The (pricing) culture that Washington is not
The Interstate 66 toll lanes opened Monday in Washington’s Northern Virginia suburbs with prices so steep they could be among the highest drivers have paid for the privilege of traveling on a state-owned highway in the United States.
Tolls in the high-occupancy toll lanes hit $34.50 — or close to $3.50 a mile — to drive the 10-mile stretch from the Beltway to Washington during the height of the morning commute.
Bravo, but we’ll see how this develops.
Trumponomics is in fact novel, we neglect it at our peril
That is the topic of my latest Bloomberg column, here is the opening bit:
I’ve seen hundreds of articles on President Donald Trump and trade, but the real significance of the Trump economic revolution — for better or worse — is a focus on investment. There is no coordinating mastermind, but if you consider the intersection between what the Trumpian nationalists want and what a Republican Congress will deliver, it’s this: wanting to make the U.S. a new and dominant center for investment, including at the expense of other nations.
And:
In essence, a new kind of supply-side economics has been invented. The theory of the 1980s focused mainly on individuals, and lowering the tax rates they faced on labor income and capital gains. Cutting these rates was supposed to mobilize the power of those individuals, through more work or more investment. The idea today is that the real power of mobilization comes through corporate associations. Assuming the tax bill passes, that theory is about to get a major test.
Strikingly, the tax bill and the trade policies of the Trump administration can be viewed as having a similar underlying philosophy, whether entirely intended or not. One of the president’s first official acts was to withdrawal from the Trans-Pacific Partnership. Although I favored that agreement, as did most other economists, it’s worth considering what the most intelligent nationalist case against the TPP looks like. It’s not about trade, because the deal wouldn’t have affected tariff rates faced by Americans very much (exports of beef to Japan aside). Rather, the TPP would have given American certification to Vietnam, Malaysia and eventually other emerging economies as stable repositories of foreign investment from multinationals. That could in turn draw investment away from the U.S.
Do read the whole thing, it is my favorite recent piece by me.
New Evidence of Generational Progress for Mexican Americans
U.S.-born Mexican Americans suffer a large schooling deficit relative to other Americans, and standard data sources suggest that this deficit does not shrink between the 2nd and later generations. Standard data sources lack information on grandparents’ countries of birth, however, which creates potentially serious issues for tracking the progress of later-generation Mexican Americans. Exploiting unique NLSY97 data that address these measurement issues, we find substantial educational progress between the 2nd and 3rd generations for a recent cohort of Mexican Americans. Such progress is obscured when we instead mimic the limitations inherent in standard data sources.
That is by Brian Duncan, Jeffrey Grogger, Ana Sofia Leon, and Stephen J. Trejo in a recent NBER working paper.
Pass-through of minimum wages into U.S. retail prices
That is studied by Renkin, Montialoux, and Siegenthaler in a recent paper, which is also a job market paper for Tobias Renkin from the University of Zurich. Here is the abstract:
We study the impact of increases in local minimum wages on the dynamics of prices in local grocery stores in the US during the 2001-2012 period. We find a signifi cant impact of increasing minimum wages on prices in grocery stores. Our baseline estimate of the minimum wage elasticity of grocery prices is 0.02. This magnitude is consistent with a full pass-through of cost increases into prices. We show that price adjustments occur mostly in the months following the passage of minimum wage legislation rather than at the actual implementation of higher minimum wages. This forward-looking pattern of price adjustments is qualitatively consistent with pricing models that feature nominal rigidities. We fi nd no differential price effect for products consumed by poorer and richer households, and no evidence for demand effects. Our results suggest that consumers rather than firms bear the cost of minimum wage increases. Moreover, poor households are most negatively affected by the price response. Price increases in grocery stores alone offset at least 10% of the nominal income gains of the poorest households.
Of course this also would suggest the sector is relatively competitive. And if you are wondering, here is the full slate of job candidates from Zurich.
Monday assorted links
1. According to this estimate, non-searchers lose about a penny on the dollar (pdf).
2. The culture that is Portland how much should companies accommodate the homeless?
3. Solve for the equilibrium: “A UK supermarket chain will sell pasta, crisps, and rice for just 10p to reduce food waste.”
4. Potatoes reduced the number of civil wars.
5. Why a lot of important research is not being done (NYT).
New Zealand to Compensate Organ Donors for Lost Earnings
NZ Ministry of Health: People who donate a kidney or part of their liver can now do so knowing they can be fully compensated for lost earnings as a result of their donation surgery.
The Ministry of Health will be implementing compensation for live organ donors from 5 December. People who donate a live organ will be fully recompensed for lost earnings for up to 12 weeks while they recover. This will be paid weekly following the donation surgery. In the past donors received some assistance in the form of a benefit for this.
Former GMU student, Eric Crampton, now Senior Fellow at University of Canterbury had a role in the design.
Hat tip: Frank McCormick.
What Tom Whitwell learned this year
Here are my selected bits and pieces from a longer list:
“Artificial intelligence systems pretending to be female are often subjected to the same sorts of online harassment as women.” [Jacqueline Feldman]
Swintec is a company in New Jersey that sells up to 5,000 typewriters a year to prisoners in the US. Their typewriters have clear plastic covers so inmates can’t hide anything inside. Transparent TVs, CD players and Walkmen are also available. [Daniel A Gross]
In the UK, marriages between couples over 65 have risen 46% over the last decade. [Cassie Werber]
A cryptocurrency mining company called Genesis Mining is growing so fast that they rent Boeing 747s to ship graphics cards to their Bitcoin mines in Iceland. [Joon Ian Wong]
Dana Lewis from Alabama built herself an artificial pancreas from off-the-shelf parts. Her design is open source, so people with diabetes can hack together solutions more quickly than drug companies. [Lee Roop]
In August, Virginia Tech built a fake driverless van — with the driver hidden inside the seat — to see how other drivers would react. Their reaction: “This is one of the strangest things I’ve ever seen.” [Adam Tuss] (Fluxx have also been experimenting with fake autonomous vehicles in Cambridge)
Women are eight times more likely to ask Google if their husband is gay than if he is an alcoholic. [Sean Illing]
Men travelling first class tend to weigh more than those in economy, while for women the reverse is true. [Lucy Hooker]
Facebook employs a dozen people to delete abuse and spam from Mark Zuckerberg’s Facebook page. [Sarah Frier]
Pro tip: Ask your current customers “What nearly stopped you buying from us?” [Karl Blanks]
Here is the full list, Tom has an excellent algorithm for building the list.
A simple theory of Moore’s Law and social media
1. Moore’s Law plus the internet makes smart people smarter, and stupid people less smart.
2. Manipulable people can be reached with a greater flood of information, so over time as data on them accumulate, they become more manipulable.
3. It is often easier to manipulate smart people than stupid people, because the latter may be oblivious to a greater set of cues and clues.
4. Social media bring smarter people together with the less smart more than used to be the case, Twitter more so than Facebook. Members of each group are appalled by what they experience. The smarter people see the lesser smarts of many others. The less smart people — who often are not entirely so stupid after all — can see how manipulated the smarter people are. They also see that the smarter people look down on them and attack their motives and intellects. Both groups go away thinking less of each other.
4b. The smarter people, in reacting this way, in fact are being manipulated by the (stupider) powers that be.
5. “There is a performative dimension that renders both sides more rigid and dishonest.” From a correspondent.
6. Consider a second distinction, namely between people who are too sensitive to social information, and people who are relatively insensitive to social information. A quick test of this one is to ask how often a person’s tweets (and thoughts) refer to the motivations, intentions, or status hierarchies held by others. Get the picture? (Here is an A+ example.)
7. People who are overly sensitive to social information will be driven to distraction by Twitter. They will find the world to be intolerably bad. The status distinctions they value will be violated so, so many times, and in a manner which becomes common knowledge. And they will perceive what are at times the questionable motives held by others. Twitter is like negative catnip for them. In fact, they will find it more and more necessary to focus on negative social information, thereby exacerbating their own tendencies toward oversensitivity.
8. People who are not so sensitive to social information will pursue social media with greater equanimity, and they may find those media productivity-enhancing. Nevertheless they will become rather visibly introduced to a relatively new category of people for them — those who are overly sensitive to social information. This group will become so transparent, so in their face, and also somewhat annoying. Even those extremely insensitive to social information will not be able to help perceiving this alternate approach, and also the sometimes bad motivations that lie behind it. The overly sensitive ones in turn will notice that another group is under-sensitive to the social considerations they value. These two groups will think less and less of each other. The insensitive will have been made sensitive. It’s like playing “overrated vs. underrated” almost 24/7 on issues you really care about, and which affect your own personal status.
9. The philosophy of Stoicism will return to Silicon Valley. It will gain adherents but fail, because the rest of the system is stacked against it.
10. The socially sensitive, very smart people will become the most despairing, the most manipulated, and the most angry. The socially insensitive will either jump ship into the camp of the socially sensitive, or they will cultivate new methods of detachment, with or without Stoicism. Straussianism will compete with Stoicism.
11. Parts of social media will peel off into smaller, more private groups. At the end of the day, many will wonder which economies of scale and scope have been lost. And gained. Others will be too manipulated to wonder such things.
12. The “finance guy” in me thinks: how can I use all this for intellectual arbitrage? Which camp does that put me in?
13. What bounds this process?
The new Chetty, et.al. paper on innovation and inventors
The authors are Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen, here is the abstract:
We characterize the factors that determine who becomes an inventor in America by using deidentified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children’s propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact, as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole. We develop a simple model of inventors’ careers that matches these empirical results. The model implies that increasing exposure to innovation in childhood may have larger impacts on innovation than increasing the financial incentives to innovate, for instance by cutting tax rates. In particular, there are many “lost Einsteins” – individuals who would have had highly impactful inventions had they been exposed to innovation.
Here is the paper, here are the slides (best place to start), here is a David Leonhardt column on it.
Florence! Motown! Kuna molas! David Hume knew this! The work looks very interesting, though I doubt if the main effect is actually channeled through absolute income, as evidenced by the immediately afore-mentioned examples. Also, I don’t think their tax analysis quite holds up once you see intermediaries as needing to cover fixed costs for the innovators. Taxing profits from innovation then lowers the number of potential innovators quite a bit, by discouraging investment from the intermediaries.
Will Venezuela launch a cryptocurrrency?
President Nicolas Maduro said on Sunday that Venezuela will launch a cryptocurrency to combat what the leftist leader says is a financial “blockade” against the crisis-hit nation spurred by U.S. sanctions.
Maduro said the OPEC member’s new currency, “petro,” will be backed by natural resources reserves although he did not provide details on the logistics of its roll-out.
Here is the link, no additional text, believe what you wish! For the pointer I thank M. Do any of you have a more detailed Spanish-language source?
Further Sunday assorted links
1. Tony Blair backs a land value tax.
2. Austin Frakt on why the CVS-Aetna merger might be good (NYT).
3. Extremist nominees turn out more base from the other side (pdf).
4. Should Waze optimize for the single driver or for drivers in general?
5. Finding X in Espresso: Adventures in Computational Lexicology; when does a bad spelling become correct? (recommended, another Samir Varma special).
Sunday assorted links
1. A musician’s take on Google and net neutrality. Not my view, but that is what makes life interesting…
2. A very good thread on personnel economics.
3. Diane Coyle reviews the new Edith Penrose biography; Penrose’s book was a favorite of mine as a teen. And Pankaj Mishra reviews Sujatha Gidla.
4. Why Nigeria wins at Scrabble (The Economist).
5. Raising a teenage daughter (mother writes the essay, teenage daughter comments on it).
The Power of Abortion Policy
That is by by Caitlin Knowles Myers, and the full title is “The Power of Abortion Policy: Reexamining the Effects of Young Women’s Access to Reproductive Control.” It is published in the most recent JPE, here is the abstract:
I provide new evidence on the relative “powers” of contraception and abortion policy in effecting the dramatic social transformations of the 1960s and 1970s. Trends in sexual behavior suggest that young women’s increased access to the birth control pill fueled the sexual revolution, but neither these trends nor difference-in-difference estimates support the view that this also led to substantial changes in family formation. Rather, the estimates robustly suggest that it was liberalized access to abortion that allowed large numbers of women to delay marriage and motherhood.
In other words, the pill was less influential than you might think. And from the paper proper:
…policy environments in which abortion has legal and readily accessible by young women are estimated to have caused a 34 percent reduction in first births, a 19 percent reduction in first marriages, and a 63 percent reduction in “shotgun marriages” prior to age 19.
And:
Between the 1950 and 1955 birth cohorts, the fraction of women having sex prior to age 18 increased from 34 to 47 percent.
And:
…cohorts that experienced the most rapid changes in sexual behavior exhibited little change in fertility.
And:
Lahey (2014)…finds that the introduction of abortion restrictions in the nineteenth century increased birthrates by 4-12 percent…
I thought this was one of the most interesting papers I have read all year. Here is an earlier, ungated copy.
*The Dead March*
The author is Peter Guardino and the subtitle is A History of the Mexican-American War. This book brought the War to life for me as no other book has, most of all by considering issues of morale, organization, and how hard did the Mexicans really fight back (more than many sources claim). Here is one good “fact of the day”:
Between 1829 and 1860 around 14 percent of regular army soldiers deserted every year.
That’s for the American army, not the Mexicans. This one is good enough to make my best of the year list, so it will be on the addended version.
Saturday assorted semiotics links
1. “Men can’t handle the truth of transparent government, “The Emperor’s New Clothes” tells us. And so, Andersen gives us a consolation prize: a brave little boy who speaks up to reveal a truth that ultimately empowers the boss.” Link here.
2. Hidden signals in corporate ribbon-cutting ceremonies?
3. NYT obituary for Jerry Fodor.
4. “Chinese man repaints road markings to make his commute quicker. Bus passenger thought having a special lane to turn left was slowing down traffic going straight on so he tried to remedy it with paint and brush.” He was fined $150.
5. What do Belgian princes and American academics have in common?