Also, a shout-out to Extra Credit. I discovered the channel through just a literal Google search about Bismarck, but it seems very interesting indeed. Worth a follow, if you ask me.
Month: February 2020
Jake La Motta, Digital Quarantines, Banned Books, Unintended Consequences, and p-values
(Keep an eye out in this thread about banned books for no. 12!)
Kindle, Vancouver, Onions, Government Size and Quizzing
Five articles that I enjoyed reading this week, with a couple of sentences on why I think you might benefit from reading them.
The extent to which Amazon, via the Kindle, tracks your reading habits. Most of this article did not come as a surprise to me, and of course the Kindle and the books on it are as cheap as they are precisely because Amazon makes money by tracking precisely what this article says they do. Personally, I am OK with that – but you might want to read this before you make your own decision.
Could Amazon’s monopoly over the publishing industry change the nature of books themselves? As a result of the economic pressures of the streaming industry, the length of the average song on the Billboard Hot 100 fell from 3 minutes and 50 seconds to 3 minutes and 30 seconds between 2013 and 2018. Will books be the next art form to be altered? Greer said it is possible.
“Never underestimate the power, or willingness, of tech companies to do almost anything to make a little extra money – including shifting the entire way we make music or read and write books,” she said. “They are perfectly willing for art to be collateral damage in their pursuit of profit.”
The equilibrium is being solved for in Vancouver, by observing the lack of an equilibrium in other cities. On Uber, Lyft, British Columbia, and the last mover advantage:
“A decade after Uber got its start, and eight years after Lyft changed the ride-hail model by allowing anyone to use their everyday car to pick up passengers, British Columbia thinks it has nailed how to regulate these companies, which have often slipped into the gray areas between transportation and labor laws. Call it the last mover advantage. Government officials in the province have spent years studying how other places dealt with an influx of ride-hail vehicles—and the sometimes unfortunate effects they had on local transportation systems.”
Vivek Kaul explains one application of the law of unintended consequences in this article in the Livemint, about onions.
When prices of an essential commodity, like onions, go up, state governments can impose stockholding limits. This leads to a situation where wholesalers, distributors and retailers dealing in the essential commodity need to reduce the inventory that they hold in order to meet the requirements of a reduced stock limit. The idea is to curb hoarding, maintain an adequate supply of the essential commodity and, thus, maintain affordable prices. This is where the law of unintended consequences strikes. Instead of ensuring prices of the essential commodity remain affordable, ECA makes it expensive.
Small governments aren’t necessarily great governments, but large governments don’t always do well either. But if you must choose when it comes to government, size does too matter! Via Marginal Revolution.
The plots do not support the hypothesis that small government produces either greater prosperity or greater freedom. (In reading the charts, remember that the SGOV index is constructed so that 0 indicates the largest government and 10 the smallest government.) Instead, smaller government tends to be associated with less prosperity and less freedom. Both relationships are statistically significant, with correlations of 0.43 for prosperity and 0.35 for freedom.
Samanth Subramanian on the joy of quizzing.
To attend these contests, quizzers rearrange the furniture of their lives, budgeting their time away from their families, or ensuring that they don’t travel overseas for work during a quiz weekend. I know one quizzer who switched jobs because his city’s quiz scene wasn’t active enough; I know another who scheduled his wedding to avoid a clash with a quiz. Once, while we were waiting around for a popular annual quiz to begin, a friend remarked that his wife was heavily pregnant; he hoped she wouldn’t go into labour over the next few hours. That would be unfortunate, we agreed.
“No, you don’t understand,” he said. “If my daughter’s born today, that means she’ll have a birthday party on this date every year. Which means I can never come to this quiz again.”
Applied Microeconomics
Every single class that I teach, I end with a little tradition: students must ask me five completely random questions. These questions must necessarily have nothing to do with whatever it is that I taught in that class, but that apart, they can be about absolutely anything under the sun.
There are many, many reasons for this little exercise: a fun way to wrap up class, helps students ask better questions, keeps me on my toes are just three of them. One of the questions that I was asked recently was about the whole Kunal Kamra/Arnab Goswami incident.
Here’s the quick summary of how I answered that question in class: I am not (and this is putting it mildly) a fan of Arnab Goswami, but I wish Kunal Kamra had not done what he did.
In what follows, I try to think like an economist in explaining the latter half of the summary above.
- Many more people have a heightened awareness of both Kunal Kamra and Arnab Goswami than before the incident took place, and to the extent that their professions benefit from more publicity, they gain in this one regard. (It is, of course, more complicated and nuanced than that, but this is a blog post.)
..
.. - One reason I wish Kunal Kamra hadn’t done what he did is because the ensuing publicity of the video normalizes heckling somebody on a flight/in a public space. Yes, I have seen the video in which Tejaswi Yadav was heckled by the Republic employee, and of course I wish that hadn’t taken place either. My point remains the same in both cases: it has become more acceptable to heckle somebody in a public space, and that isn’t great for civilized discourse.
In economist-y terms, the price one pays in terms of social disapprobation is lower for everybody. In plain English, it is now ok to do that, is the message that people are left with.
..
.. - Both points above taken together imply there is a higher benefit (in terms of attention on social media) to be gained at a lower cost (lower social disapproval), which should lead the economist to predict that we should see more such incidents take place in public. The point remains true no matter who is doing it to whom in terms of the (for lack of a better phrase) ideological divide.
..
.. - But then again, the fact that the supply of such incidents will rise effectively means a shifting out of the supply curve (with the quantity of such incidents on the horizontal axis and time spent being informed of these incidents on the vertical one). In English, the more such incidents are reported, the less time we will spend thinking about them.
..
.. - That will either disincentivize people from being a part of such incidents, or normalize it entirely to the point of it becoming almost banal. As a cynic, my bet is on the latter.
..
.. - Which, by my standards, is society becoming definitively worse off.
..
.. - And by that standard, my normative prescription is that one should not engage in heckling somebody in a public space…
..
.. - … and, in equilibrium, one should also make this the last article about this topic! This applies as much, of course, to the writer as it does to the reader.
Addendum: a friend to whom I had sent this post for feedback pointed out that in equilibrium with regard to point 5., people will have to be ever more attention seeking. My friend was horrified by that conclusion, and I agree on both counts.
Four articles about the creation of Germany, and one about its reunification
I had the pleasure of being in Germany for about a week in January, and it is a country that I would love to visit again. For a variety of reasons, it must be said, not the least of which is that Germany’s reputation when it comes to beer is entirely deserved. What’s more, every single German I met told me that January was probably the worst time of the year to visit if beer was the main thing on the agenda, which only makes my argument stronger.
As a side note: every single German with him I spoke about beer also said that Oktoberfest is by now vastly overrated. I would have expected that in any case, but it was a useful reaffirmation.
In February, we will learn more about Germany, but I plan to not write about the two world wars at all. Not, of course, because they are not worth writing about, but because I would expect most people reading this to know about them in any case.
Instead, I propose to link to articles about the following topics: the founding of Germany, the reconstruction of Germany after the end of the IInd World War, Germany’s (almost horrified) fascination with inflation today, and conclude with a rather longish article about my impressions of Germany from my visit there, and what I hope to learn more about as a consequence. If you feel very strongly about any topic that should be included in addition to these, please let me know!
Germany, as perhaps most of you reading this already know, became Germany the nation – in the sense that we understand it today – only in 1871. Whether this was in response to rising feelings of nationalism in other parts of Europe, or because of Otto Van Bismarck, or a combination of the two will forever be a matter of surmise.
In the Gründerzeit period following the unification of Germany, Bismarck’s foreign policy as Chancellor of Germany under Emperor William I secured Germany’s position as a great nation by forging alliances, isolating France by diplomatic means, and avoiding war. Under Wilhelm II, Germany, like other European powers, took an imperialistic course, leading to friction with neighbouring countries. Most alliances in which Germany had previously been involved were not renewed. This resulted in the creation of a dual alliance with the multinational realm of Austria-Hungary, promoting at least benevolent neutrality if not outright military support. Subsequently, the Triple Alliance of 1882 included Italy, completing a Central European geographic alliance that illustrated German, Austrian and Italian fears of incursions against them by France and/or Russia. Similarly, Britain, France and Russia also concluded alliances that would protect them against Habsburg interference with Russian interests in the Balkans or German interference against France.
This is what Germany looked like at the outset:
At its birth Germany occupied an area of 208,825 square miles (540,854 square km) and had a population of more than 41 million, which was to grow to 67 million by 1914. The religious makeup was 63 percent Protestant, 36 percent Roman Catholic, and 1 percent Jewish. The nation was ethnically homogeneous apart from a modest-sized Polish minority and smaller Danish, French, and Sorbian populations. Approximately 67 percent lived in villages and the remainder in towns and cities. Literacy was close to universal because of compulsory education laws dating to the 1820s and ’30s.
And there was a reason this mattered. Germany was about to change in a whole different variety of ways.
The person most responsible for this was, of course, Otto Van Bismarck. The entire Wikipedia article makes for fascinating reading, not just the excerpt below.
Imperial and provincial government bureaucracies attempted to Germanise the state’s national minorities situated near the borders of the empire: the Danes in the North, the Francophones in the West and Poles in the East. As minister president of Prussia and as imperial chancellor, Bismarck “sorted people into their linguistic [and religious] ‘tribes'”; he pursued a policy of hostility in particular toward the Poles, which was an expedient rooted in Prussian history. “He never had a Pole among his peasants” working the Bismarckian estates; it was the educated Polish bourgeoisie and revolutionaries he denounced from personal experience, and “because of them he disliked intellectuals in politics.”Bismarck’s antagonism is revealed in a private letter to his sister in 1861: “Hammer the Poles until they despair of living […] I have all the sympathy in the world for their situation, but if we want to exist we have no choice but to wipe them out: wolves are only what God made them, but we shoot them all the same when we can get at them.” Later that year, the public Bismarck modified his belligerence and wrote to Prussia’s foreign minister: “Every success of the Polish national movement is a defeat for Prussia, we cannot carry on the fight against this element according to the rules of civil justice, but only in accordance with the rules of war.”With Polish nationalism the ever-present menace, Bismarck preferred expulsion rather than Germanisation
One of the best books that I read about the history of Europe in this period is a book called The War That Ended Peace, by Margaret Macmillan. Read the book, but begin with this review:
After Hitler’s war, though, English-speaking historians were more likely to see a pattern of German aggression stretching back before 1914, and in 1961 the Hamburg historian Fritz Fischer made the controversial case (bitterly opposed by most German historians) that Germany had mounted a pre-emptive strike. The “Fischer thesis” became the orthodoxy for a while, but has been plausibly challenged in recent years by historians who have pointed the finger almost everywhere except at Berlin. The current consensus seems to be that there is no consensus. There is, finally, the question of the decisions made by a score or so of men (and they were all men) in half a dozen capitals.
As noted above, we now fast forward to the year 1990 (or thereabouts). There is much more to German reunification than the fall of the Berlin Wall.
The East German government started to falter in May 1989, when the removal of Hungary’s border fence with Austria opened a hole in the Iron Curtain. It caused an exodus of thousands of East Germans fleeing to West Germany and Austria via Hungary. The Peaceful Revolution, a series of protests by East Germans, led to the GDR’s first free elections on 18 March 1990, and to the negotiations between the GDR and FRG that culminated in a Unification Treaty.[1] Other negotiations between the GDR and FRG and the four occupying powers produced the so-called “Two Plus Four Treaty” (Treaty on the Final Settlement with Respect to Germany) granting full sovereignty to a unified German state, whose two parts were previously bound by a number of limitations stemming from their post-World War II status as occupied regions.
Next Wednesday, I’ll link to five articles about the reconstruction of post-war Germany and associated topics.
Understanding Microsoft Better
One reason that I will probably never shift over to the Apple ecosystem is simply because I am so accustomed to using Windows. Which is not to say that I am not tempted: of course I am. But sit me in front of a Windows PC, and I can be working right away (insert Windows 8 joke here) – shifting to a Mac is tempting, but I lose a couple of days just figuring out what is where. Windows is literally part of my muscle memory now (insert Windows 8 joke here too).
And it’s not just me! Microsoft is, for better or for worse, omnipresent in so many people’s lives today, and that’s primarily why Bill Gates is as wealthy as he is.
But how? How did Microsoft get to be Microsoft?
“Microsoft entered the operating system (OS) business in 1980 with its own version of Unix called Xenix but it was MS-DOS that solidified the company’s dominance. IBM awarded a contract to Microsoft in November 1980 to provide a version of the CP/M OS to be used in the IBM Personal Computer (IBM PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products which it branded as MS-DOS, although IBM rebranded it to IBM PC DOS. Microsoft retained ownership of MS-DOS following the release of the IBM PC in August 1981. IBM had copyrighted the IBM PC BIOS, so other companies had to reverse engineer it in order for non-IBM hardware to run as IBM PC compatibles, but no such restriction applied to the operating systems. Microsoft eventually became the leading PC operating systems vendor”
So much so that the PC was ubiquitous. Almost part of the furniture!
So potent was the PC — especially the Windows PC — two decades ago, that The New York Times commented: “Computer use has become so widespread, and Microsoft’s grip on the industry so powerful, that the introduction of Windows 95 took on the decibel level of a national event, almost a new August holiday that might be dubbed Bill Gates Day.”
In effect, for many many years, especially for the layman, Microsoft was Windows, and Windows was Microsoft. But that is no longer true, and has not been true for years.
The story of Windows’ decline is relatively straightforward and a classic case of disruption:
The Internet dramatically reduced application lock-inPCs became “good enough”, elongating the upgrade cycle
Smartphones first addressed needs the PC couldn’t, then over time started taking over PC functionality directly
It’s just that it took some time for Microsoft itself to realize this:
My well-chronicled frustration with Microsoft’s corporate strategy comes down to one point: I don’t think any company should have both horizontal (i.e. services) and vertical (i.e. devices) businesses. It creates conflicting incentives: a horizontal business should be great on every platform, while a vertical business should be differentiated.
And Nadella’s approach has been key:
Microsoft existed to “empower every person and every organization on the planet to achieve more.” Though vague enough to deserve a place in the pantheon of corporate sweet nothings, the new mission offered a semantic shift that would define Microsoft for the five years that followed: It would become a people company instead of a product company.
I hope to post more about the company, especially the fifth link, because understanding how Nadella got Microsoft to completely reinvent itself is worthy of deeper exploration.
India and her cities
In the previous week, Livemint published an excellent article, titled “Why India has the fastest-growing cities“. Today’s post is a rumination on that article, and associated thoughts.
Urbanization, I unequivocally hold, is an good thing. This belief has come about as a consequence of learning development economics over many years. It has also come about because I have had the opportunity to read many great books about the topic, of which I think Ed Glaeser’s ‘The Triumph of the City‘ is by far the best one.
The reason I like that book so much is because it is an unapologetic paean to urbanization. It not just defends urbanization, it actively reveres it. And there is something to be said for that argument. Cities, when designed well, are worth revering! Watch this lovely TED talk by Jeff Speck, for example. The talk is ostensibly about how to make cities more walkable, but it covers a lot more ground than just that.
Here’s the most important reason, I think, that cities ought to be revered. It is because of their most important feature, and their most appropriate definition: they are labor markets, first and foremost.
What are cities?
Cities are simply a lot of people packed into a relatively tight space, most whom happen to be open to new job opportunities. That’s a paraphrased definition, and it is certainly not mine. The best way to truly understand what this means in practice is to read a lovely (but by Indian standards, prohibitively expensive) book by Alain Bertaud, called Order Without Design.
As I said, the book is expensive, but I can recommend three freely available online resources that you might want to read, listen and watch instead.
When I quit my job in the analytics industry in 2009, it was because I wanted to switch over to academia. Switching over to academia meant that I had to come to Pune. Now, Pune is my hometown, and I love it to bits, but the reason I had to come to Pune is because there were many more jobs in academia in this city than any other city in India.
Conversely, if you are looking to set up a college, a student exchange program or a university, Pune is the best place to do so, precisely because of the paragraph that precedes this one.
That’s what Alain Bertaud means when he says this:
“Sometimes when I read the papers of my fellow urban planners, I get the sense that they think cities are Disneyland or Club Med. Cities are labor markets. People go to cities to find a good job. Firms move to cities, which are expensive, because they are more likely to find the staff and specialists that they need. If a city’s attractive, that’s a bonus. But basically, they come to get a job.”
“All the jobs are in the cities” is a phrase that you will hear often enough in India, but reading Alain Bertaud’s book helps you understand that the statement is actually tautological.
But, if you think about it, and to the extent that you agree with what is written above, we’re committing a moral crime by not glorifying urbanization. Strong words? Maybe. But, I would argue, true words as well.
Urbanization in India
But then how come urbanization in India is only 31%? If all the jobs are in the cities, and people in India are crying out for jobs, why aren’t they all moving to India’s cities?
There are three responses to that.
First: we make it difficult, expensive and to begin with, potentially unremunerative for people to migrate to India’s cities. Difficult because of a whole host of laws and regulations that hamper and hinder the development of efficient urban labor markets. Expensive because of poor urban planning which means housing and transport are not cheap for first generation immigrants into India’s cities. And potentially unremunerative because a lot of our welfare schemes require their targeted beneficiaries to be citizens of rural, rather than urban India.
Second, they are too moving away from villages! Hop into an Uber in your city, and take the time out to speak to your driver. More likely than not, your driver is likely to have the following characteristics. He will be a he, he will have a parcel of land back home in his native village, and he’ll have come to the city in search of a job. That he is a he is an indictment of our culture and our labor market. That he has a parcel of land back home is an indictment of our lack of reforms when it comes to land. And the fact that he is working as an Uber driver (services) rather than in a factory (manufacturing) is an indictment of our lack of reforms when it comes to labor and land market laws. But, to loop back to the start of this paragraph, people are certainly leaving India’s villages.
Third, in spite of it being difficult, expensive and potentially unremunerative, they are migrating, but to areas just outside our country’s cities. And therein lies a trifecta of tragedies: of policy design, of incorrect measurement and therefore of a poor urban experience.
The Livemint article…
… has been written by three people: Kadambari Shah, Vaidehi Tandel and Harshita Agarwal. All three of them work at the excellent IDFC Institute, located in Mumbai. One reason I use the word excellent that is relevant to today’s blog post is the fact they produced a very interesting report, a somewhat abridged version of which is this article, that came out in Livemint a while ago.
In that article, they gave us India’s original definition of urbanization, as it was defined in the year 1961.
“India’s three-tiered census definition of ‘urban’—at least 5,000 inhabitants, density of 400 people per sq. km or more, and at least 75% of male working population engaged in non-farm activities—was first framed in 1961 by then census commissioner Asok Mitra.”
By this three-tier definition of urbanization, we’re at 31%. That is, roughly one-third of our population is urbanized, and the remaining is not.
But does that mean that the remaining is rural (and somehow agrarian)?
No!
Because of what we discussed above, in the section “Urbanization in India”, folks migrate out of villages, but not to India’s cities. They migrate to areas just outside of India’s cities: the so-called satellite towns.
So what’s the big deal?
Well, if you stay out of the local municipal corporation’s limit, it is not obligated to provide you the following services: “town planning, slum improvement, public amenities including street lighting, parking lots, bus stops, solid waste management, building regulations and fire services.”
Sure, of course not, you might think. It won’t be, for example, the Pune Municipal Corporation’s job, but that of the satellite town’s corporation. Ah, but because it is a town (a census town, to use the government’s definition), it will not be covered under the definition of an Urban Local Body (ULB). It will, instead, be a Regional Local Body (RLB).
And the RLB doesn’t need to provide (you might say cannot provide, given financial and other capacity constraints) the services mentioned above.
So What?
So:
- Urbanization is good, even great
- We don’t have enough of it in India
- Because we make it difficult for people to move
- When they do move, we make it difficult for them to find jobs
- They still move, but we don’t measure the movement well enough
- We don’t measure it accurately enough because our approach to the measurement is wrong, and woefully out of date
- As a consequence, when (and if at all) folks attempt to urbanize, they don’t get the kind of urban amenities that they so desperately need.
- All of this is assuming, of course, that urban amenities are provided, and ably so, by municipal corporations – but a blog post should only be so long, hey?
On the first Monday of March, we’ll come back to the topic of urbanization and India once again.
Key Takeaways from the Indian Budget, 2020
Indonesia, Online Scams, Better Conferences, The Narrow Corridor and Inflation in India
Tweets that were especially informative for me, and hopefully for you as well!
EconForEverybody 