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Nations can be start-ups, too
That is my latest Bloomberg column, here is one excerpt:
The virtues of business startups have led to many a success story. These enterprises start with clean slates. They embody the focused and often idiosyncratic visions of their founders. The successful ones grow faster than their competitors. Even after they become larger and more bureaucratic, these companies often retain some of the creative spirit of their startup origins.
It is less commonly recognized that some nations, including many of the post-World War II economic miracles, had features of startups. For instance, Singapore started as an independent country in 1965, after it was essentially kicked out of Malaysia and suddenly had to fend for itself. Lee Kuan Yew was the country’s first leader, and he embodied many features of the founder-chief executive: setting the vision and ethos, assuming responsibility for other personnel, influencing the early product lines in manufacturing and serving as a chairman-of-the-board figure in his later years.
Other start-ups nations have been UAE, Israel, Taiwan, Hong Kong, Cayman Islands, Estonia, South Korea, and of course way back when the United States. You will note that many of these examples are imperfectly democratic in their early years, and they do not in every case grow out of it. And this:
The world today seems to have lower potential for startup nations. This is in part because international relations are more peaceful and also because most colonial relationships have receded into the more distant past. Those are both positive developments, but the corresponding downside is not always recognized, namely fewer chances for reshuffling the pieces.
This is the close:
To paraphrase John Cleese from Monty Python, the startup nation concept isn’t dead, it’s just resting. Whether in business or in politics, the compelling logic of the startup just isn’t going away.
The best chances for future start-ups may be in Africa, around the borders of Russia, and perhaps someday (not now) Kurdistan. Do read the whole thing.
Monday assorted links
1. Remember Walter Block’s “Murderer’s Park”? South African markets in everything.
2. A professional cook criticizes amateur cooks.
3. “Harper made the startling claim that we might see “an all-intersex podium in the 800 in Rio and I wouldn’t be surprised to see as many as five intersex women in the eight-person final.”” Link here.
4. In praise of Claudia Olivetti. And the economics of university presses.
Not exactly St. Francis talking to the birds, in fact it is more useful
This is remarkable:
Now scientists have determined that humans and their honeyguides [a kind of bird] communicate with each other through an extraordinary exchange of sounds and gestures, which are used only for honey hunting and serve to convey enthusiasm, trustworthiness and a commitment to the dangerous business of separating bees from their hives.
The findings cast fresh light on one of only a few known examples of cooperation between humans and free-living wild animals, a partnership that may well predate the love affair between people and their domesticated dogs by hundreds of thousands of years.
Claire N. Spottiswoode, a behavioral ecologist at Cambridge University, and her colleagues reported in the journal Science that honeyguides advertise their scout readiness to the Yao people of northern Mozambique by flying up close while emitting a loud chattering cry.
For their part, the Yao seek to recruit and retain honeyguides with a distinctive vocalization, a firmly trilled “brrr” followed by a grunted “hmm.” In a series of careful experiments, the researchers then showed that honeyguides take the meaning of the familiar ahoy seriously.
…Researchers have identified a couple of other examples of human-wild animal cooperation: fishermen in Brazil who work with bottlenose dolphins to maximize the number of mullets swept into nets or snatched up by dolphin mouths, and orcas that helped whalers finish off harpooned baleen giants by pulling down the cables and drowning the whales, all for the reward from the humans of a massive whale tongue.
But for the clarity of reciprocity, nothing can match the relationship between honeyguide and honey hunter. “Honeyguides provide the information and get the wax,” Dr. Spottiswoode said. “Humans provide the skills and get the honey.”
Here is the full NYT story.
Tuesday assorted links
1. How sex workers verify the identities of their clients.
2. Chat at the Institute for Economic Affairs with Stephen Davies. We covered Brexit, Trump, the great stagnation, why you won’t live to 800, cultural diversity, and much more. I wasn’t holding back for this one, and some crowd members were appalled.
3. David Beckworth interviews Bob Hall.
4. Africa’s motorcycle taxi. And Chris Blattman on botox and related matters Romer. And Paul Romer on Paul Romer.
5. Has China reached peak urbanization?
6. Against dichotomies for understanding Turkish society — Jenny B. White from 2015.
Thursday assorted links
1. Hyperuniformity.
2. The fastest growing market for Chinese goods is the Philippines.
3. The PR culture that is Faroe (warning: violent images at the link).
4. Howard Raiffa has passed away (NYT).
5. An African free trade agreement on the way.
6. Radley Balko on the Roland Fryer study, very good piece.
Freedom in the World is in Decline
My thoughts on Independence Day are more muted this year than they have been in the past. In the first half of my life I saw the Berlin Wall fall and I watched as democracy, trade, and greater freedom spread around the world. There was still plenty wrong, of course, especially for a libertarian, but the world was on an upswing and it seemed like the ideas that led to the economic, political and social destruction of the first half of the twentieth century were in decline. Now, following the second Great Depression, illiberalism is on the rise much as it rose following the first Great Depression. All could yet turn out well but there is no denying that the world is no longer on an upswing.
In Freedom in the World: 2016, Freedom House reports:
The world was battered by crises that fueled xenophobic sentiment in democratic countries, undermined the economies of states dependent on the sale of natural resources, and led authoritarian regimes to crack down harder on dissent….
- The number of countries showing a decline in freedom for the year—72—was the largest since the 10-year slide began. Just 43 countries made gains.
- Over the past 10 years, 105 countries have seen a net decline, and only 61 have experienced a net improvement.
- Ratings for the Middle East and North Africa region were the worst in the world in 2015, followed closely by Eurasia.
- Over the last decade, the most significant global reversals have been in freedom of expression and the rule of law.
Freedom in the World has now declined for the 10th year in a row.
In defense of Davos, or at least its cosmopolitanism
I very much liked yesterday’s Ross Douthat piece, and I agree with most of it, and I regard him as one of the truly great columnists writing today. Still, there was one tiny part I disagreed with, and I see the point being repeated in varying forms elsewhere, so I thought I would pull it out and add a few comments, namely:
(There is more genuine cosmopolitanism in Rudyard Kipling and T. E. Lawrence and Richard Francis Burton than in a hundred Davos sessions.)
That is Ross, do read the whole piece for context, but here are my worries. They may be nitpicks, but actually I feel a fair amount is at stake here:
1. It seems unfair to compare Davos sessions to some rather robust, historically important, top-of-the-line explorers. Virtually all sessions are boring, including or maybe even especially in the 19th or early 20th centuries. How about comparing the elites of back then to the elites of today? Then I think the Davos set would look quite good. Or if you compare the explorers of more recent times — say Jan Morris or Louis Sarno — to the explorers of back then, still the present day looks good and possibly even considerably superior in terms of curiosity, tolerance, and a broad outlook.
Overall, I see a lot of evidence — both cross-sectional and time series — that those qualities are what economists call normal goods rather than inferior goods, or in other words those qualities rise with income. And do we moderns not in some ways have an overall better and more accurate perspective? Have we not read much more, learned better social science, and developed a greater facility for spotting prejudices and logical fallacies?
2. I suspect either the elites or the explorers of today are better when it comes to understanding differing perspectives of gender, neurology, sexuality, race, age (should you beat your kids?), and a variety of other dimensions. Maybe none of these wisdoms fall exactly under the heading of the adjective “cosmopolitan,” but still they seem relevant for whether today’s elite is wiser and broader. How many of the earlier elite were women, and embodied that set of diverse perspectives, to pose a simple comparative question?
3. I’ve never been to Davos, but I know some people who have. They’re weird! And I mean that in a (mostly) good way. I am reluctant to overgeneralize about them, and I suspect they are more diverse than is often thought to be the case. Almost by the virtue of having been invited, they are some pretty extreme outliers, consider for instance Bill Gates or Elon Musk. I’d also like to see data on how many of them have spent serious time in say poor rural villages in less developed nations, or had other strange or diverse experiences. The answers might surprise us.
Who amongst us knows this about CEO and billionaire Patrick Byrne of Overstock?:
“30 years ago in China I contracted Hep C. I got a bad head wound and a ‘barefoot doctor’ they called him, sewed me up. I’ll give you the facts, I went stage 4 last summer, seemed to have gotten through the treatment but it’s been quite harsh on me and it’s on top of a long, I’ve actually had 106 surgeries, 51 times they stopped my heart electrically, another 50 times chemically,”
Isn’t that a kind of cosmopolitanism? And the medical treatments also have given him some pretty novel perspectives. Patrick by the way is fluent in Mandarin and has spent years in strange and unusual parts of China, and during a time when it was far less safe and comfortable than today.
Or how about what Jeff Sachs does? Whether or not you agree with all of his economics, it’s not easy, and I mean on both the mind and the body. How about those Harvard MBAs who are Mormons and have done missions in exotic locales and gone door to door for two years?
Muhammad Yunus was born in a Chittagong Muslim village into a family of nine children, circa 1940. Later “From 1969 to 1972, Yunus was assistant professor of economics at Middle Tennessee State University in Murfreesboro.” Isn’t that a pretty incredible diversity of life experience?
Thomas Friedman, a classic exemplar of the globalist mindset and whipping boy for many, in fact spent serious time in Beirut covering the civil war, and doing original reporting in situations of very real danger, winning Pulitzers and a National Book Award for the quality of his work. During one later four-year period, he traveled over 500,000 miles. Nicholas Kristof is another good example of someone who really “gets out there,” in his case often in Africa but not only.
If you are curious, here’s a basic list of Davos attendees. Note also that the very real increase in segregation by income in America — mostly a bad development and which Ross mentions — seems to be centered around the upper middle class, not the Davos set, as the very wealthy and the elites always have lived somewhat apart.
Overall I think Ross and many others are somewhat underrating Davos. I do understand that Davos attendees may, as a whole, suffer from excess hubris, excess complacency, or be excessively fond of technocracy. And the fact that many (by no means all) of them have not suffered very much does limit some of their perspectives. But are they not in fact actually about as cosmopolitan as we might hope for?
Addendum: Rob Howse offers some useful remarks, and also notes the connection of the “genuine cosmopolitan” idea — a tricky concept — to Leo Strauss. Here is his closing bit:
Is it so that the cosmopolitans Douthat despises merely retreat into comfortable and familiar neighborhoods in global cities?…[many are] working in a combat zone with Medicins sans frontiers; or persisting as a foreign correspondent in a country where journalists’ lives are threatened; or setting up a truth commission to heal wounds in a conflict-ridden nation; or soldiering as a social entrepreneur to empower women’s small business in an African village; or confronting traditional community leaders about female genital mutilation. These are all quintessentially cosmopolitan roles, which involve real risks, real sacrifice, and often wrenching encounters with otherness.
I agree with Ross’s description that the Davos set is very often “liberal Christianity without Christ.” But maybe that’s the most cosmopolitan philosophy going these days. The bigger question of course is, given slow economic growth and institutional rigidification, how much that really helps us.
Brussels notes
I strongly recommend a visit, as the different currents of contemporary Europe swirl together here like nowhere else. You can see high culture, high taxes, dysfunctional governance, bickering linguistic groups, EU bureaucrats, tourists, Art Nouveau, Turks and Moroccans, and cops carrying submachine guns, all within minutes of each other. It is cheaper than most other major European cities, and has excellent architecture, art, and food, including ethnic food and some of the continent’s best African food (try Resto Bar Tam-Tam).
Unlike in Paris, the immigrant neighborhoods are often no more than a ten or fifteen minute walk from the major non-immigrant neighborhoods. That is the geographic feature which gives Brussels its special feel. Here are my notes on Molenbeek, a short stroll from city center.
The area near the European Commission reminds me of the part of Washington with the World Bank and IMF. Hard to believe, I know.
I don’t find the chocolate here better than in say France, but Brussels does show that chocolate competition lowers prices.
Here is Ian Buruma on Brussels.
Sunday assorted links
1. Does gender equity cause sex differences to grow bigger? (speculative)
2. Tenure extension policies may not always benefit women (NYT).
3. MIE: swastika golf balls. And a mobile phone with a rotary dial. And Stefan Zweig biopic coming.
4. How Africans will lose from Brexit.
5. Silicon Valley’s robot pizzeria.
Geneva notes
This is still the land of the $76 veal chop, and that is not at Michelin-starred restaurants. You will do better by seeking out ethnic food on and around Rue de Monthoux, which is in center city and concludes right by the lake. At an Indian-Iranian restaurant just off this street, Royal India, I had perhaps the best fesenjan in memory.
Due to lost bank secrecy, international banks are leaving Geneva, and Swiss watch exports are falling. The view of the lake is still beautiful, and some of the lake shore real estate now seems to be empty. The swans are still all white, however.
Barbier-Mueller is piece for piece one of the higher quality museums in the world, mostly African and Oceanic items, and currently they have a good show on media of exchange with artistic qualities.
Center city now seems to be at least fifty percent immigrants, and I am not referring to the numerous French and Germans who settle in Switzerland. This was not what I was expecting the first time I saw Geneva in 1985. It is a livelier city, but it still radiates that old, vague sense of dullness.
Where is freedom in the world contracting? Advancing?
Contracting:
America, China, Hong Kong, Russia, Ukraine, Austria, Hungary, Poland, Slovakia, Turkey, Syria, Libya, Iraq, Yemen, Kosovo, Afghanistan, Philippines, Venezuela, Nigeria, South Africa, Malaysia, and Brazil, though the latter may be in flux. Tunisia and Iran are problematic, but arguably hard to call. Saudi may be headed toward collapse, but I don’t think you can say they are less free just yet. Ethiopia is losing more political freedom, though still making very real economic progress.
Advancing:
Mexico and Colombia, if only by consolidating previous gains, and still there is a chance of a turnaround in Argentina at some point. Latvia? Where else? You could make a (modest) case for India and some of the smaller African countries.
Neutral:
Japan, South Korea, Canada, and much of Western Europe though many of these cases appear fragile to me.
Overall this is not a thrilling ledger. I haven’t listed most of the smaller countries, but in the longer run they often follow the lead of their larger neighbors.
File under Not Good.
Altruism toward others can hinder cooperation
Altruism toward others can inhibit cooperation by increasing the utility players expect to receive in a noncooperative equilibrium. To test this, we examine agricultural productivity in West African polygynous households. We find cooperation, as evidenced by more efficient production, is greater among co-wives than among husbands and wives. Using a game-theoretic model, we show that this outcome can arise because co-wives are less altruistic toward each other than toward their husbands. We present a variety of robustness checks, which suggest results are not driven by selection into polygyny, greater propensity for cooperation among women, or household heads enforcing others’ cooperative agreements.
That is a new paper by Akresh, Chen, and Moore, via the excellent Kevin Lewis. Here are some ungated versions.
Environmental lawsuits and the vengeance donors
There are so, so many environmental lawsuits, often brought by non-profits backed by philanthropists. These institutions, among other things, target polluting corporations and bring lawsuits against them for purposes of constructing a deterrent against yet more pollution. The Sierra Club and Greenpeace would be two examples, and of course a big chunk of the funds comes from the relatively wealthy. How is this for one example of many?:
On 7 October, Greenpeace filed a lawsuit in Superior Court for the District of Columbia against Dow Chemical, Sasol North America (owned by the South African State Oil Company), two public relations firms – Dezenhall Resources and Ketchum – and four individuals.
On top of that, it is easy enough to be an anonymous donor to these groups, and to stay anonymous. That said, I have heard tales — apocryphal perhaps — of donors who gave to environmental causes because they too earlier in their lives had suffered under the adverse effects of pollution. In back room whispers they are sometimes called “vengeance donors,” and it is suggested that because of the vengeance donors soon enough all companies will go out of business or at the very least be at the mercy of the whims of the wealthy.
Now, to be sure, many of these environmental lawsuits are excessive, or unfair, or would fail both a rights and cost-benefit test and we should condemn them, as indeed you see happening with equal frequency on the Left and on the Right. Many companies have gone out of business because of environmental lawsuits or the threat thereof, or perhaps the companies never got started in the first place because they couldn’t afford large enough legal departments. I can safely say that just about everyone sees the problem here.
But we shouldn’t condemn the good lawsuits, right? Right? Or is this whole philanthropic lawsuits business simply out of control and needs to be stopped altogether?
And oh, that Greenpeace lawsuit I linked to above? It actually wasn’t about environmental pollution at all, at least not directly. It was because Greenpeace felt it was under secretive and privacy-intruding surveillance. You should have seen my Twitter feed light up when the vengeance donors let on their role in that one.
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 internationalization of Italy?
Two days ago I reported on how Italian food was the big winner from culinary globalization. How are things going in Italy itself?:
Annual spending by Italian families on restaurants and cafes shrank nearly 2% between 2007 and 2014, Eurostat’s latest data show, while consumption of ethnic foods such as Chinese or North African has nearly doubled during that period.
The Masuellis—with a back-of-the-envelope way of running their business—can’t get bank loans to modernize their restaurant. They had to sell a property to fund the restaurant in 2011 and 2012, and have also reached into their own pockets to pay salaries and taxes at times.
Mr. Masuelli considered firing some of his five employees, but the rigid labor laws meant the cost of dismissing them was too high. At the same time, new health and safety regulations have eaten into profit.
More broadly there is this:
Officer Pang is a top supervisor in one of China’s biggest police departments, in the southern metropolis of Guangzhou. But for two weeks, he and three other Chinese police officers are in Italy with strict orders: to protect Chinese tourists.
Of course it is only four officers, but isn’t that what they said at first about RoboCop? I also enjoyed this paragraph:
“It’s our duty to make Chinese fall in love with Rome and Italy,” said Alessandro Zucconi, the president of the Young Hoteliers Federation in Rome, who agreed that “misunderstandings” sometimes occur between the two cultures. “They are not like the Germans, who mostly come knowing our culture and literature better than we do.”
Developing…