Indian and Pakistani stock markets

Right now the Indian market is up a small amount for the week, of course that may change.

I know you all love to yelp that markets don’t predict well (not what markets do!…that word “predict” is loaded) and that stock markets did not predict WWII, etc.  The lack of an Indian market reaction here is fully consistent with the fact that prediction is very hard.  Investors might simply be unsure which priors to update, and thus prices haven’t changed much.  That is consistent with the work of Philip Tetlock, also indicating that prediction is very hard.  So this kind of market result does not have to conflict with the best knowledge we have from political science and the other social sciences.

The Pakistan stock exchange, by the way, is down a few percentage points but not seeing massive carnage.

Not from The Onion

The UK government is due to hold emergency talks with industry leaders on Tuesday after discovering that the country doesn’t have the right pallets to continue exporting goods to the European Union if it leaves without a deal next month.

Under strict EU rules, pallets — wooden structures that companies use to transport large volumes of goods — arriving from non-member states are required to meet a series of checks and standards.

Wood pallets must be heat-treated or cleaned to prevent contamination and the spread of pests, and have specific markings to confirm that they legal in EU markets.

Most pallets that British exporters are using do not conform to these rules for non-EU countries, or “third countries,” as EU member states follow a much more relaxed set of regulations.

Here is the full story, via Catherine Rampell.

Could wage decoupling be because of health insurance?

From Scott Alexander:

There are a few lines of argument that suggest it’s not true.

First, wage growth has been worst for the lowest-paid workers. But the lowest-paid workers don’t usually get insurance at all.

Second, the numbers don’t really add up. Median household income in 1973 was about $48,000 in today’s dollars. Since then, productivity has increased by between 70% and 140% (EVERYBODY DISAGREES ON THIS NUMBER), so if median income had kept pace with productivity it should be between $82,000 and $115,000. Instead, it is $59,000. So there are between $23,000 and $67,000 of missing income to explain.

The average health insurance policy costs about $7000 per individual or $20000 per family, of which employers pay $6000 and $14000 respectively. But as mentioned above, many people do not have employer-paid insurance at all, so the average per person cost is less than that. Usually only one member of a household will pay for family insurance, even if both members work; sometimes only one member of a household will buy insurance at all. So the average cost of insurance to a company per employee is well below the $6000 to $14000 number. If we round it off to $6000 per person, that only explains a quarter of the lowest estimate of the productivity gap, and less than a tenth of the highest estimate. So it’s unlikely that this is the main cause.

I don’t agree with all of his framing (are there different deflators floating around in those estimates?  Scott does discuss that later in the post), but those points are worth considering nonetheless.  On Scott’s broader points (not discussed in my excerpt), I think he is underemphasizing the possibility that productivity may be measuring better than it really performed, and thus there is not so much decoupling at all.

For the pointer I thank Benjamin Cole.

The effect of banning payday loans

n November 2008, Ohio enacted the Short-Term Loan Law which imposed a 28% APR on payday loans, effectively banning the industry. Using licensing records from 2006 to 2010, I examine if there are changes in the supply side of the pawnbroker, precious-metals, small-loan, and second-mortgage lending industries during periods when the ban is effective. Seemingly unrelated regression results show the ban increases the average county-level operating small-loan, second-mortgage, and pawnbroker licensees per million by 156, 43, and 97%, respectively.

That is from Stefanie R. Ramirez, via the excellent Kevin Lewis.

Tuesday assorted links

1. Paul Krugman pursues the MMTers (NYT).  I’m never going to enter that derby.

2. Douthat on community and big government (NYT).

3. Good thread on Kashmir, general background.

4. What does the public think of eugenics?  Sad but not surprising.

5. Cass Sunstein’s On Freedom comes out today.

6. “In certain situations, there appear differences between the behavior of people trained in economics and other groups, but as the existing evidence is mostly ambiguous, a comprehensive picture of the nature and sources of these differences has not yet emerged.”  Link here.

*Not Working: Where Have All the Good Jobs Gone?*

That is the new and forthcoming book by David G. Blanchflower, here is one excerpt:

The high-paying union private-sector jobs for the less educated are long gone.  Real weekly wages in April 2018 in the United States were around 10 percent below their 1973 peak for private-sector production and non-supervisory workers in constant 1982-84 dollars.  In the UK real wages in 2018 are 6 percent below their 2008 level.

And:

In the post-recession period underemployment has replaced unemployment as the main indicator of labor market slack.

This is a very good book for anyone wishing to rethink what is going on in labor markets today.  In his view there is plenty more slack, as evidence by sluggish wage behavior.  You can pre-order here, due out in June.

*IBM: The Rise and Fall and Reinvention of a Global Icon*

That is the new and excellent and I am tempted to label definitive book by James W. Cortada.  The author worked at IBM for thirty-eight years, a reasonable qualification to attempt such a tome.  Here is one excerpt:

It is difficult to exaggerate the importance of the Social Security win to the evolution of IBM.  That one piece of business, along with its effects on other agencies and businesses, wiped out the Great Depression for IBM.  That transaction handed IBM a potential market of 20,000 other companies that would need to process social security data.  When the books were closed on IBM’s business in 1937, revenue had increased by 48 percent of 1935’s, and by the end of 1939, by 81 percent of 1935’s.

And then for the 1960s:

IBM’s System 360 was one of the most important products introduced by a U.S. corporation in the twentieth century, and it nearly broke IBM.  A short list of the most transformative products of the past century would include it…

On April 7, 1964, IBM introduced a combination of six components, dozens of items of peripheral equipment, such as tape drives, disk drives, printers, and control units, among others; and a promise to provide the software necessary to make everything work together — a mindboggling total of 150 products…manuals describing all the machines, components, software, and their installations and operation filled more than 50 linear feet of bookshelves.

But later on, by the 1970s:

With ten layers of management, each with staffs, it was probably inevitable that bureaucracy would grow.

The research and background context is amazing and the book is readable throughout.  You can pre-order here.

What is the real problem with social media? And how should we respond?

That is the topic of my latest Bloomberg column.  Here is one bit:

Psychologist Daniel Kahneman, who is also a Nobel laureate in economics, has written and co-written a number of papers on happiness in which he distinguishes between enjoying the moment and having an overall sense of satisfaction with one’s life. As it turns out, these two variables often diverge quite dramatically…

My tentative conclusion from all this: Online life is inducing us to invest less in our memories and long-term sense of satisfaction. It is pretty obvious from human behavior that, right now, the internet is doing more to boost short-term pleasures.

The more negative take would be that online life is obscuring our understanding of our own lives. I do not go that far. After all, humans make analogous choices about balancing short- and long-term happiness when they have one child rather than four, or when they sit on an exercise bike rather than get on a plane to Paris. Those aren’t the wrong decisions for everybody.

The solutions include pro-natalism and more travel:

There is so much talk about regulating or controlling the internet. Dare I suggest an alternative approach? Use public policy to help shift the balance of ease back toward life satisfaction and the formation of longer-term memories. Make it cheaper and easier to have and raise children. Use the education system to support more study trips abroad. Think about how to ease the pursuit of long-term life satisfaction.

There are plenty of human imperfections behind our online choices. As we respond, why not accentuate the positive — and keep the freedom to choose?

There is much more at the link, please do read the whole thing.

*Big Business: A Love Letter to an American Anti-Hero*

I am very excited about my next book, due out April 9:

I view this work as an antidote to many of the less than stellar arguments circulating today.  It looks like this:

Table of contents

1. A new pro-business manifesto

2. Are businesses more fraudulent than the rest of us?

3. Are CEOs paid too much?

4. Is work fun?

5. How monopolistic is American big business?

6. Are the big tech companies evil?

7. What is Wall Street good for, anyway?

8. Crony capitalism: How much does big business control the American government?

9. If business is so good, why is it disliked?

Here is part of the Amazon description:

An against-the-grain polemic on American capitalism from New York Times bestselling author Tyler Cowen.

We love to hate the 800-pound gorilla. Walmart and Amazon destroy communities and small businesses. Facebook turns us into addicts while putting our personal data at risk. From skeptical politicians like Bernie Sanders who, at a 2016 presidential campaign rally said, “If a bank is too big to fail, it is too big to exist,” to millennials, only 42 percent of whom support capitalism, belief in big business is at an all-time low. But are big companies inherently evil? If business is so bad, why does it remain so integral to the basic functioning of America? Economist and bestselling author Tyler Cowen says our biggest problem is that we don’t love business enough.

In Big Business, Cowen puts forth an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. He dismantles common misconceptions and untangles conflicting intuitions.

You can pre-order here on Amazon.  Here at Barnes & Noble.  Here at Books a Million.  Here at Itunes.  Here at IndieBound.  From PlayGoogle.  From Kobo.

Here is the publisher’s home page.  Definitely recommended…and if you are a regular MR reader, no more than five to ten percent of this book has already appeared on this blog.

NY State Budget Director on Amazon

The open letter on Amazon from Robert Mujica, New York State’s Budget Director, is on fire. It shines an unflattering light on many people involved in the Amazon decision but its analysis of twitter mobs goes well beyond Amazon.

In my 23 years in the State Capitol, three as Budget Director, Amazon was the single greatest economic development opportunity we have had. Amazon chose New York and Virginia after a year-long national competition with 234 cities and states vying for the 25,000-40,000 jobs. For a sense of scale, the next largest economic development project the state has completed was for approximately 1,000 jobs. People have been asking me for the past week what killed the Amazon deal. There were several factors.

First, some labor unions attempted to exploit Amazon’s New York entry. The RWDSU Union was interested in organizing the Whole Foods grocery store workers, a subsidiary owned by Amazon, and they deployed several ‘community based organizations’ (which RWDSU funds) to oppose the Amazon transaction as negotiation leverage. It backfired.

…Organizing Amazon, or Whole Foods workers, or any company for that matter, is better pursued by allowing them to locate here and then making an effort to unionize the workers, rather than making unionization a bar to entrance. If New York only allows unionized companies to enter, our economy is unsustainable, and if one union becomes the enemy of other unions, the entire union movement – already in decline – is undermined and damaged.

Second, some Queens politicians catered to minor, but vocal local political forces in opposition to the Amazon government incentives as ‘corporate welfare.’ Ironically, much of the visible ‘local’ opposition, which was happy to appear at press conferences and protest at City Council hearings during work hours, were actual organizers paid by one union: RWDSU. (If you are wondering if that is even legal, probably not). Even more ironic is these same elected officials all signed a letter of support for Amazon at the Long Island City location and in support of the application. They were all for it before Twitter convinced them to be against it.

…Furthermore, opposing Amazon was not even good politics, as the politicians have learned since Amazon pulled out. They are like the dog that caught the car. They are now desperately and incredibly trying to explain their actions. They cannot.

…Third, in retrospect, the State and the City could have done more to communicate the facts of the project and more aggressively correct the distortions. We assumed the benefits to be evident: 25,000-40,000 jobs located in a part of Queens that has not seen any significant commercial development in decades and a giant step forward in the tech sector, further diversifying our economy away from Wall Street and Real Estate. The polls showing seventy percent of New Yorkers supported Amazon provided false comfort that the political process would act responsibly and on behalf of all of their constituents, not just the vocal minority. We underestimated the effect of the opposition’s distortions and overestimated the intelligence and integrity of local elected officials.

Incredibly, I have heard city and state elected officials who were opponents of the project claim that Amazon was getting $3 billion in government subsidies that could have been better spent on housing or transportation. This is either a blatant untruth or fundamental ignorance of basic math by a group of elected officials. The city and state ‘gave’ Amazon nothing. Amazon was to build their headquarters with union jobs and pay the city and state $27 billion in revenues. The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits – a program approved by the same legislators railing against it – would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don’t need to be the State’s Budget Director to know that a nine to one return on your investment is a winner.

The seventy percent of New Yorkers who supported Amazon and now vent their anger also bear responsibility and must learn that the silent majority should not be silent because they can lose to the vocal minority and self-interested politicians.

…Make no mistake, at the end of the day we lost $27 billion, 25,000-40,000 jobs and a blow to our reputation of being ‘open for business.’ The union that opposed the project gained nothing and cost other union members 11,000 good, high-paying jobs. The local politicians that catered to the hyper-political opposition hurt their own government colleagues and the economic interest of every constituent in their district. The true local residents who actually supported the project and its benefits for their community are badly hurt. Nothing was gained and much was lost. This should never happen again.

Even if you think the end result was fine, as I do, this was a political fiasco for New York. Amazon was wise to exit when they did because the pecking of the chickens would only have intensified as they sunk investments.

What I’ve been reading

Arvind Panagariya, Free Trade and Prosperity: How Openness Helps the Developing Countries Grow Richer and Combat Poverty.  Self-recommending.  The book has plenty of evidence, not just the usual hand-waving.

Knut Hamsun, On Overgrown Paths.  Hamsun’s memoir, last creation, and maybe most interesting work?  But few like to talk about it, for it is 1945 and the Norwegian government has just come to place him under house arrest and in turn bring him to an institution, for having wholeheartedly supported the Nazis. The story of course is told from his rather matter of fact point of view…

Jenny Davidson, Reading Jane Austen.  I hardly know any books about Jane Austen, and indeed I don’t much enjoy reading her novels.  Still, this is the best book on Austen I have seen, take that for what it is worth.  It is very much to the point and furthermore the author writes: “I also hold a degree of suspicion toward those who love Austen, though, myself included.”

James Grant, Bagehot: The Life and Times of the Greatest Victorian is a good treatment of someone who was not the greatest Victorian.

Richard J. Evans, Eric Hobsbawm: A Life in History, I had high hopes but it bored me.

Mercatus has republished The Market Process: Advanced Studies in Political Economy, a series of Austrian-like essays from the 1980s, edited by Peter J. Boettke and David L. Prychitko.

Joel S. Baden, The Book of Exodus: A Biography is forthcoming, a good general introduction.

David C. Rose, Why Culture Matters Most, is from the perspective of a Douglass North-type economist.