Marginal Revolution

Does the U.S. need an auto industry?

Here is the symposium, I was in a Bryan Caplan and Don Boudreaux sort of mood when I emailed in my answer:

I’m an economist not a business forecaster, so I don’t have any particular predictions about Chrysler and G.M. We do know that Ford is likely to survive.

More important, there are some very efficient Toyota plants in the United States. That too is part of our domestic automobile industry and those plants employ a large number of American workers.

You might think that Toyota is different because it is a Japanese company rather than an American one. But in fact Toyota is a publicly traded company, as are most of the other major automobile makers. That means any American can, any time he or she wants, buy some Toyota shares and make Toyota more of an “American company” and less of a “Japanese company.”

Have you gone out and bought those shares? Maybe not. Maybe that means you don’t really care about whether Toyota is a Japanese or an American company. If you have bought Toyota shares, maybe it is simply because you thought that the company was a good investment. That’s O.K., there is nothing wrong with those attitudes. In fact those attitudes are a sign of your rationality.

Our automobile industry could be much more “American” if we really cared to make it so. But we don’t. Our behavior as investors and consumers is usually more rational than the claims we offer up in politics and in public discourse.

Assorted links

1. Torture and civilization.

2. Critique of UNESCO World Heritage program.

3. Ron Paul and Sasha Baron Cohen.

4. What really happened with Cochabamba water privatization.

5. Forcing health care professionals to work during a pandemic.

The Twitter barrage

In the last forty-eight hours I have acquired many hundreds of new Twitter followers for my Twitter posts, yet for no apparent reason.  I've probably doubled my number of followers over the last two days and that includes a concentrated swarm of followers with Russian or Ukrainian names (what about Belarus?).  Today I can click on my email every few minutes and have a bunch of new followers.

Yet I have done nothing notable over that same time period nor have I received significant media coverage.  What accounts for this equilibrium?  What is the underlying model of social contagion?  One model is simply that these followers have been queued for weeks by Twitter and the notices are being released only now; does that accord with your experience as a Twitter user?

Flu fact of the day

Here is Revere at Effect Measure:

We currently have fewer staffed hospital beds per capita than we did in the last pandemic, 1968 (the "Hong Kong flu").

He offers further wise words and note that this hypothetical projection is one of the better case, mutation-free scenarios:

Now take a bad flu season and double it. To each individual it's the same disease but now everybody is getting it at once, in every community and all over the world. In terms of virulence, it's a mild pandemic. It's not a lethal virus like 1918. But in terms of social disruption it could be very bad. If twice as many people get sick, the number of deaths could be 80,000 in the US instead of 40,000. Gurneys would line the hallways of hospitals and clinics. And absenteeism amongst health care workers would compound the problem. Infrastructure would probably survive intact. No need to have your own water supply or electricity generator. But it would be a very rough ride.

All of this could plausibly happen from this virus without it causing anything more than the usual case of influenza.

Old people love Kindle

Citing this Amazon forum, Publishers Lunch Deluxe reports:

We extracted about 75 percent of the responses on age (representing about 700 responses, taking equally from the earliest and most recent postings, which show very similar age distributions). Per John Makinson's quip at an LBF panel, over half of reporting Kindle owners are 50 or older, and 70 percent are 40 or older. Here is the full age bracket distribution:

0 - 19: 5%
20 - 29: 10%
30 - 39: 15%
40 - 49: 19.5%
50 - 59: 23%
60 - 69: 19.5%
70 - 79: 6%
80+: 2%

The comments themselves are as illuminating as the numbers. So many users said they like Kindle because they suffer from some form of arthritis that multiple posters indicate that they do or do not have arthritis as a matter of course. A variety of other impairments, from weakening eyes and carpal-tunnel-like syndromes to more exotic disabilities dominate the purchase rationales of these posters. Which in turn explains Amazon's pseudo-statistical case that e-book purchases are incremental/additive, rather than cannibalistic of their print sales. Countless people report being able to read much more with Kindle because it overcomes physical obstacles or limitations that had made reading difficult for them previously.

I thank S. for the pointer.

Keynes's *General Theory*, chapter 12

This is the best chapter in the book and one of the most important economics essays of all time.  Read it here.

Upon rereading it, I am overwhelmed by its insight and also its relevance to our current predicament.  I object to the final paragraph on the nationalization of investment but still this is a stellar performance.

It is section IV which did the most for me and I put that under the fold for your consideration...

In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention. The essence of this convention — though it does not, of course, work out quite so simply — lies in assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change. This does not mean that we really believe that the existing state of affairs will continue indefinitely. We know from extensive experience that this is most unlikely. The actual results of an investment over a long term of years very seldom agree with the initial expectation. Nor can we rationalise our behaviour by arguing that to a man in a state of ignorance errors in either direction are equally probable, so that there remains a mean actuarial expectation based on equi-probabilities. For it can easily be shown that the assumption of arithmetically equal probabilities based on a state of ignorance leads to absurdities. We are assuming, in effect, that the existing market valuation, however arrived at, is uniquely correct in relation to our existing knowledge of the facts which will influence the yield of the investment, and that it will only change in proportion to changes in this knowledge; though, philosophically speaking it cannot be uniquely correct, since our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation. In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield.

Nevertheless the above conventional method of calculation will be compatible with a considerable measure of continuity and stability in our affairs, so long as we can rely on the maintenance of the convention.

For if there exist organised investment markets and if we can rely on the maintenance of the convention, an investor can legitimately encourage himself with the idea that the only risk he runs is that of a genuine change in the news over the near future, as to the likelihood of which he can attempt to form his own judgment, and which is unlikely to be very large. For, assuming that the convention holds good, it is only these changes which can affect the value of his investment, and he need not lose his sleep merely because he has not any notion what his investment will be worth ten years hence. Thus investment becomes reasonably “safe” for the individual investor over short periods, and hence over a succession of short periods however many, if he can fairly rely on there being no breakdown in the convention and on his therefore having an opportunity to revise his judgment and change his investment, before there has been time for much to happen. Investments which are “fixed” for the community are thus made “liquid” for the individual.

It has been, I am sure, on the basis of some such procedure as this that our leading investment markets have been developed. But it is not surprising that a convention, in an absolute view of things so arbitrary, should have its weak points. It is its precariousness which creates no small part of our contemporary problem of securing sufficient investment.

The insights here have yet to be fully mined.

Negative nominal interest rates

We've figured out how to do it.  Courtesy of La Gloria of course.

Interview with Obama

This is exactly the sort of link which MR normally shuns.  But it really is worth reading.  David Leonhardt runs the interview.  I do not agree with Obama on all points but he understands economic policy better than do most professional economists, whether Democrats, Republicans, etc.

Google Data

Google has tied BLS data to a nifty graph utility making it very easy to examine say unemployment rates across counties, states and so forth.  Do a search for unemployment rate, click on the top graph and check it out.  More is planned.

Hat tip to Flowing Data.

Assorted links

1. Competition in the hug market.

2. Should restaurants charge for bread and butter?

3. New data analysis blog.

4. The education of a libertarian, by Peter Thiel.

5. The ten most influential films of recent times?