Results for “markets in everything”
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Saturday assorted links

by  Tyler Cowen

1. An obvious but still underrated point: “we find parenting attitudes strongly predict paternalistic policy attitudes—more than ideology, party identity, or any other measured demographic variables…”

2. DSM-V now makes the bestseller list (London Times).  “Ralph Lewis, a psychiatrist, wrote recently in Psychology Today of a “trend toward increased self-diagnoses” that was “particularly pronounced among young people” and predated the pandemic.”

3. Roubini in the FT: “Before this week’s ECB meeting, executive board member Isabel Schnabel stated that the bank’s willingness to deal with fragmentation risk had “no limits”. This echoed former ECB president Mario Draghi’s game-changing “whatever it takes” statement of 2012. But Schnabel also hinted at the need for policy conditionality when it comes to offering support. Given the current volatility of financial markets, one can expect they will further test the ECB’s ability to protect the currency union by backstopping fragile eurozone states.”

4. ESPN: “The Warriors are 5-1 to win the 2023 NBA title at Caesars Sportsbook, followed closely by the Brooklyn Nets and Boston Celtics, who are each listed at 6-1. The Milwaukee Bucks (15-2), Phoenix Suns (8-1) and LA Clippers (8-1) round out the teams with single-digit odds entering the offseason.”  Nets #2???

5. “So intense was the EU’s involvement in Northern Ireland – a part of a non-member state, remember – that it has imposed 4,000 new laws there over the past 18 months.”  Link here, where are the fans of democracy on this issue?  (NB: I don’t agree with everything in this piece, should go without saying but periodic reminders can be useful.)

6. Further evidence (from sex lives) on the current human capital deficit (FT).

Further jobs with your voice

by  Tyler Cowen in

I’m a re-recording mixer and sound mixer so I can confirm that the people who provide such specialized voice talents are amazing. There are also many more varieties: one of the films I mixed featured a dog as a lead character. There are two people who are known for their abilities to mimic dogs and make between 5 and 10 thousand dollars a day.

There are also the amazing people who work in “loop groups”. They provide the background chatter that you hear in any scene with more than a few people. Whether it’s a scene with a few people in an office, or a large group in a restaurant, they have to provide talking without actually saying any identifiable words. It’s particularly important as many countries, especially Germany, will block any films that have identifiable English in the sound files. These background vocals are known as “walla”.

That is from Michael Farnan in the comments.

What Operation Warp Speed Did, Didn’t and Can’t Do

by  Alex Tabarrok in

Operation Warp Speed was a tremendous success and one that I was pleased to support from the beginning. Many people, however, are concluding from the success of OWS that big Federal funding can solve many other problems at the same speed and scale and that is incorrect.

First, it’s important to understand that OWS did not create any scientific innovations or discoveries. The innovative mRNA vaccines are rightly lauded but all of the key scientific ideas behind mRNA as a delivery mechanism long predate Operation Warp Speed. The scientific advances were the result of many decades of work, some of it supported by university and government funding and also a significant fraction by large private investments in firms such as Moderna and BioNTech. It was BioNTech recall that hired Katalin Karikó (and many other mRNA researchers) when she couldn’t get university or government funding. Since OWS created no new scientific breakthroughs there isn’t much to learn from OWS about the efficacy of large scale programs for that purpose.

Second, it’s important to understand that we got lucky. OWS made smart bets and the portfolio paid off but it could have failed. Indeed, some OWS bets did fail including the Sanofi and Glaxo-Smith-Klein vaccine and the at-best modest success of Novavax. Many other vaccines which we didn’t invest in but could have invested in also failed. To be clear, my work with Kremer et al. showed that these bets and more were worth taking but one should not underestimate the probability of failure even when lots of money is spent.

So what did Operation Warp Speed do? There were four key parts to the plan 1) an advance market commitment to buy lots of doses of approved vaccines–this was important because in past pandemics vaccines had entered development and then the disease had disappeared leaving the firms holding the bag with little to show for their investment 2) the lifting of FDA regulations to allow for accelerated clinical trials, for example, phase 3 trials could start before phase 2 trials were fully complete 3) government investment in large clinical trials–clinical trials are the most expensive part of the development process and by funding the trials generously, the trials could be made large which meant that they could be quick 4) government investment in capacity, building factories not just for the vaccines but also for the needles, vials and so forth, even before any of the vaccines were approved–thus capacity was ready to go. All of these steps shaved months, even years, off the deployment timeline.

The key factor about each of these parts of the plan was that we were mostly dealing with known quantities that the government scaled. It’s known how to run clinical trials, it’s known how to produce vials and needles. The mRNA factories were more difficult but scaling problems are more easily solved with investment than are invention problems. It’s also known how to lift government regulations and speed the bureaucracy. That is, no one doubts that lifting regulations and speeding bureaucracy is within our production possibilities frontier.

It also cannot be underestimated that OWS funded people who were already extremely motivated. The Pfizer and Moderna staff put in near super-human effort–many of them felt this was the key moment of their life and they stepped up to their moment. OWS threw gasoline on fire–don’t expect the same in a more normal situation.

Another factor that people forget is that with vaccines we had a very unusual situation where the entire economy was dependent on a single sector–a macroeconomic O-ring. As a result, the social returns to producing vaccines were easily a hundred times (or more) greater than any potential vaccine profits. Thus, by accelerating vaccine production, OWS could generate tremendous returns. Most of the time, markets internalize externalities imperfectly but reasonably well which means that even if you accelerate something good the total returns aren’t so astronomical that you can’t overspend or spend poorly. Governments can spend too much as well as too little so most of the time you have to factor in the waste of overspending even when the spending is valuable–that problem didn’t really apply to OWS.

So summarizing what do we need for another OWS? 1) Known science–scaling not discovering, 2) Lifting of regulations 3) Big externalities, 4) Pre-existing motivation. Putting aside an Armageddon like scenario in which we have to stop an asteroid, one possibility is insulating the electrical grid to protect North America from a Carrington event, a geomagnetic storm caused by solar eruptions. (Here is a good Kurzgesagt video.) Does protecting the grid meet our conditions? 1) Protecting the electrical grid is a known problem whose solution does not require new science 2) protecting the grid requires lifting and harmonizing regulations as the grid is national/inter-national but the regulations are often local, 3) The social returns to power far exceed the revenues from power so there are big externalities. Indeed, companies could have protected the grid already (and have done so to some extent) but they are under-incentivized. (The grid is aging so insulating the gird could also have many side benefits.) 4) Pre-existing motivation. Not much. Can’t have everything.

I think it’s also notable that big pandemics and solar storms seem to occur about once in every one hundred years–just often enough to be dangerous and yet not so often that we are well prepared.

Thus, while I think that enthusiasm for an “OWS for X” is overblown, there are cases–protecting the grid is only one possibility–where smart investments could pay big returns but they must be chosen carefully in light of all the required conditions for success.

Explaining NFTs

by  Alex Tabarrok in

Writing at the Harvard Business Review, Steve Kaczynski and Scott Duke Kominers have en excellent explanation of how NFTs create value–the best I have read.

NFTs don’t just provide a kind of digital “deed.” Because blockchains are programmable, it’s possible to endow NFTs with features that enable them to expand their purpose over time, or even to provide direct utility to their holders. In other words, NFTs can do things — or let their owners do things — in both digital spaces and the physical world.

In this sense, NFTs can function like membership cards or tickets, providing access to events, exclusive merchandise, and special discounts — as well as serving as digital keys to online spaces where holders can engage with each other. Moreover, because the blockchain is public, it’s even possible to send additional products directly to anyone who owns a given token. All of this gives NFT holders value over and above simple ownership — and provides creators with a vector to build a highly engaged community around their brands.

It’s not uncommon to see creators organize in-person meetups for their NFT holders, as many did at the recent NFT NYC conference. In other cases, having a specific NFT in your online wallet might be necessary in order to gain access to an online game, chat room, or merchandise store. And creator teams sometimes grant additional tokens to their NFT holders in ways that expand the product ecosystem: owners of a particular goat NFT, for example, were recently able to claim a free baby goat NFT that gives benefits beyond the original token; holders of a particular bear NFT, meanwhile, just received honey.

Thus owning an NFT effectively makes you an investor, a member of a club, a brand shareholder, and a participant in a loyalty program all at once. At the same time, NFTs’ programmability supports new business and profit models — for example, NFTs have enabled a new type of royalty contract, whereby each time a work is resold, a share of the transaction goes back to the original creator.

This all means that NFT-based markets can emerge and gain traction quickly, especially relative to other crypto products. This is both because the NFTs themselves have standalone value — you might buy an art NFT simply because you like it — and because NFTs just need to establish value among a community of potential owners (which can be relatively small), whereas cryptocurrencies need wide acceptance in order to become useful as a store of value and/or medium of exchange.

Read the whole thing. Kaczynski and Kominers also offer good advice to firms and organizations interested in creating NFTs. It remains true, of course, that there is a lot of foolish and wasted spending in the space–that’s typical of most new asset classes where the rush to get into the space throws up a lot of noise making the signal more difficult to detect.

Addendum: Don’t forget you can buy the Marginal Revolution NFT! You will be purchasing from the new owner (we sold it) but I believe we get a royalty which also illustrates an advantage of the NFT model.

Image: SupDucks6484.

Why the lab leak theory matters

by  Tyler Cowen in

Here is Ross Douthat at the NYT:

…there’s a pretty big difference between a world where the Chinese regime can say, We weren’t responsible for Covid but we crushed the virus and the West did not, because we’re strong and they’re decadent, and a world where this was basically their Chernobyl except their incompetence and cover-up sickened not just one of their own cities but also the entire globe.

The latter scenario would also open a debate about how the United States should try to enforce international scientific research safeguards, or how we should operate in a world where they can’t be reasonably enforced.

I agree, and would add one point about why this matters so much.  “Our wet market was low quality and poorly governed” is a story consistent with the Chinese elites not being entirely at fault.  Wet markets, after all, are a kind of atavism, and China knows the country is going to evolve away from them over time.  They represent the old order.  You can think of the CCP as both building infrastructure and moving the country’s food markets into modernity (that’s infrastructure too, isn’t it?), albeit with lags.  “We waited too long to get rid of the wet markets” is bad, but if anything suggests the CCP should have done all the more to revolutionize and modernize China.  In contrast, the story of “our government-run research labs are low quality and poorly governed”…that seems to place the blame entirely on the shoulders of the CCP and also on its technocratic, modernizing tendencies.  Under that account, the CCP spread something that “the earlier China” did not, and that strikes strongly at the heart of CCP legitimacy.  Keep in mind how much the Chinese apply a historical perspective to everything.

A number of you have asked me what I think of the lab leak hypothesis.  A few months ago I placed the chance of it at 20-30%, as a number of private correspondents can attest.  Currently I am up to 50-60%.

How would actual alien spacecraft influence asset prices?

by  Tyler Cowen in

Primarily as an exercise, I thought about that question for a while, and here is part of my answer in a Bloomberg column:

If you know you are being watched, what exactly do you wish to buy more of? I would bet on defense stocks to rise, whether or not there is much we can do to defend ourselves against this alien presence.

Of course investors could not be sure that these alien drone probes will merely observe us forever. They might be observing with the purpose of rendering judgment. If they are offended by our militaristic tendencies, the quality of our TV shows and our inability to adopt the cosmopolitan values of “Star Trek” over the next 30 years, maybe they will zap us into oblivion. But that kind of systematic risk is hard to insure against. After such an act of obliteration, neither gold nor Bitcoin will do you any good.

My main prediction is that alien UFOs will be bullish for the dollar. The U.S. government seems most closely connected to the UFO phenomenon, for whatever reason. (Maybe its pilots fly more sallies and record better data?) In any case, if alien UFOs become more likely, an informational advantage would accrue to the federal government. And the dollar already has a tradition as a safe haven currency…

Most of us would get used to the idea of alien presence without quite believing in it. As The New Yorker makes clear, many Americans believed in alien-origin UFOs after World War II, as did many American policymakers. It might have spurred greater interest in the space program and science fiction, but it didn’t affect most aspects of American life, nor did it seem to drive markets.

Never underestimate the capacity of markets, like humans, to adapt. Just as many of the strangest parts of our lives can come to seem normal, so Wall Street can find a way to do business with just about anybody — aliens included.

I do full, literally mean everything stated in the column.  But the piece also has (at least) two esoteric meanings — can you guess what they are?

Tuesday assorted links

by  Tyler Cowen

1. Promise on an HIV vaccine?

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?

by  Alex Tabarrok in

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

by  Tyler Cowen in

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:

And:

And:

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

by  Tyler Cowen in

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

by  Tyler Cowen in

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

by  Tyler Cowen in

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

by  Tyler Cowen in

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

by  Tyler Cowen in

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

by  Tyler Cowen in

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.