Results for “concentration”
182 found

Why should we not recreate Neanderthals?

A few of you were puzzled over this question two days ago, or at least pretended to be.  So why not?  For a start, the cloning process probably would require a lot of trial and error, with plenty of victims of experimentation being created along the way.

Then ask yourself some basic questions about Neanderthals: could they be taught in our schools?  Who would rear the first generation?  Would human parents find this at all rewarding?  Do they have enough impulse control to move freely in human society?  How happy would they be with such a limited number of peers?  What public health issues would be involved and how would we learn about those issues in advance?  What would happen the first time a Neanderthal kills a human child?  Carries and transmits a contagious disease?  By the way, how much resistance would the Neanderthals have to modern diseases?

What kinds of “human rights” would we issue to them?  Would we end up treating them better than lab chimpanzees?  Would they be covered by ACA and have emergency room rights?

We don’t know the answers here, but I would expect to run up against a number of significant fails on these issues and others.

We do, however, know two things.  First, the one environment we know they could survive in (for a while) was a Europe teeming with wildlife.  That no longer exists.

Second, we’ve already run the “human/Neanderthal coexistence experiment” once, and it seems to have ended in the violent destruction of one of those groups.  It would be naive to expect anything much better the second time around.

Most likely the Neanderthals would end up in some version of concentration camps, with a lot of suffering and pain along the way, and I don’t see that as an outcome worth bringing about.

Addendum: If you’d like to read another point of view, there is George Church and Ed Regis, Regenesis: How Synthetic Biology Will Reinvent Nature and Ourselves.

Looking at pictures of cute animals makes you work more carefully and deliberately

Or so we are told:

A new study by Japanese researchers now shows there are more benefits to looking at pictures of these universal delights than just getting a case of the warm and fuzzies. Afterwards, we concentrate better.

Such is the “Power of Kawaii”, as a paper documenting the research is appropriately titled. The Japanese word “kawaii” means cute. The paper was published in the online edition of the U.S. journal Plos One on Thursday. Through three separate experiments a team of scientists from Hiroshima University showed that people showed higher levels of concentration after looking at pictures of puppies or kittens.

For the pointer I thank Mark Thorson.

Are isolated capital cities worse?

From Filipe R. Campante, Quoc-Anh Do, and Bernardo Guimaraes (pdf):

We show empirical evidence that non-democratic countries with [geographically] isolated capital cities display worse quality of governance, as measured across many diff erent dimensions. We provide a framework of endogenous institutional choice that accounts for this stylized fact, based on the idea that autocratic elites are constrained by the threat of rebellion, and that this threat is rendered less eff ective by distance from the seat of political power. Broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city. Conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite (the rents that would have to be shared) are larger. In equilibrium, a correlation between isolated capitals and misgovernance emerges as a result. The framework yields additional predictions on the size of the income premium enjoyed by capital city inhabitants and on the level of military spending by ruling elites, which are also supported by the evidence.

The title is “Isolated Capital Cities and Misgovernance: Theory and Evidence.”

As I wrote yesterday, Naypyidaw!  And yet there is more.  Across the fifty American states, isolated capital cities are more corrupt:

We show that isolated capital cities are robustly associated with greater levels of corruption across US states. In particular, this is the case when we use the variation induced by the exogenous location of a state’s centroid to instrument for the concentration of population around the capital city. We then show that different mechanisms for holding state politicians accountable are also affected by the spatial distribution of population: newspapers provide greater coverage of state politics when their audiences are more concentrated around the capital, and voter turnout in state elections is greater in places that are closer to the capital. Consistent with lower accountability, there is also evidence that there is more money in state-level political campaigns in those states with isolated capitals. We find that the role of media accountability helps explain the connection between isolated capitals and corruption. In addition, we provide some evidence that this pattern is also associated with lower levels of public good spending and outcomes.

Trenton Makes the World Takes” — not exactly!

China and Russia billionaire facts of the day

…two men who in the last decade held the title of richest man in China are now in jail on corruption charges of one kind or another.  That is not to say that the charges were baseless, only that in China’s freewheeling business culture, the authorities seem to pay particularly close attention when the deal-making generates fortunes approaching $10 billion. Deng Xiaoping declared that “it’s glorious to be rich,” but the message now is, not too rich. The government appears intent on generating competitive churn at the top, in part to contain social resentments.

Now look at Russia, where one hundred billionaires control fortunes worth an astonishing 20 percent of national GDP. Russia has nearly as many billionaires as China but they control twice as much total wealth in an economy one-fourth the size. Just as striking, Russia is missing not only a middle class but also a millionaire class; according to Boston Consulting Group, China ranks third in the world for number of millionaires, while Russia is not even in the top 15 for millionaires.

The growing business influence of the state is reflected in the fact that 69 of those billionaires live in Moscow, the largest concentration for any city in the world. Protected by their patrons, the richest face little competition. Eight of the top 10 are holdovers from 2006. More than 80 percent of the wealth of Russian billionaires comes from non-productive industries like real estate, construction and especially commodities, namely oil and gas, in which political ties can sustain fortunes indefinitely. In no other developing nation is this share greater than 35 percent. Even in Brazil, a commodity economy at the same income level as Russia, the non-productive share of billionaires’ wealth is just 12 percent.

The entire post, by Ruchir Sharma, is fascinating, and with some superb visuals, do read it.

Jared Diamond reviews *Why Nations Fail*

There is much in the review, excerpt:

In their narrow focus on inclusive institutions, however, the authors ignore or dismiss other factors. I mentioned earlier the effects of an area’s being landlocked or of environmental damage, factors that they don’t discuss. Even within the focus on institutions, the concentration specifically on inclusive institutions causes the authors to give inadequate accounts of the ways that natural resources can be a curse. True, the book provides anecdotes of the resource curse (Sierra Leone cursed by diamonds), and of how the curse was successfully avoided (in Botswana). But the book doesn’t explain which resources especially lend themselves to the curse (diamonds yes, iron no) and why. Nor does the book show how some big resource producers like the US and Australia avoid the curse (they are democracies whose economies depend on much else besides resource exports), nor which other resource-dependent countries besides Sierra Leone and Botswana respectively succumbed to or overcame the curse. The chapter on reversal of fortune surprisingly doesn’t mention the authors’ own interesting findings about how the degree of reversal depends on prior wealth and on health threats to Europeans.

Do read the whole review (that is not just the usual cliched command to do so), and I will gladly link to any response by Acemoglu and Robinson.  Here is Diamond’s bottom line:

My overall assessment of the authors’ argument is that inclusive institutions, while not the overwhelming determinant of prosperity that they claim, are an important factor. Perhaps they provide 50 percent of the explanation for national differences in prosperity. That’s enough to establish such institutions as one of the major forces in the modern world. Why Nations Fail offers an excellent way for any interested reader to learn about them and their consequences. Whereas most writing by academic economists is incomprehensible to the lay public, Acemoglu and Robinson have written this book so that it can be understood and enjoyed by all of us who aren’t economists.

The Chicago School

In Launching the Innovation Renaissance I wrote:

In the United States, “vocational” programs are often thought of as programs for at-risk students, but that’s because they are taught in high schools with little connection to real workplaces. European programs are typically rigorous because the training is paid for by employers who consider apprentices an important part of their current and future work force. Apprentices are therefore given high-skill technical training that combines theory with practice—and the students are paid!

In the United States there are some experimental programs moving in this direction. One of the most interesting is being pushed by Chicago mayor Rahm Emanuel:

Chicago Public Schools (CPS) students will have the opportunity to attend five Early College STEM Schools (ECSS) that focus on technology skills and career readiness – as well as earn college credits– under a partnership agreement with five technology companies, CPS and City Colleges of Chicago, Mayor Rahm Emanuel announced…

The five technology companies, IBM, Cisco, Microsoft Corporation, Motorola Solutions and Verizon Wireless, will help develop a unique curriculum at each new school to teach students the skills required in that marketplace, as well as provide mentors and internships.  Upon graduating from these tailored programs, the students will be prepared for careers in science and technology.

…All of the new schools will open in September 2012 with a class of ninth graders.  Each student will be able to graduate in four-years with a high school diploma with college credits, with a goal of graduating within six years with an Associate of Science (AS) degree in Computer Science or an Associate in Applied Science (AAS) in Information Technology. The college courses will be taught by professors from CCC.

Emanuel is also redesigning the City Colleges of Chicago along similar lines:

Rahm fired almost all the college presidents, hired replacements after a national search, and decreed that six of the seven city-run colleges would have a special concentration. Corporations pledging to hire graduates will have a big hand in designing and implementing curricula. “You’re not going for four years, and you’re not going for a Nobel Prize or a research breakthrough,” he says. “This is about dealing with the nursing shortage, the lab-tech shortage. Hotels and restaurants will take over the curriculum for culinary and hospitality training.” Already AAR, a company that has 600 job openings for welders and mechanics, is partnering with Olive-Harvey College; Northwestern Memorial Hospital is designing job training in health care for Malcolm X College.

It’s too early to judge these developments but Emanuel’s op-ed on this subject was surprisingly good. The key question, which I haven’t yet seen answered, is whether the the companies will have real skin in the game, which I see as critical to success.

Hat tip: Ben Casnocha.

Corporate cash and Apple

Apple alone represents $64 billion or 36% of the total $179 billion increase in corporate cash since 2009. And in 2011, overall corporate cash would have actually declined by $6 billion had it not been for Apple’s $46 billion increase.

…Supported by our expectations that consumers worldwide will continue to feast on Apple products, we expect overall corporate cash and its concentration will increase in 2012. Apple alone could represent 12% of total corporate cash, about three times more than the next cash king. …

There is more here, and I thank Brian Bares for the pointer.

Should speed limits be higher?

Arthur van Benthem, who is on the job market from Stanford, says no:

When choosing his speed, a driver faces a trade-off between private benefits (time savings) and private costs (fuel cost and own damage and injury). Driving faster also has external costs (pollution, adverse health impacts and injury to other drivers). This paper uses large-scale speed limit increases in the western United States in 1987 and 1996 to address three related questions. First, do the social benefits of raising speed limits exceed the social (private plus external) costs? Second, do the private benefits of driving faster as a result of higher speed limits exceed the private costs? Third, could completely eliminating speed limits improve efficiency? I find that a 10 mph speed limit increase on highways leads to a 3-4 mph increase in travel speed, 9-15% more accidents, 34-60% more fatal accidents, and elevated pollutant concentrations of 14-25% (carbon monoxide), 9-16% (nitrogen oxides), 1-11% (ozone) and 9% higher fetal death rates around the affected freeways. I use these estimates to calculate private and external benefits and costs, and find that the social costs of speed limit increases are three to ten times larger than the social benefits. In contrast, many individual drivers would enjoy a net private benefit from driving faster. Privately, a value of a statistical life (VSL) of $6.0 million or less justifies driving faster, but the social planner’s VSL would have to be below $0.9 million to justify higher speed limits. The substantial difference between private and social optimal speed choices provides a strong rationale for having speed limits. Although speed limits are blunt instruments that differ from an ideal Pigovian tax on speed, it is highly unlikely that any hidden administrative costs or unforeseen behavioral adjustments could make eliminating speed limits an efficiency-improving proposition.

The Rent Seeking is Too Damn High

Bloomberg: Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show.

The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046.

The future of Ontario (Canada?)

Daniel Drache reports on some trends which I had not quite been following:

Ontario has the densest concentration of car production probably in the world…

From a North American perspective, Ontario, Canada’s industrial heartland, ranks 16 out of 18 on his competitiveness ranking index, just ahead of Michigan.

…the job boom in resources including minerals and agricultural exports offset less than one-fifth of the jobs lost in Canadian manufacturing facilities.  The big winners in terms of job growth are private services and government…

…the incredible growth in services challenges one of the standard assumptions of globalization — that Canada is becoming more integrated into the global economy.  Most service production is consumed domestically and virtually all public services are not traded…the most remarkable structural change in the Canadian economy is that Canada was less integrated in world markets at the end of 2006 than it was a decade earlier measured by intense export openness…Canadian exports reached their peak at over 45 percent of the share of Canada’s total GDP in 2000; by 2007 this had declined by 10 points to 35 percent.

Here is yesterday’s related post on America.  Here is my earlier post on Harold Innis.

Not From the Onion

The headline says it all:

House keeps farm subsidies, cuts food aid

Here are some of the other provisions which seem designed just to be ridiculed by Jon Stewart:

Directs the Agriculture Department to rewrite rules it issued in January meant to make school meals healthier. Republicans say the new rules, the first major overhaul of school lunches in 15 years, are too costly.

Forces USDA to report to Congress every time officials travel to promote the department’s “Know Your Farmer, Know Your Food” program, which supports locally grown food, and discourages the department from giving research grants to support local food systems. Large agribusiness has been critical of the department’s focus on these smaller food producers.

Prevents USDA from moving forward with new rules that would make it easier for smaller farmers and ranchers to sue large livestock companies on antitrust grounds. The proposed rules are meant to address the growing concentration of corporate power in agriculture.

Delays for more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. A Republican amendment adopted Thursday would require the Commodity Futures Trading Commission, which funded in the bill, to first have other rules in place to facilitate its collection of derivatives market data.

Prevents the FDA from approving genetically modified salmon for human consumption, a decision set for later this year.

Questions the scope of Obama administration initiatives to put calories on menus and limit the marketing of unhealthy foods to children.

Don’t get me wrong, I’d probably do away with a number of these rules as well. But anyone who argues against making school meals healthier because it’s too expensive at the same time as they vote for keeping billions of dollars in farm subsidies is not concerned about expenses. What unites the bill is not ideology but protection of agribusiness.

Perhaps the most outrageous provision was one the good guys won:

Critics of farm subsidies did score one victory: The House voted to block a $147 million annual payment to Brazil’s cotton industry. The United States agreed to make that payment last year after Brazil’s industry complained to the World Trade Organization that Washington unfairly was subsidizing U.S. cotton farmers. The United States lost the WTO case and agreed to make the payments to Brazil as a settlement.

So not only have we been subsidizing cotton farmers but we have been paying Brazil to allow us to keep subsidizing cotton farmers. Incredible. I wonder whether this provision will make it into the final bill.

When does greater inequality lead to greater redistribution?

Henry Farrell reports:

Noam Lupu and Jonas Pontussen (PDF) have a piece on the relationship between inequality and distribution in the new American Political Science Review. There is a lot of debate about whether the level of economic inequality in society leads to greater or lesser distribution – what Lupu and Pontussen suggest is that the structure of inequality (that is – the more particular relationships between different segments in the income distribution, rather than some summary index) is more important. More particularly they argue that if one tries to hold racial and ethnic cleavages constant, the key factor determining redistribution is the income gap between middle income voters and lower income voters. Where this gap is low, middle class people feel some degree of solidarity with the poor and exhibit what Lupu and Pontussen describe as “parochial altruism.” That is, they are more likely to support income redistribution because they feel that the poor are in some sense, ‘like them.’ When the gap is high, middle class people will have a much weaker sense of solidarity with the poor, and hence be less supportive of redistribution. Lupu and Pontussen suggest that the US is an outlier, with weaker solidarity than the structure of US inequality would suggest. They argue that the explanation for this is straightforward – “it is clearly attributable to the high-concentration of racial-ethnic minorities in the bottom of the income distribution.” More bluntly put – middle class Americans feel less solidarity with the very poor because the very poor are more likely to be black.

Where does Japan put its nuclear reactors?

Chris Blattman reports on the work of Daniel Aldrich, quoting Aldrich:

Using a new dataset from Japan, this paper demonstrates that state agencies choose localities judged weakest in local civil society as host communities for controversial projects. In some cases, powerful politicians deliberately seek to have facilities such as nuclear power plants, dams, and airports placed in their home constituency. This paper then explores new territory: how demographic, political, and civil society factors impact the outcomes of siting attempts. It finds that the strength of local civil society impacts the probability that a proposed project will come to fruition; the greater the concentration of local civil society, the less likely state-planned projects will be completed.

Here is further reporting on the research from John Sides.

What I’ve been reading

1. The Half-Made World, by Felix Gilman.  I very much enjoyed this mix of dystopian steampunk and speculative science fiction, reviewed by Henry here.

2. Vassily Grossman, Everything Flows.  I found this more fluent and compelling than his longer Life and Fate; it's the story of a man who returns home from a concentration camp.  Recommended.

3. Richard Overy, 1939: Countdown to War.  I didn't think a book so short on this topic could be good.  I was wrong.  Overy has a strong overall track record as an author.

4. Samuel Moyn, The Last Utopia: Human Rights in History.  I don't have any objections to this much-touted book, but I expected to learn more from it than I did.  It didn't feel like 352 pp. 

5. Nicholas Ostler, The Last Lingua Franca: English Until the Return of Babel.  A provocative book on the forthcoming decline of English as a globally dominant language.  I'm not (yet?) convinced, but I'm less unconvinced than I thought I would be.  One main point is that more and more business will be done without English at all, often through the BRICS countries.  It is interesting to see that fewer people in South Africa are learning English.

Writing naked puts and how the financial sector makes so much money

In part the financial sector does the equivalent of writing "naked puts," namely taking risks which usually yield extra income but occasionally blow up and bring large losses, part of which are socialized.  Lending money to homeowners under relatively loose terms is one way of taking such a position but of course trading strategies can replicate related risk positions.

H. Peyton Young just wrote me that he and Dean Foster have a piece in the latest QJE on a closely related logic; I have yet to read it closely but it strikes me as a very very important article.

The key problem underlying all of this is we don't know how to punish people in a manner consistent with the rising size of absolute rewards.  As I wrote:

Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.

That’s an underappreciated way to think about our modern, wealthy economy: Smart people have greater reach than ever before, and nothing really can go so wrong for them. As a broad-based portrait of the new world, that sounds pretty good, and usually it is. Just keep in mind that every now and then those smart people will be making—collectively—some pretty big mistakes.

Matt is correct that the argument doesn't require bailouts, although bailouts make the problem much worse, by neutering creditors as a risk-reducing force.

Most likely, shareholders favor some but not all of these "going short on volatility" risks.  To some extent they are ripping off the creditors by taking such risks, to some extent they are ripping off the public sector through an expected bailout (not true for most non-financial firms, of course), and to some extent the managers are pushing the risk beyond the point shareholders would desire, if they understood what was going on.  Keep in mind that shareholders and bondholders are also potential market competitors, so the firm's trading book can't be completely open to even the owners of the firm (a neglected point, in my view).

One question, raised by Robin Hanson, is why everyone doesn't write these naked puts.  You can introduce the "not everyone can expect a bailout" point here and it works fine.  But there are other reasons too:

1. Large-scale banking involves economies of scale (after the few biggest U.S. banks, size drops off dramatically).  You don't have to think these economies are socially productive; the point remains that Goldman can take positions which my local bank will not or cannot with equal facility, for a mix of institutional and expertise reasons.  The prospect of bailouts, of course, cements concentration in the sector because everyone wants to lend to "Too Big to Fail."

2. Arguably every bank does write the equivalent of naked puts to a socially non-optimal degree.  It is often homeowners on the other side of the market, arguably to an irrational degree.  In any case the resulting price of the put can be actuarially fair and the basic mechanism still operates.  If you play this strategy, you can expect (the mode) a bunch of years of multi-million returns, followed by an eventual unceremonious firing (if that) and life in the Hamptons.  If you follow an efficient markets strategy, you can expect the going rate of return on the diversified market portoflio.  Which sounds better?

Soon I'll write a post on whether vigilant creditors can neuter this risk-taking, so please hold off on that question for now.

Addendum: This "going short on volatility" risk strategy is receiving a good deal of attention from commentators on my piece, but I actually think "arriving there first with a good asset purchase," as I discuss in the article, is a somewhat more important mechanism for increasing income inequality among the top one percent.  A lot of the rise in income inequality has come outside the financial sector narrowly construed, though it still is related to the existence of relatively open capital markets.