Tyler Cowen's Blog, page 391

Good or bad news for Bitcoin?

You tell me:

After hitting bottom at $1.994 in November [2011], however, Bitcoin simply refused to die. The price bounced back to a high of $7.22 in January 2012 before settling down at $4.90, and news slowly began to once again turn positive…

The Bitcoin price has just broken the all-time high of $31.9099 that it set on June 9, 2011 on MtGox. After a persistent, one-and-a-half month rally from $13 to $28, followed by nearly two weeks of bumping up against $30 and then hovering around the $28-$31.5 range, the bulls have finally won…

With apologies to Scott Sumner, I say Bitcoin is a bubble.  Outside of war and rebellion, do “normal” new currencies behave this way?

The full story is here.  For the pointer I thank Mark Thorson.

Addendum: Scott Sumner comments.

Calgary bleg

I will have one free day there, so your advice is most welcome…I thank you in advance for the suggestions.  I already have noticed that Frommer’s is not exactly rich with suggestions about what is surely an interesting locale.

Daniel Brook on Dubai

Because there is no dominant culture one feels pressured to join, Dubai is a cosmopolitan city where most people are not cosmopolitans.

That is a sentence from Brook’s new A History of Future Cities, a frequently interesting conceptual history of Dubai, Mumbai, St. Petersburg/Leningrad and Shanghai.  The first Amazon review is quite on the mark.

Assorted links

1. The career incentives of Jihadi clerics.

2. Price inflation is too low.

3. Ryan’s real robot talk.

4. Mid-period Martha Stewart (I am not surprised).

5. The Great Famine potato spud returns to Ireland (MIE)

6. I’m all for science funding, neuro too, but is the Brain Activity Map really the way to go?  There is an introduction to the idea here.

7. Signaling (recommended for economists to click to see the photo).

On the FAA and the sequester, from Air Genius Gary Leff

Of course the FAA budget goes up year-over-year (in nominal terms) even under the sequester, and air traffic control is handling 27% fewer departures than prior to 9/11 with a budget that’s 41% higher (again, nominal $).  And that’s aside from actually probably being able to make some cuts without noticeable service effects, even before having to put off capital investment in future air traffic control improvements.

That is from an email.  There is more from Gary here, including this:

Lots of commenters argued that I must simply not understand the sequester, that the money has to be taken proportionally from each program / project / activity. I pointed out that these things are not at all defined in the statute, and it was still up to the Administration then to choose what that would mean for implementation.

Why isn’t there even more nepotism in Hollywood?

Alan Crede emails me the following:

It seems there’s a lot of nepotism in Hollywood (the Sheens, Clooneys, Douglases, Arquettes, Goldie Hawn-Kate Hudson, Aaron Spelling-Tori Spelling, etc.).

But it seems for every Angelina Jolie with industry connections, there’s someone like Brad Pitt (an outsider from Missouri).

My question is why is it not *all* nepotism?

I’m struggling to think of a bit of a theory of economic theory that could explain the equilibrium that we see other than the (question-begging) contention that, in order to maximize profits, Hollywood producers cast the ablest actors available to them.

Imagine a talent selection system with many different levels of filters and many, many applicants and also few winners.  The first level could be something as simple as “does anyone even look at your photo shoot or ask you for an audition?”  Let’s also say that nepotism gets you past the first filter, or maybe a bit more, but not past the final filters.  They won’t let you star in a movie just because you’re Goldie Hawn’s daughter (by that time most of her clout is gone).  Nonetheless relatives of famous actors, actresses, etc. still will end up considerably overrepresented on the screen.

There is also someone known who can vouch for you, albeit not always with perfect credibility: “Believe me, if you give my brother this role, he won’t ruin the movie promo efforts with a cocaine addiction.”  And so on.

You will be remembered more easily: imagine a director saying “hey for this bit part, why don’t we get what’s-his-name, you know the brother of [xxxx].”  It is then easier to work your way up.

Being the brother, sister, etc. of a famous actor gets you publicity and makes for a good story.  It draws interest from viewers, just as I was keen to have met Alex’s brother in Toronto last year.  That will help your chances too.  At the same time, talented outsiders still will make their way through the process and achieve stardom.

Nepotism and focality are closely related and they often reinforce each other.

Humorous titles

At first I thought this was satire:

Thomas Jefferson’s Creme Brulee: How a Founding Father and His Slave James Hemings Introduced French Cuisine to America.

I ran across that one in One More Page Books, a good Arlington independent bookstore which oddly no one had told me about.  It’s a bit out of the way in west Arlington, almost at Falls Church, right off Rt.29.

Assorted links

1. Interview with Saez (I find his views on elasticities somewhat surprising, actually).

2. Why conspiracy theories persist in Pakistan (they are often true).

3. There is no great stagnation.

4. The largest gathering of humanity in the world, the six-week pop-up city, and the accompanying theory of search, plus one possible way of cutting unwanted ties.  All in one story.  India too.

5. Dennis Rodman in North Korea, and oddly the game ended in a tie.

6. Those Americans who will tell pollsters they approve of Congress, excellent piece, one excerpt: “Other answers were simpler. Clyda Mellett of Tennessee, who described Medicare as her top political interest, offered an unqualified thumbs-up. “I think they’re doing great,” she said.”

Sentences to ponder

From Brad Plumer:

Mid-wage occupations, paying between $13.83 and $21.13 per hour, made up about 60 percent of the job losses during the recession. But those mid-wage jobs have made up just 27 percent of the jobs gained during the recovery.

By contrast, low-wage occupations paying less than $13.83 per hour have utterly dominated the recovery, with 58 percent of the job gains since 2010. (This data all comes from an earlier report (pdf) from the National Employment Law Project.)

Important throughout.

A neglected piece of news from Italy

One reason Berlusconi did so well is because of his opposition to a very unpopular property tax from the previous government:

The [Berlusconi] letter was sent to voters in swing regions of Italy.

It vows to scrap the unpopular property tax brought in under ex-Prime Minister Mario Monti and pay voters back.

There is more here.  Why does this matter?  Note that Italy has much more wealth than income, as indeed do all countries I know of.  Rogoff and Rinehart have focused our attention on the debt-gdp ratio, but as a pure accounting matter the debt-wealth ratio is more important.  And debt-wealth ratios rarely if ever look terrifying.  If you wish to get practical about it, imagine Italian homeowners — who have very low levels of debt on their homes — turning over twenty percent of the equity value in their living quarters to German and French banks.  (“Unterschreiben Sie hier, bitte…”)  The crisis is solved and, with apologies to Robert Barro, I am not even sure how much the negative wealth effect would crush consumer spending.  Life would go on and day-to-day taxes on income and consumption do not need to rise.

Yet of course this rarely if ever happens.  Indeed the Italians just took a big step away from such a “solution.”  The real lesson is that debt crises are crises of political will, not problems in the numbers per se.  And I take that to be bad news for the United States.  It also means that neither the debt pessimists nor the debt optimists convince me much with their cited numbers.  Look to the politics and adjust your mood accordingly.