Tyler Cowen's Blog, page 476
July 28, 2012
Markets in everything, Indonesian traffic jockeys
To reduce the number of cars on the road, lawmakers have designated several main arteries as what they call “Three in One zones.” During the morning and afternoon rush, you can’t drive there unless you have at least three people on board. That’s why, near the entrances to the zones, men, women and children line up – raising their index finger – offering to rent themselves to commuters in a hurry.
20-year-old Litjak climbs into a black sedan, cradling her 2-month-old daughter Nabilah. Together, they’ll help a college student get to class on time. The baby gives Litjak a competitive advantage, providing two passengers for the price of one.
Litjak says she can make at least two trips in a morning, collecting two or three dollars to help pay for household expenses. She never worries about her safety, and she likes the work. People who can afford to pay have nice cars, so she sits in air conditioned comfort, listening to the radio.
She and others in this line of work are called traffic jockeys. They dress neatly each day and may have regular customers. For some, it’s their only income. Others, like 21-year-old Adik, see this as an easy way to make extra cash when he’s not on the job parking cars.
Here is more, and for the pointer I thank Nick Lawler. It is not legal to work as a traffic jockey in Indonesia.
Sentences to ponder
The findings reveal that 20.7% of the studied articles in behavioral economics propose paternalist policy action and that 95.5% of these do not contain any analysis of the cognitive ability of policymakers.
No, that is not Arnold Kling, it is from Niclas Berggren. Hat tip goes to Daniel Klein.
July 27, 2012
Assorted links
1. Why is UK employment up and output down?
2. Genetics vs. paleoanthropology?
3. Price inflation and stock returns (pdf), and here, and here, and most recently here; “There is a consistent lack of positive relation between stock returns and inflation in most of the countries.” I am urging a) a bit of caution, and b) engagement with the literature on this topic. I do favor a more expansionary monetary policy, but I see the balance of evidence as different from how it is frequently portrayed in the blogosphere.
4. New archery gold medal winner is legally blind, and here.
*Trust Me I’m Lying*
The author is Ryan Holiday and the subtitle is Confessions of a Media Manipulator. Anyone interested in the economics of blogs or new media should read this book, replete with and indeed emphasizing seamy tales of manipulation, etc. Think of it as Upton Sinclair on the blogosphere, and you will even find an anecdote about Marginal Revolution.
Who reads Chinese fashion magazines?
Lena Yang, general manager of Hearst Magazines China, who oversees nine publications including Elle and Marie Claire, says that the typical reader of Hearst Magazines in China is a 29.5-year-old woman who is more likely to be single than married. She has an average income of about $1,431 a month and spends $938 a season on luxury watches, $982 on handbags and shoes and $1,066 on clothes.
Ms. Yang says these women often live at home and turn to their parents and grandparents to pay for them. The study also showed that many readers in their 20s saved little.
“Most of them, they are a single child,” Ms. Yang said. “That means they don’t have to pay for their rent. So all of that goes to pocket money. They have the parents support them and the grandparents. They actually have six persons to support them.”
Here is more.
July 26, 2012
My favorite things China
1. Novel: Soul Mountain, by Gao Xingjian. Parts of Dream of the Red Chamber are splendid, but it is hard to keep track of the whole thing and also I wonder whether any of the available editions in English are satisfactory.
2. Movie: The Story of Qiu Ju. A real charmer.
3. Comedian: Jackie Chan.
4. Movie, set in, but not a Chinese movie: How about Transsiberian? Shanghai Noon? Are any of those old movies set in China any good?
5. Book, non-fiction: James Fallows, China Airborne. I am also a fan of the book where the guy drives a car around China. The Private Life of Chairman Mao is a stunner, maybe the best book I know on tyranny.
6. Book, set in, fiction (not by Chinese author): Edgar Snow, Red Star Over China. Pearl Buck I find boring.
7. Sculpture: Tang horses, some images are here.
8. Contemporary Chinese artist: Cai Guo-Qiang, images here. His one man show at the Guggenheim is one of the best exhibitions I’ve ever seen. Try this video, apologies for the ad at the beginning.
9. Chinese traditional music: I am interested in Chinese opera, but don’t quite feel I’ve heard the real thing. I once heard an electrified performance, but my sense is the music is all about the timbre and needs to be heard in an nowadays-almost-impossible-to-achieve setting, given that I am not a 17th century Chinese noble. Any advice? By the way, here is a good article on recent developments in Chinese (semi-classical) music.
10. Cookbooks: Fuchsia Dunlop’s two Chinese cookbooks are not only two of the best cookbooks ever they are two of the best books ever.
11. Best book about Chinese fiction: Sabina Knight, Chinese Literature: A Very Short Introduction. This short book is a marvel of economy, substance, and style.
12. Pianist: Yundi Li, try this video of Chopin’s 2nd Scherzo.
13. Architect: I.M. Pei. We have friends who live in a Pei-designed house, and it is splendid.
14. Movie director: John Woo was born in China. The Killer might be his best movie, but It Takes a Thief is arguably the most underrated. WindTalkers is quite good too and also underrated.
I am not counting either Hong Kong or Taiwan for these categories. I also am not counting American-born, ethnic Chinese, such as Maya Lin. And J.G. Ballard was born in Shanghai, but what category do I put him in?
July 25, 2012
Manila bleg
As this bleg is posting I am on a flight to Beijing. After that, Manila. I’ll have plenty to say about China, but in the meantime your Manila suggestions would be much appreciated, thanks!
Markets in everything
Their new crossover model the Fiat 500L boasts a whole range of accessories, but the one drawing the most attention and perhaps concerns, is their built-in espresso machine.
…However, the car maker says, don’t rush to judgement, you can’t brew up a cup unless your car is stopped.
The story is here, and for the pointer I thank Chris F. Masse.
The value of microfoundations
Here is Noah Smith on microfoundations, responding to Matt Yglesias (here and here, here is also a Krugman post on the topic). I am usually pro-microfoundations, though without any particular philosophy of science-derived attachment to the idea. Here is why:
1. In some very important, simple, and intuitive models, there is nominal stickiness but money is still neutral. Caplin and Spulber 1980 is one of my favorite pieces and time spent studying their model will be repaid with value. I don’t think the model applies to 2007-2009, or say 1929-1933, when we have “out of the ordinary” shocks, but it may apply to many other time periods.
2. Often the data suggest that money is neutral or roughly neutral or at least the data are not inconsistent with neutrality. I know that one does not hear much about that in today’s economics blogosphere, but I kid you not. Again, I differ strongly from this literature for “the times which really matter,” such as 2007-2009 or 1929-1933, but still I take the data seriously. Try this relatively “atheoretical” piece by Harald Uhlig, which does not reject monetary neutrality (nor does it cover 2007-2009). Nominal stickiness models have trouble explaining why money doesn’t matter more than in fact it does. Understanding microfoundations will keep you out of the trouble you will get in if you keep trying to use money to expand output.
3. We can try to nudge people into more flexible wages, but again that requires some understanding of microfoundations. The Fed can prevent any risk of a deflationary downward spiral, and please note it is no coincidence we are in the two percent inflation range. You don’t have to view this as a high return activity to favor it (it is funny how the mere mention of wage nudges will cause many people to suddenly turn against the nudge idea, at least temporarily.)
4. Microfoundations don’t have to mean intertemporal maximization with extreme assumptions about rational or well-behaved preferences. George Akelof has written some of the best papers on microfoundations. Nor do microfoundations have to mean staking out an extreme position on the Lucas critique.
5. There are plenty of flex-wage professions which still have been seeing high unemployment. Like real estate agents. Or what happened to all those Mexicans who used to stand around on street corners? Were their wages sticky too? I don’t think so. Does their return to unemployment or underemployment in Puebla refute the sticky wage model? I personally don’t think so, but it’s hard to answer that question — an obvious one to a critical observer — without a clear sense of microfoundations.
6. Just how bad is monopoly? We wish to know when designing a competition policy. Under some microfoundations models, the existence of market power is essential for ongoing stickiness, in other models not. This question matters, and we need microfoundations to better resolve it.
7. Should a government subsidize, tax, or be neutral toward contract indexation? Try answering that question, or even getting started on it, without some sensible microfoundations.
8. If you are trying to end a hyperinflation or high rate of inflation, do you need to get fiscal policy right, in some kind of credible manner, before enacting monetary restraint? It is hard to imagine answering this question without good microfoundations.
I could go on. I am worried that people are rejecting microfoundations because they think microfoundations imply objectionable attitudes toward macro policy. But note: if those attitudes are objectionable and indeed wrong, they won’t be implied! It is entirely defensible to argue “we should have a more expansionary monetary policy today, even without the microfoundations to support that view.” It is much tougher to argue “economics should deemphasize microfoundations altogether.” The broader the range of questions one considers, the more important microfoundations turn out to be.
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