By James Stent, I thought this was quite a special book.  Most of all, it tries to explain how things actually work (it is sad how rare this is in books, outside the genre of angling tomes).  Stent tries to give the reader a good sense of what kind of demotion a failing leader of a big bank might receive, how the 1998 failure of GITIC (Guangdong International Trust and Investment Corporation) shaped the thinking of Chinese leaders on bank resolution, how major bank board directors are chosen, how the percentage of non-performing loans is calculated within banks, how SME loan risk is dealt with, and how the regulators try to ensure safety (lots of liquidity), among many other matters.

It is perhaps no surprise that the author has been an independent director on the boards of two Chinese banks, and has four decades of banking experience in Asia.

It’s not a thrilling read for most people, but if you read books on China or international finance you’ll learn a great deal from this one.  That said, I believe the author’s assessments are in general not sufficiently critical, noting that some recent events seem to bear out such a judgment.

You can buy it here.  Also useful, for different reasons, is the new book The Economics of Air Pollution in China: Achieving Better and Cleaner Growth, by Ma Jun.  It is funny (read: sad) how many people think the planet is at stake when it comes to climate change, and yet they will not deign to read a single book about air pollution in China.  Should they not read all of them?

Saturday assorted links

by on December 10, 2016 at 12:16 pm in Uncategorized | Permalink

1. “In total, 3,821,926 toys were seized from two warehouses, and would be sold at low prices, it said…The agency also posted photos of the two executives being marched from the premises by a squad of heavily armed soldiers.” Link here, you can guess the country.

2. Peruvian governance update, by Cesar Martinelli.

3. French Polynesia seasteading update.

4. Japanese city tags dementia sufferers with bar codes.

5. Louis Armstrong sings “Give Peace a Chance.”

Best world music, 2016

by on December 10, 2016 at 7:13 am in Music, Uncategorized | Permalink

Habib Galbi (YouTube), an Israeli band adapting Yemeni folk music, here is a good article about them.  They sing in Yemenite, a nearly extinct dialect of Arabic spoken by the Jews of Yemen.

Caetano Veloso and Gilberto Gil, Dois Amigos, Um Século de Música: Multishow Live, it is remarkable how fresh these guys still sound.

Tanbou Toulou Lou: Meringue, Kompa, Kreyol, Vodou Jazz & Electric Folklore from Haiti 1960-1981, one of the best collections.  And here on YouTube.

Faransiskiyo Somaliland, Sahra Halgan Trio.  And on YouTube.

Miriam Makeba, Indispensable 1955-1962.

Songs to fill the Void, and other works by American composers, most of all Virgil Thomson.

Here are the world music recommendations from Songlines, an excellent magazine by the way.

That is the topic of my latest Bloomberg column, here are parts of my analysis:

The upshot is that the possibility of conflict of interest will impose the biggest problems for those areas where a president’s legitimacy and credibility are most important, and also where the president has the most unilateral power. Those factors point to foreign policy as the most significant trouble area.

Domestic corruption is wrong, but I find it less worrying in practical terms, for instance:

Or consider the value of domestic property as a potential source of conflict of interest. If Trump really put the value of his hotel properties before the national interest, that might encourage a lot of policies to foster urban growth, travel, and tourism. Those policies might not spread their benefits efficiently, but they are hardly the worst outcome imaginable. A lot of the most scathing critiques of Trump refer to his proposed climate-change policies, but those seemed common to most of the other Republican candidates, and they are not a result of Trump’s particular asset holdings.

On the other hand:

But when it comes to foreign policy, all of these factors change for the worse, in part because the president has so much unilateral power. It’s hard for a president with perceived conflicts of interest to make credible commitments to allies because the allies can’t be confident that a president will stick to a proposed agreement or course of action. The result is an unraveling of alliances, a decline in international trust and possibly dangerous rearmament and nuclear proliferation. It’s hard for a subsequent president to reverse those losses.

Hostile powers or lukewarm neutrals also will be confused if foreign policy is not run in the usual predictable, bureaucratized fashion. That raises the risk of conflict or it makes an amelioration of tensions less likely.

Furthermore, imagine what would happen if members of the executive branch invited direct or indirect bribe payments from foreign powers. Large, corrupt, and partially hostile countries such as Russia and China – not Denmark – would probably make the biggest offerings.

Overall I find I am seeing too many “theory free” criticisms of Trump on the corruption issue.  Do read the whole thing.

Friday assorted links

by on December 9, 2016 at 12:33 pm in Uncategorized | Permalink

Here is a very good Amanda Ripley NYT piece, more than just the usual.  Here is just one of numerous interesting bits:

In 2006, socioeconomic status had explained 17 percent of the variance in Americans’ science scores; in 2015, it explained only 11 percent, which is slightly better than average for the developed world. No other country showed as much progress on this metric. (By contrast, socioeconomic background explained 20 percent of score differences in France — and only 8 percent in Estonia.)

And this:

Generally speaking, the smartest countries tend to be those that have acted to make teaching more prestigious and selective; directed more resources to their neediest children; enrolled most children in high-quality preschools; helped schools establish cultures of constant improvement; and applied rigorous, consistent standards across all classrooms.

For the United States, math is still clearly the weakest subject, in fact at all income levels.

The mayor-elect of Rio de Janeiro is promoting a new idea to bolster tourism in his crime-plagued city: levying a new tax on tourists, then using the proceeds to reimburse visitors who are mugged.

The mayor-elect, Marcelo Crivella, a right-wing evangelical Christian gospel singer who was elected in October, floated his call for action this week at a luncheon with business leaders. Mr. Crivella, who will take office on Jan. 1, said his “bold proposal” could be funded by assessing a new tax on airplane tickets bought by tourists.

“Rio de Janeiro cannot continue treating its tourists as if they were an afterthought,” Mr. Crivella, 59, told the audience, emphasizing the need to “shatter” Rio’s “negative image.”

Here is the full NYT story.  The muggers, it seems, do not treat Rio’s tourists as an “afterthought.”

You too may soon be able to feel what it was like to hit an iceberg on the Titanic.

Construction of a life-size replica of the doomed passenger ship began in China’s southwestern Sichuan province on Wednesday with a keel-laying ceremony and fireworks to mark the occasion.

It is part of Star Energy Investment Group’s plans for a tourist resort along the Qijiang River in Sichuan’s Daying County.

And it will eventually come with a simulation of the iceberg collision that sank the original ship in the Atlantic Ocean on April 15, 1912.

Backers say the project will also play on the 1997 blockbuster “Titanic” movie, starring Leonardo DiCaprio and Kate Winslet.

Steven Star Chief Executive Su Shaojun said it should not be strange that it is in China.

Here is further information, via Peter Metrinko.

About 92 percent of 1940 babies had higher pretax household earnings at age 30 than their parents had at the same age. (The results were similar at older ages and for post-tax earnings.)

…For babies born in 1980 — today’s 36-year-olds — the index of the American dream has fallen to 50 percent: Only half of them make as much money as their parents did.

That is from David Leonhardt at the NYT, channeling new research by Raj Chetty.  Here is more from Jim Tankersley.  Here is Brookings coverage.  Here is Vincent Geloso considering various adjustments to the data.


Mexico facts of the day

by on December 8, 2016 at 1:03 pm in Data Source, Economics | Permalink

About 40 percent of the value of U.S. goods imports from Mexico was made up of goods originally exported from the U.S. to Mexico, four economists (three of them then employed at the U.S. International Trade Commission) found in 2010. The equivalent figure for imports from China was just 4.2 percent. In a 2014 report for the Peterson Institute for International Economics, Georgetown University’s Theodore Moran and Lindsay Oldenski found that a 10 percent increase in employment at the Mexican subsidiaries of U.S. corporations led to a 1.3 percent increase in employment and 4.1 percent increase in research and development spending back home.

That is from Justin Fox, I still think the peso is slightly undervalued due to excess fear of Trump on this issue.

Thursday assorted links

by on December 8, 2016 at 11:57 am in Uncategorized | Permalink

1. Is there a chance Scotland could have the power to veto or forestall Brexit?

2. The demography of Appalachia, recommended.  And does higher education propel regional population growth?

3. “The empirical findings are consistent with a model of statistical discrimination where female executives are better equipped at interpreting signals of productivity from female workers. The evidence suggests substantial costs of under-representation of women at the top of the corporate hierarchy.”  Link here.

4. Lunch with the FT is now on Medium, here is Marc Andreessen.

5. NYT picks best TV shows of 2016.

In When Economics was Radical Marshall Steinbaum and Bernard Weisberger lament that the American Economic Association is no longer a radical, progressive force.

The AEA had been conceived as an upstart challenge to classical economic orthodoxy. Its founding platform stated, “We regard the state as an educational and ethical agency whose positive aid is an indispensable condition of human progress”

..But the AEA’s radicalism would be smothered soon after its birth…[and it] retreated to the safer ground of nonpartisan neutrality as the hallmark of professionalism. That move away from radicalism ensured that some of the most controversial questions in the field would never be answered convincingly, at least not by economists.

Steinbaum and Weisberger are correct about the AEA’s founding but they do the readers of the Chronicle of Higher Education a disservice* by not revealing that Ely’s “radicalism” consisted of socialism with a capitalist veneer, racism, and eugenics. Ely, of course, wanted more government ownership of the commanding heights, more regulation of economic life and more militarism and service to the state. Ely didn’t just reject laissez-faire in economics he rejected laissez-faire in all areas of social life.

For example, after explaining why the benevolence of modern society might lead to a decline in the fitness of the race, he argued, don’t worry, we have a solution:

….the regulation of marriage, which is proposed, and which is being pushed forward by physicians and thoughtful people, — by people who are the farthest removed from any possible designation as cranks, — looks beyond the prevention of the marriage of paupers and feeble-minded.

He then approvingly quotes an Indiana state Senator describing proposed eugenics legislation:

“The Commission should provide for physical examination of all desiring to marry. This would include their racial tendencies, moral, mental, and physical condition, whether they are of sound mind, free from chronic deadly diseases, and not moral degenerates. If the several governments would devote a little attention to this subject for a few years, two generations would see a different people on this earth. It is a radical but sound idea.”

Radical indeed.

Summarizing Ely says:

The problem is to keep the most unfit from reproduction, and to encourage the reproduction of those who are really the superior members of society.

You won’t be surprised to learn that Ely had clear ideas of who was fit and who unfit:

…there are classes in every modern community composed of those who are virtually children, and who require paternal and fostering care, the aim of which should be the highest development of which they are capable. We may instance the negroes, who are for the most part grownup children, and should be treated as such.

racetraitsMoreover, this was not a side issue to the founding of the AEA; this was exactly the radicalism that Ely’s AEA promoted. One early and influential publication of the AEA, for example, was Frederick Hoffman’s Race Traits of the American Negro which after presenting reams of statistics (Hoffman was later a president of the American Statistical Society) concluded with these recommendations:

…Intercourse with the white race must absolutely cease and race purity must be insisted upon in marriage as well as outside of it. Together with a higher morality will come a greater degree of economic efficiency, and the predominating trait of the white race, the virtue of thrift, will follow as a natural consequence of the mastery by the colored race of its own conditions of life.

…All the facts brought together in this work prove that the colored population is gradually parting with the virtues and the moderate degree of economic efficiency developed under the regime of slavery. All the facts prove that a low standard of sexual morality is the main and underlying cause of the low and anti-social condition of the race at the present time. All the facts prove that education, philanthropy and religion have failed to develop a higher appreciation of the stern and uncompromising virtues of the Aryan race. The conclusion is warranted that it is merely a question of time when the actual downward course, that is, a decrease in the population, will take place. In the meantime, however, the presence of the colored population is a serious hindrance to the economic progress of the white race.

It wasn’t just blacks, of course, who were hindering the white race but also immigrants. Here, quoting Thomas Leonard’s excellent book Illiberal Reformers:

The fullest unfolding of our national faculties, Ely asserted, required “the exclusion of discordant elements–like, for example, the Chinese.” Ely assumed that a unified American nation required racial homogeneity. As for South Asians, Ely proposed that famine-relief efforts in India should be suspended. Why not, Ely ventured, “let the famine continue for the sake of race improvement?”

(You can find more quotes of this kind in a paper by Thies and Daza in Econ Journal Watch and here is Russ Roberts interviewing Thomas Leonard about Illiberal Reformers and here is Tyler on Illiberal Reformers.)

If Ely was a progressive fascist and I said “but he beat his wife” that would not discredit progressive fascism. The point, however, is that the very factors that Steinbaum and Weisberger praise, the radicalism of the early AEA and Ely’s reject of laissez-faire, are precisely the factors that led Ely to support industrial policy, racism and eugenics. To Ely property was a bundle of rights and no stick in that bundle was inherently more valuable than the others. If it’s ok to take a person’s property then it’s ok to take a person’s property full stop whether that be physical goods, the right to procreate, the right to associate, the right to speak and so forth.

Ely was clear that industrial policy is human capital policy (perhaps even truer today than in Ely’s time) and he stated the connection between the two types of regulation, writing:

We have our census of farm animals, we have our soils surveys. Is it not of the highest importance that we should have constantly going on a survey of our human resources ? We then shall learn to know what kind of human beings we have as citizens and potential citizens. We shall then know where defects exist and we shall learn how to apply suitable remedies.

…heredity is a force which sets limits to all our activities, and which, if entirely neglected, leads to decay and ruin in the nation. We have got far enough to recognize that there are certain human beings who are absolutely unfit and who should be prevented from a continuation of their kind. We do know it is important that a superior stock should not be swallowed up and lost by a more rapid increase of the inferior stock.

Ely’s views are perhaps most closely aligned today with the so-called alt-right. It’s not a connection that the AEA should be pleased to acknowledge, let alone repeat.

* Steinbaum and Weisberger do discuss some of Ely’s “exclusionary and retrograde views” in another article.

Land speculation was a natural and common preoccupation among the Founders. For some it became an economic affliction. “Hardly a prominent man of the period failed to secure large tracts of real estate, which could be had at absurdly low prices, and to hold the lands for the natural advance which increased population would bring,” wrote Albert J. Beveridge.27 For many, such speculation would prove a hazardous preoccupation. Virginia’s Henry Lee and Pennsylvania’s Robert Morris and James Wilson ended up in jail because of their debts from speculation. Washington biographer James Thomas Flexner noted that land speculation was “a fundamental aspect of American economic life, but it had become in the last few years an extremely tricky one. General [Henry] Knox was above the knees in financial trouble because of the new settlements he had started in Maine.”28 Speculation in land became particularly rampant in the early 1790s when the stability of the new republic seemed assured. Describing the process of speculation, historian Forrest McDonald wrote: “One worked or connived to obtain a stake, then worked or connived to obtain legal title to a tract of wilderness, then sold the wilderness by the acre to the hordes of immigrants, and thereby lived and died a wealthy man. Appropriately, the most successful practitioner of this craft was George Washington, who had acquired several hundred thousand acres and was reckoned by many as the wealthiest man in America.”


Washington’s land holdings clearly affected his political outlook – first regarding England, and later regarding the United States. Washington thought big and thought about the implications of thinking big. Glenn A. Phelps wrote that Washington’s “extensive land-holdings in the West, as well as his frequent surveying expeditions to the frontier, had placed him within a circle of Virginia politicians with somewhat more enterprising, expansionist, westward-looking interests than their tidewater brethren.”59 Increasingly after the Revolutionary War, Washington’s land-holdings affected his preoccupation with the development of the Potomac River and a canal through the area where it was not navigable. Washington wrote a friend in 1785 that “unless we can connect the new States which are rising to our view in those regions, with those on the Atlantic by interest (the only binding cement, and not otherwise to be effected by opening such communications as will make it easier and cheaper for them to bring the product of their labour our markets, instead of going to the Spaniards southerly, or the British northerly), they will be quite a distinct people; and ultimately may be very troublesome neighbors to us.”


Washington foresaw America’s great westward migration and he foresaw potential wealth for himself. Historian Edmund S. Morgan wrote: “Washington believed that as a private citizen pursuing his own interests he could still be working for the good of the nation. He engaged without a qualm in a scheme that would benefit him financially, while it bolstered American independence in a way that he thought was crucial…

Washington also supported infrastructure projects that would increase the value of his landholdings.  Here is the source, with the tip via MR commentator g. ruqt.

Here is my earlier post on Inconvenient Questions.

Wednesday assorted links

by on December 7, 2016 at 1:17 pm in Uncategorized | Permalink

I was pleased to see their title for the column: “Go Wet, Young Man.”  Here is one of the claims:

Counterintuitively, I see the greatest promise for seasteading as a path toward more rather than less human companionship.

…some of the elderly have started living on cruise ships full-time. A good assisted-living facility might cost $80,000 a year in the U.S., more than many year-long cruises. (Cruising could also be cheaper than living in an expensive neighborhood.) Furthermore, the cruise offers regular contact with other passengers and also the crew, and the lower average age means that fewer of one’s friends and acquaintances are passing away. The weather may be better, and there is the option of going onshore to visit relatives and go shopping.

The cruise ship removes the elderly from full-service hospitals, but on the plus side, regular social contact is good for health, passengers are watched much of the time and there is a doctor minutes away. Better health and human companionship could be major motives for this form of seasteading. I could imagine many more of the elderly going this route in the future, and some cruise lines already are offering regular residences on board.

The goal of this seasteading enterprise is to pack people more tightly together rather than to open up broad new vistas for a Wild West kind of settlement. The proprietors make physical space more scarce, not less, to induce better clustering. So seasteading does have a future, but it is to join and build a new and crowded communitarian project, not to get away from one.

Do read the whole thing.