Tyler Cowen's Blog, page 103

Assorted links

1. The magical organ and musical taste.

2. Dropbox apologizes in Mission Soccergate.

3. Leonard Liggio has passed away.  Leonard’s voracious reading habits, and gentle nature, were very much a role model for me.  We will miss him.

4. There is no great cloud stagnation.

5. Austin Frakt on the new David Cutler book.  And Bill Gates reviews Piketty, very good piece.

6. Data on rebounds.

Why is Football More Popular than Ever?

Tivo and Netflix ought to have been made other entertainment more popular and football less popular as a form of entertainment but instead more people are watching football than ever before. Gabriel Rossman asks why?

We can start with a few basic technological shifts, specifically the DVR and broadband internet. Both technologies have the effect that people are watching fewer commercials. From this we can infer that advertisers will have a pronounced preference for “DVR-proof” advertising.

….In practice getting people to watch spot advertising means programming that has to be watched live and in practice that in turn means sports. Thus it is entirely predictable that advertisers will pay a premium for sports. It is also predictable that the cable industry will pay a premium for sports because must-watch ephemera is a good insurance policy against cord-cutting. Moreover, as a straight-forward Ricardian rent type issue, we would predict that this increased demand would accrue to the owners of factor inputs: athletes, team owners, and (in the short-run) the owners of cable channels with contracts to carry sports content. Indeed this has basically all happened….

…Here’s something else that is entirely predictable from these premises: we should have declining viewership for sports….If you’re the marginal viewer who ex ante finds sports and scripted equally compelling, it seems like as sports get more expensive and you keep having to watch ads, whereas scripted gets dirt cheap, ad-free, and generally more convenient, the marginal viewer would give up sports, watch last season’s episodes of Breaking Bad on Netflix, be blissfully unaware of major advertising campaigns, and pocket the $50 difference between a basic cable package and a $10 Netflix subscription.

…The weird thing is that this latter prediction didn’t happen. During exactly the same period over which sports got more expensive in absolute terms and there was declining direct cost and hassle for close substitutes, viewership for sports increased. From 2003 to 2013, sports viewership was up 27%. Or rather, baseball isn’t doing so great and basketball is holding its own, but holy moly, people love football. If you look at both the top events and top series on tv, it’s basically football, football, some other crap, and more football…. I just can’t understand how when one thing gets more expensive and something else that’s similar gets a lot cheaper and lower hassle, that you see people flocking to the thing that is absolutely more hassle and relatively more money.

It’s a good question. Demographics don’t appear to explain the change. Football skews young, male and black but none of these are undergoing rapid increase. (It’s the aged that are undergoing high growth rates but it’s baseball that appeals more to the old and that isn’t doing great). Fantasy football is big but is it cause or effect?

One possibility is that precisely because there are so few common events to coordinate on, the ones that do coordinate become more important. Why football and not baseball or basketball? Why not? It’s not hard to spin stories but it may also be that random advantages snowballed.

Other theories?

Ebola markets in everything

Terrence McCoy reports:

Schultz wants $150,000 for Ebola.com — a price he thinks is more than reasonable. “According to our site meter, we’re already doing 5,000 page views per day just by people typing in Ebola.com to see what’s there,” said Schultz, who monitors headlines the way brokers watch their portfolios, to gauge his domain’s worth. “We’re getting inquiries every day about the sale of it. I have a lot of experience in this sort of domain business, and my sense is that $150,000 is reasonable.”

The full story is here, and for the pointer I thank Michael Rosenwald.

The French disease is not just hypochondria

From a Jean Tirole press conference:

French economist Jean Tirole advocated Scandinavian-style labour market policies and government reform as a way of preserving France’s social model.

Hours after he won the economics Nobel Prize, Tirole said he felt “sad” the French economy was experiencing difficulties despite having “a lot of assets”.

“We haven’t succeeded in France to undertake the labour market reforms that are similar to those in Germany, Scandinavia and so on,” he said in telephone interview from the French city of Toulouse, where he teaches.

France is plagued by record unemployment and Tirole described the French job market as “catastrophic” earlier on Monday, arguing that the excessive protection for employees had frozen the country’s job market.

“We haven’t succeeded also in downsizing the state, which is an issue because we have a social model that I approve of – I’m very much in favour of this social model – but it won’t be sustainable if the state is too big,” he added.

Tirole remarked that northern European countries, as well as Canada and Australia, had proven you could keep a welfare social model with smaller government. In contrast, he said France’s “big state” threatened its social policies because there will not be “enough money to pay for it in the long run”.

There is more here, hat tip goes to Alex.  And I very much liked this Appelbaum interview with Tirole,here is one bit:

There’s no easy line in summarizing my contribution and the contribution of my colleagues. It is industry-specific. The way you regulate payment cards has nothing to do with the way that you regulate intellectual property or railroads. There are lots of idiosyncratic factors. That’s what makes it all so interesting. It’s very rich.

It requires some understanding of how an industry works. And then the reasoning is very much based on game theory. Usually we don’t have a perfectly competitive market, so we use game theory, which describes situations with a small number of actors. And information economics, those are the tools. But then you go into the industries and try to think about the possible rules. It’s not a one-line thing.

I liked David Henderson’s piece, and this one too, Tirole on France and Canada.

India fact of the day

$74 million: That’s the amount India spent on its Mars program. Modi described it best when he said the Sandra Bullock-starrer Gravity cost more to make than India’s Mars mission. NASA’s Maven mission, admittedly more complex, cost $671 million in comparison. European Space Agency’s 2003 Mars Express Orbiter mission cost $386 million. Japan’s failed mars mission cost $189 million.

Rs 7 per kilometre: That is how much the journey to mars cost India. That is cheaper than an auto ride in Delhi, which will cost you, if you are lucky, Rs8 per km.

From Saptarishi Dutta, there is more here.

Alan Taylor on mortgage lending as predicting financial crises

He has a new paper (pdf) on this topic, with Jorda and Schularick, based on data from seventeen advanced economies since 1870.  In an email he summarizes the main results as follows:

1. Mortgage lending was 1/3 of bank balance sheets about 100 years ago, but in the postwar era mortgage lending has now risen to 2/3, and rapidly so in recent decades.

2. Credit buildup is predictive of financial crisis events, but in the postwar era it is mortgage lending that is the strongest predictor of this outcome.

3. Credit buildup in expansions is predictive of deeper recessions, but in the postwar era it is mortgage lending that is the strongest predictor of this outcome as well.

Here is VoxEU coverage of the work.  On a related topic, here is a new paper by Rognlie, Shleifer, and Simsek (pdf), on the hangover theory of investment, part of which is applied to real estate.  It has some Austrian overtones but the main argument is combined with the zero lower bound idea as well.

Assorted links

1. Ireland’s suburban ghost towns.

2. The man who smuggles Trader Joe’s into Canada.  By the way, I much prefer Whole Foods, I hardly like any of the items at Trader Joe’s, although they have good smoked trout.

3. The culture that is San Francisco, bros vs. kids.

4. James Hamilton on lower oil prices.

5. Should China privatize its farmland?  Is North Korea doing a bit better than most people think?

6. Catalan government calls off independence referendum, but it’s complicated.

7. Tirole on energy, climate, and the environment.  And Justin Wolfers on Tirole.  Vera’s list of fun Tirole papers.  And from Economist’s View.  A Fine Theorem.

Discover Cosmic Rays with your SmartPhone

This is one of the stories that I had to double check to make sure it wasn’t a hoax but it does check out. Here’s the background:

[R]esearchers from the University of California have drafted a paper in which they describe testing whether a smartphone camera can detect high energy photons and particles of the sort produced by cosmic rays. Testing with radioactive isotopes of radium, cobalt, and cesium showed that the detector easily picked up gamma rays (and you didn’t even have to point the phones at the source!). They also put a phone inside a lead box and showed that they could detect high energy particles. Finally, they took a phone up on a commercial flight and were able to obtain a particle track across the detector.

With everything looking good, they made some software, called CRAYFIS, for cosmic rays found in smartphones (why they didn’t add “and handhelds,” I’m not sure). When your phone is inactive and plugged in for charging, CRAYFIS monitors the camera, looking for signs of high-energy items striking the detector. The authors calculate that if they can get 1,000 active cell phones within a square kilometer, they’ll be able to detect nearly all of the high energy cosmic rays that strike the atmosphere above it despite the low efficiency of each individual detector.

You can find out more about the science and sign up your smartphone here.

There are now some 1.75 billion smartphone users in the world and soon there will be many more. That’s an astounding amount of computing power distributed over most of the world’s surface and it’s computing power that is capable of reaching out to the world around it to measure, monitor, test and connect.

Adam Posen on Japan

Similarly, the returns on tackling the underutilisation of human capital in Japan dwarf the impact of everything else, including the problem of a declining workforce. If Japan were to get more of its university-educated women into the workforce, the demographic problem would go away for 20 years. If Abe accomplished this, the fatalistic whining about Japan’s supposedly intractable demographic crisis would cease to be an excuse or a constraint for its economic future. But the efforts made to date, while encouraging, are insufficient. About 420,000 women have rejoined the workforce over the past year or so. This is an impressive achievement. In absolute terms, though, this is a small fraction of what is possible for female labor force participation.

There are further points of interest here.

When will the first two-hour marathon be run?

I found this piece by Alex Hutchinson very interesting, here is one excerpt on the issue of incentives:

One reason marathoners are running faster is that road racing is more lucrative. When the Sheikh of Dubai put up $1 million in prize money plus a $1 million world-record bonus in 2008, the Dubai Marathon instantly became one of the world’s fastest, despite its desert temps (average high in January, when the race is held, is 75°F). In fact, prize money for road races more than doubled since 1998, while track racing purses have gotten smaller (see below). As a result, runners are increasingly heading straight to the marathon. But big money can also draw the fastest runners away from the fastest courses, and the standard winner-takes-most prize structure favors cat-and-mouse tactics as runners race each other instead of the clock. When the Amsterdam Marathon switched to time-based prizing in 1999, four different runners immediately smashed the course record by 90 seconds. The sub-two-hour solution? A big pot of money that runners can win no matter where they race, and that is shared equally among all who break 2:00 in that event.

It is not obvious to me why a big first prize is not a good incentive, for instance why does it militate against speed to “race each other instead of the clock”?  Is it that the runners stay on too few courses, thus lowering the variance of performance outcomes?

In any case the hat tip goes to Vic Sarjoo.