Results for “south africa”
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Assorted links

1. Why the minimum wage doesn’t explain stagnant wages.

2. What is the optimal way to pro-rate co-authorship?

3. White and Asian per capita incomes, in South Africa, are up significantly since Mandela’s election victory in 1994.

4. Innovation changes everything, by Seth Roberts.

5. What kind of ads should a Eugene Fama story carry?

6. The increasing inequality of art prices, and from the story I liked this line: “The beauty of art is that there is a lot of it.”

On the Hayek-Pinochet connection

Corey Robin has a long post on this, here is one part:

Hayek complied with the dictator’s request. He had his secretary send a draft of what eventually became chapter 17—“A Model Constitution”—of the third volume of Law, Legislation and Liberty. That chapter includes a section on “Emergency Powers,” which defends temporary dictatorships when “the long-run preservation” of a free society is threatened. “Long run” is an elastic phrase, and by free society Hayek doesn’t mean liberal democracy. He has something more particular and peculiar in mind: “that the coercive powers of government are restricted to the enforcement of universal rules of just conduct, and cannot be used for the achievement of particular purposes.” That last phrase is doing a lot of the work here: Hayek believed, for example, that the effort to secure a specific distribution of wealth constituted the pursuit of a particular purpose. So the threats to a free society might not simply come from international or civil war. Nor must they be imminent. As other parts of the text make clear, those threats could just as likely come from creeping social democracy at home. If the visions of Gunnar Myrdal and John Kenneth Galbraith were realized, Hayek writes, it would produce “a wholly rigid economic structure which…only the force of some dictatorial power could break.”

Hayek came away from Chile convinced that an international propaganda campaign had been unfairly waged against the Pinochet regime (and made explicit comparison to the campaign being waged against South Africa’s apartheid regime). He set about to counter that campaign.

He immediately wrote a report lambasting human rights critics of the regime and sought to have it published in the Frankfurter Allgemeine Zeitung. The editor of this market-friendly newspaper refused, fearing that it would brand Hayek as “a second Chile-Strauss.” (Franz Josef Strauss was a right-wing German politician who had visited Chile in 1977 and met with Pinochet. His views were roundly repudiated by both the Social Democrats and the Christian Democrats in Germany.) Hayek was incensed. He broke off all relations with the paper, explaining that if Strauss had indeed been “attacked for his support for Chile he deserves to be congratulated for his courage.”

There is much more at the link.

Are we living in a time of asset bubbles?

Here is one typical complaint about bubbles, from Jesse Eisinger, excerpt:

We are four years into the One Percent’s recovery. Now, we are in Round 3 of quantitative easing, the formal term for the Fed injecting hundreds of billions of dollars into the economy by purchasing longer-term assets like Treasury bonds and Fannie Mae and Freddie Mac paper. What’s that giving us? Overvalued stocks. Private equity firms racing to buy up Arizona real estate. Junk bond yields at record lows. Ratings shopping on structured financial products.

These are dangerous signs of prebubble activity.

Here is a Krugman rebuttal.  I will offer a few points on a series of debates which in general I have stayed away from.

1. I don’t find most predictive discussions of bubbles interesting, while admitting that such claims often will prove in a manner correct ex post.  “OK, the price fell, but was it a bubble?  I mean was there froth, like on your Frappucino?”  Or to quote Eisinger, it might also have been “dangerous signs of prebubble activity” (what happens between the “prebubble” and the “bubble”?  The “nascent bubble”?  The “midbubble”?  The “midnonbubble”?)

2. Good news and improving conditions may well bring more bubbles or greater likelihood of bubbles, but that is hardly reason to dislike good news and improving conditions.

3. Relative to measured real interest rates, stocks look cheap right now.  That doesn’t mean they are, but reread #1.

4. No one understands the term structure of interest rates, no matter what they tell you.  Reread #1.

5. I don’t see why anything particular about the current state of affairs, at least in the United States, needs to be “unwound.”  I sometimes draw a distinction between those of us who have been thinking about interest on reserves since S. Tsiang, Fischer Black, and the Reserve Bank of New Zealand, and those of us who have not.

6. One coherent definition of bubble is that of a hot potato, traded in a world of heterogeneous expectations, but which must ultimately pop, because eventually the price of that asset will consume all of gdp, a bit like those old Tokyo parking spots.  Fair enough, but I don’t see that in many asset markets today if any (Bitcoin for a while?).

7. Another coherent definition of a bubble has less to do with a dynamic price path and ongoing resale for gain, but rather there may be a (temporary) segmentation across classes of asset market buyers.  The obvious candidate here is that  many people and institutions have been frightened into Treasuries and away from almost everything else.  That could mean we have a real interest rate bubble, but it also could mean that lots of other assets are undervalued, at least if the liquidity effect defeats the higher real interest rate effect of moving out of Treasuries.  (It would be odd to think that a shift of funds out of Treasuries and into stocks would cause stock prices to fall, but perhaps some people fear this.)

I don’t agree with this view, but I do feel I understand it.  The most likely “bubble” is then in real interest rates, due to a (temporary?) skewing of the risk premium.  That all said, I do not think this should be called a bubble.  Changes in the risk premium and “bubbles” have traditionally been considered alternative explanations for asset prices.  Reread #1, and reread #4 while you’re at it.

8. Ruchir Sharma made some interesting points yesterday:

Far from fighting off a deluge of foreign capital, leaders from India to South Africa are struggling to attract a greater share of global capital flows in order to fund widening current account deficits. Over the past decade, the foreign exchange reserves of the developing world grew at an average annual rate of 25 per cent, swelling from $570bn in 2000 to $7tn in 2011. But over the past year, the average rate slowed to a crawl of barely 5 per cent.

The idea that money is still flooding emerging markets misses the big picture, which is that global cross-border capital flows are down 60 per cent from their 2008 peak. The largest shares of cross-border capital flows are in bank loans, trade and foreign direct investment, which are slowing worldwide.

9. I expect the real economy over the next twenty years to be more volatile than it was say in the 1990s.  In that sense, many current asset market prices may be revised and quite dramatically.  Still, I don’t find the bubble category to be so useful in this regard.  We really don’t know what is going to happen and that is why the current prices are wrong, not because of a “bubble.”

10. I am probably done blogging about bubbles for a while.  Satisfying you was not the goal of this post, but that is in the nature of the subject area, not out of any desire for spite.

Stories to watch for in 2013

Here is a list from The Guardian.  Here is an FT list.  My list looks more like this:

1. Economic turnarounds in the Philippines, Sri Lanka, Indonesia, and possibly Pakistan and Myanmar.

2. Pressures for secession in Catalonia, and a potential crisis of the Spanish state.

3. East Asian belligerence, with more hawkish leaders in the three major countries.

4. There is actually a non-trivial chance we totally blow it on the debt ceiling.

5. The continuing rise of machine intelligence and the general recognition of such as the next major technological breakthrough.

6. Significant positive reforms in Mexico on education, foreign investment, and other matters too.

7. Political collapse in South Africa.

8. Continuation of America’s “Medicaid Wars,” over state-level coverage, combined with the actual implementation of much more of ACA.  Continuing attempts in Rwanda, Mexico, and China to significantly extend health care coverage to much poorer populations.

9. The return of dysfunctional Italian politics, combined with the arrival of recession in most of the eurozone economies, including France and Germany.

10. The ongoing barbarization of North Africa, including Mali, Syria, and possibly Egypt.  And whether any of these trends will spread to the Gulf states.

11. Whether China manages a speedy recovery and turnaround.

12. Watching India try to overcome its power supply problems, its educational bottlenecks, and its low agricultural productivity.

13. Seeing whether Ghana makes it to “middle income” status and how well broader parts of Africa move beyond resource-based growth.

14. Whether U.S. and also European political institutions can handle the intensely distributional nature of current fiscal questions.

Those are some of the main stories I will have my eye on, but of course I expect to be surprised.  I suppose Israel and Iran should be on that list somehow, North Korea too, but I don’t find that thinking and reading about it yields much in the way of return, compared to a simple “wait and see.”

Addendum: Here is Matt’s list.

*Searching for Sugar Man*

There is plenty of social science in this unexpected indie hit, which depicts the musical career of Sixto Rodriguez.  Rodriguez had two very good albums in the early 1970s but faded into obscurity after failing to gain commercial traction.  Unbeknown to the artist, he had become an enduring national celebrity in South Africa.  His fans there had no idea he had been working in Detroit as a construction demolitionist (this is before the modern internet, although eventually the internet helped his daughter discover his fame in South Africa, through a fan’s web site).  Here is Cass Sunstein on the movie and its portrayal of social and cultural dynamics.

The music is quite appealing — imagine a mix of Donovan, Motown, and low-tech psychedelia, the latter a’la Love.  If you are looking to hear or download one song, I recommend the iconic “I Wonder.”

To my ear it sounds naive but charming, but to the South Africans it was revelatory and cool.  Furthermore here was a non-Black coming out of Motown (Mexican ancestry but born in the United States), yet with much of the anti-establishment feel of a black artist of the time.  The movie never touches on this racial angle as possibly relevant to his popularity; did the South Africans require a non-black version of a black idol?  And what does he now symbolize, given that white rule has ended?  When they show Rodriguez’s post-apartheid concerts in South Africa, there is not a black face to be seen, as if he has become a nostalgia act in a slightly unsettling manner with the anti-establishment gloss now drained away.

The full story has not yet been told, not even on the American side.  From watching the movie, the viewer receives the feeling that Rodriguez fell into a hole circa 1973.  The reality is that he was touring Australia as late as 1981 (more here) and even put out a live album from that country in the same year.  Music aficionados will know all about the close cultural connections between Australia and South Africa at that time; did Rodriguez really have no idea of his South African following?  And what kind of connections was he keeping with the commercial world of music?

I would gladly read a book about how failing artists string out their careers by playing in niche markets or writing for them.  For instance Harry Nilsson released some of his late albums in the UK, Australia, and Japan only.  Erwin Nyiregyhzai kept giving periodic piano recitals in Japan, well after his prodigy years were over and he supposedly was “lost” and thus before his “rediscovery.”  What is a rediscovery anyway?

Here is Rodriguez’s eBook guide to happiness.  For pointers I thank Cass Sunstein and also Angus.

International PPP for faculty salaries

Not exactly what I would have thought:

Canada comes out on top for those newly entering the academic profession, average salaries among all professors and those at the senior levels. In terms of average faculty salaries based on purchasing power, the United States ranks fifth, behind not only its northern neighbor, but also Italy, South Africa and India.

You will note however that this is not covering the extreme right hand tail of top faculty salaries in top U.S. universities, but rather a measured mean from public institutions.  There is more here, hat tip goes to Jacob Levy.  In percentage terms, the biggest gap between entry salaries and top salaries is found in China.  There is much more data here.

Rhino links

1. Fake rhino attempts zoo escape, in Japan.  Might the real rhino be more fierce?  Pointer from Ryan McCarl.

2. Killing a rhino by mistake in an anti-poaching demo.  Pointer from George Edwards.

3. South Africa sends rhino poachers to jail for twenty-five years each; a lot of the demand comes from hereAt $40,000 a kilogram, “Traffickers and gangs have been breaking into museums and auction rooms in Britain and Europe to steal rhino heads and horns.”  It is now feared that the eighty-five rhinos housed in British zoos will be the next target and so a high alert has been called.

India and the Promise of Productivity

In the comments to Anti Chain Store Policies in India and America, “Lark” posted a long “refutation” from Triple Crisis of the “neo-liberal” arguments for retail reform in India. I will focus on one remarkable argument:

…experience across the world makes it incontrovertible that large retail companies displace many more jobs of petty traders, than they create in the form of employees. This has been true of all countries that have opened up to such companies, from Turkey in the 1990s to South Africa. Large retail chains typically use much more capital intensive techniques, and have much more floor space, goods and sales turnover per worker.

One estimate suggests that for every job Walmart (the largest global retail chain) creates in India, it would displace 17 to 18 local small traders and their employees. In a country like India, this is of major significance, since around 44 million people are now involved in retail trade (26 million in urban areas) and they are overwhelmingly in small shops or self-employed.

Of course this is no refutation, fewer jobs are precisely the point. What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.

Fewer workers in farming (or retail) means more workers producing more goods in other industries. The same basic lesson holds throughout an economy, it is the declining sectors that allow other sectors to advance. Instantaneously? Immediately? With higher wages for every worker? No. Transitions always involve some pain; creation always involves some destruction; growth always involves change. The alternative, however, is stagnation.

The politics of growth are difficult because those who lose from change are always present and are often more numerous and perhaps even more deserving than the present winners, the capitalists, the business people, the international mega corps; but today’s losses and gains are fleeting, the permanent winners are the workers and consumers of the future who will know only the benefits of productivity.

Switzerland fact of the day

Nearly half the marriages in Switzerland are international ones, up from a third in 1990.

Yet language still matters:

…the Swiss “marry out” in particular ways. The German-speaking Swiss marry largely neighbouring Germans; the Francophone Swiss marry the French; Italian-speakers marry Italians.

Story here, and here are some more numbers:

According to Gavin Jones of the National University of Singapore, 5% of marriages in Japan in 2008-09 included a foreign spouse (with four times as many foreign wives as husbands). Before 1980, the share had been below 1%. In South Korea, over 10% of marriages included a foreigner in 2010, up from 3.5% in 2000. In both countries, the share of cross-border marriages seems to have stabilised lately, perhaps as a result of the global economic slowdown.

…in France the proportion of international marriage rose from about 10% in 1996 to 16% in 2009. In Germany, the rise is a little lower, from 11.3% in 1990 to 13.7% in 2010.

…In most developing countries, the share of men married to foreign women was less than 2% in 2000 (0.7% in Ghana and Bolivia; 0.2% in Colombia and the Philippines; 3.3% in South Africa)…only 4.6% of Americans were married to a foreigner in 2010, up from 2.4% in 1970.

In my pile

1. Food Trucks: Dispatches and Recipes from the Best Kitchens on Wheels, by Heather Shouse.  I’ve read enough of this book to know it is true to its title.

2. The Moral Lives of Animals, by Dale Peterson.  It looks like Adam Smith’s TMS applied to the moral sense of non-human animals, making the point that the moral sense is not unique to human beings.

3. Music for Silenced Voices: Shostakovich and his Fifteen Quartets, by Wendy Lesser.

4. Zoo City, by Lauren Beukes; so far I love it, imagine a mix of Raymond Chandler, near-future science fiction, and South African grit.

All are worthy of purchase, we will see how they develop.  I found The Windup Girl, by Paolo Bacigalupi, the most enjoyable science fiction novel I’ve read in a few years, and it should appeal to fans of Thailand too.

Banerjee and Duflo on poverty and food

It is an excellent piece, excerpt:

The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim. We shouldn’t forget, too, that other things may be more important in their lives than food. Poor people in the developing world spend large amounts on weddings, dowries, and christenings. Part of the reason is probably that they don’t want to lose face, when the social custom is to spend a lot on those occasions. In South Africa, poor families often spend so lavishly on funerals that they skimp on food for months afterward.

And don’t underestimate the power of factors like boredom. Life can be quite dull in a village…

We often see the world of the poor as a land of missed opportunities and wonder why they don’t invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible and celebrating when occasion demands it.

Hat tip goes to half of the people I follow on Twitter.

What determined the playing length of an audio CD?

Here is one account:

Sony had initially preferred a smaller diameter, but soon after the beginning of the collaboration started to argue vehemently for a diameter of 120mm.  Sony’s argument was simple and compelling: to maximize the consumer appear of a switch to the new technology, any major piece of music needed to fit on a single CD…Beethoven’s Ninth Symphony was quickly identified as the point of reference — according to some accounts, it was the favorite piece of Sony vice-president Norio Ohga’s wife.  And thorough research identified the 1951 recording by the orchestra of the Bayreuther Festspiele under Wilhelm Furtwängler, at seventy-four minutes, as the slowest performance of the Ninth Symphony on record.  And so, according to the official history, Sony and Philips top executives agreed in their May 1980 meeting that “a diameter of 12 centimeters was required for this playing time.”

That is from the new and interesting book by Tim Büthe and Walter Mattli, The New Global Rulers: The Privatization of Regulation in the World Economy, the book’s home page, with free chapter one, is here.  Speaking of which, Garth Saloner is another very good South African economist and he is now Dean of Stanford Business School.

Globalization and the Expanding Moral Circle

In 1869 the Irish historian William Lecky (1838-1903) wrote that moral progress is about extending the moral circle.

At one time the benevolent affections embrace merely the family, soon the circle expanding includes first a class, then a nation, then a coalition of nations, then all humanity…

What is the effect of globalization on the moral circle? Does trade melt barriers and expand the moral circle or does globalization make "the other" a more salient division allowing politicians to demonize and control through xenophobia?

Two pieces of evidence, one anecdotal the other experimental, suggests that globalization expands the moral circle. The anecdotal evidence is the cover story of this month's Wired titled "1 Million Workers. 90 Million iPhones. 17 Suicides. This is where your gadgets come from? Should you care?"

Now from a rational point of view this is absurd. Put aside that the suicide rate is higher among American college students than Chinese workers at Foxconn, even odder is that the writer cares about 17 suicides but not say the million plus deaths in China due to lung disease. But no one said that the moral circle grows for rational reasons. In this case, the writer, Joel Johnson, found that the purchase of the cell phone extended his moral circle to workers who assembled the phone half a world away: 

I was burdened by what felt like an outsize provision of guilt–an existential buyer’s remorse for civilization itself. I am here because I want to know: Did my iPhone kill 17 people?

What about the experimental evidence? In an excellent paper, Buchan et al. discuss results from a public good dilemma game that they ran on thousands of people in six countries around the world: Iran, South Africa, Argentina, Russia, Italy and the United States.

In each country the players could contribute to themselves, to a local group or to a world group. Local contributions were doubled and world contributions were tripled such that the world-group maximizing strategy would be for all contributions to go to the world account, the local-group maximizing strategy would be for all contributions to go to the local account and (as usual) the dominant strategy was to contribute to self only. (Local contributions also paid more to self than did contributions to the world account). 

The authors find two strong effects. First, the rate of donation to the world account increased significantly with the extent of a country's globalization, as measured by a globalization index. Second, within countries the rate of donation to the world acount increased with an individual's globalization index (based on measures such as whether the individual worked for an international firm, watched foreign movies, called people abroad etc.) Thus, globalization increases the potential for global cooperation.

The authors conclude:

…not only is living in a more globalized country associated with more cooperation at the world level, but the same relationship holds as the degree of individual global connectedness increases as well. The cosmopolitan hypothesis receives clear support from our experiments.

… our findings suggest that humans' basic “tribal social instincts” may be highly malleable to the influence of the processes of connectedness embedded in globalization. 

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.