Links for 16th May, 2019

  1. “The other risk of a huge centrally planned response to climate change is that of a huge centrally planned response to anything: clumsy megaprojects chosen for their political or bureaucratic acceptability rather than because they deliver the biggest results for the lowest cost.”
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    In which the ghost of Pigou is found to be giving a contented chuckle. Pigouvian taxes is a term you should learn about, and read this article to find out how and why the idea continues to resonate.
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  2. “With casuals being the next wave of streaming adopters, their impact will increase. But despite being ‘more valuable’ they will also reduce royalties, because more streams per user means revenue gets shared between more tracks, which means lower per-stream rates. The music industry thus has an apparently oxymoronic challenge: it is not in its interest to significantly increase the amount of media consumption time it gets per user, but instead it will be better served by getting a larger number of people listening less!Current market trajectory points to more streams per user, which – for subscriptions, where royalties are paid as a share of revenue – means lower per-stream rates.”
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    Have you read The Long Tail, by Chris Anderson? Read it (or about it), and then read this article to learn about the problems that will arise in a world full of long tails.
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  3. “The answer is no and yes. The views of Piketty and Blanchard can indeed be reconciled, because they are talking about different interest rates. While Blanchard focuses on the rate on low-risk government bonds, Piketty is concerned with the return on risky capital investments. Because the two interest rates are separated by a risk premium of roughly five percentage points, it is entirely possible for the rate on government bonds to be below the economic growth rate, while the rate on capital is above it.”
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    Barry Eichengreen on the return (as he puts it) of fiscal policy. A short article, but a useful one to understand macroeconomics better.
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  4. “When historians in the distant future look back at our era, the name Alfred Sauvy may appear in a footnote somewhere. Sauvy was a French demographer who coined the term “third world” in a magazine article in 1952, just as the Cold War was heating up. His point was that there were countries not aligned with the United States or the Soviet Union that had pressing economic needs, but whose voices were not being heard.”
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    The always excellent Tim Taylor on the nomenclature for “third world” countries – how it came about, what it means, how it might change going forward – and ends with a clarification about how it may not have been what we have thought all along!
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  5. “I have to tell you, I’m a pretty lazy person, I don’t work more than 40 hours per week. What I’ve discovered helps me is to not compartmentalize – because if I thought of my life as, “there’s teaching, there’s research, there’s writing on my blog, there’s X, Y and Z…” then you very quickly run out of hours in the day. But almost everything I do spills over into almost everything else I do. So I’m constantly looking for ways to take whatever I do and get it to serve three or four or five purposes.”
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    A fascinating interview with Aswath Damodaran – a person you must know more about if you want to study finance. The entire interview is worth reading – but this excerpt is for you even if you are not a student of finance – his view about what qualifies as work, and what doesn’t.
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Links for 10th May, 2019

  1. “Thus in his famous 1969 paper “Information and Efficiency-Another viewpoint” (reprinted in his The Organization of Economic Activity, vol.2, Blackwell, 1988), Harold coined the notion of the “nirvana fallacy” in criticising Kenneth Arrow’s claim using the Arrow-Debreu framework (in his Economic Welfare and the Allocation of Resources for Invention) that with ‘market failure’, government intervention could make markets more efficient. Demsetz argued that this assumed a perfect government whilst failing to consider if the actual intervention could be perfect. “Those who adopt the nirvana viewpoint seek to discover discrepancies between the ideal and the real and if discrepancies are found, they deduce the real is inefficient.”
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    Deepak Lal on the passing of two economists, one of whom I am enjoying reading more of these days.
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  2. “So while Spotify might get the better of Apple in this particular fight, it’s no angel. Its excessive collection of user data forced its CEO to apologize after a consumer backlash in 2015. It is one of several targets of a complaint under Europe’s stringent new GDPR data privacy rules. And let’s not forget that its own business model tends toward market dominance. An antitrust victory in the battle with Apple would be welcome for Spotify shareholders; for suffering musicians it would mean far less.”
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    If you have been following the Spotify – Apple debate/drama about Apple taking a 30% cut  – this is an article that does a good job of arguing both sides of the story.
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  3. “What is the best way to protect and restore this public commons? Most of the proposals to change platform companies rely on either antitrust law or regulatory action. I propose a different solution. Instead of banning the current business model — in which platform companies harvest user information to sell targeted digital ads — new legislation could establish a tax that would encourage platform companies to shift toward a healthier, more traditional model.”
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    A Pigouvian solution to a modern day problem?
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  4. “But Mr. Munger was there to talk about anything on his mind, which is just about everything. His favorite activity, he says, is figuring out “what works and what doesn’t and why.””
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    Anything that helps you understand how Charlie Munger thinks is worth a read. Clicking through tot hat link will give you a full transcript of the interview, and I’d recommend you do so.
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  5. “Preventing an impact is possible — theoretically. Humans need only change the asteroid’s velocity by a few centimeters per second; over the course of several orbits around the sun, that change adds up to push the rock fully in front of or behind the Earth. But the proposed methods for deflection are expensive and untested.”
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    Not that I mean to get your weekend off to a bad start