While responding to comments on a rather facetious Comment is Free article[1] on the UK “loans for lordships” scandal, I came across this fantastic investment opportunity. Burke’s Peerage are apparently the leading (which is to say, probably the only) brokerage firm in buying and selling genuine (by which I mean, fairly genuine) titles of nobility. They come in three categories:
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From the category archives:
Economics/Finance
He’s far too shy to announce it over here, but Daniel has “a piece”:http://commentisfree.guardian.co.uk/daniel_davies/2006/03/defining_protectionism_down.html about the shifting meaning of “protectionism” over at the new Guardian “Comment is Free” pseudo-blog.
“Brad DeLong”:http://delong.typepad.com/sdj/2006/03/income_inequali.html quotes “Paul Krugman”:http://krugman.page.nytimes.com/b/a/251584.htm on income inequality in America. (Note the Krugman link is behind the TimesSelect firewall.)
One of the truly strange features about discussions of inequality is the way people shy away from talking about the extent to which the gains from rising inequality have gone to a tiny, wealthy elite … A few days ago Steve Pearlstein of the Washington Post — a good guy, and sensible — wrote about income inequality. As I did in my column just a few days earlier, “Feeling No Pain,” he emphasized the “retrospective income” distribution data released by the I.R.S. (Paper at http://www.irs.gov/pub/irs-soi/04asastr.pdf. Tables at http://www.irs.gov/pub/irs-soi/04asastr.xls.) As he pointed out, those data show that the share of income received by the top 10 percent of taxpayers rose from 33 percent in 1979 to 44 percent in 2003 … But Pearlstein stops there, leaving the impression that everyone in the top 10 percent was a big winner. In fact, there was hardly any rise in the share of income going to people between the 90th and 95th percentiles: almost all the gain went to the top 5 percent. And most of the gain went to a very small elite. The income share of the top 1 percent went from 9.6 to 17.5 percent, accounting for more than 70 percent of the top decile’s gain. The income share of the top 0.25 percent went from 4.9 to 10.5, accounting for a bit more than half the total gain.
Today “this story about income inequality in Australia”:http://www.theage.com.au/news/national/so-it-emisem-the-rich-what-gets-the-pleasure/2006/03/14/1142098463260.html was on the front page of The Age online.
Appearing to contradict claims that Australia is now a more egalitarian society, research by the Australian National University and Oxford University has concluded that the richest 1 per cent of the population has almost doubled its share of national wealth. The report, by ANU economist Andrew Leigh and Oxford’s Sir Anthony Atkinson, found that the wealthiest 1 per cent of Australians now took 9 per cent of national income, compared with a 5 per cent share in 1980.
… of whom I am one, are starting to growl again.
The cenral tenet of interest rate bearishness is that if interest rates are low enough to generate negative savings, as is the case in the US and Australia, they are too low to be sustained. The counterargument, put most forcefully by Ben Bernanke is that someone must be willing to lend at these low interest rates, and this lending must reflect a “global savings glut”. Bears respond that the supposed glut does not reflect savings by households or business, but is really a liquidity glut created by expansionary monetary policy around the world, which must eventually come to an end, or be dissipated in inflation.
I “mentioned”:https://crookedtimber.org/2006/03/07/michael-moore-to-edit-economist/ a few days ago that Paddy Power had opened a book on the race to succeed Bill Emmott as editor of the _Economist_, and suggested that depending on liquidity, there was a fair amount of scope for manipulating the results. I’m sorry to report that my speculations were “bang on the mark”:http://business.timesonline.co.uk/article/0,,8210-2076421,00.html.
bq. Paddy Power, the bookmaker, has been offering odds on the new editor, to replace the departing Bill Emmott. Several punters this week started to put large sums ranging up to £500 on Ed Carr, the business and financial editor, at 6-1. The bookie yesterday suspended all bets, after even more tried to open accounts. Any of them e-mails with “theeconomist” somewhere in the address? “We haven’t seen anything quite that unsubtle. They’re more intelligent at The Economist. Mind you, when we ran a book on the editor of The [Daily] Mirror . . .”
The Economist‘s journalists have always been quite keen on the “predictive”:http://www.economist.com/displaystory.cfm?story_id=3400241 “power”:http://www.economist.com/displaystory.cfm?story_id=5244000 of betting markets. Nice to see a few of them put their money where their mouth is. In other news on the race for the prize, I hear that “Clive Crook”:http://www.economist.com/displaystory.cfm?story_id=5244000 is now a hot contender, and “Chris Anderson”:http://www.thelongtail.com/about.html is climbing up that long tail. Not that you’re able to bet on either of them now, but still.
[This post is co-written by Harry and Chris and is an extended follow up to Chris’s “initial response”:https://crookedtimber.org/2006/03/06/cato-on-inequality/ to David Schmidtz’s Cato Unbound piece “When Equality Matters”:http://www.cato-unbound.org/2006/03/06/david-schmidtz/when-equality-matters/ .]
We live in a highly unequal world and in strikingly unequal societies. The income discrepancies between the global poor and those in wealthy societies are enormous, with around one quarter of the world’s population living on less than $1 US per day, and many suffering from acute malnourishment, disease and premature death.[1] (For some further details see articles by Thomas Pogge “here”:http://www.onlineopinion.com.au/view.asp?article=3717 and “here”:http://portal.unesco.org/shs/es/file_download.php/9c2318f24653a2a4655347d827f144acPogge+29+August.pdf .) But even within the very wealthiest societies great wealth coexists with severe poverty. Moreover, this is not simply an inequality in outcomes. Whilst the United States, for example, likes to imagine itself as a land of opportunity, social mobility is extremely low and in recent years the benefits of economic growth have been ever more concentrated in the very richest sectors of the population. According to one study, only 1.3 per cent of children born to parents in the bottom 10 per cent of income earners end up in the top 10 per cent. By contrast, almost a quarter of children born into the top 10 per cent stay there, and almost half stay in the top 20 per cent. Children born into the richest tenth of households are 18 times more likely than children born into the poorest tenth to end up in the top tenth. (Further see the “Economist”:http://www.economist.com/world/na/displayStory.cfm?story_id=3518560 and “Samuel Bowles and Herbert Gintis”:http://www.umass.edu/preferen/gintis/intergen.pdf .)
David Schmidtz’s recent piece for Cato Unbound, “When Inequality Matters”:http://www.cato-unbound.org/2006/03/06/david-schmidtz/when-equality-matters/ is an artful and unnerving attempt to make use of some recent work within egalitarian political philosophy to argue against what we what we think of as the core of egalitarianism: the demands for greater equality of condition and opportunity. We are not convinced. In our view Schmidtz’s case neglects the impact that relative inequalities have on absolute levels of flourishing and depends at crucial points on dubious analogies and on muddying important distinctions. But it would be churlish not to acknowledge that he gets some things right. For instance, he is correct to emphasize that we must identify the dimensions in which equality matters, for the basic reason that making people equal on one dimension will often have the simple effect of making them unequal on another. Equalizing incomes, for example, would leave people unequal in well-being, because different people have different capacities to convert their income into well-being.
Poetic justice as fairness. Thanks, I’ll be here all week. Actually, my first thought, on hearing that the UAE company had edged out Singapore’s hometown PSA was, “shit, they should have had Singapore do it!” Say what you like about Singapore’s idosyncratic form of government, they a) run the most kick-ass port in the world and b) can really be counted on to deliver efficient government services, without either the corruption which plagues such services in other SE Asian nations, or the general how-can-I-make-this-person’s-life-worse attitude which often seems to prevail in such places as, oh I don’t know, say the Washington, D.C. DMV? On the question of whether it’s a good idea to allow a UAE state-owned company to control (in whatever attenuated way) our port security, I’m kind of of two minds. On the one hand, if some other foreign company would otherwise be running the show, and if the same US, union-member stevedores will be doing the actual work, then maybe its not that big a deal. On the other hand, it seems that the US actually had to refrain from bombing bin Laden (pre-9/11) at some falconing retreat because a good portion of the “emirs” who make up the Emirate in question were there too. I don’t know why that makes me feel dubious…On the gripping hand, I have a perverse sense of pleasure as I watch Bush twist in the wind of the very anti-Arab, our-oceans-no-longer-protect-us bullshit the rest of us have had to hear for the last 5 years. Enjoy! (Unlike during the cold war, where naiads festooned with the stars and stripes were on constant call to toss back offending ICBM’s from their dophin-pulled-seashell mobile tactical units.) But his latest defense is, “I didn’t know anything about it.” Whaaaa? “The president is a sock-puppet moron” is supposed to be a snide criticism, not an exculpatory point. In general I am confused and await further information. Matthew Yglesias rightly notes that the alert citizen will have learned not to trust the administration to make S’mores without plunging half the nation into a sticky-sweet inferno of death. Death that’s sandwiched between Graham crackers! Food for thought.
I’ve always thought that an economist is someone who understands opportunity cost. If there is one thing a first-year undergraduate economics course should teach, it’s an understanding of this concept. So it’s alarming to discover that most members of a sample drawn from participants in the profession’s most important conference are not, at least by my definition, economists.
Via Harry Clarke, I found this paper by Paul Ferraro and Laura Taylor (guest registration or subscription required). Ferraro and Taylor presented their volunteer subjects with this question:
Please circle the best answer to the following question:
‘You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton?
(a) $0
(b) $10
(c) $40
(d) $50.
Take some time to think before looking over the fold
I was pleased that “Liverpool beat Arsenal”:http://news.bbc.co.uk/sport1/hi/football/eng_prem/4703844.stm last night, but perhaps I shouldn’t have been surprised. Despite having heard Alan Hansen and Mark Lawrenson tell us on may occasions (usually apropos Chelsea) that money doesn’t buy success, I’m struck by the “table of 2004 transfer spending”:http://www.footballeconomy.com/stats/stats_turnover_10.htm for English PL clubs on the “Political Economy of Football”:http://www.footballeconomy.com/index.htm site. Here are the top spenders:
1. Chelsea
2. ManYoo
3. Liverpool
4. Tottenham
5. Arsenal
and the rank ordering of the “Premiership today”:http://news.bbc.co.uk/sport1/hi/football/eng_prem/table/default.stm after 26 games?
1. Chelsea
2. ManYoo
3. Liverpool
4. Tottenham
5. Arsenal
The correlation breaks down somewhat further down the table, but still.
Fareed Zakaria has yet another piece on the inevitable decline of Europe. In it, he makes the claim
Talk to top-level scientists and educators about the future of scientific research and they will rarely even mention Europe. There are areas in which it is world class, but they are fewer than they once were. In the biomedical sciences, for example, Europe is not on the map.
High energy physics, anyone? Western European output of scientific papers surpassed that of the US about 10 years ago and the gap is still widening. The US is relatively stronger in biomedical research than in the physical sciences, but Europe has caught up there as well. The loss of the US lead in science is sufficiently widely-accepted that proposed responses made it into Bush’s State of the Union speech.
Over the last few weeks, I’ve been catching up on my Terry Pratchett in the wee hours and came across a passage in _Going Postal_ (“Powells”:http://www.powells.com/partner/29956/s?kw=terry%20pratchett%20going%20postal , “Amazon”:http://www.amazon.com/exec/obidos/redirect?link_code=ur2&tag=henryfarrell-20&camp=1789&creative=9325&path=http%3A%2F%2Fwww.amazon.com%2Fgp%2Fproduct%2F0060502932%2Fsr%3D1-1%2Fqid%3D1138645666%2Fref%3Dsr_1_1%3F%255Fencoding%3DUTF8 ) which has some bearing on the perennial debate over whether or not “Pratchett”:http://www.nataliesolent.blogspot.com/2003_10_12_nataliesolent_archive.html#106651083158570151 “is”:http://www.samizdata.net/blog/archives/004798.html “a”:http://www.theadvocates.org/celebrities/terry-pratchett.html “libertarian”:http://en.wikipedia.org/wiki/Libertarian_Futurist_Society. The villain of the book, an unscrupulous pirate of finance capital who has dubbed himself Reacher Gilt, is defending himself before the autarchical ruler of Ankh-Morpork, Lord Vetinari.
bq. “Don’t patronize me, my lord,” said Gilt. “We own the Trunk. It is our _property_. You understand that? Property is the foundation of freedom. Oh, customers complain about the service and the cost, but customers always complain about such things. We have no shortage of customers at whatever cost. Before the semaphore, news from Genua took months to get here, now it takes less than a day. It is affordable magic. We are answerable to our shareholders, my lord. Not, with respect, to you. It is not your business. It is our business and we will run it according to the market.”
I have to agree with Scott Lemieux about the validity of self-reported incomes in responses to an online questionnaire. Is the “mean average” [sic] income of LGF readers actually over $105,000? Do Roger Simon readers really pull down a (mean, natch) average of $116,000? Why do I have a sneaking suspicion that user death2dhimmicrats5 claimed to be making…one BILLION dollars a year. Click through to the linked Dennis the Peasant post for more hilarity. A bewildered commenter there wonders:
In a prior career, my title was “Media Buyer”. If this is accurate it’s highly pathetic. With all their money, couldn’t PJM come up with $15k to put together a bitchin’ printed media kit? Media buyers like to have something tangible in their hands. And don’t they have a WebEX account? What the heck is going on?
I feel horrible for laughing at this because I have been a fan of LGF and Glenn and Roger for 3+ years. These guys are savvy at so many things, but this is a fiasco. How can this happen?
How, indeed? And if the Pajamas Media readers love The Blog so much, why don’t they marry it? Oh, wait, looks like they’re working on it.
Belle’s post on the fact that the US appears unlikely ever to go metric prompted me to try and put together some thoughts I’ve had for a long time.
When I lived in the US around 1990, I was struck by all sorts of minor inefficiencies that seemed to be sanctified by tradition. In addition to its unique system of weights and measures (similar to, but confusingly different from, the Imperial system I had grown up with), there was the currency, with no coin of any substantial value, thanks to inflation (this particular inefficiency was subsequently enshrined in the Save the Greenback Act), and the practice of quoting prices net of sales tax, so you always had to pay more than the marked price. And then there was a huge, but ill-defined, range of activities where tips were expected, apparently regardless of the quality of service. In all of these cases, Americans seemed much more willing to put up with day-to-day inefficiency in the name of tradition than Australians would be, and much more resistant to government action that would sweep such inefficiencies away in the name of reform.
Bigger issues like creationism can be fitted into this picture. As far as I can see, very few supporters of creationism (or intelligent design or what have you) have any desire to see it taught in university biology departments [there are a handful of exceptions, like Bob Jones, that are resolutely stuck in the pre-Civil War era on most things] or applied by oil geologists. Their big objection is seeing evolution stated as fact in museum displays or taught in high schools. Broadly speaking the position seems to be like that with the metric system – scientists are welcome to be evolutionists as long as they don’t try and ram it down the throats of our kids. Obviously, this is costly; as with metric and traditional measures, the two systems are bound to clash from time to time.
Then there’s the inefficiency that seems to be built in to the US system of government. When I lived there, I was subject to four different levels of government (town, county, state and federal) with multiple overlapping responsibilities, and procedures that seem designed to achieve maximal inconvenience for citizens (not to mention resident aliens!).
All of this of course, was set against the background of a general level of technology in advance of very other country in the world, and an economic system in which the pursuit of efficiency wasn’t much hindered by concerns about equity. At least for the upper-middle class to which I belonged, these things produced a very high standard of living.
How much do these minor inefficiencies matter? In one sense, I think, quite a lot. In another, they don’t matter very much at all, and can in fact be defended on cultural grounds
Henry gave me the heads-up on this extraordinary story from Institutional Investor (it is worth watching the interstitial ad in order to read the story as it really is dynamite). It’s an account of the dog’s breakfast that was the Harvard Institute for International Development’s mission to Russia. I learned a few things I didn’t know from it – particularly, it was interesting the extent to which Jeffrey Sachs, who suffered quite a lot of damage to his reputation through being the titular head of HIID at the time it all blew up, wasn’t actually in charge, and to which Andrei Shleifer and his wife were involved in the whole thing to an extent which it is rather implausible to dismiss as the work of a head-in-the-clouds academic who didn’t realise that there might be a conflict of interest. It adds quite a lot to David Warsh’s excellent coverage of the same story, and indeed to the cacophony of fuck-all which has been our beloved mainstream media’s coverage of what is quite visibly one of the most interesting and scandalous tales of the 1990s (I’m linking to Warsh’s own story on the II story because it contains a few quotes that are in the paper version but not the online one, but it is well worth poking around in the Economic Principals archives for other stories on this subject).
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The NYT reports the victory of Socialist Michelle Bachelet (briefly a refugee in Australia) in the Chilean presidential election under the headline “What Is Missing in This Woman’s Victory? Coattails”
I would take this to mean that there were also Parliamentary/Congressional elections at the same time, and that Ms Bachelet’s party had lost, but the body of the report implies the opposite saying her win “assured another four years in power for the [centre-left] coalition, which has governed Chile without interruption since Gen. Augusto Pinochet was forced to step down in 1990. ” Has anyone got any idea what the NYT sub-editor who chose this headline was thinking? As pointed out by Jon in comments, this is a reference to the point made about halfway through that other female elected presidents in the region have been the widows of political leaders this seems a strange choice of emphasis to me.
In other news from the Chilean campaign, the much-vaunted privatised pension scheme introduced under Pinochet is in serious trouble. Even conservative candidate Sebastián Piñera, brother of José Pinera who introduced the scheme, described it as being in crisis.
The success of the Chilean scheme was always illusory. It was introduced not long after mismanagement of the exchange rate had generated an economic crisis and stockmarket crash. So early investors got the benefits of above-average returns as the market recovered. These were enough to hide the high administrative costs (between a quarter and a third of contributions) and poor design of the scheme. Once returns fell back to normal the problems became apparent. The government is still footing a huge ‘transitional’ bill, and coverage is patchy at best.