Frank Stella, RIP
U.S.A.-India fact of the day
US ambassador to India, Eric Garcetti, has emphasized the remarkable success of Indian immigrants in the United States, noting that over 10% of Fortune 500 companmy CEOs as Indian immigrants who studied in the US.
Here is the link. Via the excellent Samir Varma.
Will Sri Lanka have gdp-linked bonds?
Negotiations to finally bring an end to Sri Lanka’s long-running $13bn debt default could result in an innovative new type of bond that would link payouts to economic growth and governance reforms, a long-held aim of emerging market bond investors.
The bankrupt south Asian nation and its creditors have agreed in principle to replace the debt, which it stopped paying in 2022 following a currency crisis, with so-called macro-linked bonds that would track the country’s recovery.
The inclusion of GDP-tied payouts into bonds that could be included in major indices is a big step forwards in trying to develop debt structures that will lure international investors back to riskier emerging market nations desperately in need of financing, say analysts…
In return for taking a roughly one-third haircut on their original debt, creditors have proposed a new $9bn bond with payments adjusted higher or lower in 2028 depending on the average US dollar GDP that Sri Lanka achieves. The country has put forward other ways of setting GDP-linked payments and is also assessing a creditor proposal for a separate governance-linked bond. This would cut coupon payments if the country raises tax revenue collection as a share of GDP and passes anti-corruption reforms.
As they emerge from defaults, countries such as Ukraine and Uruguay have handed out equity-like warrants, which promise extra money based on factors like movements in the price of commodities that the country produces or GDP, as a way of getting creditors to swallow debt losses.
Here is the full FT story by Joseph Cotterill, here is an earlier Alex post on Bob Shiller and related ideas.
Thwarted markets in everything, antiquities remain underpriced
An auction house has withdrawn 18 ancient Egyptian human skulls from sale after an MP said selling them would perpetuate the atrocities of colonialism.
Bell Ribeiro-Addy, the chair of the all-party parliamentary group on Afrikan reparations, believes the sale of human remains for any purposes should be outlawed, adding that the trade was “a gross violation of human dignity”.
The skulls of 10 men, five women, and three people of uncertain sex, were listed by Semley Auctioneers in Dorset, with a guide price of £200-300 for each lot.
They were originally collected by the Victorian British soldier and archaeologist Augustus Henry Lane Fox Pitt-Rivers, who founded the University of Oxford’s Pitt Rivers Museum in 1884.
Here is the full Guardian story, indirectly via Samir Varma.
Saturday assorted links
1. Incels vs insings, “Half of Malmö Consists of Guys Who Dumped Me.”
2. Will agentic work flows lead to more and better training data?
3. Critique of feminism, not by BC.
4. The New Atlantis, call for submissions, on what we should be building.
5. Chilean births down 20% over the last year.
6. “I make over $2,500 a month from focus groups.”
7. The actor behind Jar Jar Binks (NYT).
Who was the wealthiest man in the world in the 1830s?
Wu Bingjian, better known in the west as ‘Houqua’, or sometimes ‘Howqua’, was the most successful Chinese merchant of his day. As leader of the Cohong (gonghang), the guild of Chinese traders that had been authorized in the late 18th century by the Qing court to oversee trade with Western merchants at Canton (Guangzhou), he was at once the richest man in the world. In 1834, Wu’s personal wealth was estimated at 26 million Mexican silver dollars (£6.24 million then, around (£680 million today). To put this wealth in perspective, the contemporary European financier Nathan Rotschild held capital equivalent to US $5.3 million (around £1.06 million) in 1828. Wu’s extraordinary ability to maintain a complex balance between his business interests, the Qing court and his Western partners, made him the most importnat player in Western countries’ trade with China for over half a century.
That is from the new and quite interesting Creators of Modern China: 100 Lives from Empire to Republic 1796-1912, edited by Jessican Harrison-Hall and Julia Lovell.
Economists’ predictions from 1980
That is the topic of my latest Bloomberg column, here is the intro:
Out of curiosity, I recently cracked open The American Economy in Transition, published in 1980, edited by Martin Feldstein and including contributions from… Nobel-winning economists [Samuelson, Friedman, Kuznets], successful business leaders and notable public servants. Though most of the essays get it wrong, I found the book oddly reassuring
The problems the book describes truly are of a different era. On one hand, I was comforted to learn that many of these fears turned out to be unfounded. On the other, I am concerned that many current economists are not worried about the correct things.
How did they do in their analyses?:
For instance, many authors in the book are focused on capital outflow as a potential problem for the US economy. Today, of course, the more common concern is a possible excess inflow of foreign capital, combined with a trade deficit in goods and services. Another concern cited in the book is European economies catching up to the US. Again, that did not happen: The US has opened up its economic lead. Energy is also a major concern in the book, not surprisingly, given the price shocks of the 1970s. No one anticipates that the US would end up the major energy exporter that it is today.
Then there is the rise of China as a major economic rival, which is not foreseen — in fact, China is not even in the book’s index. Nether climate change nor global warming are mentioned. Financial crises are also given short shrift, as the US had not had a major one since the Great Depression. In 1980 the US financial sector simply was not that large, and the general consensus was that income inequality was holding constant. Nor do the economics of pandemics receive any attention.
So you may see why the book stoked my fears that today’s economists and analysts do not have a good handle on America’s imminent problems.
As for opportunities, as opposed to risks: The book contains no speculation about the pending collapse of the Soviet Union. Nor are the internet, crypto or artificial intelligence topics of discussion.
The column is interesting throughout. Milton Friedman for instance thought that the Fed would not find it politically profitable to fight inflation until inflation reached 25 percent. The best essay in the book was by Samuelson, who noted that such predictions usually misfire.
Edge Esmerelda
From Devon Zuegel:
“Edge Esmeralda is a month-long “popup village” for people who believe the future can be better and are actively working to make it happen.
- Replacing Aging, by Laura Deming from The Longevity Fund
- Hard Tech Weekend, by Eli Dourado from The Abundance Institute
- LabWeek Field Building, by Juan Benet from Protocol Labs
- Advance Market Commitments Unconference, by Nan Ransohoff who leads Stripe Climate
Learn more & sign up at edgeesmeralda.com.” And here is coverage from Sonoma Magazine.
The world of labor shortages, the culture that is alcohol
Drunken-driving deaths in the U.S. have risen to levels not seen in nearly two decades, federal data show, a major setback to long-running road-safety efforts.
At the same time, arrests for driving under the influence have plummeted, as police grapple with challenges like hiring woes and heightened concern around traffic stops.
Here is more from the WSJ. “About 13,500 people died in alcohol-impairment crashes in 2022…” Here is my earlier post on the culture of guns and the cultural of alcohol.
Via the excellent Kevin Lewis.
Friday assorted links
2. Yuen Yuen Ang on adaptive political economy.
3. A resurgence of folk deities in Taiwan? (NYT)
4. Benjamin Yeoh podcast with Henry Oliver on late bloomers. And a Tweet: “Khomeini was a such a strange man in his time. He didn’t get involved in politics until he was 61, & didn’t run a revolution until he was 76. By contrast Lenin was 47, Hitler 34, Ataturk 38, Mao 34, Mussolini 39, Ho Chi Minh 55, & Gaddafi 27 when they launched their revolutions.”
5. Soumaya Keynes on work from home: “Whereas men devote a higher share of the time that they save from commuting into childcare and outdoor exercise, women plough more of their saved time into household chores.” (FT)
6. The modern Manhattan project?: “Meta spent almost as much as the Manhattan Project on GPUs in today’s dollars.”
Northern Virginia fact of the day
Data center developers in Northern Virginia are asking utility Dominion Energy Inc. for as much power as several nuclear reactors can generate, in the latest sign of how artificial intelligence is helping drive up electricity demand.
Dominion regularly fields requests from developers whose planned data center campuses need as much as “several gigawatts” of electricity, Chief Executive Officer Bob Blue said Thursday during the company’s first-quarter earnings call. A gigawatt is roughly the output of a nuclear reactor and can power 750,000 homes.
Electric utilities are facing the biggest demand jump in a generation. Along with data centers to run AI computing, America’s grid is being strained by new factories and the electrification of everything from cars to home heating.
Here is more from Josh Saul from Bloomberg. As I have been telling people, be long power generation…
Migrants at Sea: Unintended Consequences of Search and Rescue Operations
Many countries are facing and resisting strong migratory pressure, fueling irregular migration. In response to mounting deaths in the Central Mediterranean, European nations intensified rescue operations in 2013. We develop a model of irregular migration to identify the effects of these operations. We find that smugglers responded by sending boats in adverse weather and utilizing flimsy rafts, thus inducing more crossings in dangerous conditions and ultimately offsetting intended safety benefits due to moral hazard. Despite the increased risk, these operations likely increased aggregate migrant welfare; nevertheless, a more successful policy should instead restrict supply of rafts and expand legal alternatives.
That is by Claudio Deiana, Vikram Maheshri and Giovanni Mastrobuoni, published in the latest issue of the AEA policy journal.
As a side point, the call for greater legality is under-argued to say the least. This is a classic example of academic bias not being called out, as there is zero consideration of the costs of such migration. Loyal MR readers will know I am hardly unsympathetic to immigration, but there are reasons why the arrival of so many migrants in Europe is unpopular. Policy recommendations can be issued without considering those reasons? And there is a call for the EU to help Africa grow — are there plausible policy instruments there with benefits above costs? Enough to matter for the migration problem? Doesn’t making poor societies richer often boost the flow of migrants because now migration can be planned and afforded? Also not discussed.
Or maybe it is that no one thinks these are real policy discussions, rather it is not “mood affiliation permissible” to simply end a piece on the note that trying to help vulnerable individuals can backfire and lead to a lot of moral hazard? And so a mood affiliation of “we care about them nonetheless” has to be slipped in at the end?
Either way come on, both authors and editors…
Nonetheless this is an interesting paper, worthy of attention! Here are less gated versions of the paper.
What is the problem in Australia? (from my email)
From Khalil Menaf Hegarty, note that an Australian dollar is worth about 65 cents. I also won’t double indent:
“There are a series of economy-wide, labour-related problems in Australia that policymakers appear incapable of tackling in a coherent way.
First up, this is a very good summary of some key national indicators around Australia’s per capita recession.
The story here is a good entry point to what is happening on the ground, but I’ll try and summarise.
-
- Left-leaning state governments have embarked on major infrastructure projects (and require significant public debt);
- These projects require minimum pay requirements that are effectively endorsed by construction unions;
- Costs and wages tend to blow out for these reasons (and I don’t want to get into the public debt conversation here);
- As noted in the story, the wage demands are quite significant. (AUD240k = approx. USD160k)
At the same time:
- Significant labour shortages in teaching, healthcare/nursing, law enforcement and the defence forces;
- A housing crisis, with a massive shortage of homes, prompting house construction targets;
- An inability to meet house targets because of the labour shortage;
- Immigration as both the solution to a labour shortage, problems for the housing crisis, and a spiral for both.
Perhaps this is a similar situation to Canada (as per your April column), but perhaps the problem is more acute because we don’t have access to the US labour market in the same way.
So, my questions are: What’s wrong with Australia’s economy? Is this precedented? What would you do about it?”
TC again: Perhaps we need new and better models for this kind of situation…
Thursday assorted links
Ryan Bourne on the British growth deterioration
From the London Times (gated), he starts from my earlier MR discussion of the topic:
Yet, from a policy perspective, identifying what changed after 2008 is less interesting than what could have been done better. Cowen’s question was ignited by a British entrepreneur telling him that the UK’s planning laws explain much of the enduring prosperity gap to the United States. I agree, and think that Cowen understates the damage of nimbyism after 2008. The financial crisis headwinds made it more imperative to dismantle growth-stifling land-use barriers, which are becoming increasingly damaging with time.
Careful analysis by the LSE economists John Van Reenen and Xuyi Yang suggests the UK has a sharper deterioration in productivity growth than France or Germany because of weaker capital investment, which the financial crisis, Brexit and political uncertainty have exacerbated. We can’t undo the financial crisis or easily overturn the public’s decision on Brexit, but giving the green light to more housing, energy and infrastructure projects by liberalising land use was an obvious path to countering this investment collapse…
Prior to 2008, pharmaceuticals, chemicals, and life sciences were expanding strongly, but are increasingly hampered by land rationing and escalating rental costs, too. Savills estimated in 2020, for example, that London had 90,000 sq ft and Manchester 360,000 sq ft of suitable lab space available, compared with Boston’s 14.6 million sq ft and New York’s 1.36 million sq ft. Similar problems afflict efforts to build hyperscale data centres.
This is all worth a ponder. Claude 3 estimates that land rent is 12-15% of British gdp, so I still would like to see a very careful decomposition done here. I estimated the NIMBY issues accounted for about 15% of the gdp shortfall, if we relaxed NIMBY quite a bit how much upside would that create?