Tyler Cowen's Blog, page 220
March 1, 2014
Ryan Avent on why TPP is a good idea
Second, one of the stated ambitions of both TPP and the Trans-Atlantic Trade and Investment Partnership is reduction in non-tariff barriers, which in most cases add substantially more to goods costs than tariff barriers. According to estimates by the World Bank, for instance, American tariff restrictions on agricultural imports are relatively low on the whole, at just 2.2%. But the tariff equivalent of an all-in measure of restrictiveness, which takes into account non-tariff barriers, jumps to 17.0%. The all-in rates for many of the partners in TPP negotiations are substantially higher; Japan’s all-in tariff equivalent on agricultural imports is 38.3%. South Korea’s is 48.9%. Australia’s is 29.5%.
Third, “implicit protection of services” does indeed impose additional costs. For instance, the cost to foreign providers of some crucial transport and shipping services within the American market is basically infinite. Services account for four times as much economic output as goods production in America but only around one-fifth of American trade. Many services aren’t tradable, of course; haircut tariffs will not be on the TPP agenda. But a growing array are. And rules on service trade have barely changed at all in two decades. TTIP and TPP (as well as the Trade in Services Agreement) are aimed at updating rules on services trade to make it easier to sell insurance, or financial and consulting services, or IT and environmental services, and so on, across borders. Now maybe these deals are “really about” intellectual property, and all-powerful Hollywood has convinced the government to expend a lot of time and effort setting standards for services trade, the better to provide a smokescreen for its own nefarious activities. But I doubt it.
Investment is another key item on the agenda. At present rules on cross-border investment can be pretty ad hoc; a firm interested in buying shares in a business in another country often needs to be careful not to buy too much or not to invest in politically sensitive industries, lest the investment invite political scrutiny. TPP is working to reduce the scope for ad-hockery in interference in investment, which I think we would generally consider to be a good thing. TTIP is as well (that’s what the “I” is all about).
There is more here, useful throughout. I would add that this is also a foreign policy initiative and it will, if successful, allow various smaller countries in the region to resist pressures from various larger countries in same said region.
Assorted links
2. Does the “habitable epoch” lie far behind us?
3. How many healthy animals do zoos put down?
4. Autonomous drones flock like birds.
5. Leo Tolstoy’s Sevastopol Sketches. And Dinner Party Economics is now on-line at Amazon.
6. “How to sweet talk your lady,” advice from 1656. Here are related thoughts from 1663.
7. Kevin O’Rourke speaks good sense on the euro.
Software Patents are Not Good Property Rights
A good system of property rights establishes clear borders. Clear borders reduce disputes, encourage investment and promote efficient trade. Software patents, however, often fail to define clear borders. I am one of the amici in a amici curiae brief to the Supreme Court (regarding Alice Corp. v. CLS Bank) on software patents that makes this point:
Such abstract claims as “displaying data in
frames,” “recommending media based on past choices,” “reproducing information in material objects at a
point of sale,” or, as in the present case, using “a third
party . . . to eliminate ‘counterparty’ or ‘settlement’
risk,” simply cannot be reliably construed to define a
reasonable area of covered technology. See Wang, 197
F.3d at 1379; Interactive Gift, 256 F.3d at 1323; Pinpoint, 369 F. Supp. 2d at 995; cf. CLS Bank Int’l v.
Alice Corp. Pty. Ltd., 717 F.3d 1269, 1274 (Fed. Cir.
2013).
A general counsel at a technology startup
would be hard-pressed to describe any concrete
bounds or permissible follow-on innovations to her
fellow engineers in the face of such claims. Any
software that resulted in a similar functional result
could be construed as infringing, and any investment
in the commercialization of those technologies could
inevitably carry liabilities, risks, and costs whose
magnitudes are impossible to predict in advance.
Thus, the property system that ostensibly exists to
assure investors that long-term rents are secure does
the very opposite, casting a pall of uncertainty over
the viability of any commercial product that happens
to be adjacent to a lurking abstract claim.
Eli Dourado and I note that the Federal Circuit seems to have quite willfully disregarded the intent of the Supreme Court regarding patents on abstract ideas and I think this case may provide further pushback from the SC.
Questions that are rarely asked (are we ready for “home college”?)
From Hollis Robbins:
As a matter of economics, why not consider the option of hiring a single professor to teach a first-year curriculum to a small number of students? At the level of the individual student, it may make sense to some families. Rather than spend $50,000 for a year of college at a selective private institution, one could hire a single Ivy League-trained individual with a doctorate and qualifications in multiple fields for, say, two-thirds the price (far more than an adjunct professor would make for teaching five courses at an average of $2,700 per course).
The idea becomes more attractive with multiple students. A half-dozen families (or the students themselves) could pool resources to hire a single professor, who would provide all six students with a tailored first-year liberal-arts education (leaving aside laboratory science) at a cost much lower than six private-college tuitions, and at the level of a real salary for a good sole-proprietor professor.
A low-cost, high-value first-year education would allow students to transfer into a traditional degree-granting institution at a second- or third-year level, saving a year or more of tuition. Home-colleged students would have a year of personal attention to writing skills, research skills, oral-presentation skills, and the relationship of disciplines in the liberal arts. The attention to oral and written skills may be particularly valuable to non-English-speaking students looking to succeed at an American college or university.
Accreditation is key, but if the problem has been solved at the secondary-school level for home schooling, why not in higher education?
Read the whole thing.
February 28, 2014
Paul Krugman will leave Princeton for CUNY and a Manhattan-based existence
Here is the Bloomberg account, here are Krugman’s own words. I say it’s a good move and if I were in an analogous position I would do something similar. Think of it as another form of disintermediation. Think of it also as being closer to useful airports and also media centers.
More generally, the value of living in either New York City or Washington, D.C. — for those who seek influence — is going up. Krugman’s decision reflects that broader reality.
The proliferation of (illegal?) drone flights
Commercial drones such as the one that left her and two friends with bruises are prohibited in the U.S. That hasn’t stopped a proliferation of flights nationwide that’s far beyond the policing ability of the Federal Aviation Administration, which is laboring to write long-awaited rules governing flights of unmanned aircraft. Drones, which are available online and at hobby shops, have been used to film scenes in The Wolf of Wall Street and to deliver flowers. They’ve been sent aloft to inspect oil-field equipment, capture sporting events, map farmland, and snap aerial photographs for real estate ads.
Some operators plead ignorance of the law. Others claim their flights are permitted under exemptions for hobbyists. Flying model aircraft below 400 feet and away from populated areas is generally permitted, provided it’s for recreation only. There’s not much the FAA can do to stop people from flouting the rules.
There is more here, from Bloomberg Businessweek.
What I worry about
For Russia, matters in Ukraine are close to an existential crisis, as Ukraine is intimately tied up with Russia’s sense of itself as presiding over a mini-empire of sorts. Nor could an autocratic Russia tolerate a free and prosperous Ukraine, developing along the lines of Poland. America cares about Ukraine less, and cares more about Syria and Iran, or at least cares about saving face in those latter venues. Therefore there is a Coasean deal to be had between America and Russia, where Russia gets to partition part of Ukraine, create a buffer against Europeanization and democratization, keep the larger Ukraine unit weak, and also keep its Black Sea fleet. In turn Russia would do something less than totally sabotage all American plans for Syria and Iran. (Of course that is Coasean for the leaders, and not necessarily for the citizenries.)
The thing is…China. What kind of signal would such a Coasean deal of partition send to China?
That is what I worry about.
Larry Summers on WhatsApp and sluggish investment
Joe Weisenthal reports:
Ponder for example that the leading technological companies of this age, I think for example of Apple and Google, find themselves swimming in cash and facing the challenge of what to do with a very large cash hoard. Ponder the fact that WhatsApp has a greater market value than Sony with next to no capital investment required to achieve it. Ponder the fact that it used to require tens of millions of dollars to start a significant new venture. Significance new ventures today are seeded with hundreds of thousands of dollars in the information technology era. All of this means reduced demand for investment with consequences for the flow of – with consequences for equilibrium levels of interest rates.
I don’t completely follow that argument (does it show up in the producer price index numbers?), but I pass it along to stimulate your thought. Ashok Rao has excellent commentary:
…software (the blue line) is still only 15 percent of private investment and not significantly higher than points in the past two decades when interest rates were a lot higher. On the other hand, residential investment as a share of private investment, hasn’t changed much in structure since the mid-’60s and is still very sensitive to changes in the interest rate.
The full (short) piece on Summers is here.
February 27, 2014
Tyler Cowen on the adjustment to growing automation
Despite the grim forecast, Tyler Cowen argues that western societies won’t collapse under the weight of future industrial change, but will eventually adjust to a new phase of ubiquitous automation—the period Brynjolfsson calls the ‘Second Machine Age’. However, he warns that evolution will take considerable time to play out.
‘If you look at the Industrial Revolution that starts in England say around 1780 and for a long time a lot of jobs do go away, wage gains are very slow, there’s a lot of volatility, it’s not really until the 1840s that real wages in England are going up significantly,’ he says. ‘So I think this time around it will actually be a lot like the last time. We will have a transition period of many decades. That will be tough for many people. In the very long run it will be splendid, but along the way it’s not always going to feel splendid. I think that is the historical pattern for a lot of these changes.’
There is more here, from Australian Radio National.
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