Sunday, February 07, 2016

When "investments" really aren't

China's ghost cities (Wired): a reminder that markets are far more efficient at capital allocation than governments.

Thursday, February 04, 2016

Why most Germans rent

Surprise, surprise, incentives matter. Fascinating look at housing policy - particularly in Germany and how it has shaped whether people buy or rent. Also a look at well meaning interventions elsewhere that have ultimately failed most the people they were designed to "help" (qz):

There’s another pretty simple reason Germans are less likely to own houses. The government doesn’t encourage it. Unlike high-homeownership countries like Spain, Ireland and the US, Germany doesn’t let homeowners deduct mortgage-interest payments from their taxes. (There’s more on the structure of European tax systems here.) Without that deduction, the benefits of owning and renting are more evenly balanced. “Both homeowners and landlords in Germany are barely subsidized,” wrote Voightländer in a paper on low homeownership rates in Germany. Those regulations, a solid supply of rental housing, and the fact that German property prices historically rise very slowly —that’s a whole other story—mean German rents don’t rise very fast. And because one of the main reasons to buy a home is to hedge against rising rents, the tendency of German rents to rise slowly results in fewer homebuyers and a lower homeownership rate.

Friday, January 22, 2016

The things people get offended by...

High up on the list seems to be that outcomes are influenced by personal choices (CBC - yes, the our state sponsored broadcaster):

Not wanting to face a lifetime of debt, Cooper sacrificed three years of his life to pay down a $255,000 mortgage on a $425,000 Toronto home he bought in 2012.

He worked up to 100 hours a week at three jobs: pension analyst; financial writer; and supermarket clerk. Naturally, the bachelor's social life suffered. Cooper also lived like a pauper, maintaining a strict budget and residing in the basement so he could collect rent on the rest of his house.

His story generated more than 2,000 comments on CBC News sites.​

[...] Media across the globe have now jumped on the story and also taken sides. "Well done, big fella, congratulations, an inspirational guy," gushed host David Koch on the Australian breakfast television program, Sunrise.

But America's Slate magazine had a different take, stating Cooper's story implied our money troubles were entirely our own fault. The Slate article suggested cash-strapped people wanted real economic change rather than just "inspirational stories of sacrifice and pluck."
General rule of thumb: when you're offended by what someone else has done that isn't hurting anyone else, that probably says more about you than anyone else...

Tuesday, January 05, 2016

The real barrier to affordable housing?

According to Reason, regulations and bureaucrats:

In an alternate reality, the city government wouldn't be calling shots on what is legal and illegal in terms of apartments, rents, sub-contracting, you name it. That would fall on the shoulders of owners and renters rather than what is at best a capricious set of rules enforced by bureaucrats whose actions are subject to wide variation.

According to Lisa Sturtevant of the National Housing Conference, regulatory approvals (zoning, inspections, and more) add up to $50,000 to the cost of new single-family dwellings in urban areas. That's a lot of scratch that ends limiting housing supply and squeezing residents in all sorts of ways.

Sunday, January 03, 2016

Michael Burry: After the financial crisis

Yep. Remarkably candid/good reporting from NYMag:

The major reform legislation, Dodd-Frank, was named after two guys bought and sold by special interests, and one of them should be shouldering a good amount of blame for the crisis. Banks were forced, by the government, to save some of the worst lenders in the housing bubble, then the government turned around and pilloried the banks for the crimes of the companies they were forced to acquire. [...] Whether it’s the one percent or hedge funds or Wall Street, I do not think society is well served by failing to encourage every last American to look within. This crisis truly took a village, and most of the villagers themselves are not without some personal responsibility for the circumstances in which they found themselves. We should be teaching our kids to be better citizens through personal responsibility, not by the example of blame.
But also, in response to the question "What, if anything, makes you hopeful about the future?":
Innovation, especially in America, is continuing at a breakneck pace, even in areas facing substantial political or regulatory headwinds. The advances in health care in particular are breathtaking — so many selfless souls are working to advance science, and this is heartening. Long-term, this is good for humans in general. Americans have so much natural entrepreneurial drive. The caveat is that it is technology that should be a tool making lives better in the real world, and in line with the American spirit of getting better and better at something, whether it’s curing cancer or creating a better taxi service. I am less impressed with the market values assigned to technology that enhances distraction. We don’t want Orwell’s world, but we don’t want Huxley’s world either.

2015: Best year to be alive, but also a year of absurdity

A juxtaposition - a pessimistic look of 2015 and the pain we, in the West, inflict on ourselves by George Will (Washington Post):

We learned that a dismal threshold has been passed. The value of property that police departments seized through civil asset forfeiture — usually without accusing, let alone convicting, the property owners of a crime — exceeded the value of property stolen by nongovernment burglars. [...]

The Internal Revenue Service persecutes conservative advocacy groups but does not prosecute IRS employees who are tax cheats: An audit revealed that over the past decade, the IRS fired only 400 of the 1,580 employees who deliberately violated tax laws, rather than the 100 percent required by law. [...]

A suburban Washington high school promoted self-esteem by naming 117 valedictorians out of a class of 457. Two Edina, Minn., elementary schools hired “recess consultants” to minimize “conflict” — children saying “Hey, you’re out!” rather than “Nice try!” The principal of a San Francisco middle school withheld the results of student elections that did not produce properly “diverse” results.
But a year of hope as well - from John Stossel looking at the world as a whole. While the US, along with much of the west, may be making incremental moves away from economic and personal liberty that has brought them prosperity, much of the rest of the world has been moving in the opposite direction with quantifiable, positive and predictable results (Fox):
Twenty-five years ago, 2 billion people lived in extreme poverty -- that meant surviving on about a dollar a day, often with little access to basic needs like water and food. “Experts” predicted that number would rise as the population grew. Happily, thanks to the power of free markets, they were wrong. In the space of a generation, half the people most in need in the world were rescued.

Ten percent of the world’s people still live in dire poverty, but the trend is clear: Where there is rule of law and individual freedom, humanity is better off. As Marian Tupy of puts it, “Away from the front pages of our newspapers and television, billions of people go about their lives unmolested, enjoying incremental improvements that make each year better than the last.”

Tuesday, December 29, 2015

Science myths that just won't die

Nature: "False beliefs and wishful thinking about the human experience are common. They are hurting people — and holding back science."

Saudi Arabia's finances hit by low oil prices

It couldn't happen to nicer people... (Reuters) other than Russia of course:

The government ran a deficit of 367 billion riyals ($97.9 billion) or 15 percent of gross domestic product in 2015, officials said. The 2016 budget plan aims to cut that to 326 billion riyals, reducing pressure on Riyadh to pay its bills by liquidating assets held abroad and issuing bonds.

Next year's budget projects spending of 840 billion riyals, down from 975 billion riyals actually spent this year. The ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

Revenues next year are forecast at 514 billion riyals, down from 608 billion riyals in 2015, when oil revenues accounted for 73 percent of the total. The Brent oil price averaged about $54 a barrel this year but is now around $37.

China slows...

An overview from the WSJ:

China's Communist Party promised to transform people's lives after decades of chaos. Higher living standards underpin the party’s rule, making limits on personal freedoms worthwhile for many. As the economy slows, that social compact is fraying.
There's a certain amount of nervousness, fear but also optimism and hope as to what comes next.

Plus other challenges: Xinjiang seethes under Chinese crackdown (NYT via Instapundit)

Thursday, December 24, 2015

Because making some customers less profitable...

Will make banks want to serve those customers more? I'd say that the economic literacy/idiocy is remarkable but sadly I don't think it is (NYT):

Some who advocate the use of the ID cards question whether the refusal to accept them has less to do with security concerns and more to do with protecting the bottom line. Regulations reining in fees have reduced the profits banks can make from low-income customers, putting the city’s immigrants among the least attractive sources of potential customers.

“If New Yorkers who rely on IDNYC were perceived to be highly profitable customers, the big banks would no doubt change their tune,” said Deyanira Del RĂ­o, a co-director of New Economy Project, which works with community groups in New York.

Saturday, December 19, 2015

Branding is crucial...

But so is authenticity: How the Mast Brothers fooled the world into paying $10 a bar for crappy hipster chocolate (Quartz). We've been exploring ecommerce and the development of nascent brands lately so I've been thinking a lot about things like this... though it also speaks to the limitations of marketing (as I'm sure the Mast Brothers are about to learn).

Friday, December 18, 2015

Sunday, December 06, 2015

Corruption as symptom, not cause, of poverty

Interesting hypothesis being advanced by Daron Acemoglu and James A. Robinson (WSJ):

Corruption doesn’t come from nowhere. It is a result of economic and political institutions that empower unrepresentative elites while shutting out the rest of the country. That empowerment lets politicians, bureaucrats and soldiers grab resources and get wealthy from bribes. What allows them to get away with it is the absence of democratic accountability and effective checks and balances, like the rule of law and press freedom. Without fundamental change in these institutions, anticorruption crusades aren’t likely to improve the economic lives of ordinary people. The greedy elites that dominate most poor countries will just find other ways to enrich themselves at public expense.

If corruption were the real problem, its absence would mean widespread prosperity, but we know that’s not the case. Take pre-1994 South Africa, where white-supremacist rule included a competent, professional bureaucracy and a somewhat independent judiciary. Uncorrupt though it might have been, this apartheid state ruthlessly oppressed its impoverished and disenfranchised black majority.

Or consider Cuba, which Transparency International today considers to be less corrupt than Greece. Cuba is poorer now than at the time of Fidel Castro’s revolution in 1958. The reason isn’t graft or the enrichment of the country’s elites. The problem is communist dictatorship: The economic institutions established by the Castro brothers discourage investment, innovation and entrepreneurship.
It would have been nice had the authors explored further what this means. What institutions can/should get developed and how does one develop them when their transparency and creation run counter to the entrenched interests of local elites?

Friday, November 20, 2015

Self inflicted wounds: Another company leaves Connecticut

What's galling is that these regulations that hurt businesses are supposed to help workers. Without jobs how are these workers really helped? A farewell letter (TheArtsMechanical):

With the Litchfield hills and Connecticut in our rear-view mirror as we move our 101-year-old manufacturing company to South Carolina, we are nostalgic, excited, and disappointed.

We love Torrington and Connecticut but not all the things the General Assembly and the governor have done to induce us to leave family and friends behind. After more than a century of manufacturing in Connecticut, we are not looking for handouts.

We have paid our fair share, but enough is enough.

Connecticut’s high cost of doing business and its anti-employer attitude have finally driven us out. We are not moving for any government incentives.

Consider these facts:
• We sold our 50,000-square-foot building for enough money to buy a 100,000-square-foot building — and still had enough money left to pay for the transport of 100 trailer loads of machinery and equipment to our new site.
• The property taxes on our big new facility in South Carolina are much less than those on our smaller former building in Connecticut.
• Our utility costs in South Carolina, especially for electricity, will be about a third of what we paid here, though our space will more than double.
• We are taking a third of our employees with us and paying them the same wages. With South Carolina’s lower cost of living, it is as if they are getting a big raise. And we pay our new employees in South Carolina competitive local wages. These savings could no longer be ignored.

At the same time, the constant hostility of the General Assembly, the governor, and state agencies, particularly the state Labor Department, settled the matter against staying in Connecticut.

Year after year employers like us have to fight off efforts to: — Expand state requirements for paid sick leave.
— Increase the highest minimum wage in the nation to $15 per hour and more.
— Require paid family and medical leave.
— Impose unworkable restrictions on workforce scheduling.
— Restrict our ability to talk to our employees about union organizing efforts.
— And, of course, make us pay for every new “investment” policymakers think is a good idea.

We have always believed that to attract the best employees, we need to be among the best employers. We have never paid minimum wage and we have always offered our employees excellent benefits, including health insurance plans, paid vacation time, disability insurance, a 401(k) plan with employer matching contributions, profit sharing, and other time off based on individual needs.

Some people in authority in Connecticut refuse to understand that a mandated $15 minimum wage would mean that companies like ours would have to raise pay across the board. It would mean that rather than investing in our company and being able to create more jobs, we would have to raise pay for all employees, including those who are already being paid a good wage. These cost increases would cause us to raise the price of our product and become less competitive with companies outside Connecticut.

To make it worse, staying in Connecticut would require us to speculate on how much more our taxes and costs will go up as state government fails to pass a balanced budget.

Under the current administration state government has imposed nearly $4 billion in tax increases and still runs a deficit.

We can’t afford to wait for the governor and the legislature to see they have a spending problem and to address it. We can’t wait for state government to make any more “investments” by giving our money to a few favored companies.

Perhaps the final straw for us was our mind-boggling treatment by the Labor Department, which actually awarded unemployment compensation to an employee who was fired for threatening a supervisor with physical harm. No one is surprised that the only state agency we heard from when the word got out that we were thinking of leaving was the Labor Department, which insisted that we allow it into our company to conduct a seminar for our employees to tell them how to get all the benefits they were entitled to.

Sunday, November 08, 2015

Confusion over the Obama Administration's decision on Keystone XL encapsulated

"In 2015 US denies oil market access to its ally Canada but grants access to Iran." (nextbigfuture via Instapundit). I'm guessing Canada will end up selling its oil to China because that's going to be far better for the environment?

Tuesday, October 20, 2015

Harvard economist Raj Chetty: how to improve income mobility

Any starting point that doesn't start with the fixed pie fallacy and focusing on bringing down the rich instead of bringing up the poor, I think, is a good one though I wonder if each party is just looking to for what it wants to hear (WSJ):

In a presidential campaign where candidates from both parties are blaming globalization for a shrinking middle class, a 36-year-old India-born economist has a different explanation: Bad neighborhoods and bad teachers rob poor children of the chance to climb into the middle class.

His solution? Help the children and their families move to better neighborhoods.

Sunday, October 18, 2015

Can machines replace human intuition?

A study around one algorithm not only suggests yes, but the machines are faster as well ( via Instapundit):

MIT researchers aim to take the human element out of big-data analysis, with a new system that not only searches for patterns but designs the feature set, too. To test the first prototype of their system, they enrolled it in three data science competitions, in which it competed against human teams to find predictive patterns in unfamiliar data sets. Of the 906 teams participating in the three competitions, the researchers' "Data Science Machine" finished ahead of 615.

In two of the three competitions, the predictions made by the Data Science Machine were 94 percent and 96 percent as accurate as the winning submissions. In the third, the figure was a more modest 87 percent. But where the teams of humans typically labored over their prediction algorithms for months, the Data Science Machine took somewhere between two and 12 hours to produce each of its entries.

Uber vs San Antonio

Moral of the story? The more consumers come directly in contact with markets/individual choice (enabled by technology) and governments, they choose markets and, er, choice (NationalReview via Instapundit):

We are at a very interesting historical tipping point. The willingness of states and political agencies to boss people and businesses around and to seize resources for the use of the political class has not abated, but their ability to do so is being challenged. San Antonio is a left-leaning city; its attitude toward business is far from Singaporean. The city authorities would love to be able to dictate terms to Uber — but they can’t. Nationally, we’re starting to figure out that you can’t really regulate marijuana; you can try to, and pretend to, but you can’t really do it. Trying to ban guns in an age when anybody with a 3-D printer can produce a dozen of them in his bedroom is absurd.

The problem with the Sanders phenomenon

First, the Foundation of Economic Education notes, is his (mistaken?) belief that the 'rich are getting richer' on the backs of the poor. The reality is somewhat different:

Senator Sanders is half right: the rich are getting richer. However, his assertion that the poor are becoming poorer is incorrect. The poor are becoming richer as well.

Economist Gary Burtless of the Brookings Institute showed that between 1979 and 2010, the real (inflation-adjusted) after-tax income of the top 1% of U.S. income-earners grew by an impressive 202%.

He also showed that the real after-tax income of the bottom fifth of income-earners grew by 49%. All groups made real income gains. While the rich are making gains at a faster pace, both the rich and the poor are in fact becoming richer.
The irony is that while the Democratic slate for President is made up of privileged white people, their advocacy isn't so much for policies that address poverty but bringing down the rich (or more precisely, high income earners - conveniently excluding the wealthy who already have capital and continue to generate wealth through their capital/inheritances, NYPost via Instapundit):
Progressives, in other words, are shooting at the wrong target. The moral problem posed by the distribution of wealth isn’t inequality.

It’s poverty.

The same issue? Frankfurt shows they’re not. Suppose, he says, there is a resource that will keep a person alive, but only if that person has five units of it. There are 10 people, and 40 units of the resource. If it’s distributed equally, everybody gets four units — and dies. To insist on equality in that case, he argues, “would be morally grotesque.”

Fortunately, says Frankfurt, we don’t really try to promote equality. Even those who worry about inequality adjust their consumption to their own assessments of their needs. They don’t reduce their consumption because it’s unfair for them to have money.
More (WashingtonPost via Instapundit): What Bernie Sanders doesn't understand about income inequality.

The end game for Lyft (and Uber?)

Jitneys on a mass scale (TechnologyReview). Fascinating read that includes a discussion of the efficient private network of buses in Zimbabwe (and much of Africa), the inefficiency of public transportation, and the coming promise of self-driving cars.

Friday, October 16, 2015

Will China end up leading the way on next generation nuclear?

An exciting nuclear race to watch that won't end with a mushroom cloud (TechnologyReview via Instapundit):

At Oak Ridge this week, Xu outlined a roadmap that shows that China is further along than any other advanced reactor R&D program in the world. China, which still gets nearly three-quarters of its electricity from burning coal, is racing to develop low-carbon energy sources, including both conventional nuclear plants and advanced systems such as molten-salt reactors. The largest emitter of greenhouse gases in the world, China aims to more than double its nuclear capacity by 2020, according to the World Nuclear Association.

Xu detailed a multi-stage plan to build demonstration reactors in the next five years and deploy them commercially beginning around 2030. The institute plans to build a 10-megawatt prototype reactor, using solid fuel, by 2020, along with a two-megawatt liquid-fuel machine that will demonstrate the thorium-uranium fuel cycle. (Thorium, which is not fissile, is converted inside a reactor into a fissile isotope of uranium that produces energy and sustains the nuclear reaction.)

In all, there are 700 nuclear engineers working on the molten-salt reactor at SINAP, Xu said, a number that dwarfs other advanced-reactor research programs around the world. The team has a preliminary design for a 10-megawatt thorium-based molten-salt reactor, and has mastered some of the technical challenges involved in building and running such reactors, such as the preparation of high-purity molten salts and the control of tritium, a dangerous isotope of hydrogen that can be used in the making of nuclear weapons. Limiting the production of tritium is a key research goal for the development of molten-salt reactors.