Tyler Cowen's Blog, page 506

Assorted links

1. Via Chris F. Masse, new solutions to Greek problems, using iPads, and this is coming soon to your Mac, maybe it can patch up Spain.

2. Does self-deception inhibit laughter?

3. Are chimp personalities similar to those of humans?

4. Review of the new Google car.

5. Do people like spoiled stories more?

Sentences to ponder (West Virginia fact of the day)

Those results come two weeks to the day after Keith Judd, a convicted felon incarcerated in Texas, won 41 percent of the vote against Obama in the West Virginia primary.

There is more here.

Driverless car update

Getting lawmakers in the seat of a self-driving Prius has become Google’s M.O., according to Matthew Newton, editor of DriverlessCarHQ.com, a site dedicated to covering autonomous cars. “Google has been giving free rides to policymakers in California, Nevada and Florida,” Newton told Wired from his home base in Melbourne, Australia. “So it makes sense that they would do it in D.C.”

Eric Cantor, for one, was given a ride.

Could Japan use some more private equity?

Noah Smith writes:

In Japan, there is no big private equity industry, because it is very difficult to do a leveraged buyout of a company. The Japanese government allows companies to defend themselves from takeovers in ways that are illegal in America. Also, Japanese companies often hold each other’s shares, a practice known as “cross-shareholding”, which tends to prevent hostile takeovers. Cross-shareholding creates huge financial risks; however, many of the Japanese companies that engage in cross-shareholding are big banks that are backed by the government (much as ours are here in the U.S., but more explicitly), so this risk is assumed by the Japanese taxpayer. For a comprehensive primer on Japanese corporate governance, see here.

Upshot: In Japan, private-equity firms cannot buy companies and force them to restructure.

Fact 2: Japan has a productivity problem. We think of Japan as being super-productive, and in fact some industries (and most export-oriented factories) are. But overall, Japanese productivity kind of stinks. Since at least the 90s, Japan’s Total Factor Productivity has lagged far behind that of the U.S. Nor is this due (as Ed Presott has tried to claim) to a slowdown in technology; it appears to be a function of how resources are allocated within and between Japanese companies.

New issue of Econ Journal Watch

It is here, along with the table of contents.  Here are two segments, reproduced from the front page of the journal:

Willie Mays, Mickey Mantle, and the Guy Next Door: Race, Ethnicity, and Baseball Card Prices

David Findlay and John Santos replicate an analysis of the market for baseball Hall-of-Famer rookie cards produced since 1947, when Jackie Robinson made his major-league debut. The earlier study did not find evidence of significant racial discrimination by card buyers. Having detected a pattern of data errors in that study, Findlay and Santos correct the errors, extend the analysis, and include Hispanics. Their more powerful analysis also finds no evidence of significant racial or ethnic discrimination.

The Findlay and Santos article
Robert Muñoz—one of the authors of the original study—acknowledges the corrections, applauds the extensions, and explores dimensions of the discrimination question that are not well illuminated by the findings of the investigation.

Characteristics of the Members of Twelve Economic Associations:

Using survey responses from 299 U.S. economics professors, the authors report on membership in the professional economic associations with names including the following terms: American, Eastern, Southern, Western, Econometric, Evolutionary Economics, Private Enterprise Education, Feminist Economics, Public Choice, Socio-Economics, Austrian Economics, and Radical Political Economics. Association membership is related to voting, policy views, and favorite economists.

How to find good food in American bars

Jacob Grier has an excellent post on this topic (which I do not cover), here is just one part of a longer discussion:

Reading An Economist Gets Lunch inspired me to think explicitly about how to find good food in American bars. Here are a few general suggestions based on my own experience:

Avoid places with lots of vodka and light rum. These can be bought cheaply and are easy to dress up in crowd-pleasing ways with liqueurs, fruit, and herbs. If these are what the customers are demanding than the food may be equally designed for broad appeal.

In contrast, look for ingredients that signal a knowledgeable staff and consumers. Italian amari, herbal liqueurs, rhum agricole, quality mezcal, batavia arrack, and – lucky for me – genever are good indicators. If I see a bar stocked with these I’ll want to see the food menu.

Go into the city. The density of consumers with expendable income, knowledge of food and drinks, and access to transportation that doesn’t require them to drive is in urban areas.

Laws matter. In some states regulations require that places selling spirits also serve food. Where these laws don’t exist, many of the best cocktail destinations won’t bother much or at all with food, so one might plan to eat and drink separately. (These laws are bad news if you just want to drink, since your drink prices may be covering the cost of an under-utilized cook and kitchen or bars may simply close earlier to save on labor. Virginia’s law creates particularly perverse incentives.)

Assorted links

1. Credit guarantee risk in China.

2. The world’s largest swimming pool.

3. ELA and now “de-euroisation” are the words which should be attracting your attention these days.

4. How will self-driving cars reshape our cities?

5. Truly disgusting markets in everything, calling Jonathan Haidt, you are needed in Tokyo.  I still wonder if it is some kind of joke.

Shout it from the rooftops, Matt!

Matt Yglesias shouts it from the rooftops on occupational licensing:

Licensing requirements…are by far the best statistical predictor of business-friendliness, for those subjected to them. And unlike taxes or environmental rules, these have spread like kudzu, with little scrutiny and often scant policy rationale.

A recent comprehensive survey of state licensing practices by the Institute for Justice reveals little consistency or coherent purpose behind most licensing. Nevada, Louisiana, Florida, and the District of Columbia, for example, all require aspiring interior designers to undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. In the other 47 states, meanwhile, there’s no legal training requirement. My friends and co-workers living in D.C.’s Virginia and Maryland suburbs appear to get on fine with unlicensed interior decorators, and all across America, amateurs have decorated their own homes without imperiling public safety.

Almost all states—though not Alabama or the anarchic United Kingdom—require barbers to be licensed, but the specific requirements seem to vary arbitrarily. New York barbers need 884 days of education and apprenticeship. Across the river in New Jersey, it’s 280. But getting one’s hair cut in New Jersey (to say nothing of England) is hardly a life-threatening gamble.

…a wide range of these rules could be done away with entirely at basically no risk. Regulation is needed when it would make sense for a firm to deliberately engage in malfeasance. Dumping harmful toxins into the air is highly profitable unless it’s prohibited. Financiers can draw huge bonuses by taking on too much risk, only to wreck the economy later. In other occupations, though, shoddy work brings its own punishments. An interior decorator who can’t get recommendations from satisfied customers probably won’t remain an interior decorator for long.

In these cases, licensing rules raise the prices the rest of us pay, make it difficult for successful entrepreneurs to expand their businesses, and are often a major barrier to employment for the most vulnerable populations.

We have covered these issues before on MR but sometimes you just have to KEEP SHOUTING.

I, Robot?

In experiments at six public universities, students assigned randomly to statistics courses that relied heavily on “machine-guided learning” software — with reduced face time with instructors — did just as well, in less time, as their counterparts in traditional, instructor-centric versions of the courses. This largely held true regardless of the race, gender, age, enrollment status and family background of the students.

Here is more.  The report was led by William Bowen, an economist who is famous for, among other things, having described education as subject to an inexorable “cost disease” for lack of labor-saving innovation.

The money pump (sentences to ponder)

Let’s say the run on Greek banks continues or accelerates.  Then this sentence will become more relevant:

Importantly, Greek banks ONLY run out of Euros if the ECB can justify a shut down in funding to the BoG ELA facility or the Greek banks directly.

In other words, the ECB has to pull the plug at some point or simply finance Greece ad infinitum.  Read the whole thing, ignore the hyperbole toward the end, and study up on brinksmanship.

Here is a useful discussion of ELA [Emergency Liquidity Assistance], excerpt:

ELA is a subject on which the ECB is deeply reluctant to provide information – even on where or when it is provided.

“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent,” Luc Coene, Belgium’s central bank governor, explained in a Financial Times interview this month.

And here is yet further detail, excerpt:

Some of Europe’s central bankers are nevertheless no longer willing to allow themselves to be endlessly tapped for cash. Belgian Luc Coene has already openly warned that even the ELA payments must “absolutely” be stopped if the Greek banks are actually hopelessly bankrupt, and not merely illiquid.

If you read through these sources, it will help answer the question — which I receive frequently — “why can’t Greece default and yet not leave the eurozone?”