June 6, 2011
Tyler Cowen discusses “The Great Stagnation”
Oxfam’s latest report a Curate’s Egg
Tim Worstall points out the good bits first:
Oxfam’s latest campaign, “Grow”, seems so lovely and cuddly that to criticise it is almost like torturing puppies. What could be wrong with trying to feed the hungry and thus make the world a better place? Alas, if wishes were kings we could all be monarchs for the day and what’s wrong with the campaign is not the initial wish but the list of damn fool things it intends to do.
Praise first: Oxfam is quite right that there are several entirely stupid things that are being done about food currently. The first and most obvious is the biofuels nonsense: food should go into people, or at least animals we can eat, not into cars. But the European Union has insisted that 10 per cent (to rise to 15 per cent) of all petrol/diesel must be made from plants instead. Oxfam seems to think that this will reduce emissions: despite every scientist worthy of his slide rule pointing out that growing and processing the plants emits more than the oil being replaced.
Another policy we should stop yesterday is the subsidy of the rich world’s farmers. Can’t make a profit growing what people want to eat? Then stop and do something else. We say this to car makers, to buggy whip makers and there’s nothing about wading in cow shit that makes farming any different. New Zealand did it and farming profits went up.
Well, that’s about it for the good:
And then the report goes entirely doolally over commodities speculation, over futures and options. One of the points the report makes (in one of the good bits) is that price volatility is damaging both to producers and consumers. So we’d like to have some method of dampening such volatility. At which point it insists that this means we must lessen speculation in foodstuffs. But, umm, speculation in foodstuffs is what dampens price volatility in foodstuffs.
If any Oxfam type happens to read this by mischance, here’s why. To make money in commodities you have to buy low and sell high. When you buy low you prevent prices from falling further, in fact you raise them: maybe only a little depending on how much of the market you’re buying, but raise them you do. Good, so we’ve just reduced the slumping of prices which do so much damage to farmers. When you sell high you’re increasing the supply onto the market at a time of shortage. This reduces the price volatility at the high end which does such damage to consumers. So, our speculator making money reduces price volatility: it’s only the speculator who buys high and sells low who increases it and as he goes bust very quickly we don’t need to worry about him.
The term in the headline explained.
June 3, 2011
June 6 is Tax Freedom Day in Canada
You can find your personal tax freedom day (if you live in Canada) by visiting the Fraser Institute’s Tax Freedom Day Calculator.
For the federal government, $1B is a rounding error
Terence Corcoran glares balefully at what the federal government considers “deep cuts”:
We are destined for two days of political self-congratulation in Ottawa. Throne speech Friday. Budget Monday. Prime Minister Stephen Harper and his Finance Minister, Jim Flaherty, will use these opportunities to heap praise on their even-keeled and prudent handling of the economy, their deft manoeuvring of federal finances through the global storm, and their unwavering determination to guide us through the many uncertainties that lie ahead.
What they will not talk about is how they are going to balance the federal budget on target. Even less likely are any signs of enthusiasm for what should be a Conservative priority: reducing government spending.
That project has been shuffled off to Tony Clement at Treasury Board, where he will chair a small Cabinet committee that will dither away for a year trying to find the fiscal equivalent of nickels and dimes in a piggy bank the size of the House of Commons. Their first year target is $1-billion in cuts in departmental budgets of $120-billion, a spending reduction of less than 1%.
This is not good enough, not even close. For future years, Mr. Clement’s team will be hunting for an additional $3-billion in annual savings aiming for a total reduction of $4-billion by 2014, or about 1.3% of Ottawa’s total expenses of $300-billion.
As anyone who has ever done a family budget, or worked through tough times on a corporate budget, a 1% cut is a piece of cake, not much more than a rounding error.
May 31, 2011
How do you say “Doom!” in Chinese?
Remember that calm, reassuring phrase “don’t worry”? Okay, time’s up. You can forget it now:
Falling land prices may prompt Chinese property developers to write down the value of their assets, forcing a sober reassessment for those with vast land holdings, according to a survey released Monday by Credit Suisse.
Most at risk are those mainland Chinese and Hong Kong developers who added aggressively to their land banks in 2009 and 2010, the prices of which could come under pressure amid Beijing’s ongoing credit tightening, the investment bank said.
[. . .]
Prices for land sold at auction were down 20% so far this year, the report cited one industry expert as saying. Other data indicated price declines of up to 50% for the year to date, although the figures were affected by slumping transaction volumes in cities such as Beijing, possibly overstating the true rate of declines, the report said.
Meanwhile, the tighter credit conditions are having a “double impact” upon developers, Credit Suisse said.
On one hand, delays in mortgage approvals mean developers are having to wait longer to get paid than they did in earlier times. Today’s leaner environment has also resulted in a rise in buyers backing out of purchasing commitments on new projects because they can’t secure financing.
Remember that old joke about it being time to get out of the market when even the cab drivers have stock tips? It’s been time to get out of the Chinese real estate market since every small-time operator started buying up “choice” plots of land. It’s a classic sign of a bubble (when uninformed buyers are rushing in to get in on the “sure thing”), and those who can read the signs before they become ubiquitous are those who survive the collapse of the bubble in the best shape.
May 30, 2011
Cory Doctorow: “Every pirate wants to be an admiral”
Licensing Salem’s witches
Katie Zezima reports on the surge of witches looking to be licensed in Salem, Massachusetts, after the city council made it easier to get a license:
“It’s like little ants running all over the place, trying to get a buck,” grumbled Ms. Szafranski, 75, who quit her job as an accountant in 1991 to open Angelica of the Angels, a store that sells angel figurines and crystals and provides psychic readings. She says she has lost business since the licensing change.
“Many of them are not trained,” she said of her rivals. “They don’t understand that when you do a reading you hold a person’s life in your hands.”
[. . .]
But not everyone is sure that quantity can ensure quality. Lorelei Stathopoulos, formerly an exotic dancer known as Toppsey Curvey, has been doing psychic readings at her store, Crow Haven Corner, for 15 years. She thinks psychics should have years of experience to practice here.
“I want Salem to keep its wonderful quaint reputation,” said Ms. Stathopoulos, who was wearing a black tank top that read “Sexy witch.” “And with that you have to have wonderful people working.”
Under the 2007 regulations, psychics must have lived in the city for at least a year to obtain an individual license, and businesses must be open for at least a year to hire five psychics. License applicants are also subject to criminal background checks.
May 29, 2011
May 27, 2011
Colby Cosh: It wasn’t a market failure that caused the sub-prime fiasco
He’s quite right, not that the powers-that-be will take away the correct lesson from the experience:
What I see when I look at the origins of the financial pandemic is the story “government-sponsored enterprises that subsidize crazy lending practices and puppetize legislators fail.” Mortgage-writing institutions did things throughout the late 1990s and early oh-ohs that weren’t just likely to turn out badly; they made enormous amounts of loans that were practically certain to go bust in the short-to-medium term, loans that your mother could have told you would go sour. It wasn’t a “free” market that relaxed mortgage underwriting standards to the point of annihilation; it wasn’t a “free” market that put unskilled workers in million-dollar homes in the Sand States, or that spent too long ignoring the rising default rates that resulted.
We know this, in part, because we know how slightly freer mortgage markets traditionally behaved; they “redlined” the living heck out of low-income neighbourhoods. Because redlining resulted in racial discrimination — critics would just say it is racial discrimination — there has been a concerted attempt among economists to absolve the major U.S. anti-redlining statute, the Community Reinvestment Act of 1977, from any role in creating the housing bubble. Obviously it won’t do to pin the crisis on a 1977 law, but there is such a thing as the straw that broke the camel’s back; the CRA was followed by an even more intense fusillade of statutory and regulatory measures consciously designed to increase home ownership in America without making homes less expensive and valuable per se.
May 26, 2011
Charles Stross on Buckminster Fuller’s “Dymaxion House”
I remember something about Fuller’s potentially revolutionary design for housing from a few mentions in Robert Heinlein’s work, but I’d never followed up those hints. Charles Stross did:
. . . the Dymaxion House was probably the most fascinating of his failures, because it was nothing short of an attempt to revolutionize how we live.
Modernist architects of the 20th century generally designed two types of house: those for rich architects and other members of the upper classes to enjoy, and grimly regimented concrete cookie-cutter apartment blocks for factory workers. Fuller’s approach to housing was cookie-cutter-esque, insofar as he planned to mass-produce Dymaxion Houses on converted B-29 Superfortress production lines after the second world war, and ship them to their owners in freight containers, but as far as I know it was radically different in conception, purpose, and design from any of the other modular homes of the period. For one thing, he was interested in portability and nomadism; while a concrete foundation with utility connections was necessary, Fuller’s idea of moving house was that you could pack your house down into a container that would fit on a truck, drive it to your new neighbourhood, and deploy it again — the design influences of the traditional Mongolian yurt should be obvious. The Dymaxion House used aluminium sheeting for floors and structures, suspended by wires from a central steel structural shaft: saving weight was a priority. As he famously asked an architect on one occasion, “why are your houses so heavy?”
For another thing, he took an early interest in minimizing the human impact on the environment. The Dymaxion House had passive air temperature control and a pressure-triggered roof vent to survive near-misses from tornados (by releasing over-pressure inside the building so that it didn’t rupture). It had a then-unique mist-spray shower and a grey-water system to reduce water usage; Fuller was also interested in non-flush toilets.
Finally, it was intended to be mass produced for $6,500 per house in 1946 money — the cost of a high-end automobile — with a design life of 30-50 years. Early development was funded by the Pentagon, for reasons that should be obvious: WWII generated unprecedented demand for accommodation on bases overseas and, later, demand for housing in war-ravaged regions.
The story of why we aren’t all living in Dymaxion houses today is a convoluted epic of business failure (for one thing, starting up a production line for houses using cutting-edge aerospace technology was something that had never been done before; for another, Bucky’s business sense was not, sadly, as good as his design sense) that has been recounted in numerous biographies. What interests me about it is that it’s a far more humane approach to the problem of providing housing for the masses than his Brutalist contemporaries, whose designs tended to be fixed, immovable, made cheaply out of low-end materials, and built with high density mass housing in mind rather than low impact customizability. It was also way ahead of the field in terms of awareness of environmental constraints; while we could design better today, we’d be making incremental tweaks, whereas Bucky came up with the original idea of modular, lightweight, mobile low-impact housing ab initio.
Image detail from Tim O’Reilly’s Flikr photostream.
More, including a few photos at Wikipedia. And Rivet-head has a picture of the house while it was in use.
May 25, 2011
Netflix now the 500lb gorilla sitting on your internet bandwidth
In a shocking display that if you make something legally accessible, people are willing to pay for it (who’d ever have expected that?), Netflix has supplanted Bittorrent as the largest user of peak-time internet traffic:
Is solving the copyright “wars” really so difficult? New traffic research shows that Netflix has overtaken Bittorrent as America’s favourite internet application, knocking http into third place. “P2P is here to stay,” note the authors in Sandvine’s Global Internet Report, Spring 2011 edition, which shows that demand for legal, paid-for stuff is the single biggest internet traffic trend.
Copyright-holders who are slow to bless legal services, by contrast, find themselves being swamped by pirates.
Netflix now accounts for 24.71 per cent of peak time aggregate traffic in the US, pushing Bittorrent into second place with 17.23 per cent. By contrast, the Sandvine numbers show that in markets where there are no legal services, pirate services flourish. In Latin America, file-sharing program Ares grabs 15.48 per cent of peak-time (fixed line) internet traffic, behind http. In Europe, Bittorent rules, with 28.4 per cent of peak-time traffic, ahead of http. Here, YouTube grabs third place, with almost 12 per cent of peak-time traffic.
We signed up for a month-long trial of Netflix (on the recommendation of Dark Water Muse) and have been quite happy with the service. In fact, it was a major factor in our buying a PS3 over the weekend, as our existing Blu-Ray player was incompatible with Netflix.
How to analyze bubbles and crashes
Warren C. Gibson reviews Boombustology by Vikram Mansharamani, which looks at the boom and bust pattern frequently seen in economics, with special emphasis on China:
The author’s macro lens includes Austrian business cycle theory. That theory says inflation of the money supply causes a drop in interest rates, which is misinterpreted as an increased aggregate preference for saving over consumption, leading to investments in more roundabout means of production. When it becomes clear that there has been no such preference shift, these undertakings are seen to be at least partial mistakes, requiring write-offs and retrenchment — a bust. The boom is the problem, not the bust, which is the market’s attempt to realign itself to the realities of time preference. Austrian business cycle theory has great merit but leaves some things unexplained.
Mansharamani’s micro lens includes the concept of reflexivity. Market participants don’t just observe prices but also influence them. Reflexive dynamics occasionally give rise to instabilities in which rising prices lead to increased demand. A simpler term would be a “bandwagon effect.” I recall an office party in 1980 where one of the secretaries asked about buying gold — precisely at the peak, as it turned out. All she knew about gold was that it was way up and therefore must be going higher. I should have realized that when you see financially unsophisticated people like her climbing on a bandwagon, you can be pretty sure there’s no one left to sell to and nowhere for prices to go but down, which is where gold and silver prices went in 1980, and in a big hurry.
From psychology Dr. M. borrows ideas and data about cognitive biases. For example, subjects asked to guess some bland statistic, like the number of African countries that belong to the UN, are influenced by the spin of a wheel of fortune: When the wheel lands on a high number, they guess higher. He translates this and a dozen other cognitive biases into irrational market behavior that can foster booms and busts.
He introduces his biology lens with an analogy to the spread of an infectious disease. When the prevalence of a disease reaches a high level, the infection rate necessarily slows and the disease begins to wane, just like the 1980 gold market. But it is devilishly difficult to “inoculate” oneself against infectious ideas. Individual investors who can do so have a decent chance to beat the market averages over time, I believe. (Those who would pursue these ideas in greater depth would do well to find James Dines’s quirky and expensive but worthwhile book, Mass Psychology.)
Governments don’t have the power to prevent booms and busts — but they sure do have the ability (and too often, the will) to extend booms as long as possible, which only makes the necessary correction that much more painful.
May 24, 2011
Bribery: Canada ranked below international pariahs Australia, Hungary, and New Zealand
Apparently, Canadian businessmen pass out bribes like business cards, and we’re accused of being the only G7 nation to fail to crack down on the practice, according to Transparency International:
Canada has again been scolded on the international stage for its “lack of progress” in fighting bribery and corruption by a watchdog agency that ranks it among the worst of nearly 40 countries.
Transparency International, a group that monitors global corruption, put Canada in the lowest category of countries with “little or no enforcement” when it comes to applying bribery standards set out by the Organization for Economic Co-operation and Development.
[. . .]
The poor rating places Canada in the embarrassing company of countries like Greece, Hungary, the Slovak Republic and Slovenia — although New Zealand and Australia are also among the 21 countries in the bottom rung.
<sarc>Well, there goes our sterling reputation for international dealings. We might as well order in 30 million black hats now.</sarc>
“Why does dubious social science keep showing up in medical journals?”
William Easterly and Laura Freschi have determined the decision tree for publishing crappy social science research:
Aid Watch has complained before about shaky social science analysis or shaky numbers published in medical journals, which were then featured in major news stories. We questioned creative data on stillbirths, a study on health aid, and another on maternal mortality.
Just this week, yet another medical journal article got headlines for giving us the number of women raped in the DR Congo (standard headline: a rape a minute). The study applied country-wide a 2007 estimate of the rate of sexual violence in a small sample (of unknown and undiscussed bias). It did this using female population by province and age-cohort — in a country whose last census was in 1984.
We are starting to wonder, why does dubious social science keep showing up in medical journals?
The medical journals may not have as much capacity to catch flaws in social science as in medicine. They may desire to advocate for more action on tragic social problems. The news media understably assume the medical journals ARE vetting the research.
H/T to Tim Harford for the link.
