Tyler Cowen's Blog, page 63

There are nominal rigidities in Indian villages too

Supreet Kaur has a new NBER paper on this:

This paper tests for downward nominal wage rigidity in markets for casual daily agricultural labor in a developing country context. I examine transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. First, there is asymmetric adjustment: nominal wages rise in response to positive shocks but do not fall during droughts. Second, transitory positive shocks generate ratcheting: after they have dissipated, nominal wages do not adjust back down. Third, inflation moderates these effects, enabling downward real wage adjustments both during droughts and after positive shocks. Fourth, wage distortions generate employment distortions, creating boom and bust cycles: employment is 9% lower in the year after a transitory positive shock than if the positive shock had not occurred. Fifth, consistent with the misallocation of labor across farms, households with small landholdings increase labor supply to their own farms when they are rationed out of the external labor market. The results are not consistent with other transmission mechanisms, such as migration or capital accumulation. These findings indicate the presence of rigidities in a setting with few institutional constraints. Survey evidence suggests that workers and employers believe that nominal wage cuts are unfair and lead to effort reductions.

There are ungated versions here.  I am often puzzled, by the way, that we do not spend much more time studying nominal rigidities, which are the source of rather considerable deadweight losses.   We do not find nominal rigidities everywhere.  Salespeople working on commission often have flexible wages, as do (some) people working in high-trust, high morale organizations.  What exactly accounts for these differences and how much can they be replicated?  What are their psychological costs?  Are there personality types which can deal with nominal flexibility of wages and types who cannot?  How frequent is one type relative to the other?  How do the psychological costs of a wage cut compare to the psychological costs of suffering losses when running your own business?  Questions such as these should be much higher on the list of research priorities.

The progress of Bitcoin

Timothy B. Lee has a good short essay on that question, here is one piece of it:

Between January 2013 and today, the amount of money invested in Bitcoin startups has grown more than 100-fold. Even after 2014’s declines, Bitcoins today are worth 20 times what they were worth at the start of 2013. The number of Bitcoin ATMs has gone from 0 to 342. Yet during the same two-year period, the number of Bitcoin transactions each day has not even doubled.

In short, there’s a lot of excitement among Bitcoin hackers, Bitcoin investors, and other insiders. But normal people are hardly using the network at all.

Recommended throughout, he argues that 2015 will be a make or break year for Bitcoin.

Markets (?) in everything, black metal Ronald McDonald edition

Drive-thru metal is really a thing, or at least this L.A.-based band is trying to make it a thing. Mac Sabbath (yes, that’s really their band name) is a foursome of rockers who dress up as McDonald’s characters and perform covers of Black Sabbath songs. And they even change up the lyrics so they’re burger-themed.

On stage, they dress as Ronald McDonald, Grimace, the Hamburglar, and Mayor McCheese (with tusks and sans the top hat).

According to Mac Sabbath’s Facebook page, they’re not a joke band to sell t-shirts. They describe their shows as “Ronald Osbourne and the whole gang in full regalia playing all their hits like ‘Sweet Beef’ and ‘Chicken for the Slaves’ in a multi-media show with video, theatrics, audience participation and sing alongs.”

There is more here, including videos, via Robert Lawson.

Monday assorted links

1. “I became a statistician because I was put in prison.”

2. Profile of Isabel Sawhill on marriage.

3. Drones vs. mosquitos.

4. A Rust Belt theory of low cost high culture.

5. .

6. How to politely (?) end a conversation, the science thereof.

7. Malcolm Gladwell reviews America’s Bitter Pill, on ACA.

8. Eric Posner responds on quadratic voting.

9. Jeff Sachs on Krugman and austerity.

Los Angeles notes

Los Angeles no longer seems so superficial, perhaps because so many other parts of the country have been revealed to be the same or worse.  Their bookstores are no longer an embarrassment because now everyone’s are an embarrassment.  The city feels less glamorous and more normal, a better place to live but a more difficult place to talk about.  It remains an oddly forgotten city, overlooked in America’s love affair with Brooklyn and Silicon Valley and yes the Southeast, yet better to live in than perhaps anywhere else on this continent.  (Provided you do not have school-age children.)  The city has lost relative ground in one major way however: California no longer has such a monopoly on good Asian and Latin food.  Nor do movies exercise much of a hold on the American imagination nowadays.  It is no longer easy to identify what is essential about Los Angeles, yet no one here seems to care.

Eat at La Flor de Yucatan, get the cochinita pibil, the tamales dzotobichay, and the strange green egg dish, huevos papadzules, plus consider the daily specials.  Others recommend the hojaldra, note the establishment has only one table and they don’t shut the door on relatively cold winter days.

Also go to Jitlada Restaurant and get the mango raw blue crab, Coco lotus (fish soup in coconut milk), and Miang khum shrimp 7 heaven for a knockout southern Thai meal.

The Amazon order test as an algorithm for evaluating books

If you read a book, how many other related or similar books does it make you order?  (Of wish to order, if you are budget constrained.)  If the number is at least three or four, the book you read is almost certainly very interesting and worthwhile, if not always accurate.

Andrew Roberts’s biography of Napoleon made me want to read an additional biography of Napoleon, because it made his life to me more interesting.  It made Napoleon’s period more interesting too.  I might read a book on cavalry tactics as well, a topic I have never read on before.

Some books pretend to be the final word on a topic, but it is unlikely they succeed.  If you don’t end your read with some additional book orders, maybe you need to ask yourself what exactly went wrong.

At times it is not a book order which is the appropriate follow-up.  Say you read a book on Sri Lanka and you respond by going to Sri Lanka, well that counts too.  Or a biography of Beethoven may lead you to more of his music, rather than to another book on his life.

If I apply the Amazon order test, the best book for me this last year was Michael Hoffman’s Where Have You Been?: Selected Essays.

Hofmann’s book wins additional points for chain effects, namely the books I ordered, as a result of reading Hofmann, in turn made me want to order further books.  But chain effects are tricky.  Following my read of Andrew Roberts, and then a follow-up Napoleon biography, will I read yet another life of Napoleon?  That may depend on how good the follow-up is, and Roberts should not be held liable for that.  Or should he?  What should you think of a book which leads you to so-so follow-ups rather than to excellent follow-ups?  A blog post which does the same?

What percentage of the value of a book is derived from the quality of the follow-ups it induces?  Under plausible rates of discounting, for serial readers this could easily by eighty or ninety percent or more.  (Could it be that actual book reviews are not consequentialist? Horrors.)  How about a book review outlet which refuses to consider the books under consideration, but rather considers and evaluates what they will induce you to read next?

I would subscribe.

Sunday assorted links

1. The benefits of diversity.  A good and important post.

2. What might Republicans attempt at the state level?

3. Predictions from Kevin Drum.

4. Houllebecq on the new Houllebecq.

5. Loeb Library to do comprehensive coverage of the early literature of India, a major undertaking.

6. Why are the literary and reviewing worlds so male?

The ruble and the fiscal theory of money

John Cochrane writes:

Facts

1. Oil prices have gone down by half. Russia is a big exporter, and the Russian government gets a lot of revenue from oil exports, 45% by one media account.

2. The Ruble is collapsing.

There is more to the argument than that, but that is not such a bad start.  The problem I have with the fiscal theory of money is that I do not know how to define the fundamental value of money.  It may work analytically to treat money as a “get out of jail card” of a defined value, yet it seems doubtful to me that is the only factor pinning down money’s value.  Multiple equilibria are running around in the background somewhere…we just don’t quite know how and where.

Markets in everything, spas for seven year olds

“I feel like the best princess in the world,” said Paige, who celebrated her seventh birthday at Sweet and Sassy, a national chain of spas that boasts that its cosmetologists are specially trained to work with children. After the beauty treatments, Paige and her guests walked down a red carpet and disappeared into a hot pink limousine, which took the squealing children on a spin around the parking lot. One 6-year-old guest documented the revelry in a series of selfies.

The rest of the article won’t make you feel better about…anything.

Model this (online dating fact of the day)

According to forecasts from Match.com and Plenty of Fish, two of the country’s largest dating sites, the single most popular time for online dating — the window when the most people sign up, log on and poke around — will be Jan. 4, from roughly 5 to 8 p.m. Zoosk, another data-focused dating site, backs that estimate up; in 2014, it’s most trafficked time was on the Sunday after New Year’s.

The full article is here, via Ninja Economics.  Might it mean that a) online dating is a kind of palliative against holiday depression?  Or that online dating is a kind of New Year’s resolution, a willingness to undergo a brutal experience for a supposed potential long-run benefit?  Or a bit of both?  Personally, I engage in some of my least productive work on Sunday evenings.

Your model, by the way, should not neglect these corollary facts:

Interestingly, this cycle doesn’t just play out on dating sites — in fact, it’s far broader than that. Researchers have also observed a post-holiday spike in searches for porn, for instance, and a 2012 study by Facebook’s data team found that people are far more likely to change their relationship status in January or February than they are at any other time of year. Offline, the holiday season tends to see a jump in both condom sales and conceptions.