Attention Economy


Saturday, April 30, 2016

International Affairs – Key Readings

Sykes-Picot Process and the Middle East Mess – Time to Redraw National Borders?

France – The New ‘Sick Man of Europe’

The Economist on UK’s Brexit Debate
http://www.economist.com/news/finance-and-economics/21697858-british-economy-would-be-neither-destroyed-nor-unleashed-leaving-eu-if

Jean Pisani-Ferry on Policy Choices – Discretion versus Consistency
“One thing that security policy and economic policy have in common is that they force governments to choose between minimizing immediate damages and safeguarding credibility. Economic debates also frequently place in opposition to one another those who emphasize unconstrained judgment and those who regard consistency as the gold standard of good policy.”

Defining Political Corruption

Case Forces US Supreme Court to Define Political Corruption
http://www.newyorker.com/news/news-desk/a-waynes-world-argument-at-the-supreme-court
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Washington Politics Operates in Bizzare Ways – 
https://www.washingtonpost.com/world/national-security/how-a-new-us-ambassador-got-confirmed-and-government-gets-40-new-reports/2016/04/29/1ebb59e0-0e41-11e6-8ab8-9ad050f76d7d_story.html

Bloomberg’s Excellent Commencement Address

Michael Bloomberg’s 2016 Commencement Address at the University of Michigan:
A few highlights from the speech –
“The most useful knowledge that you leave here with today has nothing to do with your major. It’s about how to study, cooperate, listen carefully, think critically and resolve conflicts through reason. Those are the most important skills in the working world, and it’s why colleges have always exposed students to challenging and uncomfortable ideas.
The fact that some university boards and administrations now bow to pressure and shield students from these ideas through “safe spaces,” “code words” and “trigger warnings” is, in my view, a terrible mistake.
Think about the global economy. For the first time in human history, the majority of people in the developed world are being asked to make a living with their minds, rather than their muscles. For 3,000 years, humankind had an economy based on farming: Till the soil, plant the seed, harvest the crop. It was hard to do, but fairly easy to learn. Then, for 300 years, we had an economy based on industry: Mold the parts, turn the crank, assemble the product. This was hard to do, but also fairly easy to learn.
Now, we have an economy based on information: Acquire the knowledge, apply the analytics and use your creativity. This is hard to do and hard to learn, and even once you’ve mastered it, you have to start learning all over again, pretty much every day.
As durable as the American system of government has been, democracy is fragile -- and demagogues are always lurking. Stopping them starts with placing a premium on open minds, voting, and demanding that politicians offer practical solutions, not scapegoats or pie-in-the-sky promises.”

The Persistence of Nationalism

A great piece from FT:
Trump, Le Pen and the enduring appeal of nationalism by Mark Mazower
“The flags are flying, the anthems ring out. We live in the time of the homeland, of Donald Trump, Marine Le Pen and the Freedom party’s presidential candidate Norbert Hofer, fresh from his resounding victory in the first round of the Austrian presidential poll. Trump has called on Americans to resist “the false song of globalism”. “In a huge number of European countries, patriotic movements are surging vigorously,” was how Le Pen greeted news of Hofer’s victory last weekend. Nationalism is back like it never went out of fashion and, with it, the head-scratching, the puzzlement. How to explain the irrational, the commentators ask."

A Promising Economic Theorist Wins the 2016 JBC Award

Yuliy Sannikov has won the 2016 John Bates Clark award – awarded biennially to the top American economist under the age of 40.
http://www.bloomberg.com/news/articles/2016-04-29/yuliy-sannikov-wins-john-bates-clark-young-economist-award

Two important papers by Sannikov –
THE ROLE OF INFORMATION IN REPEATED GAMES WITH FREQUENT ACTIONS
A Macroeconomic Model with a Financial Sector
https://www.aeaweb.org/articles?id=10.1257/aer.104.2.379
Working paper version - https://www.princeton.edu/~sannikov/macro_finance.pdf

Friday, April 29, 2016

Will the Recent Oil Rally Fizzle Out?

Oil Price Rally - Not Sustainable?
http://www.bloomberg.com/news/articles/2016-04-29/oil-market-deja-vu-triggers-predictions-of-a-return-to-30

Meanwhile, WSJ piece notes:
“Even as oil rallies, analysts have barely nudged up their price forecasts as they worry that crude’s recent gains might not be sustainable.
The price of oil has jumped 76% from the decade-low it hit earlier this year. That is mainly on hopes that dwindling U.S. oil production will help take crude out of an oversupplied market.
But many analysts aren’t buying the rally. They question whether the glut is indeed on the wane given current stockpiles and the potential for increased supply from Iran and elsewhere. They point out that last year, the oil price also rallied in the spring on a belief supply was falling, only to collapse in the year’s second half.”

Tuesday, April 26, 2016

Has Apple Peaked?

Has Apple Peaked?
“Apple Inc.’s streak of 51 consecutive quarters of uninterrupted sales growth is over -- and its expansion may not resume until late this year….
The last time Apple’s quarterly profit dropped compared with the same period a year earlier was in the second quarter of fiscal 2003”

John Oliver on Puerto Rico

Private Sector and Infrastructure Investment

Saturday, April 23, 2016

Wealth-Based Caste System Reemerges in America

American Businesses Learn to Cater to a Stratified Society
“With disparities in wealth greater than at any time since the Gilded Age, the gap is widening between the highly affluent — who find themselves behind the velvet ropes of today’s economy — and everyone else.
It represents a degree of economic and social stratification unseen in America since the days of Teddy Roosevelt, J. P. Morgan and the rigidly separated classes on the Titanic a century ago.
What is different today, though, is that companies have become much more adept at identifying their top customers and knowing which psychological buttons to push. The goal is to create extravagance and exclusivity for the select few, even if it stirs up resentment elsewhere. In fact, research has shown, a little envy can be good for the bottom line.”

Brazil’s Developmental Challenges – The Long View

A wide-ranging essay from the WSJ:
http://www.wsj.com/articles/brazils-giant-problem-1461359723

Friday, April 22, 2016

Innovation and Opportunity

Historian Anne McCants notes –
“However, economic history viewed on shorter time horizons tells us that population size alone is not enough. Rather, it is in populations where lots of people are both permitted and capable of “having a go,” to quote my colleague Deirdre McCloskey, where innovation thrives best.
What allows people to have a go? Two conditions are critical: 1) being accorded the social dignity to speak their minds and pursue their own goals; and 2) access to the human capital that allows them to achieve their full potential. Both of these factors are severely limited by rigid systems of hierarchy and by the conditions of poverty.
Hierarchical systems depend on keeping people in their “place.” And for the majority, being in place means a priori not having a go. Poverty works its damage through the second mechanism, namely it sabotages human capital in a process that starts at birth, indeed even before birth.”

Singapore’s Meritocratic Society Evolves

A great read:
“Most visibly, meritocracy has been a backbone of talent management in Singapore’s public administration. Each year, publicly funded scholarships are awarded to students to study at top universities, mostly overseas. The competition for these scholarships, on the basis of academic, extracurricular and leadership achievements, has been very keen. The returning scholarship-holders are stringently assessed to join the premier Administrative Service, where they are stretched, tested and groomed to become top public-sector leaders. The best of them become Permanent Secretaries (administrative heads of government ministries) or even cabinet ministers if eventually coopted into politics. Each year, Administrative Service officers are put through a thorough performance evaluation, ranked and subjected to a re-calibration of their career potential. A significant number are mercilessly removed to make way for new officers.”

Free Trade – A Reality Check

Princeton economist Alan Blinder’s timely WSJ op-ed – Five Big Truths about Trade
http://www.wsj.com/articles/five-big-truths-about-trade-1461280205
Bilateral trade imbalances are inevitable and mostly uninteresting. Each month I run a trade deficit with Public Service Electric & Gas. They sell me gas and electricity; I sell them nothing. But I run a bilateral trade surplus with Princeton University, to which I sell teaching services but from which I buy little. Should I seek balanced trade with PSE&G or Princeton? Of course not. Neither should countries.”

America’s Most Troublesome Ally

Saudi Arabia: The devil we know by Fareed Zakaria


Thursday, April 21, 2016

Goldman Sachs and the Financial Crisis

Troubling new details emerge regarding the role of Goldman Sachs:
Why the S.E.C. Didn’t Hit Goldman Sachs Harder BY JESSE EISINGER
http://www.newyorker.com/business/currency/why-the-s-e-c-didnt-hit-goldman-sachs-harder

Wednesday, April 20, 2016

Highest Paying Companies in the US

Tech and consulting firms dominate the list:
http://www.bloomberg.com/news/articles/2016-04-20/these-are-the-highest-paying-companies-in-the-u-s

Robo-Advisers and Financial Market Cycles

A fascinating read – For Robo-Advisers, the Next Bear Market Is Make or Break
“Low fees and an investing-on-autopilot approach have attracted about $50 billion in assets to the broad universe of robo-advisers, according to researcher Aite Group LLC. The rise of these robots and their automated investment strategies has largely coincided with a multi-year bull run in stocks, which means the nascent industry could face a big test if markets were to turn.
A bear market would represent a challenge that the ranks of robo-advisers haven't encountered yet, and it would be the ultimate test of just how crucial, or irrelevant, working with actual humans is to good, long-term investing.”

Business Competition in America

Decline in Business Sector Dynamism
The Council of Economic Advisers Report notes:
“In summary, there is evidence of 1) increasing concentration across a number of industries, 2) increasing rents, in the form of higher returns on invested capital, across a number of firms, and 3) decreasing business and labor dynamism. However, the links among these factors are not clear. On the one hand, it could be that a decrease in firm entry is leading to higher levels of concentration, which leads to higher rents. On the other hand, it could be that higher levels of concentration are providing advantages to incumbents which are then used to raise entry barriers, leading to lower entry. Or it might be that some other factor is driving these trends. For example, innovation by a handful of firms in winner-take-all markets could give them a dominant market position in a very profitable market that could be difficult to challenge, discouraging entry.”



Related: Business in America (cover story from The Economist)

Global Migration – The Big Picture View

The Migration Superpowers
“We have entered the age of migration. If all the people who live outside the country of their birth united to form their own – a republic of the rootless – it would be the fifth-largest country in the world, with a population of more than 240 million people.”

The ‘Average’ 29 Year Old American

From The Atlantic:
“The median income at 29 is about $35,000. Talk of a steady “career” for most young people is more aspirational than descriptive. Jobs are still temporary for twentysomethings. The average American has had more than seven jobs before she turns 29, and a third of them lasted less than six months. One might assume that job-hopping and short-term employment is just a part of being a teenager. But Americans at all levels of education held an average of more than two jobs between ages 25 and 28. The challenge of temporary employment is worse for young people without a high-school or college diploma. The typical length of a job for a high-school dropout between 18 and 28 is only six months.”

Monday, April 18, 2016

Oil Prices and the Global Economy

Politics and Global Oil Prices

US Oil Production and Oil Price Fluctuations
http://www.cnbc.com/2016/04/18/low-oil-prices-dont-cut-into-us-production-by-much.html

Cities and the Great American Divide

A timely piece from the WSJ:
“Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming more and more expensive.”

Sunday, April 17, 2016

Politics of High-Income Taxation – Historical Perspective

When are high marginal taxes on the rich feasible?
Interesting hypothesis:
“What in the middle of the 20th century caused tax rates to spike? They didn’t find much evidence that stretches of inequality overlapped with these high tax rates. And they considered that maybe tax rates went up when more-liberal politicians were in power, but tax rates went up only slightly during those times.
Instead, the explanation they found most plausible was that the mid-20th-century differed from all other periods in a crucial way. “The key events we see in driving that inverted U-shape are mass mobilization for war,” Scheve explains. When countries (especially democratic ones) mobilized for war, questions about fairness came to a head, because—even during nationwide drafts—it was most often the lower and middle classes that were on the front lines. “The actual rhetoric of the times was, if you're going to conscript labor, you need to conscript capital,” Scheve says.”

Egypt – Rising Discontent

Brief historical review of Egypt’s key political and economic developments:

Why interest rates are still very high in some countries - Egypt as an example of a high risk premium economy:
http://www.bloomberg.com/news/articles/2016-04-12/where-a-14-yield-in-world-of-negative-rates-still-isn-t-enough

Foreign Affairs – Recent Developments

[UPDATE] Oil's Grand Bargain Falls Victim to Saudi Arabia's Iran Fixation

NATO-Russia – A New Cold War?
http://foreignpolicy.com/2016/04/14/obama-putin-russia-nato-syria-assad/

New Nuclear Arms Race

Democratic Party Debate on Foreign Policy
Trump and Sanders share surprisingly similar foreign policy views
https://www.washingtonpost.com/news/worldviews/wp/2016/02/12/how-bernie-sanders-and-donald-trumps-views-of-the-middle-east-are-strikingly-similar/

Saudis threaten to sell US assets – Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill
http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html


Saturday, April 16, 2016

Life Expectancy, Inequality and Politics

Life Expectancy, Inequality and Politics in America

New research:
Related NYTIMES article:


Reality and Fiction Collide

Former UK Prime Minister Tony Blair’s dodgy dealings since leaving office are uncannily similar to the plot lines of the fantastic British thriller The Worricker Trilogy (Page Eight, Turks & Caicos, and Salting the Battlefield):
http://www.telegraph.co.uk/news/2016/04/15/tony-blair-used-secret-fund-to-manage-multi-million-pound-fortun/

Refugees - Morality versus Reality

A thought-provoking piece
“There’s no lack of information in today’s world about distant hardships; … But as the fading of attention to the refugee crisis since then demonstrates, this kind of knowledge doesn’t always translate into compassion; indeed it may compound apathy, calcifying public opinion and paralyzing world leaders. “Sadly,” according to Francis, “today’s information explosion does not of itself lead to an increased concern for other people’s problems. ... Indeed, the information glut can numb people’s sensibilities and to some degree downplay the gravity of the problems.”...
“The pope seems to be suggesting that this is something new, but of course it’s rather the reverse I think,” said Peter Singer, a moral philosopher and professor of bioethics at Princeton University. “We’ve always basically had less regard for strangers, often zero regard for strangers or outright hostility to strangers. And perhaps there are evolutionary explanations for why that should be.” (Singer pointed out that unlike the pope, he doesn’t approach these issues from a religious perspective.)”

Technology and Real Estate Commissions

““Zillow wasn’t as big and powerful in the past, which meant that the MLS (multiple listing service) that served Realtors was their ace in the hole. That barrier is gone. Recognizing the growing threats, the real estate industry is racing to automate and add technology. In every industry where this happens, margins contract. This industry is no exception, and commissions are dropping dramatically and quickly.””

Is OPEC Still Relevant?

The oil cartel is becoming increasingly irrelevant – a good development for the global economy:
https://www.washingtonpost.com/news/energy-environment/wp/2016/04/15/how-opec-lost-control-of-the-oil-market/

Financial Trading in the 21st Century

Modern day high-frequency and algorithm-based trading:
http://www.bloomberg.com/news/articles/2016-04-13/inside-equinix-s-ny4-data-center-where-wall-street-trades

China Poised to Dominate Global Movie Industry

China’s box office receipts will soon overtake that of North America

Friday, April 15, 2016

Luck and Success in Life

Economist Robert Frank considers the role of luck:
“And yet, the luckiest among us appear especially unlikely to appreciate our good fortune. According to the Pew Research Center, people in higher income brackets are much more likely than those with lower incomes to say that individuals get rich primarily because they work hard. Other surveys bear this out: Wealthy people overwhelmingly attribute their own success to hard work rather than to factors like luck or being in the right place at the right time.
That’s troubling, because a growing body of evidence suggests that seeing ourselves as self-made—rather than as talented, hardworking, and lucky—leads us to be less generous and public-spirited. It may even make the lucky less likely to support the conditions (such as high-quality public infrastructure and education) that made their own success possible.”

Guaranteed Basic Income – The Debate Continues

Guaranteed minimum basic income - An idea popular with some liberals and a few libertarians is gaining traction:
“GiveDirectly's is one of at least five basic income studies happening at the moment. The Dutch city of Utrecht is currently giving some existing welfare recipients a basic income instead of their usual benefit package, Finland is planning a two-year trial testing of a variety of different basic income approaches, the Silicon Valley investment firm Y Combinator is funding an experiment, and the government of Ontario is doing a pilot too.”

What is Money?

John Lancaster’s fantastic LRB piece on monetary fundamentals:
“The ten pound note is worth what it claims it is because the state, in the form of the Bank of England, says so, and we choose to believe it. This is what students of currency call ‘fiat’ money, money whose value has been willed into being by the state. The value of fiat money is an act of faith.”

US Banking Sector Exposure to the Oil Sector

Wall Street exposure to oil sector
http://www.bloomberg.com/news/articles/2016-04-15/wall-street-s-oil-crash-a-story-told-in-charts

A few American states are suffering due to low oil and coal prices:
http://www.bloombergview.com/articles/2016-04-15/state-economic-flu-doesn-t-seem-to-be-contagious

Economics of ‘Citizenship-by-Investment’ Programs

An interesting piece:
“As migration and inequality continue to get significant attention from U.S. presidential candidates, it is worth noting a rising phenomenon at the intersection of these two topics: economic citizenship. A growing number of countries offer individuals passports in return for investment, and the wealthy have been taking advantage of such programs in increasing numbers. In 2014, the global rich spent an estimated $2 billion acquiring nationalities.
The Caribbean is the global capital of “citizenship-by-investment” programs. A passport from Dominica can be had in return for a $100,000 investment. A $400,000 real estate investment or a $250,000 donation to a development fund will get you citizenship in St. Kitts and Nevis. Similar sums are required for a passport from Antigua and Barbuda, in addition to five days of residency over the first five years of citizenship. In 2015, Caribbean nations effectively sold an estimated 2,000 passports through citizenship-by-investment programs, up 100 percent over the past five years.”

Wednesday, April 13, 2016

Do Patents Help or Hinder Growth and Development?

NYTIMES piece considers the implications of the rising use of patents in the clean energy sector:

Related:

An excellent survey article on patents:
Boldrin, Michele, and David K. Levine. 2013. "The Case against Patents." Journal of Economic Perspectives, 27(1): 3-22.; Open Access: https://research.stlouisfed.org/wp/2012/2012-035.pdf
Abstract
The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity. Both theory and evidence suggest that while patents can have a partial equilibrium effect of improving incentives to invent, the general equilibrium effect on innovation can be negative. A properly designed patent system might serve to increase innovation at a certain time and place. Unfortunately, the political economy of government-operated patent systems indicates that such systems are susceptible to pressures that cause the ill effects of patents to grow over time. Our preferred policy solution is to abolish patents entirely and to find other legislative instruments, less open to lobbying and rent seeking, to foster innovation when there is clear evidence that laissez-faire undersupplies it. However, if that policy change seems too large to swallow, we discuss in the conclusion a set of partial reforms that could be implemented.

Global Economy - Stuck in the Slow Lane

Tuesday, April 12, 2016

Economics of Corruption


Corruption is BOTH a “Principal-Agent Problem” AND a “Collective Action Problem” by Matthew Stephenson
https://globalanticorruptionblog.com/2015/04/09/corruption-is-both-a-principal-agent-problem-and-a-collective-action-problem/