Results for “from the comments” 1938 found
From the comments, on secular stagnation
In “National Income and the Price Level,” Martin Bailey discussed the issues of the liquidity trap and secular stagnation.
He observed that at a zero real interest rate, it would be profitable to level the Rocky Mountains and fill in the Gulf of Mexico. The land created would have a rate of return over zero. Also, replacing all steel with stainless steel would pay off.
The examples get to the problem. If someone wanted to level a mountain and fill in the Gulf, it would take a decade to get EPA approval, if it ever came. At negative real interest rates, there are plenty of profitable investments. Maybe in the medical sector, or energy, or finance, or banking, or education, or transportation….where government approval can block the investment for a decade. Secular stagnation is feasible in a world of heavy regulations and taxes, regardless of technological opportunities or the productivity of capital. Keystone Pipeline, anyone?
In a regulated state, easy Fed policy might boost the stock market and lower bond yields without boosting investment much at all. Sound familiar?
From the comments, on a fusion reactor
So for once I can intelligently comment on a Marginal Revolution article. (I have a Ph.D. in applied plasma physics and fusion energy; I worked on the “conventional” fusion reactor design, the tokamak). Lockheed hasn’t released many details of their concept (at least, not enough details that it can actually be evaluated in technical detail), but it looks like it’s a combination of a magnetic mirror and a levitated dipole. The magnetic mirror was studied in detail in the 1960s and 1970s and didn’t work out (due to [detailed plasma physics reasons]) and the levitated dipole has a fundamental flaw as a power-producing reactor in that the superconducting magnets are inside the neutron shielding – neutrons destroy the magnets.
It’s tough as a scientist to be able to comment on things like this, because it’s “science by press release”, i.e. there’s a big media hype but the actual researchers don’t release enough technical details to actually evaluate it. One wants to remain cautiously optimistic, but with fusion in particular, we’ve been down this road many, many times. Thus I predict that the most likely outcome is that as they scale their device up, they’ll find that the confinement (a measure of how well the device holds a fusion plasma) unexpectedly drops off due to some different types of turbulence turning on at higher temperatures / higher pressures… and it will quietly go away.
I hope that I am proven wrong.
There are other interesting comments at the link and Kottke offers more.
From the comments, on infrastructure
David wrote:
the point about unnecessarily fancy infrastructure with weak maintenance is endemic to all the corrupt east asian economies, really
if you want to quickly assess a city’s transport infrastructure, look to see if all the roads have good sidewalks and all the streetlights have a number. the head honcho is only driven past, he doesn’t walk on the pavement – if the project exists only to impress him, then the pavement will be subpar and cracking. if the streetlights are not numbered, then nobody is tracking failures and replacing parts.
Tyler [not this Tyler] wrote:
A week in China often leaves Westerners impressed. So shiny! So new! So big!
Live there a year and you yearn for the Newark Airport…
Douglas Levene wrote:
I live and work in Shenzhen and can add a few observations. First, the food in Shenzhen is generally not very good, and does not compare to Hong Kong or Taipei. Second, a lot of the infrastructure (the subway, the parks) is new and shiny (and there is excellent cell service on the subway), but construction quality being what it is on the mainland, you can expect much of it to look terrible in a short time. Third, although Shenzhen is much cleaner than it was four years ago, it’s still very dirty compared to Hong Kong and Taipei. Fourth, you can’t get decent internet service to foreign (English) language websites anywhere in Shenzhen, even with a VPN. This is probably due to the Great Chinese Firewall. Fifth, it’s very hard to find housing built to Western standards of comfort, size, and cleanliness. Sixth, western style toilets are still a rarity in Shenzhen. That all said, Shenzhen remains the beating heart of the capitalist South and is the best hope for China.
From the comments, on Bob Shiller and CAPE
For context, CAPE is the cyclically adjusted price-earnings ratio. On that topic, 3rdMoment writes:
While I have great respect for Shiller, I don’t understand his confidence that the CAPE is likely to return to it’s historical average of around 16. There are several reasons why we might expect the average CAPE going forward to be higher than in the past:
1. The average levels of CAPE in most of the last century appear, with hindsight, to have been puzzlingly low. This is the well-known “equity premium puzzle.”
2. There has been a large shift in corporate payout mix, from virtually all dividends in the past, to a roughly equal mix of dividends and share repurchases today. This by itself will add a couple of points to CAPE even if nothing else changes, (as shown in this post by the anonymous blogger who tweets as “Jesse Livermore”): http://www.philosophicaleconomics.com/2013/12/Shiller/
3. Some other accounting changes to the definition of profits might raise the CAPE as well, again see the linked blog post above.
4. Lower information and transaction costs and the rise of index investing have dramatically lowered the cost of maintaining a globally diversified portfolio. This decreases the raw rate of return for any given required rate of realized returns. For example if the costs of investing in equities fall by just 50 basis points, this would allow the required raw earnings yield to fall from 5% to 4.5%, corresponding to a rise in CAPE from 20 to 22, without changing realized returns for investors.
5. The real “risk free” return on treasuries seems to be very low by historic standards. Real returns on other forms of debt also appear low. This lowers the return stocks need to be attractive by comparison.
6. Large corporate cash balances, a “global savings glut,” lower rates of real economic growth, possible “secular stagnation,” all seem to point to the idea that real returns are somewhat harder to get than the past.
Some of these reasons are more certain than others, but taken together they seem to show that we have good reason to expect CAPE levels significantly above the historical average going forward.
Are there any countervailing reasons offsetting the list above, factors that would tend to make CAPE lower than in the past? I can’t really think of any. And I haven’t seen anybody else offering any.
How should we quantify coolness? (from the comments)
David H. writes:
Yes, this Forbes list is a miserable failure, but it got me thinking about how to quantify coolness. Good restaurants are valuable, but to be cool, restaurants also need to be affordable and a little off-putting. If I were doing this, I would generate a list of touring bands that rank highly in RYM, knock out the superstars, and then see what US cities they played in the last 4 years. Each band-visit would count as a portion of coolness for that city, and a partial portion for the immediate vicinity. Also, RYM records which cities the bands came from. That should count for a lot. Then I would look for cities with an outsized and lively gay scene. I’m not sure how the causation works – whether a gay scene adds substantial coolness or whether it follows coolness – but the correlation seems pretty clear to me.
Coolness is unstable partly because it’s much more difficult to achieve in expensive cities. San Francisco and Berkeley are sinking in coolness partly for this reason. A truly cool city needs a critical mass of underemployed creative types who will devote a great deal of time to “the scene”, and this is hard to do when you’re paying $6+ for each of your beers. So, the lower the urban rents and general cost of living, the cooler the city, other things being equal.
OK, Forbes was right that proportion of young people living in the city is important. I also think that trends are important, like: Which cities are gaining young people, and which are losing them?
What else?
The link to RYM was added by me. I would think that a truly cool place cannot be rated as cool by too many other sources. How about that retirement community in Florida, an incorporated city, ruled largely by contract, where only the elderly live and the visits of grown children are regulated and rationed? How about the city in America which has the highest birth rate? Isn’t that kind of cool? Seriously. That would put Memphis, Ogden, and Provo in the lead. What’s so cool about tracking RYM?
From the comments, more on LBGT as deserving of respect
Mr. Econotarian wrote:
Actual science is that your brain can be gendered during development in a different fashion than your sex chromosomes. And that gender is not something that hormones alone can “fix”.
For example, the forceps minor (part of the corpus callosum, a mass of fibers that connect the brain’s two hemispheres) – among nontranssexuals, the forceps minor of males contains parallel nerve fibers of higher density than in females. But the density in female-to-male transsexuals is equivalent to that in typical males.
As another example, the hypothalamus, a hormone-producing part of the brain, is activated in nontranssexual men by the scent of estrogen, but in women—and male-to-female transsexuals—by the scent of androgens, male-associated hormones.
I would stress a social point. If it turns out you are born “different” in these ways (I’m not even sure what are the right words to use to cover all the relevant cases), what is the chance that your social structure will be supportive? Or will you feel tortured, mocked, and out of place? Might you even face forced institutionalization, as McCloskey was threatened with? Most likely things will not go so well for you, even in an America of 2014 which is far more tolerant overall than in times past, including on gay issues. Current attitudes toward transsexuals and other related groups remain a great shame. A simple question is how many teenagers have been miserable or even committed suicide or have had parts of their lives ruined because they were born different in these ways and did not find the right support structures early on or perhaps ever. And if you are mocking individuals for their differences in this regard, as some of you did in the comments thread, I will agree with Barkley Rosser’s response: “Some of you people really need to rethink who you are. Seriously.”
It’s not just the libertarian argument that you have — to put it bluntly — the “right to cut off your dick” (though you do). It’s that there are some very particular circles of humanity, revolving around transsexuality, cross-gender, and related notions, which deserve a culture of respect, above and beyond mere legal tolerance.
India is not the paradise for cross- and multiple-gender individuals that it is sometimes made out to be, but still we could learn a good deal from them on these issues. If nothing else, the argument from ignorance ought to weigh heavily here: there is plenty about these categories which we as a scientific community do not understand, and which you and I as individuals probably understand even less. So in the meantime should we not extend maximum tolerance for individuals whose lives are in some manner different?
No, I do not know what are the appropriate set of public policies for when children should receive treatment, if they consistently express a desire to change, and what are the relative limits of family and state in these matters. But if we start with tolerance and acceptance, and encourage a culture of respect for transsexualism, we are more likely to come up with the right policy answers, and also to minimize the damage if in the meantime we cannot quite figure out when to do what.
From the comments, on the ECB
Ptumov writes:
First, on the market reaction. This action has been leaked/signaled to the markets in many ways over the last month. Therefore, to judge the market reaction to the ECB action, I think one should look at the change from early May to today.
Second, what’s the difference between non-sterilized SMP and QE? Not much, maybe maturity. I think this was the more significant development moving the market over the past month than negative deposit rates.
From the comments, on Scottish independence
In response to my original post, Alex Buchanan writes:
Where to start? As a Scot living in Scotland and very much intending to vote YES I have to take issue on many things stated here. First of all your emphasis on the term “partnership”. There has never been a partnership between England and Scotland, Scotland has always been told what to do and if Scotland doesn’t like it Scotland has to lump it. We are more socially aware of our society with a more caring emphasis on what is good for OUR nation, Scotland, as a whole, not the dog eat dog right wing politics of England which is more of a right wing society. See Tory and ukip voting patterns. As for the currency we will be using? It will be sterling! Sterling does not just belong to England and if we’re in a currency union or not, we will still use sterling just like many other former commonwealth countries did before. The matter of us being in the EU is still debatable. Many EU institutions have intimated that Scotland will be welcome with open arms and even some unionist politicians have said we will have no problems joining. Ask your Westminster government they can get the answers. By the way I don’t think it has escaped your notice that we are already dominated by the EU and Westminster to boot. So what’s new? We can cut out the middle man whose sole interest is to look after London first. We are also getting an in-out referendum on membership of the EU in 2017. Can you tell me if we’ll still be in the EU after that? Tell me Tyler? What is the mechanism for evicting an already member of the EU? I don’t think there is one.
You cite that we have no practical reason to leave. Well how about self determination? How about being able to take decisions for ourselves? How about not going into useless wars? How about not having nuclear weapons, that England won’t have, located on our doorstep? Or how about having our wealth squandered on the South East of England while we are accused of being subsidy junkies? Are they practical reasons?
Alex Salmond has sound economics to back up his claim of Scots receiving more money under Independence. UK government records show that we contribute 9.9% (no doubt massaged down) of the exchequer’s total income, but we receive back only 9.3% back in total spend. Whereas the latest treasury figures were disowned straight away by the professor who they used as a source for their findings. The professor said that they had misrepresented his figures by a factor of 12 times more.
No being British is not good enough. I see day-in-day-out my country being turned into a region, a region of Britain you may say, but when in reality we all know what Britain means to the people down in England, don’t we? Britain simply means England in most people’s eyes in England. If you looked at the latest census carried out in Scotland you would have seen that nearly 75% of the population consider themselves Scottish and not British, only a mere 18% considered themselves Scottish and British. If it’s any consolation to you I can’t understand many English dialects either. Try listening to a Geordie, Scouser, Brommie, Cockney or even someone from Pashtun.
I expect the YES vote to prevail and I just want to point out to you that ignorant articles like this will hasten that vote.
He is an articulate fellow, but he hasn’t changed my mind, quite the contrary.
From the comments
Mesa wrote:
I would suspect that successful research institutions don’t feel obliged to redistribute their funding to less fortunate institutions. I think the point that is interesting here is that successful academic institutions are probably deemed to have earned their support, while successful business people are not, they having generally thought to have earned their success through luck or inheritance. From the endowment and research funding data it seems universities have both high income inequality and wealth inequality, to use terminology from the current debate.
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.
From the comments
Here is BP, on New Zealand:
New Zealand has a chronic shortage of equity capital, exacerbated by a generous pay-as-you-go state pension and a tax system that favours passive landholding as a wealth accumulation vehicle. The country consequently imports a large amount of capital to meet the savings-investment balance and this requires a high equilibrium rate of interest. As a result the exchange rate is chronically high, the returns to exporting are lower than they should be given the country’s bounty, and the hurdle rate of return on investment on new equity investment is high. (Apart from this, the policy mix is pretty good). Many good innovative businesses emerge only to be bought by American corporations or funds before they get to more than say $100m in value, as there is a paucity of domestic investors.
From the comments
This is from John B. Chilton:
For those who don’t click through this is what Tyler wrote:
“6. The exchanges will be mostly working by March 2014, but by then the risk pool will be dysfunctional. In the meantime, real net prices will creep up, if only through implicit rationing and restrictions on provider networks. The Obama administration will attempt to address this problem — unsuccessfully — through additional regulation.”
The simple answer to Christian’s query (“I’m curious how you stand now given current enrollment numbers and your previous prediction about a dysfunctional exchange.”) is that it’s not the enrollment numbers that matter, it’s the risk pool.
The jury’s out on the risk pool — lots of opinions out there on whether exchange premiums will go up for 2015.
Here is Ross Douthat on how will we know if Obamacare is working? It is the best post on this debate so far. He closes with this:
I’ll lay down this marker for the future: If, in 2023, the uninsured rate is where the C.B.O. currently projects or lower, health inflation’s five-year average is running below the post-World War II norm, and the trend in the age-adjusted mortality rate shows a positive alteration starting right about now, I will write a post (or send out a Singularity-wide transmission, maybe) entitled “I Was Wrong About Obamacare” — or, if he prefers, just “Ezra Klein Was Right.”
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.
From the comments
A knocking at the door.
“Who’s there?” I asked. “Amazon drone,” came a polite but firm bass voice.
I opened the door to find box on the step as the hexacopter retracted its delivery arm and spun up its rotors. An invoice icon appeared on my Amazon eyeglasses. What wonders had I been brought today and how much would they cost?
But then, I thought, which of the two of us was truly an Amazon drone?
From the comments, on being a government economist
DC Economist writes:
I am in this cohort of economists (although ashamedly a non-responder to the NSF SED survey – I filled it out but neglected to mail it). And I did chose a government job over an academic offer and I’ve never been sorry that I did.
All my academic offers (2002) were from public institutions, mostly on the west coast and mid-west. For the next five years of my career, almost all of those departments had pay freezes. Meanwhile, I was quickly promoted in my government job. While the cost of living in DC eats a comfortable share of that salary differential, it was decidedly better financial move in retrospect to take the federal job. (I did not know that ex ante; my federal starting salary was actually lower than the starting pay for my best academic offer, and I assumed I was making a financial sacrifice to take a job I genuinely preferred.)
You can make even more money in consulting, but it’s a different world, and I’ve known a fair number of economists who move back and forth between consulting and government, depending on their relative preference for money vs. interesting work. Colleagues that have moved back and forth between academia and government have often voiced to me their extreme surprise how interesting and rewarding the work can be.
I just got back from recruiting at the AEAs and as always, I remain truly surprised how strongly candidates prefer academic jobs to government work. Academic jobs often have serious drawbacks — geography, teaching, collegiality (the incentives are stronger for us to all get along on this side of the market), the gut-wrenching uncertainty of the tenure track. Government jobs often offer better opportunities to do research (especially empirical work) and find similar co-authors. DC is also a great place to be an economist – lots of jobs, lots of interesting work – and the policy work is often more rewarding than teaching can often be. The one serious drawback is a lack of sabbaticals and summer research time. I often groan at the inevitable co-author email flood in May – let’s get back to our paper! – while I’m still working as hard in June as I was in March. But that’s not enough to tempt me back to academia – I’m much, much happier here.
But every year I offer a job to a junior candidate who turns me down for a really marginal academic job. I understand being turned down for a good-to-great academic offer, but turning this job down for a really marginal academic department makes no sense at all to me. And yet so many junior candidates can’t seem to imagine themselves in another line of work that they torpedo their own research opportunities to take a lower-paying, high-teaching load, academic job. Maybe they are just not that into research, and would rather have their summers off than be placed somewhere where they will work harder but have better opportunities for research. Or maybe they worry that all government jobs are being some boring government bureaucrat and they can’t see past that initial bias (those jobs do exist, but those agencies aren’t often looking for Ph.D. economists at AEAs to fill them).
Graduate students really should be more strongly considering some of the great government jobs in the DC area. You really can have a great, rewarding career here.