Results for “age of em” 16699 found
Do positive wealth shocks stick?
There is a new paper by Hoyt Bleakley and Joseph P. Ferrie, titled “Up from Poverty? The 1832 Cherokee Land Lottery and the Long-run Distribution of Wealth.” This paper uses a very clever experimental design, relying on random, lottery-based allocations of land. The question is how much winning this land lottery helped people in the longer run. Here is the abstract:
The state of Georgia allocated most of its land to the public through a system of lotteries. These episodes provide unusual opportunities to assess the long-term impact of large shocks to wealth, as winning was uncorrelated with individual characteristics and participation was nearly universal among the eligible population of adult white male Georgians. We use this episode to examine the idea that the lower tail of the wealth distribution reflects in part a wealth-based poverty trap because of limited access to capital. Using wealth measured in the 1850 Census manuscripts, we follow up on a sample of men eligible to win in the 1832 Cherokee Land Lottery. We assess the impact of lottery winning on the distribution of wealth 18 years after the fact. Winners are on average richer (by an amount close to the median of 1850 wealth), but mainly due to a (net) shifting of mass from the middle to the upper tail of the wealth distribution. The lower tail is largely unaffected.
The bottom line is that the grants increased inequality, many people were helped a great deal, and a large chunk of people weren’t helped at all. An ungated version of the paper is here.
Assorted links
1. New paper on MIT’s openness to Jewish economists, by E. Roy Weintraub.
2. The last telegram has not yet been sent.
3. How well or badly did the sequester work out? In most areas we were told something far from the truth.
4. Is there such a thing as a basic emotion? Very interesting piece.
5. Claims about Japanese rice, and new Chinese law says children must visit their elderly parents.
Why don’t dying firms raise prices?
Bryan Caplan asks:
“Demand is more elastic in the long-run than the short-run.” It’s a textbook truism. Implication: Raising prices is often a bad idea even if profits instantly rise. In the long-run, demand will get more elastic, and the price-gouging firm will discover that its behavior was penny-wise and pound-foolish.
This all makes sense, but there is an awkward implication: Once firms realize that they’re dying, they ought to raise prices. By the time long-run demand elasticity kicks in, they’ll be out of business. Why not opportunistically take advantage of the situation?
Yet as far as I can tell, this almost never happens. When firms are on their last legs, they tend to cut prices, or at least hold them steady.
What gives? Is the textbook truism false? Is this a corporate governance problem – the current CEO never wants to admit that the end is nigh? Or what?
I can think of a few examples of this phenomenon. Dying academic book publishers for instance seem to be raising prices. This also may explain some aspects of the market for oil. Arguably to the extent Saudi Arabia perceives itself as running out of oil, they feel less need to keep the market price down to limit investment in energy substitutes. But why are there not more examples? Is demand too low for reasons of selection? Does internal collapse within the firm, and personnel departures, raise the shadow value of bringing in revenue sooner rather than later?
Cash Transfers to the Poor
Chris Blattman, author of one of the key papers on cash transfers to the poor, takes a page from Albert Hirschman’s book and practices a bit of self-subversion.
First, the message can be misunderstood. It is not, “Cash transfers to the poor are a panacea.” More like, “They probably suck less than most of the other things we are doing.” This is not a high bar.
Second, cash transfers work in some cases not others. If a poor person is enterprising, and their main problem is insufficient capital, terrific. If that’s not their problem, throwing cash will not do much to help. I recommend the paper for details….
Third, a cash transfer to help the poor build business is like aspirin to a flesh wound. It helps, but not for long. The real problem is the absence of firms small and large to employ people productively. The root of the problem is political instability, economic uncertainty, and a country’s high cost structure, among other things. A government’s attention is properly on these bigger issues.
If I were an enterprising young researcher looking for an idea and experiments that will prove powerful in five years, I would try to find the stake I can drive into the heart of the cash transfer movement.
…That is not depressing. That is science. We should welcome it.
In that spirit: I look forward to the stake-wielders.
*World War Z*
I was surprised how serious a movie it is and also by how deeply politically incorrect it is, including on “third rail” issues such as immigration, ethnic conflict, North Korean totalitarianism, American urban decay as exemplified by Newark, gun control, Latino-Black relations, songs of peace, and the Middle East. Here is one (incomplete) discussion of the Middle East angle, from the AP, republished in el-Arabiya (here is a more detailed but less responsible take on the matter, by a sociology professor and Israeli, spoilers throughout).
The movie is set up to show sympathy for the “Spartan” regimes and to have a message which is deeply historically pessimistic and might broadly be called Old School Conservative, informed by the debates on martial virtue from pre-Christian antiquity. But they recut the final segment of the movie and changed the ending altogether, presumably because post-Christian test audiences and film executives didn’t like it. Here is one discussion of the originally planned finale. It sounds good to me. The actual movie as it was released reverts to a Christian ending of sorts. My preferred denouement would have relied on the idea of an asymptomatic carrier or two, go see it and figure out the rest yourself.
By the way, for all the chances taken by the film makers, they were unwilling to offend the government of China (see the first link), in part because you cannot trick them easily with subtle, veiled references. Such tomfoolery works only on Americans — critics included — which I suppose suggests a lesson of its own.
Here is a Times of Israel review of the movie, interesting throughout, and it notes that the Israel scenes are simply translated to “the Middle East” for Turkish audiences.
A good film, I liked it. How many other movies offer commentary on Thucydides, Exodus, Gush-Shalom, Lawrence Dennis, and George Romero, all rolled into one?
Assorted links
Is there a case against small plates on restaurant menus?
That is the current rage in the DC dining scene, namely that you can more easily order lots of “small plates” rather than a big plate with steak and spinach. Neil Irwin makes the case against that practice here, Matt Yglesias responds and defends small plates.
Neither mentions price discrimination or for that matter does much analysis of price. You will recall Glazer’s Law: “It’s either taxes or price discrimination.” And usually it is price discrimination.
Here is Alex on bundling cable channels as a form of (possibly) welfare-improving price discrimination. Read through that stuff if you don’t already know it, but the punchline is that big plates are like a “take it or leave it” cable contract, and small plates are like the a’la carte cable pricing schemes. The bundled contract gets some marginal channels to people who wouldn’t otherwise be willing to pay for them if those channels were sold on a stand-alone basis. In the TV context some of us browse reality TV, Farsi news, and women’s roller derby, even if we wouldn’t pay for those transmissions per se. In the restaurant context, the big plate gets some of us to eat more vegetables and munch on more parsley. Who would pay much for coleslaw? Output goes up under many of the most basic scenarios and consumer welfare goes up too.
In a more competitive market, as indeed the DC restaurant scene has become, bundling breaks down somewhat. We move toward a system of “small plates.” So the increasing competitiveness is good for consumers but the breakdown of bundling can be bad for them, with indeterminate welfare results, which means either Neil or Matt can be correct (but do lay out the whole story, and never ever ever reason from a plate size change!)
Those who have a relatively low marginal value for the add-on items of a meal (vegetables?) will be the ones who eat less under a regime of small plates. How their consumer surplus fares, a priori, is more complex and is not easily settled by theory alone. But, using some typical numbers, very often those who value the vegetables inelastically are worse off under a regime of small plates.
I wonder whether Neil Irwin or Matt Yglesias likes vegetables more?
The future of manufacturing jobs in developing nations
Nike is to tackle rising labour costs at its Asian factories by “engineering the labour out” of its shoe and clothing production as it seeks to defend its profits.
Don Blair, Nike’s chief financial officer, said its objective was to reduce the number of people making its products as he highlighted the impact of a sharp increase in wages in Indonesia.
From the FT, here is more. Here is my recent NYT column on related developments.
Who is the most influential public intellectual of the last twenty-five years?
A while ago I asked a related question. But my answer blew it on one major possibility. Doesn’t Andrew Sullivan have a reasonably strong claim to that title, especially after the recent Supreme Court decisions on gay marriage? Sullivan was the dominant intellectual influence on this issue, from the late 1980s on, and that is from a time where other major civil liberties figures didn’t give gay marriage much of a second thought, one way or the other, or they wished to run away from the issue. Here is his classic 1989 New Republic essay. Here is a current map of where gay marriage is legal and very likely there is more to come.
Sullivan was also a very early blogger, and an inspiration for many in that regard (myself included), and the blogging innovation seems like it is going to stick. That’s two big wins right there, and how many other people can even come up with one?
Many of you will complain about his “war blogging,” his connection to Obama, and perhaps other matters, but no matter what you think on these issues it still seems to me he holds the lead.
Pre-Sullivan, I would give the honors to Milton Friedman.
Is the labor market return to higher education finally falling?
Peter Orszag considers that possibility in his recent column. About one in four bartenders has some kind of degree. Orszag draws heavily on this paper by Beaudry and Green and Sand, which postulates falling returns to skill. It’s one of the more interesting pieces written in the last year, but note their model relies heavily on a stock/flow distinction. They consider a world where most of the IT infrastructure already has been built, and so skilled labor has not so much more to do at the margin. This stands in noted contrast to the common belief — which I share — that “IT-souped up smart machines” still have a long way to go and are not a mature technology. You can’t hold that view and also buy into the Beaudry and Green and Sand story, unless you think we have suddenly jumped to a new margin where machines build machines, with little help from humans.
Rather than accepting “falling returns to skill,” I would sooner say that education doesn’t measure true skill as well as it used to.
The more likely scenario is that the variance of the return to having a college education has gone up, and indeed that is what you would expect from a world of rising income inequality. Many people get the degree, yet without learning the skills they need for the modern workplace. In other words, the world of work is changing faster than the world of what we teach (surprise, surprise). The lesser trained students end up driving cabs, if they can work a GPS that is. The lack of skill of those students also raises wage returns for those individuals who a) have the degree, b) are self-taught about the modern workplace, and c) show the personality skills that employers now know to look for. All of a sudden those individuals face less competition and so their wages rise. The high returns stem from blending formal education with their intangibles (there is also more pressure to get an advanced degree to show you are one of the privileged, but that is another story.)
This polarization of returns — among degree holders — explains both why incomes are rising at the top end, and why the rate of dropping out of college is rising too. At some point along the way in the college experience, lots of students realize they won’t be able to “cross the divide,” and the degree alone won’t do it for them. They foresee their future tending bar and act accordingly.
Too many discussions of the returns to education focus on the mean or median and neglect the variance and what is likely a recent increase in that variance.
Assorted links
2. Automated coach to practice conversations (pdf).
3. Will Wilkinson on fairness, norms, and inequality.
4. Food trucks for dogs (MIE), and use Kinect to control your cockroaches.
5. The shadow banking culture that is China.
6. Miles Kimball and Matt Rognlie on wage stickiness, price stickiness, and TFP. That is also a good post showing some differences between blogospheric economics and academic economics.
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.
Assorted links
1. Jesse Friedman is not cleared.
2. Story on the Millennium Village disputes.
3. Inequality in conducting opportunities.
4. Is there too much co-authorship in economics?
5. Claims about Treasuries and LTRO paydowns, speculative. From Scott here are various market monetarist perspectives on China, Treasuries, and Bernanke.
6. Markets in everything, Great Mutiny of 1857 edition.
Alex and I visit the Google Sci Foo convention
It was excellent, and for me the two highlights were hearing some of the world’s top cosmologists debate inflation theory (theirs, not ours), and Larry Page discussing his vision for Google looking forward and why internet access by balloon makes sense.
I saw a display of Google Glass but I still don’t get it. It struck me as excellent for people who want to send photos to their Facebook page in real time, or record their children, but that’s not me. What I like about the iPad is that it pulls you out of the world, whereas Glass seems to integrate “the flow of information world” with “the real world.” Why spoil two such wonderful things? But I’ll be the first to admit that a) the defect in my understanding of Glass is my fault alone, and b) I will buy one immediately once it is available.
The best new question I heard was this: if you could change the physical laws of the universe so as to create more life in it, what would you do? Make gravity stronger or weaker? Change which constants? Have stars distributed more densely throughout the universe? More or less carbon? And so on. The ultimate point of the question is to get you thinking about whether our universe is fine-tuned for life after all.
The cafeteria food was not nearly as good as what I have had in the New York Google and it struck me as overrated and most likely in decline. The vegetarian dishes were best. What you should do is eat in the Telugu restaurant Pessaratu, Andhra mess-style food, in Sunnyvale, get the lentils and make sure you eat them with your fingers, South Indian-style, for the maximum taste experience.
For how long can the carry trade go on?
Here is a rather scary article by @exantefactor, consider it speculative and please use with care, nonetheless I thought it was worth a ponder. Here is one bit:
This QE carry trade nightmare became reality last week, and the Eurodollar pit was ground zero. As carry trade asset prices come under pressure due to rising US real interest rates, investors are forced to sell Eurodollars to hedge higher financing costs and negative gamma exposure. The magnitude of the selling implies that there is a lot of money exposed, but it’s not clear what still needs to unwind.
Last week, there were rumors of bond dealers who were both liquidating MBS inventory and ceasing to bid on these securities until quarter end. There were also accounts of liquidity drying up in the Treasury market. When dealers cease to bid on the assets that collateralize the loans for carry trades, the system is frozen. This is serious.
If you believe the accounts in the media, you would think the Fed believes the move in the front end of the yield curve, including the Eurodollar strip, is a misinterpretation of Fed tightening. The Eurodollar market not only has an interest rate component but also a credit component, and one interpretation of the blow out in the strip is a spike in banking system credit risk.
…Make no mistake about it: Bernanke is blowing up the QE trade he engineered. The question for markets at this juncture is not what assets are exposed to this trade but rather how much capital is exposed and who will take the other side of the unwind. The move in the most liquid part of the rates curve suggests that the position is very deep; the reluctance of dealers to bid on financing collateral suggests the bid is very shallow. Finding a level where that bid/ask comes together is likely to be a very disruptive process, and if history is any guide, the “collateral” damage will be felt around the world.
The full article is here, hat tip goes to Izabella Kaminska. Is “we haven’t been understanding the carry trade” the key to unpacking some otherwise puzzling recent asset price movements?