Results for “assorted links” 5625 found
From the comments
Here is Brett on Piketty:
I’m surprised to see so few critiques of Piketty on the grounds that higher wealth and income inequality won’t necessarily lead to oligarchical politics and the capture of the economy by rentiers. I’m a bit skeptical myself of his interpretation of 19th century politics – at the same time we had the Belle Epoque, there was increasing working class political power in the UK (particularly with reforms in the 1830s and 1860s), the lead-up to the near-complete loss of political power in the House of Lords in 1911, the rise of income taxes in both the UK and France, greater social mobility, broader modernization and consumer culture, and so forth. You see some pushback from Larry Bartels and the like pointing to research showing policymaking following the preferences of the rich and organized, but they don’t provide much information about whether this has changed with increasing income and wealth inequality – the rich and organized interest groups may have just always had a disproportionate interest on policymaking, even during the Postwar Period.
Morgan Kelly, in his review (via John O’Brien), serves up a related point:
If Piketty’s story about slow growth leading inevitably to rising inequality and the power of the rich is true, then we expect that inequality would have risen sharply during the 19th century when growth in industrialised economies was less than 1 per cent per year. In fact the longstanding research of Peter Lindert and Jeffrey Williamson on English inequality (which Piketty, incredibly, fails to cite) finds inequality was fairly constant, albeit high, until about 1870, and then appears to have fallen somewhat until 1913.
Accounting for U.S. Earnings and Wealth Inequality
Believe it or not, there is an article on wealth and inequality in the United States, with a reasonably good and accurately calibrated model. It is authored by Ana Castaneda, Javier Dıaz-Gimenez and Jose-Vıctor Rıos-Rull, and it was published in the Journal of Political Economy in 2003.
I find the conclusion a good place to start:
…we provide a theory of earnings and wealth inequality, based on the optimal choices of households with identical and standard preferences, that accounts for the U.S. earnings and wealth inequality almost exactly. We show that uninsured idiosyncratic earnings risk, retirement, altruism, and government transfers to retired households are essential ingredients of our theory, since they allow us to replicate the observed earnings to wealth ratios of both the rich and the poor households simultaneously. We also show that calibrating the earnings process directly is a must if we want our model economies to replicate the observed distributions of earnings and wealth in sufficient detail.
Here is the abstract:
We show that a theory of earnings and wealth inequality based on the optimal choices of ex-ante identical households who face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the U.S. earnings and wealth inequality almost exactly. Relative to previous work, we make three major changes to the way in which this basic theory is implemented:
(i) we mix the main features of the dynastic and the life-cycle abstractions, that is, we assume that our households are altruistic, and that they go through the life-cycle stages of working-age and of retirement;
(ii) we model explicitly some of the quantitative properties of the U.S. social security system; and
(iii) we calibrate our model economies to the Lorenz curves of U.S. earnings and wealth as reported by the 1992 Survey of Consumer Finances. Furthermore, our theory succeeds in accounting for the observed earnings and wealth inequality in spite of the disincentives created by the mildly progressive U.S. income and estate tax systems, that are additional explicit features of our model economies.
In other words we already have a theory which does quite well in explaining U.S. wealth inequality, and it isn’t based on the total centrality of a comparison of r and g, as you find in Piketty. And no one in the current debates is citing this piece, Piketty included. From the main results, note this:
We find that abolishing estate taxation brings about an increase in steady-state output of 0.35 percent and an increase in the steady-state stock of capital of 0.87 percent. Along every other dimension, the differences between the benchmark and the No EstateTax model economies are negligible. If anything, we find that abolishing estate taxation brings about a very small increase in wealth inequality [emphasis added]. Specifically, the Gini index of wealth increases from 0.79 to 0.80, and the share of total wealth owned by the top quintile increases from 81.97 percent to 82.33 percent.
We conjecture that the main reason that justifies these findings is that, given the demographics of our model economy, the role played by the estate tax rate in determining the after-tax rate of return of the economy is quantitatively very small.
I don’t hear this point brought up very much these days.
An ungated pdf is here, and for the pointer I thank Tony Smith. You should by the way also read the Krusell and Smith paper, which deals with similar topics. See this survey too.
So much of the current Piketty debate is simply forgetting that…science exists and has already offered a wide range of insights on these topics, as well as having rendered some of the more extreme claims unlikely. In addition to what I offered Sunday, via Tony Smith here are a few additional links:
1. Huggett: http://www9.georgetown.edu/faculty/mh5/research/jedc1993.pdf
2. Aiyagari: http://www.minneapolisfed.org/research/WP/WP502.pdf
3. Heathcote et al: http://www.jonathanheathcote.com/HSV_AR.pdf
Update: Piketty did cite the main piece discussed here in 2010.
From the comments, Charles Mann on Chinese coal
In any case, according to most analysts — see, e.g., Bloomberg, “The Future of China’s Power Sector”, Aug. 2013 http://about.bnef.com/white-papers/the-future-of-chinas-power-sector/ — China won’t stop putting in coal plants. Indeed. Bloomberg projects that 343-450 gigawatts of new coal generation will be built in China over the next fifteen years, more than the total capacity of the entire US coal base (300 gigawatts). China’s power needs are so big that even if it installs solar and wind facilities faster than any other nation has ever emplaced them, the nation will still bring online 1 large 500 MW coal plant *per week* from now until 2030.
Even if somehow China *could* build enough solar and wind plants in time, it still would be building coal plants, too. The basic reason is that solar panels in China typically produce <20% of their annual peak capacity (China has few sunny regions) and wind 80% of peak capacity and do it all the time, so to get reliable power you have to build vastly more peak capacity from renewables than coal, and China can’t afford that.
There is more, including more from Mann, here.
Kebko on North Carolina’s unemployment insurance experiment
#5: I think Evan is being a bit too broad with his interpretation of the labor market in North Carolina. There have been two distinct phases of labor force adjustments:
1) Between the passage of the law and its implementation, there was a small decrease in unemployment. But, mostly, on net, there was a decrease in employment and a corresponding decrease in labor force participation. The movement was from employment to not-in-labor-force. I don’t know if there is a straightforward way to interpret this, but I don’t believe Evan is addressing it cleanly in the article.
2) After the implementation of the law, labor force participation stabilized. Since that time, there has been a decrease in unemployment and an increase in the Employment to Population ratio. People are moving from unemployment to employment.
The first phase could have a number of interpretations. The second phase is clearly what opponents of Emergency Unemployment Insurance would have predicted. At this point, I think we still need to give it a few months to see if the rebound in the employment to population ratio continues. If it does, then this article by Evan will have been unfortunate.
Here is my post on the issue, with some graphs: http://idiosyncraticwhisk.blogspot.com/2013/12/a-natural-experiment-on-emergency.html
From the comments, on high frequency trading
This is from a high frequency trader, in response to my link to this paper (pdf), favoring batch auctions:
The author’s purported cure is far worse than the disease. Positional externalities from shaving latency are indeed real, but they’re not really that large relative to market size. A good way to estimate their magnitude is by how much money has been spent on cutting down the Chicago-NYC messaging latency, the two most liquid and hence profitable trading centers. The cost recently spent on this infrastructure (largely microwave relay networks) is about $500 million. Assume that the infrastructure depreciates in about a year and generously assume that the spending on intra-market latency is about the same.
That’s a total cost of about $1 billion/yr in market costs imposed by latency based positional externalities. American equity markets trade $24 quadrillion in value a year (and that’s only counting shares, not derivatives). Which means the cost to the typical investor of the latency externalities comes out to an upper bound of $4.5e-05 per dollar traded, or for example to trade one share of MSFT: $0.0016. That’s the upper bound of cost savings by perfectly eliminating latency externalities. The cost certainly isn’t trivial, but it is much lower than the forced imposition of $0.005 in bid-ask trading costs because the SEC refuses to decrease the minimum $0.01 tick size. With an economical tick size the average bid-ask spread would easily go in half. (Plus it would reduce the latency externalities since market makers could price improve rather than rushing to jump first in line the order book queue). My point being is that if we’re that worried about reducing costs to investors there’s an alternative that we’re already ignoring that both has a larger impact and poses much less risk than completely tearing up the foundations of the market structure.
Finally the authors assume that batch auctions don’t come with any of there own structural costs. Not only do they indeed have substantial defects themselves, but they don’t even eliminate the latency externalities. The market already uses batch auctions at market open and close. As any trader will tell you these are far more manipulated than continuous trading. During a batch auction an indicative price is published prior to crossing based on the currently resting buy and sell orders. A trader can easily change this indicative price or imbalance by entering a large order and canceling it before auction. Analogous strategies aren’t impossible, but are much harder in continuous trading because a resting order can be crossed at any time, and hence poses real economic risks to the trader. To paraphrase Alex continuous trading acts as a tax on bullshit.
The flip side of a pre-cross indicative price is that traders will wait for as long as possible before the cross to enter their orders. No trader using proprietary signals is going to want other market participants to see his order for any longer than is absolutely necessary. The counter-strategy being shaving down your latency even further so you get to see others’ orders first. Then modify yours accordingly by trading even closer to the cross time using your lower latency. So what frequently happens in opening and closing batch auctions is that the order book and indicative price is pretty much garbage until a few milliseconds before the cross, at which point the real price formation occurs. When I worked in a much larger HFT firm I was a continuous guy, but sat next to the batch auction guys. We certainly cared about our latency, but generally we focused much more on our signals and execution algorithms. The auction guys in contrast were always obsessed with their latency.
Switching to batch auctions will not reduce the cost of latency positional externalities, and is pretty likely to increase them. On top of all that it will give us a much lower-quality and less efficient market structure. There are certainly better ways to tackle the latency externality costs. But it’s important to recognize the perfect’s the enemy of the good here, I doubt we can ever fully eliminate them under any sane structure. It’s better to think of moderate improvements that work on the margin, rather than centrally planned grand sweeping re-designs of the entire market structure.
At the first link, in the comments, he has several follow-up explanations, all recommended.
Do low wages for unskilled workers weaken the case for more immigration?
Here is a point which I think the anti-immigration forces are getting wrong, mostly on the side of economics. It can be pointed out that low-skilled (native) labor in the United States has not seen strong income gains for some time. You might then wonder whether it makes sense to bring more unskilled labor into the country.
In my view the evidence (and here) suggests that the negative wage pressures on unskilled labor, to the extent they have international origins at all (as opposed to TGS or automation or political factors), come more from outsourcing and trade than from immigration. So if you limit low-skilled immigration, outsourcing likely will go up, as it would be harder to find cheap labor in the United States. The United States will lose the complementary jobs as well, such as the truck driver who brings cafeteria snacks to the call center. Conversely, if you increase low-skilled immigration, you will also get more investment in the United States and more complementary jobs as well and possibly some increasing returns from clustering and maybe more net tax revenue too. On top of that the individuals themselves have greater choice as to where to spend their lives and build their careers.
Here’s another way to put it. Either factor price equalization will go on or not, noting that capital flows are the more active marginal lever here and there is no serious talk of banning capital outflow. If FPE isn’t going to happen much, no big deal either way. If FPE is going to happen, you still might want to have it happen with more of those jobs inside your country.
Again, you may wish to counterbalance this against any political costs from having more unskilled labor in your country, as I mentioned earlier. But from an economic point of view, the case for accepting the immigration — including low-skilled immigration — still seems strong to me.
Whose entire body of work is worth reading?
I’d be curious to see Tyler’s “completist” list. In other words, authors whose entire body of work merits reading. If this does get a response, I’m most interested in seeing the list begin with literature.
I’ll repeat my earlier mention of Geza Vermes. And to make the exercise meaningful, let’s rule out people who wrote one or two excellent books and then stopped. Adam Smith is too easy a pick. I won’t start with literature, however, but here are some choices:
1. Fernand Braudel.
2. George Orwell. Plato. Nietzsche and Kierkegaard. Hume. William James.
3. Franz Kafka, he died young.
4. T.J. Clark, historian of art and European thought.
5. J.C. D. Clark, the British historian.
Let’s stop here and take stock. Many historians will make the list, because if they are good they will find it difficult to produce crap. Without research, they cannot put pen to paper, and with research a careful, thoughtful historian is likely to be interesting. With thought you could come up with a few hundred historians who were consistently interesting and never wrote a bad book. Then you have a few extreme geniuses, and J.S. Mill might make the list if not for System of Logic, which by the way Mill himself thought stood among his best works. Timon of Athens hurts Shakespeare but he also comes very close.
Do any producers of “ideas books” make this list? Other than those listed under #2 of course. And are there truly consistent (and excellent) authors of fiction, other than those with a small number of works? I’m not thinking of many. How about Virginia Woolf or John Milton or Jane Austen?
One also could make an “opposite” of this list, namely important authors whose works are mostly not worth reading, and you could start with Conan Doyle, H.G. Wells, and Aldous Huxley. The existence of Kindle makes it easier to discover who these people really are.
From the comments
On your 2010 R&R post: Your point about 90% being neither sacred nor stable shows how badly many people misinterpreted the paper.
You also said we don’t know how much higher than 90% we can go. I’m not sure exactly what you meant, but I’ve suggested that the threshold we should be most concerned about is the point beyond which you can be sure you’ll never get back to safe debt levels, because you’ll be faced with the Catch-22 of both austerity and “not-austerity” pushing debt higher for different reasons. This threshold is much lower than the point at which large countries will actually experience a fiscal crisis and probably lower than most people think. A reasonable estimate is only 150% debt-to-GDP, based on the observation that there are no historical episodes of countries recovering from 150%+ that are at all relevant to the U.S. or U.K. today (yes, I used the R&R data among other sources to test this).
The risk that the U.S. sails through such a threshold is becoming very real at current debt levels.
If you (or anyone) are interested, my paper reviewing all historical episodes of debt >150% of GDP (from the R&R database) was posted last month on Seeking Alpha and on http://www.cyniconomics.com and it’s called “Answering the Single Most Important Question in Today’s Economy.” And if the U. Mass. trio are interested, I’ll even offer my calculations.
The very best books of the year 2011 (so far)
This year there are three stand-out winners, which is not usually the case. These are all major books which virtually everyone should read, at least provided you read non-fiction (fiction) at all:
1. Steven Pinker, The Better Angels of Our Nature: Why Violence has Declined. My review is here.
2. Walter Isaacson, Steve Jobs, interesting on every page and lives up to the hype. Here is a good review by Michael Rosenwald.
3. Haruki Murakami, IQ84. I haven’t finished it yet, but I feel confident putting it on the list (I’m about one-third through). I even agree with many of the reservations expressed in this review but the book is nonetheless a major achievement. There are dozens of reviews here.
Here is the (lame) PW list of the ten best books of the year. And if you are wondering, I have sour impressions of the new Eco and Joan Didion books.
Soon I’ll prepare a longer list of my favorite books of the last year, in part for your gift-giving purposes.
From the comments
This is from Mark, the caps are his:
We had these big interconnected undercapitalized things that were mandated by federal policy to keep expanding the amount of paper they bought or backed, which meant inevitably they were going to reach the point where the paper they were backing was too risky, and the GSE’s mandated growth necessarily called for them to issue more paper of their own to do that..And then you had Basel II and its US application that made GSE paper Tier I capital to support maximum loan growth in private sector banks. No wonder credit dried up when the GSEs were taken over in Sept 08. But you never see the Rortys and Mins speak to this perspective. THE GSE’S WERE PROCYCLICAL VECTORS THAT TRANSFORMED HOUSING DEMAND TRENDS INTO CREDIT MARKET TRENDS AND VICE VERSA, FREQUENTLY AMPLIFYING THEM, BUT THEY WERE NOT STRONGLY CAPITALIZED ENOUGH TO ABSORB A TREND REVERSAL.
Most Popular Marginal Revolution Posts from 2010
Here are the most popular Marginal Revolution posts from 2010 as measured by landing pages and page views.
1. Book lists were very popular as a category. The highest ranked post in terms of page views was Tyler's Books which have influenced me the most which created a blogosphere avalanche. Links to other people's lists (of influential books) was also very popular. As was Books of the year, 2010 and peculiarly this post on The best-selling book of all time.
2. The number one linked post was What happened to M. Night Shyamalan? a one-liner and one-picturer. Also very popular in the category of "quickies" were Barbados v. Grenada, the demand for own-goals, Dead Birds, Freak-onomics, Nazi-Nudging, and Yuck_markets in Everything.
3. One Game Machine per Child on the failure of a computer voucher program to raise grades (but it did increase gaming).
5. The Dark Magic of Structured Finance.
7. Peter A. Diamond.
10. Why Did the Soviet Union Fall? (from 2007).
12. A Theory for Why Latvian Women are Beautiful.
Other substantive posts with high popularity (in the top-50) were my posts Insiders, Outsiders and Unemployment and The Philosophical Cow and Tyler's posts How many children should you have?, Is there a case for a vat?, Does the Law Professor have cause to complain? and Why is Haiti so Poor?
Two of my posts from previous years were also popular in 2010, from 2008 What is New Trade Theory? on Paul Krugman's Nobel and from 2005 Why Most Published Research Findings are False.
Hope you have enjoyed this years offerings. What have I missed?
From the comments
I never really bought the "conservatives are fearful" argument; after all, the left is the one arguing for more economic protection.
I think a more useful distinction is that people want free-market competition in areas where they are strong, and protection and regulation in areas where they are weak. Conservatives want free competition in the economic sphere but moral protections in social interactions; liberals want protection from market forces but are happy to take their licks in status-seeking competitions.
In a state of nature, the highest-status people get away with much more bad behavior than low status folks. Therefore, strict social rules are essentially a progressive tax on status!
Why pick on cryonics?
A few of my lunch compadres have asked why I compare cryonics (unfavorably) to acts of charity, rather than comparing other acts of personal consumption (I enjoy the gelato here in Berlin) to charity. My view is this: the decision to have one's head frozen is not primarily instrumental but rather expressive. Look at the skewed demographics of the people who do it, namely highly intelligent male readers of science fiction, often with tech jobs. Is it that they love their lives especially much? Unlikely. Instead it's a chance to stand for something and in a way which sets them apart from many others. It's a chance to stand for instrumental rationality, for Science, for attitudes which go beyond traditional religion, for the conquering of limits, for probabilistic reasoning, and for the notion that the subject sees hidden possibilities and resources which more traditional observers do not.
It's like voting for a very unusual political candidate.
In my view the people interested in cryonics are often highly meritorious, as is Robin. So I'm very sympathetic with a) letting them do what they want, and b) praising them and their affiliations, simply because they are productive and smart and also not harming others. Those factors militate in favor of cryonics and indeed I am happy to endorse laissez-faire for the practice but still I don't find myself settling into really liking the idea.
Let's say I use another Hansonian construct and put everyone behind a contractarian veil of ignorance. I then ask: given that we don't know who will be born into which position, which expressive symbols do we want these highly intelligent individuals to send, and also to identify with, given that reputation is limited and publicity is scarce? Keep also in mind that society is insufficiently appreciative of intelligence and we would prefer that more people had greater respect for analytic thinking. There are also many worthy causes out there.
I don't see the positive deal here. I believe the world would be better off, and the relative status of the virtuous nerds higher, if instead the cryonics customers sent more signals which were perceived as running contrary to type. Ignoring cryonics, and promoting charity, would do more to raise the status of intelligence and analytical thinking than does cryonics.
On the practical side, while I am a non-believer, I also think that charity has a greater chance of bringing a longer life to one's self – or immortality — than does signing a cryonics contract. That's an even stronger triumph for probabilistic thinking than what the cryonics customers have on tap.
Addendum: If you haven't already, do go back and read both Quentin and #44 on these issues. Bracing stuff.
Paul Romer, ask and ye shall receive
For a man who likes the Kentucky Colonels, is that not how it ought to be? Reality now brings Caribbean Charter Islands:
The UK has resumed day-to-day control of the Turks and Caicos
islands amid ongoing allegations of widespread corruption in the
British overseas territory, the Foreign Office said tonight.
Local
government in the islands, which lie 500 miles south-east of Florida in
the Atlantic, will be suspended for up to two years while their affairs
are put back in "good order", according to the FCO.
The Islanders themselves are divided over the idea.
Punkers for capitalism
With his mohawk, ratty fatigues, assorted chains and his menagerie of tattoos – swallows on each shoulder, a nautical star on his back and the logo of the Bouncing Souls, a New York City punk band, on his right leg – 22-year-old Nick Rizzuto is the very picture of counterculture alienation. But it’s when he talks politics that Mr. Rizzuto sounds like a real radical, for a punk anyway. Mr. Rizzuto is adamantly in favor of lowering taxes and for school vouchers, and against campaign finance laws; his favorite Supreme Court justice is Clarence Thomas; he plans to vote for President Bush in November; and he’s hard-core into capitalism.
“Punks will tell me, `Punk and capitalism don’t go together,’ ” Mr. Rizzuto said. “I don’t understand where they’re coming from. The biggest punk scenes are in capitalist countries like the U.S., Canada and Japan. I haven’t heard of any new North Korean punk bands coming out. There’s no scene in Iran.”
Here is a New York Times article, don’t forget to check out the pictures (password required). Here is a website for GOP punkers, they seem to approve of Reagan’s famous threat to bomb the Soviet Union. Or perhaps it is just irony. They stress that they are not libertarians because America is “at war” with the left, and the libertarian philosophy is not well-suited to fighting a war. Here is their cited critique of the Canadian health care model. Good economics, but these punkers, oppositional by nature, feel a kneejerk need to defend every action of the Bush administration. Here is the ConservativePunk.com website, which offers an interview with right-wing punker Johnny Ramone. Here is yet another site, which cites right-thinking punk bloggers. And will National Review be pleased that MyEvilMinion.com links to them approvingly?
My take: Punk music needs an idea of evil and an oppositional stance. So punkers will adopt every position of defiance they can find, including in-your-face right-wing politics. But in the long run? Remember what The Clash sung: “You grow up, you calm down, working for the clampdown…”