Tyler Cowen's Blog, page 396

#thirdworldproblems

If a case of soap is pilfered from a U.S. military base here or pinched from a NATO shipping container, it will probably, sooner or later, end up for sale in the Bush Market, a sort of thieves’ outlet mall in central Kabul.

Named after George W. Bush, the U.S. president who launched the war in Afghanistan, the bazaar has flourished for more than eight years, thanks to the long presence of foreign troops that provided war booty aplenty. But in the Obama era, with its steady withdrawal of U.S. forces, the good times are ending in the sprawling hive of vendors who hawk mountains of Pop-tarts and enough Head & Shoulders shampoo to combat the dandruff of untold army divisions.

The story is here, and for the pointer I thank Peter Metrinko.  By the way:

A pack of Wrigley’s 5 gum fetches $2, more than in the States.

Assorted links

1. David Autor on the relative roles of trade and technology.

2. Indian rice productivity seems to be rising.

3. Profile of Stanley Fischer.

4. Uh-oh (photo).

5. Ezra Klein on House of Cards.

6. Maker’s Mark has reversed its decision to dilute the alcohol content.

7. How the elephants get stacked.

8. Volatility and instructor turnover in the Coursera microeconomics class.

Are your views on sticky nominal wages and the minimum wage consistent?

Let’s say your labor is worth $10 an hour but you won’t go back to work for less than $12, thereby leading to the unemployment of you.

In essence you are self-imposing a minimum wage on that market, but the employer is responding by leaving you jobless.  (Analogous to “self-deportation,” a sarcastic wag might suggest.)

Let’s say, alternatively, that you finally decided to settle for $10 but the law now stipulates $12.  It’s not quite the same (“the public regime has shifted”), but still I can imagine that an employer, if he did not hire you in the first setting, also would not hire you in the second setting with the higher legal minimum.

Keynesians believe that worker-imposed minimum wages do not lead to reemployment very readily.  Other people, some of whom are also Keynesians, believe that state-imposed minimum wages are reasonably consistent with employment/reemployment.

If there is significant monopsony in labor markets, can a worker-imposed minimum wage improve outcomes?

I know many economists who will argue: “let’s raise the state-imposed minimum wage.  Employers will respond by creating higher-productivity jobs, or by paying more, and few jobs will be lost.”  I do not know many Keynesians who will argue: “In light of the worker-imposed minimum wage, employers will respond by creating higher-productivity jobs, or by paying more, and few jobs will be lost.”

Again, I am not saying that the worker-imposed minimum wage and the state-imposed minimum wage are identical in their nature.  Still, it would be interesting, in terms of a model, to deduce where the relevant difference comes from.

Is the difference that the worker-imposed minimum wage is too high?  That the worker has not publicly precommitted to his or her personal stubbornness?  That a legal minimum wage applies to a larger and broader class of workers?  Something else?

In policy terms, does it suffice to argue that minimum wage increases should be restricted to periods of high or at least adequate demand?  Have you noticed that is not what we are seeing?

Addendum: For an additional exercise, under what model are your views on the minimum wage, sticky nominal wages, and payroll tax cuts consistent?  Consider please a payroll tax for each side of the market.  Toss in the liquidity trap for true extra credit.

In case you are wondering about Chinese growth…

I still do not believe that the Chinese “recovery” is for real:

Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking, stoking concerns that the economy could overheat.

Total new financing in January reached Rmb2.5tn ($400bn) – up more than 50 per cent from December and more than double the figure a year ago – eclipsing even the start of 2009 when China unleashed stimulus spending to battle the global financial crisis.

…The big increase in credit issuance stems from last year when China slouched to 7.8 per cent growth, its weakest in more than a decade. To revive the economy, the government stepped up the pace of infrastructure investment and gave a green light to banks to provide more funding, including through off-balance-sheet channels.

This succeeded in fuelling a recovery in the final quarter of 2012 and the momentum of that upturn has continued through into the start of this year.

But I would gladly be proven wrong.  The FT article is here, and I will admit, at the very least, to needing to revise my views on how often the fires can be restoked.  I had been expecting 3 to 5 percent “real growth” for China in 2012.  By the way, also from the FT, you will find a more optimistic take on Chinese matters here.

Now there are two new estimates, each revising downward actual Chinese gdp.  Here is one report:

Wiemer argues that “household services and manufacturing upkeep” component of the official CPI index is a better measure of services inflation.

And, given that adjustment, from Stephen Green:

…our [gdp] guesstimates for 2011 and 2012 are 7.2% and 5.5%, respectively, compared with the official prints of 9.3% and 7.3%.

From Toshiya Tsugami, here are further worrying signs.  About half of measured growth is coming from fixed investment, and yet bank data suggest these investments are a) not close to self-financing, and b) the figures are “grossly inflated” in the first place.  By the way, these fixed investments rose 20% from 2011 to 2012, not exactly the rebalancing which everyone is looking for.

I would again stress that we do not yet know what is going on, but it is a mistake to assume that China is in the clear.  If you put together the Green and Tsugami modifications into one revision, what kind of growth would we be measuring?

The 20 Greatest Songs About Work?

The list is here.  Number one is Tennessee Ernie Ford’s “Sixteen Tons,” followed by Dylan’s “Maggie’s Farm.”  “Atlantic City” would not have been my Springsteen pick but overall the list is better than expected.  There is, however, an odd under-representation of folk music, see for instance this list.

Why are the service sectors underrepresented on such lists?  There is “Dr. Robert,” “Lawyers, Guns, and Money,” “Police and Thieves,” and many others from the more stagnant sectors of the economy, although arguably police productivity has risen quite a bit.

For the pointer I thank the estimable Chug.

Assorted links

1. Marionettebots, Japan, video, culture, markets, etc.

2. Complaints about Canadian currency, and hockey for the blind.

3. Mailbox, a new email service.

4. Measuring the popularity of parks.

5. Is Psy the Antichrist (video)? Is God a Straussian?

6. We are not as wealthy as we thought we were, retirement edition.

From my email, about the deadweight loss of Valentine’s Day

Consider:

Single people report feelings of inadequacy, anxiety.

People in relationships suffer from the tyranny of expectations. Good experiences are met with hedonic adaptation, bad experiences can be, I’m reliably informed, remembered for decades.

Florists, restaurateurs, etc., demand – and receive – excess producer surplus for their services.

For years, my solution has been to randomly select a surprise Valentine’s day substitute. Our private utility is well served (the wife loves the arrangement), and as a bonus I think I am minimizing the negative consumption externality.

In my estimation, 1 and 2 outweigh 3, resulting in a deadweight loss.  I’m not a naive utilitarian; yes, I understand there is value in signaling, and, believe it or not, I’m a romantic. I just think that by coordinating this behavior in holiday form we suffer on both demand side (expectations, zero-sum positional goods) and supply (constraints in providing flowers, restaurant tables).

That is from Shiraz Allidina, MR reader.

Tabarrok Talk

I will be speaking at GMU’s Economic Community Forum on Tuesday; free and open to the public.

Topic: Launching the Innovation Renaissance

Date and Time: Tuesday, February 19, 2013 from 7:30 p.m. to 9:00 p.m.

Location: Dewberry South in the Johnson Center, Fairfax Campus

*The Battle of Bretton Woods*

This is an excellent book.  The author is Benn Steil and the subtitle is John Maynard Keynes, Harry Dexter White, and the Making of a New World Order.

If you enjoyed Liaquat Ahamed’s Lords of Finance, and his take on the 1920′s, and you are looking for something comparable on postwar economic reconstruction, this is the place to go.

The book also contains some explosive revelations about White’s work as a Soviet spy, very well documented I might add.

World music CDs of recent times/2012

I now realize that last year I neglected to cover “Best World Music CDs of the year.”  So here goes:

1. Bahamas: Goombay 1951-1959.  I listened to this CD last year more than any other.  It’s also some of the wittiest music I own, and it has plenty of economic themes.

2. Bwati Kono, by Lobi Traore, raw electric blues from Bamako, hypnotic, Jimi Hendrix of West Africa stuff.

3. Pete Seeger, The Complete Bowdoin College Concert 1960.  Some people think of Seeger as a “right place, right time” sort of guy, but that does him an injustice.  He was one of the most talented American musicians of his generation, and this live two-CD set shows him at his versatile peak, as a kind of walking human jukebox of American musical traditions, with lots of world music too.

For an honorable mention I would suggest Y’anbessaw Tezeta, by Getachew Mekuria and The Ex & Friends, Ethiopian saxophone.

Here are two free songs from Revue Noire a Tana, one of my favorite world music albums, years old but I am still listening to it regularly.  It’s not on Amazon, maybe you can find a copy somewhere in these links.