Tyler Cowen's Blog, page 404
January 23, 2013
Assorted links
1. Belief in the great stagnation is the new normal.
2. The brutality of English leisure gardeners.
3. Are too many people photographing their meals? And can you surreptitiously film inside Disney World?
4. Is the (published) claim that most published results are wrong itself…wrong?
5. Is the Zara guy the third richest man in the world? On average they open a new store every day.
edX course with Banerjee and Duflo
You will find it here, thanks to Yogesh for the pointer.
Selling Federal Assets
According to The Institute for Energy Research the Federal government owns oil and gas worth on the order of $128 trillion. I suspect that these numbers are optimistic. Nevertheless, some judicious sales of land and assets (and to its credit the Obama administration has made some small steps in this direction) would be wise.
Federal assets below the ground are primarily mineral and energy resources, such as oil, natural gas, and coal. For example, the United States owns millions of acres and billions of barrels of oil that can be developed on federal lands and waters. Currently, the government leases only 2 percent of federal offshore areas and less than 6 percent of federal onshore lands for oil and natural gas production. Areas that the federal government could open to oil and gas development include:
The 10.4 billion barrels of oil and 8.6 trillion cubic feet of natural gas in the Arctic National Wildlife Refuge
The 86 billion barrels of oil and 420 trillion cubic feet of natural gas in the outer continental shelf of the lower 48 states
The 896 million barrels of oil and 53 trillion cubic feet of natural gas in the Naval Petroleum Reserve-Alaska
The 25 billion barrels of oil in the outer continental shelf of Alaska
The 90 billion barrels of oil and 1,669 trillion cubic feet of natural gas in the geologic provinces north of the Arctic circle
The 982 billion barrels of oil shale in the Green River Formation in Colorado, Utah, and Wyoming.These technically recoverable resources total 1,194 billion barrels of oil and 2,150 trillion cubic feet of natural gas that is owned by the federal taxpayer. At $100.00 per barrel of oil and $4.00 per thousand cubic feet of natural gas, the oil resources are worth $119.4 trillion and the natural gas resources are worth $8.6 trillion for a grand total of $128 trillion, or about 8 times the U.S. national debt.[iii]
Hat tip: Robert Murphy.
January 22, 2013
Why should we not recreate Neanderthals?
A few of you were puzzled over this question two days ago, or at least pretended to be. So why not? For a start, the cloning process probably would require a lot of trial and error, with plenty of victims of experimentation being created along the way.
Then ask yourself some basic questions about Neanderthals: could they be taught in our schools? Who would rear the first generation? Would human parents find this at all rewarding? Do they have enough impulse control to move freely in human society? How happy would they be with such a limited number of peers? What public health issues would be involved and how would we learn about those issues in advance? What would happen the first time a Neanderthal kills a human child? Carries and transmits a contagious disease? By the way, how much resistance would the Neanderthals have to modern diseases?
What kinds of “human rights” would we issue to them? Would we end up treating them better than lab chimpanzees? Would they be covered by ACA and have emergency room rights?
We don’t know the answers here, but I would expect to run up against a number of significant fails on these issues and others.
We do, however, know two things. First, the one environment we know they could survive in (for a while) was a Europe teeming with wildlife. That no longer exists.
Second, we’ve already run the “human/Neanderthal coexistence experiment” once, and it seems to have ended in the violent destruction of one of those groups. It would be naive to expect anything much better the second time around.
Most likely the Neanderthals would end up in some version of concentration camps, with a lot of suffering and pain along the way, and I don’t see that as an outcome worth bringing about.
Addendum: If you’d like to read another point of view, there is George Church and Ed Regis, Regenesis: How Synthetic Biology Will Reinvent Nature and Ourselves.
Will Latin American stay underpopulated for another century?
Think of how many people live in Asia, and how few, relatively speaking, live in Latin America.
Latin America has (mostly) beautiful weather, lots of natural resources, and attractive cultural amenities. Mock the living standard all you wish but even Bolivia has higher per capita income than the much better publicized “Asian tiger” Vietnam. The region simply isn’t that poor by global standards.
Crime is a problem but likely will fall, due to aging, better policing, and perhaps lead removal.
What does a Coasian bargain between parts of Asia and Latin America look like? Will many Chinese and Indians end up in Ecuador and Honduras?
I would bet no, but still I wonder. Often we overvalue the permanence of the status quo and the region has seen some major inward migrations in times past.
January 20, 2013
Why is there still inflation in Greece? (model this)
The rates of price inflation in Greece have been running in the range of 0.8% to 2%.
For another point of view, try this article:
The new bank that emerged from the breakup of Greece’s troubled Hellenic Postbank will initially hire all of the old lender’s staff but offer voluntary redundancies as it tries to cut payroll costs by 30 percent, its management said on Saturday.
The latter story of course is not just specific to a single firm but is common from Greece over the last few years.
It’s funny how many people pretend to understand what is going on here. If Greece were seeing a stronger bout of price deflation, the situation would be much clearer. How can you try to explain these disparate facts?
1. The true rate of inflation is much lower — in fact there is deflation — because of reporting biases in the Greek CPI. That’s putting a lot of faith in numbers we do not see, plus it does not explain why the recorded numbers still show some upward pressure.
2. For structural adjustment reasons Greece needs a big cut in real wages, but AD is holding up OK. It’s hard for me to believe the last part of that one.
3. You can have a major and sustained whack to AD, but still have rising prices. How so? Would Lieutenant Colombo be happy with this?
4. Scott Sumner has a view which I do not understand, and thus do not wish to try to state, but it has something to do with not really believing in the concept of price inflation.
5. Prices are sticky, AD is falling, and almost all of the adjustment is in quantities. Yet this still doesn’t explain why prices are inching up, and furthermore it is grossly at variance with the actual empirical literature on price stickiness (much neglected in the blogosphere I should add), which is not nearly as strong as wage stickiness.
6. There are multiple equilibria, and Greece is moving from a perception of having “nearly West European levels of trust and cooperation” to having “Balkan levels of trust and cooperation,” and that is causing real wages and investment to plummet. I’ve toyed with this hypothesis in the past, but I would be the first to admit it is highly speculative. I do still think it is part of the explanation.
There is a similar puzzle for some of the other eurozone economies, and even, to a much smaller degree, for the United States over the last few years.
January 19, 2013
*What Works in Development*
That is the new and very useful short book by Eva Vivalt, and the subtitle is 10 Meta-Analyses of Aid Programs. This is a good overview of what economists know about aid and how it is they know this. You can order the book here.
David Henderson reviews the new Alan Blinder book
The review is here, here is one interesting paragraph:
Mr. Blinder omits a crucial fact about Lehman, one that, by itself, explains why the huge drop in value of Lehman’s mortgage-backed securities led to its collapse: the effect of changes in federal bankruptcy law. Thanks to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, when Lehman went bankrupt it could not simply, as in earlier days, pay holders of derivatives as much as possible with its assets. Instead, it had to give each derivative holder a new contract identical to the one it had signed with Lehman, but with a different counterparty. Lehman would also have to pay the transaction cost of the new contract. Such costs are typically about 0.15% of the contract’s total value. That’s small, right? No. When Lehman went bankrupt, the face value of Lehman’s derivative contracts was $35 trillion—with a “t.” The transaction costs alone were $52.5 billion. That is what sank Lehman.
The strange and indeed unjustified senior status of derivatives contracts remains an under-discussed area for financial reform. Here is a relevant Bolton and Oehmke paper (pdf). The Blinder book you can buy here.
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