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August 15, 2014
Europe’s problem isn’t just the deflation
Leonid Bershidsky writes:
For more than four years, consumer prices in Switzerland have risen at an annual pace well below 1 percent. In 2012 and 2013, the country even experienced deflation. Yet its economy has grown at a steady pace, and is expected to expand by 2 percent this year. The unemployment rate is a low 3.2 percent.
He makes some good points, but I think he is too complacent about the costs of deflation for less flexible economies.
Are big cities bad places to live?
Kevin Bryan directs my attention to this David Albouy paper (pdf), which attempts to estimate the quality of life across various metropolitan areas. Here is the key part of the abstract:
…adjusted quality-of-life measures successfully predict how housing costs rise with wage levels, are positively correlated with popular “livability” rankings and stated preferences, and do not decrease with city size. Mild seasons, sunshine, hills, and coastal proximity account for most inter-metropolitan quality-of-life differences.
If you go to Table A1, toward the very back of the paper, Honolulu is #1, followed by some fancy places in northern California, Santa Barbara, and Santa Fe. Last on the list are Decatur, Il, Beaumont-Port Arthur Texas, and last and also least is Kokomo, Indiana.
The states with the highest qualify of life are out west and in New England. I suspect these rankings are not taking heterogeneity seriously enough, as market prices capture marginal values but marginal values only for some movers. “Livability” is actually closer to an “average value” sort of concept. In other words, even with above average income I don’t want to have to pay Santa Barbara home prices.
In any case, the topic has come up lately and I thought I would pass these results along.
August 14, 2014
How bad is political polarization anyway?, with reference to Rhode Island
Josh Barro reports on Rhode Island, arguably the least polarized state in the Union:
Wonder what Washington might look like if it were less polarized? Just look to Rhode Island. The political scientists Boris Shor and Nolan McCarty analyzed state legislative voting records from 1996 to 2013 and found Rhode Island had the least ideological difference between the typical Republican and Democratic lawmakers.
It’s common for Republican officials in heavily Democratic Northeastern states to be moderates. What makes Rhode Island stand out is the number of conservatives within its Democratic legislative supermajority. The median Democrat in Rhode Island was more conservative than in all but 13 state legislatures, scoring directly between Georgia and Indiana and far to the right of those in Connecticut or Massachusetts.
This kind of ideological scrambling — one might say incoherence — has made it possible for Republicans and Democrats to find common ground and work together. But does it actually lead to desirable public policy? Nobody I spoke with in Rhode Island seemed inclined to hold up their state as a model of consultative governance for the rest of the country.
“We are unique state with a unique governing culture – and I would submit, a uniquely bad governing culture,” says Senator Hodgson. Of course, it’s not unusual for a member of a permanent minority party to criticize his state’s governance. But Rhode Island is a notably poor fiscal and economic performer, and observers across the political spectrum tend to talk about Rhode Island as a state that has fallen behind its richer neighbors.
The full story is here.
How should we quantify coolness? (from the comments)
David H. writes:
Yes, this Forbes list is a miserable failure, but it got me thinking about how to quantify coolness. Good restaurants are valuable, but to be cool, restaurants also need to be affordable and a little off-putting. If I were doing this, I would generate a list of touring bands that rank highly in RYM, knock out the superstars, and then see what US cities they played in the last 4 years. Each band-visit would count as a portion of coolness for that city, and a partial portion for the immediate vicinity. Also, RYM records which cities the bands came from. That should count for a lot. Then I would look for cities with an outsized and lively gay scene. I’m not sure how the causation works – whether a gay scene adds substantial coolness or whether it follows coolness – but the correlation seems pretty clear to me.
Coolness is unstable partly because it’s much more difficult to achieve in expensive cities. San Francisco and Berkeley are sinking in coolness partly for this reason. A truly cool city needs a critical mass of underemployed creative types who will devote a great deal of time to “the scene”, and this is hard to do when you’re paying $6+ for each of your beers. So, the lower the urban rents and general cost of living, the cooler the city, other things being equal.
OK, Forbes was right that proportion of young people living in the city is important. I also think that trends are important, like: Which cities are gaining young people, and which are losing them?
What else?
The link to RYM was added by me. I would think that a truly cool place cannot be rated as cool by too many other sources. How about that retirement community in Florida, an incorporated city, ruled largely by contract, where only the elderly live and the visits of grown children are regulated and rationed? How about the city in America which has the highest birth rate? Isn’t that kind of cool? Seriously. That would put Memphis, Ogden, and Provo in the lead. What’s so cool about tracking RYM?
Assorted links
1. 2003.
3. Old interview with Susan Sontag.
4. “Humans Need Not Apply” (video on mechanization). And how good will Siri-like entities get?
5. Rescuing orphaned baby elephants.
6. George W. Hilton, UCLA economist and transportation historian, has passed away.
7. Japan markets in everything, slightly risque.
Ferguson fact of the day
Violent crime rate in 2012
Ferguson 217.3
U.S. Average 214.0
The link, with further data, is here. Property crime in Ferguson has been much higher than the national average, in one year (2004) violent crime in Ferguson was lower than the national average. An index for all crimes in Ferguson has fallen by about 25% since 2000.
The pointer there is from @Bitspitter.
What should the European Central Bank actually do?
As parts of the eurozone seem to be creeping into deflation, a number of you have written and asked me what I think the ECB should be doing. Here are my views on three options:
1. Quantitative easing. People mean different things by this, but I am not sure that a complicated answer would be much better than a simpler one. I view it as better than nothing, but there is a risk it amounts to little more than a short- vs. long-term asset swap, which is hardly a solution.
2. Nominal gdp targeting. In general I like this idea, but which ngdp gets targeted? Eurozone ngdp, presumably. But when you have multiple countries, individual countries can end up with insufficient nominal gdp even if the eurozone meets a well-specified target overall. (Given independent bank regulators, debt structures, fiscal authorities and the like, I view this as more serious than say the 50 U.S. states, which have a higher level of integration, most of all at the policy level.) How much of a guarantee is there that Portugal would reap expansionary benefits, given the private credit contraction in that country? The potential clustering of ngdp growth in some parts of the eurozone is another way of stating why the currency union wasn’t a good idea in the first place. This is still much better than doing nothing, but as a monetary policy rule ngdp seems better designed for the single-country case.
There is another issue with ngdp targeting for the ECB, and that is markets simply might not believe it. If that were the case, what then should the ECB actually do to see through the promise? That brings us to #3:
3. A new and different inflation target. My current wish would be a new ECB mandate specifying a minimum core inflation rate of three percent for each of the largest countries in the eurozone, say France, Germany, Italy, and Spain. If any of these four countries seemed to be coming in under three percent inflation, the ECB would have to do more. And if need be, you could extend this rule through to more countries, with Malta and Cyprus probably at the end of that list.
Sumnerians should note this also might be the best way to actually meet an operational ngdp target for a fair number of eurozone countries. Note that I accept many of Scott’s critiques of inflation rate targeting, at least on a theoretical level. The (only?) advantage of this policy is that citizens would know what it means. They would know they hate it, in the same way that say Americans hate higher gas prices. They would know this is a higher inflation policy and the ECB would know it could not spin it any other way. A fair amount of inflation and thus monetary stimulus would in fact result.
Of course that is also why this is unlikely to happen. We’ll probably get some form of ineffective QE as a cop-out but better-than-nothing attempt.
“Needing a policy that you hate” — maybe there should be a phrase in Nahuatl for that?
Addendum: Scott Sumner comments.
August 13, 2014
The email culture that is German, with reference to optimal queuing theory
Daimler employees can head to the beach this summer without worrying about checking emails, sparing their partners and children the frustration of work-related matters intruding on the family vacation.
The Stuttgart-based car and truckmaker said about 100,000 German employees can now choose to have all their incoming emails automatically deleted when they are on holiday so they do not return to a bulging in-box.
For that matter they will not feel any pressure to check work email while they are away. From the FT there is more here.
You will notice this is related to some ideas from optimal queuing theory. The sender is notified that the email will be obliterated, and if it is important, he or she can send again and rejoin the queue once the recipient is back from vacation. In other words, when a long queue of email might otherwise form, potential queue creators are told they have to wait and restart later on, but at the back of the line, so to speak.
Some part of me finds this deeply wrong, but perhaps as a blogger/infovore I am not the person to ask. And there is this, which I don’t believe can be the long-term equilibrium:
It is up to Daimler employees to decide whether they wish to use the system, but Daimler assured staff it would not record who had done so.
There is a legal/regulatory angle too:
Germany’s labour ministry told managers to stop emailing or calling staff out-of-hours except in an emergency.
Is Washington, D.C. America’s “coolest” city?
It turns out we are getting our own branch of Momofuku. And Forbes recently decided DC is the coolest city in the United States. As an act of apparent satire, they followed up by naming Bethesda #19. I say Bethesda is about the least cool town around, Annandale should have done better.
What do I think? Well, Washington would be cooler if it were breeding its own Momofuku equivalents; northern Virginia did produce or at least refine or perhaps drive crazy the unreliable Peter Chang. David Chang, the Momofuku guy, did grow up in northern Virginia and ate in the “American-Chinese” restaurants of Vienna, VA, before striking out on his own in New York City, rated by Forbes as the eleventh coolest city in America (doesn’t NYC have to be either #1 or “totally not cool at all”? Can you really sandwich it between #10 Dallas and #12 Oakland?).
You know, I very much enjoy and admire quite a few Forbes writers, most of all Modeled Behavior. So I don’t mean for what follows to cast any aspersions on Forbes, but…you know…Forbes itself isn’t actually all that cool, not in the world of media at least.
Can we agree that…Washington really does deserve to be Forbes’s idea of the coolest city in America?
(I thank J.O. for a useful conversation related to this blog post.)
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