Links for 28th February, 2019

  1. “India holds the dubious distinction of having the worst non-performing loan ratio among the world’s major economies, having surpassed Italy. The Reserve Bank of India said in December that the ratio for banks fell for the first time since 2015, though it’s still “high for comfort.” A $190 billion pile of soured and stressed debt has cast the future of some lenders in doubt and curbed investments.”
    There actually isn’t that much more to read at the link, but the chart is instructive. Also bear in mind that it is quite unlikely that the data is accurate – this is not a criticism of the IMF, but rather of the banking system itself in both Italy and India.
  2. ““Let there be no misconceptions about who protects [JeM]. Pakistan is small potatoes . . . True global power shielding Jaish is China. As death toll rises today, let nobody forget how China has consistently blocked action against Jaish,” tweeted Shiv Aroor, a television reporter specialising in military and strategic affairs.”
    China’s blocking of India’s move to have Masood Azhar declared a terrorist has been an issue that hasn’t recieved as much attention, both within and outside India, as it should have. But the reason reading this article makes sense is because it’s a good way to think about how China’s bargaining position as regards this issue is slightly weaker now, given it’s trade wars with the USA.
  3. “All it takes is a half-hour at this intersection in Lagos, the sprawling metropolis in Nigeria, to begin fearing this city. White oil tankers crawl along both on and beneath an overpass on the multilane Apapa Road, making their way out of the Niger River delta. Zipping around them are black-and-yellow rickshaws and minibuses, with sweaty passengers clinging to the doors. Every few meters, a truck hits the brakes with an ear-splitting shriek, the clouds of exhaust mixing with the diesel fumes of the generators. The foul air hangs like a thick blanket over the corrugated metal slums to the right and left of the street. Just 30 minutes at this intersection is enough to make you want to flee this city — a megalopolis that is growing faster than almost any other place on earth.”
    Who can predict the future? Short answer: don’t bother trying. One thing that makes economics so endlessly interesting is reading conflicting views – if you recall the article on The Empty Planet the other day, this one is in direct contradiction – at least in terms of the theme, if not the data itself. Der Spiegel reviews three different countries and the challenges they are facing, and will face, on account of population growth.
  4. “Nobody is expecting the prince to do anything about Pakistan and India being on the brink of a war yet again. Like all little princes he does not have to pick sides or make a choice. When he visits India this week, he is expected to sign more investment deals. The Pakistani government calls his visit historic, and Indian officials call it historic. But only people with no sense of history call every passing chariot a historic event. The prince is playing with Pakistan and India because he is being temporarily snubbed by the boys and girls of the West, the ones he really wanted to play with.”
    Mohammed Hanif is dismissive of the storm in the teacup that is Prince Mohammed’s visit to India and Pakistan. Sometimes, having that perspective helps contextualize the visit, and it’s inevitability. Think from a game theoretic perspective: what choices did Saudi Arabia, Pakistan, India (and China have)?
  5. “If these behaviors add up to consciousness, it means one of two things: Either consciousness evolved twice, at least, across the long course of evolutionary history, or it evolved sometime before birds and mammals went on their separate evolutionary journeys. Both scenarios would give us reason to believe that nature can knit molecules into waking minds more easily than previously guessed. This would mean that all across the planet, animals large and small are constantly generating vivid experiences that bear some relationship to our own.”
    The Atlantic explores a veterinary hospital in Delhi, Jainism, birds (crows in particular), fish, consciousness and a temple in Gujarat – all in one glorious article. Worth it in particular for the theme of consciousness – but much else besides as well!

Links for 27th February, 2019

  1. “The time for masking such equity-type investments as loans has passed. Real estate in India is facing a glut, with $110 billion worth of unsold homes across the top eight markets, including Mumbai. That’s almost four years of sales, according to property analytics firm Liases Foras. Back in 2009, when apartment inventory was equal to about one year of sales, only 25 percent of construction funding came from shadow financiers. Banks controlled 75 percent.The tables have now turned: Housing-finance firms and other nonbank lenders, more adventurous than conventional banks, account for 55 percent of advances to builders. Lenders pocketing 2 percent to 3 percent of the loan value as upfront fees in exchange for not collecting on the principal for years has allowed a buildup of poor-quality debt. Moratoriums have delayed builder bankruptcies, and prevented timely detection of the problem.”
    This is a problem just waiting to become a full blown crisis in India – not the real estate sector per se, but the financing of the real estate sector in India. Read this article to find out how and why it has become as big a problem as it has.
  2. “Like all great work, it was the foundation for other huge contributions – work by other great economists such as Oliver Hart, Bengt Holmstrom, Paul Milgrom and many others can easily be traced to this paper. The paper’s starting point – that coordination within firms is not accomplished ‘by fiat’ (Demsetz famously remarks “This is delusion”), and that one should instead examine how incentive structures within firms create efficiencies relative to other forms of organisation – became the starting point for nearly the entire field of the economics of organisation ever since.”
    I have linked to this piece earlier, I think in January. But since I am currently teaching a course in Industrial Organization at Gokhale Institute, I found myself reading this piece all over again. Demsetz really was a giant in this field – and his analysis of why firms exist, and how they coordinate and incentivize activity within the firm is truly illuminating.
  3. “So, the UN forecasting model inputs three things: fertility rates, migration rates, and death rates. It doesn’t take into account the expansion of education for females or the speed of urbanization (which are in some ways linked). The UN says they’re already baked into the numbers. But when I went and interviewed [the demographer] Wolfgang Lutz in Vienna, which was one of the first things we did, he walked me through his projections, and I walked out of the room gobsmacked. All he was doing was adding one new variable to the forecast: the level of improvement in female education. And he comes up with a much lower number for global population in 2100, somewhere between 8 billion and 9 billion.”
    Population “crises” are over-rated in any case (people are a resource!) – but even the forecasts for how many people there will be on the planet in the next thirty to eighty years are likely to be wrong. The world is changing right in front of our eyes. The problem of the (near) future isn’t one of too many people – it’s one of too few.
  4. “Instead, the signatories objected to the election of a student union president of Tibetan descent, who “was found to hold the political belief that Tibet should be free”.”
    Based on what you have read above, which country are we talking about? Not only might the answer surprise you, but it will also help you think about geopolitics, international finance and the benefits of diversification.
  5. “Most developed countries of today addressed many of their basic plumbing challenges largely through public production. China is clearly an example of the latter. It appears to have perfected the use of industrial policy to co-ordinate private enterprise even into some of the most difficult areas for private engagement. This is the case of industrial policy to both address a critical plumbing issue as well as catalysing a market. And this is what makes its achievement exceptional.”
    Law, innovation, state led industrial policy and judicial pendency, all in one lovely article by Gulzar Natarajan. Gokhale Institute recently released a report on judicial pendency in India – China has an interesting way of tackling this problem.

Links for 26th February, 2019

  1. “He wished to insure “all persons against absolute want,” but this minimum subsistence income had to be made “less desirable than the condition of those who find support for themselves.””
    Before you click on the link, would you care to take a guess about who is batting for UBI? As the article points out, the idea itself isn’t new. Nobody has come up with a clearheaded way of implementing it, though. Also, have you heard of the flypaper effect?
  2. “Any restructuring of Venezuela’s debt will therefore need to be intolerant of holdout creditors of any type because even a marginal holdout community could pose a lethal threat to the prospects for the recovery of the economy.”
    Paging Ronald Coase. Read this article to find out how to think about debt, and debt resolution in international finance – and about how different points of views are inevitably going to emerge. How to reconcile these views? Paging Ronald Coase!
  3. “There is no $3 billion that NYC gets to keep if Amazon does not show up. That “money” was a pledged reduction in Amazon’s future tax burden at the state and local level.”
    In which Tyler Cowen explains to us why Amazon not setting up in New York is bad news – not good. You don’t usually think of the word lugubrious when you think of Professor Cowen, which is worrying.
  4. “The meekness of the pangolin allowed it to survive for tens of millions of years. They are ancient. But humans, the only creatures that can threaten them, have not been kind to them in return. Of the eight species of pangolin, four are listed as vulnerable, two as endangered, and two as critically endangered. They are the most trafficked animals in the world”
    I know very little – next to nothing, in fact, about the pangolin. But reading this article helped me both learn about the pangolin, and about how without some degree of protection, pangolins might well not survive. Also contains interesting snippets about how humanity has, over the ages, tried to make sense of its surroundings. This link is via The Browser – if you like reading, and have some cash to spare, I’d recommend subscribing.
  5. “India is interested in creating a reliable transport corridor that would link it with Central Asia, Russia and Northern Europe; however, the corridor would have to pass through Pakistani territory – and strained relations between New Delhi and Islamabad stand in its way. Similarly, territorial disputes between New Delhi and Beijing have put paid to the hope of a commercial corridor being developed through Chinese territory.”
    How might India develop better relations with the Central Asian nations. Most of us would struggle to even place all the Central Asian nations on a map – but this article helps us begin to understand why the relationship is important, and the challenges associated with developing it.

Links for 25th February, 2019

  1. “So it makes sense that, when Bibi and Poldi were on the outs, the Happs and their colleagues tried to patch things up. After all, this was a couple that—whether they knew it or not—had made it through the Great Depression, two World Wars, and the millennium. Surely one little spat wouldn’t do them in.”
    Love, as it turns out, doesn’t last forever – only about eight decades or so. Interesting for a variety of reasons besides the obvious one – the efforts that were taken at reconciliation on part of the staff I found equally instructive!
  2. “Coal use in China is very high and increasing. India has been canceling coal plants as solar becomes cheaper but coal is still by far the largest source of power in India. Thus, there is plenty of opportunity to buy out, high-cost coal mines in China and India.”
    Alex Tabarrok on why buying coal might well be a great way to, well, not use coal – or at least, help others not use it. And where else might this idea be usefully applied, hmmm? And does buying always mean by paying money?
  3. “The master key is part of a new global effort to make the whole domain name system secure and the internet safer: every time the keyholders meet, they are verifying that each entry in these online “phone books” is authentic. This prevents a proliferation of fake web addresses which could lead people to malicious sites, used to hack computers or steal credit card details.”
    The internet, which we not just take for granted but are positively addicted to, has a rather weird security system underpinning it – and having read the article twice, I can’t quite say I understand it. Which is worrying, really. This is via @insoupciant on Twitter.
  4. “In the meantime, slow productivity growth may be the last thing that’s holding back wage growth. Even as they try to make up for past rises in inequality, policy makers shouldn’t forget the importance of technology and economic efficiency. But regardless of what policy does, workers may finally be getting more of the raises they’ve been missing out on for more than a generation.”
    Noah Smith on wage stagnation in the USA – what changed, when it changed and why (the reasons are many). Worth reading for a good introduction to wage rates in the USA.
  5. “Los Angeles architect Tim Smith was sitting on a Hawaiian beach, reading through the latest building code, as one does, when he noticed that it classified wood treated with fire retardant as noncombustible. That made wood eligible, he realized, for a building category—originally known as “ordinary masonry construction” but long since amended to require only that outer walls be made entirely of noncombustible material—that allowed for five stories with sprinklers.His company, Togawa Smith Martin Inc., was working at the time with the City of Los Angeles on a 100-unit affordable-housing high-rise in Little Tokyo that they “could never get to pencil out.” By putting five wood stories over a one-story concrete podium and covering more of the one-acre lot than a high-rise could fill, Smith figured out how to get the 100 apartments at 60 percent to 70 percent of the cost. The building, Casa Heiwa, opened its doors in 1996, and the five-over-one had been invented.”
    A fascinating article in Bloomberg on how most modern construction in urban America is on the back of a loophole in the rules regarding construction in USA. An unintended consequence, if you will. The pitfalls of policy-making, rules, incentives and unbridled urbanization, all in piece. Well worth your time!

Video for 24th February, 2019

Tweets for 23rd February, 2019

Links for 22nd February, 2019

  1. “We seem somehow bored with thinking. We want to instantly know. There’s this epidemic of listicles. Why think about what constitutes a great work of art when you can skim “The 20 Most Expensive Paintings in History?”I’m very guided by this desire to counter that in myself because I am, like everybody else, a product of my time and my culture. I remember, there’s a really beautiful commencement address that Adrienne Rich gave in 1977 in which she said that an education is not something that you get but something that you claim.

    I think that’s very much true of knowledge itself. The reason we’re so increasingly intolerant of long articles and why we skim them, why we skip forward even in a short video that reduces a 300-page book into a three-minute animation — even in that we skip forward — is that we’ve been infected with this kind of pathological impatience that makes us want to have the knowledge but not do the work of claiming it.”
    Have you heard of Maria Popova? This interview helps you understand who she is, and her importance in combating what I linked to a couple of days ago – David Perell’s article about the Never Ending Now.

  2. “Thanks to government backing, the state-owned company building the bridge is unlikely to default or go bankrupt. But bridges like Chishi leave local governments and developers struggling with debt, and those who live below nonplused.“If you don’t build roads, there can’t be prosperity,” said Huang Sanliang, a 56-year-old farmer who lives under the bridge. “But this is an expressway, not a second- or third-grade road. One of those might be better for us here.””
    The New York Times on bridges in China – and how there might be one too many of them. Economists have worried for many years now about how China’s economy will slowdown in the years to come, and also about how China’s economy has masked it’s imminent slowdown by building bridges, roads and entire cities when the immediate need is not apparent.
  3. “Turns out the reason was likely the same as the one behind every one of my life choices: it involved the least effort. As Frankie Huang, a writer and strategist based in Shanghai, told me over email, numbers are far easier to type for purposes like websites’ names, as compared to pinyin, the Romanised system for Chinese characters.”
    …speaking of China, Mithila Phadka explains why the Chinese prefer using numbers evreywhere possible – even preferring to use numbers rather than text for URL’s. 12306.cn is preferred to ChinaRail.com, for example.
  4. “In Study the Great Nation, you can catch up on the latest state media reports on Mr. Xi’s decisions, savor a quote of the day from Mr. Xi or brush up on “Xi Jinping Thought.” You can quiz yourself on Mr. Xi’s policies and pronouncements, or take in a television show called “Xi Time,” which is … well, you get the picture.Doing each of these activities can reward users with “study points,” which can be redeemed for gifts in future versions of the app.”
    I worry that China won’t be the only country doing this for very long – far too many leaders in far too many countries are likely to be tempted to be, um, inspired.
  5. “This conclusion, if it withstands open-minded analysis in India, does not mean that India lacks ways to punish Pakistan and motivate it to demobilize groups that threaten to perpetrate terrorism in India. Rather, it suggests that more symmetrical and covert operations would yield a better ratio of risk to effectiveness for India. There are many ways to make Pakistani military leaders conclude that the cohesion, security, and progress of their own country will be further jeopardized if they fail to act vigorously to prevent terrorism against India. Limited, precision air strikes are not India’s best option now or for the foreseeable future.”
    This is from 2015 – but as of that point, this rather well researched article points out that India may not be able to carry out precision air strikes against Pakistan – because of the threat of escalation, because of the technology available with Pakistan today, and because other ground based options may be more operationally feasible.