Crushing Procrastination

Bidsketch via Lifehacker.

Leadership and Economic Development

Waiting for superman never did seem like a particularly good strategy for developing countries. From a new study (SSRN via Blattman):

Leadership is an under-studied topic in the international development literature. When the topic is broached it is usually in support of what might be called a ‘hero orthodoxy’: One or other individual is identified as the hero of a specific achievement. The current article offers a three part argument why this orthodoxy is problematic and wrong for many developing countries, however. It suggests first that heroes have not emerged in many countries for a long period and individuals who may have been considered heroes in the past often turned out less than heroic. It posits second that heroes are actually at least as much the product of their contexts as they turned out to be the shapers of such. It proposes third that the stories about hero-leaders doing special things mask the way such special things emerge from the complex interactions of many actors—some important and some mundane. Leadership, it appears, is about multi-agent groups and not single-agent autocrats. The conclusion posits that romantic notions of heroic-leadership in development become less convincing when one appreciates these three arguments. It calls development theorists and practitioners to go beyond the heroic-leader perspective.

More on "Cash for the Poor"

From Chris Blattman:

First, the message can be misunderstood. It is not, “Cash transfers to the poor are a panacea.” More like, “They probably suck less than most of the other things we are doing.” This is not a high bar.

Second, cash transfers work in some cases not others. If a poor person is enterprising, and their main problem is insufficient capital, terrific. If that’s not their problem, throwing cash will not do much to help. I recommend the paper for details. Apologies: It is even more boring that Das Kapital.

Third, a cash transfer to help the poor build business is like aspirin to a flesh wound. It helps, but not for long. The real problem is the absence of firms small and large to employ people productively. The root of the problem is political instability, economic uncertainty, and a country’s high cost structure, among other things. A government’s attention is properly on these bigger issues.

Update (Aug 19, 2013): Even more on giving cash to the poor (Chris Blattman)

More on Creativity and Caffeine

Caffeine may be good for creativity? (theAtlantic) in response to an earlier article in the NewYorker.

The difference between "good" and "bad" wine

Apparently it isn't price - an interesting compilation of studies from Pricenomics (via HN):

A Lafite Rothschild Bordeaux sells for a minimum of around $500 a bottle, while humble brands like Charles Shaw and Franzia sell for as little as $2. But as far as “wine economists” are concerned, the level of correlation between the price of a bottle of wine and its quality is low or nonexistent. In a number of damning studies, they suggest that wine is not just poorly priced, but that the different tastes we describe in wine may all be in our heads.

A 2008 paper in The Journal of Wine Economics, for example, found that when consumers are unaware of a wine’s price, they “on average enjoy more expensive wines slightly less [than cheap ones].” Experts do not fare much better. The study could not conclude that experts preferred more expensive wine: “In sum, we find a non-negative relationship between price and overall rating for experts. Due to the poor statistical significance of the price coefficient for experts, it remains an open question whether this coefficient is in fact positive.”

In another experiment, critics tasted one red wine and one white wine. They described the red in language typical of reds and the white in language typical of whites. The problem? Both were identical white wines; the “red” had been tinted with food coloring.

Another study looked at the accuracy of the influential 100 point scale invented by wine critic Robert M. Parker Jr. By having judges at a tasting rate the same wine multiple times, retired statistician and hobbyist winemaker Robert Hodgson found that the judging was completely inconsistent

Are the 1% the 1% because they deserve it?

New paper: "It’s the Market: The Broad-Based Rise in the Return to Top Talent" by Steven N. Kaplan and Joshua Rauhvia via Greg Mankiw:

We believe that the U.S. evidence on income and wealth shares for the top 1 percent is most consistent with a “superstar”-style explanation rooted in the importance of scale and skill-biased technological change. In particular, we interpret the fact that the top 1 percent is spread broadly across a variety of occupations as most consistent with an important role for skill-biased technological change and increased scale. These facts are less consistent with an argument that the gains to the top 1 percent are rooted in greater managerial power or changes in social norms about what managers should earn.

Not unless he's talking about extreme poverty

Chris Blattman asks: "End poverty by giving cash to the poor?" (Blattman). It's difficult to see how this would be true in the West where extreme poverty has almost entirely been eliminated. More previously.

A few productivity myths debunked

You're probably familiar with at least a few of them (e.g. multi-tasking is bad), but good pointers to the underlying studies (via Lifehacker)

Study: Caffeine may improve focus, but not creativity

It's one thing coffee doesn't seem to do (NewYorker via America's Test Kitchen)

Regulation: the Anti-Stimulus

It's befuddling that states/countries would deliberately handicap themselves when it comes to jobs - but that they do. As WSJ puts it, "Andy Puzder, the man who revived Carl's Jr., explains why he's not expanding in California and how the Affordable Care Act is hurting employment. Expect to order with an iPad:"

These days, California is one of the few states where the company isn't looking to expand. "Like many businesses, we love California and would love to build more restaurants," he says. But "California is not interested in having businesses grow," even though many multinational companies, including CKE, have headquarters there.

Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it's 285. "I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California," he says.

Then there are California's cumbersome labor regulations, which appear designed to encourage litigation. The company has spent $20 million in the state over the past eight years on damages and attorney fees related to class-action lawsuits.

Mr. Puzder's favorite California-bites-business story is a law that requires employers to pay general managers overtime if they spend 50% of their time on non-managerial tasks like working the register if they're short-staffed, "which is what we pay and bonus them to do in just about every other state." Since managers were filing class-action lawsuits against the company for not being paid overtime, "every retailer in the state basically has now taken their general managers and made them hourly employees."

The managers hated the change "because they worked all their careers to get off the base to become managers," he says, and paying themselves overtime could hurt their restaurants' bottom lines and chances of a bonus. Mr. Puzder adds that his company must now fire managers who don't report their work hours because they present a legal risk.

The Future of Jobs, Flailing and Regulation

Is this time really different? Will technology end up destroying more jobs than it creates? (Instapundit) While I'm optimistic this isn't the case, regardless of where you stand on the idea, it seems terribly unwise to create artificial barriers in areas where we're just starting to see innovation and new ideas are just starting to flourish (TechCrunch).

Update: How Technology Is Destroying Jobs (TechnologyReview)

Pathological Altruism

It explains why some cling so fiercely to ideas that we know will have "unintended consequences" and stop at nothing to realize them. Barbara Oakley defines pathological altruism as "altruism in which attempts to promote the welfare of others instead result in unanticipated harm." (James Taranto via Instapundit):

Pathological altruism is at the root of the liberal left’s crisis of authority, which we discussed in our May 20 column. The left derives its sense of moral authority from the supposition that its intentions are altruistic and its opponents’ are selfish. That sense of moral superiority makes it easy to justify immoral behavior, like slandering critics of President Obama as racist–or using the power of the Internal Revenue Service to suppress them. It seems entirely plausible that the Internal Revenue Service officials who targeted and harassed conservative groups thought they were doing their patriotic duty. If so, what a perfect example of pathological altruism.

Oakley concludes by noting that “during the twentieth century, tens of millions [of] individuals were killed under despotic regimes that rose to power through appeals to altruism.” An understanding that altruism can produce great evil as well as good is crucial to the defense of human freedom and dignity.

Greg Mankiw: Defending the One Percent

An essay in the Journal of Economic Perspectives (Harvard via Greg Mankiw)

Update (June 20, 2013): In defense of Greg Mankiw (TVHE via GregMankiw)

Tax Cuts, Economic Growth, and the UK

New paper (CES via ASI):

The resulting tax changes are shown to be unforecastable on the basis of past macroeconomic data. I find that a 1 per cent cut in taxes stimulates GDP by 0.6 per cent on impact and by 2.5 per cent over three years. These findings are remarkably similar to the corresponding estimates for the United States.

Travel Tip: Inflight Ginger Sweet Tea

Coming off a bizarre cold just as summer is settling in, I may try this now. It's a great idea for travel though if you're someone who normally brings a waterbottle/thermos anyway (theKitchn).

Myths about immigration

via ASI:

Update (June 20, 2013): The truth about immigration (Telegraph).

More on the future of jobs and technology

ASI asks: "Do technological advances destroy jobs without creating new ones?":

Perhaps the line which most annoys me is "the belief that technology doesn't destroy jobs, but merely creates new and better ones, is, like so much else about bourgeois economics, a baseless assumption."

Does Mueller really believe that claim? Unemployment is 7.8%. Employment is touching 30m, its highest level ever. Since the 1750s there has been a tide of vastly transformative technological improvement and yet somehow a much larger population is employed. At the same time, this larger workforce is working much fewer hours and enjoys much greater abundance. Surely these widely available facts are enough to suggest that the assumption technology creates—as well as destroys—jobs is more than just a "baseless assumption"?

By no means is it certain that the trends of the past, which have seen mobile phones, more hygienic toilets and tasty soft drinks spread to even the poorest areas of the world, will continue. But certainly some evidence (e.g. the graph above) seems to suggest that technologies are spreading throughout society—and benefiting the general populace, not just the wealthy—faster than ever before. This is great, and implies that we can hope for greater abundance and leisure without smashing new technologies. If it turns out that not all benefit, then what we need is something like Krugman's universal basic income, not drastic societal upheaval.

More: The BBC asks, is the solution for more jobs lower wages? And that's also why most economists dispute the need or effectiveness of the minimum wage...

The Evolution of Social Impact Bonds

The idea of social impact bonds is developing. From the WashingtonPost:

The competition for technical assistance attracted 28 applications — a number that surprised officials at Rockefeller and Harvard.

The six winners are developing programs that range from early childhood education to efforts aimed at helping senior citizens remain in their homes longer.

“I love this pay-for-success model,” said South Carolina Gov. Nikki Haley (R), whose state is planning a nurse-family partnership program aimed at reducing the state’s infant mortality rate, which at 7.4 per 1,000 births is among the highest in the nation. “We have tried to make different moves to try to fix that number. This will allow us to go farther.”

Colorado plans to target homelessness in a way that Gov. John Hickenlooper (D) said would be fiscally impossible through the normal government funding channels.

“The hardest money for us to raise is when we have a new idea and it has been in a couple of places but is not widespread,” he said. “There is an inclination in mayors’ and governors’ offices to avoid risk. But investment funds that have a strong social component will inherently take more risk.”

The Greatest Threat to the "Sharing Economy"?

Leviathan. According to Dan Primack at Forbes:

Sidecar CEO Sunil Paul said yesterday at a conference that U.S. auto ownership will be cut in half over the next decade thanks to social car-sharing services like his. It sounds ludicrous for any number of socio-demographic reasons, but what if you allow yourself to drink the battery fluid? What would the rise of companies like Sidecar mean for the country?

Less traffic? Likely. A cleaner environment? Probably. A massive cut in state tax revenues. Definitely.

According to an April study by the Center for Automotive Research, the auto sector was responsible for approximately $91.5 billion in state taxes for 2010 -- or around 13% of all such receipts. Included in that figure was $30 billion from the sale of new and used vehicles and $20 billion from vehicle registration fees. Not included were such things as excise taxes or title fees.[...]

To be sure, there are all sorts of social and environmental benefits to car-sharing specifically, and to the larger notion of a sharing economy. But there also are significant national costs to decreased ownership of major goods like automobiles. At the very least, Paul and other sharing economy evangelists should be aware of both sides of the equation.

Primack's take seems somewhat bizarre though. While I can respect that it's necessary to be aware of "both sides of the equation", the problem isn't the innovation that allows for us to use what we own more effectively as it's framed, it's taxing the wrong activities, it's the overspending, it's the over regulation.

America's Worst Charities

It's too bad organizations that get government support through tax breaks and other incentives don't get the same level of scrutiny as many private companies out there. The list is here (TampaBay), and the preamble is here (CNN):

The 50 worst charities in America devote less than 4% of donations raised to direct cash aid. Some charities gave even less. Over a decade, one diabetes charity raised nearly $14 million and gave about $10,000 to patients. Six spent no cash at all on their cause.

Even as they plead for financial support, operators at many of the 50 worst charities have lied to donors about where their money goes, taken multiple salaries, secretly paid themselves consulting fees or arranged fund-raising contracts with friends. One cancer charity paid a company owned by the president's son nearly $18 million over eight years to solicit funds. A medical charity paid its biggest research grant to its president's own for-profit company.

Some nonprofits are little more than fronts for fund-raising companies, which bankroll their startup costs, lock them into exclusive contracts at exorbitant rates and even drive the charities into debt. Florida-based Project Cure has raised more than $65 million since 1998, but every year has wound up owing its fundraiser more than what was raised. According to its latest financial filing, the nonprofit is $3 million in debt.

Red tape keeping space upstarts tied to the ground?

I'm somewhat surprised the Economist noticed this one. It also points to the reason why, more generally, the US has been having problems finding economic growth (The Economist).

The most beautiful Excel spreadsheet in History?

None of my banking spreadsheets ever looked this good - though probably with good reason. On the other hand, they might have been less useful. (Spoon & Tamago via Chris Blattman):

The real problem with growth in the US?

As Niall Ferguson points out in the WSJ, even the World Bank's "Doing Business" points out it's becoming more difficult to well, do business in the US. Ferguson argues the problem of anemic growth won't be solved with more stimulus (WSJ):

Consider the evidence from the annual "Doing Business" reports from the World Bank and International Finance Corporation. Since 2006 the report has published data for most of the world's countries on the total number of days it takes to start a business, get a construction permit, register a property, pay taxes, get an export or import license and enforce a contract. If one simply adds together the total number of days it would take to carry out all seven of these procedures sequentially, it is possible to construct a simple measure of how slowly—or fast—a country's bureaucracy moves.

Seven years of data suggest that most of the world's countries are successfully making it easier to do business: The total number of days it takes to carry out the seven procedures has come down, in some cases very substantially. In only around 20 countries has the total duration of dealing with "red tape" gone up. The sixth-worst case is none other than the U.S., where the total number of days has increased by 18% to 433. Other members of the bottom 10, using this metric, are Zimbabwe, Burundi and Yemen (though their absolute numbers are of course much higher).

Why is it getting harder to do business in America? Part of the answer is excessively complex legislation. A prime example is the 848-page Wall Street Reform and Consumer Protection Act of July 2010 (otherwise known as the Dodd-Frank Act), which, among other things, required that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Comparable in its complexity is the Patient Protection and Affordable Care Act (906 pages), which is also in the process of spawning thousands of pages of regulation. You don't have to be opposed to tighter financial regulation or universal health care to recognize that something is wrong with laws so elaborate that almost no one affected has the time or the will to read them.

Of course, there's also a Fed study "that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy" (via Washington Examiner).

"We May Live on a Natural Gas Machine"

Ground breaking (pardon the pun) if true (WSJ):

There's increasing doubt about whether all natural gas (which is 90% methane) comes from fermented fossil microbes. Some of it may be made by chemical processes deep within the earth. If so, the implications could be profound for the climate and energy debates. [...]

When the ocean floor is driven down deep into the molten mantle, in the so-called subduction zones where continents are barging their way over the oceanic crust, this carbonate gets heated and pressurized. In 2004, Henry Scott of Indiana University and his colleagues discovered that ideal conditions exist for this carbonate to lose its oxygen and gain hydrogen instead, making methane on a massive scale.

In effect, this would recycle the Earth's carbon dioxide by turning it back into the fuel from which it was made when burned or breathed. Maybe this explains why so much methane bubbles up through hydrothermal vents on the ocean floor. Moreover, a new paper by Vladimir Kutcherov of the Royal Institute of Technology in Stockholm argues that this might also explain why vast quantities of hydrated methane (known as fire-ice) have been found under the seabed near the continental margins: Perhaps it has come up from the mantle. Recently the Japanese announced a successful pilot project to extract some of this methane as a source of energy.

Dr. Kutcherov thinks the evidence "confirms the presence of enormous, inexhaustible resources of hydrocarbons in our planet." If he is right—and America's new Deep Carbon Observatory aims to resolve the question in the next few years—natural gas may effectively never run out.

Crowdsourced Financing: The Next Evolution of Finance?

I used to be fairly skeptical about the idea but it's also fairly obvious there's a gap in the market traditional banks aren't meeting. But is the issue regulatory? Or is it something else that technology may be able to solve? An interesting discussion - about 30 minutes worth, on crowd lending at Le Web (AVC):

"Destroying jobs is the entire point of this invention stuff"

I can't help but be uncomfortable at the handwringing over the fear that there won't be enough jobs in the future. There's even a hashtag for it #peakjobs (Twitter). ASI argues that the jobs technology destroys is a good thing - but it does require faith that like every time in the past, more new more productive jobs - many we haven't even conceived of, replace the ones destroyed:

Think about it for a moment, if we still had 22% in farming and 36% in manufacturing then that's 58% of the people. Currently 81% of the population work in services (there's a bit in construction, water etc as well). If we've 58% who cannot be in services because they're in food or manufacturing then we'd, just as in 1841, only be able to have 33% working in services. So, which half to two thirds of the services we currently do get would you like to give up simply because we don't have the people available to do them? OK, we all agree the diversity advisers can go but beyond that?

Quite. By mechanising agriculture and manufacturing we've been able to get the production of both of those that we desire and also have a vast expansion of services that we also get to enjoy. We have more thus we're richer. And that of course is the point of doing such mechanisation: to make us all richer and long may it continue.

Financial Literacy Gets Worse After Financial Crisis

Little wonder, given the stellar journalism in the mainstream press (WSJ via Freakonomics):

In fact, Americans’ grasp of concepts such as investment risk and inflation has weakened since the recovery began in mid-2009. Research released last week shows that on a five-question test (take the test here), respondents did worse in 2012 than in 2009. The average number of correct answers fell to 2.9 in 2012 from 3.0 on the test in 2009.

Quote of the Day: Seeking Happiness

William J. Reilly via Chris Blattman:

There is only one way in this world to achieve true happiness, and that is to express yourself with all your skill and enthusiasm in a career that appeals to you more than any other. In such a career, you feel a sense of purpose, a sense of achievement. You feel you are making a contribution. It is not work.

Say it with Bacon

I haven't posted a video in a while... and given that I'm on a CrossFit kick at the moment, and Father's day is coming up, I thought this was appropriate:

Regulatory Capture, London (UK) Homeowner's Edition

Something to keep in mind the next time you're in a metropolitan city and someone complains about housing prices and calls for regulation. Maybe the reason for the high prices *is* regulation (Economist):

This is the subject of ongoing debate in Britain; witness the furore over whether to allow construction on London's "greenbelt". Construction is a constant point of contention in built-up areas as well. The magnitude of the impact of these supply restrictions on real estate costs is astounding. In a 2008 paper, Paul Cheshire and Christian Hilber estimated the "shadow tax" imposed by such regulations on office prices in London and other major cities. They found a shadow tax rate of planning restrictions (above construction costs) of about 800% in London's West End, and of nearly 500% in the City of London. The comparable rate is about 300% in Paris, 68% in Brussels, and 50% in Manhattan. (The Manhattan estimate is for the year 2000; other city estimates are for the early 2000s.) [...]

London property owners, as a class, are effectively an incredibly successful rent-seeking operation greedily sucking up the economic surplus generated by the city's economy. When a London firm brings someone to London, they do so, presumably, because the move generates a productivity increase which generates gains that can be shared between firm and worker. But the lion's share of that increase flows not to the firm or the worker but to the owner of the firm's office space and the worker's flat. As a result, London winds up with many, many fewer firms and workers than it could otherwise expect to have. As does Britain, because firms and workers deflected from London are more likely to wind up in New York or Hong Kong than in Newcastle.

Keep that in mind when you read stories about Britain's struggling economy; its lagging growth and productivity performance, and its difficulties raising exports. It's largely down to those great vampiric beasts that bestride London's economy. You know, the homeowners.

"'Aid' to Africa: why the fiercest defenders of aid are invariably white"

A forceful and passionate attack on the aid industry... but one that's much needed (thisisAfrica via Afritech):

As The Spectator put it, the fiercest defenders of aid are invariably white, and the most trenchant critics tend to be African intellectuals like Ghana’s George Ayittey and Uganda’s Andrew Mwenda. Foreign aid is a comparatively middle- and upper-class business and a middle- and upper-class enthusiasm. It starts with a gap year to exciting places like Nairobi or New Delhi, being driven around in Land Cruisers and lecturing adults on how to run their countries. To some, aid work is attractive because of the adventure and the thrill of danger. To others, the lure is endless gap-year exoticism and third-world partying (with the additional benefit of being one of the good guys). You can earn a decent, high-status living in the aid world, without soiling your hands in trade or industry.

Study: The Relationship between Government Wages and Corruption

Interesting new study (Federal Reserve Bank of St Louis via Paul Kedrosky):

When the relationship between government wages and corruption is modeled to vary with the level of income, we find that the impact of government wages on corruption is strong at relatively low-income levels.

Planning for Post-Travel Tip

A pretty good idea: have a frozen/easy to make meal ready for you when you get back (thekitchn). Especially useful for those +12 hour trips when all you want to do is burn your clothes let alone be seen in public after you get back.

Another dismal view of jobs

I wonder if this was what journalism was like as the West began industrializing (TechCrunch):

So the good news is, if you lose your job some years from now, with any luck the same technological advances that devour it will also have generated enough wealth that the government will pay you and your family a basic income while you’re unemployed. The bad news is that you’re not likely to get another long-term job–ever–and that basic income will probably be only just enough to scrape by on.

Do you believe education will save you, and/or your children? Sorry. Not all of the well-educated will find good jobs; increasingly, some won’t find jobs at all. Meanwhile, the cost of higher education keeps climbing higher and higher. Peter Thiel is already arguing that “we’re in a bubble and it’s not the Internet. It’s higher education.”

It’s possible that universities will start to seem almost like casinos: great for the winners, but you’d actually be better off not going at all than paying to go and failing to win. Obviously an engineering or CS degree will improve your chances much more than, say, English Lit…but not everyone can be a tech worker, and what’s more, it’s only a matter of time before technology starts eating tech jobs, too.

If this scenario plays out, the world will divide into a dwindling minority of the very rich — tech workers, finance barons, and those who inherited their wealth, mostly — living in a handful of idyllic cities dripping with wealth, and/or their summer homes on nearby beaches, lakes, and mountains … and the majority who barely get by, doing occasional contract work or odd jobs for a little extra money, too poor to even visit the places where the rich live, work, and play. Aside from those few with government jobs, there’ll be hardly any middle class at all between those two groups.

Does that sound implausible or unstable? No: it’s how most of the world works today. That’s a reasonable description (albeit to varying degrees, and in varying forms) of Brazil, Russia, India, China, and South Africa today. Until recently the expectation has always been that they would evolve and grow to become more like North America, Western Europe, and Japan. But it seems likely to me that the converse is true–that for the next few decades, at least, the rich world, even as it grows wealthier, will begin to look a lot more like the BRICS. It’s a sobering thought.

More here.

Join Wall Street. Save the World.

When I first saw the title of this, I was kind of optimistic. And in a way, it's a step in the right direction (WashingtonPost via Brian H):

Trigg makes money just to give it away. His logic is simple: The more he makes, the more good he can do.

He’s figured out just how to take measure of his contribution. His outlet of choice is the Against Malaria Foundation, considered one of the world’s most effective charities. It estimates that a $2,500 donation can save one life. A quantitative analyst at Trigg’s hedge fund can earn well more than $100,000 a year. By giving away half of a high finance salary, Trigg says, he can save many more lives than he could on an academic’s salary.

In another generation, giving something back might have more commonly led to a missionary stint digging wells in Kenya. This generation, perhaps more comfortable with data than labor, is leveraging its wealth for a better end. Instead of digging wells, it’s paying so that more wells are dug.

“A lot of people, they want to make a difference and end up in the Peace Corps and in the developing world without running water,” Trigg says, “and I can donate some of my time in the office and make more of a difference.”

In a way it's kind of sad - the idea that you should work in a field that you're not really passionate about, to make money to put to use in things that you do. It's a false choice. The article seems to divorce the signal markets make for valued skills from the fact that these actually have a measurable impact in helping society - ie undervalues the work that finance and other high paying fields do.

In considering whether Bill Gates will do more good for the world with his success of Microsoft or that of his foundation, I suspect, that in the final analysis, it would be Microsoft by a large margin. I don't fault Trigg for his altruism, but perhaps he is underestimating his impact of just making money versus giving it away...

Update: Chris Blattman's thoughts.

Chris Blattman's Carry-on Baggage Tips

A nice little checklist for a long haul flight (ChrisBlattman)