Niche dominations

An interesting exploration of ethnic domination of niche economic sectors, or, how to develop a jati.

How do some ethnicities wind up taking over (e.g.) hotel management? Aporia discusses the hows and the side effects--not all of them are benign. One is that a number of low-status jobs are no longer available as entry level jobs to youth of other ethnicities--nail salon employment is nearly locked down in LA.

AID reduction

AID cuts have downstream consequences that are easily foreseeable, and, as expected, reported on skew. "the cost of cancelled projects could be as high as \$US300 million, equal to a third of Liberia’s \$800 million yearly budget." Apples to oranges here: the government budget isn't the GDP.

The first story is about a nutrition project--one in which the object was to spur local intrepeneurs to market a local infant food. And then another anecdote:

For nearly a decade, Julie Sundaygar, 29, of the Bong Mines Bridge community on the outskirts of Monrovia, has sold bananas and shelled peanuts to workers who poured out from the Ministry of Finance’s Mechlin Street entrance. Sundaygar recalls almost doubling her sales when USAID-funded projects filled the ministry with USAID workers. “I could sell \$LD15,000 (about \$US75) first,” says Sundaygar who brings her fruit here from a twice weekly hour-long journey to Omega Market. Now her prices have halved. “Nobody here now gets their fruit.”

When I was last there, one of the popular job training choices the NGOs offered was furniture-making. There was quite a market for American/European style chairs, but if you looked closely the market was NGO workers and UN peacekeeping troops. The peacekeepers were never going to stay forever, and the NGOs come and go--and when they go they rarely pack furniture to go with them, so the market glutted.

An economic plan that's contingent on money coming for free forever is crazed. Tourism is challenging but they have people working on that. Infrastructure is a problem, of course, both the building of and the maintenance of.

The first link above tells of one aid project, but the first one they reported on I took note of: a 17M USAID project to advise the government on tax policy.

I was told the main purpose of USAID when founded was to funnel money to the right people to encourage good behavior and presumably wise choices; secondarily to help out the poorer populations (hopefully as a consequence of those wise choices). That's not necessarily a bad thing, but it lends itself to corruption and recently quite a bit of their money had been going to political influence buying in this country, which is way out of line. I'm not impressed by the motte-and-bailey defenses I've heard.

Improper valuation

Over at Chicago Boyz a post and thread on slavery and the Civil War got me noodling around to see if I had ever figured out how much of the drop in wealth in the South was due to destruction and opportunity cost of war, and how much to the disappearance of the "wealth" value of the slaves. Apparently I didn't, and there's quite a bit of research and back and forth on the subject.

Studies of things like census records suggest that the South had per capita wealth almost twice the North, with claims of less income inequality. Income inequality is lower in rural areas, and the South was more rural than the North, but I'd love to see histograms rather than averages. And to what degree the bigger boys were also more indebted. Apparently Olmstead's observations are not supposed to tell the whole story--though he was there and the new researchers weren't.

Anyhow, a population of 5.5M free (3.5M slave) with a per capita wealth for the free of about 1040, gives about 5.7 billion dollars, and estimates of the value of slaves run from about 3 to 3.5 billion. So that's about a 50-60% drop in net "wealth". A wicked bubble.

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An unexpected oddity--I added a LaTeX app to the blogsite so I could write equations more easily, and that turns the dollar sign into math-mode start/stop. Just a heads-up if you were planning to do the same.

These didn't demand a lot of comment

The video Chernobyl mentioned "beta tan", which I'd heard of years ago--beta particles (electrons and positrons) don't penetrate far at nuclear energies, so they give something like a sunburn. Naturally, the first thing that google serves up is a cough remedy.

Supply chain issues get magnified in poorer countries: "the company disclosed that the arrival of jet fuel in Liberia will be delayed as a result of the shortage on the global market." ... "The vessel should have arrived on December 14, 2022. We are now being informed that the vessel will not be in Liberia until January 13, 2023."

Customs change. Used to be that beggars got a Christmas gift from the President. (One year they banded together to buy a goat in thanks, and the donation was reduced!) Now: "Zogos took to the streets after being denied their routine Christmas packages from Finda Bondo, the Chief of Protocol to President George Weah." With cutlasses. Bystanders handled two of them.

Do not get arrested in third world countries

The Baptist War ... Also known as the Christmas Rebellion, it was an eleven-day rebellion that started on Christmas Day 1831 in Jamaica. The harsh repression of it became so notorious that it helped fuel the banning of slavery in England.

I've been looking off and on at radiation tolerance studies: there's a new report about bank voles "Chernobyl fibroblasts had higher total antioxidant capacity than the control cells and were less sensitive to DNA damage induced lethality, both of which processes may explain their increased resistance against radiation."

It doesn't seem overstated

This quillette article claims that the housing market has been distorted for the benefit of the rentier class--that nominally environmental and social goals have had the at-best-unintended consequences of sending housing prices sky-high and making home ownership extremely hard. This hits the middle class hard, and reduces the middle class's relative independence of the elites. It is horrible for the poor, who are already dependent.

You are at liberty to believe the consequences were accidental.

Hoenig

I don't keep close track of the finance world. Some things the big player do are obvious blunders, but others require intimate knowledge of the players to evaluate. I'd heard of people who weren't happy with federal inflation-risky policies, but couldn't tell you who they were.

a reputation hardened around Hoenig as the man who got it wrong. He is remembered as something like a cranky Old Testament prophet who warned incessantly, and incorrectly, about one thing: the threat of coming inflation.

But this version of history isn’t true. While Hoenig was concerned about inflation, that isn’t what solely what drove him to lodge his string of dissents. The historical record shows that Hoenig was worried primarily that the Fed was taking a risky path that would deepen income inequality, stoke dangerous asset bubbles and enrich the biggest banks over everyone else. He also warned that it would suck the Fed into a money-printing quagmire that the central bank would not be able to escape without destabilizing the entire financial system.

Asset inflation enriches the already rich. Read the article. Is the author missing something?

Different impacts

In case we forget: things like 25% higher shipping rates and contention for carriers are an annoyance for us, and cause quite a bit of pain for JIT businesses, but can be an existential issue when a 10% jump in rice prices means you eat less.

University implosion

AVI posted recently on the "lot of ruin in a university", and a fine example popped up this week.

Laurentian university got a judge to declare them insolvent, and cut 69 academic programs and 110 faculty jobs (and 36 administrators--so I think they're serious). "The university estimates that 10 percent of undergraduates are affected by the program closures."

If you want a weepy description "This is Canada's big mining town. Right? This is the mining university for Ontario. And I see that they haven't cut that part of the university." That's supposed to be a bad thing, BTW. and "Francophone students are being told that their education, language and culture aren't worth saving." and "These cuts counter the Truth and Reconciliation Commission of Canada's Call to Action #16: 'We call upon post-secondary institutions to create university and college degree and diploma programs in Aboriginal languages.'"

The university argued in court filings that its operations are inefficient: There are too many faculty, too many programs and classes are too small. More than half the university’s courses have fewer than 15 students, the court documents say. So almost 1/3 of the teachers are let go, and the U. claims this touches only 10% of the undergrads.

It has debts of nearly \$100-million from a building spree that didn’t produce enrolment gains and it ran deficits in the range of \$2-million to \$5-million a year for several years, according to its court filings. It also spent millions in grants earmarked for research to keep the lights on, owing in part to the practice of having just one bank account where incoming funds from various sources were mixed.

That's a couple of big red flags--I think the latter might be fraud. And when you look at the list of closures it looks like they bit off more than a college of 6000 could chew (Biomedical Physics, three different Environmental programs).

The image of program cuts at the daily nous seems to differ from that above--Women's Gender and Sexuality Studies cut but Equite, diversite et droits de la personne (both languages) stays, as does Criminology in both languages, and Motion Picture Arts goes away. I'm not sure how to reconcile those lists. "Women’s and Men’s Varsity Swimming and Hockey programs will be discontinued", but basketball, soccer, golf, etc remain. AVI found their current undergrad program list. I'm not sure how a few of the Econ courses will be without some math courses to back them up: Mathematical Economics looks like quite a semester's worth.

They had a "tricultural mandate." English, French, and Anishinaabemowin. This sounds spread very thin.

Of course the Prime Minister is talking about this, and I've no notion of how the dust will finally settle. If I were deciding the cuts I'd have chosen differently, ashcanning more of the gender/diversity stuff and trying to keep their famous midwifery program, but I suspect most of these were made with a simple #students/#faculty threshold. That probably hits francophone courses harder. C'est la guerre.

My take-away is that the current administration decided they didn't want to spend years talking to faculty and not meeting payroll, but decided to bite the bullet and see if they could save something from the university, at the cost of some of their semi-sacred cows. They'll get a lot of flack--I wonder if they have the spine to hold on. Either way the result could be interesting. Wild card--how many of the current decision-makers were involved in the misuse of research funds?

Gold

Very interesting. I should try to verify this myself:

It turned out that there were ten times as many troy ounces of nominal gold, stored away in the world’s safest places, than there was solid gold to be found — on the same planet. Ninety percent of this gold was paper, then, and would be electrons today, on some leftist creep’s fickle server.

Money and blood

When Youngest Son was in Civil Air Patrol, I hung out with some of the adults of the group for a while. One of them asked, "What keeps a plane in the air?" I figured there was a trick to the question, and there was. He went on: "Money."

Yes. That. That's what keeps a military running too, and has done so at least since the Crusades. I'm assured that amateurs discuss tactics and strategy, and professionals discuss logistics. That makes sense; if your men and stuff aren't where they need to be or when they need to be, or are stepping on each other, your tactics don't matter much.

Your logistics demand money.

It isn't just a matter of making the materials you need for war. (We already have people whose job is to worry about strategic materials and strategic industries.)

The money that keeps the military going comes from taxes, and if businesses are closing because the war cut off imports or too many workers got drafted, some of that money dries up. A command economy doesn't work terribly well for very long, even in wartime. Managers aren't that smart.

We've tried to trade money for blood. We don't just train our fighters, we equip them with gadgets to make them more effective, and provide expensive coordination tools (close air support, etc). Fewer soldiers do the work of more--at least in some battlefields.

Less money => more lives lost.

You need a strong economy to pay for readiness, and to keep the number of gold stars small in war. I assume we have people dedicated to figuring out how to degrade an enemy's economy--for just that reason. What do we call people who worry about our own economy's effect on the military? We do have them, don't we?

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Related considerations apply when you're talking about non-human enemies.

Devil in the details

In the story about new monetary policy of the Central Bank of Liberia you find these two comments:

“It is becoming increasingly difficult for a cash based economy to contribute on a cash based. the sooner we put that in the back of our minds and look for options using electronic works, using other digital financial tools, increasing the numbers of ATMs and increasing the numbers of points of sales, the better it becomes for all of us,” he said.

and

“Whenever we go the bank, they give us tear (torn) money. And when we want our money, they will say system down. It should not be like that. The system should not be down for us because when we go there to deposit our money, they can’t (never) tell us system down. This system down English (talk, excuses) is not doing well for the marketers. Let the system be up for us this holiday season,” she said.

Universal electronic transactions when the bank's systems are either down or lied about? That has got to inspire confidence.

One little change was that for the month of December, they are suspending the 25% policy--25% of all remittences into Liberia have to be converted into Liberian dollars, but for December you can keep your hard currency. A little something for their 25'th.

Who benefits (again)

In the news reports I skimmed yesterday, some of the usual suspects explained why having children is a bad idea and that they'll never do it (for the sake of future generations--parse that...). What X thinks is X's affair, but the publicity is managed by money. And my first question these days is "who benefits? in this case from people having fewer kids?" I wish I didn't have to be so cynical.

Short term--anybody who sells toys for adults instead of children. Double income, no kids ==> lots of money to spend on consumables, entertainments, travel--and having two cogs in the machine instead of one helps keeps down the wage you have to pay a cog. And it is easier to sell stuff to someone who is vaguely disatisfied with life. (Yes, I know poverty is really hard when there are lots of little mouths to feed--but we're talking upper and middle class here.)

Longer term--you won't have as many customers, but lots of firms don't look that far ahead.

I looked up one of those cost of raising a child stories to see if I could figure out the relative expenses of a child and an adult. I already knew the expenses were elastic--the nominal \$233,000 for a total of 17 years times 5 kids was quite a bit more than I was pulling down. But this bit was interesting: "The actual cost of raising a baby in its first year is around \$21,000 (for a household earning \$40,000) and \$52,000 (for one bringing home \$200,000)." True, they include the cost of housing in that, but I guess more money burns holes in your pockets faster.

In case you were curious, the USDA report has a \$13K annual estimate per kid for a 2-child family with income between \$59K and \$107K. At the low end of that, it comes to \$13K per kid and \$15K per adult (OK, with taxes maybe more like \$10K/adult), and if I assume a linear relationship from the previous paragraph's numbers, \$21K per kid and \$33K per adult at the upper end. (with taxes maybe less).

So it looks as though adults are about as costly as kids, maybe more so. Don't trust these hacked numbers--the devil is in the details/taxes/elasticity.

The Road to Serfdom by F. Hayek

I finally got around to reading The Road to Serfdom. Yes, it is worthwhile reading.

He undertakes to show how any attempt to redesign a society along centrally planned lines, as every version of socialism (National Socialist or Facist or International Socialist or Democratic Socialist) tries to do, will, by the logic of planning and the limits of the human mind, tend inevitably to try control not "merely economic things" but by extension every aspect of life, control information, and revise the meaning of words. And so it has proved. For a simple example, those enamored of centralized re-education have spent the effort to try to redefine words like "racism" and "free speech" to try to eliminate contrary positions without debate.

The book draws more heavily from German examples than Soviet ones, because it was written during WWII, when the USSR was an ally which nobody wanted to antagonize, but for every German example you can easily find plenty of Soviet counterparts. It draws heavily on British politicians and thinkers because it was meant for publication on the other side of the pond.

One aspect of society which Hayek does not mention is religion, possibly because he did not understand it well. The commonalities are obvious, though. God can demand anything of us, and so can the totalitarian state. However, pastors and bishops are obviously not omniscient, so in practice we tend not to experience such thorough guidance. Only God has the intellect to manage billions of human lives with individual attention and love. Human planners have to think in terms of faceless lumps--and not think very well, either. But because the divinity in a planned state is vested in human constructs, there's no vast gap between the god and the representatives, and they can and do demand compliance with more and more intrusive rules. "Who died and made you God?" is answered by "The Plan/Party/People is God and I am part of it."

Another aspect he did not foresee, though others did notice it, is that as liberty is further and further restricted, people would be thrown the bone of "sexual liberation."

The Reader's Digest produced a condensed version of the book when it first came out--and I can easily see how it could have been condensed. His style is a bit wordy.

And, FWIW, he is not averse to things like a guaranteed minimum provision for citizens if the nation is wealthy enough, but is alive to the extreme problems of how to define the minimum and what happens at the border between states, one of which has a larger minimum provision than the other.

Entertainments and pleasures

From Utopia of Usurers

Every religion, apart from open devil worship, must appeal to a virtue or the pretence of a virtue. But a virtue, generally speaking, does some good to everybody. It is therefore necessary to distinguish among the people it was meant to benefit those whom it does benefit. Modern broad-mindedness benefits the rich; and benefits nobody else. It was meant to benefit the rich; and meant to benefit nobody else. And if you think this unwarranted, I will put before you one plain question. There are some pleasures of the poor that may also mean profits for the rich: there are other pleasures of the poor which cannot mean profits for the rich? Watch this one contrast, and you will watch the whole creation of a careful slavery.

and

A house with a decent fire and a full pantry would be a better house to make a chair or mend a clock in, even from the customer’s point of view, than a hovel with a leaky roof and a cold hearth. But a house with a decent fire and a full pantry would also be a better house in which to refuse to make a chair or mend a clock—a much better house to do nothing in—and doing nothing is sometimes one of the highest of the duties of man.

Even the "free" pleasure of surfing the net demands some money for a machine and a network connection. The free pleasure of singing or whistling to yourself seems to be little-exercised.

Of course "doing nothing," while it may be a high duty, is also a chore magnet.

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I have never understood why Satanism gets to be classified as a religion, when it is by construction an anti-religion.

Susu club

I ran across the phrase in Liberia news and looked it up. A Susu club (non-profit variety) is a group with an agreement to bank with a trusted member a certain amount each month, on the understanding that each member receives the total amount one month. (Or week, or whatever.) For example, 12 people get together and each chips in \$10. The first month A gets \$120, the second month B does, and so on.

So what's the difference between doing this and saving money in a bank or putting it in a mattress? First, there's the chance that you might get the lump payout before the year is out. That's an attractive feature. Second: well, read the complaint in that link: "So, the main reason for paying into a Susu is that the members lack fiscal discipline, and spend whatever money they have on their hands."

That's not a nice way of describing the situation. True, many people are no good at planning for the future. But in Liberia, and many other places, it isn't just you who determines how your paycheck is spent. And family obligations are extremely elastic. If you have \$10 extra, your third cousin will explain to you that his child needs school fees. It is very bad form to stiff your family. But if the money is in a susu, it is out of your hands. When the \$120 finally comes around to you--well, that's enough to replace the roof, which is what you needed the money for in the first place.

Minting money

This morning an amusing little report circulated that one can buy a cypto-currency mining system that doubles as a space heater. Clever--take a feature that tends to be a nuisance, especially in consumer-grade computers--the high power requirements of the GPU(*)s used in the calculations that go into "crypto-currency mining," and spin it as a feature--the waste heat can heat your room! With 8 GPUs packed into that small a volume the water heat transfer system had better work well or you can set things on fire. That happened with some collaborators of ours in Maryland.

The whole crypto-currency business reminds me of the gold-rush folks. They looked to get rich by increasing the quantity of symbols of value--but not creating anything particularly valuable themselves. Thought experiment: suppose your country found boatloads of silver and gold (we won't go into details about how they collected it), and brought it back. Now you have the wherewithal to import more stuff, and you need to import--because, funny thing, having twice as many doubloons doesn't automatically double the size of your local industry. In fact it's simply apt to double the prices. Lots more gold, but not necessarily more stuff.

In Dawn Treader Lewis never bothered to explain why a lake that turned things to gold would be bad--except that people got greedy. Too bad, it would have been a one-liner.

Physics and econ

RCS has a link today to a Guardian story: "Why I left physics for economics. I recently decided to abandon the rules that govern nature for the rules that govern people and markets: economics. Why would I do such a thing?"

Short version: work in physics is hard to find and unstable (which means jerking your family around--some of us value stability, contra Zuckerberg's values). Econ has interesting patterns and rules to be discovered, just like plasma physics.

Do other people remember quants on Wall Street? True, that was GIGO and most of the blame lies with screwed-up economic models the quants were given. Still, I'd look twice. Maybe three times.

It seems that the quant jobs weren't all they were cracked up to be. (One of the warnings in that last link is that living near the super-rich and seeing shops devoted to things you'll never afford makes even well-off people feel poor. Wealth is relative--who knew?)

Housing

We took the kids to Old World Wisconsin from time to time. It turns out that it is possible to fit a family in a room not much bigger than one of the kid's bedrooms.

I remember a little about some of the places we lived in before moving to Africa, and I remember visiting some relative's houses now and then. As a general rule, they weren't very big. But now: "Likewise, the median-size home has increased in size by almost 1,000 square feet, from 1,525 square feet in 1973 to 2,506 last year." (Our duplex seems to be less than 800 square feet--military housing from the 60's. We succeeded in making the basement legally habitable, though, so maybe our house is growing too.)

It makes housing a little pricey.

This story is strongly black-and-white--probably the regulators have something to say on their behalf--but it makes fascinating reading. Plausible-sounding rules have far-reaching consequences, and some groups seem hostile to the entire idea of small housing.

Revised micro-housing legislation proposes more expansive changes, including prohibiting congregate housing development in places zoned for neighborhood commercial centers and for low-rise multi-family buildings, such as small apartment buildings and duplexes. Such zones are exactly the parts of the city where most micro-housing was previously built and where it makes economic sense.

The linked article is about micro-housing--apartments, basically. When we moved to Illinois, we couldn't afford a 3-bedroom apartment, and were lucky that the third child wasn't yet born, because rules prohibited renting a 2-bedroom to 5 people.

Zoning rules push for more space between a new house and the street (old houses were grandfathered in), wider sidewalks, wider driveways--more land and more expensive. (The lots our duplexes were built on are now almost too small to lawfully build a house on!) Which presumably helps make apartments more expensive too, though there are some fixed expenses to recoup. In the middle, and especially the lower middle, housing eats up a huge chunk of the income, and leaves a lot of us "one paycheck away from disaster." (Ill health has driven several people out of homes in this neighborhood.) Or a fire, or a tree landing on the roof, or something else that has you paying for both the original house and for a place to live...

At the low income end once you drop below trailer court prices there doesn't seem to be anything left except public assistance.

True, some people don't do themselves any favors (the feckless, the slovenly, and the jerks), but there should be some sink-or-swim ways for them to fend for themselves. There's no place to build-your-own in the city (maybe in Detroit). There are tiny houses. (I'm not sure wood is a good choice for building rental tiny-houses--too easily damaged.) Policing is an issue in collections of small housing--the predatory have to be driven out, and if they're homeless as a result that's sad, but not unendurably so. (Those with serious mental illness are another matter--if it is severe enough there's not much we can do short of locking them in, and for others we can think of halfway homes.)

There's a lady who lives on a corner of the Capitol Square. Over the years she has accumulated a fair pile of blankets and whatnot. She's peaceful and clean and seems to get out of the way without hassle when there's an event on the Square, so I guess people just let her stay. On campus, groundsmen accidentally found a tunnel where someone had been living for at least a couple of years. They never showed up again, so nobody knows if this was a squatter or a student trying to save on housing costs.

This year's "Go Big Read" at UW Madison is Evicted. I gather it focuses on the landlords, if the NYT review is any guide. There may be other players involved.

Negative interest

Sweden has been using negative interest rates.

Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.

What is happening now should not – according to conventional thinking – be possible.

As central bank rates have turned negative, the rates offered on bank deposits have followed. Yet rather than stuffing cash under mattresses, people have left their money in the bank or spent it.

Later on the article says

Pension funds might be among the first to abandon banks if things get too painful, because of what in effect can look like a tax on holding money.

One solution is to give savers nowhere else to go. This idea was floated by the Bank of England’s chief economist in recent weeks, who made the case that sub-zero rates will be needed in the near future.

Andy Haldane, a member of the Monetary Policy Committee (MPC), the UK’s equivalent of the FOMC suggested that to achieve properly negative rates, the abolition of cash itself might be necessary.

The first point about negative interest rates is that they've been tried in Japan and Sweden, two countries with strong social cohesion and trust. The second:

I find it useful to translate proposals into simple models. It gets around a lot of obfuscation.

I put my paycheck in the bank. The bank takes some of it away. I automatically lose money.

I'm not allowed to not put money in the bank.

The only way the bank doesn't get my money is if I spend it right away.

If everybody knows I have to spend money right away, they will raise prices.

No matter what I do, I get less for my hours of work.

Cui bono?

1. The State. They overspend and need to borrow. Negative interest rates force us to subsidize their borrowing: they benefit. I notice that all the happy-joy talk about this comes from government types, who grimly warn that cash is used for drug deals and other evil trades. Like paying the kid next door to mow the lawn while I'm on vacation.
2. The bank, as long as they can make sure my rate is worse than theirs

I conclude that this is, at minimum, a disingenuous way of raising taxes.

Conjecture

I'm not an economist by trade, and don't know if this has already been studied, but after keeping my eyes open a few years I'm pretty sure the following statement is true.

Given any two competing businesses, an arguably neutral regulation can be devised that penalizes one in relation to the other.

The implications for lobbying are obvious.

Examples abound.