south africa

Markets in everything, hunting mutant animals edition

More than 99.9 percent of all wild gnus, also called wildebeest, from the Afrikaans for “wild beast,” have dark coats. But this three-year-old golden bull and his many offspring are not an accident. They have been bred specially for their unusual coloring, which is coveted by big game hunters.

These flaxen creatures are the latest craze in South Africa’s $1 billion ultra-high-end big-game hunting industry. Well-heeled marksmen pay nearly $50,000 to take a shot at a golden gnu — more than 100 times what they pay to shoot a common gnu. Breeders are also engineering white lions with pale blue eyes, black impalas, white kudus, and coffee-colored springboks, all of which are exceedingly rare in the wild.

“We breed them because they’re different,” says Barry York, who owns a 2,500-acre ranch about 135 miles east of Johannesburg. There, he expertly mates big game for optimal — read: unusual — results. “There’ll always be a premium paid for highly-adapted, unique, rare animals.”

…No one disputes that there’s money to be made in rare big game. Africa Hunt Lodge, a U.S.-based tour operator, advertises “hunt packages” to international clients traveling to South Africa that include killing a golden gnu for $49,500, a black impala for $45,000, and a white lion for $30,000.

There is more here, and for the pointer I thank Kaushal Desai.

*Chappie*, or Emile

This Neill Blomkamp (“District 9”) movie has received only lukewarm reviews, but while highly imperfect it is more interesting than most critics seem to realize.  The initial premise is that in a few years’ time South Africa resorts to AI-driven, robot policemen.  I see the film as revolving around three key questions:

1. What will a robot be like, if he grows up under rather brutal conditions?  This is first and foremost a movie about education, and it could have been written by John Gray.  Don’t assume that people (robots) have an irrevocable tendency to support liberal values, at least not when the chips are down and they have been beaten up.  The gang motive is both popular and enduring.

2. Can a society dependent on robots for law enforcement become/remain a liberal society?  Or will the “arms race” between the law and the criminals result in brutality and a loss of liberty?

3. How robust is a robot society to the eventual possibility of human error and depravity?

Along the way there are references to Asimov, “Silent Running,” Blade Runner, Verhoeven of course, and other android sources.  I can’t endorse every angle of the ending, or every character decision, but still I didn’t consider leaving this one.

Why India is protected from the global slowdown

Victor Mallet writes:

Amid gloom over global economic growth and uncertain prospects for emerging markets, India is beginning to stand out as uniquely well-placed to gather the windfall benefits of an international slowdown.

Unlike Brazil, Russia or South Africa, India reaps immediate advantages for its terms of trade and its domestic budget from the fall in commodity prices triggered by renewed concerns about the world economy.

And unlike China, India will not suffer much from any decline in global demand for manufactured goods because its export sector is relatively small.

Commodities – mostly oil – account for more than half of India’s imports but only 9 per cent of its exports, mainly food. The current account deficit falls by about $1bn a year for every $1 decline in the price of a barrel of oil, and the reduced cost of fuel subsidies is also easing the burden on the budget.

Another benefit of weaker commodity prices is falling inflation, long the bane of the Indian economy.

How is IBM deploying Watson these days?

IBM on Tuesday revealed details of how several customers are putting Watson to work, showing that cognitive computing has garnered at least an initial interest among different sorts of businesses. Naming customers also helps other businesses feel more at ease about trying the new technology.

In Australia, the ANZ bank will allow its financial planners to use the Watson Engagement Advisor to help answer customer questions. The idea is that the bank can then better understand what questions are being asked, so they can be answered more quickly.

Also in Australia, Deakin University will use Watson to answer questions from the school’s 50,000 students, by way of Web and mobile interfaces. The questions might include queries about campus activities or where a particular building is located. The service will be drawn from a vast repository of school materials, such as presentations, brochures and online materials.

In Thailand, the Bumrungrad International Hospital will use a Watson service to let its doctors plan the most effective treatments for each cancer patient, based on the patient’s profile as well as on published research. The hospital will leverage research work IBM did with the Memorial Sloan Kettering Cancer Center to customize Watson for oncology research.

In Cape Town, South Africa, Metropolitan Health medical insurance company will be using Watson to help provide medical advice for the company’s 3 million customers.

Watson is also being used by IBM partners and startups as the basis for new services.

Using Watson, Travelocity co-founder Terry Jones has launched a new service called WayBlazer, which can offer travel advice via a natural language interface. The Austin Convention and Visitors Bureau is testing the WayBlazer app to see if it can increase convention and hotel bookings.

Veterinarian service provider LifeLearn of Guelph, Canada, is using Watson as the basis of a new mobile app called LifeLearn Sofie, which provides a way for animal doctors to research different treatment options. The Animal Medical Center in New York is currently testing that app.

Watson is also being incorporated into other third-party apps serving retailers, IT security and help desk managers, nonprofit fund-raisers, and the health care industry.

There is more information here.

New York (Texas and Tennessee) fact of the day

The median household income in the city of New York is a few hundred dollars a year more than the median household income in the state of Texas, but in practical terms the average New York City household is much worse off.The most obvious issue is the cost of housing, which for New Yorkers is about four times what it is for Texans.

That is from Kevin Williamson, who stresses that New York City is actually a relatively poor place.

By the way, New York and DC have Ginis reflecting more inequality than what we find in Mexico or Nigeria.  Manhattan and Putnam County, Tennessee have Ginis almost as high as that of South Africa.

Have I mentioned that a Gini coefficient isn’t a very good measure of inequality for most purposes?  It does not command much loyalty from people who actually work in that area (generalized entropy measures are much more popular), yet it has become a staple of discussion in popular economics.

Acemoglu and Robinson on Piketty

There is a new paper out by them:

Thomas Piketty’s recent book, Capital in the Twenty First Century, follows in the tradition of the great classical economists, Malthus, Ricardo and Marx, in formulating “general” laws to diagnose and predict the dynamics of inequality. We argue that all of these general laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. Using the economic and political histories of South Africa and Sweden, we illustrate not only that the focus on the share of top incomes gives a misleading characterization of the key determinants of societal inequality, but also that inequality dynamics are closely linked to institutional factors and their endogenous evolution, much more than the forces emphasized in Piketty’s book, such as the gap between the interest rate and the growth rate.

For the pointer I thank Nathaniel Bechhofer.

Assorted links

China estimate of the day (speculative)

Officially, the People’s Republic of China is an atheist country, but that is changing fast as many of its 1.3 billion citizens seek meaning and spiritual comfort that neither communism nor capitalism seem to have supplied.

Christian congregations, in particular, have rocketed since churches began reopening when Communist leader Mao Zedong’s death in 1976 signalled the end of the Cultural Revolution. Less than four decades later, some believe China is now poised to become not just the world’s No. 1 economy but also its most numerous Christian nation.

“By my calculations China is destined to become the largest Christian country in the world very soon,” said Fenggang Yang, a professor of sociology at Purdue University in Indiana and author of Religion in China: Survival and Revival under Communist Rule. “It is going to be less than a generation. Not many people are prepared for this dramatic change.”

China’s Protestant community, which had just one million members in 1949, has already overtaken those of countries more commonly associated with an evangelical boom. In 2010 there were more than 58 million Protestants in China compared with 40 million in Brazil and 36 million in South Africa, according to the Pew Research Centre’s Forum on Religion and Public Life.

Yang, a leading expert on religion in China, believes that number will swell to around 160 million by 2025. That would be likely to put China ahead even of the United States, which had around 159 million Protestants in 2010 but whose congregations are in decline.

By 2030, China’s total Christian population, including Catholics, would exceed 247 million, placing it above Mexico, Brazil and the U.S. as the largest Christian congregation in the world, Yang predicted.

The article is here, via Noah Smith.

Which countries will fare worst from a Chinese slowdown?

If you want to look at some good tables ranking the vulnerability of emerging countries to China, you could do worse than check Craig Botham of Schroders’ views summarised at http://blogs.ft.com/beyond-brics/2014/03/13/ranking-em-vulnerability-to-china/#axzz2vlzb3Xby. According to this, Chile, Columbia, Russia, South Africa and Peru are the most exposed, but few countries in Asia get off lightly, or Brazil for that matter. And while Australia doesn’t figure, of course, Perth should. And because of other concerns people have about the lack of demand in Australia ex-Perth, creeping weakness in employment,  and looming instability in housing and mortgage markets, this is definitely a ‘watch-this-space’.

Looking at copper, half of China’s usage is accounted for by infrastructure and construction, and a further third by consumer and industrial goods. To the extent this reflects China’s development model, i.e. with an emphasis on fixed investment and exports, respectively, it is clear that economic rebalancing away from these sectors to household goods and services must entail a significant fall-out in terms of the commodity intensity of growth.

China’s consumption of other commodities also accounts for a hefty share of global production, though not as large as for base metals. In the case of non-renewable energy resources, the proportion is 20%, and for major agricultural crops, it’s 23%.

That is from George Magnus.

Assorted links

1. Why the minimum wage doesn’t explain stagnant wages.

2. What is the optimal way to pro-rate co-authorship?

3. White and Asian per capita incomes, in South Africa, are up significantly since Mandela’s election victory in 1994.

4. Innovation changes everything, by Seth Roberts.

5. What kind of ads should a Eugene Fama story carry?

6. The increasing inequality of art prices, and from the story I liked this line: “The beauty of art is that there is a lot of it.”

On the Hayek-Pinochet connection

Corey Robin has a long post on this, here is one part:

Hayek complied with the dictator’s request. He had his secretary send a draft of what eventually became chapter 17—“A Model Constitution”—of the third volume of Law, Legislation and Liberty. That chapter includes a section on “Emergency Powers,” which defends temporary dictatorships when “the long-run preservation” of a free society is threatened. “Long run” is an elastic phrase, and by free society Hayek doesn’t mean liberal democracy. He has something more particular and peculiar in mind: “that the coercive powers of government are restricted to the enforcement of universal rules of just conduct, and cannot be used for the achievement of particular purposes.” That last phrase is doing a lot of the work here: Hayek believed, for example, that the effort to secure a specific distribution of wealth constituted the pursuit of a particular purpose. So the threats to a free society might not simply come from international or civil war. Nor must they be imminent. As other parts of the text make clear, those threats could just as likely come from creeping social democracy at home. If the visions of Gunnar Myrdal and John Kenneth Galbraith were realized, Hayek writes, it would produce “a wholly rigid economic structure which…only the force of some dictatorial power could break.”

Hayek came away from Chile convinced that an international propaganda campaign had been unfairly waged against the Pinochet regime (and made explicit comparison to the campaign being waged against South Africa’s apartheid regime). He set about to counter that campaign.

He immediately wrote a report lambasting human rights critics of the regime and sought to have it published in the Frankfurter Allgemeine Zeitung. The editor of this market-friendly newspaper refused, fearing that it would brand Hayek as “a second Chile-Strauss.” (Franz Josef Strauss was a right-wing German politician who had visited Chile in 1977 and met with Pinochet. His views were roundly repudiated by both the Social Democrats and the Christian Democrats in Germany.) Hayek was incensed. He broke off all relations with the paper, explaining that if Strauss had indeed been “attacked for his support for Chile he deserves to be congratulated for his courage.”

There is much more at the link.

Are we living in a time of asset bubbles?

Here is one typical complaint about bubbles, from Jesse Eisinger, excerpt:

We are four years into the One Percent’s recovery. Now, we are in Round 3 of quantitative easing, the formal term for the Fed injecting hundreds of billions of dollars into the economy by purchasing longer-term assets like Treasury bonds and Fannie Mae and Freddie Mac paper. What’s that giving us? Overvalued stocks. Private equity firms racing to buy up Arizona real estate. Junk bond yields at record lows. Ratings shopping on structured financial products.

These are dangerous signs of prebubble activity.

Here is a Krugman rebuttal.  I will offer a few points on a series of debates which in general I have stayed away from.

1. I don’t find most predictive discussions of bubbles interesting, while admitting that such claims often will prove in a manner correct ex post.  “OK, the price fell, but was it a bubble?  I mean was there froth, like on your Frappucino?”  Or to quote Eisinger, it might also have been “dangerous signs of prebubble activity” (what happens between the “prebubble” and the “bubble”?  The “nascent bubble”?  The “midbubble”?  The “midnonbubble”?)

2. Good news and improving conditions may well bring more bubbles or greater likelihood of bubbles, but that is hardly reason to dislike good news and improving conditions.

3. Relative to measured real interest rates, stocks look cheap right now.  That doesn’t mean they are, but reread #1.

4. No one understands the term structure of interest rates, no matter what they tell you.  Reread #1.

5. I don’t see why anything particular about the current state of affairs, at least in the United States, needs to be “unwound.”  I sometimes draw a distinction between those of us who have been thinking about interest on reserves since S. Tsiang, Fischer Black, and the Reserve Bank of New Zealand, and those of us who have not.

6. One coherent definition of bubble is that of a hot potato, traded in a world of heterogeneous expectations, but which must ultimately pop, because eventually the price of that asset will consume all of gdp, a bit like those old Tokyo parking spots.  Fair enough, but I don’t see that in many asset markets today if any (Bitcoin for a while?).

7. Another coherent definition of a bubble has less to do with a dynamic price path and ongoing resale for gain, but rather there may be a (temporary) segmentation across classes of asset market buyers.  The obvious candidate here is that  many people and institutions have been frightened into Treasuries and away from almost everything else.  That could mean we have a real interest rate bubble, but it also could mean that lots of other assets are undervalued, at least if the liquidity effect defeats the higher real interest rate effect of moving out of Treasuries.  (It would be odd to think that a shift of funds out of Treasuries and into stocks would cause stock prices to fall, but perhaps some people fear this.)

I don’t agree with this view, but I do feel I understand it.  The most likely “bubble” is then in real interest rates, due to a (temporary?) skewing of the risk premium.  That all said, I do not think this should be called a bubble.  Changes in the risk premium and “bubbles” have traditionally been considered alternative explanations for asset prices.  Reread #1, and reread #4 while you’re at it.

8. Ruchir Sharma made some interesting points yesterday:

Far from fighting off a deluge of foreign capital, leaders from India to South Africa are struggling to attract a greater share of global capital flows in order to fund widening current account deficits. Over the past decade, the foreign exchange reserves of the developing world grew at an average annual rate of 25 per cent, swelling from $570bn in 2000 to $7tn in 2011. But over the past year, the average rate slowed to a crawl of barely 5 per cent.

The idea that money is still flooding emerging markets misses the big picture, which is that global cross-border capital flows are down 60 per cent from their 2008 peak. The largest shares of cross-border capital flows are in bank loans, trade and foreign direct investment, which are slowing worldwide.

9. I expect the real economy over the next twenty years to be more volatile than it was say in the 1990s.  In that sense, many current asset market prices may be revised and quite dramatically.  Still, I don’t find the bubble category to be so useful in this regard.  We really don’t know what is going to happen and that is why the current prices are wrong, not because of a “bubble.”

10. I am probably done blogging about bubbles for a while.  Satisfying you was not the goal of this post, but that is in the nature of the subject area, not out of any desire for spite.

Stories to watch for in 2013

Here is a list from The Guardian.  Here is an FT list.  My list looks more like this:

1. Economic turnarounds in the Philippines, Sri Lanka, Indonesia, and possibly Pakistan and Myanmar.

2. Pressures for secession in Catalonia, and a potential crisis of the Spanish state.

3. East Asian belligerence, with more hawkish leaders in the three major countries.

4. There is actually a non-trivial chance we totally blow it on the debt ceiling.

5. The continuing rise of machine intelligence and the general recognition of such as the next major technological breakthrough.

6. Significant positive reforms in Mexico on education, foreign investment, and other matters too.

7. Political collapse in South Africa.

8. Continuation of America’s “Medicaid Wars,” over state-level coverage, combined with the actual implementation of much more of ACA.  Continuing attempts in Rwanda, Mexico, and China to significantly extend health care coverage to much poorer populations.

9. The return of dysfunctional Italian politics, combined with the arrival of recession in most of the eurozone economies, including France and Germany.

10. The ongoing barbarization of North Africa, including Mali, Syria, and possibly Egypt.  And whether any of these trends will spread to the Gulf states.

11. Whether China manages a speedy recovery and turnaround.

12. Watching India try to overcome its power supply problems, its educational bottlenecks, and its low agricultural productivity.

13. Seeing whether Ghana makes it to “middle income” status and how well broader parts of Africa move beyond resource-based growth.

14. Whether U.S. and also European political institutions can handle the intensely distributional nature of current fiscal questions.

Those are some of the main stories I will have my eye on, but of course I expect to be surprised.  I suppose Israel and Iran should be on that list somehow, North Korea too, but I don’t find that thinking and reading about it yields much in the way of return, compared to a simple “wait and see.”

Addendum: Here is Matt’s list.

*Searching for Sugar Man*

There is plenty of social science in this unexpected indie hit, which depicts the musical career of Sixto Rodriguez.  Rodriguez had two very good albums in the early 1970s but faded into obscurity after failing to gain commercial traction.  Unbeknown to the artist, he had become an enduring national celebrity in South Africa.  His fans there had no idea he had been working in Detroit as a construction demolitionist (this is before the modern internet, although eventually the internet helped his daughter discover his fame in South Africa, through a fan’s web site).  Here is Cass Sunstein on the movie and its portrayal of social and cultural dynamics.

The music is quite appealing — imagine a mix of Donovan, Motown, and low-tech psychedelia, the latter a’la Love.  If you are looking to hear or download one song, I recommend the iconic “I Wonder.”

To my ear it sounds naive but charming, but to the South Africans it was revelatory and cool.  Furthermore here was a non-Black coming out of Motown (Mexican ancestry but born in the United States), yet with much of the anti-establishment feel of a black artist of the time.  The movie never touches on this racial angle as possibly relevant to his popularity; did the South Africans require a non-black version of a black idol?  And what does he now symbolize, given that white rule has ended?  When they show Rodriguez’s post-apartheid concerts in South Africa, there is not a black face to be seen, as if he has become a nostalgia act in a slightly unsettling manner with the anti-establishment gloss now drained away.

The full story has not yet been told, not even on the American side.  From watching the movie, the viewer receives the feeling that Rodriguez fell into a hole circa 1973.  The reality is that he was touring Australia as late as 1981 (more here) and even put out a live album from that country in the same year.  Music aficionados will know all about the close cultural connections between Australia and South Africa at that time; did Rodriguez really have no idea of his South African following?  And what kind of connections was he keeping with the commercial world of music?

I would gladly read a book about how failing artists string out their careers by playing in niche markets or writing for them.  For instance Harry Nilsson released some of his late albums in the UK, Australia, and Japan only.  Erwin Nyiregyhzai kept giving periodic piano recitals in Japan, well after his prodigy years were over and he supposedly was “lost” and thus before his “rediscovery.”  What is a rediscovery anyway?

Here is Rodriguez’s eBook guide to happiness.  For pointers I thank Cass Sunstein and also Angus.

International PPP for faculty salaries

Not exactly what I would have thought:

Canada comes out on top for those newly entering the academic profession, average salaries among all professors and those at the senior levels. In terms of average faculty salaries based on purchasing power, the United States ranks fifth, behind not only its northern neighbor, but also Italy, South Africa and India.

You will note however that this is not covering the extreme right hand tail of top faculty salaries in top U.S. universities, but rather a measured mean from public institutions.  There is more here, hat tip goes to Jacob Levy.  In percentage terms, the biggest gap between entry salaries and top salaries is found in China.  There is much more data here.