Results for “age of em” 17236 found
Shiller on Trills
In this short piece, Robert Shiller explains one of the basic ideas of his work on macro markets:
The governments of the world should issue shares in their GDPs, securities that pay to investors as dividends a specified fraction of GDP, in perpetuity (or until the government buys them back on the open market). Governments need to end their historic reliance on debt financing: governments issuing shares in GDP is analogous to corporations issuing equity. My Canadian colleague Mark Kamstra and I propose issuing trillionth shares in GDP, and so to call these “Trills.” Last year, a U.S. Trill would have paid $15.09 in dividends, a Canadian Trill C$1.72. The dividends will change every year as GDP is announced, and predicting these changes will certainly interest investors, just as in the stock market. Governments can auction off Trills when current government debt comes due and needs to be refinanced, as part of a debt reduction program.
In this piece, Shiller focuses on the benefits of Trills as opposed to debt:
Substituting Trills for conventional debt helps deleverage the government, something whose importance has become very clear with the debt crisis in Europe. The payments required of the government by the Trills is connected to the country’s ability to pay, measured by their GDP.
Trills could also be the foundation for many types of insurance products, for example, products that would pay off when GDP was down helping to alleviate business cycle issues. A market in Trills could also be used to make predictions and to judge policies (see Gurkaynak and Wolfers for an early test). Which policies will most increased the value of future trills? Similarly, by looking at how the market for trills changes as the Iowa Political Markets change we could identify which politicians are best for GDP (not just the equity and bond markets).
I featured Shiller’s work on macro markets in my book Entrepreneurial Economics: Bright Ideas from the Dismal Science. I think of this body of work as his most visionary and deserving of the Nobel.
Economic convergence between black immigrants and black natives
Alison Jane Rauh, a job candidate from the University of Chicago, has a new (job market) paper on this topic. The abstract is full of information:
The number of black immigrants living in the US has increased 13-fold from 1970 to 2010, increasing their share of the black population from 1% to 10%. Black immigrants’ labor market outcomes surpass those of native blacks. This paper determines in how far the relative success of black immigrants is passed on to the second generation. While blacks of the second generation have equal or higher education and earnings levels than the first generation, the return on their unobservable characteristics is converging to that of native blacks. Race premia are put into a broader context by comparing them to Hispanics, Asians, and whites. Blacks are the only group that experiences a decrease in residual earnings when moving from the first to the second generation. Black immigrants do not only converge to native blacks across generations but also within a generation. For Asians and Hispanics, residual earnings decrease monotonically with age of immigration. For blacks, the residual earnings-age of immigration profile is upward sloping for those immigrating before the age of 15. Convergence across generations is mostly driven by low-educated second generation blacks that drop out the labor force in greater numbers than low-educated first generation immigrants do. Similarly, convergence within a generation is mostly driven by low-educated blacks who immigrate when they are young dropping out of the labor force in greater numbers than those who immigrate when they are older. A social interactions model with an assimilation parameter that varies by age of immigration helps explain this phenomenon. When making their labor force participation decision, immigrant men of all races, but not women, generally place more weight on the characteristics of natives the earlier they immigrate.
I take this to be a “peer effects are really really important” paper, namely that many of the virtues of immigrant culture are swallowed as the second generation assimilates. I should note that the contents of this paper are interesting throughout, for instance: “Conditional and unconditional annual earnings of native black women are at 91% and 78% of white women, which points to a much more equal distribution than that of men (64% and 78%).”
Here is the abstract of another paper (pdf) by Alison, entitled “Successful Black Immigrants Narrow Black-White Achievement Gaps”:
The number of black immigrants in the US quadrupled from 1980 to 2010, increasing their share of the black population from 4% to 10%. During that time period the black-white wage and employment gap widened substantially. This paper explores the extent native blacks differ from immigrant blacks. Additionally it determines in how far increased selective immigration masks an even greater deterioration in the economic condition of native blacks. In 2011, excluding black immigrants increases the white-black wage gap by 4% for men and 9% for women. It increases the employment gap by 13% and 19% for men and women respectively.
Here is the author’s home page. I hope she gets a very good job.
Who disapproves of Obamacare?
I was somewhat surprised by these numbers:
Fifty-three percent of the uninsured disapprove of the law, the poll found, compared with 51 percent of those who have health coverage. A third of the uninsured say the law will help them personally, but about the same number think it will hurt them, with cost a leading concern.
I wonder if any of this poll was conducted in Spanish, and if not whether that would have changed the results. I found this interesting too:
Of the uninsured who said they were not likely to sign up by the deadline, fully half said it was because of the high cost. Twenty-nine percent said they planned to go without coverage because they object to the government’s requiring it, and 11 percent said they did not need health insurance.
And this:
Seventy-seven percent of the uninsured said they disapproved of the mandate, compared with 65 percent of those who already have health insurance.
The politics of science fiction
Science fiction is an inherently political genre, in that any future or alternate history it imagines is a wish about How Things Should Be (even if it’s reflected darkly in a warning about how they might turn out). And How Things Should Be is the central question and struggle of politics. It is also, I’d argue, an inherently liberal genre (its many conservative practitioners notwithstanding), in that it sees the status quo as contingent, a historical accident, whereas conservatism holds it to be inevitable, natural, and therefore just. The meta-premise of all science fiction is that nothing can be taken for granted. That it’s still anybody’s ballgame.
That is from Tim Kreider, who praises the political visions and fiction of Kim Stanley Robinson. Kreider also longs for a more political literature, devoted to such ideas as common stewardship of land and water, and also “small co-ops” instead of “vast, hierarchical, exploitative corporations.” Among other changes. He then writes:
My own bet would be that either your grandchildren are going to be living by some of these precepts, or else they won’t be living at all.
What is a good response to that? Let’s look at the article itself, and we can see sentence which is smarter than Kreider himself seems to realize:
If historians or critics fifty years from now were to read most of our contemporary literary fiction, they might well infer that our main societal problems were issues with our parents, bad relationships, and death.
I would myself note that the politics of science fiction, on average (with exceptions), encourage us to think about “breaking a few eggs,” and not for the better. The reality is that when it comes to the future, we can “see around the corner” only to a limited degree. The upshot is that the rights of the individual — when applicable — should remain paramount, and no I don’t mean Caplanian libertarian rights. You can only rarely be sure you will get such a great gain from violating rights, so why not do the right thing instead? Science fiction inhabits the realm of fiction precisely because the building of grand scenarios is denied to us, for the most part.
To again use Kreider’s own words, societies where “nothing can be taken for granted” are exactly the ones I would never wish to visit, much less live in. I know the radical anarcho-capitalist strand, but is there a Burke-Oakeshott-Hayek science fiction, in the traditionalist and conservative sense of that combination? Or must we resort to the “fantasy” genre to capture such a vision? What would a science fiction account of a macro-level spontaneous order look like? Iain Banks? Frank Herbert?
Why is liquidity “passing through” the global economy in such a segmented, non-neutral fashion?
“It is fair to say that the Fed has created a marvellous environment for virtually all assets, even if this remains one of the weakest economic recoveries on record in the US and through virtually all of the developed markets,” wrote Deutsche Bank in a note.
European high yield, or “junk”, corporate bonds have fared best, producing total returns of more than 150 per cent. Among the few losers were owners of Greek shares.
And yet the eurozone may be approaching deflation and has exhibited weak nominal gdp growth. From the FT there is more here. You should be certain about the appropriateness of the taper — or not — only if you understand this issue better than any human being I have met or heard or read. I wonder if that’s you.
Milton Friedman, some time ago, wrote that money was for the most part neutral, and that the new money rapidly mixes in with the old. That made sense to me at the time, and it nudged me away from Austrian views, yet we have seen decidedly non-neutral effects from the various QEs and the periodic taper talk.
(Where does this non-neutrality come from? Do liquidity injections swing to concentrated areas in financial markets when an underlying economy has not solved what Arnold Kling calls its “PSST problems“, and/or when rates of return are low? That is speculation.)
Note that Michael Woodford supports the taper, and Stanley Fischer has called for the same (“It would be good to start“). They are the leading experts on this question, along with Bernanke himself of course, and each also appreciates the potential benefits from monetary stimulus. Donald Kohn wants to delay the taper but refers to it as a “close call.”
Here is another opinion:
“The best argument for tapering sooner rather than later?” Peter R. Fisher, senior director at the BlackRock Investment Institute, wrote in a recent analysis. “The Fed is running out of stuff to buy.” He estimated that if it maintained the current level of asset purchases, the Fed could soon be consuming all the new issuance of Treasuries and mortgage bonds.
Is this the methadone for withdrawal from QE?
Overall, we don’t have a very good understanding of the different ways in which economies can build up imbalances. Unfortunately, we may soon learn more.
Update: There is indeed a new tapir.
From the comments, on lotteries and education
John S. wrote:
States don’t use lottery proceeds to *increase* funding to schools. They tie the lottery to education as a marketing gimmick, both to sell it to the voters initially, and then to deflect criticism (what do you mean you don’t like the lottery — are you anti-education?) See http://goo.gl/f5b55R
We’re told we need lotteries because people would gamble anyway, and yet a large fraction of lottery revenues go toward advertising, presumably so that people don’t lose interest in it.
I also liked the remarks from ant1900:
This (http://en.wikipedia.org/wiki/Racino) suggests that the appeal of racinos is being able to bring in slot machines to an existing race track. After reading only a few pages of ‘Addiction by Design’ I can see why. The smart machines are now subsidizing the humans and the horses. The horses are probably the hook that convinces voters to allow horse tracks to expand into slot machines (‘we have had the hose track for many years and that has worked out ok, and they are already regulated and already in the gambling business, so let’s let them expand into slot machines, which is not a huge leap from betting on horses’).
Software Patents
Excellent column by Gordon Crovitz in the WSJ on patents and the prospects for reform:
Today’s patent mess can be traced to a miscalculation by Jimmy Carter, who thought granting more patents would help overcome economic stagnation. In 1979, his Domestic Policy Review on Industrial Innovation proposed a new Federal Circuit Court of Appeals, which Congress created in 1982. Its first judge explained: “The court was formed for one need, to recover the value of the patent system as an incentive to industry.”
The country got more patents—at what has turned out to be a huge cost. The number of patents has quadrupled, to more than 275,000 a year. But the Federal Circuit approved patents for software, which now account for most of the patents granted in the U.S.—and for most of the litigation. Patent trolls buy up vague software patents and demand legal settlements from technology companies. Instead of encouraging innovation, patent law has become a burden on entrepreneurs, especially startups without teams of patent lawyers.
…A system of property rights is flawed if no one can know what’s protected. That’s what happens when the government grants 20-year patents for vague software ideas in exchange for making the innovation public. In a recent academic paper (pdf), George Mason researchers Eli Dourado and Alex Tabarrok argued that the system of “broad and fuzzy” software patents “reduces the potency of search and defeats one of the key arguments for patents, the dissemination of information about innovation.”
…For now, the best prospect for real reform is in the Supreme Court, which earlier this month agreed to hear CLS Bank v. Alice Corp., a case about whether a bank’s computerized process for settling transactions via an escrow can be patented. A judge on the appeals court noted this idea was “literally ancient,” developed during the Roman Empire, and should not get a patent now just because a computer is involved.
I think it is too early to call CLS Bank v. Alice Corp. an obituary for software patents as The Economist does but real patent reform is stronger than I thought it would be even 6 months ago.
Addendum: Here is my 2 minute video on some of the problems with patents.
The ultra-Orthodox as (happy) threshold earners
Asher Meir writes to me:
I enjoyed your post today especially since it is one that actually interfaces with my research and not just my teaching of basic micro/macro.
Israeli Ultra-Orthodox are threshold earners in both the positive sense (they don’t on the whole strive to earn more than some basic level) and also the normative sense (they are really more interested in other things.)
Here is an interesting demonstration, you can easily do it yourself using the Israeli CBS “Social Survey Table Generator”. (surveys.cbs.gov.il/Survey/surveyE.htm)
One thing you can easily verify is that the Haredim (you can find them using Topic = Religion and Religiosity, Variable = Religiosity Jews and value is “Ultra Religious/ Haredi) have a reported life satisfaction that is through the roof. It is hugely higher than that of any other sector. (Get there from: Topic = Satisfaction – general; Variable = Satisfied with life.)
But you might say that could be because even though their economic situation is admittedly dire, they care more about other things. Now check out “Satisfaction economic situation”. They still come out way on top. They are not only happiest despite their economic situation, they are happiest with their economic situation. (I am aware that reported happiness and reported life satisfaction are different, I am just expressing myself briefly.) I’m attaching the spreadsheet.
Now here is the real threshold earner criterion: For each group, figure out the average life satisfaction for each earnings level. Then calculate the correlation between life satisfaction and earnings. For every population group it is positive, except for the Ultra-Orthodox. Their coefficient is not significantly different from zero. (J27 is the coefficient, J28 the standard error.)
I’m attaching an Excel spreadsheet that does this for 2012 but I’ve done it a number of times. I do not include the regressions for other sectors but you can easily do so and verify that the income coefficient is positive.
I calculated life satisfaction using a linear weighting, zero for Not so satisfied, one for Satisfied and two for Very satisfied. (Note that the “Not satisfied at all” column is empty. No ultra-orthodox gave this answer.) I used the middle of the income range for income. But in my experience it doesn’t matter much how you do this.
I played around with this once using the WVS to see if I could find some other group in the world for whom life satisfaction was totally uncorrelated with income. I didn’t find any but I imagine that Hal Varian would find it easy to do so.
Those are intriguing results. One possibility is that (some?) religions make people pretty happy. Another is that lack of money does not make you unhappy, provided that a) you can cite a good reason for having a lower income, b) you have peer and family support for your situation/decision, and c) there is no negative selection into the other lower income individuals you will end up hanging around. Bryan Caplan might cite the large number of children as a source of life satisfaction.
If one was looking for grounds to be skeptical, perhaps extremely religious groups use the concepts of happiness and life satisfaction in different ways. For instance complaining about your life satisfaction might be considering a signal of impiety and thus the extremely religious might put a better gloss on things than their actually happiness would warrant. Of course “pretending to be happy” may itself be a possible source of happiness.
From the comments, negative T-bill rates of return
On my somewhat complicated post on negative rates of return from last week, Robert Sams writes:
Very interesting post and #5 is crucial (it’s a geometric process). Two points.
1. I think that we can substitute “ability to leverage at near-treasury rates” for “special trading technologies” and get the same implied predictions yet put the relevant institutional factors into relief.
2. Your #1-3 still works with the wrong model of Treasury returns, as it implicitly models demand as if it’s coming from a “real money” portfolio sort of buyer. Those guys exist of course, and they’re basically buyers at any price (central banks, regulatory demand, etc.). But if we ignore CB policy expectations, the valuation is set in the leveraged market, which is much larger, and treasuries trade rich /not/ so much b/c people want safety and therefore want to buy them, but rather they trade rich because people want to /short/ them for hedging purposes (e.g., investor wants corporate credit w/o the interest rate risk.)
Sounds paradoxical, I know, but failure to appreciate this fact is the basic misconception of the entire “risk premia” way of modelling this stuff.
For any given treasury issue, X billion were sold by Treasury, but the outstanding amount of people long the issue will be many times X because of all those repo leveraged buyers of UST’s, and for every one of those repoed longs, there is a short on the other side doing reverse repo. The market clears with the repo rate, which can often be much lower than fed funds and indeed can go up to -300bps at times if the (primarily hedging) demand from shorts is extreme. (The effective repo rate in this market is rather different from the general collateral series you can pull from public sources.. it’s hard to get good data as it’s proprietary to the big IDB’s… why the Fed tolerates this degree of opacity, I’ve never understood.)
Treasuries can therefore be seen as a special financial “currency”, and the treasury market can be modeled as type of free banking regime, where the public debt is base money, the much larger qty of leveraged UST positions is broad money, and the repo market is an interbank lending market where USD cash is collateral instead of money.
Looked at this way, the phrase “shadow banking system” is a quite literal description. Turn a market monetarist lose in this parallel universe, and the low rate conundrum is due to UST “base money” not keeping up with demand and the Treasury is a tight fisted CB.
In this universe, the real return of treasuries isn’t the relevant variable, it’s the spread between the repo rate and the treasury yield, which acts as a sort of “fee” for the guy who wants a hedged Investment in a riskier asset and pari passu a benefit to the party who wants a leveraged bet that the Fed means what it says about ZIRP. In finance-land with its UST currency, that spread /is/ the ST interest rate, which is volatile and well-above zero.
Now we can define quite precisely your “entry fee” thesis: the entry fee is the relative credit terms (haircut’s, etc) you’ll get in this repo market. In a world of only non-bank dealers and traders, those terms are symmetrical b/c counter-party risk is broadly symmetrical. In the world of TBTF, naturally only the bank holdco’s get the best terms. So, to win the wealth-accumulation game in this world, be a bank or be a very good client of a bank.
Ponder at your leisure!
Triply stupid policies
Doubly stupid policies are pretty common, but here is a triply stupid one:
Unique to racino legislation is the allocation of a statutorily set percentage of gaming revenue to purses to support racing and breeding operations in the state.
So what are the three layers of stupidity here? First, there shouldn’t, as a special legal category, be racinos (that’s casino-style gaming at racetracks). Second, this legislation is a response to competition from state lotteries, which in general I do not favor. Third, the money from a dubious policy should not be spent “to support racing and breeding operations in the state.” Those operations can pay their own way: how about spending the money on poor people, rather than on sectors which extract money from a disproportionately lower income clientele? Or spending money on animal welfare without at the same time having to subsidize a “legally privileged against competitors” commercial sector?
So what is the background here?
A key theme of the enabling legislation in most states permitting casino-style gaming at racetracks [i.e., racinos] is preservation of the racehorse and greyhound racing and breeding industries in light of competition from other forms of gaming, such as state lotteries and casinos.
In other words, the racinos receive special legal exemptions to help the racetracks compete with state lotteries. (Why not opt for the simpler solution of no state lottery in the first place? Or some other notion of a regulatory level playing field? Oh, how my brain HURTS to ponder how this “problem” arose in the first place.) But it gets worse. Often “racino gaming devices” are placed under the state lottery’s regulatory authority. (Note to self: when attempting to protect B against competitive ravages from A, do not appoint A as regulatory overseer of B.)
So might we have a quadruply stupid policy here?
But wait, on second thought government lotteries, while I do not favor them, perhaps should not be described as “stupid” policies, since there are some reasonable albeit in my view misguided arguments on their behalf. So maybe we are just back to triply stupid after all, I am not sure.
That is all from Richard Thalheimer’s “The Economics of Racetrack-Casino (Racino) Gambling,” from The Oxford Handbook of the Economics of Gambling, edited by Leighton Vaughan Williams and Donald S. Siegel.
Dear readers, can you think of examples of triply or even quadruply stupid laws and policies?
French price discrimination on the basis of politeness
Be polite, or be prepared to pay.
That’s the message a French cafe is sending its customers. Employees of La Petite Syrah in Nice, France, posted a menu that rewards politeness and punishes rudeness. A photo was posted on Twitter with the line, roughly translated to “There are still people who know how to live!”
So, here’s the deal. Customers who can only be bothered to mumble, “un cafe” (without a greeting or a “please”) can expect to pay 7 euros ($9.63).
A lot of money for a cup of java. Fortunately, there are simple ways to cut that cost dramatically. If the customer includes a “s’il vous plait” (“please”), the price goes down to 4.25 euros ($5.85). But wait — don’t order quite yet.
If you really want to save cash, greet your barista with a “Bonjour” (“Good day” for those who never saw “Beauty and the Beast”) and the cost drops again, this time to a perfectly reasonable 1.40 euro ($1.93).
This may be a marketing vehicle for the cafe, although the manager claims it was started as a joke. I am not sure what is the most plausible theory for how this might actually be effective price discrimination. There is more here, and I thank Mark Thorson and Ray Lopez for the pointers. Jason Kottke offers more detail.
Assorted links
1. Why so few subsidies for ACA enrollees?
2. Atlantic’s most important economic stories of 2013 in 37 graphs., or try this link here.
3. Taxing athletes when they play in various states.
5. There is water vapor on Europa, Jupiter’s moon. And would you rather have your nation recognized by the UN…or by Facebook?
The Media Doesn’t Talk About Suicide
Slate has been collecting media reports on gun deaths since Newton. What they found was a big discrepancy between the gun deaths reported in the media and the actual gun deaths as counted by the CDC. Chris Kirk explains:
The CDC counts about 32,000 people killed with guns each year, while Slate’s database only has one-third of that. Why the huge discrepancy?
Earlier this month Slate launched an effort to categorize the gun deaths in our system. That effort verified the source of the discrepancy: suicides. We’ve missed nearly all gun-related suicides, because our information is based on media reports, and the media typically avoid reporting on suicides.
The Media’s Picture of Gun Violence (suicides in red)
The CDC’s Picture of Gun Violence (suicides in red)
Justin Briggs and I also have an article in Slate on suicides and guns. I’ll cover that in another post.
*Addiction by Design*
The author is Natasha Dow Schüll and the subtitle is Machine Gambling in Las Vegas. I read this on the flight back home and it is a good choice for one of the very best books of the year, as well as one of the best books on “behavioral economics” and “nudge.”
Almost every page in this book is instructive. Here is one good passage of many:
…his department noticed nearly three times as many deaths by heart attack occurring in Clark County as in other counties. A closer look revealed that two-thirds of the cardiac arrests took place in casinos and realized that the high rate of death had to do with the delays encountered by paramedic teams negotiating their complicated interiors. Although they arrived at casino properties within four and a half to five minutes of a call, it took them an average of eleven minutes to reach victims inside.
The casinos, by the way, very often do not let the rescue teams come in through the main front door, for fear of putting off their customers.
The very best parts of the book are about the elaborate private sector strategies to milk the clientele for greater yield, and how those desires interact with the very competitive nature of the market:
…the industry has since attempted to strategically steer players…toward the cherry-dribbling, slow-bleeding pole of play, a profit-from-volume formula that one industry member has referred to as the “Costco model of gambling.”
And:
While in the past the typical gambling addict had been an older male who bet on sports or cards for ten years before seeking help, now it was a thirty-five-year-old female with two children who had played video for less than two years before seeking help.
And:
“In my life before gambling, she tells me, “money was almost like a God, I had to have it. But with gambling, money had no value, no significant, it was just this thing — just get me in the zone, that’s all…You lose value, until there’s no value at all. Except the zone — the zone is your God.”
The book’s home page is here, and the author’s home page is here. This is an impressive book. It is also a brilliant study of man-machine interaction and I found it to be a complete page turner.
While we are on the topic, I very recently received a review copy of The Oxford Handbook of the Economics of Gambling, edited by Leighton Vaughan Williams and Donald S. Siegel, which appears to be excellent.
Assorted links
1. Eurozone industrial production: the recovery?
2. Are Chinese provinces picking up the stimulus slack?
3. Yuval Levin has a good analysis of the sequester redo.
4. Fama and Shiller, on each other.
5. Average is Over in farming. And the FDA restricts antibiotic use in livestock.