Marginal Revolution

The January test for the eurozone

Tyler Cowen

Portugal was on Wednesday forced to pay big interest rate premiums to borrow from the markets in the country’s first test of sentiment of the new year.

Lisbon had to pay 3.68 per cent in yields for six-month loans, a jump from 2.04 per cent compared with a similar sale in September and 0.59 per cent a year ago.

One strategist said: “This is ominous. Portugal is heading towards a bail-out as the country’s borrowing costs are continuing to rise. This is unsustainable.”

The article is here, there is more to come in what will be an active month for European bond issues.

*The World in 2050*

Tyler Cowen

The author is Laurence C. Smith and the subtitle is Four Forces Shaping Civilization's Northern Future. 

This book is excellent on at least two questions:

1. Which environmental problems remain real, even taking into account the dynamic adjustment properties of markets?

2. Why the northern countries will grow in economic and political importance over the next forty years.

Excerpt:

Extraction industries will favor projects nearer the water.  Looking ahead, our northern future is one of diminishing access by land, but rising access by sea.  For many remote interior landscapes, the perhaps surprising prospect I see is reduced human presence and their return to a wilder state.

My main criticism of this book is that it does not direct enough criticism at government water subsidies and their role in worsening this environmental problem. 

Here is the book's rather non-Hayekian close:

No doubt we humans will survive anything, even if polar bears and Arctic cod do not.  Perhaps we could support nine hundred billion if we choose a world with no large animals, pod apartments, genetically engineered to algae to eat, and desalinized toilet water to drink.  Or perhaps nine hundred million if we choose a wilder planet, generously restocked with the creatures of our design.  To be, the more important question is not of capacity but of desire: What kind of world do we want?

Definitely worth the read.  I don't agree with everything here, but this is a book (very well-written by the way) which should be making a splash.  For the pointer I thank a loyal MR commentator.

Further assorted links

Tyler Cowen

1. Here is David Leonhardt (!) on Guanajuato.

2. This guy reviewed a lot of books.

3. Can hard times boost support for immigration?

4. The iPad is cracking the education market.

Going Once, Going Twice, Not Going for $150!

Alex Tabarrok

I love that it says, "Tip: Delta accepts lower bids first."

Hat tip to Jim Ward.

Paragraphs to ponder on cellphones and prisons

Tyler Cowen

“The smartphone is the most lethal weapon you can get inside a prison,” said Terry L. Bittner, director of security products with the ITT Corporation, one of a handful of companies that create cellphone-detection systems for prisons. “The smartphone is the equivalent of the old Swiss Army knife. You can do a lot of other things with it.”

One inmate says: "Almost everybody has a [smart] phone."

Inmates use the phones to coordinate protests and also to plan outside crimes.  How do the phones get in?:

In South Carolina, where most prisons are rural and staff members have to pass through X-ray machines and metal detectors, smugglers resort to an old-fashioned method — tossing phones over fences.

They stuff smartphones into footballs or launch them from a device called a potato cannon or spud gun, which shoots a projectile through a pipe. Packages are sometimes camouflaged with a coating of grass, which makes them hard for guards to detect. The drops are coordinated through texts or calls between inmates and people outside, said Jon Ozmint, director of the South Carolina Department of Corrections, which confiscates as many as 2,000 cellphones a year.

The cellphone industry does not support phone-jamming plans, which it claims are illegal: "He [a spokesman] cited the Communications Act of 1934, which prohibits the blocking of radio signals — or, in this case, cellphone signals — from authorized users."

The full story is here.

Assorted links

Tyler Cowen

1. Photo gallery of Detroit.

2. Seattle's new parking pricing policies.

3. The economics of the Dave Matthew Band.

4. Blog of datasets for developmental economics.

5. Inspiration, from the earth.

6. Mochi (rice cake) deaths in Japan.

Which shipping company is kindest to your packages?

Tyler Cowen

A field experiment was done, using advanced technology:

So which company treats your packages with the most tender loving care? After crunching the data and averaging the number of spikes recorded by each carrier on each trip, we found that the USPS has the gentlest touch, with a per-trip average of 0.5 acceleration spikes over 6 g's. FedEx and UPS logged an average of three and two big drops per trip, respectively (see graph, next page).

Given those results, we were a little surprised to find that the USPS flipped over its Express Mail packages an awful lot, averaging 12.5 position changes per trip. Meanwhile, FedEx averaged seven position changes, and UPS had an average of four.

All three carriers did a good job at maintaining a stable temperature, but FedEx nabbed the top rating, with an average change of only 26.01 degrees, compared with 26.8 degrees for UPS and almost 32 degrees for the USPS. But the maximum temperatures our package experienced were within 2 degrees, and at no time did a temperature register above 80 degrees or below 47 degrees.

One disheartening result was that our package received more abuse when marked "Fragile" or "This Side Up." The carriers flipped the package more, and it registered above-average acceleration spikes during trips for which we requested careful treatment.

Here is much more, including a nice picture.  At the very least, the packages seem to arrive on time.

For the pointer I thank www.bookforum.com.

New html edition of my ethnic dining guide is up

Tyler Cowen

Google to my home page and scroll down to the bottom.  If you follow the blog version of the guide (on Twitter), you won't find anything new here, but if you wish this way you can print the whole thing out.

Markets in only a few things

Tyler Cowen

North Korea, of course:

The professor even told of a shop in which human manure could be traded to be used as an alternative to chemical fertilizer, an item on which the North had heavily depended from the South for years.

"Skinny jeans, blue crabs, pig-intestine rolls" are now all actively traded in the Hermit Kingdom.

For the pointer I thank a Bulls fan.

Assorted links

Tyler Cowen

1. Scott Sumner's response to me, part II.  And Scott defends high earnings in finance.

2. The iPad and the future of the magazine.

3. Interview with Roger Penrose.

4. Interview with Michael Rutter (pdf).

5. The effects of immigration and emigration on European wages.

Assorted Links

Alex Tabarrok

1. Interview with Gary Gorton.

2. Appreciations of Fred Kahn from Tom Hazlett and Susan Dudley.

3. The Dow Piano.

4. Andrew Gelman's five books on statistics; some surprising choices.

5. NSF Grand Challenges papers - basically well known economists arguing for why their research should get more money, but not less interesting for that.

The academic job market for history and for economics

Tyler Cowen

During the 2009-10 academic year, the number of positions listed with the American Historical Association dropped by 29.4 percent, according to a study the group will release today. That follows a 23.8 percent drop the year before. Last year, the association announced that the number of listings it received -- 806 -- was the smallest in a decade; this year's total of 569 marks the smallest number in 25 years.

But in data also being released this week, the American Economic Association is announcing that its job listings in 2010 recovered from a 21 percent decline in 2008. Further, the number of academic jobs exceeded the number in 2008. (Economics job listings include positions in the finance and consulting industries, in addition to academic slots.)

Here is more.  And:

...The total number of listings with the AEA rose to 2,842 in 2010, up from 2,285 in 2009, and only 43 jobs shy of the 2008 total. Because many of the 2008 openings that were listed were for searches that were subsequently called off, the AEA report -- prepared by John J. Siegfried, secretary-treasurer of the association -- says that it believes job openings are now above 2008 levels.

New academic jobs increased to 1,884 in 2010, up from 1,512 in 2009, and now exceed 2008 totals by 24. The vast majority of the academic jobs are at universities with graduate programs.

The top area of specialization in job listings, by far, was mathematical and quantitative methods, followed by microeconomics, macroeconomics and financial economics, international economics, and macroeconomics and monetary economics.

A sexual selection model of schizophrenia

Tyler Cowen

Schizophrenia is a mental disorder marked by an evolutionarily puzzling combination of high heritability, reduced reproductive success, and a remarkably stable prevalence. Recently, it has been proposed that sexual selection may be crucially involved in the evolution of schizophrenia. In the sexual selection model (SSM) of schizophrenia and schizotypy, schizophrenia represents the negative extreme of a sexually selected indicator of genetic fitness and condition. Schizotypal personality traits are hypothesized to increase the sensitivity of the fitness indicator, thus conferring mating advantages on high-fitness individuals but increasing the risk of schizophrenia in low-fitness individuals; the advantages of successful schzotypy would be mediated by enhanced courtship-related traits such as verbal creativity. Thus, schizotypy-increasing alleles would be maintained by sexual selection, and could be selectively neutral or even beneficial, at least in some populations. However, most empirical studies find that the reduction in fertility experienced by schizophrenic patients is not compensated for by increased fertility in their unaffected relatives. This finding has been interpreted as indicating strong negative selection on schizotypy-increasing alleles, and providing evidence against sexual selection on schizotypy.

That is from Marco Del Giudice and for the pointer I thank Harpersnotes.

My pre-election column on Obama

Tyler Cowen

This was published in Spanish, in a magazine called Capital, right before the Presidential election.  I will put the English draft under the fold...

Continue reading "My pre-election column on Obama"

Assorted links

Tyler Cowen

1. The modern Panopticon.

2. What's happened to the New York Stock Exchange?

3. Best jazz of 2010?

4. Animal homosexuality (pdf).

5. New book on Karl Polanyi.

6. Speculative results on gaze and politics (interesting, but I've looked only at the link).

7. The obscure and surprising in the year to come.

Markets in everything

Tyler Cowen

Kindle eBook, for $6,431.20 -- Selected Nuclear Materials and Engineering Systems.

Don't forget, we get a commission if you buy one.

For the pointer I thank Jason Lewis.

Advice for a future regulator

Tyler Cowen

WW, a loyal MR reader, emailed me a request:

My friend recently accepted a fellowship at REDACTED and will be starting in a few months. I was wondering what advice or reading suggestions you might have for a future component of the regulatory regime.

I am assuming this is not a "policy level" position.  I suggest these pointers:

1. Ponder whether you actually wish to move up into a managerial position over time.  Your job will change a lot and your headaches will increase.  Inertia will push you in this direction, but don't take it for granted.

2. Figure out in advance what kinds of cognitive capture you will be subject to, and whether you wish to fight or embrace them.

3. Watch Kurosawa's movie Ikiru, about a dying Japanese bureaucrat and his final quest for meaning.

4. Keep on reading within the field you work on.  There will be a tendency to assume you "know it all," but the perspectives of outsiders will remain valuable, even if they commit stupid blunders on some of the details.

5. If you don't already know, learn the value of ambiguity and how to build alliances in the workplace.  Many people remain bad at these skills.

What else can you all think of?

Addendum: David Henderson has more.

Skating Lessons

Alex Tabarrok

Yesterday I inaugurated the New Year by taking the kids ice skating. Naturally this got me to thinking about economics, specifically Dan Klein's modern classic, Rinkonomics: A Window on Spontaneous Order.

Long ago people didn't know anything of skating. Imagine yourself one of them. Imagine that a friend walks up to you and tells you with great enthusiasm about his new idea for a business:

"I'll build a huge arena with a smooth hard wooden floor and around the perimeter a naked iron hand-rail. I'll invite people to come down to the arena and strap wheels onto their feet and skate round n' round the arena floor. They won't be equipped with helmets, shoulder-pads, or knee-pads. I won't test their skating competence, nor separate skaters into lanes. Speedsters will intermingle with toddlers and grandparents, all together they will just skate just as they please. They'll have great fun. And they'll pay me richly for it!"

Knowing nothing of skating, you would probably expect catastrophe. You exclaim: "How are 100 people supposed to skate around the arena without guidance or direction?...The arena will be a scene of collision, injury, and stagnation. Who will pay for that?!"...

Yet, we have all witnessed roller skating, and we know that somehow it does work out. There are occasional accidents, but mostly people stay whole and have fun, so much so that they pay good money to participate. The spectacle is counter-intuitive. How does it happen?...

An important quality of collision is mutuality. If I collide with you, then you collide with me. And if I don't collide with you, you don't collide with me. In promoting my interest in avoiding collision with you, I also promote your interest in avoiding collision with me.

The key to social order at the roller rink is this coincidence of interest.I do not intend to promote your interest. I am not necessarily even aware of it. Still, by looking out for myself I am to that extent also looking out for you. My actions promote your interest.

Skating on the floor of the roller rink is an example of what Friedrich Hayek called spontaneous order.

John Stossel memorably demonstrated the alternative process of centrally planned skating in this video (starting about 3:16).

How to eat well anywhere in Mexico

Tyler Cowen

You'll sometimes hear fallacious claims that San Miguel Allende or Guanajuato or other parts of Mexico don't have superb food.  What is true, in many Mexican cities, is that almost every place near the main square is only so-so.  Here's what to do:

1. Look for time-specific food.  In San Miguel for instance, there is barbacoa [barbecue] from 8-10 a.m., carnitas from about 11-4, and wonderful chorizo after 8 p.m.  In Mexico, if the food is available only part of the day, it's almost always good.  It's for locals and there is no storage in these places so it's also extremely fresh.

2. Often the best meals are served in places which have no names.  In San Miguel the "brothers Bautista" run the best carnitas stands, but there is no sign and no marking.  The stands are simply there on the side of the road, with some plastic tables and chairs, at a few places around town.  Everyone in town knows about them.

3. Ask around with taxi drivers and be persistent.  Ask the older taxi drivers.  Throw away your guidebook, no matter which one you have.

4. Use breakfast and lunch for your best meals; dinner is an afterthought.  Almost everywhere good is closed by 8 p.m. or often long before then.  Always visit a place that closes by 1 p.m.

5. Roadside restaurants, on the edges of towns or between towns, serve some of the best food in Mexico or anyhere else for that matter.  Some of these restaurants even have names, though you can overlook that in the interests of eating well. 

Peak travel

Tyler Cowen

A study of eight industrialized countries, including the United States, shows that seemingly inexorable trends — ever more people, more cars and more driving — came to a halt in the early years of the 21st century, well before the recent escalation in fuel prices. It could be a sign, researchers said, that the demand for travel and the demand for car ownership in those countries has reached a saturation point...

Most of the eight countries in the study have experienced declines in miles traveled by car per capita in recent years. The U.S. appears to have peaked at an annual 8,100 miles by car per capita, and Japan is holding steady at 2,500 miles.

Here is more.

Real wages for the previously unemployed

Tyler Cowen

Catherine Rampell reports:

Nearly 7 in 10 of the survey’s respondents who took jobs in new fields say they had to take a cut in pay, compared with just 45 percent of workers who successfully found work in their original field.

Of all the newly re-employed tracked by the Heldrich Center, 29 percent took a reduction in fringe benefits in their new job. Again, those switching careers had to sacrifice more: Nearly half of these workers (46 percent) suffered a benefits cut, compared with just 29 percent who stayed in the same career.

Assorted links

Tyler Cowen

1. Thomas Hazlett on Alfred Kahn.

2. Kent Annan has a new book coming out.

3. Gelman and Salam on threshold earners, more.

4. Bolstering the case for constitutional monarchy.

5. Putting Alzheimer patients on higher indifference curves.

Classical music for $100

Tyler Cowen

Enda asks:

Loyal MR reader and consumer of alternative/indie/rock music here. If someone asked me for a broad introduction to the best of the genre with a budget of $100, my personal recommendation would be to purchase Sgt Pepper (The Beatles), skip most of the next two decades, Doolittle (Pixies), OK Computer (Radiohead), Pinkerton (Weezer), Siamese Dream (Smashing Pumpkins), Loveless (My Bloody Valentine), Is This It (The Strokes), Songs for the Deaf (Queens of the Stone Age) and Funeral (Arcade Fire).I have a $100 budget for an introduction to classical music and an essentially blank canvas. Your recommendations?

I'll price this by the CDs rather than the MP3s:

1. Start with a box of the Beethoven symphonies, either Gardiner or van Karajan cost only $20.  (For $43 the Klemperer set offers the piano concerti as well.) 

2. The Bach Brandenburg Concerti; the Pinnock set is basically $20 with the Suites thrown in.  Or get the Alessandrini set for $26.

 

3. Glenn Gould, both sets of the Goldberg Variations, $13.

  

4. Never buy an inferior recording simply because it is cheaper.  In the long run it is more expensive.

5. Mozart, symphonies 40 and 41 and other late symphonies, $15.

That brings us to about $68. For the rest I would draw from Dvorak's New World Symphony, Schubert (Symphony 9 or Trout Quintet, with superb pairings on both CDs), assorted Chopin, Beethoven piano sonatas, or Monteverdi, or Philip Glass Songs from the Trilogy.  In general, try whichever pieces might have personal meaning to you; for instance if you liked the movie Black Swan, buy Tchaikovsky's Swan Lake (by either Previn or Pletnev) I've focused on the most accessible pieces, but if you wish to skip ahead Schubert's String Quintet is better than the Trout, Op.31, etc.

Prospects for a Space Elevator

Alex Tabarrok

Fun video clip from BBC on material science and prospects for a space elevator. 

Incentives vs. the TSA

Tyler Cowen

Every spring, private security officers at San Francisco International Airport compete in a workplace "March Madness"-style tournament for cash prizes, some as high as $1,500.

The games: finding illegal items and explosives in carry-on bags; successfully picking locks on difficult-to-open luggage; and spotting a would-be terrorist (in this case Covenant Aviation Security's president, Gerald L. Berry) on security videos.

"The bonuses are pretty handsome," Berry said. "We have to be good - equal or better than the feds. So we work at it, and we incentivize."

Somehow, this I had not known, nor had I known it was possible:

Some of the nation's biggest airports are responding to recent public outrage over security screening by weighing whether they should hire private firms such as Covenant to replace the Transportation Security Administration. Sixteen airports, including San Francisco and Kansas City International Airport, have made the switch since 2002.

The full story is here.

Assorted links

Tyler Cowen

1. A hypothesis about why the east side of cities is usually poorer.

2. International trade and New Year's resolutions.

3. Nature's science predictions for 2011.

4. Nature's science predictions for 2010.

5. An ethics code for economists?

Most Popular Marginal Revolution Posts from 2010

Alex Tabarrok

Here are the most popular Marginal Revolution posts from 2010 as measured by landing pages and page views.

1. Book lists were very popular as a category. The highest ranked post in terms of page views was Tyler's Books which have influenced me the most which created a blogosphere avalanche. Links to other people's lists (of influential books) was also very popular. As was Books of the year, 2010 and peculiarly this post on The best-selling book of all time.

2. The number one linked post was What happened to M. Night Shyamalan? a one-liner and one-picturer.  Also very popular in the category of "quickies" were Barbados v. Grenada, the demand for own-goals, Dead Birds, Freak-onomics, Nazi-Nudging, and Yuck_markets in Everything.

3. One Game Machine per Child on the failure of a computer voucher program to raise grades (but it did increase gaming).

4. Lost: The Final Episode. 

5. The Dark Magic of Structured Finance.

6. Gay Sex Statistics.

7. Peter A. Diamond.

8. How the Bill Will Evolve.

9. Economic Misconceptions.

10. Why Did the Soviet Union Fall? (from 2007).

11. The Small Schools Myth.

12. A Theory for Why Latvian Women are Beautiful.

Other substantive posts with high popularity (in the top-50) were my posts Insiders, Outsiders and Unemployment and The Philosophical Cow and Tyler's posts How many children should you have?, Is there a case for a vat?, Does the Law Professor have cause to complain? and Why is Haiti so Poor?

Two of my posts from previous years were also popular in 2010, from 2008 What is New Trade Theory? on Paul Krugman's Nobel and from 2005 Why Most Published Research Findings are False.

Hope you have enjoyed this years offerings. What have I missed?

What falsehood would you most likely think is true?

Tyler Cowen

Is that the best way to sum up the question?  S.L., a loyal MR reader, asked:

What is the thing that would with highest likelihood be true if you didn't know it was probably not?  This is extremely interesting but also too broad to get a handle on---easier to think about in certain areas. E.g. what is the economic non-fact that satisfies this, or the physical ("god does not play dice" is up there).

I will try "that the universe as we know has not been there forever."  When I was a kid it seemed obvious to me that the sky and stars had always been there, albeit with some recycling of content, much like they changed the TV shows every few years or so.  I was surprised to learn about the Big Bang, at first held out hope for steady state matter theories, and now again see that some form of constancy may survive at the level of the metaverse.

How about in economics?  I am surprised how little power real interest rates have to predict investment.  I am surprised how few investors can consistently violate/beat the weak efficient markets hypothesis (aren't lots of people simply smarter than the marginal investor?).  And I am surprised that the Industrial Revolution ever took place, after not having taken place for so long.

Your picks?

What will happen with real wages?

Tyler Cowen

Put aside the rise of China, and think back to when the three major economies were the United States, Japan, and Germany.

Japan has seen a continuing decline in real wages.  The German data are harder to assess, but we have seen periods of wage declines, a lot of wage stagnation, and arguably real wages have declined relative to education levels in the work force.

If we look at U.S. real wages over the next ten years, what is the chance that they rise?

Monopsony markets in everything

Tyler Cowen

Two Mississippi sisters serving double life sentences for their roles in an $11 armed robbery will be released, but only on the condition that the younger sibling donate her kidney to her sister, whose organs are failing, state officials said Thursday.

Here is much more.

Assorted links

Tyler Cowen

1. Photos with economic content.

2. All first class stamps will become forever stamps.

3. Fantasy economists' league.

4. Utah legislative proposal for a parallel gold standard.

5. Will prizes prove effective?

6. More on threshold earners.

Drinks are on the House

Alex Tabarrok

...in terms of breadth of interest in economic subjects, literature and ephemera, Marginal Revolution is like nipping into a world-class local bar, where the drinks are always perfectly mixed, the atmosphere is relaxed and civilized, while intelligent conversation and serendipity are available on tap. The comments tend to be of unusually high quality too.

From Alen Mattich's writeup of the best economics blogs in the WSJ. Congrats and thanks to all our commentators.

James Heckman bleg

Tyler Cowen

When it comes to the idea of "early intervention," and the claims that it offers very high rates of return, does he have serious published critics?

Facts about Brazil

Tyler Cowen

[Rio favela] Complexo do Alemao ranks lower than the African country of Gabon on the United Nations Human Development Index, a world survey of living standards that measures factors like access to education and health care. By comparison, the Development Index scores of upscale Rio neighborhoods like Gavea and Leblon are higher than Norway, the world’s top-ranked country.

Here is more, mostly on the war against the drug gangs.

Free Money

Alex Tabarrok

Christopher Beam's piece on libertarianism had some amusing moments:

Say we started from scratch and created a society in which government covered only the bare essentials of an army, police, and a courts system. I’m a farmer, and I want to sell my crops. In Libertopia, I can sell them in exchange for money. Where does
the money come from? Easy, a private bank. Who prints the money? Well, for that we’d need a central bank—otherwise you’d have a thousand  banks with a thousand different types of currency.

 

A monetary system with thousands of banks issuing their own currency! Ho, ho, ho....those wacky libertarians where do they get their crrrrrazy ideas? 

Images from Nick Szabo, the Minneapolis Fed, the San Francisco Fed, the Philadelphia Fed and Larry Schutts. 

Addendum: Scott Sumner has other bones to pick.

Joseph Gibson on how to improve Congress

Tyler Cowen

Chug refers me to this new book.  A few of the ideas are:

1. Make Congress a temporary job, a bit more like jury duty or serving in the military.

2. Allow all financial contributions but require full disclosure on the internet.

3. Lower or eliminate the fixed allotment for Congressional staff, to limit the "bubble" which surrounds Congressmen.

4. Do not allow fundraising while Congress is in session, to make sessions more urgent.

5. Require that bills be written in plain English.

6. Allow formal vote-trading, so minority legislators could have some prospect of promoting their better ideas.

7. Make it easier to repeal unnecessary laws.

8. Eliminate the "hold" and make filibusters much harder.

9. Make confirmations quicker and easier.

10. Make the House smaller.

There is more, but that is a start. 

In general I find Congressional reform proposals, including filibuster abolition, difficult to evaluate.  There is no simple model at hand.  Sometimes the median voter model is useful, but in most cases it implies the reforms don't matter, a conclusion which I would not wish to accept so readily.  Multi-dimensional cycling models often imply that either a) it still doesn't matter (the agenda setter remains in charge), or b) it matters some huge amount in a way which is difficult to forecast but the entire political equilibrium can shift and not just locally.

There are many "near median voter models," perhaps too many.

There is also the Becker QJE 1983 model about the bargaining power of different interest groups.  Still, when it comes to outlining exactly how the procedural reforms shift the political bargain, we are again looking at a black box.  The first cut version of the model seems to imply that political procedures don't much matter.

The overall problem is that plausible models generate either no changes or large, non-local changes.  Maybe we should take those results seriously, but then in the former case it doesn't matter and in the then-more-relevant latter case we still can't predict the nature or even the direction of the non-local shift.

The euro: where we are at

Tyler Cowen

Wolfgang Munchau writes:

The EFSF will expire in 2013, at which point a new, tougher crisis regime will kick in. The EU has chosen this particular two-step construction for mainly political reasons, but from a funding perspective it is a nightmare. All existing bondholders will be protected until 2013. All government bonds issued from 2013 onwards will have collective action clauses. This means that if a government cannot service the debt, it can agree a haircut with a majority of investors – with legal force for all investors, including those who disagree with the majority vote. Looking at it from a risk-management perspective, this means that the entire default risk of the eurozone periphery will be concentrated on post-2013 bond issues. No one in their right mind would buy such junk bonds.

The way the new crisis mechanism is constructed ensures that the market for European periphery bonds is going to remain thin. What is now being conceived as a new crisis mechanism may end up as the eurozone’s principal funding agency if no one else will provide the funds. It would issue its own bonds – eurozone bonds – underwritten by the few remaining triple A-rated sovereigns, most importantly Germany and France. It is hard to see how such a construction could be sustainable. Should there ever be a default, Berlin and Paris would have to pay up – or default themselves.

How they are teaching English in South Korea

Tyler Cowen

The robots, which display an avatar face of a Caucasian woman, are controlled remotely by teachers of English in the Philippines -- who can see and hear the children via a remote control system.

Cameras detect the Filipino teachers' facial expressions and instantly reflect them on the avatar's face, said Sagong Seong-Dae, a senior scientist at KIST.

"Well-educated, experienced Filipino teachers are far cheaper than their counterparts elsewhere, including South Korea," he told AFP.

Apart from reading books, the robots use pre-programmed software to sing songs and play alphabet games with the children.

"The kids seemed to love it since the robots look, well, cute and interesting. But some adults also expressed interest, saying they may feel less nervous talking to robots than a real person," said Kim Mi-Young, an official at Daegu city education office.

Kim said some may be sent to remote rural areas of South Korea shunned by foreign English teachers.

The full story is here and I thank the ever-excellent Daniel Lippman for the pointer.  There is more here.

Assorted links

Tyler Cowen

1. Denis Dutton passes away.

2. Female pianist oppressed by government, horse.

3. Speculative claims about the medieval nature of modernity.

4. A political theory of populism.

5. Columbus, Ohio pronounces "smooth jazz" dead; hat tip to BookForum.

6. What Chinese tourists want to see in Europe.

Markets in everything

Tyler Cowen

There is only one legal gun store in all of Mexico, and the military serve as the clerks, and yet in the country guns are still bought and sold:

Alberto Islas, a security expert based in Mexico, said it is common knowledge that the easiest way for the average citizen to buy a gun is to ask a friendly local police officer.

"The cop will bring it to your house and show you how to load it," Islas said. "Of course, it is technically illegal."

Here is police reform in Mexico.

Today is Ronald Coase's 100th birthday

Tyler Cowen

That is an email notice from David Boaz.

What are the novels about monetary policy?

Tyler Cowen

Ezra writes:

"It’s too bad 'You Shall Know Our Velocity' isn’t a novel about monetary policy."

That's Matthew Yglesias, and it got me wondering about whether there are any novels about monetary policy. There's "The Wonderful Wizard of Oz," which some believe to be an allegory for the debate over the gold standard. If you're willing to include novels about the effects of monetary policy, pretty much any novel about the Great Depression counts, and "The Grapes of Wrath" is particularly eloquent on the subject. But is there anything more on-topic than that?

I am reminded of Paul Cantor on Thomas Mann on hyperinflation.  Specialists may wish to consult Friedrich Achberger, "Die Inflation und die zeitgenossische Literatur," in Aufbruch und Untergang: Osterreichische Kulturzwischen 1918-1938, Franz Kadrnoska, ed. (Vienna: Europa, 1981), pp. 29-42; there are monetary policy themes in Musil, Zweig, and Broch, among others.  Hans Fallada too.  Is there a monetary theme in H.G. Wells's The Last War?; Wells was a follower of Frederick Soddy.  How about from 19th century England?  From science fiction?  Isn't there mutual banking in Eric Frank Russell?

Addendum: Here is Krugman's pick.  And more here.

One paragraph on the Lehman bankruptcy

Tyler Cowen

Do you know the old saying "A picture is worth a thousand words"?  How about a new saying: "197 words is worth a thousand words"?:

To take one example: Lehman’s holding company (LBHI) filed for bankruptcy, but at the last minute its US broker-dealer (LBI) was kept out of bankruptcy by the NY Fed. The problem was that no one knew about this — most people thought LBI had filed too. Lehman had all sorts of problems getting employees to even show up for work; JPMorgan, which was LBI’s clearing bank, unilaterally shut off LBI’s access to its accounts for several days, and actually started seizing assets of LBI’s prime brokerage clients (a huge no-no); clearinghouses improperly limited LBI’s trading activity; the NSCC mistakenly seized a large amount of LBI’s customer securities; Lehman’s European broker-dealer (LBIE) stopped payments to LBI’s omnibus account even though LBI continued to make payments to LBIE; incoming customer securities to LBI weren’t getting properly segregated; counterparties simply stopped posting collateral they owed on OTC derivatives with LBI; and so on. That first week, the biggest challenge was simply getting someone at Lehman on the phone. (I saw a 63-year-old senior partner do a fist-pump you’d have to see to believe when he finally got an account executive at Lehman on the phone. Unquestionably the highlight of my week.)

The full article is here, hat tip goes to Matt Yglesias.