Saturday, August 29, 2015

"Technology eliminates jobs, not work"

Reason's Ron Bailey facetiously asks "why are there any jobs still left?" while pointing out how technology has created far more jobs than it's destroyed:

Despite all these jobs and more lost to automation, U.S. employment continued to steadily rise. Why? Because technological progress is a "great job-creating machine," argue Ian Stewart, Debapratim De, and Alex Cole, three economists at the business consultancy Deloitte. The trio argues that "the current discourse is biased towards the job-destroying effects of technological change due to the relative unpredictability of its creative aspects."

Analyzing technological and employment trends over the past 150 years in the United Kingdom, the three find that while machines have eliminated millions of jobs, they have also conjured into existence many more. Even better, living standards dramatically improved as the technological destruction of old jobs proceeded.

How? First, technology substitutes for labor, thus raising productivity and lowering prices. Since 1950, the percent of British incomes spent on food and clothing has fallen from 35 and 10 percent to 11 and 5 percent, respectively. In addition, the real price of automobiles has been halved. In 1948, a television in the U.S. would have cost the equivalent of $12,000 in today's money. Since then, the price of a TV has since fallen by 98 percent.

Second, the sectors that are the sources of innovation expand, boosting the demand for labor. The Bureau of Labor Statistics reports that the number of people working in computer systems design and related fields rose from 400,000 in 1990 to over 1.5 million in 2011. Similarly, the number of people employed in life sciences (biotechnology, pharmaceuticals) increased from 174,000 in 1990 to 1 million in 2012.

Third, technology improves outcomes in areas such as medicine, leading to increased demand for labor in those areas. Consider that the annual death rate for cardiovascular diseases in the United States has fallen from 805 per 100,000 in 1963 to 236 per 100,000 today. Five-year cancer survival rates have risen from 50 percent in 1970 to 70 percent today. Meanwhile, U.S. health-care employment rose from 2 percent of the workforce in 1950 to 9 percent today—that is, from 1.2 million to 13.4 million workers.

"Resource curse" hits Brazil

The "resource curse" that typically hits developing countries really doesn't accurately describe the principle problem: bad government. Brazil is no different whose politicians can most charitably be described as idiots (WSJ):

Buoyed by China trade, nationalist-minded politicians launched a foreign policy meant to reduce the role of the U.S. in Latin America. Brazil blocked a U.S. free-trade initiative for the Americas. They teamed with Venezuela to create a regional security council to supplant one that included the U.S. The foreign minister worked from an office with a huge map of the world upside down, offering the message that the era of emerging markets was at hand.

But the world wasn’t upside down. While Brazil tied itself more closely to anti-American governments like Venezuela, Argentina and Iran, some regional neighbors—Chile, Colombia and Peru—went around Brazil and cut individual free-trade deals with the U.S.

Brazil also started spending its commodity windfall before its oil and ore were out of the ground—another feature of the resource curse.

Anticipating commodity sales, the government spent increasingly heavily. Government banks supplied Brazilians with easy credit. Brazil subsidized energy bills, issued cheap loans to big companies with government ties and built stadiums to host global events such as the 2014 World Cup and the 2016 Olympics.

Wednesday, August 26, 2015

Americans have more, and work less than 30 years ago

In a way it's depressing that there's almost never any historical context in current political discourse... especially since the demagoguery is used to enact policies that counteract some of the gains they've seen:

Not only are Americans wealthier on average, but they are also working less. The average American worker in 2015 works 30 fewer hours in a year than her counterpart in 1988, and yet is almost $18,000 dollars richer in real terms.

Sunday, August 23, 2015

Is capitalism on the decline?

Nope, it's flourishing (TheEconomist via Instapundit):

If you define capitalism as the interaction of individuals with a market economy, the system is advancing, not retreating. New-economy websites such as Airbnb and Etsy allow people to earn money in new ways—renting out their homes while they are on holiday, or selling arts and crafts. In the past, homeowners might have struggled to find renters and hobbyists to find buyers; aggregator websites make the task much easier.

It is true that some of these new websites undermine existing business models, just as file-sharing wrecked music-publishing companies. But investors expect most of these companies to be profitable eventually, judging by the valuations they attract. Google started as a free internet-search business but has found a way to monetise its reach. The move from an economy based on physical goods to one based on software and intellectual property seems to be allowing higher returns on capital than before. The internet has been in wide use for 20 years or so, and corporate profits are close to a post-war high as a proportion of American GDP.

By reducing the cost of information, the internet kills some business models. But not all. New models will appear and people will always be willing to pay for products that convey status, whether luxury watches or fast cars or branded clothing. They can stream music for nothing, but people will spend vast sums to hear rock bands play live.

Another new-economy effect is that the old idea of lifetime employment is fading. More people will follow “portfolio careers”, switching from one employer, or even industry, to another as the economy changes. This will require them not just to learn new skills as they age, but to monitor the economy for new opportunities.

Many more people are likely to be self-employed, offering services to a wide range of customers. In a sense, they will be artisans, not employees. Activities such as sales, marketing and accounting—matters that salaried employees leave in the hands of specialist colleagues—will become the responsibility of the individual. Such workers will have to be more, not less, sensitive to the market economy than the typical office drone.

And then there are pensions. Two decades ago, many workers could rely on a paternalistic system under which companies provided a retirement income linked to their final salary. New private-sector workers merely build up a savings pot, which they must use to see them through their retirement years as best they can.

Saturday, August 22, 2015

California: now with more poverty than Mississippi

A bit of a surprise (NewGeography):

Back in the years when the nation had a "California Dream," it would have been inconceivable for things to have gotten so bad --- particularly amidst what is widely hailed as a spectacular recovery. The 2013 data shows California to have the worst housing cost adjusted poverty rate among the 50 states and the District of Columbia. But it gets worse. California's poverty rate is now more than 50 percent higher than Mississippi, which long has set the standard for extreme poverty in the United States

Friday, August 21, 2015

The rush to regulate the "gig economy"

Yep (TechCrunch):

With a number of technologies emerging together to enable the unprecedented ability to coordinate and allocate resources in real time, a corresponding rise of new work and organizational structures may be an inevitability.

Despite this, a number of policy leaders and many in the media are still having the wrong conversation about these platforms, not asking the right questions about the underlying technology shifts taking place.

Instead, they are attempting to categorize the entire industry as either good or bad. In our view, this is almost like 19th century politicians trying to hold a Yes/No vote on industrialization.

Tuesday, August 18, 2015

What's wrong with the West's economies?

Essay about some of the apparent failings of economies in the west and exploring the role education has to play (NYBooks):

In the classical models I have been describing, no one is trying to think up something new (except perhaps new profitable investments) and no one is attempting to create it. There is no conception of human agency, only responses to wages, interest rates, and wealth. The economy is mechanical, robotic. The crops may be growing, but there is no personal growth. In the classical canon, Bentham, with his “sum of utilities,” portrays individuals like machines working to contribute their share to the general welfare. Joseph Schumpeter portrays “innovation” as produced by hard-driving entrepreneurs who make “obvious” applications of discoveries occurring outside the nation’s economy—as if the economy’s central participants possessed no imagination whatever.

Such classical models are basic to today’s standard economics. This economics, despite its sophistication in some respects, makes no room for economies in which people are imagining new products and using their creativity to build them. What is most fundamentally “wrong with economics” is that it takes such an economy to be the norm—to be “as good as it gets.” The cost is that elements of the Western economies are becoming products of this basically classical economics, which has little place for creativity and imagination.

Why do so many intellectuals hate markets?

Because they don't trust people... interesting discussion/podcast (Cato):

Robert Nozick, in his essay “Why Do Intellectuals Oppose Capitalism?” proposed that many highly-educated public intellectuals tend to lean towards collectivism and authoritarianism because they expect society to work best in the way that schools and the academic system (which is the system they are most familiar with) operates.

Why no one really wants to make vaccines anymore...

So the companies that may have cured Ebola don't actually expect to make money from it... there's something horribly bizarre about this (fool.com via Instapundit):

However, for investors who bid up Ebola vaccine developers in 2014, there may not be much financial reason to cheer. Even if Merck and NewLink are successful in bringing rVSV-ZEBOV to market, it may not wind up making either company a profit (aside from the $50 million NewLink received upfront from Merck for worldwide rights to the vaccine). The reason is that vaccines are wholly dependent on outbreaks and government stockpiling demands. Out of the gate there could be strong initial demand for the vaccine, especially in select developed nations and the worst-affected African countries. Beyond an initial stockpiling, though, sales of rVSV-ZEBOV could dry up, or at best be incredibly lumpy.
Of course, there are some who also believe that drug companies should take this approach to all their drugs... and then wonder why no one wants to create new drugs.

Sunday, August 16, 2015

Tipping and travel...

Useful but recurring issue... how much to tip while travelling abroad? (WSJ)

Saturday, August 15, 2015

This is the charter school that NYC's mayor wants shut down

"New York's largest charter network outperformed traditional public schools in wealthy zip codes" (Reason.com):

Success Academy schools did well in English—68 percent of students were proficient, compared with 30 percent in the city over all—but in math, the scores were astonishing. Ninety-three percent of Success Academy test-takers were proficient in math, compared with 35 percent citywide.

To put that into perspective, of the 1,282 public schools tested, just 12[*] were part of the Success Academy network, or 1 percent of the total. Yet 5 out of the 10 schools that scored highest in math were part of the Success Academy network. Of the 20 schools that did best in math, 9 were part of the Success Academy network. All twelve schools in the network were ranked in the top 40 for math. Results of this sort were unheard of before Success Academy arrived on the scene.
And they say that conservatives are the "mean ones"? (paulg on Twitter)

Friday, August 14, 2015

As true then as it is now...


More: Researchers at Philadelphia’s Temple University that suggests the entry of Uber’s low-cost ride service, Uber X, into 14 California counties led to a 3.6 to 5.6 percent decline in drunken driving deaths (KQed via PaulG).

Share of people in and out of poverty

How can you not be incredibly optimistic when you see stuff like this? Two centuries ago your chance of living in poverty was 94% Today it's 14%. Though, apparently you can as the first comment in the twitter stream is asking about inequality (Max Roser)

Wednesday, August 12, 2015

Brink Lindsey's guide to fixing the US economy *and* inequality

Four steps (Reason.com): fix intellectual property rights - restrictive patents, free immigration particularly for highly skilled workers and entrepreneurs, dismantle excessive occupational licensing and zoning. Read the white paper (PDF, Cato).

Update: Even the White House agrees that occupational licensing hurts jobs and consumers (Reason.com).

Tuesday, August 11, 2015

"Democrats Vs. Uber"

'How can the government possibly help you if you aren't regulated?' (Forbes):

In Hillary Clinton’s recently unveiled economic plan, she heavily criticized Uber and the sharing economy as a major contributor to the rise in income inequality arguing it creates independent contractors, such as Uber drivers, who do not receive government mandated employee benefits.

However, these arguments ignore evidence that in Uber’s top 20 markets, Uber drivers “averaged more than $19 an hour in earnings, compared to $12.90 in average hourly wages for cab drivers based on Occupational Employment Statistics data”, according to a study co-authored by Princeton economist Alan Krueger, one of Hillary Clinton’s named economic advisers.

At least the robots are pleased...

"Wendy’s explains what mandated wage hikes do to jobs at burger joints" (WSJ):

CFO Todd Penegor talked about the pressure to pay higher wages and said that “we continue to look at initiatives and how we work to offset any impacts of future wage inflation through technology initiatives, whether that’s customer self-order kiosks, whether that’s automating more in the back of the house in the restaurant. And you’ll see a lot more coming on that front later this year from us.”

On last week’s call with securities analysts, Wendy’s CEO Emil Brolick was asked how the franchisees who own and operate Wendy’s locations could raise prices to offset the higher wage costs in places like New York. He replied that “our franchisees will likely look at the opportunity to reduce overall staff, look at the opportunity to certainly reduce hours and any other cost reduction opportunities, not just price. You know there are some people out there who naively say that these wages can simply be passed along in terms of price increases. I don’t think that the average franchisee believes that.”

Mr. Brolick elaborated that “we believe that some of these increases will clearly end up hurting the people that they are intended to help. And we continue to believe that one of the great opportunities you have in a business like ours is that an entry-level person, in a very short period of time, can rise to become a manager in a restaurant, and have an income above the median household income in the United States of America.”

Monday, August 10, 2015

Cato: why and how government fails

From the Cato Institute:

Most Americans think that the federal government is incompetent and wasteful. What causes all the failures? A new study from Cato scholar Chris Edwards examines views on government failure, and outlines five key sources of federal failure. Edwards concludes that the only way to substantially reduce failure is to downsize the federal government: “Political and bureaucratic incentives and the huge size of the federal government are causing endemic failure. The causes of federal failure are deeply structural, and they will not be solved by appointing more competent officials or putting a different party in charge.”

The Swedish Welfare State

And the myths that are believed by many... (WeeklyStandard).

Sunday, August 09, 2015

Is America becoming a Bureaucratic Tyranny?

Maybe a bit overwrought as I suspect (and hopefully, I'm not wrong that) many of these regulatory regimes are unsustainable politically. In the short(er) run, if America is becoming a "regulatory state" there will be significant costs to both freedom and economic growth (PointsandFigures via Instapundit):

We’re headed for an economic system in which many industries have a handful of large, cartelized businesses— think 6 big banks, 5 big health insurance companies, 4 big energy companies, and so on. Sure, they are protected from competition. But the price of protection is that the businesses support the regulator and administration politically, and does their bidding. If the government wants them to hire, or build factory in unprofitable place, they do it. The benefit of cooperation is a good living and a quiet life. The cost of stepping out of line is personal and business ruin, meted out frequently. That’s neither capture nor cronyism.

Russia after Putin...

Predictions of a breakup (Nextbigfuture via Instapundit, Stratfor). But as a friend wonders, what will happen of their black budgets and nuclear arms?

Why vaccines don't get developed

The NYT piece makes the claim that the primary issue is cost, but doesn't do a good job at looking at why the costs are as high as they are, nor why drug companies aren't able to generate an adequate return on their investments in the space (NYT via Instapundit):

Dr. Berkley and other vaccine experts note a grim irony. Scientists showed that this vaccine was effective in monkeys a decade ago. Thereafter, the vaccine lingered in scientific limbo.

“We should have had an Ebola vaccine at least two or three years ago,” said Dr. Peter J. Hotez, the president of the Sabin Vaccine Institute and a science envoy at the State Department.

[...] Vaccines are one of the great triumphs of science, but the way that modern medicine functions makes it hard to develop new ones. “That model doesn’t work,” said Dr. Hotez. “It hasn’t worked for decades, and it was really brought home with Ebola.”

To make a vaccine, scientists first design experimental forms to test on cells and animals. It may cost $25 million to perform these studies, said Dr. Plotkin. The cost of that basic research is typically covered by governments or philanthropies.

Then researchers have to put vaccines through several rounds of trials in humans. In small initial studies, they evaluate its safety and figure out the right dose. In larger studies, they look more closely at its effectiveness and side effects.

The cost of taking a vaccine all the way through this process is hundreds of millions of dollars, said Dr. Plotkin.

Major pharmaceutical companies can afford to pay for the later stages of vaccine development, said Dr. Adel A.F. Mahmoud, the former president of Merck Vaccines and now a professor of molecular biology and public policy at Princeton.

But drug companies are increasingly reluctant to take the risk. “The next step, nobody is touching,” he said.

Saturday, August 08, 2015

Don't follow your passion, do what contributes...

From Ben Horowitz, co-founder of Andreessen Horowitz (Inc.):

There are four big problems with using passions as a guide: (1) They're hard to prioritize, (2) they change, (3) a passion may reflect something you aren’t actually good at and (4) following your passion is kind of self-centered.

American foreign policy reminder: peace is not the absence of war

While it may be a bit early to evaluate the legacy the Obama Administration leaves when it comes to foreign policy, the indicators to date, aren't promising (Cato):

By praising Ethiopia’s repressive regime for being “democratically elected” last week, President Obama was driving home once again something that should be abundantly clear by now: His administration marks a radical departure from previous ones when it comes to democracy promotion.

On the contrary, the Obama legacy will be one of propping up dictatorial regimes around the world. His praise for the government of Prime Minister Hailemariam Desalegn merely took to Africa what Obama and his foreign policy team have already done on a grander scale in Iran, Cuba and Burma.

To be sure, President Obama was standing next to Desalegn at a joint press conference in Addis Ababa when he spoke. Maybe he didn’t want to be a bad guest. And the president did add that the Ethiopian government has “more work to do.” After a slew of criticism at home, he later also questioned why African leaders cling to office rather than leave after their terms are completed.

Of course they would...

Unions demand an exemption from the $15 minimum wage laws they advocated for (theDailySignal).

A bit of perspective on Cecil the Lion

From a Zimbabwean student studying in the US (NYT)

We Zimbabweans are left shaking our heads, wondering why Americans care more about African animals than about African people.

Don’t tell us what to do with our animals when you allowed your own mountain lions to be hunted to near extinction in the eastern United States. Don’t bemoan the clear-cutting of our forests when you turned yours into concrete jungles."

And please, don’t offer me condolences about Cecil unless you’re also willing to offer me condolences for villagers killed or left hungry by his brethren, by political violence, or by hunger

Tuesday, August 04, 2015

Markets in everything... the lucrative business of disaster rescue

Not sure how much ethics (as Wired claims) come into play here... if there weren't the incentive, the solution wouldn't exist.

Quibbling over the vernacular: "post capitalism"

In general, I like the article but to call the increased efficiency of markets as being "post capitalist" seems as a bit silly and sensationalist but the basic premise is this:

New forms of ownership, new forms of lending, new legal contracts: a whole business subculture has emerged over the past 10 years, which the media has dubbed the “sharing economy”. Buzzwords such as the “commons” and “peer-production” are thrown around, but few have bothered to ask what this development means for capitalism itself.
It's worth noting that the term "capitalism" itself was coined and created as a pejorative by self described "socialists" (econlib)

Puerto Rico defaults on debt

They're not going to be the last... (USAToday via Instapundit):

Puerto Rico's Government Development Bank paid only $628,000 of the $58 million due creditors, the agency said. It said the decision "reflects the serious concerns about the Commonwealth's liquidity" and the need to ensure "essential services (residents) deserve are maintained."

​Given the tiny payout, "Moody's views this event as a default," said Emily Raimes, vice president at the U.S. credit giant.

Puerto Rico's outstanding debt of $72 billion is far bigger than Detroit's $20 billion bankruptcy two years ago but a fraction of Greece's $350 billion in obligations. But unlike Detroit, there's no law allowing Puerto Rico to declare bankruptcy. And Treasury Secretary Jack Lew has said the federal government won't bail out the island, as institutions such as the International Monetary Fund rescued Greece.
While the USAToday article seems to infer that the problem is because of a phase out of corporate tax breaks for the commonwealth, the more obvious reason seems to be that the government spent far too much money on things that didn't result in an economic return (BondBuyer, 2013) - ie they ran out of other people's money.