Further evidence for The Great Reset

by on September 11, 2014 at 2:31 pm in Current Affairs, Economics, Medicine | Permalink

Matt Yglesias writes:

…the Kaiser Family Foundation is out today with new reporting on employer benefit costs that reveals the slowdown is visible in this slice of the market. Premium costs rose by just 3 percent, a number much lower than they routinely rose by in the recent past. So how about those wage rises? Well — let’s just say there’s no evidence that they’re happening.

In other words, there is still downward pressure on real wages, even when we don’t always see real wage cuts.

This also means that the monetary policy argument “there can’t be a build up inflationary pressures because we don’t see real wages rising” is highly unreliable or at the very least a non sequitur (NB: I am not in fact extremely worried about inflationary pressures these days).

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China estimate of the day

by on September 11, 2014 at 1:38 pm in Current Affairs, Economics, Uncategorized | Permalink

From The Wall Street Journal:

Over the past decade, China rushed to buy up global commodities as its economy boomed—both to feed its factories and to ensure it wasn’t reliant on Western powers for raw materials. China’s overseas investments in resources soared to $53.3 billion last year, from $8.2 billion in 2005…

China came late to the global resources boom and often overpaid for assets Western companies had passed over or wanted to sell. China typically paid one-fifth more for oil-and-gas assets than the industry average, estimates Scott Darling, Asian regional head of oil-and-gas research at J.P. Morgan Chase & Co.

…Last year, the head of China’s mining association estimated that 80% of all overseas mining deals had failed, though he didn’t elaborate, according to state media.

The full story, by Wayne Arnold, is very interesting and quite thorough, use news.google.com if you have to.

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Assorted links

by on September 11, 2014 at 12:18 pm in Uncategorized | Permalink

1. 53 percent of Chinese respondents expect China to go to war with Japan.

2. “Tell me something I don’t know” is looking for participants.

3. John Gray on Francis Fukuyama and democracy.

4. What does a “harvard.edu” email account cost on the Chinese black market?  How about UC Merced?

5. Student attendance is down at college football.  Cereals are declining too.

6. There is no great pizza box stagnation.

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Crafty Nudges and Prize Linked Savings Accounts

by on September 11, 2014 at 7:12 am in Economics, Games, Law | Permalink

Thirteen percent of US citizens play the lottery every week. The average household spends around $540 annually on lotteries and poor households spend considerably more than the average. The high demand for lotteries, especially among the poor, has led many to suggest that we use them to promote some other good. Los Angeles, for example, has recently discussed giving voters lottery tickets–a great idea if we want to encourage more voting by uninformed people with a penchant for get-rich-quick schemes. What could go wrong?

A somewhat better idea is to use lotteries to promote saving. Prize linked savings (PLS) accounts offer savers pro-rata lottery tickets based on how much they save. The average return on a PLS account can be the same as on regular account but the interest rate is lowered to make up for the small probability of a big gain. It’s illegal for banks in the United States to offer lotteries but a few credit unions have experimented with PLS accounts and they are used in some 20 other countries around the world.

Does the option of saving in a PLS account increase total savings or does it merely reallocate savings? In a new paper, Atalay, Bakhtiar, Cheung and Slomin run an experiment in which participants allocate a budget to consumption, saving, lottery tickets, and a PLS account. They conclude:

…the introduction of a PLS account indeed increases total savings quite dramatically (on average by 12 percentage points), and that the demand for the PLS account comes from reductions in lottery expenditures and current consumption. We further show that these results are stronger among study participants with the lowest reported savings on the survey.

Thus, PLS accounts appear to be a kind of crafty nudge, a way to trick the get-rich-quick brain module to save more.

If we allow PLS accounts, the poor may save more and in a competitive bank market the return on PLS accounts will trump the lousy returns offered by state lotteries. Win, win. If we deregulate all kinds of lotteries, however, I have little doubt that entrepreneurs will come up with schemes that will easily trump PLS accounts–but without the social benefit of encouraging saving among the poor. As a libertarian, I can live with that but as a political economist I wonder how well we can draw the line between banning gambling and allowing gambling so long as it’s tied to a nice nudge.

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Does natural resource wealth imply technological stagnation?

by on September 11, 2014 at 2:09 am in Economics, History, Science, Web/Tech | Permalink

Peter Thiel tells us:

Look at the Forbes list of the 92 people who are worth ten billion dollars or more in 2012. Where do they make money? 11 of them made it in technology, and all 11 were in computers. You’ve heard of all of them: It’s Bill Gates, it’s Larry Ellison, Jeff Bezos, Mark Zuckerberg, on and on. There are 25 people who made it in mining natural resources. You probably haven’t heard their names. And these are basically cases of technological failure, because commodities are inelastic goods, and farmers make a fortune when there’s a famine. People will pay way more for food if there’s not enough. 25 people in the last 40 years made their fortunes because of the lack of innovation; 11 people made them because of innovation.

I also liked this bit:

One of the smartest investors in the world is considered to be Warren Buffett. His single biggest investment is in the railroad industry, which I think is a bet against technological progress, both in transportation and energy. Most of what gets transported on railroads is coal, and Buffett is essentially betting that after the 21st century, we’ll look more like the 19th rather than the 20th century. We’ll go back to rail, and back to coal; we’re going to run out of oil, and clean-tech is going to fail.

This very useful post collates and presents all of Peter’s evidence for his view that modern technology has been stagnating.  It is both “interesting throughout” and “self-recommending.”  It is from this blog by Dan Wang.

I very much liked Peter’s new book, Zero to One: Notes on Start-Ups, or How to Build the Future.

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What I’ve been reading

by on September 11, 2014 at 1:44 am in Books | Permalink

1. Kai Bird, The Good Spy: The Life and Death of Robert Ames.  Kai Bird is very highly rated, but in my view he remains underrated.  I very much like each and every one of his books, and this sympathetic treatment brings to life the Middle East conflicts through the 1980s, and also the life of a CIA officer, as well as a bygone era in U.S. foreign policy.

2. Henry Kissinger, World Order.  I liked parts of his China book, but there’s nothing really to this one.  Leave it alone.

3. Pascal Bonafoux, Rodin & Eros.  Beware of visiting too many Rodin museums, you might end up thinking he just repeated the same themes over and over again.  This book, including the color plates, will jolt you into seeing his work fresh once again.

4. Samuel Fromartz, In Search of the Perfect Loaf: A Home Baker’s Odyssey.  A fun cross-sectional look at the bread universe, combined with some recipes and reminiscences.

5. Henry R. Nau, Conservative Internationalism: Armed Diplomacy under Jefferson, Polk, Truman, and Reagan.  We could use more of this, and I am referring to each of those words “conservative” and “internationalism,” as well as the combination of the two.  This book was published about a year ago, and I don’t think the author could have realized how relevant it was going to become.  An important book for 2014, it sets out a manifesto for a classical liberal but non-isolationist approach to foreign policy.

6. Jeff Riggenbach, Persuaded by Reason: Joan Kennedy Taylor and the Rebirth of American Individualism.  I knew her a bit and was always fond of her.  This book is a good look at 1970s libertarianism, and the rebirth of libertarian feminism in the United States.  Both Alex and I make cameos in the text, he as an editor, gatekeeper, and theorist of self-ownership and abortion, I as a purchaser of the CD collection from the estate of Roy Childs (Joan was executor of the estate and also Roy’s dear friend).

I’ve spent time with both the new Ian McEwan novel and the new David Mitchell.  Both have some virtues but neither appears to be a must-read.

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South Korea markets in everything

by on September 10, 2014 at 1:20 pm in Medicine, Uncategorized | Permalink

Fake casts for pretending you have an injured arm to evade having to help prepare holiday meals have become brisk sellers in South Korea ahead of the Chuseok festival.

“We have been selling this for 10 years now, but sales increased drastically starting last week,” said a sales manager at an online vendor who declined to be identified.

Both men and women were buying the bogus casts, he said.

During Chuseok, a three-day thanksgiving holiday, women traditionally do most of the work in preparing and cooking elaborate ceremonial dishes while the men of the family chat, drink and watch television.

The holiday gender divide is so entrenched that it has spawned the term “daughter-in-law holiday syndrome”, with many young women suffering post-holiday stress and fatigue.

But getting away with the phoney cast ruse may be difficult this year after several media outlets reported on brisk sales of the devices in the run-up to the holiday starting on Sunday.

Data from the Ministry of Gender, Equality, and Family in 2010 showed only 4.9 percent of people surveyed said both genders shared holiday chores, while the rest said women do most of the work.

There is more here, and for the pointer I thank David Lee.

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Assorted links

by on September 10, 2014 at 12:28 pm in Uncategorized | Permalink

1. Amazon and the Coase theorem.

2. Is this Coase failing or succeeding?

3. How do scientists feel about Scottish independence?

4. Blue whales are making a comeback.

5. Credit Suisse warns of grave deflationary shock for Scotland.

6. Ancient Egyptian art contains the records of past extinctions.  Why fight over an island in the South China Sea when you can make one?

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Just a reminder about Abenomics in Japan

by on September 10, 2014 at 8:31 am in Current Affairs, Economics | Permalink

Unemployment is at 3.7 per cent. Recently, it has been as low as 3.5 per cent, considered by some economists to be pretty much full employment.

That’s one big reason why all that stimulus just won’t have all that much oomph.  It is odd how rarely you hear this mentioned, perhaps because “free lunch” thinking is back in vogue these days.  The entire piece, by David Pilling at the FT, is interesting, it focuses on job market polarization in Japan.  Here is on bit on that:

Outside the ranks of the protected “job-for-lifers” – a much rarer breed these days – nearly 40 per cent of workers are about as flexible as you get. They work in poorly paid jobs for hourly rates. Benefits are all but non-existent. For most of these workers, sometimes referred to as the “precariat”, unemployment is a mere “sayonara” away.

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dyfalu

by on September 10, 2014 at 1:07 am in Books, Education, History, The Arts | Permalink

In Welsh poetry, dyfalu is the piling on of comparisons, definition through conceit.  The word also means “to guess” in Welsh, and many poems of dyfalu have an element of guesswork, a fanciful and riddling dimension.  “The art of dyfalu, meaning “to describe” or “to deride,” rests in the intricate development of a series of images and extended metaphors which either celebrate or castigate a person, animal, or object,” the encyclopedia of Celtic Culture explains.  Dafydd ap Gwilym’s poems to the mist and the wind are classic fourteenth-century examples.

That is from Edward Hirsch, A Poet’s Glossary, which I am quite enjoying.  There is interesting material on every page and it is written with passion.   A hendiatris is a “figure of speech in which three words are employed to express an idea, as in Thomas Jefferson’s tripartite motto for the Declaration of Independence: “Life, liberty, and the pursuit of happiness.””  When there are only two words so employed, it is of course a hendiadys.

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Jason Sorens on Scottish independence

by on September 10, 2014 at 12:33 am in Current Affairs, Economics, Uncategorized | Permalink

From a longer post:

A closer look reveals that different stocks responded differently to the poll news. Two transportation companies, FirstGroup and Stagecoach Group, lost virtually nothing, and Aggreko, which rents temperature control systems, lost absolutely nothing. Financial and energy/power companies were pounded. An engineering company closely linked to the oil industry, the Weir Group, took a more modest 1.0% loss.

How to sum up?

So far capital markets seem to be telling us that the economic costs of independence to Scotland would be significant but not catastrophic, and that they would be virtually nil to the rest of Britain. How much of those costs are due to the policies Scotland would implement after independence, rather than secession as such? It is difficult to know, but the differential returns to particular firms give us a clue. Transportation companies have closer links to the state, so a more statist policy regime might not hurt them. Financial companies might lose because of the lender of last resort issue (Scotland might not have a credible one). Energy and engineering companies might lose because nationalists want to tax oil heavily to fund social programs. Also, stricter environmental laws may hurt the electric utility SSE, which lost heavily on Monday.

Speculatively, then, capital markets seem to be telling us that the costs of secession as such are modest, but that the costs of dramatically different economic policies are substantial.

But I find this earlier bit less optimistic:

What would happen to these firms’ value if independence were dead certain? Expected utility analysis helps us here. They lost $800 million in value on an increase in the probability of independence of 5.5+2.7=8.2%. We can infer that an increase from 20% to 100% would wipe out $800 million*8/.6=$7.8 billion. That’s a fair proportion of their existing value: about 16%.

There is more here, and for the pointer I thank Chaim Katz.

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DJs are now making mistakes on purpose

by on September 9, 2014 at 2:36 pm in Music, Web/Tech | Permalink

Graham writes:

DJs all over the world are now deliberately making mistakes during their mixes to prove to fans and critics that they are in fact real DJs.

The latest craze, known as miss-mixing, is proving very popular amongst digital DJs as a way of highlighting that they are actually manually mixing tracks rather than using the sync button.

Michael Briscoe, also know as DJ Whopper, spoke about miss-mixing with Wunderground, “Flawless mixing is now a thing of the past, especially for any up and coming digital DJs. You just can’t afford to mix without mistakes these days or you’ll be labelled as a ‘sync button DJ.’”

“I learned how to mix on vinyl years ago so naturally I’m pretty tight when it comes to matching beats,” continued the resident DJ. “I swapped to digital format a couple of years ago because it’s convenient, now I spend more time practicing making mistakes than I do practicing actual mixing.”

Of course the software can toss in some mistakes too…good luck.

For the pointer I thank Will Ivy.

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Assorted links

by on September 9, 2014 at 12:38 pm in Uncategorized | Permalink

1. Progress on making graphene more commercially viable.

2. The chocolate teapot (there is no great stagnation).

3. Podcast of Ray Dalio and Larry Summers (I haven’t heard it yet myself).

4. Why the current campaign against inversion will prove counterproductive.

5. Pearlstein on crony capitalism.

6. “Smart genes” are hard to find.

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What should we infer from Obamacare rate increases?

by on September 9, 2014 at 12:23 pm in Current Affairs, Economics, Medicine | Permalink

Robert Laszewski writes:

The 2015 rate increases have been largely modest. Does that prove Obamacare is sustainable? No. You might recall that on this blog months ago my 2015 rate increase prediction was for increases of 9.9%.

You might also recall my reason for predicting such a modest increase. With almost no valid claims data yet and the “3Rs” Obamacare reinsurance program, insurers have little if any useful information yet on which to base 2015 rates and the reinsurance program virtually protects the carrier from losing any money through 2016. I’ve actually had reports of actuarial consultants going around to the plans that failed to gain substantial market share suggesting they lower their rates in order to grab market share because they have nothing to lose with the now unlimited (the administration took the lid on payments off this summer) Obamacare reinsurance program covering their losses.

We won’t know what the real Obamacare rates will be until we see the 2017 rates––when there will be plenty of valid claim data and the Obamacare reinsurance program, now propping the rates up, will have ended.

The post has other interesting points.

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Scotland fact of the day

by on September 9, 2014 at 8:38 am in Current Affairs, Economics | Permalink

Scottish banking assets 1,200% of GDP, more than Iceland, Ireland and Spain in 2007.

That is from Robin Wigglesworth.  Of course exactly for this reason, RBS probably would not end up domiciled in a newly independent Scotland.

Let’s hope the #royalbaby manages to keep the Scots on board.

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