Thursday, July 31, 2014

When you think of the innovation economy, think rotisserie chicken

I have to say that I love getting rotisserie chicken particularly from Costco - from Megan McArdle (Bloomberg):

The rotisserie chickens were actually cheaper than buying and roasting my own. [...]

Grocery stores make them out of unsold chicken that is about to pass its expiration date. It’s an elegant way to make a profit out of food that would otherwise be a net loss. And it’s not just chicken -- according to Vasko, the ever-expanding prepared-foods section of the supermarket uses up all sorts of unsold produce and meat. It is, as she says, a bit like hunter-gatherers using every inch of the animal.

This is the sort of thing that no one talks about when they talk about innovation --and yet, it’s a major way in which our economy has become more efficient over the last few decades. Reducing spoilage means grocery stores can sell us raw chickens at lower prices -- and that we can get fresh, delicious prepared food at even lower prices. It’s a win for the grocer and the consumer.

Saturday, July 26, 2014

Study: Charter school students smarter, earn more

While I have little doubt that this is the case in the long run, I also don't doubt that in the short run, there are public schools or schooling systems that can leave students better off. Charters are in effect experiments and actual markets where individual schools can do much better or even more poorly than their publicly run counterparts.

I think the difference in charter schools is that there's a virtuous feedback loop - that the best survive and thrive while poorly performing public schools tend to live on to deliver immense harm to students. I think this an even more important moral argument to make. quoting the study:

Comparing [National Assessment of Education Progress] achievement obtained in public charter schools versus TPS for 21 states and DC, we find the public charter school sector delivers a weighted average of an additional 17 NAEP points per $1000 invested in math, representing a productivity advantage of 40% for charters; In reading, the public charter sector delivers an additional 16 NAEP points per $1000 invested, representing a productivity advantage of 41% for charters.

... The analyses we present in this report indicate that charter schools are more productive than TPS, either because they produce higher student gains at a lower cost or because they produce similar or only slightly lower student outcomes at a significantly lower cost.

Prioritizing aid

An op-ed from Matt Ridley, the author of The Rational Optimist, on Born Lomborg's Copenhagen Consensus (WSJ):

The Copenhagen Consensus Center process has won world-wide respect for its scrupulously fair methods and startling conclusions. Its 2012 report, published in book form as "How to Spend $75 Billion to Make the World a Better Place," came to the conclusion that the top five priorities should be nutritional supplements to combat malnutrition, expanded immunization for children, and redoubled efforts against malaria, intestinal worms and tuberculosis.

Their point wasn't that these are the world's biggest problems, but that these are the problems for which each dollar spent on aid generates the most benefit. Enabling a sick child to regain her health and contribute to the world economy is in the child's interest—and the world's.

The numbers produced by this exercise are eye-catching. Every dollar spent to alleviate malnutrition can do $59 of good; on malaria, $35; on HIV, $11. As for fashionable goals such as programs intended to limit global warming to less than two degrees Celsius in the foreseeable future: just 2 cents of benefit for each dollar spent.

Figuring out the best way to help the world's poor isn't like solving a math problem. There are not right and wrong answers. But there are better and worse answers, and the only way to assign those priorities is to set aside our sentimental commitments and do the hard work of assessing costs and benefits.

Using property rights to protect local forests

Some environmentalists discover the power of property rights (NewScientist):

The best way to protect rainforests is to keep people out, right? Absolutely not. The best way to keep the trees, and prevent the carbon in them from entering the atmosphere, is by letting people into the forests: local people with the legal right to control what happens there.

Given the chance, most communities protect rather than plunder their forests, says a new study by the World Resources Institute and Rights and Resources Initiative, both in Washington DC. The forests provide food, water, shelter, medicines and much else.

The report, Securing Rights, Combating Climate Change collates many existing studies. It concludes that forest communities only have legal control over one-eighth of the world's forests. The rest is mostly controlled by governments or leased for logging or mining, often in defiance of community claims.

But community-owned forests are often the best-protected. In the Amazon rainforest, deforestation rates in community-owned areas are far lower than outside.

Friday, July 18, 2014

Surprise! Tech makes us happier

Peter Diamandis (Chairman/CEO of X-Prize Foundation) via Instapundit:

Regardless of what the naysayers believe about human interaction and social media, the data shows us that the abundance of technology is actually increasing the abundance of happiness all over the world.
Related: Is Silicon Valley Funding the Wrong Stuff? (TechCrunch)

Wednesday, July 16, 2014

Uber/Lyft: The best regulators are consumers

Except it means giving up control for actual regulators. Mark Perry via Instapundit:

As I’ve noted before, it’s important to remember that Uber and Lyft are already very heavily regulated ride-sharing services, and in some ways they are regulated even more intensely than traditional taxis by a very ruthless group of regulators – the consumers who use their services. The issue really isn’t regulated versus unregulated ride services; the issue really is who is the primary regulator: a) government bureaucrats and legislators who are often captured by the regulated taxi cartels or b) consumers. And there’s no question that captured regulators almost always put the special interests of the well-organized, concentrated groups of regulated producers like the taxi cartel over the public interest of the dis-organized, dispersed thousands/millions of consumers.

In defense of usury, part xxx

The US Obama Administration is attempting to decimate the pay day lending industry through regulation and coercion. Lawyer, Ronald L. Rubin argues in the WSJ why this is misguided - and these attacks hurt those they are most supposed to help:

The CFPB should only create programs to educate consumers about payday loans, pass regulations to ensure that lenders follow existing laws and prosecute businesses that don't treat borrowers honestly. The Dodd-Frank law requires these actions, and no more. The CFPB wasn't created to protect consumers from themselves.

Informed consumers who take out a loan have calculated that they are better off with that loan than without it. A borrower's desperation does not alter this equation. A man whose car is about to be repossessed may calculate that he is better off taking out a payday loan than losing his job because he lacks transportation. The government is blind to such motivations, and it can harm consumers by substituting its judgment for theirs. It is better to help consumers make good decisions than to make decisions for them.

China's looming bad debt crisis

Something to keep an eye on. From Michael Pettis:

[...] we cannot simply put the bad debt behind us once the economy is “reformed” and project growth as if nothing happened. Earlier losses are still unrecognized and hidden in the country’s various balance sheets. These losses will either be explicitly recognized or they will be implicitly amortized. The only interesting question, as I see it, is which sector will effectively be assigned the losses. This is a political question above all, and its answer will tell us a great deal about how the newly-constituted, “reformed” China will grow over the next few decades.

Monday, July 14, 2014

Too many entrepreneurs not enough factory workers?

While the article is provocatively titled "Please do not teach this woman to fish", Daniel Altman at ForeignPolicy asks if the microfinance industry is overfunded:

Along with them came the microfinance programs -- as well as many other aid schemes designed to promote entrepreneurship -- which were often based in rural villages where repayment would be enforced primarily by peer pressure among the members. These programs tended to target women, who were viewed as more reliable stewards of the groups' money. Some women did manage to start their own businesses with the loans they received, but the verdict of research into microfinance's ability to reduce poverty was decidedly mixed.

There was a simple reason for this. By trying to make microfinance less risky and more sustainable, the program managers also made it less effective. To understand why, consider a common-sense question: How big can a business be in a rural village? There aren't many customers there, and incomes aren't very high either. A business would have to serve several villages to start creating jobs in any significant numbers. Now, consider rural women with families. They may be reliable repayers of loans, but they're much less mobile than single men. Single men can move to cities, or at least cover a lot of ground in the countryside, in an effort to win new customers. By contrast, even women without children face constraints on their movements in plenty of countries.

Microfinance may have given a lot of people a little, but it was never designed to give anyone a lot. Unlike the microenterprises founded in rural villages, businesses that serve lots of customers take advantage of economies of scale in production and distribution. These economies of scale are essential for economic growth. After all, which economy is more productive -- one in which every single person is an entrepreneur, or one in which a minority of entrepreneurs employ the majority of people?

In fact, poor countries already have many more entrepreneurs per capita than rich countries. More entrepreneurship is not what they need; economies of scale are. Indeed, the most productive economies are the ones that balance economies of scale with the benefits of competition. Too many businesses, and workers will fall short of their maximum productivity. Too few businesses, and monopolists will gouge consumers, quash innovation, and fail to serve the entire market.
I don't think the problem is with entrepreneurship though - or even subsidies that are reducing the risk of 'subsistence entrepreneurship', but red tape/quagmire that bogs down successful entrepreneurs and an inability to access capital at the same costs as some of their smaller competitors thereby preventing them from scaling.

Chris Blattman: "Development must be seized, through struggle. It cannot be given."

Great quote. Blattman also quotes Owen Barder:

Too often we think of scaling up in development like rolling a new product line across an existing series of shops. That’s the wrong model. Scaling up in development is more like building a series of separate businesses from scratch, each in a different market.

…Instead of thinking that creating capable organisations will deliver results effectively, perhaps successful organisations are the consequence, not the cause, of success. Capability in formal organisations is what happens when successful folk practices, which evolve out of years of struggle and adaptation, are consolidated into formal processes.

Who does "Fairtrade" help?

Guild ridden liberals in the west? Because apparently it's not the low paid workers in developing countries (SOAS).

Thursday, July 10, 2014

"Why does doomsaying dominate discussions about new technologies?"

From GMOs to plastics to energy it's a familiar pattern - I think the most important takeaway here is that the doomsaying is nothing new (Techliberation):

Clive Thompson notes that “dystopian predictions are easy to generate” and “doomsaying is emotionally self-protective: if you complain that today’s technology is wrecking the culture, you can tell yourself you’re a gimlet-eyed critic who isn’t hoodwinked by high-tech trends and silly, popular activities like social networking. You seem like someone who has a richer, deeper appreciation for the past and who stands above the triviality of today’s life.”

[...]Put simply, there exists a wide variety of explanations for why our collective first reaction to new technologies often is one of dystopian dread. In my work, I have identified several other factors, including: generational differences; hyper-nostalgia; media sensationalism; special interest pandering to stoke fears and sell products or services; elitist attitudes among intellectuals; and the so-called “third-person effect hypothesis,” which posits that when some people encounter perspectives or preferences at odds with their own, they are more likely to be concerned about the impact of those things on others throughout society and to call on government to “do something” to correct or counter those perspectives or preferences.

Some combination of these factors ends up driving the initial resistance we have see to new technologies that disrupted long-standing social norms, traditions, and institutions. In the extreme, it results in that gloom-and-doom, sky-is-falling disposition in which we are repeatedly told how humanity is about to be steam-rolled by some new invention or technological development.

No, pro-business really is not the same as pro-markets

Just like crony capitalism isn't the same as well, capitalism - Export-Import Bank edition (WashingtonExaminer):

Sen. Chuck Schumer explained: “The Tea Party is moving the Republican Party so far to the right on important issues like the Export-Import Bank, that the business community is now farther from the Republican Party and closer to Democrats.”

[...]Politico’s MJ Lee explains what these two are up to: “Democrats have formed a united front in support of the bank, seizing on an opening to appeal to the hearts and wallets of the business community ahead of the November elections.”

People respond to incentives: unemployment benefits edition

Charles Krauthammer (via Instapundit):

While liberals hail new job numbers as a vindication of President Obama’s economic policies, it is conservatives who should feel vindicated, said Charles Krauthammer on Thursday’s Special Report. Citing a recent National Review Online post on The Corner by economist Robert Stein, Krauthammer noted that the sharp drop in unemployment has coincided with the end of emergency unemployment benefits. Obama and the Democrats, who insisted that the benefits be extended, wrongly predicted that their expiration would come as a calamity to the poor. Instead, their end has demonstrably had “precisely the opposite effect.”

“These six months coincide with a decrease in the medium length of unemployment from 17 weeks to 13 weeks — the largest six-month decline in the length of unemployment ever measured,” he said. “Which means the real problem of long-term unemployment was a function of this anomaly of emergency-extended unemployment, which should never have happened, and whose end has contributed to this excellent result. The debate on that extension is over, and the conservatives were right.”

Sunday, July 06, 2014

Regulations save lives?

They also take them, and can make existing ones more miserable than they need to be. On the EPA's proposed loosening of radiation limits (Reason):

Other skeleton in the EPA’s closet are environmental limits caused by its policy of “chasing the last molecule.” If EPA could be forced to modify its radiations limits, what about its other extremes? Take sulfur, for example. Its prevalence has already been reduced by 90 percent. Still, using its now discredited LNT theory, EPA is has ordered refiners to eliminate the last 10 percent. This will add between 6 and 9 cents per gallon to the cost of gasoline.

There is another major implication. Many if not most of the EPA's other limits on pollutants and carcinogens are also deduced from the faulty LNT theory. Eliminating 90 percent of some chemical or dust is often easily accomplished, however, eliminating the last 10 percent can cost billions more than the first 90 percent. For example, a Wall Street Journal report on ozone explains that new EPA limits reducing ozone from today’s 75 parts per billion to 60 to 70 ppb would cost industry some $90 billion, according to the EPA itself. These are the costs that many industries are howling about and a real reason that Americans’ standard of living has stopped increasing. Much analysis, beyond the scope of this report, needs to be researched for dozens of other excessive limits imposed by Washington, D.C.

The yearly cost of unnecessary EPA regulations is in the many hundreds of billions of dollars, reducing wages and hurting the world's standard of living.

The science behind building great teams

An interesting paper from HBR:

With remarkable consistency, the data confirmed that communication indeed plays a critical role in building successful teams. In fact, we’ve found patterns of communication to be the most important predictor of a team’s success. Not only that, but they are as significant as all the other factors—individual intelligence, personality, skill, and the substance of discussions—combined.

Should regulation correct ignorance?

ASI makes the case that it was regulations designed to protect the banking system resulted in the underestimation of risk by much of the market.

"Encourage people to do something for its own sake, not for its benefits"

Incentives matter - particularly the right incentives. From Amy Wrzesniewski and Barry Schwartz (NYT):

Whenever a person performs a task well, there are typically both internal and instrumental consequences. A conscientious student learns (internal) and gets good grades (instrumental). A skilled doctor cures patients (internal) and makes a good living (instrumental). But just because activities can have both internal and instrumental consequences does not mean that the people who thrive in these activities have both internal and instrumental motives.

Our study suggests that efforts should be made to structure activities so that instrumental consequences do not become motives.
Personally, I'm of the view that in an ideal world, instrumental consequences reinforce internal consequences. Instrumental consequences can and should, however, guide how you effect internal motivations.

People respond to incentives: North Carolina Unemployment Benefits edition

From the WSJ: Unemployment in the Tar Heel State dropped by 17% in the second half of 2013 after extended benefits expired.

Tuesday, July 01, 2014

Makers Who Are Reinventing the American Dream

I think a better descriptor for it is democratizing the American Dream (PopularMechanics via Instapundit). The companies include Kickstarter, AutoCAD and Stratasys.