Lima, Peru bleg

by on August 27, 2016 at 2:18 pm in Food and Drink, Travel | Permalink

Your assistance is humbly requested, noting that the shortness of the trip will prevent any significant excursions outside of the city.  Do note I have been there twice, though not in the last nineteen years or so.

I thank you all in advance for your suggestions.

Saturday assorted links

by on August 27, 2016 at 12:21 pm in Uncategorized | Permalink

Paper Pushers

by on August 27, 2016 at 7:25 am in Economics, Law | Permalink

Excellent piece by Tim Carney:

Five years ago, a new quirky-sounding consumer-rights group set up shop in a sleepy corner of Capitol Hill. “Consumers for Paper Options is a group of individuals and organizations who believe paper-based communications are critically important for millions of Americans,” the group explained in a press release, “especially those who are not yet part of the online community.”

This week, Consumers for Paper Options scored a big win, according to the Wall Street Journal. Securities and Exchange Commission chairman Mary Jo White has abandoned her plan to loosen rules about the need to mail paper documents to investors in mutual funds.

Mutual funds were lobbying for more freedom when it came to mailing prospectuses — those exhaustive, bulky, trash-can-bound explanations of the contents of your fund. In short, the funds wanted to be free to make electronic delivery the default, while allowing investors to insist on paper delivery. This is an obvious common-sense reform which would save whole forests of trees.

You won’t be surprised to lean that Consumers for Paper Options is funded by paper mills, timber firms and the Envelope Manufacturers Association.

What bothers me about these stories is not the rent-seeking–that is to be expected. What bothers me is that there is a law that prescribes how mutual funds must inform their customers. Why must every aspect of commercial life be governed by a gun? And this is where I expect pushback–the mutual funds will rip us off if we don’t have these laws, blah, blah, blah. Fine, believe that if you must, but then you have no cause to complain about rent seeking. You created the conditions for its existence.

At the prices they are offering, a lot of bugs in their software are going undetected.  Yet the company has the funds to pay more, and you might think for Coasean reasons the value to Apple of maintaining the franchise is pretty high.  So why don’t they pay more?  From Russell Brandom, this may be the reason:

If Apple really did put its enormous cash reserves behind catching every bug, the result might have unintended consequences for its own security workforce. Building and deploying patches is hard work, every bit as delicate and creative as finding vulnerabilities. Companies need dedicated teams to do that work — but with skyrocketing prices for iOS vulnerabilities, why not put in a few months to find an exploit, turn it in for the bounty, and then spend the rest of the year working on your tan? “If Apple or other defense bounties tried to outbid or even match offense bug prices, they may lose the employees they need most to fix the issues,” Moussouris says.

The article is of interest more generally.

A simple parable of crowding out

by on August 27, 2016 at 1:05 am in Economics | Permalink

Think tank X decides to expand its policy output on urban economics, so it hires some new scholars in the area.  That means fewer people teaching urban economics in academia, or maybe fewer people driving Uber.

It also means more computers in the think tank sector and fewer computers elsewhere.

Or make the example corporate.  Microsoft hires more economists, so fewer economists work for banks.

None of this has to involve higher interest rates, whether on government securities or corporate bonds, yet still there is an opportunity cost from the new decisions.  Do interest rates have to go up every time resources are switched across sectors?  No.  Will there in general be a significant “multiplier” from these sectoral shifts?  I say that question is a category mistake, but if you insist the multiplier could easily be negative rather than positive.

There is some upward wage pressure from these labor reallocations, and you could consider such wage changes as evidence for this crowding out.  Note three points.  First, real wages have been rising as of late.  Second, the sectoral shift also could cause some wages to fall.  Third, a lot of wage groups have seen falling real wages since 1999-2000, at least as we measure wages by traditional means.  The “rising wage” pressure therefore may take the form of “wages fell less than otherwise.”  Pointing at stagnant wages for an economic group therefore is not, in the recent environment, evidence for no crowding out of labor.

These are all simple points, but they are being forgotten in today’s discussion.  A good rule of thumb is to start by viewing the problem in real terms rather than focusing on “finance capital.”  As the point applies to labor, so does it apply to tractors.

Here is an earlier post on related topics.

Arrived in my pile

by on August 26, 2016 at 1:29 pm in Books | Permalink

Friday assorted links

by on August 26, 2016 at 11:14 am in Uncategorized | Permalink

arlingtoncover

That is from Arlington magazine.  When I clicked on the site, the first five articles were about food.

A recent piece from the excellent Conor Sen has attracted some disputation.  The main claim is that building restrictions aren’t as bad as they might at first seem.  If you keep people out of Manhattan they move to Atlanta, and that produces synergies too:

Here in Atlanta, as in the rest of the Sun Belt, job migration is the driving force of the economy. Corporate relocations and expansions are celebrated here the way billion-dollar tech startups are celebrated in Silicon Valley. The “New South” would not have developed were it not for people looking to flee the crowded and expensive cities of the Northeast.

…Housing constraints in some cities accelerate economic development in emerging parts of the country. They decrease economic inequality between metro areas and lead to economic interdependence that drives civil rights. And they offer some promise to ease the pain of waning communities in the Rust Belt, Appalachia and beyond. A country where the vast majority of talented people move to one or two cities might be an economist’s idea of utopia, but a nightmare to those of us concerned about equality of economic opportunity.

Analytically, the first question is whether the biggest cities would attract too many people in the absence of building restrictions.  To answer that, you have to balance crowding costs vs. synergy benefits.  It can be said that average social returns to living in cities will equalize, even if marginal social returns do not.  Cross-city migration equates the average returns, even in the presence of externalities, just as in the classic “two roads” problem.  If one road is going faster than the other, people will switch, although the “final driver” still is not taking his entire social impact into account.

Note that if urban synergies are constant across scale, equality of the average across two cities will in turn imply equality of the marginal, and an efficient allocation of population across the larger and smaller cities will result.  Building restrictions won’t change that, although they do shift where the equalization margin will be at.

(Building restrictions also may mean NYC space is used inefficiently, even if the distribution of population across cities is more or less optimal.  Building restrictions are not identical to urban entry fees, but rather they shift space allocations at various margins of construction, though to potential movers their “entry fee” aspect may seem most important.  These marginal distortions may interact with the “entry fee” aspects of building restrictions in various ways, muddying the analysis.  Complicated!)

Now maybe synergies aren’t constant across urban scale, but suddenly the costs of building restrictions in Manhattan look lower.  They are defined by the differences in synergies across scale, which may not be such a huge number.  Furthermore synergies might be more important for the Atlantas than for the Manhattan, in which case the building restrictions in Manhattan could be welfare-improving.

(Note that if a city or region has really big firms, the chances that interpersonal synergies will be internalized into initial wage offers will be higher.  And there is a time horizon issue.  Circa the 1920s, Los Angeles synergies may have appeared much lower than those for NYC, but it probably ended up better for the nation as a whole that the racist “entry fee” for movie-making in NYC led to the creation of Hollywood on the West Coast.  Similarly, was it not also a good thing that NYC blew its chances of being the center of the American venture capital market?  If Peter Thiel were here, and communing with Kenneth Arrow, he might see too many risk-averse, conformist entrants into New York and look for a remedy, just as New York was itself once a respite from an overcrowded, restrictionist, religiously conforming Europe.)

OK, that’s scale but what about congestion costs?  They do seem to go up in a non-linear manner with scale, and that lowers the costs of building restrictions in Manhattan.  Manhattan is more likely to be too crowded than is Atlanta, as a first-order approximation.  Of course differential endowments across regions can complicate this, for instance NYC has better mass transit.

Now, to push this all one step further, is Peoria just a smaller Atlanta?  Does it too have synergy benefits?  (Or can we say that too many people stay in Peoria and too few go to NYC + Atlanta?)  Don’t we observe the very largest synergy benefits at small scales, namely going from households of one to two, two to three, etc.?  Might Peoria have the highest synergy gains of them all?  At least in utility terms if not in dollar terms?  Or do we need an ongoing risk of “Peoria brain drain” to induce Peoria residents to acquire the skills that they may or may not end up taking out of Peoria?

In any case, worth a ponder.

Thanks to a government initiative, all teen residents who reach that milestone this year will be given a “Cultural Bonus”—a cool €500 to spend on movies, books, theater and concert tickets, museums, and national parks, reports The Local.

From an economic point of view, such vouchers can make good sense, as Alan Peacock used to stress.  Nonetheless they take away two of the big reasons why arts funding is politically popular.  The vouchers do not offer well-defined benefits to specific suppliers (read: interest groups), and the government cannot affiliate very directly with specific popular or prestigious projects.

In terms of stimulus, this is less likely to boost employment than many public works projects.  A lot of cultural goods are local public or club goods, supplied beyond the point of congestion.  In other words, just let one more person sit in the movie theater.  That does, however, mean lots of pure profit for suppliers of reproducible popular culture.

Here is the Cara Giamo article at Atlas Obscura.

City_ArtMichael Heizer, the large-scale sculpture artist, has been building City, a sculpture in the Nevada desert since 1972. City is reputedly on the scale of the Washington, DC’s National Mall and something like Teotihuacan but no one knows for sure since “Visitors are explicitly not welcome, and due to its orientation away from the road and system of earthen berms no part of “City” can be viewed from the ground without trespassing on posted property.” A few photos have been smuggled out.

The New Yorker has an interesting article on Heizer. Naturally I appreciated his thoughtful consideration of the economics of building something for the ages:

“City” is made almost entirely from rocks, sand, and concrete that Heizer has mined and mixed on site. The use of valueless materials is strategic, a hedge against what he sees as inevitable future social unrest. “My good friend Richard Serra is building out of military-grade steel,” he says. “That stuff will all get melted down. Why do I think that? Incans, Olmecs, Aztecs—their finest works of art were all pillaged, razed, broken apart, and their gold was melted down. When they come out here to fuck my ‘City’ sculpture up, they’ll realize it takes more energy to wreck it than it’s worth.”

Thursday assorted links

by on August 25, 2016 at 12:31 pm in Uncategorized | Permalink

1. Will I someday be a fan of Fan Bingbing?  And are index funds communist?

2. There is no great stagnation.  Whenever I give no further description with this header, it is usually something pretty good (bad), right?

3. Bombardment and dust when you fly at 20% of the speed of light.

4. The link between politics and personality maybe isn’t that strong.

5. “After all, labor market slack has now already declined to very low levels.

6. Given Hillary’s speech, I will re-up my earlier post on neo-reaction, which is related to “Alt Right.”

Singapore’s nuTonomy, founded by two researchers from the Massachusetts Institute of Technology, said Thursday it began testing a free taxi-hailing service in a small business district in Singapore called one-north, a campus-like space dominated by tech firms and biotechnology companies. Other tech companies including Chinese internet giant Baidu Inc. have been testing self-driving cars on the roads for years, but this is the first time the vehicles have been open to public use.

…Mr. Parker said the Singapore government had laid out a series of milestones for nuTonomy to achieve before it is allowed to extend its trials to other areas of the city. He declined to provide details on those milestones, but said the next stage would be to expand the service to a neighborhood adjacent to one-north.

Here is the WSJ piece, here are other articles.  I recall predicting about a year and a half ago that Singapore would be the first to do this.  A Singaporean countered me, and interjected they were very worried that their plans were falling behind.  I said: “That is exactly my point.  You are worried that you are falling behind.  Congratulations.”

Worry.  Singapore.  Think about it.

When it comes to contingent government pension liabilities as a percentage of gdp, Poland appears to be above 350%.

France, Denmark, and Germany are next in line, with figures well over 300%.  For purposes of comparison, the United States is considered to have a serious pension problem but the corresponding number is only slightly above 100%.

Here is the John Authers and Robin Wiggelsworth FT story.  Australia seems to be doing best.

One reason for this high Polish sum is that the Polish government has semi-nationalized a lot of the private sector pension liabilities.  In 2014, this procedure (FT) did not receive much discussion:

As part of an overhaul of the country’s pension system, Warsaw will next week transfer from privately-managed funds to the state 150bn zlotys (€36bn) of Polish government bonds and government-backed securities, which will then be cancelled.

I believe this idea will reenter the broader policy debate sooner or later.

That is my latest Bloomberg column, here is one excerpt:

The virtues of business startups have led to many a success story. These enterprises start with clean slates. They embody the focused and often idiosyncratic visions of their founders. The successful ones grow faster than their competitors. Even after they become larger and more bureaucratic, these companies often retain some of the creative spirit of their startup origins.

It is less commonly recognized that some nations, including many of the post-World War II economic miracles, had features of startups. For instance, Singapore started as an independent country in 1965, after it was essentially kicked out of Malaysia and suddenly had to fend for itself. Lee Kuan Yew was the country’s first leader, and he embodied many features of the founder-chief executive: setting the vision and ethos, assuming responsibility for other personnel, influencing the early product lines in manufacturing and serving as a chairman-of-the-board figure in his later years.

Other start-ups nations have been UAE, Israel, Taiwan, Hong Kong, Cayman Islands, Estonia, South Korea, and of course way back when the United States.  You will note that many of these examples are imperfectly democratic in their early years, and they do not in every case grow out of it.  And this:

The world today seems to have lower potential for startup nations. This is in part because international relations are more peaceful and also because most colonial relationships have receded into the more distant past. Those are both positive developments, but the corresponding downside is not always recognized, namely fewer chances for reshuffling the pieces.

This is the close:

To paraphrase John Cleese from Monty Python, the startup nation concept isn’t dead, it’s just resting. Whether in business or in politics, the compelling logic of the startup just isn’t going away.

The best chances for future start-ups may be in Africa, around the borders of Russia, and perhaps someday (not now) Kurdistan.  Do read the whole thing.