Tyler Cowen's Blog, page 156

China fashion markets in everything

Fashionistas no longer have to choose between looking stylish and protecting their lungs.

Next week, Beijing- and Hong Kong-based designer Nina Griffee, owner of face-painting and body art company Face Slap, will introduce a new line of outfits that incorporate face masks on the runway as part of a collection at Hong Kong Fashion Week.

Even the designer, who was born in England, admits that the eight outfits she’s created to launch the line – which look something like burkas for the space age – might not be everyone’s cup of tea. “There’s a fine line between fashion and costume,” she says. “I’m not entirely sure we made it completely into the fashion category.”

Though it isn’t the first time models will have appeared on stage wearing masks, it appears to be the first time the effect is so deliberate.

The outfits incorporate Vogmask pollution masks—already a choice among many of the pollution cognoscenti as the most stylish face coverings—attached by a zipper to shawls, dresses and ponchos. The zipper allows the wearer to remove the mask to dine, for instance, while retaining the high-fashion look.

There is more here, with good stylish photos too.

What I’ve been reading

1. Tom Doyle, Man on the Run: Paul McCartney in the 1970s.  This book actually has some fresh material, plus you realize that John and Paul were even more obsessed with each other than we used to think.

2. Francisco Goldman, The Interior Circuit: A Mexico City Chronicle.  Further evidence that politics is often the enemy of really good books, nonetheless this is still a moderately interesting treatment.

3. Elizabeth Pisani, Indonesia, Inc.: Exploring the Improbable Nation.  Lots of emphasis on the islands.  Pretty good, not great.

4. Hans Ulrich Obrist, ?Everything You Always Wanted to Know About Curating*?, a successful Swiss attempt at being clever and punchy.

5. Carl Wilson, editor, Let’s Talk About Love: Why Other People Have Such Bad Taste.  Most of this volume concerns Céline Dion, or is that Celine Dion?  Fascinating in parts, the subtitle should have been the title.

As part of an agreement with Bryan Caplan, I’ve also started an attempted reread of Catcher in the Rye, and hope to report back to you on that one…

Assorted links

1. Bryan Caplan on private sector vs. public sector workers: “Last month, I read most of the academic literature on this topic.  The more I read, the more confused I became.  As far as I could tell, researchers reached a clear answer: federal employees really are paid more than equivalent workers in the private sector.”

2. Slate on Srugim.

3. Megan on Hobby Lobby, on the mark.  The current discussion of this issue is chockful of mood affiliation.

4. Why don’t we have more telecommuting?  And Airbnb and the evolution of trust.

5. The earlier baby boom for Southwest native Americans.

Comparative Advantage

Don Boudreaux’s Everyday Economics video on comparative advantage is one of the best introductions to comparative advantage that I know of in any format.

(The series is a product of MRU but I cannot take any credit for its creation.)

Will international trade as a share of global gdp go up or down?

The common presumption is that it will go up, but I find this question not so easy to answer.  Let’s say this is over the next twenty years, will the technologies of easier cross-border trade really outrace the other progressing technologies in play?  Here are a few forces suggesting the share of trade in gdp will go up:

1. More countries are attaining middle income status and higher levels of productivity.  In a “balls and bins” approach to trade, there will be fewer zeros.

2. The internet makes it easier to trade across borders and also more people are learning the global language of English.

3. Social and commercial networks are increasingly global rather than local or national.  I think this is the most important positive force.

4. Natural resources are becoming a higher share of gdp, and trade in those resources is especially imperative, given the materials-intensive nature of most emerging economies.

Here are a few forces suggesting the share of trade will go down:

5. Services will be a higher proportion of gdp and services are harder to trade, for both economic reasons and for legal, protectionist reasons.

6. China’s economy will become less resource-intensive.  More generally the amazing global rise of China will not continue at its previous pace.

7. There already has been a lot of wage equalization across borders, and that limits future gains from additional cross-border trade.  Even though average Chinese wages remain low, actually setting up an export-feasible enterprise in China today cannot be done without paying a pretty severe wage bill.

8. Robots and smart software lower the returns to investing in and trading with lower-wage nations.  Put the plant in Texas.

9. The next twenty years may not be as peaceful as the last twenty years.

When you add this all up, globalization as a trend may well have peaked over the last twenty years.

Very good sentences

If savings for cross-sectional out-of-pocket nursing home expense risk were held in the form of vehicles, it is large enough to account for the entire stock of transportation equipment in the United States.

That prize goes to Karen A. Kopecky and Tatyana Koreshkova.  That paper was just published in American Economic Journal: Macroeconomics as well.

Assorted links

1. New Chinese mega-city of 130 million?  Ho-hum.

2. “Uncle Sam Wants You — Unless You’re 71% of Youths.”

3. Robots are blossoming in China.

4. The new dispute over Janet Yellen has nothing to do with nominal gdp.  I call it The Culture that is Georgetown.

5. If gun control is popular, why don’t more Congressmen support it?

6. My 2007 discussion of Thomas Piketty, sort of.  And Piketty in R Markdown, and the code is here.

Lee Ohanian on the real wage premium for public sector workers

For the case of the public sector, the probability of involuntary separation is just 1.3 percent, which is one-third as high as the probability in the private sector case. I then calculate the difference in compensation between the public sector (low unemployment case) and the private sector, such that a worker would be indifferent between working in either sector. I find that workers would be willing to work for about 10 percent less compensation in the public sector, given the additional benefit of much higher job security. This estimate is conservative in terms of considering today’s labor market, as average unemployment duration today is much higher than its historical average.

This analysis suggests the possibility that public sector compensation may be significantly higher than competitive levels. Moreover, the fact that public sector workers are only about one-third as likely to voluntarily leave their job as private sector workers is consistent with the conclusion that average public sector compensation rates are in excess of competitive levels, indicating that there are relatively few external employment opportunities that dominate public sector workers’ jobs. The fact that average public compensation is higher than average private sector compensation suggests that public sector worker compensation may be well above competitive levels and indicates that public sector wages could be reduced without significantly impacting public sector employment. For example, I’ve calculated the impact of a 5 percent wage reduction for all public employees in California, a state with one of the most severe fiscal crises in the country. A 5 percent wage cut would reduce state spending by $1.33 billion, which would reduce California’s 2011 state budget deficit by nearly 15 percent.

There is more here, interesting throughout.  There is further relevant information here.  Here is the news on today’s Supreme Court decision on public sector unions: “Supreme Court drastically curtails public sector unions.”

The Great Portuguese factor price equalization reset

Portugal may have 15 percent unemployment, but that does not mean that Reiter Affiliated Companies, an American fruit producer, can find local people to pick berries on its 76-hectare farm here.

Last year, the company, also known as RAC, began a nationwide recruitment campaign and hired 40 Portuguese. Half quit after the first day. By the end of the week, not a single one was left.

“They wanted a job, but this wasn’t what they were looking for, because it was basically too hard for too little money,” said Arnulfo Murillo, the farm’s production manager. “Farming here isn’t harder than in America, but the big difference is that being unemployed in the U.S. is a lot harder and in no way an attractive alternative.”

Instead, the farm has imported a third of its labor force all the way from Thailand — 160 of 450 employees — a more expensive alternative, but one that has filled its ranks.

Please note people, this is not (mainly) a post about immigration, which is only one possible channel for factor price equalization.  The full story is here.

*The Social Order of the Underworld*

The author of this new and excellent book is David Skarbek and the subtitle is How Prison Gangs Govern the American Penal System.  It carries rave blurbs from Thomas Schelling and also Philip Keefer.  My favorite section was the discussion of how the rate of gang formation in prisons depends on how the prisons are governed (start at p.65).  For instance when prison officials cannot reliably protect prison inhabitants, gang membership is especially likely.  Gangs rarely operate in UK prisons and when they are do they are usually far less powerful.  Some observers believe that indeterminate sentences increase inmate frustration and stimulate gang formation within prisons.  Female prisoners in many states, such as California, also do not have gangs in the traditional sense, although they may form into “small families.”  Gangs are also more likely in large prisons with many inmates than in small prisons.

A very interesting book, which should be read by anyone with an interest in this topic.