Tyler Cowen's Blog, page 81

A subtle yet disturbing application of the Coase theorem

“Corinthian Colleges, accused of exploiting students, finds a buyer for half its schools.  The unlikely savior?  A student loan debt collection company.”

Note that quotation is in the print edition but I don’t see it on-line.

Assorted links

1. The funniest TV shows don’t have too many jokes (worthy of its own blog post, but difficult to excerpt).

2. Paul Krugman responds on Keynes.

3. Women choose jobs which are geographically more mobile.

4. Can you sue a government for being complicit in your own prostitution?

5. FT best books of the year list.

6. What would it mean for the economy if this Kobe Bryant analogy actually were true?

7. What tasty food would be disgusting eaten over rice?

8. Claudia Goldin visits Saudi Arabia.

Claims about oil

“All told, roughly 2.6 million barrels a day of world crude oil production comes from projects with a breakeven price in excess of $80 a barrel,” the report said. World oil production was 93.2 million barrels a day in the third quarter.

You will note, of course, that because of fixed costs and option value, a currently unprofitable project can remain up and running for a long time to come.  (As explained in the Cowen and Tabarrok Principles text.)  Here is a related point:

At the same time, analysts have also noted that for many shale producers, a large chunk of production costs — acquiring acreage, contracting wells, etc. — have already been spent. As a result, the more important figure might be “half-cycle” production costs. which analysts at Citi last week pegged at between $37 to $45 a barrel.

From William Watts, there is more here, including a discussion of which forms of fossil fuel energy are profitable at $80 a barrel.

Claims about Russia

Sergei Guriev, a former ­adviser to Prime Minister Dmitry Medvedev and a former board member of Russia’s largest state bank, said: “If nothing changes, if sanctions aren’t removed and the price of oil does not go up, then in two years the Russian government will have a major problem — it will lack cash and it will not be able to borrow it.”

The luxury goods market may contract up to eighteen percent this year in Russia.  There is more here, via www.macrodigest.com.

Not From the Onion: Man Arrested for Pointing Banana at the Police

A Colorado man, from Fruitvale (I am not making this up), was arrested for pointing a banana at the police. What makes this actually scary is the language of the police report:

The officers wrote in the police report they feared for their safety despite observing the supposed weapon was yellow.

“I immediately ducked in my patrol car and accelerated continuing northbound, fearing that it was a weapon,” Officer Joshua Bunch wrote in the report, according to the newspaper. “Based on training and experience, I have seen handguns in many shapes and colors and perceived this to be a handgun.”

The man was fortunate that he was only arrested. Had he been wielding a pointed stick he would surely have been shot.

Young Matt Dillon markets in everything

In Matt Dillon’s case, he would often look in the wrong direction. I would tell him that on the screen he would be looking in the right direction, even though it felt wrong when he was shooting it. Trying to explain this to a 14-year-old kid who was already suspicious about the whole thing wasn’t easy. So I’d put a $20 bill on my forehead, and I’d say, “Matt, if you look at this $20 bill, it’s yours when the shot is finished.” Over the course of the movie he made about $200.

There is more (too much more) here, and for the pointer I thank Hugo Lindgren.

Assorted links

1. Dulles airport is becoming less popular (i.e., markets work).

2. The proliferation of drones.

3. New Cornell blog on development economics.

4. The science of hate in college football, and runners do better when they have rivalries (WSJ, google “science of hate in college football” if need be).

5. Is American household deleveraging over?

6. The new Star Wars trailer.

The economics of Uber

We were talking about this at lunch the other day, and now Josh Barro steps forward with the numbers:

The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. Previous figures published by the city’s Taxi and Limousine Commission — showing flat prices — appear to have been incorrect, and the commission removed them from its website after an inquiry from The New York Times.

In other big cities, medallion prices are also falling, often in conjunction with a sharp decline in sales volume. In Chicago, prices are down 17 percent. In Boston, they’re down at least 20 percent, though it’s hard to establish an exact market price because there have been only five trades since July. In Philadelphia, the taxi authority recently scrapped a planned medallion auction.

There is more here.  I learn also that Nevada just banned Uber.

The French work a bit more than you think

Is this information about the work week good news or bad news?

But in reality, France’s 35-hour week has become largely symbolic, as employees across the country pull longer hours and work more intensely, with productivity per hour about 13 percent higher than the eurozone average. And a welter of loopholes lets many French employers outmaneuver the law.

All told, French workers put in an average of 39.5 hours a week, just under the eurozone average of 40.9 hours a week, according to the Organization for Economic Cooperation and Development.

That is from Liz Alderman.

China estimate of the day — the return of Austro-Chinese business cycle theory

“Ghost cities” lined with empty apartment blocks, abandoned highways and mothballed steel mills sprawl across China’s landscape – the outcome of government stimulus measures and hyperactive construction that have generated $6.8tn in wasted investment since 2009, according to a report by government researchers.

In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy in those years, according to research by Xu Ce of the National Development and Reform Commission, the state planning agency, and Wang Yuan from the Academy of Macroeconomic Research, a former arm of the NDRC.

…The bulk of wasted investment went directly into industries such as steel and automobile production that received the most support from the government following the 2008 global crisis, according to the report.

Mr Xu and Ms Wang said ultra-loose monetary policy, little or no oversight over government investment plans and distorted incentive structures for officials were largely to blame for the waste.

Don’t forget this part:

Misallocation of capital and poor investment decisions are not the only explanation for the enormous waste in China’s economy. A significant portion of China’s post-crisis stimulus binge was simply stolen by Communist Party officials with direct responsibility for boosting growth through investment, according to separate estimates by Chinese and overseas economists.

There is more here, from the excellent Jamil Anderlini.  As Arnold Kling would say, 祝你今天愉快…

Addendum: Here is a criticism of how that estimate was made.