Results for “concentration” 203 found
What I’ve been reading
1. Joshua Foer, Dylan Thuras, and Ella Morton, Atlas Obscura: An Explorer’s Guide to the World’s Hidden Wonders. Short descriptions of places you ought to visit, such as ossuaries, micronations, museums of invisible microbes, the floating school of Lagos, the Mistake House of Elsah, Illinois, Bangkok’s Museum of Counterfeit Goods, and the world’s largest Tesla coil in Makarau, controlled by Alan Gibbs of New Zealand. The selection is conceptual, so I like it. I will keep this book.
2. James T. Hamilton, Democracy’s Detectives: The Economics of Investigative Journalism. A highly original look at exactly what the subtitle promises, I thank Jay for keeping Cowen’s Second Law valid. Has this topic ever been more important than this year?
3. Andre Schlueter, Institutions and Small Settler Economies: A Comparative Study of New Zealand and Uruguay, 1870-2008. There should be more such books! New Zealand and Uruguay had roughly comparable per capita incomes in 1920, yet New Zealand pulled away and never gave back much of that lead. One factor, according to the author, was that the Kiwis had about 40% public ownership of farm land in 1930, resulting in a greater distribution of gains from agriculture and eventually a more egalitarian polity. Uruguay, in contrast, had engaged in some badly-run land privatizations and ended up with excess concentration. New Zealand also took the lead on frozen meat shipments, and New Zealand had a much more rapid recovery from the Great Depression, among other factors, and in Uruguay the enforceability of contract rights slipped away considerably in the 1940s and 1950s. In sum, Uruguay ended up with more rent-seeking policies that redistributed resources toward elites. I can’t believe this one wasn’t a bestseller.
4. John Richard Boren, For Intellectual Property: The Property Ideas of Andrew J. Galambos. As far as I can tell from this intriguing but maddeningly vague book, and based on what I have heard, Galambos was a 1960s-70s libertarian astrophysicist who believed in intellectual property rights for all ideas, indeed in ideas and not just for the expression of ideas as under current law. The rumor, possibly apocryphal, was that those who knew his true doctrines were forbidden to explain them to others without first making the requisite payments. I saw this in the bibliography in the back of the book:
Sic Itur Ad Astra, Volume One by Andrew J. Galambos. This is the transcript of his 1968 delivery of Courses V-50 and V-50X. The book discloses the basics of the Science of Volition but has been removed from sale by Galambos’ trustees. Used copies are sometimes available. Some of Galambos’ recorded lectures…can be heard online at the FEI website, www.fei-ajg.com, where the trustees have imposed significant restrictions on access. Only one Galambos course, V-76…is available for purchase on CD without restrictions.
In fact I know more than I am letting on.
5. James Joyce, Ulysses, always worth a reread, in bits and pieces. Don’t start on p.1. That way, you won’t be discouraged by not knowing what is going on. That is serious advice.
I have browsed the useful-seeming Johan A. Lybeck, The Future of Financial Regulation: Who Should Pay for the Failure of American and European Banks? Most books with titles like that are bad and boring, this seems to be a very useful collection of facts about previous bailouts.
Yesterday’s antitrust laws can’t solve today’s problems
I view antitrust law as a body of doctrine that is largely obsolete. Here is one part of my broader argument, from today’s Bloomberg column:
Or consider the body of law assessing resale-price maintenance in the book trade. Today you can buy used books online. That constrains the prices of both used and new books, no matter how judges might rule. In 1998, the U.S. Justice Department initiated an antitrust suit against Microsoft, partly on the grounds that the company sought to extend its market power to browsers. Few people today think the company’s Internet Explorer browser failed because the government restored competitiveness; Firefox and Google built better software. Yet prosecutors spent years distracting the talent of one of America’s most successful companies, as they had with IBM earlier in a 13-year case dropped in 1982.
Policy should instead focus on the real problems that depress living standards for the middle class and the poor. Rates of inflation have been high for housing, medical care and higher education, major budget items for many people. As for housing, there are harmful restrictions on cheaper building, but in the expensive areas there is no monopolistic landlord who owns all the housing stock. So that is not an antitrust issue, nor is university tuition for the most part.
On the other hand, there is a strong case that growing concentration in the hospital market has raised health-care costs. Some major metropolitan areas have only a small number of hospital chains. Part of the problem is that highly regulated environments encourage consolidation and larger firms to deal with compliance costs, so antitrust law won’t provide an easy fix. Nonetheless, hospitals probably should be the biggest area of concern for antitrust enforcers, as competition does not now operate freely.
And this:
The major internet companies are a new target of antitrust attention, yet most of them give their main product away for free. Contrary to charges that they were going to stifle innovation, Google and its parent company, Alphabet, have led or subsidized innovation in driverless vehicles, artificial intelligence and wearable devices. Most major tech companies also are seeking to expand their innovative presence outside their main businesses, with artificial intelligence being a major new field of competition. Complainers about Amazon are more likely to be suppliers than consumers, the presumed beneficiaries of antitrust enforcement.
The best we can hope for is benign neglect, as I cannot imagine today’s politics producing an improved version of antitrust laws. Do read the whole thing, I consider IP law, cable regulation, and a number of other issues too.
Innovation is less concentrated than it used to be
Might growing deconcentration possibly be either a partial cause or symptom of the Great Stagnation? Yasin Ozcan and Shane Greenstein report:
Using patents as indicators of inventive activity, this article characterizes the concentration of origins of invention from 1976 to 2010, and how these changed over time. The analysis finds pervasive deconcentration in virtually every area related to ICT, but it can explain only a small part of this trend. Deconcentration happens despite the role of lateral entry by existing firms. New firm entry drives part of the deconcentration, but this alone cannot explain the change. A single supply factor in the market for ideas, such as the breakup of AT&T, also cannot explain the trend. Finally, eleven percent of patents change hands through mergers and acquisitions activity, but this does not make up for the declines in concentration in the origins of invention.
Worth a ponder…
Economic development in an “Average is Over” world
Here is my new paper on that topic (pdf, new link here), commissioned by the Asian Development Bank (but not yet approved or refereed by them). The key question is what kind of development path will follow, given the realities of premature deindustrialization in emerging economies today. Here is one bit from the paper:
…trickle-down growth from price discrimination and the erosion of intellectual property rents becomes more important as a source of economic improvement. I call this mechanism “cell phones instead of automobile factories.” Many economic ideas are subject to non-rivalrous use, as they can be deployed by many people once they exist. That phenomenon may sound separate from the substitution of capital for labor outlined above, but that is part of the same broader process. If the wealthier nations use smart software to displace imports from the developing world, poorer nations will benefit from the software in other ways, including a trickle-down of goods and services.
The cell phone (and by extension the smart phone) is a paradigmatic example of trickle-down consumption. The technologies behind the cell phone were invented across a variety of nations, none of them poor (although China contributed to the finishing process), and yet cell phones are extremely prominent in poor and lesser developed nations. Internationally, cell phones and smart phones have brought significant benefits and often at relatively low cost. In the poorer parts of Asia, cell and smart phones are available for much lower prices than in the West. Part of that is the result of price discrimination, such as when Samsung sets deliberately lower prices for most of Africa and the poorer parts of Asia. In other cases the poorer countries buy a somewhat lower quality product, but one still effective for many of their needs. The Blackberry was not long ago state of the art in the United States, but now it sells primarily in poorer countries, including Indonesia, Vietnam, and South Asia, in addition to parts of Africa, and of course it sells to these regions at lower prices.
And this:
Or in other words, rather than Indonesia or Cambodia exporting manufactures to buy imported goods, an alternative development path is that some of those imports trickle down and enter poorer countries at especially low prices. Poorer economies can’t get constant cost goods and services for any cheaper than they are available in wealthier countries and in fact they may have to pay more because of shipping costs, poor institutions, and less efficient retail systems. If the wealthy nations produce more cement, the trickle down benefits from that activity may be slight. But for declining cost commodities, it is a different story entirely.
The more the economies of the wealthy countries are focused on increasing returns to scale sectors, the more important this version of trickle-down growth will become. And for the last few decades, many of the most important innovations in the wealthy countries have been shifting into increasing returns to scale sectors, most notably in the tech world. The tech world is geographically clustered, and centered in Silicon Valley, which are both classic signs of an increasing returns to scale sector. Some of the outputs are given away for free (Google, Facebook), and others show high degrees of market concentration, with a single dominant supplier providing a network good (eBay, Facebook, Instagram, Twitter). When it comes to the hardware behind the tech sector, there is an emphasis on new models, upgrades, and differential pricing plans, again all signs of increasing returns to scale.
In the limiting case, if everything in the economy looks and acts like the tech sector, this source of growth could be quite significant indeed. In other words, a world where “software eats the world,” to borrow Marc Andreessen’s phrase, is a world where the developing nations end up doing pretty well, even if the traditional export-oriented path to convergence has gone away.
Most forms of economic growth are fundamentally imbalanced (Hirschman 1958), but in this “cell phones scenario” we see a new form of imbalance. The new imbalance would be based on increasing returns to scale goods, which would trickle down to poorer countries, vs. constant and increasing cost goods, which would not trickle down. Developing nations thus would be very well supplied with (cheaper versions of) increasing returns to scale goods, but have relatively stagnant supplies of constant and decreasing returns to scale goods.
Comments of course are welcome. The paper also includes some brief discussions of how the main arguments might apply to China, India, the Philippines, and Central Asia, in line with its ADB origins.
The Number of Publicy Traded Firms Has Halved
In the past twenty years [the] U.S. has lost almost 50% of its publicly traded firms [from 6,797 in 1997 to 3,485 in 2013, AT]. This decline has been so dramatic, that the number of firms these days is lower than it has been in the early 1970s, when the real gross domestic product in the U.S. was one third of what it is today. This phenomenon has been a general pattern that has affected over 90% of U.S. industries.
A rather stunning finding from Grullon, Larkin and Michaely.
The total number of firms has dropped far less than the number of publicly traded firms, so in part this is probably due to laws affecting publicly traded firms in particular such as Sarbanes-Oxley. But there has also been a small drop in the total number of firms (depending on year measured) and concentration ratios have increased which suggests that competition might have fallen. (I wish the authors had looked more closely at the entire size distribution). Have international firms risen to offset the decline of publicly-trade firms? The authors discuss but discount the role of globalization. I don’t see, however, how their findings of small effects on output competition are consistent with big labor market effects. Nevertheless the bottom line is that as concentration rates have increased so have profits, as a recent CEA report also argues.
Is this all the after-effects of the Great Recession? I hope so but the decline in the number of publicly traded firms is also consistent with the research on long-run declining dynamism (including my own research on regulation and dynamism) which shows that startup and reallocation rates have been trending down for thirty years.
Guy Rolnick at Pro-Market also discusses these trends and adds another thought to keep you up at night:
…One question may even loom larger: given that more and more Americans’ pensions and long-term savings today are invested in the stock market in defined contribution schemes, have we created a pension model that is based on a growing share of investments in rent-seeking activities? Put another way, are we facing an economic model in which tens of millions of Americans’ pensions are relying on the ability of companies to extract rents from consumers and taxpayers?
Tuesday assorted links
1. Economist Peter Navarro endorses Trump.
2. Olivier Blanchard is worried about Japan.
3. “Dallas, with the highest concentration of [Craigslist] missed connections, has an impressive spread from Monday to Friday, with its inhabitants posting throughout the workday and late into the evening.” For the country as a whole, the most lovelorn days seem to be Mondays.
4. Is Hillary likely to be prosecuted? I’ve tried to avoid this topic, but I found this article both realistic and full of actual information.
5. Jonathan Haidt responds to critics. And one interpretation of the new Chetty results.
Does it matter that to some extent banks are commonly owned?
There is now a paper on this topic by Azar, Raina, and Schmalz, the main result is this:
We document a secular increase of deposit account maintenance fees and fee thresholds with a new branch-level dataset, as well as substantial cross-sectional variation in these prices and in deposit rate spreads. We then examine whether variation in bank concentration helps explain the variation in prices. The standard measure of concentration, the HHI, is not correlated with any of the outcome variables. A generalized HHI (GHHI) that captures both common ownership (the degree to which banks are commonly owned by the same investors) and cross-ownership (the extent to which banks own shares in each other) is strongly correlated with higher maintenance fees, fee thresholds, and deposit rate spreads. We use the growth of index funds as a source of exogenous variation to establish a causal link from GHHI to higher prices for banking products.
In other words, if companies are owned by the same pension and mutual funds, why should they compete against each other? Imagine managers given financial incentives for greater stability rather than greater risk-taking, so this does not require a publicly traceable conspiracy.
The first paper on this general question was in fact written by me and Ami Glazer about twenty-five years ago, although we never managed to get it published. Our biggest problem was perhaps the lack of clear evidence at the time. This is the best evidence I have seen so far, although I still file this under “speculative”…
For the pointer I thank Uri Bram.
The political economy of Kansas fiscal policy (from the comments)
MR commentator Patrick L. has a go at it:
OK I’ll bite.
In nominal terms, between 2002 and 2012 state receipts grew 50%. Inflation in this period was 28%, and probably significantly lower for Kansas, while population growth has only been about 10% since 2000. Even the “low” 2014 receipts are $1.5 billion more in revenue from when Sebelius first took office and the government started rapidly growing. In the past 15 years expenditures have grown over 50%, exceeding $6 billion today. The shortfall is $300 million, or about 5%. While the growth of the Kansas government in the past 15 years is smaller than other governments in the country, it still explains the shortfall. We can justify this increase by saying that education and health are rising faster than everything else, but that is not a revenue problem. Tax rates have to rise because education and health costs are growing faster than our economies. That says nothing at all about the optimum size of taxation for state governments with regard to growth, jobs, or even revenue. The tax and spending levels Brownback choose would have been adequate ten, maybe even five years ago. With a bit of luck, he could have ignored the shortfall because of variance, which for receipts can be a few hundred million a year.
Republicans should be wise enough to not depend on luck, and they should be wiser predicting how trend lines go. Cutting the size of government was never a serious option.
I haven’t looked at the votes in depth, but it looks like a classic case of urban // rural split that typically troubles the state’s politics. Just under half the state’s population lives around Kansas City or Wichita, which are both five times than the next largest city. These places have as many votes as the rest of Kansas combined, but their needs are radically different.
Rural Kansas has two unique problems. First, there’s the problem of population collapse, which all farm states are seeing. What few children are born move out when they come of age and new people are not moving in. Fixed costs like “We need at least one school building” or “We need at least one teacher per grade” start to add up for small towns of 1000 or less. Those are the obvious problems, not to mention any number of federal or state concerns dealing with food, medical, or disability services that have to be met. As a matter of geography, 98% of the state is rural, and I think I heard 25% of the state is in towns less than 2500 – with over 400 municipal governments servicing less than 1000 people it’s probably the highest per capita in the country (This is FIVE times the national average).
This is a non-trivial growing problem related to scale government services that has been an issue of intense legal debate in the state. Wichita School District’s scale is such it can use its buses to deliver free or low cost lunches to children in the summer. Small cities don’t have buses. Is that fair? How should taxes be structured to compensate? The only political viable solution to this problem has been to spend more money. If all the small towns could magically consolidate into a super smallville, taxes would (back of the envelope) be 10-15% lower.
Government services to low population areas are subsidized by high population areas, and it costs much more to deliver the same services to small towns. The US Postal Service paid for delivery to small towns across the country by charging monopolistic prices on first class letter mail in cities (Which cost almost nothing to deliver). NPR’s national budget mostly goes to setup stations in small towns. The small towns in Kansas are both relatively and in many cases actually getting smaller, older, and poorer. They are costing more and delivering less.
The other problem is that some rural areas are *growing*, but they’re growing because of immigration attracted to the agriculture and food packaging industries. Which is not the same as growing from a resource boom which can be taxed heavily to compensate. Liberal, KS is the largest per capita immigrant community in the United States. While this influx of people is necessary for the health of these places, the new population has more expensive demands on government services and pays less in taxes. Some of these small towns are the same ones that a decade ago were collapsing. Services and infrastructure might have been allowed to lapse or removed, and now rapidly needs to be replaced. That’s expensive! In the long run this problem might replace the first problem, but for now it’s the worst of both worlds.
The economy of the small cities is based largely around food production, which mostly can’t move, and food packaging, which probably can’t for logistical reasons. These places are poorer, getting relatively poorer per capita, and demanding more in services both directly (immigration / aging) and through scale issues. Their populations are either getting very old or very Hispanic, or both.
In contrast, Kansas City is a stable metropolis whose economy depends on manufacturing is built around a national centralized hub for trains. It also has some finance and telecom sprinkled in, though those guys can probably go anywhere. Wichita, is a moderately growing city based around aircraft manufacturing. When state taxes can’t provide enough government services, local taxes for these areas easily rise to compensate. Their economic concerns are how to stop businesses from going across the border to Omaha, Oklahoma City, Tulsa, Springfield, or Kansas City, Mo – places which are functionally identical and just as close. Given their dependence on manufacturing, they also have to consider movement across international borders to China and Mexico. Their demography is much closer to the national averages rather than the extremes. They are large enough that they can take advantage of scaling for government services, without being so large that there is decreasing actual returns. I don’t have figures, but I’d guess income rates in the urban areas to be between 150 and 200% those of the rural areas, which are themselves typically around 2/3rds the national average. This is an industry effect, a farmer in Kansas City and an aeronautical engineer in Greensburg, KS would not make much money. The cities are richer, but they’re richer because they have industries that are becoming increasingly easier to move.
On a political level, normally cities become more liberal, and poorer as you go deeper into the city – a leftover of 19th century industrialization competing against 20th century transportation. Deep urban cores produce these deep blue constituencies that act as checks on conservative suburban rings. In some states this manifests itself as a coalition between the poor rural areas and the poor urban areas against richer suburban areas allowing normal American class politics to balance itself. Cities produce political equilibrium: The richer and denser it becomes, the more liberal, which pushes more money and voters to suburbia, diluting the power. In short, declining rural power (D) and rising urban power (D) offset each other, but rising urban power (D) enhances suburban power (R), and so at a state level you get a balance.
The problem is that the inner core of Kansas City is in Missouri, so Kansas only gets the rich (Republican) suburban ring and a tiny blue part. Typical democratic concerns like maintaining a progressive tax structure can’t really find a foundation. While Wichita also has an urban core that does provide a Democratic representation, the city isn’t constrained geographically by anything (No ocean, mountain, lake, and transportation goes around, not through, the city) means concentration, an ingredient for populist politics, is lessened. The city spreads, and the poor can easily move up the class structure by moving further and further out. Wichita has half the population density of Syracuse and two thirds that of Madison, two close sized metropolitan areas. I haven’t done a county level comparison, but I suspect that Sedgwick has half the density of the ‘average American county with half a million people’ in it. There are other places in America like that, but guess how they vote.
Nor are either cities big university cities, like Madison or Boston. The two big universities in the state are in the small towns of Lawrence and Manhattan, which are quite separate from the rest of the state. Urban centers are places of “Commanding Heights” industries, like health and education that can’t easily move, but Wichita and Kansas City are based around manufacturing.
The political outcomes are not that surprising at all. There is nothing ‘the matter with Kansas’. The power structure easily shifts between slim majorities formed from predominately suburban populations who are wealthier, and whose jobs are most likely to move, and slim majorities formed from the small urban cores and rural parts of the state.
There’s no possible political coalition that you could form that would pass a constitutional amendment allowing a floating balanced budget over a 10 year period. Nor are the populist pressure strong enough to push against regressive taxation. You have ‘fiscal hawks’ in the rural areas who never vote for cuts, and suburban conservatives who never vote for taxes. When the storm gets too bad, they vote a nice moderate democrat in to raise taxes and crack down hard on whatever (Non manufacturing / agricultural) big business they can put pressure on. Obviously something that can’t move easily like Health Insurance.
In summery, this really is an issue of Urban vs Rural politics. Unlike other cities, the kind of industries around Kansas City and Wichita can move. The jobs in the rural areas can’t. The rural areas require more per capita government services, and the urban areas have more money. They both have half the vote. Solve for equilibrium.
== As for the deal:
It’s mostly a .4% sales tax increase, which is less than some of the more fanciful projects done by local governments in the past 15 years, which have included sports arenas, loans to movie theaters, and waterfront improvement. A half cent increase in sales tax does move the state into the top 10 for the country, but the overall tax burden is still quite low. The real problem is that city/county sales taxes are a function of distance from Wichita, and the inverse of population. The smaller your city, and the farther you are from Wichita, the more the county depends on sales taxes. In places like Junction City, this could put the sales tax close to 10%! The real disparity is going to be at the border towns: After the change there will be a .7% difference between KC, KS and KC, MO, though I bet the Missouri side will raise taxes to compensate. After the increase, there’s a 1.5% difference between Pittsburg, KS and Joplin, MO – big enough that I could see some people consider driving for purchases more than $300 (Biweekly grocery shopping for a large family?), especially if retailers on the Missouri side are not dumb. As a general rule, the money and the shopping is on the Kansas side of the border, so stuff isn’t going to transition immediately, but I expect some Laffer curve effects here for local governments, and I would hope they’ll respond by dropping taxes to compensate.
This is probably WHY such a deal was able to pass. Most of the damage goes on the poor and rural parts of Kansas, which is where most of the balance budget hawks are. The rich living near Kansas City will have the easiest time dodging the increase and avoid it more often. A regressive tax, but an efficient one.
As for the other parts of the deal, $90 million in itemized deductions are being removed. I don’t actually think this will amount to much, since there aren’t many itemized state deductions left. What remains are things like adoption, historical preservation, or disabled access. I don’t see much money coming in this way, and the state will almost certainly reverse itself the first chance it gets (As it did the last time it got rid of the adoption credit).
Whew!
Bad optics, bad PR, the culture that is Germany
…a public outcry has arisen over a town council plan to house refugees in a building that once served as a Nazi command post at the Buchenwald concentration camp.
Schwerte, a community of 50,000 south of Dortmund, has decided to move 21 refugees into the camp’s only remaining building on the outskirts of the town.
The move comes, town officials say, because all the refugee housing in the town’s jurisdiction is already filled with 200 asylum seekers, and the town doesn’t have the money to purchase temporary structures. According to the town council’s spokeswoman, “The solution is a practical one.”
The full story is here, via the excellent Mark Thorson.
How are Americans portrayed in North Korean films?
There is a good interview with Paul Fischer, who has studied this and related topics, here is one bit:
The way Americans are shown is equally counterfactual. There’s a long-running film franchise in North Korea that Kim Jong-il started called — depending on how you translate — Unknown Heroes or Unsung Heroes. It’s all about undercover spies, and the villains in every single one of them are dastardly Americans with bad hair and plans to kill children or poison people with AIDS. So there’s a sense in which the anger about The Interview being offensive to North Koreans is a little bit of the pot calling the kettle black. One of the weird things about The Interview situation is that in real life Kim Jong-un is this short, fat young guy who’s running a failed, bankrupt irrelevant state. I haven’t seen The Interview, of course, but from the trailers they make Kim Jong-un look like this broad-shouldered, badass cigar-smoking leader of an awesomely dangerous state. It’s actually a flattering portrayal. But it’s like with any kind of bully: They don’t get the joke. The fact that the joke exists is threatening.
There is a video example of Americans in North Korean film at the link. This is interesting too:
The country found The Interview‘s portrayal of Kim Jong-un to be hugely offensive. Are the Kims ever portrayed by actors in North Korea?
I believe there’s one film biography of Kim Il-sung — called either The Sun of Korea or The Star of Korea — where he’s played by an actor. Allegedly, this was a guy who they brought in and gave plastic surgery to so that he looked like Kim Il-sung and then, when they were done with him, they sent him off to the concentration camps. That’s the only time, because the thinking was, How do you have a guy play god? How do you paint god? So, with the Interview, the idea that there was an American playing the great leader, and playing him for laughs, and getting killed at the end — that just couldn’t be allowed.
The drunk utilitarian
Here is a new paper by Aaron A. Duke and Laurent Bègue:
The hypothetical moral dilemma known as the trolley problem has become a methodological cornerstone in the psychological study of moral reasoning and yet, there remains considerable debate as to the meaning of utilitarian responding in these scenarios. It is unclear whether utilitarian responding results primarily from increased deliberative reasoning capacity or from decreased aversion to harming others. In order to clarify this question, we conducted two field studies to examine the effects of alcohol intoxication on utilitarian responding. Alcohol holds promise in clarifying the above debate because it impairs both social cognition (i.e., empathy) and higher-order executive functioning. Hence, the direction of the association between alcohol and utilitarian vs. non-utilitarian responding should inform the relative importance of both deliberative and social processing systems in influencing utilitarian preference. In two field studies with a combined sample of 103 men and women recruited at two bars in Grenoble, France, participants were presented with a moral dilemma assessing their willingness to sacrifice one life to save five others. Participants’ blood alcohol concentrations were found to positively correlate with utilitarian preferences [emphasis added] (r = .31, p < .001) suggesting a stronger role for impaired social cognition than intact deliberative reasoning in predicting utilitarian responses in the trolley dilemma. Implications for Greene’s dual-process model of moral reasoning are discussed.
The gated version is here. The original pointer is from SteveStuartWilliams.
What is the welfare cost of Amazon supply restrictions on books?
Maybe that welfare cost is not very high at all. After all, if Amazon does not carry a book you can sign up at the Barnes & Noble website and that takes a few minutes at most.
There is a tension in most criticisms of Amazon. On one hand, the critic wishes to argue that a “not carry” decision by Amazon has a big impact on how a book does. On the other hand, the critic wishes to argue that the loss of access to particular titles is a big deal. You cannot easily have it both ways. If readers won’t switch to B&N.com, they must not care very much about particular titles, in which case the Amazon refusal to carry (or delay in shipping) is small even relative to the size of the (small) trade in books.
Krugman’s column today, which covers Amazon vs. Hachette, appears terrible at first glance, but in fact he presents a new and original argument. Get past the mood affiliation and you come to this:
…what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place.
If I may fill in some blanks, one possible version of the hypothesis — to pull an idea from Gary Becker and Steve Erfle — is that readers consume both “books” and “buzz around books” as complements. The marginal gains from books can be low but the marginal gains from the bundled package may be much higher and those higher gains will not be measured by the (high) price elasticity of book purchases.
In the early stages of this war, Amazon boycotts have often increased the buzz for a book, such as with Beth Macy’s Factory Man. But if these practices continue, they will cease to be news stories and an Amazon refusal to carry or promote plausibly will damage how books will do, without much potential for upside.
How much of the value in a book/buzz package is due to the buzz? 65 percent? That would explain the concentration of reading interest among bestsellers and books your peers are reading. But if Amazon won’t carry or promote a book, does the total supply of buzz fall? Or does the buzz simply transfer to other titles? In the latter case we are again back to small welfare costs from an Amazon refusal to carry. Krugman’s idea is fun, but I am still inclined to think the welfare cost of Amazon supply restrictions on individual books likely is small, again even relative to the size of the book sector, much less relative to gdp.
It is fine to argue that Amazon is being unfair to some authors and to object on ethical grounds. The economist also should add that readers don’t seem to mind very much. Most of the objections I am seeing are coming from authors and publishers, who of course in this sector are much less diversified in their interests than are readers.
Charles Murray on Ayn Rand
Charles Murray has a good piece on Ayn Rand, critical in parts but especially insightful about why Rand’s books continue to be so inspirational and influential:
Rand expressed the glory of human achievement. She tapped into the delight a human being ought to feel at watching another member of our species doing things superbly well. The scenes in “The Fountainhead” in which the hero, Howard Roark, realizes his visions of architectural truth are brilliant evocations of human creativity at work. But I also loved scenes like the one in “Atlas Shrugged” when protagonist Dagny Taggart is in the cab of the locomotive on the first run on the John Galt line, going at record speed, and glances at the engineer:
He sat slumped forward a little, relaxed, one hand resting lightly on the throttle as if by chance; but his eyes were fixed on the track ahead. He had the ease of an expert, so confident that it seemed casual, but it was the ease of a tremendous concentration, the concentration on one’s task that has the ruthlessness of an absolute.
That’s a heroic vision of a blue-collar worker doing his job. There are many others. Critics often accuse Rand of portraying a few geniuses as the only people worth valuing. That’s not what I took away from her. I saw her celebrating people who did their work well and condemning people who settled for less, in great endeavors or small; celebrating those who took responsibility for their lives, and condemning those who did not. That sounded right to me in 1960 and still sounds right in 2010.
Second, Ayn Rand portrayed a world I wanted to live in, not because I would be rich or powerful in it, but because it consisted of people I wanted to be around. As conditions deteriorate in “Atlas Shrugged,” the first person to quit in disgust at Hank Rearden’s steel mill is Tom Colby, head of the company union:
For ten years, he had heard himself denounced throughout the country, because his was a ‘company union’ and because he had never engaged in a violent conflict with the management. This was true; no conflict had ever been necessary; Rearden paid a higher wage scale than any union scale in the country, for which he demanded—and got—the best labor force to be found anywhere.
That’s not a world of selfishness or greed. It’s a world of cooperation and mutual benefit through the pursuit of self-interest, enabling satisfying lives not only for the Hank Reardens of the world but for factory workers. I still want to live there.
…In scene after scene, Rand shows what such a community would be like, and it does not consist of isolated individualists holding one another at arm’s length. Individualists, yes, but ones who have fun in one another’s company, care about one another, and care for one another—not out of obligation, but out of mutual respect and spontaneous affection.
Ayn Rand never dwelt on her Russian childhood, preferring to think of herself as wholly American. Rightly so. The huge truths she apprehended and expressed were as American as apple pie. I suppose hardcore Objectivists will consider what I’m about to say heresy, but hardcore Objectivists are not competent to judge. The novels are what make Ayn Rand important. Better than any other American novelist, she captured the magic of what life in America is supposed to be. The utopia of her novels is not a utopia of greed. It is not a utopia of Nietzschean supermen. It is a utopia of human beings living together in Jeffersonian freedom.
Also worth reading is this superb piece by Robert Tracinsiki, All an Ayn Rand Hero Really Wants is Love.
Are IPOs collusive and value-destroying?
A new paper says yes, and then maybe sort of:
By modeling the market for IPOs as a repeated game with imperfect monitoring, we establish that collusion among underwriters explains the concentration of spreads at 7%, along with other characters of the data on spreads. Furthermore, the structure of optimal spreads in the model explains the existence and quantitative characteristics of underpricing in the market for IPO shares. We estimate the model by deriving moment conditions from both underpricing and spreads. Our estimates indicate that IPOs destroy value on average over the sample period 1985-2007. This result, however, is driven primarily by the dot-com era. Excluding this period, IPOs appear to increase value.
That is from Lowery and Kang at UT Austin, a few years old but I had not seen it before, the link is here. For the pointer I thank Samir Varma. He also points me to this paper on why the reputations of individual star employees may be eclipsing the reputations of institutions at the level of the investment bank.
“We all know that wealth inequality has gone up”
That is a response to the Piketty criticisms from Paul Krugman, and also mentioned by Matt Yglesias. Phiip Pilkington also has a useful treatment. This point however doesn’t do the trick as a defense. Keep in mind that the “new and improved numbers,” as produced by Chris Giles, are showing doubts about the course of measured wealth inequality in the UK. Maybe wealth inequality hasn’t gone up.
Now maybe that does “have to be wrong.” But if the “new and improved” numbers are wrong, it is hard to then argue Piketty’s wealth inequality numbers can be trusted. In which case we are back to knowing that income inequality has gone up, but not knowing so much concrete about wealth inequality. (That is one reason why my own Average is Over focuses on income, and on labor income in particular, because that is where the main action has been.) The data section of Piketty’s book, which has gathered so much praise, then is not so useful, though by no fault of Piketty’s. We might think it likely that wealth inequality has gone up, but if we are going to do these selective overrides of the best available data, we cannot trust the data so much period or otherwise cite it with authority. We also could not map wealth inequality into particular measures of the r vs. g gap at various periods of time.
If there is one big lesson of the FT/Piketty dust-up, it is that we don’t have reliable numbers on wealth inequality.
Now do we in fact “know” that wealth inequality has gone up? See this piece by Allison Schrager. Intuitions about wealth vs. income inequality are trickier than you might think. And on what we actually do and do not know, here is a very good comment on Mian and Sufi’s blog (for U.S. data):
I could not have said it better myself.