Tyler Cowen's Blog, page 114

February 23, 2014

Felix Salmon endorses local loop unbundling for cable, so does Kevin Drum.


My earlier analysis simply was assuming that we will not make this policy shift and then asking how worried we should be about the resulting semi-monopoly power in that market.  If you would like to see the pro-case, here is a UK study (pdf) showing unbundling improves quality.  Here is French evidence for higher penetration, often through quality rather than just price effects.  Here is Tom Hazlett on related issues (pdf) and Vernon Smith is a long-time proponent of related ideas.


I don’t, however, agree with Felix’s presumption that all we need do is refine the current infrastructure, or his claim that there are no other effective forms of competition at current margins.  Penetration rates could be a few percentage points higher, and that is an economic cost from the status quo, but in Felix and some of the other commentators I am seeing a black and white version of a monopoly story that simply does not correspond to the facts.  Furthermore the current monopoly power of cable means that infrastructure will be laid down more quickly next time around, and moving to local loop unbundling would weaken this incentive by confiscating some of the rents from the infrastructure investments of the cable companies.  I probably would make this trade-off, but that further blunts any estimate of the net costs from the U.S. status quo.


Note also that Netflix has turned out to be worth a lot of money as a company, a reality which those who pushed the “cable as extreme monopoly” view denied could happen, out of a belief the cable companies would simply confiscate any Netflix rents.


And here is Peter Huber on how deregulation — yes the dreaded “D word” — can improve cable competitiveness.


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Published on February 23, 2014 08:48 • 46 views

February 22, 2014

Anders Åslund wrote an interesting piece on that question, published in 2002:


For ten years Ukraine was one of the sickest economies in the former Soviet Union. By 1999 most observers had decided that Ukraine displayed all the symptoms of economic malaise. It was hopelessly corrupt, market reforms were generally tardy and unfinished, the budget deficit was larger than the available financing, non-payments and arrears were rife. It is, therefore, all the more surprising that this country is currently experiencing an extraordinary economic surge, with industrial and agricultural production skyrocketing. Even if the present economic situation doesn’t last it is already remarkable and requires serious study. The purpose of this paper is to provide a quantitative analysis of Ukraine’s sudden economic growth and strong recovery. It begins by looking at common explanations of economic growth that have not proven relevant, discusses what concrete economic policy measures appear to have contributed to the generation of growth and ends by scrutinising how this was politically feasible. A proper understanding of Ukraine’s situation should help towards an understanding of post-Soviet transformation and offer clues about how to reform other countries.


For a more complete picture, I refer you also to his contrasting 2000 essay “Why has Ukraine Failed to Achieve Economic Growth?”  Circa 2014, another piece or two could be penned on this topic.


Åslund has much more on Ukraine here, including this 2009 book.  For a while now he has been predicting the end of Yanukovych, for instance in this piece.  In any case he is the most prominent economist who writes regularly on Ukraine.


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Published on February 22, 2014 22:17 • 18 views

From a loyal MR reader, with some editing by me:


Ukraine default risk is way up, but Ukraine has barely closed the gap with Venezuela in the default probability race and Argentina, with its pari-passu case now under review for cert at the Supreme Court, is still way ahead with its CDS-implied likelihood of default. I know its hard to look at pictures of Kiev and think “that looks like a safe sovereign credit,” but even with the recent run-up Ukraine still has a market-implied default hazard at only about 60% of the level of Argentina.


http://www.dbresearch.com/servlet/reweb2.ReWEB?rwnode=DBR_INTERNET_EN-PROD$NAVIGATION&rwsite=DBR_INTERNET_EN-PROD&rwobj=cdscalc2.Start.class&cdsAction=showPic&cdsCountry=CDSC0000000000000421,CDSC0000000000000010,CDSC0000000000000009&cdsRecRate=20


Those are some graphs at the link from the CDS-implied default probabilities page from Deutsche Bank.


http://www.dbresearch.com/servlet/reweb2.ReWEB?rwnode=DBR_INTERNET_EN-PROD$CIB_LINKS&rwobj=CDS.calias&rwsite=DBR_INTERNET_EN-PROD


Part of the run-up in the Ukraine and Venezuela insurance prices is due to Argentina’s repeated losses in their pari-passu case. Should they be denied cert or lose at the Supreme Court, other nations with pari-passu clauses will find it both difficult to restructure and harder to selectively default.  That is driving up CDS rates across the risky sovereign space, mostly because of lower recovery in CDS settlement auctions.  On related issues with pari passu see this law and econ paper.


The difference between Ukraine and Argentina probably says something about the importance of willingness to pay versus ability to pay and willingness to pay is what really matters.


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Published on February 22, 2014 21:14 • 18 views

And they win the award by having a much larger crisis overall.  Russia has suspended financial aid to Ukraine.  There are rumors of runs on banks and long queues at ATMs.  There are rumors of Ukraine possibly splitting into two countries.  Here is a NYT Q&A.


Here is the one-year CDS chart.  The Russian ruble is declining to record lows.


Here are interesting remarks from Timothy Garton Ash.:


I have argued that, in our time, 1989 supplanted 1789 as the default model of revolution. Rather than progressive radicalization, violence and the guillotine, we look for peaceful mass protest followed by negotiated transition. That model has taken a battering of late, not only in Ukraine but also in the violent fall that followed the Arab Spring.


When the Soviet Union first split apart, I expected something like the current scenario to happen rather quickly.  Obviously it did not.  It is interesting to ponder what assumptions are required to produce a 25-year lag for a similar result.


If you know of interesting or good sources on what is happening in Ukraine, please leave them in the comments.


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Published on February 22, 2014 05:50 • 20 views

That is published in The Washington Post, and I can recommend both books.  Coyle’s book is GDP: A Brief But Affectionate History and Karabell’s is The Leading Indicators: A Short History of the Numbers That Rule Our World.  My opening sentences are this:


‘May my children grow up in a world where no one knows who the central banker is” is a wise saying. One also can hope for a world where arguments about measuring GDP (gross domestic product, the sum total of the goods and services produced within a nation) or the inflation rate are rare. In good economic times, we tend to take reported economic numbers for granted, but more recently, conspiracy theories have run wild.


On Coyle:


If you are going to read only one book on GDP, Diane Coyle’s “GDP: A Brief but Affectionate History” should be it. More important, you should read a book on GDP, as many of the political debates of our time revolve around this concept. Can we afford our current path of entitlement spending? Was the Obama fiscal stimulus worth it? When will China overtake the United States as the world’s largest economy?


The answers all depend on GDP. In 140 pages of snappy text, Coyle lays out what GDP numbers measure, what roles they play in economic policymaking and forecasting, and how GDP numbers can sometimes mislead us, albeit not in the way many current critics suggest.


With Karabell I have a quibble:


I do not agree with Karabell’s claim that “Bhutan is now routinely described as one of the happiest nations in the world.” The prime minister of Bhutan, Tshering Tobgay, has moved away from talk of “Gross National Happiness,” perhaps because he has realized that his country has relatively little of it. Most of the population is engaged in subsistence farming and has only a minimal chance of performing rewarding or creative labor. The prime minister instead wishes to focus on concrete goals such as “a motorized rototiller for every village and a utility vehicle for each district.” For all the talk of being content with less, external debt has soared to 90 percent of GDP. If anything, Bhutan may show that measures of GDP get at happiness more clearly than does focusing on happiness more directly. Just look at where immigrants wish to move — it is almost always wealthier countries.


Read the whole thing.


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Published on February 22, 2014 04:25 • 33 views

How much would you pay to poop in private? A new company called Posh is betting the answer is six dollars, alongside a $15-a-year membership fee. Taking a Zipcar-style approach to bathrooms in Manhattan, the service will offer private powder rooms with baby-changing stations and luxury showers in a central Manhattan location. The service also offers lockers where visitors can store their bags, but the core appeal is the bathroom, a crucial respite for small-bladdered tourists without access to other facilities. According to the site, the rooms will be cleaned after each usage, and equipped with touchless faucets and flushers to minimize hygenic concerns. The first facilities are set to arrive in the summer of 2014.


Nonetheless I find this problem to be much less severe than in the New York City of old, perhaps because merchants are less worried about you shooting up drugs in their bathroom.


There is more here, with visuals, and for the pointers I thank Samir Varma and Bill Badrick.


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Published on February 22, 2014 04:09 • 21 views

February 21, 2014

Via Kottke, here is :


In 2002, only 194 babies were named Colt, while in 2012 there were 955. Just 185 babies were given the name Remington in 2002, but by 2012 the number had jumped to 666. Perhaps the most surprising of all, however, is a jump in the name Ruger’s (America’s leading firearm manufacturer) from just 23 in 2002 to 118 in 2012. “This name [Ruger] is more evidence of parents’ increasing interest in naming children after firearms,” Wattenberg writes. “Colt, Remington, and Gauge have all soared, and Gunner is much more common than the traditional name Gunnar.”


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Published on February 21, 2014 18:45 • 21 views

Wal-Mart has 1.3 million U.S. employees, and about 4,000 of them currently make either a state or federal minimum wage, Tovar said.


There is more here, via @ModeledBehavior., who points out that is about 0.3%, and Clive Crook.


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Published on February 21, 2014 11:08 • 28 views

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