Sunday assorted links

by on February 26, 2017 at 12:43 pm in Uncategorized | Permalink

Pension spending is already the equivalent of 12% of GDP, half as much again as the average among members of the OECD, a club of mostly rich countries that have many more senior citizens (see chart). The combined annual shortfall of the pension schemes is 4.8% of GDP, equivalent to more than half the government budget deficit. The state of Rio supports more public-sector pensioners than working civil servants; for every police colonel on active duty five are retired. The state is nearly bankrupt.

…Its citizens collect pensions when they are 58 on average; Mexicans toil into their 70s. Brazilians on average incomes get pensions worth four-fifths of their pre-retirement earnings, which is generous by most countries’ standards. Widows and widowers inherit the full pensions of their deceased spouses, which they can combine with their own.

…Inflated by big increases in the minimum wage, pensions now account for more than half of the government’s non-interest spending.

Here is the full story in The Economist.


by on February 26, 2017 at 12:42 am in Food and Drink, Uncategorized | Permalink

I was walking from Union Station to about NY Ave. and 11th, and needed to eat along the way.  I passed through Chinatown, but to have taken a meal there seemed to me a bit…complacent.  I have Chinese food all the time, and at this time I cannot afford to be too complacent.  So I thought: what might serve as a radical shake-up for Tyler Cowen?

West of Chinatown, on H St., I saw a gleaming, fast food pizzeria, namely &pizza.  Living in my own strange ethnic bubble, I had never heard of it before.  In fact I don’t think I have had fast food pizza since I was a kid.  “This will do,” and I thought of the anecdotal value I would reap, albeit at the expense of a good meal.  For all my hesitation, the gleaming metal of the interior started to exercise a strange hold over my imagination.  I walked out once and then back in again.

I ordered a pizza margherita and water for $10, and to my surprise it was ready in two minutes, in a funny box to fit the oblong shape of the pizza itself.  To my bigger surprise, it was really, really good.  Betraying its apparent origins, it seemed completely fresh, and twenty years ago it might have ranked as the best pizza pie in all of DC.  I thought I would just snack on a piece, but I ended up eating the whole pie.  It was just the right size.

Funnier yet, the company is a DC start-up (don’t laugh too hard), yet without seeming to do any lobbying of the federal government.

And here is the real news: More Than 50 Couples Have Already Signed Up To Get Married At &pizza.

The next time I will go to one on purpose.

Here is the review, here is one bit:

“Matchers gain, strivers lose,” he [Cowen] writes in a new book, “The Complacent Class.”

Matchers, aka enthusiasts, are people who are motivated by personal interests, whether that’s record collecting, hiking, cooking, or obsessing about “Game of Thrones.” “The enthusiasts are not trying to come out ahead of everyone else; rather, they seek to have some of their niche preferences fulfilled for the sake of their own internally directed happiness,” Cowen writes.

Strivers, on the other hand, are motivated by beating others. “These are the people who strive to have the biggest office, bed the most mates, earn the most money, or climb whatever the relevant status ladder might be,” Cowen writes.

It’s not hard to see how recent trends have favored matchers. This group has benefitted from technology — from Tinder to Spotify to Google — that makes it easier for them to pursue their interests and find other people who share them. Meanwhile, strivers are suffering, faced with more competition than ever and a greater awareness of how many people around the world are beating them.

An excellent piece.

Saturday assorted links

by on February 25, 2017 at 12:35 pm in Uncategorized | Permalink

The big news was that China actually started to apply real pressure to North Korea, namely ceasing to buy their coal for the rest of the year.  That may prove a phantom or reversed piece of news, but still it is real progress of some kind, if only in expected value terms.  Did Trump’s antics and also his courting of Abe have anything to do with this?  We don’t know.  Was Obama’s THAAD missile deployment to South Korea a factor?  Probably.  I say score one for them both.  Keep in mind that is probably the world’s #1 foreign policy problem, and otherwise progress has been hard to come by.  Their KL airport assassination also may end up as a relevant PR disaster, costing them further foreign support.

Closer to home, outright Obamacare repeal seems increasingly unlikely.  Since I never favored Obamacare, you might think I am unhappy, but as I see it they were likely to replace with something unworkable and worse.  So this is, if not good news outright, at least the opposite of bad news.  Whether through brilliance or incompetence, Trump simply isn’t leading on this issue and so major changes won’t get done, maybe not even minor changes.

Republicans in state governments are running away from fiscal conservatism rather rapidly.  The Michigan legislature turned down a tax cut and there was a significant revolt in Kansas.  That was an under-reported story, namely a reversal of Tea Party influence on Republican-controlled state governments.

The Border Tax plan appears to be dead or on life support.  Flynn is gone and replaced by the apparently excellent McMaster.  There is talk (fact?) again of Kevin Hassett as CEA chair — a great idea — and Russia seems increasingly disillusioned with our president, also a nicer place to be.

The new Executive Order on regulation has some upside deregulatory potential.  Whether or not you favor a federal role in the matter, I thought it was a good sign to see Betsy DeVos sticking up for transgender rights.

Proposed policies on trade and immigration, as well as rhetoric toward the press, remain awful, plus various “background problems” continue, but overall I thought this was a very good week for Trump, with Flynn out to pasture and the North Korea news far outweighing the rest.

China fact of the day

by on February 25, 2017 at 12:57 am in Data Source, Medicine | Permalink

During one of the greatest economic booms in the history of the world, working-age men had trouble staying alive.

That is the disheartening news from China, where its insurance regulator recently updated a more-than 10-year-old table of mortality rates. A key finding: Mortality rates among Chinese men aged 41 to 60, who account for nearly three-quarters of the working-age population, increased by 12% over the decade through 2013, the most recent data available. This was even as mortality rates generally improved across other age groups and genders.

It could be that financial success breeds bad health habits. Disposable income per capita has risen 90% in the past six years and probably more than that over the past decade, though official government data is limited. Chinese liquor consumption—where men consume 60% more than women—has risen 5% compounded annually over the past 15 years, considered fast by global standards, according to Bernstein analysts. Richer diets go along with high incidence of lung and coronary issues for Chinese men.

That is from Anjani Trevedi at the WSJ, via the always-interesting Dan Wang.

Summers on Arrow

by on February 24, 2017 at 9:31 pm in Economics | Permalink

Larry Summers reflects on Ken Arrow with a memory that captures well the academic life. I had similar experiences watching my father, a professor of mechanical engineering, interacting with his students in our home.

My mother’s brother, the Nobel economist Kenneth Arrow, died this week at the age of 95. He was a dear man and a hero to me and many others. No one else I have ever known so embodied the scholarly life well lived.

I remember like yesterday the moment when Kenneth won the Nobel Prize in 1972. Paul Samuelson—another Nobel economist and, as it happens, also my uncle—hosted a party in his honor, to which I, then a sophomore at MIT, was invited. It was a festive if slightly nerdy occasion.

As the night wore on, Paul and Kenneth were standing in a corner discussing various theorems in mathematical economics. People started leaving. Paul’s wife was looking impatient. Kenneth’s wife, my aunt Selma, put her coat on, buttoned it and started pacing at the door. Kenneth raised something known as the maximum principle and the writings of the Russian mathematician Pontryagin. Paul began a story about the great British mathematical economist and philosopher Frank Ramsey. My ride depended on this conversation ending, so I watched alertly without understanding a word.

But I did understand this: There were two people in the room who had won Nobel Prizes. They were the two people who, after everyone else was exhausted and heading home, talked on and on into the evening about the subject they loved. I learned that night about my uncles—about their passion for ideas and about the importance and excitement of what scholars do.

Crude birth rates in Guangxi and Gansu edged down in 2016 from a year earlier. Both poor, western provinces have a large share of ethnic minorities, who were already exempt from the one-child policy, but are now assimilating the low-birth habits of the richer ethnic Han majority.

More surprising are the minuscule birth rate increases in China’s heartland. In Jiangxi province, the birth rate ticked up from 13.2 births per 1,000 people in 2015 to 13.45 last year, while in central Shaanxi province the rate rose from 10.1 to 10.64. The overall number of women of childbearing age has declined, meaning the potential impact of looser policy is limited, but changing social norms also play a role.

Here is more from Gabriel Wildau in the FT.

The culture of culture that is French

by on February 24, 2017 at 11:30 am in The Arts | Permalink

A French artist is preparing to be entombed for a week inside a 12-tonne limestone boulder in a modern art museum in Paris, after which he will emerge and attempt to hatch a dozen eggs by sitting on them for weeks on end.

…He once spent a fortnight inside a stuffed bear, was buried under a rock for eight days and navigated France’s Rhone river inside a giant corked bottle.

…He also played at being a human mole, and crossed France on foot in a straight line with a friend.

As for the entombment:

The only mystery is how he will go to the toilet, with the artist becoming uncharacteristically evasive when pressed on the subject.

Here is the article, via Anecdotal.

Friday assorted links

by on February 24, 2017 at 11:29 am in Uncategorized | Permalink

Probably not, so say Fichtner, de Rugy, and Michel, here is one bit:

The efficiency claims of proponents rely on several key assumptions that are required for the tax to be non-distortionary. Mainly, the border adjustment must be implemented completely, and international currency markets must fully adjust. For example, the US dollar would need to appreciate by 25 percent to offset a proposed 20 percent import tax and export subsidy.

The academic and policy debate on DBCFTs is generally fragmented, overly confident, and lacking in evidence, as there are no real-world examples of a destination-based cash flow tax. In this paper, we explore just a few of the most pressing questions that threaten to undermine the theoretical benefits of such a reform. Given the uncertainty and large downside risk to a DBCFT, we conclude that the proposal is not yet ready to be implemented and policymakers should focus on more traditional and straightforward reforms.

There is additional concern that the proposed reforms, as currently understood, would not meet the trade neutrality standards of the WTO.

And this:

…the preponderance of evidence seems to show that currencies don’t adjust as theory would predict. Two academic analyses show that VATs do alter international trade by reducing trade volumes, contrary to standard economic models that predict no effect on trade flows. Real-world imperfections in the design and implementation of VATs, such as imperfect border adjustments, are likely to fall more directly on traded goods over others. In a higher-level analysis, Rogoff explains “the extent to which monetary models (or indeed, any existing structural models of exchange rates) fail to explain even medium-term volatility is difficult to overstate.” The economics profession’s understanding of exchange rates is so “mediocre” that our models fail to outperform random walk models—a model that assumes we can’t predict the future.

Since the DBCFT was proposed, many private-sector analyses have supported the academic literature that finds currencies do not always fully adjust. Morgan Stanley research expects that a DBCFT would have a significant impact on foreign exchange markets. It concludes that the dollar could appreciate by 10 to 15 percent, but that real-world frictions and uncertainty around WTO eligibility would keep exchange rates from fully adjusting. Citigroup research projects a 14.6 percent rise in the real effective exchange rate three years after DBCFT implementation, finding that “slow real exchange rate adjustments are the historical norm.”

Proponents who claim that DBCFTs do not effect domestic savings-to-investment decisions are at odds with others who describe the proposal as a consumption tax.

Here is the full piece.

That is the topic of my latest Bloomberg column, here is one bit:

But I would say that the Articles, for all their formal flaws, are badly underrated. They are a brilliant construction for a power vacuum, given that the relevant parties in the 1780s couldn’t agree on very much, but nonetheless needed some path forward.

In other words, think of the Articles as an early business plan or charter for a startup. The point isn’t to get everyone’s roles and responsibilities right on first crack, but rather to make sure that the institution survives and that continued growth is possible.

By this metric, the Articles were an unprecedented success. Keep in mind that many European thinkers of the time thought that America was hopelessly disunited and that its system of government was due to collapse. The Articles proved them wrong by serving as a bridge from the Revolution to the later development of America as a fully fledged nation.

It is sometimes forgotten just how fruitful the Articles period was for laying the foundations for the further growth of the country. A system of relatively egalitarian and transferable property rights was codified for the settlement of external lands. Most importantly, the Northwest Ordinance of 1787 determined that future settlements could be incorporated into the country as states rather than subordinate territories or colonies. The independence and sovereignty of the initial founding states allowed them to support such policies, without fearing much dilution of their power or influence.

Alas I did not have the space to consider either Native Americans or slavery in the column.  National expansion was of course in general bad for Native Americans.  Slavery is a trickier matter, however.  Since the Articles gave states stronger rights, it may seem like they must have been bad for slaves.  But is that true?  Under the Articles, precisely because states’ rights were stronger, it might have been easier to create more free states on the rest of the continent.  I would judge the comparison as uncertain, plus we know the history with the Constitution involved an extremely bloody civil war.

The column has much more, including a discussion of the EU and also the emoluments clause in the Articles, do read the whole thing.

That is the subject of a new paper by Joel Waldfogel and Paul M. Vaaler, here is the abstract:

While product differentiation is generally benign, it can be employed to discriminate against customer groups, either to enhance profitability by appealing to discriminatory customers or in unprofitable ways that indulge owners’ tastes for discrimination. We explore discriminatory product differentiation in the airline market through airlines’ depiction of Israel on their online route maps and whether their online menus include kosher meal options. We first show that several international airlines omit Israel from their online route maps. Three of these airlines are members of the major international airline alliances. With data on over 100 airlines, we then document that Israel map denial is more likely for airlines with passengers from countries exhibiting greater anti-Semitism. Owner tastes also matter: denial is more likely for state-owned airlines in countries that do not recognize Israel. Kosher meal options on online menus follow similar patterns, suggesting anti-Semitic rather than anti-Zionist motivations. Israel denial does not reduce the probability of alliance membership with alliance leaders having few airline alternatives to choose from in the Middle East.

For the pointer I thank the excellent Kevin Lewis.

What should I ask Raj Chetty?

by on February 23, 2017 at 1:18 pm in Economics | Permalink

I’ll be doing a Conversation with Tyler with him later in March, but not a public event, podcast and transcript only.  So what should I ask him?

I thank you all in advance for your wise and intelligent suggestions.