Tyler Cowen's Blog, page 320

Why are CEO salaries rising?

Here is one good bit from the newly published Kaplan and Rauh paper “It’s the Market: The Broad-Based Rise in the Return to Top Talent“:

The evidence is not supportive of the arguments that the top incomes have been driven by managerial power or poor corporate governance in public companies.  Public company executives, who should be more subject to problems of managerial power problems, saw their pay and relative standing increase less over this period than executives of closely-held company businesses that are, by definition, controlled by large shareholders or the executives themselves and are subject to more limited agency problems.  Furthermore, the Bakija, Cole, and Heim (2012) findings are not consistent with loosening social norms being an important factor in the increase in incomes at the top, as it is the pay of closely-held businesses — where executive pay is private and undisclosed — that increased the most.

The paper is interesting throughout.

Chicago food bleg

From a loyal MR reader and diner, who has excellent taste in food by the way:

Might you be willing to post another bleg, this one about Chicago? The results from the Toronto one were fabulous (and it also seemed to generate a good conversation among your readers). We’re headed there Saturday, and I’m disappointed so far in my research efforts…

I don’t have a trip scheduled just yet, but I am sure I will benefit from your answers as well.  We both thank you in advance.

Assorted links

1. Good post on the challenges faced by Raghu Rajan.

2. 600 octopi made from recycled newspaper, can you guess from which country?

3. The infrastructure behind Dutch cycling.

4. Is there regional convergence in Chinese growth?  And new Michael Pettis piece on China.

5. First chapter of Tim Harford’s new book as a Kindle single.

6. I never thought Ishtar was such a terrible movie.

The Animals are Also Getting Fat

In a remarkable paper Allison et al. (2011) gather data on the weight at mid-life from 12 animal populations covering 8 different species all living in human environments. Dividing the sample into male and female they find that in all 24 cases animal weight has increased over the past several decades.

Cats and dogs, for example, both increased in weight.  Female cats increased in body weight at a rate of 13.6% per decade and males at 5.7% per decade. Female dogs increased in body weight at a rate of 3% per decade and males at a rate of 2.2% per decade.

One ready, although not necessarily correct explanation, is that fat people feed their cats and dogs more and exercise them less. Thus, the authors also looked at animals not directly under human control such as rats.

…For the 1948–2006 time period, male rats trapped in urban

Baltimore experienced a 5.7 per cent increase in body

weight per decade from 1948 to 2006 and a nearly

20 per cent increase in the odds of obesity. Similarly,

female rats trapped in urban Baltimore experienced a

7.22 per cent per decade increase in body weight, along

with a 26 per cent increase in the odds of obesity.

that too has a ready, although not necessarily correct, explanation:

… just as human real wealth and food

consumption have increased in the United States, rats

which presumably largely feed on our refuse, may also

be essentially richer.

To counter both of these objections the authors do something very clever, they gather data on the weight of control mice used in many different experiments over decades.

Among mice in control groups in the National Toxicology

Programme (NTP), there was a 11.8 per cent

increase in body weight per decade from 1982 to 2003

in females coupled with a nearly twofold increase in the

odds of obesity. In males there was a 10.5 per cent

increase per decade.

Control mice are typically allowed to feed at will from a controlled diet that has not varied much over the decades, making obvious explanations less plausible. Could mice have gained weight due to better care? Possibly although that is speculative.

More generally, there are specific explanations for the weight gain in each of the animal populations, just as there are for humans. Each explanation looks plausible taken on its own but is it plausible that each population is gaining weight for independent reasons? Could there instead be a unifying explanation for the weight gain in all populations? No one knows what that explanation is: toxins? viruses? epigenetic factors? I am not ready to jump on any of these bandwagons and in some cases the author’s samples are small so I am not yet fully convinced of the underlying facts, nevertheless this is intriguing and important research.

Hat tip: David Berreby writing in Aeon about The Obesity Era.

Smart Phone Ethics

Here is David Pogue, an excellent technology reporter but a lousy economist, reviewing the Moto X in the NYTimes:

You get your customized phone within four days, courtesy of Feature 2: it’s assembled right here in these United States. The components are still made in Asia, but they’re put together in Texas — you can lose less sleep worrying about underpaid Chinese workers.

David does not explain how a decrease in the demand for Chinese workers increases Chinese wages. Hint: It doesn’t. Perhaps, however, I have done David a disservice; although his argument fails as economics it succeeds as psychology. People who buy American probably will worry less about underpaid Chinese workers. Out of sight, out of mind.

Addendum: Adam Smith’s thoughts on China and ethics, most notably the importance of using reason not emotion to make ethical decisions, remain relevant.

*A Call to Arms*

The author is Maury Klein and the subtitle is Mobilizing America for World War II, and it weighs in at almost 900 pp.  So far it is quite good, and well-written, though fairly slow in getting off the ground.  Here is one bit:

The navy was in no better shape.  It too suffered from an antiquated organization and sclerotic leadership that still looked back to the last war.  When Frank Knox took office, his staff included only a military aide and some secretaries.  The navy had six bureaus but no central  procurement authority and hardly any knowledge of or statistics on the proposed expansion program.  Nor did it have any inventory of existing stocks or catalog of facilities or any semblance of long-range production planning.  Its contracting machinery was primitive and glacial.  James Forrestal, occupying the new position of undersecretary, had neither office nor staff nor defined duties.  He and Knox would have to start from scratch, often butting heads with an entrenched officer corps.

Here is a useful WSJ review.

Two movies about killing

The first is “The Attack,” directed by a Lebanese-American and set mostly in Tel Aviv and Nablus.  It has reportedly been banned in at least 22 Arab countries and in the Middle East it can be seen only in Israel.  The plot line is that a prominent Arab Israeli surgeon, living in Tel Aviv, discovers that his deceased wife was in fact the perpetrator of a suicide bombing.

Here is a New York Times review, but the movie admits of multiple interpretations more than most of its Western press lets on.  Because of a few nude scenes, the director could not find a Palestinian woman to play the lead female role and so he chose a Moroccan.

The second is “The Act of Killing,” which consists of interviews with Indonesian gangsters and murderers from the 1965 pogroms.  The perpetrators are given a chance to stage, reenact, and ponder their deeds, all captured on camera.  This is the most remarkable Hobbesian “document” I have experienced and the ways in which it is compelling go so far beyond other movies that there is no relevant point of comparison and I mean that in a way which is flattering to this movie.  Perhaps imagine the petty tyrant scenes of The Sopranos or Donnie Brasco multiplied fifty or one hundred times in intensity.  Werner Herzog nailed it: “I have not seen a film as powerful, surreal, and frightening in at least a decade… it is unprecedented in the history of cinema.”  It is also a compelling meditation on the human need for narrative and how we do not know what we have done until we start telling it, and even then the process of telling keeps us from the real truth.

Both movies are rich in social science and you should make every attempt to see them.

Assorted links

1. Sensitivity training for Geoffrey Miller.

2. Stimulus for the Spanish postal service.

3. .

4. Can people in fact appreciate better art?

5. Does it matter when foreigners are watching?

6. I am now doing some occasional blogging for LinkedIn, on labor market issues, my first post is here.

Creative Destruction in the News

From Michael Mandel who notes:

According to data from The Conference Board, the number of want ads for news analysts, reporter, and correspondents more than doubled from early 2010 to today! Moreover, it is noteworthy that the BLS annual series show a 25% gain in the number of working journalists from 2009 to 2012 (not shown on chart)

Now, let’s be realistic. I’m not saying that the true demand for journalists doubled between the beginning of 2009 and today, although given that no one was hiring in the depths of the recession, that statement might be literally true. In fact, the help-wanted series is an example of naturally-generated ‘big data’, meaning that it can be affected by changes in business practices, such as the way jobs are posted. The nature of journalism jobs may also be changing.

However, there seems little doubt that technology and innovation in journalism is creating new jobs in different industries even as the old companies and old industries are being undermined. I’m pretty sure that jobs at Politico are not being reported in the same industry as jobs at the Washington Post, even if Politico hires a WaPo reporter to cover more or less the same things.

As innovation accelerates, we’ll see more examples of this kind of divergence: Declining old industries, growing new jobs.

“No recovery for young people?” (The Great Reset)

In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007.

That is from Diana G. Carew, via Michael Mandel.