Tyler Cowen's Blog, page 123

In whose interest is globalization anyway? (hypotheses to ponder)

The architect of the present era of globalisation is no longer willing to be its guarantor. The US does not see a vital national interest in upholding an order that redistributes power to rivals. Much as they might cavil at this, China, India and the rest are unwilling to step up as guardians of multilateralism. Without a champion, globalisation cannot but fall into disrepair.

And yes a lot of the news is bad:

Then came the crash. Finance has been renationalised. Banks have retreated in the face of new regulatory controls. European financial integration has gone into reverse. Global capital flows are still only about half their pre-crisis peak.

As for the digitalised world, the idea that everyone, everywhere should have access to the same information has fallen foul of authoritarian politics and concerns about privacy. China, Russia, Turkey and others have thrown roadblocks across the digital highway to stifle dissent. Europeans want to protect themselves from US intelligence agencies and the monopoly capitalism of the digital giants The web is heading for Balkanisation.

The open trading system is fragmenting. The collapse of the Doha round spoke to the demise of global free-trade agreements. The advanced economies are looking instead to regional coalitions and deals – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Pact. The emerging economies are building south-south relationships. Frustrated by a failure to rebalance the International Monetary Fund, the Brics nations are setting up their own financial institutions.

That is from Philip Stephens at the FT.

Assorted links

1. The Milky Way is a suburb (no wonder it has good ethnic food).

2. Marginal revolution.  Really.

3. Emmanuel Todd on the new German empire and those who do not like Russia (in French).  The map is here large-scale.

4. Baidu’s “smart chopsticks” can (partially) test the safety of your food.

5. Michael Heise in the FT with the case against QE for Europe (not my view but a good piece).  And background on the European ABS market.

The economics of stolen celebrity photos

Here is one passage of interest, illustrating collective action dilemmas of various kinds:

The first post from this set that I could track down was nearly 5 days to the story becoming public, on the 26th of August. Each of those posts was a censored image with a request for an amount of money for an uncensored version. After numerous such posts and nobody paying attention to it (thinking it was a scam) the person behind the posts began publishing uncensored versions, which quickly propagated on anon-ib, 4chan and reddit. My theory is that other members of the ring, seeing the leaks and requests for money also decided to attempt to cash in thinking the value of the images would soon approach zero, which lead to a race to the bottom between those who had access to them.

There is more here, with some interesting exposition as well, via Lawrence Krubner.

Are economists biased to be pro-management?

Luigi Zingales has a relatively new paper on that and related questions:

The very same forces that induce economists to conclude that regulators are captured should lead us to conclude that the economic profession is captured as well. As evidence of this capture, I show that papers whose conclusions are pro-management are more likely to be published in economic journals and more likely to be cited. I also show that business schools’ faculty write papers that are more pro management. I highlight possible remedies to reduce the extent of this capture: from a reform of the publication process, to an enhanced data disclosure, from a stronger theoretical foundation to a mechanism of peer pressure. Ultimately, the most important remedy, however, is awareness, an awareness most economists still do not have.

The paper is here, via the excellent Kevin Lewis.  And here is another new Zingales paper (pdf, with Guiso and Sapienza) on time-varying risk-aversion, here is the tail end of the abstract:

Consistent with a fear-based explanation, we find that subjects who watched a horror movie exhibit a higher risk aversion than subjects who did not. The size of the increase in risk aversion caused by the horror movie is similar to the one experienced by our bank’s clients during the crisis.

If Scotland goes independent

Goldman Sachs has warned that the UK could fall into a eurozone-style crisis if Scotland votes for independence later this month.

In some of the most bleak predictions economists have made about independence, the Wall Street bank said a “Yes” vote on September 18, while looking unlikely, “could have severe consequences” for both the Scottish economy and the UK overall.

Goldman warned that public services would have to be cut if Scotland goes it alone, and that the country would face much higher borrowing costs.

But the most worrying consequence, the bank predicted, would be that uncertainty over a currency union would cause a run on sterling and a capital flight with echoes of the eurozone crisis.

“The most important specific risk, in our view, is that the uncertainty over whether an independent Scotland would be able to retain sterling as its currency could result in an EMU-style currency crisis occurring within the UK,” wrote Kevin Daly, senior economist at Goldman.

Here is more, from James Titcomb.  You should consider that speculative, but it is worth putting on the table.

What does a tattoo signal?

WE RECENTLY wrote about how a tattoo affects your job prospects. A paper from Kaitlyn Harger, a PhD student at West Virginia University, takes it a step further. Ms Harger found data from Florida and looked at what happened to people when they left prison. But her dataset was different: she knew which prisoners were tattooed.

Lots of employers are loth to employ people with tattoos. The US Army, for example, recently tightened its rules on body art. Ms Harger suggests that tattooed ex-cons, shunned by the legal labour market, slip back into criminality as a means to earn a crust: hence higher recidivism.

Her results are striking. On average, someone lasts 5,000 days (about 14 years) before finding themselves back in the cooler. A tattooed ex-con lasts half that (see chart).

That is from Free Exchange, there is more here.

Assorted links

1. Masha Gessen on Russian tragedy.

2. Famous Feynman lectures put online.  And Lena Learns a Lesson, children’s book by Mira Varma, daughter of long-time MR correspondent Samir Varma.

3. Should we set aside half of the earth for wildlife?

4. Chimps outplay humans in some brain games.

5. A better-case scenario for China rebalance.

6. Those who leave science.  And the gap in labor quality as a force behind the Industrial Revolution.

Per capita Medicare spending is falling

I did not expect to be reading this within my lifetime, and yet here it is:

Medicare spending isn’t just lower than experts predicted a few years ago. On a per-person basis, Medicare spending is actually falling.

That is from Margot Sanger-Katz, there is more here.  Do please note that the program still faces fiscal pressures, in part due to the ongoing rise in “n,” namely future program beneficiaries.

Russian feline bundled loan markets in everything

Russia’s largest bank wants to lend you a cat. Isn’t that nice?

What did you do for the good folks of Sberbank, the Moscow-based lender, that would make them want to drive a van to your home and drop off one of their 10 cats — which they keep just for occasions like this — so you can hang out with it for not more than two hours? Well, they just lent you the money for the house and, as Russian superstition has it, it’s good luck for the first creature to cross the threshold of a new home to be a feline. And, yes, the cat has to be returned to the bank.

This neighborly campaign from the friendliest of all Russian banking behemoths is a ploy to cash in on Russia’s mortgage market boom.

The cat is brought to you, and then taken away, by “two unshaven men in green overalls.”  There is more here.

What will be humanity’s most enduring monuments?

Trevor Paglen speculates:

Humanity’s longest lasting remnants are found among the stars. Over the last fifty years, hundreds of satellites have been launched into geosynchronous orbits, forming a ring of machines 36,000 kilometers from earth. Thousands of times further away than most other satellites, geostationary spacecraft remain locked as man-made moons in perpetual orbit long after their operational lifetimes. Geosynchronous spacecraft will be among civilization’s most enduring remnants, quietly circling earth until the earth is no more.

That is via Kottke.