Results for “markets in everything” 1878 found
Tuesday assorted links
2. “The money itself is programmable. Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump-start.” (WSJ)
3. Soviet LOTR “markets” in everything.
4. Have they ruined Plastic Ono Band? (WSJ, probably)
5. NYT obituary for Robert Mundell.
6. The decline of the Central American elites (The Economist).
Seatbelt Now or Wait for Airbag?
Should you take a less efficacious vaccine or wait for a more efficacious vaccine? The individual and social incentives are in conflict. For society as a whole it’s typically much better if everyone takes the less efficacious vaccine sooner. We show one example of this in the supplementary material to the Science Paper with details under different scenarios in a forthcoming paper but the intuition is clear. Herd immunity is herd immunity. In the final analysis what you care about is not your chances of overcoming the disease if challenged (the vaccine efficacy) but your chances of overcoming the disease if challenged times the probability of being challenged. Herd immunity means pushing the latter number close to zero which is more important than modest differences in efficacy rates.
What about at the individual level? If you have a choice, it’s clearly better to get the more efficacious vaccine, especially since both vaccines are free (the price system has its advantages in clearing markets). But if you have to wait for the more efficacious vaccine, the choice isn’t obvious. Many people in Europe aren’t taking the AstraZeneca vaccine in the hopes of getting an mRNA vaccine later but I think that is a mistake. Don’t fail to wear your seatbelt today because your next car may have airbags. I’d be happy to take the AstraZeneca vaccine today, if only the government would let me.
Moreover, there is little reason to believe that you can’t follow-up the J&J or AstraZeneca vaccine with a mRNA vaccine at a later date.* If we will be taking multiple SARS-COV-2 vaccines over the next 10 years, as seems likely, it really doesn’t matter much which one we get first.
Do yourself and your society a favor by getting whatever vaccine is available.
Everything in this post applies even more strongly to a country making decisions. Buy the vaccine with the earliest delivery date! And don’t forget to consider the Gamaleya, Sinovac and Sinopharm vaccines.
* Multiple shots of adenoviral vector vaccines such as AZ may become less efficacious overtime as people’s bodies recognize the vector.
My Conversation with Glen Weyl
I found it interesting throughout, the first half was on Covid-19 testing, and the second half on everything else. Here is the audio and transcript. Here is the summary:
Tyler invited Glen to discuss the plan, including how it’d overcome obstacles to scaling up testing and tracing, what other countries got right and wrong in their responses, the unusual reason why he’s bothered by price gouging on PPE supplies, where his plan differs with Paul Romer’s, and more. They also discuss academia’s responsibility to inform public discourse, how he’d apply his ideas on mechanism design to reform tenure and admissions, his unique intellectual journey from socialism to libertarianism and beyond, the common element that attracts him to both the movie Memento and Don McLean’s “American Pie,” what talent he looks for in young economists, the struggle to straddle the divide between academia and politics, the benefits and drawbacks of rollerblading to class, and more.
Here is one excerpt:
WEYL: There’s one really critical element of this plan that I don’t think has been widely discussed, which is that there are 40 percent of people in the essential sector who are still out there doing their jobs. There may have been some improvements in sanitation. There probably have been, though there have been a lot of issues with getting the PPE required to do that.
But those people are basically transmitting the diseases they always have been. And so, by far, our first priority has to be not “reopening the economy,” but rather stabilizing that sector of the economy so that transmission is not taking place within that sector.
Once we’ve accomplished that goal, it will actually be relatively easy to reopen the rest of the economy, given that that’s 40 percent. It’s just a doubling to get to everybody being in a disease-stabilized situation. So I really think the focus has to be on stabilizing the essential sector by building up this regimen. I think we can do that by the end of June.
Once that’s accomplished, I think we can, over the course of July, reintroduce most of the rest of the economy and have the confidence that, because we haven’t seen reemergence of diseases within the essential sector, that reintroducing everybody else will proceed in a similar fashion.
And:
COWEN: Other than possibly the adoption of your plan, what do you think will be the most enduring economic or social change from this pandemic?
WEYL: My guess is that there will be a lot of large corporations that take on important social responsibilities because of the trust environment that you were talking about and that it becomes increasingly illegitimate for them to be run under a pure shareholder-maximization perspective once they’re taking on that role. I think we’re going to see fundamental shifts in some of the corporate governance parameters as a result of the social role that a bunch of companies end up taking on.
And:
COWEN: At heart, coming out of the Jewish socialist tradition, through a matter of biographical accident, you first became a libertarian. Needed time to find your way back to the tradition you belonged to. Along the way, did economics, so you believe in some notion of markets, albeit directly adjusted by regulation and mechanism design. And you’ve moved away from methodological individualism.
But you’re this weird person of a Jewish socialist, believes in markets, and had this path leading away from libertarianism. No other person in the world probably is that, but you are. Is that a unified theory of you?
WEYL: Well, the thing that throws a little bit of a wrench into that is that I was actually a Jewish socialist before I became a libertarian.
COWEN: Does that strengthen or weaken the theory?
For me the most instructive part was this:
COWEN: What do you view yourself as rebelling against? At the foundational level.
But you will have to read or listen to hear Glen’s very good answer.
Definitely recommended.
Bridge loans for economically troubled firms
Andrew Ross Sorkin explains (NYT):
The fix: The government could offer every American business, large and small, and every self-employed — and gig — worker a no-interest “bridge loan” guaranteed for the duration of the crisis to be paid back over a five-year period. The only condition of the loan to businesses would be that companies continue to employ at least 90 percent of their work force at the same wage that they did before the crisis. And it would be retroactive, so any workers who have been laid off in the past two weeks because of the crisis would be reinstated.
Strain and Hubbard call for $1.2 trillion in lending to smaller businesses (Bloomberg). John Cochrane considers a version of the plan. Here is Brunnermeier, Landau, Pagano, and Reis. I have been pondering the following points:
1. If you are an optimist about the cycle of recovery, this is very likely a good idea. If you let those companies fall apart, there is a significant loss of organizational capital and the matching problems in the labor markets have to be solved all over again. Recent experience on that front is not so encouraging.
2. If you are a pessimist about the cycle of recovery, I am less sure how well this will work. Let’s say a vaccine is difficult and there a few waves of the virus. Many of the smaller or even larger businesses may be going under anyway, as they cannot live off aid forever. In the meantime, you might actually want those resources to be reallocated to good transport, biomedical testing, and so on. If the wartime analogy is apt, you don’t want to freeze the previous capital structure into place, unless of course you get lucky and win the war early.
3. If you a pessimist about the solvency of banks (have you ever seen a stress test for 30% unemployment?), you have not gotten the government out of the business of capital allocation.
4. The bridge loans might work especially poorly for start-ups. Yes, StubHub or some company like that is around for the long run, and if the bridge loans can keep them up and running until concerts return, so much the better. But what about the eighty wanna-bees next in line, most of whom are likely to fail? Do they too get bridge loans? (Do note the ecosystem as a whole is yielding positive value.) The market itself chose the venture capital financing form for those entities, not debt. And yet now the government is stepping in and propping them up with debt, even though we know virtually all of them are likely to fail (even pre-coronavirus that was the case). You might think “well, we will know not to do that.” But on what legal basis would those other “likely to fail start-ups” be excluded from the bridge loans?
4b. Is it all about “banks decide”? How do we stop banks from simply hoarding the new money? (The Fed already has flooded the banking system with liquidity.) Just loaning the money to super-safe firms for de facto negative rates? What exactly are the regulatory requirements here? To the extent the loans are de facto guaranteed, won’t banks lend to a large number of lemons? What do the interest rates and collateral requirements look like on these loans and how are those set in what is now a non-competitive setting?
5. Overall my sense is that American policy, if only for cultural reasons, has to proceed on an optimistic basis. It is not clear what the relevant alternative is, and I do not oppose bridge loans. Nonetheless I am seeing too many people jump uncritically at bridge loans with a “throw everything at the wall” approach and not thinking hard enough about their possible downsides. At the very least, being critical about bridge loans will help us make bridge loans better.
6. No, I don’t favor governmental bridge loans for non-profits. De facto, that this means this is a huge relative shift of resources away from non-profits and toward businesses. YMMV.
7. I have received numerous reader emails telling me how bad, slow, and cumbersome is the Small Business Administration process for getting loans. Will this new regime do better?
8. It is the same government that could not organize testing and mask production that we are expecting to run what might amount to a $1 trillion plus bridge loans program.
Have a nice day.
What I’ve been reading
1. Ben Cohen, The Hot Hand: The Mystery and Science of Streaks. An intelligent popular social science book covering everything from Stephen Curry to Shakespeare to The Princess Bride, David Booth, Eugene Fama, and more. I am not sure the book is actually about “the hot hand” as a unified phenomenon, as opposed to mere talent persistence, but still I will take intelligence over the alternative.
2. Richard J. Lazarus, The Rule of Five: Making Climate History at the Supreme Court. A genuinely interesting and well-presented history of how climate change became a partisan issue in the United States, somewhat broader than its title may indicate.
3. Ryan H. Murphy, Markets Against Modernity: Ecological Irrationality, Public and Private. The book has blurbs from Bryan Caplan and Scott Sumner, and I think of it as an ecological, historically reconstructed account of the demand for irrationality as it relates to the environment, interest in “do-it-yourself,” and the love for small scale enterprise. Interesting, but overpriced.
4. Juan Du, The Shenzhen Experiment: The Story of China’s Instant City. An actual history, as opposed to the usual blah-blah-blah you find in so many China books. The author has a background in architecture and urban planning, and stresses the import of the Pearl River Delta before Deng’s reforms (Shenzhen wasn’t just a run-down fishing village), decentralization in Chinese reforms, and fits and starts in the city’s post-reform history. Anyone who reads books on China should consider this one.
Gordon Teskey, Spenserian Moments, The Master is finally receiving his poetic due.
Toby Ord’s forthcoming The Precipice: Existential Risk and the Future of Humanity is a comprehensive look at existential risk, written by an Oxford philosopher and student of Derek Parfit.
What I’ve been reading
Roderick Floud, An Economic History of the English Garden. Every page of this book does indeed have economics. It just does not have interesting economics. Which may mean that gardens are not so interesting from an economic point of view. Which in turn would make this a good book. But not an interesting book.
Ajantha Subramanian, The Caste of Merit: Engineering Education in India. A critique of casteism and growing inequality, this book also doubles as a fascinating history of IIT. Best read in Straussian fashion as a sympathetic story of origins.
Dana Thomas, Fashionopolis: The Price of Fast Fashion & The Future of Clothes. Some parts of this book have bad economics and extreme mood affiliation, but in general it has more actual information than other books on the same topic and at times the author makes decent external cost arguments against the current system of clothes production. So a qualified recommendation, at least I am glad I read it, even though some parts are obviously too sloppy.
Razeen Sally, Return to Sri Lanka: Travels in a Paradoxical Island. People do not think enough about Sri Lanka, including in the social sciences! It is a richer and nicer country than what most people are expecting, and it is good for studying both conflict and ethnic tensions. This memoir — information rich rather than just blather — is one good place to get you started.
David Goldblatt, The Age of Football: The Global Game in the Twenty-First Century. Football meaning soccer of course, this book covers how soccer interacts with politics in many particular countries, including Africa, and just how much the game has grown in global markets. Mostly informative, good if you wish to read a book about this topic (I don’t).
Conversations with Zizek. Maybe the best introduction to why Žižek is a richer thinker than his critics allege? The book serves up insights on a consistent basis, and there is a minimum of jargon. Marcus Pound had a good blurb: “Audacious and vertiginous, this book is everything one expects from him, a heady mix of psychoanalysis, politics, theology, philosophy, and cultural studies that will leave the reader both exhausted and exhilarated.”
Rational discourse about the federal budget has become virtually impossible
That is the topic of my latest Bloomberg column, here is one excerpt:
The conservative and fiscal conservative response has been no more coherent. On one hand, conservatives like to boast of the power of economic growth. But if, as they often assume, the economy is going to keep growing strongly, a widening budget deficit may well prove manageable. Interest rates have been low, and even falling over the past year, while economic growth has been running over 2%. If it continues to exceed the government’s inflation-adjusted borrowing rate (currently negative for T-Bills and close to zero for longer maturities), the U.S. will be able to grow out of its debt. Under this scenario Trump will look like a genius, and the fiscal conservatives will continue their slide into irrelevance.
You might argue that the problem is government spending, rather than budget deficits per se. But the U.S. can in essence pull in more resources from abroad, finance greater spending and consumption with additional borrowing, and still pay off its bills in orderly fashion without bankrupting the future. Our grandchildren can inherit both the debt and the government bonds.
In my experience, fiscal conservatives hate this argument. But through the term structure of interest rates, markets are forecasting low rates for at least the next 10 years, and conservatives tend to respect market prices. To be against the budget deal is also to go against the markets’ current message that debt service costs will remain low.
There are twists and turns in the piece, and just about everyone gets whacked, so don’t judge the final message by that excerpt alone.
Taipei notes
My other visit here was thirty years ago, and most of all I am surprised by how little has changed. The architecture now looks all the more retro, the alleyways all the more noir, and the motorbikes have by no means vanished. Yes there are plenty of new stores, but overall it is recognizably the same city, something you could not say about Seoul.
Real wages basically did not rise 2000-2016. The main story, in a nutshell, is that the domestic capital has flowed to China. About 9 percent of the Taiwanese population lives in China, and that is typically the more ambitious segment of the workforce.
I am still surprised at how little the Taiwanese signal status with their looks and dress. The steady heat and humidity may account for some of that, though the same is not true in the hotter parts of mainland China.
The Japanese ruled Taiwan from 1895 through the end of WWII, and those were key years for industrial and social development. The infrastructure and urban layouts often feel quite Japanese.
Thirty years ago, everything was up and buzzing at 6 a.m., six days a week; that is no longer the case.
The National Palace Museum is the best place in the world to be convinced of the glories of earlier Chinese civilizations. It will wow you even if you are bored by the Chinese art you see in other places, as arguably it is better than all of the other Chinese art museums put together. How did they get those 600,000 or so artworks out of a China in the midst of a civil war?
The quality of dining here is high and rising. Unlike in Hong Kong or Singapore, Taiwan has plenty of farms, its own greens, and thus farm to table dining here is common. Tainan Tai Tsu Mien Seafood is one recommendation, for an affordable Michelin one-star, emphasis on seafood. Addiction Aquatic Development has superb sushi and is a first-rate hangout. At the various Night Markets, it is still possible to get an excellent meal for only a few dollars.
One can go days in Taipei and hardly see any Western tourists, so consider this a major arbitrage opportunity.
My Conversation with Hal Varian
Hal of course was in top form, here is the audio and transcript. Excerpt:
COWEN: Why doesn’t business use more prediction markets? They would seem to make sense, right? Bet on ideas. Aggregate information. We’ve all read Hayek.
VARIAN: Right. And we had a prediction market. I’ll tell you the problem with it. The problem is, the things that we really wanted to get a probability assessment on were things that were so sensitive that we thought we would violate the SEC rules on insider knowledge because, if a small group of people knows about some acquisition or something like that, there is a secret among this small group.
You might like to have a probability assessment of whether that would go through. But then, anybody who looks at the auction is now an insider. So there’s a problem in you have to find things that (a) are of interest to the company but (b) do not reveal financially critical information. That’s not so easy to do.
COWEN: But there are plenty of times when insider trading is either illegal or not enforced. Plenty of countries where it’s been legal, and there we don’t see many prediction markets in companies, if any. So it seems like it ought to have to be some more general explanation, or no?
VARIAN: Well, I’m just referring to our particular case. There was another example at the same time: Ford was running a market, and Ford would have futures markets on the price of gasoline, which was very relevant to them. It was an external price and so on. And it extended beyond the usual futures market.
That’s the other thing. You’re not going to get anywhere if you’re just duplicating a market that already exists. You have to add something to it to make it attractive to insiders.
So we ran a number of cases internally. We found some interesting behavior. There’s an article by Bo Cowgill on our experience with this auction. But ultimately, we ran into this problem that I described. The most valuable predictions would be the most sensitive predictions, and you didn’t want to do that in public.
And:
COWEN: But then you must think we’re not doing enough theory today. Or do you think it’s simply exhausted for a while?
VARIAN: Well, one area of theory that I’ve found very exciting is algorithmic mechanism design. With algorithmic mechanism design, it’s a combination of computer science and economics.
The idea is, you take the economic model, and you bring in computational costs, or show me an algorithm that actually solves that maximization problem. Then on the other side, the computer side, you build incentives into the algorithms. So if multiple people are using, let’s say, some communications protocol, you want them all to have the right incentives to have the efficient use of that protocol.
So that’s a case where it really has very strong real-world applications to doing this — everything from telecommunications to AdWords auctions.
And:
VARIAN: Yeah. I would like to separate the blockchain from just cryptographic protocols in general. There’s a huge demand for various kinds of cryptography.
Blockchain seems to be, by its nature, relatively inefficient. As an economist, I don’t like this proof of work that this is. I don’t like the fact that there’s one version of the blockchain that has to keep being updated. I don’t like the fact that it’s so slow. There are lots of things that you could fix, and I expect to see them fixed in the future, but I would say, crypto in general — big deal. Blockchain — not so much.
And finally:
COWEN: Now, users seem to like them both, but if I just look at the critics, why does it seem to me that Facebook is more hated than Google?
VARIAN: Well, you know, I actually don’t use Facebook. I don’t have any moral objection to it. I just don’t have the time to do it. [laughs] There are other things of this sort that can end up soaking up a substantial amount of time.
I think that one of the reasons — and this is, of course, quite speculative — I think that one of the reasons people are most worried about Facebook is they don’t really understand the limits of what can be done at Facebook. Whereas at Google, I think we’re pretty clear that we’re showing you ads. We’re showing you ads that are targeted to one thing or another, but that’s how the information’s used.
So, you’ve got this specific application in our case. In Facebook’s case, it’s more amorphous, I think.
There is much, much more at the link.
What does a continually improving labor market imply about monetary policy?
Not as much as many people think. As you may know, yesterday’s job market was quite good (NYT) and it is now many years of labor market recovery. Does this mean the Fed should have been easier with money say two or three years ago? No, that doesn’t follow. Let’s talk through a few points:
1. Aggregate demand shocks are major causes of recessions, and when they come you want the central bank to lean against them very, very hard, even if that means higher than average price inflation.
2. The early problems are mostly nominal. For whatever reasons (morale? long-term implicit contracts?), firms lay off some workers rather than cutting their nominal wages. This is a big reason why downturns involve so much unemployment, but to the extent the central bank can keep up nominal demand, at least some of this unemployment can be avoided or at least smoothed out over time.
3. Once those workers are unemployed, nominal stickiness starts to cease to be the major problem. Real rigidities and stickiness become progressively more important with the passage of time. First, the unemployed don’t even have a nominal wage to be sticky in the first place, and yes some of them are excessively stubborn with their reservation wages for accepting new jobs but that looks suspiciously like voluntary unemployment, albeit with some behavioral irrationality mixed in. But no, the main problem still is not voluntary unemployment, I am saying if the only rigidities were nominal it would be a problem of voluntary unemployment, a very different claim. I’ll come back to this shortly.
4. In the very early stages of a recession, there might simply be no jobs available, period, due to uncertainties and liquidity shocks. But usually within a year or two, a whole host of jobs open up, they just may not be good jobs for many of the unemployed. Often they are bad jobs, for reasons which relate to real rigidities, not nominal rigidities. Individuals need to be rematched to new jobs, and that process may or may not go well.
5. Here is a typical real rigidities story (but not the only one): you aspire to be an upper to mid level manager, and you are offered a job as a cashier at Walmart, or you could get such a job if you tried. You don’t take the job, because you fear its presence on your resume will shunt you onto a permanently lower career track. That is indeed a problem, and it is a real rigidity, not a nominal one. It can keep you unemployed, even if you might otherwise prefer to have the work on a temporary basis.
6. As the economy grows in real terms, the quality of jobs available will be upgraded, and eventually the unemployed are offered jobs which are worth taking. This process can be fast or slow, but in the recent recovery it has been relatively slow.
7. As more people are taking jobs, yes demand is rising but supply is rising also. The two are rising together. It is not wrong to say “greater demand is reemploying people,” but it is misleading. It is more accurate to say “real demand is rising, coincident with growing output, job quality is improving, uncertainty is being resolved, and the economy is doing a successively better job at solving the matching problem in its labor markets.”
8. In that same setting, simply boosting nominal demand with lower interest rates and higher price inflation won’t necessarily help employment much. You might get a slight labor supply increase through the not very impressive Lucas supply curve (people confusing nominal and real changes).
8b. To be sure, there is likely no harm from the easier monetary policy since price inflation has been slightly below target. I do not hate these proposed monetary easings, I just don’t think they are likely to matter much. Telling me that “higher demand has been reemploying workers” doesn’t impress me. Telling me “the labor market recovery has been underway for a long time” also does not impress me. Neither claim implies that a nominal push to demand will do the trick, if anything they might imply the contrary.
9. If the labor market recovery has been underway for a long time, that is a sign the coordination problem has been a real one rather than a nominal one. It is a sign that earlier Fed easing simply may not have mattered much.
10. You might notice that outside of emergency situations, such as 1929 or 2008 (see point #1), economists struggle mightily to demonstrate that money matters at all. I think Christina Romer has shown that surprise deflationary shocks do matter and are bad. After that, it is still up in the air, as indeed this analysis implies.
Everything I am writing is consistent with mainstream research economics, and the best and most sophisticated versions of Keynesian economics. I know it is not usually what you read on the internet. As a side note and exercise, it is worth pondering what this same framework might imply for the efficacy of fiscal policy, noting the answer will be “under what conditions?” rather than yes or no.
The case for real estate as investment
That is the topic of my latest Bloomberg column, here is one bit:
The authors of the aforementioned study — Òscar Jordà, Moritz Schularick and Alan M. Taylor — have constructed a new database for the U.S. and 15 other advanced economies, ranging from 1870 through the present. Their striking finding is that housing returns are about equal to equity returns, and furthermore housing as an investment is significantly less risky than equities.
In their full sample, equities average a 6.7 percent return per annum, and housing 6.9 percent. For the U.S. alone, equities return 8.5 percent and housing 6.1 percent, the latter figure being lower but still quite respectable. The standard deviation of housing returns, one measure of risk, is less than half of that for equities, whether for the cross-country data or for the U.S. alone. Another measure of risk, the covariance of housing returns with private consumption levels, also shows real estate to be a safer investment than equities, again on average.
One obvious implication is that many people should consider investing more in housing. The authors show that the transaction costs of dealing in real estate probably do not erase the gains to be made from investing in real estate, at least for the typical homebuyer.
Furthermore, due to globalization, returns on equities are increasingly correlated across countries, which makes diversification harder to achieve. That is less true with real estate markets, which depend more on local conditions.
Do read the whole piece.
Marijuana in Canada
Dispensaries selling various strains of marijuana and high-potency extracts, called budder and shatter, have opened on main streets. Regular pop-up markets like the one in Hamilton have sprouted, to the point vendors can attend five a week in the Toronto area.
Cannabis lounges have expanded, offering not just a place to smoke and take hits, but classes on growing cannabis at home and making cannabis creams. Cannabis-infused catering has gone so mainstream that the national association of food service businesses, Restaurants Canada, is hosting a seminar on it. Cannabis tour companies have opened, as have cannabis “bud-and-breakfasts.”
Universities and colleges across the country have introduced courses on cannabis business, investing, retail and cultivation.
Newspapers, which have hired full-time cannabis reporters, have published cannabis sections, filled with editorial ads by government-licensed producers advertising lines of cannabis-infused beverages, coffee and dog chew toys they are developing for when such products become legal.
…Ms. Roach see cannabis becoming almost like corn in its derivative form, threaded through everyday Canadian consumer products. Although people eat a minimal amount of corn each day, she said, “there’s corn syrup in everything.”
That is from Catherine Porter at the NYT. I increasingly believe that decriminalization will prove a more stable solution than outright legalization.
The rant against Amazon and the rant for Amazon
Wow! It’s unbelievable how hard you are working to deny that monopsony and monopoly type market concentration is causing all all these issues. Do you think it’s easy to compete with Amazon? Think about all the industries amazon just thought about entering and what that did to the share price of incumbents. Do you think Amazon doesn’t use its market clout and brand name to pay people less? Don’t the use the same to extract incentives from politicians? Corporate profits are at record highs as a percent of the economy, how is that maintained? What is your motivation for closing your eyes and denying consolidation? It doesn’t seem that you are being logical.
That is from a Steven Wolf, from the comments. You might levy some justified complaints about Amazon, but this passage packs a remarkable number of fallacies into a very small space.
First, monopsony and monopoly tend to have contrasting or opposite effects. To the extent Amazon is a monopsony, that leads to higher output and lower prices.
Second, if Amazon is knocking out incumbents that may very well be good for consumers. Consumers want to see companies that are hard for others to compete with. Otherwise, they are just getting more of the same.
Third, if you consider markets product line by product line, there are very few sectors where Amazon would appear to have much market power, or a very large share of the overall market for that good or service.
Fourth, Amazon is relatively strong in the book market. Yet if a book is $28 in a regular store, you probably can buy it for $17 on Amazon, or for cheaper yet used, through Amazon.
Fifth, Amazon takes market share from many incumbents (nationwide) but it does not in general “knock out” the labor market infrastructure in most regions. That means Amazon hire labor by paying it more or otherwise offering better working conditions, however much you might wish to complain about them.
Sixth, if you adjust for the nature of intangible capital, and the difference between economic and accounting profit, it is not clear corporate profits have been so remarkably high as of late.
Seventh, if Amazon “extracts” lower taxes and an improved Metro system from the DC area, in return for coming here, that is a net Pareto improvement or in any case at least not obviously objectionable.
Eighth, I did not see the word “ecosystem” in that comment, but Amazon has done a good deal to improve logistics and also cloud computing, to the benefit of many other producers and ultimately consumers. Book authors will just have to live with the new world Amazon has created for them.
And then there is Rana Foroohar:
“If Amazon can see your bank data and assets, [what is to stop them from] selling you a loan at the maximum price they know you are able to pay?” Professor Omarova asks.
How about the fact that you are able to borrow the money somewhere else?
Addendum: A more interesting criticism of Amazon, which you hardly ever hear, is the notion that they are sufficiently dominant in cloud computing that a collapse/sabotage of their presence in that market could be a national security issue. Still, it is not clear what other arrangement could be safer.
Monday assorted links
1. The More of Everything Problem.
2. RCTs vs. advertising experiments.
3. Facebook is essential to commerce in many emerging economies.
4. Two earlier MR posts on Westworld, including “*Westworld* as Haitian Hegelian Instantiation.”
5. Do Japanese rent-a-families evolve into partial sincerity?
My Conversation with Matt Levine
Here is the transcript and audio, Matt was in great form. We covered Uber, derivatives, crypto, Horace, Latin and the ancient world, neighborhoods of New York City, whether markets are volatile enough, Buffy the Vampire Slayer, whether IPOs are mispriced, Nabokov and modernist literature, Achilles and Homer, and of course the Matt Levine production function (“panic”).
Here is one excerpt:
LEVINE:
…What I’d like the story to be is that financial markets have gotten smarter and they reacted less to news. So even though the news is noisier, they react less to that noisy news because it turns out not to affect asset prices in as noisy a way as you’d think by watching TV.
I think that there is something compelling to that because we actually have seen smart people build smart things that do a good job of making investing decisions. So you’d expect over time, as people build more rational investing tools, investing would become more rational.
The good counterargument to that is that investing is not a technological problem in the world that can be solved. It’s an interpersonal fight. Trading, in particular, is an attempt to be better than someone else. You can never make trading more rational because as you get better, someone else gets better. The residue will ultimately still be your human biases.
I’m biased towards the view that we have gotten smarter at decoupling our emotional reactions to the news from financial asset prices. Part of that is — whether or not that’s true globally — there’s a local sense in which the first day of Trump’s election everyone panicked. Then he said another crazy thing, and then he said another. Eventually you tune it out. That’s a form of this thing of financial assets reacting less to human reactions to the news.
Here is another:
COWEN: Do you have a single biggest worry [about asset markets], however tiny, tiny, tiny it may be?
LEVINE: I don’t think I do. I don’t think I do. The thing that I find weirdest is the lack of volatility in the face of a very strange and volatile world, but I’ve reconciled myself to that. This is my efficient markets optimism, where I assume that if something bad is happening, it would happen.
COWEN: But efficient markets is also a pessimism, right? It’s harder to make the world better than it already is because you can’t see past what others are seeing very easily.
LEVINE: Sure, it’s an efficient markets conservatism or something.
And finally:
LEVINE: I have an idiosyncratic take on Book 9 of the Iliad. The Iliad is the story of Achilles is the great warrior on the Greek side in the Trojan War. He gets mad at some slight, and he goes back to his tent to sulk, and the Greeks start losing.
So then they send emissaries to his tent to say, “Please come back.” And he says, “No.” Then, the Greeks start losing some more.
Eventually, he comes back, and he gets killed. That’s basically the story of the Iliad. Book 9 is where they send the emissaries to say, “Please come back,” and he says, “No.”
He gives this speech, this response that is weird, where he says, effectively, “The prophecy is that if I go back to fight here, I will die here. My name will be immortal. If I don’t go back to fight, I’ll go home and live a long life and will be forgotten.” He chooses to go back and be forgotten. Then, later, he changes his mind because his friend gets killed.
I think the existential examination of this Greek warrior and this heroic culture that clearly valorizes heroism and deathless fame and everything, and who is, canonically, the most famous heroic warrior and the one with the most deathless fame, he’s the one who says, “Nah, I’d rather go back and live a long life on my farm.”
The forcing of that choice is the central point of the highest work of Greek art, sort of prefigures a lot of existentialist thought in the future, I think.
Do read and listen to the whole thing…