Tyler Cowen's Blog, page 158

African-American fact of the day (there is a great stagnation)

As sociologist Patrick Sharkey shows in his book Stuck in Place, 62 percent of black adults born between 1955 and 1970 lived in neighborhoods that were at least 20 percent poor, a fact that’s true of their children as well. An astounding 66 percent of blacks born between 1985 and 2000 live in neighborhoods as poor or poorer as those of their parents.

That is from Jamelle Bouie, there is more here, mostly about neighborhood effects.

Extracting the surplus from being in prison

Inside the razor wire on Eagle Crest Way, in rural Clallam Bay, Wash., telephone calls start at $3.15. Emails out, beyond the security fence, run 33 cents. Money transfers in, to what pass for bank accounts, cost $4.95.

Within that perimeter lies the Clallam Bay Corrections Center, a state prison — and an attractive business opportunity. One private company, JPay, has a grip on Internet and financial services. Another, Global Tel-Link, controls the phones.

The problem of course is unfettered monopoly, not the private companies per se, but private companies are often more efficient at exploiting the gains from potential monopoly power.  Still, government is in on the act too:

In Baldwin County, Ala., for instance, the sheriff’s department collects 84 percent of the gross revenue from calls at the county jail.

The story is here, and for the pointer I thank Henry Farrell.

Timothy Lee interviews Marc Andreessen on the death of the IPO

It is excellent throughout, here is one good sentence:

The funny thing about Piketty is that he has a lot more faith in returns on invested capital than any professional investor I’ve ever met.

Here is another:

The result of all that is the effective death of the IPO. The number of public companies in the US has dropped dramatically. And then correspondingly, growth companies go public much later. Microsoft went out at under $1 billion, Facebook went out at $80 billion. Gains from the growth accrue to the private investor, not the public investor…

Most American retirement savings is invested in the public stock market. Most Americans can’t invest in private companies and most Americans can’t invest in venture capital and private equity funds. They’re actually prohibited from doing so by the SEC. If you both prohibit them from investing in private growth and wire the market so they can’t get into public growth, then you can’t be invested in growth. That raises the societal question of how are we going to pay for retirements. That’s the question that needs to be asked that nobody asks because it’s too scary.

The full interview is here.

The dark side of the Chinese Coase theorem for dog meat

Yikes:

At about 11 o’clock in the morning [June 20], at the grand marketplace in Yulin [China], a dog peddler was haggling with dog lovers over the price of a dog, and because they couldn’t agree on a price, the dog peddler lifted the dog high into the air three times with metal prongs, doing so to force the dog lovers to buy the dog at a high price. In the end, a woman paid 350 yuan to buy the dog. At the scene, quite a few dog peddlers used mistreatment of the dogs to force dog lovers to buy the dogs.

Here is some further background:

Also, according to the official Weibo account of Chengdu Commercial Daily, on the eve of the Dog Meat Festival, a large number of dog lovers gathered in Yulin. On the morning of [June] 20, at 9 o’clock, at the Yulin dog meat market, upon seeing that there were dog lovers present, some dog peddlers began abusing their dogs at the scene, yelling: ”Will you people buy it or not? If not, I’ll strangle it to death [with the prongs]!” Dog lovers bought the dogs with tears in their eyes, and the dog peddlers waved the cash they got before the surrounding onlookers. The onlookers cheered, and some even gave them the thumbs-up.

The story with some rather gruesome photos is here, and for the pointer I thank Ben P.

Assorted links

1. There is no (Chinese) great stagnation.  I wonder if it’s any fun.

2. Sky cars to be built in Tel Aviv.

3. Will Wilkinson returns to BloggingHeadsTV.

4. Is Amazon demanding “print on demand” rights?

5. Ricardian equivalence in Japan, or is it the “rotten kid theorem”?

6. Pablo Escobar’s hippos.  And growth at The Washington Post.

7. Let’s get rid of the Export-Import Bank.

The Hockey Stick of Human Prosperity

We are pleased to announce a brand new course at MRUniversity, Everyday Economics. The new course will cover some of the big ideas in economics but applied to everyday questions. The first section, premiering now and rolling out over the next several weeks, features Don Boudreaux on trade. Tyler will appear in a future section on food. You can expect more from me as well. Indeed, you may spot both Tyler and I in some cameos (ala Stan Lee) in some of Don’s videos!

Here’s the first video on trade and the hockey stick of human prosperity.

How Not to Bet

Tim Harford writes of bets:

Pundits who make wagers may look grubby but at least they are accepting a cost for failure. A more subtle advantage is that betting encourages forecasts that are specific and quantifiable.

Exactly, but not all bets are well considered. Consider the following from Christopher Keating:

I have heard global warming skeptics make all sorts of statements about how the science doesn’t support claims of man-made climate change. I have found all of those statements to be empty and without any kind of supporting evidence. I have, in turn, stated that it is not possible for the skeptics to prove their claims. And, I’m willing to put my money where my mouth is.

I am announcing the start of the $10,000 Global Warming Skeptic Challenge. The rules are easy:

1. I will award $10,000 of my own money to anyone that can prove, via the scientific method, that man-made global climate change is not occurring;

…5. I am the final judge of all entries but will provide my comments on why any entry fails to prove the point.

This is a poorly constructed bet. Notice first that the preamble, “empty”, “without any kind of supporting evidence”, “prove,” is simply unscientific bluster. Scientific thinking is Bayesian. (Appropriately, I first saw Keating’s bet flagged on the blog Prior Probability.) In contrast, this talk is suggestive of someone who doesn’t weigh evidence, a point of some importance given that he writes “I am the final judge of all entries…”. Keating is really betting that no one will change his mind and that’s not a bet that I would want to take.

Second, what counts as proof? And what does it mean to say that man-made global climate change is not occurring. How much is man made? How fast is it occurring? What are the costs? What are the benefits? Keating’s challenge is vague and poorly worded.

For an example of a much better bet consider the Caplan-Bauman bet on temperature change over the next 15 years. Caplan has agreed to pay Bauman $333.33 if the average temperature over the period 2015-2029 is more than .05C greater than the average temperature over 2000-2014 as measured by the National Climatic Data Center. If the average temperature increase over that time frame is less than .05c then Bauman will pay Caplan $1000. 

The Caplan-Bauman bet is quantifiable and specific and it contains odds, as it should since Bauman expresses much greater certainty in his belief than Caplan.

Keating seems even more certain in his beliefs than Bauman. But how certain? Will he accept my offer of the same bet at 5:1 odds?

Scottish devolution hasn’t mattered much for actual policy

In the major fields of domestic policy responsibility assigned to the new devolved institutions, such as health, education, local government, there have been remarkably few initiatives. A system of local government, reorganised in 1996 on the basis of 32 multi-purpose local authorities and designed by the preceding Conservative UK government, has been largely left untouched. As in England a grossly inadequate system of council tax inherited from the preceding Conservative government and crying out for reform, has been left untouched by the first two Labour/Liberal Democratic administrations and the two successor SNP administrations. And under the latter the system has been shored up by Scottish government funding to facilitate a council tax freeze and containment of local government expenditure.

Or try this:

A 2012 Audit Scotland report has also indicated little change in health inequalities within Scotland in the last decade. Despite avoiding the major structural reorganisations experienced by the NHS in England, and being more generously endowed with public funds, the NHS in Scotland does not seem to have made, under devolution, any fundamental change to the pattern of relatively poor health outcomes. Devolution did not involve much change in the governance of health in Scotland in as much as the ministerial, civil service and medical leadership continued as before but within a new ministerial structure. What was new was the Scottish Parliament and it does not seem to have made much difference.

There is more here, by Norman Bonney, interesting throughout.  The pointer is from www.macrodigest.com.

Peter Coy sums up the student debt debate

You can read his very useful overview here.  It is hard to excerpt but worth reading in full.  A Vox survey of the debate is , also worth a look.  Here is a testy response from Choire Sicha, here is the original David Leonhardt piece.

Assorted links

1. The French economy continues to stagnate.

2. Good math textbook cover (recursive).

3. Cochrane on Summers on stagnation.

4. The polity that is San Francisco, parking app ruled illegal.

5. When will deleveraging be over?  And are morning people less ethical at night?

6. Russian pizza claims delivery by drone and not just publicity stunt, speculative, some might even say BS.

7. Russ Roberts with Ed Lazear on Gary Becker.

8. Why you should root for Nigeria.