Five articles from economists about tackling the crisis

  1. Arnold Kling advises us to not worry about “going back to normal”. It’s about winning the war, no matter what it takes. There will be a new normal at the end of it, and no one today knows what that normal will be like. Focus on winning!

    “We are acting as if our biggest worry is how to get back to our “normal,” pre-war economy. Our biggest challenge instead is to win the war, after which we will transition to an economy that looks considerably different, just as the post-WWII economy was quite different from the pre-war economy.”

  2. I found this fascinating: on how the RBI is working to keep our financial system alive.

    As the country goes on a self-imposed lockdown to fight the coronavirus contagion, a crack team of 150 people, in hazmat suits, is keeping India’s financial system up and running since March 19 from an unknown location in a completely quarantined environment. These 150 people, including 37 officials from critical departments of the Reserve Bank of India (RBI), such as debt management, reserve management and monetary operations, and third-party service providers, are now in charge of the business continuity plan of the central bank, designed in a way that could help create a benchmark for such exigencies in the future as well.

  3. Greg Mankiw comes up with a form of social insurance. Here’s a challenge for you – how would you game this system?

    Let’s send every person a check for X dollars every month for the next N months. In addition, levy a surtax in 2020–due in April 2021 or perhaps spread over several years–equal to N*X*(Y2020/Y2019), where Y2020 is a person’s earnings in 2020 and Y2019 is a person’s earnings in 2019. The surtax would be capped at N*X.

  4. Via MR, how about pausing time?

    Sometimes, the best solutions to big problems are very simple. Regarding the current outbreak of COVID-19, I propose a solution that—on the surface—might seem preposterous, but if one manages to stay with it and really think through the potential benefits, then it emerges as a much more credible course of action.I propose temporarily stopping time. This means that today’s date, Tuesday, March 17th, 2020, will remain the current date until further notice. This also means that everything that happens in time (e.g. mortgage due dates, payrolls, travel bookings, stock market trading, contractor gigs, concerts, sporting events) will be paused. It also means that all of these events remain on the books, and will continue as planned once time is resumed.

     

  5. And on the same point, Tim Taylor:

    “Here, I want to focus a bit on a theme that comes up in a number of the essays: the idea that sensible economic policy can put the economy in the freezer for a few months, and the pull the economy out of the freezer, thaw it out, and restart it. I find myself in the awkward position here of largely being in agreement with this policy as a short-run approach, and at the same time also feeling that the ultimate consequences of the policy are going to be more difficult than a number of authors are envisaging. ”

    (An aside: WordPress formatting has already cut years from my life, and will continue to do so. That last bit is, to be clear, an excerpt. That is clear to me, to you – but not to WordPress)

A paper by Barro et al about mortality and economic performance in 1918

A working paper from Barro et al about the potential effects of the coronavirus on mortality and economic activity. I learnt of the paper via Tim Taylor’s blog. Quick points of note below:

  • Their estimate is of 39 million deaths, while Laura Spinney says anywhere between 50 million to a 100 million. Basically, we don’t know – but a lot!
  • I learnt of this data source. India is missing, but there is still a lot to learn.
  • Assuming they get their 39 million number right, they say that India saw 16 million deaths. About 43% of all deaths worldwide, as per their estimate.
  • Roughly 1/3rd of the world got the flu. 2% mortality rate of all people on the planet, 6% of those who got it.
  • Below is the conclusion from their regression analyses:

 

Further, this death rate corresponds in our regression analysis to declines in the typical country by 6 percent for GDP and 8 percent for consumption. These economic declines are comparable to those last seen during the global Great
Recession of 2008-2009. The results also suggest substantial short-term declines in real returns on stocks and short-term government bills. Thus, the possibility exists not only for unprecedented numbers of deaths but also for major global economic dislocation

This is a working paper, subject to change, and the data is unreliable at best. But the bootom line is that this will at least be as bad as 2008-2009 in terms of economics, maybe worse. And let’s hope and pray that given our capability to deal with health issues, relative to 1918, our mortality rates are nowhere near as bad.

Social distancing matters.

Econ101: Policy Responses to a Pandemic

If you haven’t played it already, go ahead and give this game a try: The Fed Chairman Game. I have a lot of fun playing this game in class, especially with students who have been taught monetary policy. It usually turns out to be the case that they haven’t understood it quite as well as they think the have! (To be clear, that’s the fault of our educational system, not the students.)

But the reason I started with that is because the game always throws up a scenario that mimics a crisis, and asks you what you would do if you were the Chair of the Fed.

In this case, policymakers the world over are now staring at a very real crisis, and they need to be asking themselves: what should we do?


 

There are two broad answers, of course: monetary policy, and fiscal policy.

The Federal Reserve has cut interest rates to zero, and while it has other tools to stimulate the economy, a crisis like this requires fiscal as well as monetary responses. The legislation passed thus far has been important, but another round of fiscal policy will be required immediately to fully address this crisis.

A robust fiscal response can provide income support to households, ensure broad and continuous access to safety net programs, provide incentives for employers to avoid layoffs, provide loans to small businesses, give liquidity cushions to households and firms, and otherwise stimulate the economy.

That’s a write-up from Brookings. The specifics follow in that article, but the article makes the point that more of the lifting will need to  be done by fiscal, rather than monetary policy. And that is true for a variety of reasons,  which the article does not get into, but long story short – fiscal, more than monetary.

But, ok, fiscal policy of what kind? Should we give money to firms or to workers? Here’s Paul Krugman with his take…

And here’s Alex Tabarrok with his response:

So what’s the correct answer? Well, as we’ve learnt before, and will learn again, macro is hard! In an ideal world, all of the above, but as is manifestly clear, we are not in an ideal world. If we must choose between giving money to firms or to people, to whom should we give it? My opinion? People first, businesses second. This is, of course, a US centric discussion, what’s up with India?


 

Here’s, to begin with, a round-up from around the world – you can search within it for India’s response thus far.

Calls are getting louder for governments to support people and businesses until the new coronavirus is contained. The only questions are how much money to shovel into the economy, how to go about doing it, and whether it will be enough.

Already, officials from Paris to Washington DC are pulling out the playbook used in Asia for slowing the spread of Covid-19: they’re restricting travel and cracking down on public gatherings. While those measures have the potential to reduce deaths and infections, they will also damage business prospects for many companies and cause a synchronized worldwide disruption.

Here’s the FT from two weeks ago about the impending slow down:

Venu Srinivasan, whose company TVS is one of India’s largest makers of motorcycles and scooters, said the business had lost about 10 per cent of production in February owing to a lack of Chinese-made parts for the vehicles’ fuel injection system. He added that TVS has now managed to find a new supplier.

But Mr Srinivasan said he was bracing for India’s recovery to take longer than anticipated. “One would have expected a V-shaped recovery, but instead you have an L shaped recovery,” he said. “It’s been the long haul.”

R Jagannathan in the LiveMint suggests this:

This is how it could be designed. Any unemployed urban youth in the 20-30 age group could be promised 100 days of employment and/or skilling options paid for by the government at a fixed daily rate of ₹300 (or thereabouts, depending on city). At an outlay of ₹30,000 per person annually, the unemployed can be put to work in municipal conservancy services, healthcare support, traffic management, and other duties, with the money also being made available for any skill-acquiring activity chosen by the beneficiary (driver training for Ola-Uber, logistics operations, etc). All companies could be given an opportunity to use the provisions of the Apprentices Act to take on more trainees, with the apprenticeship period subsidized to the limit of ₹30,000 per person in 2020-21. If the pilot works, it could be rolled out as a regular annual scheme for jobs and skills. Skilling works best in an actual jobs environment.

 

He also mentions making the GST simpler, which the Business Standard agrees with:

Certainly, the rationalisation of GST will also affect government revenues. However, a simpler and more transparent system would allow greater collection and reduce evasion. The government will receive a windfall this year from lower crude oil prices. The moment to move on the structural reform agenda is now. The GST Council has done well to address the inverted duty structure in mobile phones. Further rationalisation will give confidence to the market that the government is serious about reforms. It was promised that GST would remain a work in progress, and that the GST Council would act often to improve it. So far, however, the changes have been marginal and haphazard. A more structured and rational approach, which outlines a quick path to a single rate, would pay dividends for the economy in the longer run. It would also be an effective way to manage the immediate effects of a supply shock such as is being caused by the pandemic.

Also from the Business Standard, a report on the government now considering (not happened yet) relaxing bad loan classification rules for sectors hit by the corona virus. That’s pretty soon going to be every sector!


 

Assorted Links about the topic – there’s more to read than usual, please note.

Here is Tyler Cowen on mitigating the economic impacts from the coronavirus crisis.

Here’s Bill Dupor, via MR, about the topic:

First, incentivize behavior to align with recognized public health objectives during the outbreak.

Second, avoid concentrating the individual financial burden of the outbreak or the policy response to the outbreak.

Third, implement these fiscal policies as quickly as possible, subject to some efficiency considerations.

Again, via MR, New Zealand’s macro response.

Arnold Kling is running a series on the macro response to the crisis.

Claudia Sahm proposes direct payment to individuals:

This chapter proposes a direct payment to individuals that would
automatically be paid out early in a recession and then continue annually
when the recession is severe. Research shows that stimulus payments that
were broadly disbursed on an ad hoc (or discretionary) basis in the 2001 and
2008–9 recessions raised consumer spending and helped counteract weak
demand. Making the payments automatic by tying their disbursement to
recent changes in the unemployment rate would ensure that the stimulus
reaches the economy as quickly as possible. A rapid, vigorous response to
the next recession in the form of direct payments to individuals would help
limit employment losses and the economic damage from the recession.

Here are the concrete proposals, the entire paper is worth a read:

Automatic lump-sum stimulus payments would be made to individuals
when the three-month average national unemployment rate rises by
at least 0.50 percentage points relative to its low in the previous 12
months.
• The total amount of stimulus payments in the first year is set to
0.7 percent of GDP.
• After the first year, any second (or subsequent) year payments would
depend on the path of the unemployment rate.

 

Macroeconomics IS HARD!

Economics in the times of COVID-19, there is already a book. I learnt about it from Tim Taylor’s blogpost. I have not read the book, but will soon.

The NYT, two weeks ago, on the scale of the problem facing policymakers.

 

EC101: Links for 28th November, 2019

  1. “The zeroth step, of course, is being open to the process of unlearning. We come with our own biases, shaped by our varied experiences and perceptions. But our experience or knowledge is not always indicative of the macroreality. An unrelenting hold on what we have already learnt is the equivalent of the sunk cost fallacy in economics.”
    ..
    ..
    Pranay Kotasthane has a new newsletter out, and it is worth subscribing to. Stay humble and curious is the gist of his zeroth lesson, and the other points are equally important. Go read, and in my opinion, subscribe.
    ..
    ..
  2. “China is still a one-party state, but it owes much of its current prosperity to an increase in liberty. Since Mao died, his former subjects have won greater freedom to grow the crops they choose, to set up businesses and keep the profits, to own property, and to move around the country. The freedom to move, though far from absolute, has been transformational. Under Mao, peasants were banned from leaving their home area and, if they somehow made it to a city, they were barred from buying food, notes Bradley Gardner in “China’s Great Migration”. Now, there are more rural migrants in China than there are cross-border migrants in the world.”
    ..
    ..
    The rest of this article from the Economist is about migration to the cities – and I find myself in complete agreement – many, many more people in India need to live in her cities. But also see this!
    ..
    ..
  3. “Mazzucato traced the provenance of every technology that made the iPhone. The HTTP protocol, of course, had been developed by British scientist Tim Berners-Lee and implemented on the computers at CERN, in Geneva. The internet began as a network of computers called Arpanet, funded by the US Department of Defense (DoD) in the 60s to solve the problem of satellite communication. The DoD was also behind the development of GPS during the 70s, initially to determine the location of military equipment. The hard disk drive, microprocessors, memory chips and LCD display had also been funded by the DoD. Siri was the outcome of a Stanford Research Institute project to develop a virtual assistant for military staff, commissioned by the Defense Advanced Research Projects Agency (DARPA). The touchscreen was the result of graduate research at the University of Delaware, funded by the National Science Foundation and the CIA.”
    ..
    ..
    Mariana Mazzucato, about whom more people should know, on the role of the government in today’s economy.
    ..
    ..
  4. “Back in the early 1970s, Xerox had figured out a strategy to block competitors in the photocopying business. It took out lots of patents, more than 1,000 of them, on every aspect of the photocopy machine. As old patents expired, new ones kicked in at a rate of several hundred new patents each year. Some of the patents were actually used by Xerox in producing the photocopy machine; some were not. There was no serious complaint about the validity of any individual patent. But taken as a whole, Xerox seemed to be using the patent system to lock up its monopoly position in perpetuity. Under antitrust pressure from the Federal Trade Commission, Xerox in 1975 signed a consent decree which, along with a number of other steps, required licensing its 1,700 photocopier patents to other firms.”
    ..
    ..
    Timothy Taylor adds grist to the anti-patent mill.
    ..
    ..
    “Thinking about how to facilitate a faster and broader dispersion of knowledge and productivity gains seems like a potentially important part of explaining the current economic picture and suggesting a policy agenda.”
    ..
    ..
    That’s the concluding part of the blog post. Just sayin’!
    ..
    ..
  5. Every time I begin to think I kind of understand macroeconomics

EC101: Links for 3rd October, 2019

  1. Everything is correlated.
    ..
    ..
  2. For students at Gokhale Institute for sure, but elsewhere too: the Stiglitz essay prize.
    ..
    ..
  3. Capitalim vs Socialism.
    ..
    ..
  4. On reforming the PhD.
    ..
    ..
  5. On complements, substitutes, YouTube and reading.

Ec101: Links for 4th July, 2019

  1. “I’m more worried about the part where the cost of basic human needs goes up faster than wages do. Even if you’re making twice as much money, if your health care and education and so on cost ten times as much, you’re going to start falling behind. Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.What’s happening? I don’t know and I find it really scary.”
    ..
    ..
    An article that spanned an entire book (about which more below). But do read this article very, very carefully, especially if you think you really understand microeconomics.
    ..
    ..
  2. “Here, for example, are two figures which did not make the book. The first shows car prices versus car repair prices. The second shows shoe and clothing prices versus shoe repair, tailors, dry cleaners and hair styling. In both cases, the goods price is way down and the service price is up. The Baumol effect offers a unifying account of trends such as this across many different industries. Other theories tend to be ad hoc, false, or unfalsifiable.”
    ..
    ..
    A short excerpt from an article on the book that materialized from the article on Slate Star Codex above (and by the way, you might want to start following Slate Star Codex). I have linked to some of them already, but do scroll through to click on “Other posts in this series” to read them all.
    ..
    ..
  3. “The 23 times increase in the relative price of the string quartet is the driving force of Baumol’s cost disease. The focus on relative prices tells us that the cost disease is misnamed. The cost disease is not a disease but a blessing. To be sure, it would be better if productivity increased in all industries, but that is just to say that more is better. There is nothing negative about productivity growth, even if it is unbalanced.”
    ..
    ..
    An excerpt from an excerpt, admittedly, but still well worth your time, to help you understand why the cost disease isn’t really a disease. It’s all about productivity, and how it grows unevenly (and hey, that’s a good thing!)
    ..
    ..
  4. “State intervention to fix market failures that preclude the emergence of domestic producers in sophisticated industries early on, beyond the initial comparative advantage.
    Export orientation, in contrast to the typical failed industrial policy of the 1960s–1970s, which was mostly import substitution industrialisation (ISI).
    The pursuit of fierce competition both abroad and domestically with strict accountability. ”
    ..
    ..
    You really should be reading How Asia Works by Joe Studwell – everybody should read that book, and multiple times. But that being said, here is the TL;DR version.
    ..
    ..
  5. “There doesn’t seem to be evidence that hiring from outside is better. What evidence does exist seems to be that internal hires get up the learning curve faster, and often don’t need as much of an immediate pay bump. If you persuade someone to leave their current employer by offering more money, what you get is a worker whose top priority is “more money,” rather than on work challenges and career opportunities. (“As the economist Harold Demsetz said when asked by a competing university if he was happy working where he was: `Make me unhappy.’”)”
    ..
    ..
    Tim Taylor on the difficulty of hiring (and retaining) right.

Links for 31st May, 2019

  1. “For economists, the idea of “spending” time isn’t a metaphor. You can spend any resource, not just money. Among all the inequalities in our world, it remains true that every person is allocated precisely the same 24 hours in each day. In “Escaping the Rat Race: Why We Are Always Running Out of Time,” the Knowledge@Wharton website interviews Daniel Hamermesh, focusing on themes from his just-published book Spending Time: The Most Valuable Resource.”
    ..
    ..
    Almost a cliche, but oh-so-true. The one non-renewable resource is time. A nice read, the entire set of excerpts within this link.
    ..
    ..
  2. ““Bad writing makes slow reading,” McCloskey writes. Your reader has to stop and puzzle over what on earth you mean. She quotes Quintilian: “One ought to take care to write not merely so that the reader can understand, but so that he canot possibly misunderstand.” This is harder than it sounds. As the author of several books, I’ve learned that many readers take out of a book whatever thoughts they took into it. Still, what else is worth aiming for if you want to communicate your ideas?”
    ..
    ..
    As the first comment below the fold says, she herself doesn’t follow her own advice all the time (and yes, that is putting it mildly), but the book that Diane Coyle reviews in this article is always worth your time. Multiple re-readings, in fact. Also, I am pretty good at writing bad prose myself, which is why I like reading this book so much.
    ..
    ..
  3. “Popper acknowledged that one can never know if a prediction fails because the underlying theory is false or because one of the auxiliary assumptions required to make the prediction is false, or even because of an error in measurement. But that acknowledgment, Popper insisted, does not refute falsificationism, because falsificationism is not a scientific theory about how scientists do science; it is a normative theory about how scientists ought to do science. The normative implication of falsificationism is that scientists should not try to shield their theories by making just-so adjustments in their theories through ad hoc auxiliary assumptions, e.g., ceteris paribus assumptions, to shield their theories from empirical disproof. Rather they should accept the falsification of their theories when confronted by observations that conflict with the implications of their theories and then formulate new and better theories to replace the old ones.”
    ..
    ..
    I wouldn’t blame you for thinking that the author of this essay should read the book reviewed above first – but if you aren’t familiar with falsification, you might want to begin by reading this essay.
    ..
    ..
  4. “Upheaval, by Jared Diamond. I’m a big fan of everything Jared has written, and his latest is no exception. The book explores how societies react during moments of crisis. He uses a series of fascinating case studies to show how nations managed existential challenges like civil war, foreign threats, and general malaise. It sounds a bit depressing, but I finished the book even more optimistic about our ability to solve problems than I started.”
    ..
    ..
    Bill Gates has this annual tradition of  recommending five books for the summer – and I haven’t read a single one of the five he has recommended this year. All of them seem interesting – Diamond’s book perhaps more so than others.
    ..
    ..
  5. “Books don’t work for the same reason that lectures don’t work: neither medium has any explicit theory of how people actually learn things, and as a result, both mediums accidentally (and mostly invisibly) evolved around a theory that’s plainly false.”
    ..
    ..
    To say that I am fascinated by this topic is an understatement – and I have a very real, very powerful personal incentive to read this especially attentively. That being said, I can’t imagine anybody not wanting to learn about how we learn, and why we learn so poorly.

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.”
    ..
    ..
    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.
    ..
    ..
  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.”
    ..
    ..
    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.
    ..
    ..
  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.”
    ..
    ..
    Barry Eichengreen on the return (as he puts it) of fiscal policy. A short article, but a useful one to understand macroeconomics better.
    ..
    ..
  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.”
    ..
    ..
    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!
    ..
    ..
  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.”
    ..
    ..
    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.

Links for 13th May, 2019

  1. “There should be limits, too, on the rights investors can sign away. In recent years, some companies — such as Smartsheet and Twilio — have done dual-class issues in which the extra voting rights expire after a certain number of years. These sunset provisions preserve the potential benefits of leaving initial control in the hands of founders, while avoiding the risk of creating a dynastic birthright. That’s a sensible compromise. The Securities and Exchange Commission, or the exchanges it oversees, should make such provisions mandatory.”
    ..
    ..
    A very useful article to help understand how to think about IPO’s, Uber, Lyft valuations, mandatory disclosures from firms and how they try to get around the issue – and the excerpt above is yet another example of a favorite adage of mine: the truth always lies in the middle.
    ..
    ..
  2. “We find that between 1300 and 1400 a 10 percentage point higher Black Death mortality rate was associated with a 8.7 percentage point fall in city population, but between 100 and 200 years later, the impact of mortality was close to zero. When we examine the spillover and general equilibrium effects of the Black Death on city populations, we similarly find negative effects in the short run, and no effects in the long run. Cities and urban systems, on average, had recovered to their pre-Plague population levels by the 16th century.”
    ..
    ..
    A worrying article, especially towards the end, but two major takeaways for me: cities matter, and trade matters. But my major takeaway is there is (yet more) cause for worry.
    ..
    ..
  3. “Unfortunately, the world’s most prominent specialists are rarely held accountable for their predictions, so we continue to rely on them even when their track records make clear that we should not. One study compiled a decade of annual dollar-to-euro exchange-rate predictions made by 22 international banks: Barclays, Citigroup, JPMorgan Chase, and others. Each year, every bank predicted the end-of-year exchange rate. The banks missed every single change of direction in the exchange rate. In six of the 10 years, the true exchange rate fell outside the entire range of all 22 bank forecasts.”
    ..
    ..
    Forecasts are useless. I cannot be more serious when I say this. Forecasts are useless. But foxes are better at the impossible then the hedgehogs – this article helps you understand these terms, and their usefulness. This blog is about becoming a better fox!
    ..
    ..
  4. “Again, one can argue that the amount of redistribution should be larger. But it would be untrue to argue that a significant amount of redistribution–like doubling the after-taxes-and-transfers share of the lowest quintile–doesn’t already happen. ”
    ..
    ..
    The always informative Timothy Taylor on taxes, their composition, their effectiveness and the resulting redistribution in the United States of America. Also, read the book that is reviewed in this article – the entire book is worth your time, but the chapter on income tax is what I was reminded of.
    ..
    ..
  5. “When Paul Romer expresses an opinion, it is always worthwhile to listen because it is always well-considered. In an opinion piece in the New York Times, he puts forward a proposal to restore what he terms is the “public commons” of the provision of information in support of democracy. He actually puts forward two linked proposals: one for a target on targeted ads by digital platform companies and a proposal that the tax is progressive (which may be a check on dominance). The latter is interesting but I will just focus on the former here.”
    ..
    ..
    I do not recollect if I linked to the Paul Romer piece that is linked to in the excerpt above – in case I did not, please go ahead and read it. The rest of the current article speaks about why Romer’s proposal is a good idea, but not necessarily implementable right away.

Links for 1st May, 2019

  1. “As McKinsey points out, governments, businesses and individuals will all have to embrace change and figure out the best ways to move towards digitisation — including on such basics as land records and business transparency (which could improve access to bank credit). There are also many aspects of this wave of digitisation that are not to the good—including the impact of toxic social media, the loss of privacy, and so on. The rules for this new world will have to be framed carefully to prevent business capture as well as political misuse, and to protect citizens from predatory action. What is required is to minimise the costs as much as to maximise the benefits. Still, the over-riding message is clear: The prospects of digitisation are so overwhelmingly advantageous, if not also inevitable, that those who become laggards in adapting to the new reality are the ones that will be left behind.”
    ..
    ..
    T N Ninan (author of the excellent The Turn of the Tortoise) writes about the potential of “digital” India while reviewing a McKinsey report about the same topic. The scope, details and aspects of such a topic simply cannot be dealt with in a single post – but with that in mind, this is worth reading.
    ..
    ..
  2. “The Right to Education Act in 2009 guaranteed access to free primary education for all children in India ages 6-14. This paper investigates whether national trends in educational data changed around the time of this law using household surveys and administrative data. We document four trends: (1) School-going increases after the passage of RTE, (2) Test scores decline dramatically after 2010, (3) School infrastructure appears to be improving both before and after RTE, and (4) The number of students who have to repeat a grade falls precipitously after RTE is enacted, in line with the official provisions of the law.”
    ..
    ..
    That is the abstract of this paper. Also, have you read this book? Also, have you listened to this podcast? Also, keep an eye out for this Sunday’s video.
    ..
    ..
  3. “China’s TFP surged in the 1980s following the agricultural and ownership reforms, in the 1990s following the state enterprise reforms and the creation of a modern housing market, and in the 2000s as China prepared for and was then able to exploit WTO membership.The key takeaway is that China’s one-party system deservedly has won plaudits when it has been most ambitious with regard to economic reforms and experimentation with market mechanisms. But this is not the case, for example, before the 1980s and again since 2012, when reforms were suppressed or stifled and inputs were boosted, but without any improvements.”
    ..
    ..
    An interview that remains interesting throughout if you are a student of economics, or China and especially the intersection set. Troubling times ahead for the Chinese economy, it would seem – and on account of a variety of short term reasons, and one very important long term one – TFP.
    ..
    ..
  4. “That was when he saw the light. Two small, black, rectangular boxes were stacked next to an outlet on the far side of the guest room, both facing the bed. From afar, they looked like phone chargers. But when Vest got closer, he realized they were cameras, and they were recording.”
    ..
    ..
    Airbnb, technology, privacy and customer relations. A great way to learn that There Is No Such Thing As A Free Lunch.
    ..
    ..
  5. “In 1960, 13.4% of the population age 20-74 was obese (as measured by having a Body Mass Index above 30). In 2016, 40% of the population was obese.
    In 1970, 37.1% of those age 18 and older were cigarette smokers. By 2017, this has fallen to 14.1%.”
    ..
    ..
    Just two out of many, many interesting tidbits about America today, and America back then.