Coyote Blog

Based on a Tyler Cowen pointer (who else), I thought this Twitter thread on how the Internet was changing sex work was really interesting.  This in particular caught my eye:

And now let's get to a third point: the internet has changed the economics of porn by gutting the industry through piracy, which means 3) there's increasing amounts of overlap between porn performers and escorts.

She makes this observation as part of a larger point that the Internet is breaking down some of the opposition to sex work (in addition to making it safer).  This would be a welcome change.  Sex work should be legal, and it has always been a weird thing to me that one of the stronger opponents of legalization has been parts of the keep-your-laws-off-my-body feminist community.

Anyway, what I found interesting was how parallel this is to the modern music business.  Piracy and streaming enabled by the Internet have killed the profits of the vast majority of the music recording business, meaning that top artists make a lot of their money in other ways, particularly from live performances.  In this business model, the published music is merely an advertisement and brand-building to encourage people to pay for the live performance.  If you consider pornography to be parallel to recorded music, and the escort business as the live performance, then the business models look surprisingly similar.

I was randomly browsing my blog history when I encountered a post from over 11 years ago when it was necessary to spend 1800+ words explaining why steel could still fail in the Twin Towers even when it did not actually melt.

Of late, Rosie [O'Donnell] has joined the "truthers," using her show to flog the notion that the WTC was brought down in a government-planned controlled demolition....

Rosie, as others have, made a point of observing that jet fuel does not burn hot enough to melt steel, and therefore the fire in the main towers could not have caused the structure to yield and collapse.  This is absurd.  It is a kindergartener's level of science.  It is ignorant of a reality that anyone who has had even one course in structural engineering or metallurgy will understand.  The argument made that "other buildings have burned and not collapsed" is only marginally more sophisticated, sort of equivalent to saying that seeing an iceberg melts proves global warming.  ...

Here is the reality that most 19-year-old engineering students understand:  Steel loses its strength rapidly with temperature, losing nearly all of its structural strength by 1000 degrees F, well below its melting point but also well below the temperature of burning jet fuel.

And on and on from there.  Seriously,  I know its hard to believe this was even necessary, but it was a serious charge by some of our intellectual betters in the entertainment industry.  Actually, it brings me a certain comfort in encountering this again -- maybe our public discourse is not really getting substantially stupider.  Maybe it has always been that way.

Look, I am not mocking you if you don't know the material properties of steel and how they change with temperature.   Odds are, in your jobs, you do not need to know anything about it.  What bothers me are the people who know nothing about these topics who speak with such certainty.  In some ways it seems to go past Dunning-Krueger,   People making these absolute pronouncements not only don't know anything about the topic, but many have actively avoided ever finding themselves in a classroom where the topic (or more accurately the mathematical and scientific foundations of the topic) might have been discussed.

It's not like I am totally immune to this.   Here are a few topics that I may have blogged about a few times years and years ago but now I won't touch because I know I don't understand them:

• Central banking and monetary policy
• Almost anything having to do with chemistry, including ocean acidification (or more accurately, reduced ocean alkalinity).  I even had an A in Organic Chemistry but it did not stick at all.
• Literary criticism, except to say what I liked and I didn't like
• Anything about certain performance-based crafts, like singing and acting, except to say which performances I did and did not enjoy
• Ice hockey, horse racing, and soccer (which doesn't mean I don't enjoy watching them)
• 80% of what Tyler Cowen writes about
• Anything about music post-1985
• Anything on cooking or food
• Absolutely anything on wine

To the last point, I got invited to a wine tasting the other day.  Everyone was saying they tasted chicory or boysenberry or a hint of diatomaceous earth or whatever and I tasted .. wine.  Honestly I felt like a blind person sitting in on a discussion of the color wheel.  But I resist the temptation to scream that it is all just the emperor's new clothes -- I am sure the people around me can honestly taste differences that I can't.  I know I can taste differences in bourbon they cannot taste.  Good vodkas on the other hand, are a different matter.  Some day I am going to do a blind vodka tasting for my vodka-snob friends and see if they really can taste the difference.

Postscript:  I used to love the show Connections by James Burke.  He would start with something like the Defenestration of Prague and show a series of connections between it and, say, the invention of the telephone.  Perhaps you can see why I found it entertaining since I began a post about the structural strength of steel at different temperatures and ended it with whether good vodkas really taste different.

There are a lot of James Burke TV episodes on Youtube and I recommend them all.  Connections is recommended of course but I actually think his best series was season 1 of the Day the Universe Changed.  I believe this is episode 1.

I thought this letter from Dan Hanson to Tyler Cowen was really thought provoking:

I wonder how many of the people making predictions about the future of truck drivers have ever ridden with one to see what they do?

One of the big failings of high-level analyses of future trends is that in general they either ignore or seriously underestimate the complexity of the job at a detailed level. Lots of jobs look simple or rote from a think tank or government office, but turn out to be quite complex when you dive into the details.

For example, truck drivers don’t just drive trucks. They also secure loads, including determining what to load first and last and how to tie it all down securely. They act as agents for the trunking company. They verify that what they are picking up is what is on the manifest. They are the early warning system for vehicle maintenance. They deal with the government and others at weighing stations. When sleeping in the cab, they act as security for the load. If the vehicle breaks down, they set up road flares and contact authorities. If the vehicle doesn’t handle correctly, the driver has to stop and analyze what’s wrong – blown tire, shifting load, whatever.

In addition, many truckers are sole proprietors who own their own trucks. This means they also do all the bookwork, preventative maintenance, taxes, etc. These people have local knowledge that is not easily transferable. They know the quirks of the routes, they have relationships with customers, they learn how best to navigate through certain areas, they understand how to optimize by splitting loads or arranging for return loads at their destination, etc. They also learn which customers pay promptly, which ones provide their loads in a way that’s easy to get on the truck, which ones generally have their paperwork in order, etc. Loading docks are not all equal. Some are very ad-hoc and require serious judgement to be able to manoever large trucks around them. Never underestimate the importance of local knowledge.

I’ve been working in automation for 20 years. When you see how hard it is to simply digitize a paper process inside a single plant (often a multi-year project), you start to roll your eyes at ivory tower claims of entire industries being totally transformed by automation in a few years. One thing I’ve learned is a fundamentally Hayekian insight: When it comes to large scale activities, nothing about change is easy, and top-down change generally fails. Just figuring out the requirements for computerizing a job is a laborious process full of potential errors. Many automation projects fail because the people at the high levels who plan them simply do not understand the needs of the people who have to live with the results.

Take factory automation. This is the simplest environment to automate, because factories are local, closed environments that can be modified to make things simpler. A lot of the activities that go on in a factory are extremely well defined and repetitive. Factory robots are readily available that can be trained to do just about anything physically a person can do. And yet, many factories have not automated simply because there are little details about how they work that are hard to define and automate, or because they aren’t organized enough in terms of information flow, paperwork, processes, etc. It can take a team of engineers many man years to just figure out exactly what a factory needs to do to make itself ready to be automated. Often that requires changes to the physical plant, digitization of manual processes, Statistical analysis of variance in output to determine where the process is not being defined correctly, etc.

A lot of pundits have a sense that automation is accelerating in replacing jobs. In fact, I predict it will slow down, because we have been picking the low hanging fruit first. That has given us an unrealistic idea of how hard it is to fully automate a job.

Based on this I can still think of some labor-saving, but not labor-eliminating, automation roles in trucking.

• Convoying, allowing one driver to lead multiple additional automated trucks
• Reduction in team driving.  Currently Federal rules (e.g. for rest breaks and maximum driving times) have created incentives for teams of two drivers to move priority freight that needs to be moving constantly and not parked while the driver sleeps.  Automation might allow one person plus the automated driver to keep trucks moving continuously and safely.

One thing not mentioned by Mr. Hanson is the role of regulation.  Safe automated trucks will likely exist LONG before Federal regulatory changes will occur to allow them much use.  This is not just because there is some delay with regulators getting comfortable with the safety aspects, but because affected groups with political pull who wish to keep the status quo will use safety concerns, real or imagined, to hold up the regulatory process.

If you think I am being too pessimistic, here is a story.  The typical steam engine of the 1930's needed a driver and a fireman -- the latter's job was to make sure the furnace was correctly fueled and operating well.  When diesel locomotives came along, one benefit among many was that the fireman was no longer needed.  Seeing this on the horizon, the fireman's union was ready to dig in their heals.  They actually, boldly, took the position NOT that a diesel locomotive needed a fireman, but that it should be required to have 2 firemen!  This was partially a subject for union negotiation, but in the dysfunctional world of railroad labor regulation, it also required some regulatory changes  (as the first industry with large workforces, the government took its first shot at labor regulation in a railroad-specific manner and the result was largely dysfunctional; fortunately for the rest of industry it did a better job with labor regulation later for everyone else).  It took years to totally eliminated fireman from diesel engines.  In fact, nearly every railroad labor saving technology like this (e.g. automatic brakes rather than men on roofs turning break wheels) led to regulatory foot-dagging that allowed the new technology but resisted the reduction in personnel.

I think via Tyler Cowen, this abstract:

How can political actors identify which putative expert is truly expert, given that any putative expert may be wrong about a given policy question; given that experts may therefore disagree with one another; and given that other members of the polity, being non-expert, can neither reliably adjudicate inter-expert disagreement nor detect when a consensus of experts is misguided? This would not be an important question if the problems dealt with by politics were usually simple ones, in the sense that the answer to them is self-evident. But to the extent that political problems are complex, expertise is required to answer them—although if such expertise exists, we are unlikely to know who has it.

Despite having a lot of respect for the intellect and the insane eclecticism of its author Tyler Cowen, I have never read the Complacent Class.  The title really did not intrigue me, and frankly from that title probably had the wrong vision of what the book was about.  That is, until I read George Will's recent review, in which he said in part:

In 1800, McCloskey says, the world’s economy was where Bangladesh’s economy now is, with no expectation of change. Today, most of the jobs that existed just a century ago are gone. And we are delighted that this protracted disruption occurred. Now, however, the Great Enrichment is being superseded by the Great Flinch, a recoil against the frictions and uncertainties — the permanent revolution — of economic dynamism. If this continues, the consequences, from increased distributional conflicts to decreased social mobility, are going to be unpleasant.

Although America is said to be — and many Americans are — seething about economic grievances, Tyler Cowen thinks a bigger problem is complacency. In his latest book, “The Complacent Class: The Self-Defeating Quest for the American Dream,” Cowen, professor of almost everything (economics, law, literature) at George Mason University and co-author of the Marginal Revolution blog, argues that the complacent class, although a minority, is skillful at entrenching itself in ways detrimental to the majority....

For complacent Americans, a less dynamic, growth-oriented nation seems less like an alarming prospect than a soothing promise of restfulness. In a great testimonial to capitalism’s power, “The Communist Manifesto,” Karl Marx wrote: “All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air.” Complacent, because comfortable, Americans have had enough of that.

Hmm, I suppose I should read it.  I don't want to judge the premise of the book from a few lines of a 3rd party review, but the themes here are strikingly similar to something I wrote 13 years ago (!) on this blog in a post titled "Progressives are too Conservative to Like Capitalism".  I still agree with much, though not all, of what I wrote there so I will pare it down a bit:

Most "progressives" (meaning those on the left to far left who prefer that term) would freak if they were called conservative, but what I mean by conservative in this context is not donate-to-Jesse-Helms capital-C Conservative but fearful of change and uncomfortable with uncertainty conservative.

OK, most of you are looking at this askance - aren't progressives always trying to overthrow the government or something?  Aren't they out starting riots at G7 talks?  The answer is yes, sure, but what motivates many of them, at least where it comes to capitalism, is a deep-seated conservatism.

Before I continue to support this argument, I must say that on a number of issues, particularly related to civil liberties and social issues, I call progressives my allies.  On social issues, progressives, like I do, generally support an individual's right to make decisions for themselves, as long as those decisions don't harm others.

However, when we move to fields such as commerce, progressives stop trusting individual decision-making.  Progressives who support the right to a person making unfettered choices in sexual partners don't trust people to make their own choice on seat belt use.  Progressives who support the right of fifteen year old girls to make decisions about abortion without parental notification do not trust these same girls later in life to make their own investment choices with their Social Security funds.  ... [this would also make a good example:  Progressives oppose school choice because they don't think the poor capable of making good education decisions]

Beyond just the concept of individual decision-making, progressives are hugely uncomfortable with capitalism.  Ironically, though progressives want to posture as being "dynamic", the fact is that capitalism is in fact too dynamic for them.  Industries rise and fall, jobs are won and lost, recessions give way to booms.  Progressives want comfort and certainty.  They want to lock things down the way they are. They want to know that such and such job will be there tomorrow and next decade, and will always pay at least X amount.  That is why, in the end, progressives are all statists, because, to paraphrase Hayek, only a government with totalitarian powers can bring the order and certainty and control of individual decision-making that they crave.

Progressive elements in this country have always tried to freeze commerce, to lock this country's economy down in its then-current patterns.  Progressives in the late 19th century were terrified the American economy was shifting from agriculture to industry.  They wanted to stop this, to cement in place patterns where 80-90% of Americans worked on farms.  I, for one, am glad they failed, since for all of the soft glow we have in this country around our description of the family farmer, farming was and can still be a brutal, dawn to dusk endeavor that never really rewards the work people put into it.

This story of progressives trying to stop history has continued to repeat itself through the generations.  In the seventies and eighties, progressives tried to maintain the traditional dominance of heavy industry like steel and automotive, and to prevent the shift of these industries overseas in favor of more service-oriented industries.  Just like the passing of agriculture to industry a century ago inflamed progressives, so too does the current passing of heavy industry to services.

In fact, here is a sure fire test for a progressive.  If given a choice between two worlds:

1. A capitalist society where the overall levels of wealth and technology continue to increase, though in a pattern that is dynamic, chaotic, generally unpredictable, and whose rewards are unevenly distributed, or...
2. A "progressive" society where everyone is poorer, but income is generally more evenly distributed.  In this society, jobs and pay and industries change only very slowly, and people have good assurances that they will continue to have what they have today, with little downside but also with very little upside.

Progressives will choose #2.  Even if it means everyone is poorer.  Even if it cuts off any future improvements we might gain in technology or wealth or lifespan or whatever.  They want to take what we have today, divide it up more equally, and then live to eternity with just that.   Progressives want #2 today, and they wanted it just as much in 1900 (just think about if they had been successful -- as just one example, if you are over 44, you would have a 50/50 chance of being dead now).

Don't believe that this is what they would answer?  Well, first, this question has been asked and answered a number of times in surveys, and it always comes out this way.  Second, just look at any policy issue today.  Take prescription drugs in the US - isn't it pretty clear that the progressive position is that they would be willing to pretty much gut incentives for any future drug innovations in trade for having a system in place that guaranteed everyone minimum access to what exists today?  Or take the welfare state in Continental Europe -- isn't it clear that a generation of workers/voters chose certainty over growth and improvement?  That workers 30 years ago voted themselves jobs for life, but at the cost of tremendous unemployment amongst the succeeding generations?

A while back I was writing about something -- the Civil War I think -- and I mentioned that I had been lucky enough to have James McPherson as a professor.  I remember a comment on the post that said something like "yes, yes we know, you went to Princeton."  I certainly was lucky, and that school contributed a lot to what I am.  But as far as attributing sh*t I know to a source, Princeton is in at least second place.   By far the greatest source of what I know about history, art, music and even about the sciences comes from the Teaching Company.  And that is available to all of you, no SAT required.

I just checked my account and I have taken 71 courses from them, including 54 history courses**.  I think I have taken, for example, pretty much all the courses on this list in a Tyler Cowen post.  I began my journey taking courses on things that had always interested me but I knew a fair amount about already, such as the history of Ancient Rome or the Civil War or WWII.  But the most fun I have had has been taking courses on periods I knew little about -- such as Daileader's great histories of the Middle Ages or the History of China.  And I have had the most fun taking courses on things I knew NOTHING about, such as the history of India, of pre-Columbian American civilization, and of nomadic civilizations of Asia.

The key thing to remember is:  never pay rack rate.  Everything goes on sale from time to time.  Today until midnight, for example, they are having a 70% off sale on a subset of their stuff.  You can still get cd's and dvd's if you want but I used to get the digital download for my iPod and increasingly just stream the audio from an android app and stream the video from their Roku app.

** My family thinks I am weird because I listen to these courses as I run and work out (instead of music).  But it turns out this was not nearly as weird as when I have done Pimmsleur language courses while I am running.  If you want to really take your mind off your running, try to diagram a sentence in your head to figure out which of freaking German article you should be using.  Also, it creates a nice reputation around the neighborhood for eccentricity if you babble in foreign languages as you run.

I hate to quibble about a paper that supports my preconceived notions, but I am bothered by this as linked by Tyler Cowen

We quantify the amount of spatial misallocation of labor across US cities and its aggregate costs. Misallocation arises because high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity. Using a spatial equilibrium model and data from 220 metropolitan areas we find that these constraints lowered aggregate US growth by more than 50% from 1964 to 2009.

Isn’t it possible that cause and effect are being reversed here? I accept that zoning in places like SF make it more expensive. I would have concluded that this higher cost of living allows only the most productive to live there — less productive folks can’t afford it. So the high average productivity of these cities might partially be a result of their higher costs, not because the zoning somehow increases productivity, but because the zoning creates a sorting process where only the most productive may enter, which brings up the averages.  So a reduction in zoning and living costs would cause the productivity numbers for the city to average down as lower-productivity earners can move in.

I have made this point before, but Tyler Cowen has a great chart from a new study.  The explanation is here, but basically they have defined the bands based on some income break points corrected for family size and inflation over time.

A reader sent me a nice note with this link, saying that I had been right many years ago when I began making this point.  That's good, but I will also confess to be wrong on a related point -- I said 8 years ago that the one good thing about having a Democratic President was that the media would become much more positive suddenly about the economy.  On that, I was wrong.  The media still has a strong bias towards telling everyone that their life is getting ever worse, even when no such thing is true.

The decline in new business formation in this country shouldn't be a surprise -- in industry after industry, numerous bits of government permission are needed to proceed with a new idea into a new market.  If, like Uber, you plow ahead ignoring these roadblocks, you will likely spend the rest of your life in court (as does Uber).

I thought about all this when reading this article on awesome portable automated systems that can maintain a person's insulin level.  What an amazing advance in safety and life quality for people!  The part that struck me was this line from a woman when she first saw one:

Sarah Howard became interested after she met Ms. Lewis last year. “My first question was: Was it legal?” said the 49-year-old, who has Type 1 diabetes, as does one of her two sons. “I didn’t want to do anything illegal.”

It is pathetic that this is the first reaction of Americans when they see an awesome new innovation.  And it turns out that she is right to worry.  Because if one avails oneself of the normal division of labor, in other words if one lets someone more expert to build the device or program it, then it is illegal.  Only if one downloads all the specs from the Internet and builds and programs it oneself is this fabulous device legal.

The only restriction of the project is users have to put the system together on their own. Ms. Lewis and other users offer advice, but it is each one’s responsibility to know how to troubleshoot. A Bay Area cardiologist is teaching himself software programming to build one for his 1-year-old daughter who was diagnosed in March.

This is roughly the equivalent of having to go fell a tree and mine graphite in order to makes one's own pencils.  It is simply stupid.   All because the government will not let us make our own decisions about the risks we want to take with medical products.  So if you don't have the skills or the time to put one together, you can wait 5 or 10 years for the FDA to get around to approving a professionally-made version.

Hat tip to Tyler Cowen, who by the title of his post obviously also saw the I, Pencil analogy.

Update:  I give it 12 months before someone at the FDA demands that these home-made devices be regulated, and at least registered with the government.  I wonder if in 10 years the government will be demanding registration of 3D printers?  After all, they potentially incredibly empowering to individuals and can let folks work around various product bans like this.   Exactly the kind of empowerment that government hates.

Apparently, the sea monkey and x-ray glasses business empire is being fought over by several people.  I would have bet that the business did not exist any more, but apparently it still sells several million dollars a year of the little engineered brine shrimp.  This is a fascinating article throughout, both on the history of sea monkeys, the marketing genius that made it work, and the current legal fight.  Link via Tyler Cowen.

I recommend this article (via Tyler Cowen) on the interesting topic of whether women's open source software contributions on Github are accepted more or less frequently than those of men.   The findings of the study are roughly as follows:

They find that women get more (!) requests accepted than men for all of the top ten programming languages. They check some possible confounders – whether women make smaller changes (easier to get accepted) or whether their changes are more likely to serve an immediate project need (again, easier to get accepted) and in fact find the opposite – women’s changes are larger and less likely to serve project needs. That makes their better performance extra impressive....

Among insiders [essentially past contributors], women do the same as men when gender is hidden, but better than men when gender is revealed. In other words, if you know somebody’s a woman, you’re more likely to approve her request than you would be on the merits alone. We can’t quantify exactly how much this is, because the paper doesn’t provide numbers, just graphs. Eyeballing the graph, it looks like being a woman gives you about a 1% advantage. I don’t see any discussion of this result, even though it’s half the study, and as far as I can tell the more statistically significant half.

Among outsiders, women do the same as/better than men when gender is hidden, and the same as/worse than men when gender is revealed. I can’t be more specific than this because the study doesn’t give numbers and I’m trying to eyeball confidence intervals on graphs. The study itself say that women do worse than men when gender is revealed, so since the researchers presumably have access to their real numbers data, that might mean the confidence intervals don’t overlap. From eyeballing the graph, it looks like the difference is 1% – ie, men get their requests approved 64% of the time, and women 63% of the time. Once again, it’s hard to tell by graph-eyeballing whether these two numbers are within each other’s confidence intervals.

OK, so generally good news for women on all fronts -- they do better than men -- with one small area (63 vs 64 percent) where there might or might not be an issue.

This was an interesting side bit:

Oh, one more thing. A commenter on the paper’s pre-print asked for a breakdown by approver gender, and the authors mentioned that “Our analysis (not in this paper — we’ve cut a lot out to keep it crisp) shows that women are harder on other women than they are on men. Men are harder on other men than they are on women.”

Depending on what this means – since it was cut out of the paper to “keep it crisp”, we can’t be sure – it sounds like the effect is mainly from women rejecting other women’s contributions, and men being pretty accepting of them. Given the way the media predictably spun this paper, it is hard for me to conceive of a level of crispness which justifies not providing this information.

So here is an example press report of this study and data:

Here’s Business Insider: Sexism Is Rampant Among Programmers On GitHub, Research Finds. “A new research report shows just how ridiculously tough it can be to be a woman programmer, especially in the very male-dominated world of open-source software….it also shows that women face a giant hurdle of “gender bias” when others assess their work. This research also helps explain the bigger problem: why so many women who do enter tech don’t stick around in it, and often move on to other industries within 10 years. Why bang your head against the wall for longer than a decade?” [EDIT: the title has since been changed]

This article, and many many like it, bear absolutely no relationship to the actual data in the study.  Since the article of course is all most people even read, now a meme is created forever in social media that is just plain wrong.  Nice job media.

This video, linked by Tyler Cowen, is the best I have seen to simplify the basic theory of public key encryption:

This follow-up video takes this basic understanding and explains RSA encryption

I think it was Tyler Cowen who linked to this photo spread on surviving examples of Soviet architecture.  A few of the buildings are almost compelling.

This was one example, in Bratislava

But you don't have to go to Bratislava to see something like it.  You can find something similar in Mesa, Arizona -- this is the city hall.

Kudos to the photographer for getting the shadow on the concrete pylon on the right to be positioned almost perfectly to fill out the missing part of the building.    I actually don't mind the Tempe building, it looks good in context, more public sculpture than building (particularly since this is likely a really inefficient building, with minimal floor space for the money spent to build it).

I try really hard to read some partisan blogs from the Left and Right so I see what they are saying and don't wallow in some libertarian echo chamber.  I have read Kevin Drum on the Left for year because, while I often disagree with him, he is willing to engage with opposition arguments rather than just dismissing them as the rantings of racist cis-gendered Koch-funded, uh, whatevers.

Unfortunately his guest bloggers seem to be cut from a different cloth (by the way, best wishes to Drum who is struggles with some awful health issues).  Here is Max Sawicky today:

In this post from just last weekend, Kevin links to a bit from Tyler Cowen. That was your first mistake, Brother Drum. I realize linking is not endorsing, though KD offers a limited, tentative 'interesting possibility' type of approval. You see, the prolific and very smart Tyler hails from the zany economics department of George Mason University. No good can come from referencing him. These characters spend all their time excoriating Government and social protection for the working class from tenured, Koch-subsidized positions at a public university. Sweet.

This is unfortunately what substitutes for debate nowadays.  His conclusion seems to be "don't read people that disagree with me, read only folks who work off the same assumptions.  Stay in the echo chamber!"  This is exactly what I try to avoid, but the ubiquity of this sort of ad hominem argumentation is making it really hard.

I am fascinated by Bitcoin and would love to see it be a success.  But Tyler Cowen has a quote that reflects some of my concerns about it:

…bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency.

Bitcoin is in the midst of an enormous price bubble, with increases in value of as much as 50% over just a few days.  This is astounding volatility for even a commodity, much less a currency.

Cowen said something at the end of the post, almost as a throw-away, that got my attention:  "There is, by the way, no current way to short Bitcoin."  The reason this caught my eye is that I have argued a long time that short selling is an important mechanism to reduce market volatility.

Every time we get to a market bubble or problem, insiders always start arguing against short selling saying it makes volatility worse and undermines markets.  But what they are really saying is that they like volatility so long as it is up. They had no problem with the bubble that propelled their securities up, they just don't want them to come back down to Earth.

In certain bubbles, when interest in a certain asset class gets really frothy, anyone who is skeptical of the asset and its new high values will sell and get out.  This means that as the bubble grows, all the skeptics are long gone from the market.  No longer owning the asset, these skeptics have no further "vote" or influence on the price.  Short selling is a way for skeptics to continue to influence the price and asset values.  To this extent, I think it tends to limit the peak of bubbles, just as bottom-fishers limit the debt of troughs.

Bitcoin would likely benefit from skeptics having some sort of influence on bitcoin values.  But without a way to short, Bitcoin values are driven solely by wacky anarcho-capitalists (e.g. people like me) and people fearful of Cyprus style depositor losses.  Essentially all the true believers are bidding against themselves.

I have hypothesized that immigration may have an effect on median income -- not because it is bad for the economy per se but just form the fact of adding millions of new people in the bottom quartiles would tend to shift the median downwards (just the pure math of the thing).

I have only given them a quick glance at this point, but Tyler Cowen links several studies that tend to say my hypothesis is false.

Also, here is an interesting discussion about the median income stagnation hypothesis itself and how sensitive it is to the end point, pointing out in particular that most folks start their analysis from a point within Nixon's wage and price controls, which skew the data - shifting the start point forward even a couple of years makes most of the stagnation go away.  He builds on a post by Brink Lindsey showing historic median income growth over a longer time frame, implying the aberration may have been the boom of the 1950s and 1960s rather than the lower growth rates of today.

I would normally find this a fascinating debate if it weren't for the dark cloud behind it that half the folks arguing the point wish to use it as a justification for further reductions in economic liberties.

Tyler Cowen writes:

If aggregate demand is so low, why are profits so high?

TJIC responds

SmartFlix  [TJIC's company] has show paper losses every year it's been in existence "¦ but I expect that this year it will show it's first ever paper profit.

"¦which is not a sign of macroeconomic health, but is, in fact, a sign of my very poor expectations for the economy.

Ditto here. We will probably show our largest paper profit this year, but it is mainly because we have cut way back on investment in new projects.  And this has nothing to do with demand - we are experiencing a boom, as the recession pushes Americans towards lower cost recreation of the type we operate, at the same time it cuts state budgets and makes them more amenable to our business model of private operation of public parks.

So why are we cutting back investment?  I run a very low margin service business. Here is a simplified calculation: We make, say, 8% of revenues before taxes and accelerated depreciation. 50% of our costs are labor, and the new health care law may raise our labor costs by 8% or even more.  A four percentage point cut in margins is not a big deal to Microsoft, but it is to us.  Until we figure out how this all will play out, we are still investing but only in above-average opportunities.

When we invest in a new project, it hits that year's income in two ways.  First, we have accelerated depreciation on the new capital equipment.  And second, we typically have a startup loss in the first year.  In the last few years of rapid growth, we have had close to zero paper earnings because of these growth effects.  Once we take our foot off the pedal this year, though, we will show a large positive income.  For us, reduced growth and investment = higher short term reported profits.

Years ago I coined a term for a number of people I deal with in business -- "arrogant ignorance."  I don't mind running into folks who are young and inexperienced and admit such -- in fact, I like educating and training people and sharing what limited knowledge I have accumulated.  But what really sets me off are folks who have no idea about the subject on which they are making decisions but act as if their judgment is beyond question.  This tendency seems to be reinforced by organizations that have few real performance metrics and where, as such, looking like one knows what he or she is doing is more important than actually doing anything.

More recently, I found that this effect already has a name - Dunning-Kruger, though I think my term is much more evocative.  Anyway, this is an interesting article on Dunning-Kruger and its legitimacy in describing actual human behavior.

Via Tyler Cowen

Via Tyler Cowen:

Female migrants should on average be prettier, ceteris paribus, than those who stay in the old country.

As a followup to my point on oil prices, here are a selection of posts on oil prices and speculation that have caught my eye of late:

McQ writes about the charge of "inactive" oil leases, which Democrats attempted to use as an excuse for not opening up new lease areas for drilling

Tyler Cowen has a big roundup on the topic, with many links, and Alex Tabarrok has a follow-up.  Cowen discusses rising oil prices in the context of Julian Simon here.

Michael Giberson also addresses speculation, while observing that non-industrial buyers have not increased their position in the futures market as oil prices have risen

Don Boudreaux has thoughts on drilling restrictions

Finally, via Scrappleface:

When the U.S. Supreme Court reconvenes on the first Monday in
October, the nine Justices may consider whether the Constitutional
preamble clause "secure the Blessings of Liberty to ourselves and our Posterity" guarantees an individual right to drill for oil.

Now that the court, in a 5-4 ruling on the Heller case, has upheld
the Second Amendment right of "the people," not just state-run
militias, to keep and bear arms, some scholars say the court may be
willing to go the next logical step and recognize the peoples' right to
acquire their own fuel.

Tyler Cowen links to Lane Kenworthy Saying:

]Poverty comparisons across affluent nations typically use a "relative"
measure of poverty. For each country the poverty line "” the amount of
income below which a household is defined as poor "” is set at 50%
(sometimes 60%) of that country's median income. In a country with a
high median, such as the United States, the poverty line thus will be
comparatively high, making a high poverty rate more likely...

There is actually at least one study out there by a left-leaning think tank that sort of addresses this (though not exactly).  The study first shows US and European income of the bottom 10 percentile vs. the median income of that country.  Not surprisingly, since US median income is so high, the bottom 10 percentile have a low share.  BUT, they then do the numbers a second, time, showing the bottom 10 percentile income in each country all compared to US median income, ie all with the same denominator,  here, the US poor do at least as well as most European countries.  The comparison shows clearly that while the US has more income inequality, it is not because our poor are poorer but because our rich and middle class are richer.   Here is that second study:

I was tempted to title this post "markets in everything", but I just couldn't steal that moniker from the Marginal Revolution folks.  USA Weekend has a story about the Alibi Network, which will, for a price of course, create an alibi for you:

Whether you
are looking to skip a day of work or to secretly leave town for the
weekend, Alibi Network can provide fake airline receipts or phone calls
to your boss explaining your absence and even mock up an entire
itinerary for a bogus conference you were "attending." Rarely has lying
been so creepily airtight.

The
Chicago-based company charges from $75 for a simple phone call to
thousands of dollars for extensive lying, on top of a $75 annual fee.
The most popular service is the "virtual hotel," in which the fibber
can provide a boss or family member with the phone number of a hotel
where he's supposed to be. The number rings to one of Alibi's phones,
which are staffed by actors who will answer as if a particular hotel
has been reached. The incoming call then can be forwarded to the
fibber's cellphone, making it seem as if he's in a certain city even
though he's not. (We use "he" here, but half of Alibi's members are
female.)

Some
requests involve a creative solution. One working stiff asked the
service to get him out of a boring, week-long training class that was
mandated by his office. The solution: Alibi hired an actor to dress up
as a courier and barge into the class, informing the man that his house
had been robbed and he needed to go home right away. Another request
involved a married woman with small children who longed for a relaxing
weekend away from the kids. Alibi concocted a story that the woman had
won a free spa weekend in a prize drawing and hired an actor to call
her home and leave a voicemail message informing her of her "win."

For those of you of need of such services, perhaps on January 2 nursing your hangover, their web site is here.

Update:  Tyler Cowen informs me that I am waaaayyy behind the times, and that this company actually was the first entry in "Markets in Everything" several years ago.  That's what I get for trying to take a break from blogging.

From Tyler Cowen:

The NIH works as well as it does because the money is mostly protected
from Congress. It is not a success which can easily be replicated. The
more money is at stake, the more Congress wants to influence
allocation. We should guard this feature of the system jealously and
try to learn from it. If we can.

I had not ever thought about it this way, but this is probably a correct observation about government:  The more money in a program, the more likely it is that Congress will want to direct that money to take political credit for it and reward their cronies, and therefore the more likely the program is to fail.

Via Tyler Cowen:

The Asian
Development Bank presented official survey results indicating China's
economy is smaller and poorer than established estimates say. The
announcement cited the first authoritative measure of China's size
using purchasing power parity methods. The results tell us that when
the World Bank announces its expected PPP data revisions later this
year, China's economy will turn out to be 40 per cent smaller than
previously stated......The number of people in China living below the
World Bank's dollar-a-day poverty line is 300m - three times larger
than currently estimated.

Well, this is a bit sad, as I would hope everyone likes seeing people emerge from poverty**.  But it is really not surprising.  Strongly state-run economies are notoriously hard to measure from the outside, and westerners systematically overestimated the size of the economy of the old Soviet Union.

**  I make this statement because I am an optimistic guy full of confidence in the generally good intentions of mankind.  Because if I were not such a person, and actually judged people by their actions, I would come to the conclusion that a lot of people DO NOT want people in countries like China to emerge form poverty.  Trade protectionism, apologias for looting dictators like Castro or Chavez, anti-globalization riots, anti-growth initiatives, and calls for rollbacks in fossil fuel consumption all share in common a shocking disregard for people trying to emerge from poverty -- often from folks on the left who purport to be the great defenders of the poor.  I tried to explain the phenomenon before, at least among self-styled "progressives':

Progressives do not like American factories appearing in third world
countries, paying locals wages progressives feel are too low, and
disrupting agrarian economies with which progressives were more
comfortable.  But these changes are all the sum of actions by
individuals, so it is illustrative to think about what is going on in
these countries at the individual level. 

One morning, a rice farmer in southeast Asia might faces a choice.
He can continue a life of brutal, back-breaking labor from dawn to dusk
for what is essentially subsistence earnings.  He can continue to see a
large number of his children die young from malnutrition and disease.
He can continue a lifestyle so static, so devoid of opportunity for
advancement, that it is nearly identical to the life led by his
ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but
certainly no longer than he worked in the field) for low pay (but
certainly more than he was making subsistence farming) and take a shot
at changing his life.  And you know what, many men (and women) in his
position choose the Nike factory.  And progressives hate this.  They
distrust this choice.  They distrust the change.  And, at its heart,
that is what the opposition to globalization is all about - a deep
seated conservatism that distrusts the decision-making of individuals
and fears change, change that ironically might finally pull people out
of untold generations of utter poverty.

What guy wouldn't want one of these?

Hat tip Tyler Cowen