Month: February 2019

Links for 8th February, 2019

This will be an intertwined, five part series, born out of a rabbit hole I fell into, and spent an evening over.

  1. “As we try to understand the world of the next three decades, we will desperately need economics but also political science, sociology, psychology, and perhaps even literature and philosophy. Students of each should retain some element of humility. As Immanuel Kant said, “Out of the crooked timber of humanity, no straight thing was ever made.””
    Fareed Zakaria isn’t too impressed with the state of economics today, and says that a more holistic approach is needed. Holistic is a fancy-schmancy word that is far too over-used – but essentially, his point is we need to read wider (ahem), and be rather more aware of the fact that math is way overrated.
  2. “Managing globalization, supporting a healthy middle class in an era of artificial intelligence, and incentivizing the preservation of the planet must be among the central challenges, if not the central challenges, of our era. If not from economic analysis, it is hard to see where resolutions will come from. Everyone, whether they like economics and economists, or whether they resent and distrust current economics, has a stake in the discipline being relevant and successful going forward.”
    Yes, but what about the opportunity cost of abandoning economic theory? That in effect, is what Larry Summers says in this essay, penned in response to the original. Sure, economics has its flaws, and sure, it has had to evolve over time, but surely that is a good thing?
  3. “The problem, however, is that there is also the unprofessional How Tax Reform Will Lift the Economy: We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital. It seems that every Yellen is offset by Holtz-Eakin, every Rajan by a Taylor, every Shiller by a Barro, every Krugman by a Boskin, and so on. And how is a Fareed Zakaria or a Binyamin Appelbaum supposed to disinguish those who have knowledge from those who have only ideology, or indeed from those who can and do switch their approval and disapproval of policies on and off upon changing demands from changing political masters?”
    Well, yeah, maybe, says Brad DeLong, in response to the question posed by Larry Summers above, but Fareed may have a point, still. Economists are nowhere near as consistent as they ought to be, and that ought to count against us.
  4. “Rather than suggesting coherent policies, Moore and Laffer seem to hope that a much more rapidly growing economy will provide the resources to address all these problems, and they seem to believe that this growth will follow ineluctably from the lower taxes and deregulation that lie at the heart of Trump’s agenda. It would be wonderful if that were possible. Maybe rah-rah partisans really believe it is. But more likely, it is just wishful thinking. ”
    N. Gregory Mankiw highlights some of the problems that Brad DeLong gets so upset about in a wonderfully provocative article.
  5. “On the other hand, economists do turn out to know quite a lot: they do have some extremely useful models, usually pretty simple ones, that have stood up well in the face of evidence and events.”
    Paul Krugman, who writes as well as anybody else, ever, in the field of economics – if not better – makes the point that simple economic models are surprisingly easy to understand and teach, and they work.

Links for 7th February, 2019

  1. “Using a series of network theory algorithms, Jen and Freire found that China’s influence on the world is now as sizable as the combined influence of the US and EU. The shift occurred following the financial crisis in 2008, which saw the US’s impact on average global GDP shrink from just over 40 per cent between 1989-98 to half that between 2009-18”
    FT Alphaville reports on analysis that shows just how big, and therefore important, China is in the global economy. Even more importantly, not all parts of the world will be equally affected by the Chinese slowdown/recession. Europe, it turns out, will likely be the worst hit.
  2. ““It would be kind of boring if everything was the same,” she said through a thicket of pink and green strobe lights at the bar, which sits in an upper-level parking lot. “That’s why this place is so valuable to people like us.””
    My apologies for the double-double quotes, but that excerpt encapsulates for me the dilemma underlying Singapore’s very existence. I loved the ten days or so I spent there, but maybe, just maybe, Singapore is too perfect? On the other hand, what a nice problem to have.
  3. “We became free of colonial rule in August 1947; and adopted a republican Constitution in January 1950. Seven decades later, we may be more democratic than when the British left these shores. But we are certainly less democratic than what the framers of our Constitution hoped us to be. Indeed, the faultlines I have identified here have persisted regardless of who is in power, at the Centre or in the states. They need to be addressed, and remedied, if we are to be more worthy of the ideals bequeathed us by the founders of our Republic.”
    Religious division, social inequality, environmental degradation and the degradation of public institutions are the faultlines that Ramchandra Guha speaks of – an article worth pondering upon.
  4. “All of this used to be obvious enough, but in the age of Alexandria Ocasio-Cortez it has to be explained all over again. Why does socialism never work? Because, as Margaret Thatcher explained, “eventually you run out of other people’s money.””
    Bret Stephens from the NYT lays out the reasons why socialism tends to not work – ever.
  5. “It seems clear that more people are receiving income and tax from activities that are outside traditional jobs. But other than ride-sharing jobs, just how to characterize these jobs remains murky, and the question of what rules and regulations might apply to such income-earning activities remains murky, too.”
    Care to guess which country we’re talking about before you click on this link?

Links for 6th February, 2019

  1. “Drawing about 250 cubic kilometres (sic) per year – more than a fourth of the global total – India is the world’s largest user of groundwater. More than 60 percent of India’s irrigated agriculture and 85 percent of drinking water supplies are dependent on groundwater, according to World Bank estimates”
    The Madras Courier writes on India’s impending – some would dispute the use of that word – water crisis. We simply don’t take it seriously enough, and if you want a good application of the importance of property rights, the power of pricing, and the difficulty of formulating effective policy from the top down, this is a good read.
  2. “…as Lardy suggests, in the absence of an extraordinary course reversal in government policies, as the role of the state impinges on private dynamism, growth in China will likely slow substantially over the medium term. Even with a major policy shift that provides greater scope for (domestic and foreign) private activity, a substantial pickup in growth would surprise us more than a continued decline.”
    The excellent Money and Banking blog reports on the bearish case for China in the medium to long term, on the basis of a close examination of it’s macroeconomic performance and policies of the past thirty years or so. One thing to try and understand about China is whether there is a recession underway or not in China (almost certainly, in my opinion). The second thing to try and figure out is why. That’s what this is about.
  3. “Russia sold twice as much weaponry to African countries in 2017 as it did in 2012, according to the Stockholm International Peace Research Institute. Between 2013 and 2017, Russia supplied 39 per cent of Africa’s imported arms — compared with 17 per cent from China and 11 per cent from the US. ”
    In retrospect, hardly surprising – although I must admit I didn’t know much about this. Also, reading this article gave me my word for the day: Francafrique. It’s a term worth Googling.
  4. “Anyone considering starting a marketplace business should be aware of the types of marketplaces and the potential network effects that they could benefit from. Those who are already in the thick of building a marketplace or market network should create products and features that enhance and accelerate those network effects that can propel their success forward.”
    Any microeconomics student in India today knows about competing for market share. How many, I wonder, know about competing to build the market itself? This rather long article focuses on building out your thinking about building a market – and the nuances involved in thinking along these lines.
  5. “If all the past US intelligence estimates could be declassified, I suspect readers would find a wealth of accurate predictions, particularly with regard to technical developments in the WMD programs, but far fewer when it came to prognosticating what the North Korean leadership would do. That’s the point of pursuing face-to-face diplomacy with Pyongyang, to get a clearer picture of what is possible and what isn’t as well as to learn more about what makes the North Koreans tick.”
    Or put another way, predicting production is easy. Predicting personalities – not so much. A good read to understand the problems of trying to figure out what North Korea is up to – and teasing out the predictability (or lack thereof) of the human aspect.

Links for 5th February, 2019

  1. “If there is one number that can make the edifice of budgetary arithmetic collapse and impair the growth prospects, it is the movement of crude oil prices. If for nothing else, but simply reduce the vulnerability of the fisc, this should be done. For, it is the “resource deficit” of the country which is the single biggest threat to sustained growth of 9%”
    How might a new age budget look like? Haseeb Drabu takes a look at the ways – five of them. You’ll be reading this by the time the budget has come out, of course, but it still makes sense to read this in order to think about how the budget needs to be structured.
  2. “The 0.9 per cent year-on-year (YoY) growth in the adjusted net profit of 385 companies, which have released their results for the third quarter (Q3) of the current financial year so far, does not inspire much confidence. If financials and energy companies are removed from the sample, net profit has grown 6.4 per cent in Q3 — the worst performance in five quarters.”
    I’d recommend that you read this article to either get a sense of how to judge the macroeconomic environment (partially!) on the basis of stock market performance, or even better, if you are new to finance, read this with an Investopedia tab open alongside.
  3. “Passenger vehicle sales in China fell for the first time last year since the early 1990s due to a cut to government tax breaks and wider economic sluggishness. Hyundai, which was once the third-largest automaker in China together with Kia, is now sorting out overcapacity as its sales in China have not picked up much since being hit by the anti-Korean consumer backlash in 2017.”
    The FT provides additional information on the slowdown in China – and the link on the anti-Korean backlash is also worth reading.
  4. “From the start of 2012 to the end of 2016, China produced nearly three times as much cement as the US did in the entire 20th century.Much of that investment has gone to waste. A recent study by China’s Southwestern University of Finance and Economics estimates that more than one in five Chinese homes in urban areas, or about 65m apartments, are empty. And if demography is destiny, China’s prospects are bleak. Between 1980 and 2012, China added about 380m people to its working-age population. But that number has been shrinking for the past five years and is expected to fall by a third, or about 220m people, in the next three decades.”
    More grist to the China recession mill, from the FT. The numbers are truly breathtaking – especially that quote about cement!
  5. “China’s fertility rate has officially fallen to 1.6 children per woman, but even that number is disputed. Yi Fuxian, a professor at the University of Wisconsin-Madison, has written that China’s government has obscured the actual fertility rate to disguise the disastrous ramifications of the “one child” policy. According to his calculations, the fertility rate averaged 1.18 between 2010 and 2018.”
    The NYT picks up from where the FT left off, and tells us about the impending population crisis in China – that there may soon be too few  people in China, not too many.

Links for 4th February, 2019

  1. “The classic example in language is that a doctor is male and a nurse is female. If these biases exist in a language then a translation model will learn it and amplify it. If an occupation is [referred to as male] 60 to 70 percent of the time, for example, then a translation system might learn that and then present it as 100 percent male. We need to combat that.”The Verge interviews Macduff Hughes, the head of Google Translate. Worth reading for understanding applications of AI, the amount of bias that exists in our culture (along various dimensions), and the garbage in, garbage out problem.
  2. “This was a great year for iPhone customers, but perhaps not for Apple itself… Technology is outpacing customer need and phone lifespans are ever-longer, which we saw hurt Apple’s bottom line.”Keeping a tab on Apple makes sense, and this is a good place to start. Apple has had a difficult year for many reasons, but the most important reason has been a multi-year phenomenon – Apple has gotten too good for its own good.
  3. Ben Thompson tells it like it is:
    “While I know a lot of journalists disagree, I don’t think Facebook or Google did anything untoward: what happened to publishers was that the Internet made their business models — both print advertising and digital advertising — fundamentally unviable. That Facebook and Google picked up the resultant revenue was effect, not cause. To that end, to the extent there is concern about how dominant these companies are, even the most extreme remedies (like breakups) would not change the fact that publishers face infinite competition and have uncompetitive advertising offerings.”
    Worth reading for an excellent discussion of the law of conservation of profits, the Buzzfeed firings that took place recently, and the future of media.
  4. As Tyler Cowen never tires of saying, “solve for the equilibrium“:
    “The content industry spent years trying to battle piracy via all manner of heavy handed-tactics and lawsuits, only to realize that offering users inexpensive, quality, legitimate services was the best solution. Many users flocked to these services because they provided a less-expensive, more flexible alternative to traditional cable.Now, if the industry isn’t careful, it could lose a sizeable chunk of this newfound audience back to piracy by making it overly expensive and cumbersome to access the content subscribers are looking for.”
    Worth reading for why piracy may yet re-emerge, a good understanding of market entry and exit, and competition and its implications.
  5. “The market valuation of Baidu, Alibaba, and Tencent (BAT) is more than a quarter of India’s GDP.”
    What a stunning statistic. The rest of the blog post is a good way to acquaint yourself with how China has seen it’s internet ecosystem grow, and where India could improve.

Links for 3rd February, 2019

  1. There’s China, and there’s Xi Jingping.
  2. Against Stubborn Attachments.
  3. Study history, econ nerds!
  4. An excellent take on India’s e-commerce.
  5. On the (need for) the Nissan Renault partnership

Links for 2nd February, 2019

  1. Age and, for the moment, tennis.
  2. On building a human brain.
  3. On trying to capture the “Diwali effect” in IIP.
  4. On Chinese sci-fi. What would be good Indian sc-fi?
  5. Shhhhh…..

Links for 1st February, 2019

  1. On the economics of foot binding (great read!)
  2. The lone genius myth.
  3. The Guardian on the implications of a plant based diet.
  4. Running the numbers on the Uighur detention camps.
  5. China’s maritime policy in the era of Xi Jingping.