Category: One-handed!

I started thinking about doing a podcast last year because I wanted to find a new way of learning, catching up with people in my network, and bringing new ideas to people. I still like blogging (and will continue to write here), but podcasting provides a different perspective, most obviously because it allows conversation.

I “soft launched” Jive Talking about one month ago with five interviews. In the past few weeks, I have had time to fix up the Soundcloud page hosting the podcast* and put a bit more time into improving “production quality.” I still have a long way to go before I am happy with these details (listen to my intro!), but they are not as important as the conversations, which are unscripted and free to flow wherever we wonder (and wander). I am not alone in liking this element to podcasting:

One of the things that’s so cool about the new media technology is that people want . . . They just want direct communication. They don’t like high-level production values, all to people on YouTube, and they’re very savvy media consumers. A highly produced television show just looks like a lie. If you’ve got something to say, they just want you to sit down and say it. They don’t even want you to edit it so that it’s smoother because that just looks like you’re spinning the content, and you probably are.

My one-handed conclusion is that you’re not going to learn anything until you try something new, so here goes! Please listen to a few episodes, tell me what you think, and/or suggest new guests (including you!)

Episodes:
01 // What do we mean by water privatization?
02 // Monja Esterhuizen on losing less water in South Africa
03 // Delton Chen on incentivizing carbon mitigation
04 // Marina Della Giusta on #metoo, teaching economics, and careers for millennials
05 // Walter E. Block on pollution, regulation, and libertarian ideals
06 // Michelle Wilbur on small-scale renewables, oil and living in Alaska

* Jive Talking is now syndicated via Stitcher. I’ll get Apple iTunes and Google Play links soon!

I’ve always nodded my head at the truth in Upton Sinclair’s insight that “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” but I recently realized its importance in the quest for sustainability.

It’s clear that many people who make their living from “freeing carbon” (oil workers, loggers, car makers, beef producers, etc.) are not interested in ideas about limiting carbon (and equivalents). As a result, we’re getting climate change and damages of $100 for each $1 these “vested interests” earn.

So now I realize the sad possibility that many of these vested interests — had they saved some of their “carbon windfall” — would be ok with a decarbonising world. That would be because their savings gave them other options for earning, and enjoying, their lives.

Compare Norway and Alberta (or Alaska). Norway saved and invested lots of its oil money, so it now has $1 trillion, or about $185k per citizen. Alberta and Alaska, I know, have saved a lot less. This difference in savings is important because savings make it easier to cope with risk. Norwegians would not be so worried if the “oil carbon was turned off.” Alaskans, Albertans, and the residents of most oil- carbon-exporting countries (including the US) would be terrified, because they make their living from freeing carbon.

It is thus that I arrive at my over-simplified, one-handed conclusion: If we’re going to turn off the  carbon, then we need to “take care” of those who profit from it. The simplest way to do this is pay them off. The easiest way to raise the funds to pay them off is to tax carbon. I would make the tax “dynamic” such that the burden fell for those who ran from carbon while it rose on those who strolled in the same general direction. 

It’s not about the planet, the future or technology. It’s about money.

I grew up in San Francisco and Los Angeles in the 1970s, when gasoline was leaded (thus damaging brains and increasing crime), and pollution from cars and industry much worse than it is today. (Read about changes in LA from the 70s, improvements for kids since the 90s, SF’s improvements since the 60s, and the recent dangers of inhaling smoke from wildfires.)

As a water economist, I am well aware of the advantages of clean water, which gives me a similar respect for clean air. The problem is that it’s hard to see air or water pollution, which is why I support visualizing technology. 

In the case of water, we’re still waiting, but the technology* for measuring, viewing and recording air quality is improving rapidly, which makes it more likely that average people will change their habits and push for policy changes that can be seen on their devices. (Here’s a great podcast on how residents of a poor area near San Francisco dramatically improved their air quality. Pollution in London’s Tube is 30x street levels, so maybe it’s time to bike?)

With that preamble out of the way, let me tell you about the Air Tricorder (!) I bought for €70 in Chiang Mai, Thailand.

As you can see, it’s a plastic box with fans and sensors inside that gives real time measures of the Air Quality Index (AQI) that combines measures for PM2.5, PM10 and NOx. (This video shows how quality changes as a freight train rolls through Utrecht’s central station.) The drawbacks of the Tricorder is that it does not record geo-tagged data, which means that you need to stop often and manually correlate location and time with the AQI.**

What I found to be very interesting was how AQI would change in various places, sometimes counterintuitively.

First is the fact that AQI in an alley may be lower than on a busy street, either because scooters drive in the alleys or people are cooking over charcoal (!!) in the alley. (The Tricorder doesn’t go above 500, which is labeled “ludicrous.) Those cooking habits — along with burning wood in the fireplace or smoking indoors — explain why indoor air pollution is linked to 4,000 deaths per day, worldwide.

Second, polluted air doesn’t just “stay outside,” and it can even be worse than outside if inside air is not circulated or filtered (see photo). China’s leaders know this, which is why they have dozens of machines scrubbing the air of their homes and workplaces in polluted Beijing.*** 

Third, the majority of pollution comes from bad practices (burning coal) but also old, outdated and poorly maintained machines and factories. Various countries regulate this issue by banning certain practices or older models of cars, scooters, trucks and so forth, but poor/corrupt countries do not have or enforce these rules, which means that their citizens die younger and children suffer brain damage. Is that policy pro-poor? Probably not, given that their richer neighbors use more energy and travel more. 

* Note that I am talking about mobile or personal devices. You can easily get quality measurements from fixed stations (US or EU), but that information is less personal (and thus less actionable) because it’s not about you here and now.

** I was super excited to buy a Flow device that would send real time data to my smart phone, but the €180 device bricked itself when I tried to share it with my GF’s phone. (Flow was funded in late 2018 via Kickstarter.) Two weeks later, I am still waiting for a solution. Their tech support seems to be struggling. I’ll update this post if get a working device (or my money back).

***  This famous twitter account, set up by the US Dept of State in 2008 — back when we were great — forced Chinese leaders to engage with the problem.

Marcello asks:

What are the pros and cons of the fed raising the interest rates? How does it help control inflation?

I’ll begin by describing the main goals of financial regulation and central banks before turning to the relationship between inflation and interest rates and the Federal Reserve’s tasks.

In theory, financial regulation, like any regulation, is meant to improve market efficiency and reduce systemic risk. In most cases, this means promoting transparency, spreading accurate information promptly, and preventing fraud and mistakes that put the entire system at risk. In reality, these goals tend to be ignored by politicians who want big banks (“national champions”) or benefit from bribes and (retirement) jobs at banks that they allow to make excess profits by taking risks at taxpayers expense (“privatize the gains, socialize the losses”) or growing “too big to fail.” In the US, the biggest problems arise from dividing regulation among so many government agencies that it’s ineffective and the ongoing subsidies to FannieMae and FreddieMac, the private-profit, government-guaranteed mortgage buyers at the central of the Financial Crisis of 2007-12.

Central banks sometimes regulate banks (and other non-bank financial firms), but they are always in charge of managing the money supply with the goal of “keeping inflation under control,” which has been codified as “near 2 percent” for historical reasons.

The connection between inflation and interest rates is tricky, so let me say a bit more about inflation, interest rates and the money supply.

First, there are two types of inflation. “Supply-push” inflation reflects the supply of money. As a simple example, start with a money supply of 100 and 100 units of goods sold at an average price of 1.00. In this case, the price index is 100 because the average basket of goods costs 100 units of money. If money supply doubles (everyone has $2 for every $1 in their pockets), but there are still 100 units of good, then the price index doubles to 200, meaning that inflation is 100 percent. (The most familiar price index — the Consumer Price Index, or CPI — is often used to measure inflation.) Supply-push inflation is present in Venezuela because the government is printing money — and lying about it with the hope that citizens will not notice — while the supply of goods is falling (big topic for another post).

“Demand-pull” inflation results when people devote more of their spending to some goods and thus less to other goods. In most cases, this inflation is normal and benign, because it increases profits in that sector and thus attracts more supply (resources arrive from shrinking sectors), but various political-economic distortions might lead to harmful sorts of demand side inflation in, for example, higher education, medical care and housing in the US. I could write a whole book on these issues, but I’ll give you the simple example of housing markets where demand is strong (people are moving to the area or buying larger houses because they are wealthier) but building regulations restrict demand.

Interest rates can be used to raise and lower inflation by making money “more expensive.” If inflation is high, then an increase in interest rates means that it’s better to save rather than spend money because you can make more money by leaving the money in the bank or investments. This reduction in the “velocity of money” means that they are fewer people chasing the same number of goods, so prices of those goods slow or stop rising.

Interest rates are often set in markets for money based on the demand of a country’s currency vis-a-vis other countries or the money supply set by central banks. It is for these reasons that interest rates depend on exchange rates, banking reserve requirements, open market operations (buying and selling bonds) and many other factors that are hard to understand, let alone manage. It’s this complexity that lies at the heart of debates over the role of central banks. Some people think that central bankers are geniuses that manage our collective prosperity. I am with the other people who think that humans introduce more noise and prefer that a bot increase the supply of money at a known rate and leaves the market to sort out the other factors. (Bitcoin was released 10 years ago based on that exact logic. If you’ve followed its price gyrations, then you know that other factors affect its demand and thus its price!)

Also note that interest rates vary by maturity (e.g., interest rates on overnight deposits vs 30-year loans) because varying “time preferences” lead to different aggregate demand functions.

This summary should give you a (vague) idea of how regulations are supposed stabilize prices and markets, but a brief look at the macroeconomic performance of 200+ countries will tell you that politics, regulations and cross-border operations combine in unpredictable ways to produce systems that fail often, systems that fail when shocked and systems that affect others due to their size or reliability (i.e., the US, EU, China and Japan).

It’s my opinion that the greatest threat to financial and non-financial markets arise from political interference (e.g., India, Turkey, China, UK, Italy and the US in recent months). In many cases these are caused by populists who think that markets can be manipulated to suit their superstitions. They are sometimes right in the short run but always wrong in the medium (1-2 years) and long run. (I think that bitcoin and other “trustless” currencies might gain value in the near future as people lose faith in populist shenanigans.)

Finally, let me note that the US Fedeal Reserve in unusual in its dual mission of simultaneously keeping maximizing employment and preventing inflation. Although its hard to optimize on two margins, it’s even harder to pursue these goals because increases in employment eventually lead to increases in wages (as the supply of workers falls short of demand), which leads to demand-side inflation and thus the need to increase interest rates, which will cool the economy and thus dampen demand for workers.

So what are the pros and cons of increasing interest rates? A reduction in economic activity and job losses (cons) but a decrease in prices and inflation (pros).

My one-handed conclusion is that markets are hard to “manage,” and thus should be regulated in a slow, incremental and transparent way. Most economists understand this. Few politicians do.

Under the GDPR, EU residents have gained several important rights over their data. (Privacy laws are weak in the US and non-existent in China.) 

• Deleted my Facebook account.
• Deleted all but one of my 2000+ tweets.
• Deleted a decade of photos from my computer.
• Deleted all but the past 3 years of email from the cloud. 

(Note that I have kept copies of all these deleted items on a back-up hard drive — just in case — but I kinda doubt I’ll ever look at that stuff. Years ago, I threw away the negatives from a few thousand rolls of film I shot while traveling for five years. I’ve not missed them. I still have most of my travel diaries from that period, but I have no temptation to read the detailed scribbles of my 25-year-old self.)

When I visited my father a few weeks ago in California, I was forced to listen to Fox “News” for more than the 12 seconds that I can usually stand. What struck me then was its relentless devotion to all things Trump and obsession with tiny slights that served Republican talking points (like four days of discussion of Jim Acosta’s refusal to give up the mike while asking Trump questions at the press conference). 

What I didn’t realize is how far Fox has strayed from any objective definition of news-reporting or journalism. As this VOX video shows — with clips of Fox personalities — the channel has basically morphed into a full time propaganda machine for the Republican Party. Yes, that may be profitable, but it’s also horrible to see tactics borrowed from Orwell’s Ministry of Truth and the Soviet Union’s Russia’s Pravda (un-ironically meaning “truth”) in the US. 

Watch the video and tell me that you’re ok with that. (If you are, then I have a few dictators whose prisons you’d enjoy.)

My one-handed conclusion is that a few too many Americans seem to prefer delusion to truth and tribal loyalties to national strength. Sad.

Trump is an egotistic windbag, and his lying incompetence is catching up with him.*

This retired military officer calls his “march to the border” a political stunt that risks the military’s integrity and loyalty to the Constitution.

The Trump administration tried to bury a new, massive report by 13 US government agencies  on the current and future damages from climate disruption by releasing it on Black Friday (when most Americans are shopping or recovering from overeating on Thanksgiving). Trump thinks that cold weather “disproves” climate disruption (like he thinks that people like him rather than his money), but this report buries his ignorance under 1,600 pages of science and data. Go read it — and then get angry that America’s “leader” cares more about golf than defending the country.**

My one-handed conclusion is that the best defense against lying deception is truth, facts and protest. Have you called your representative lately?

* I’m usually polite about leaders, but Trump is such a failure that I cannot see any redeeming qualities or mitigating actions. One reader of my newsletter was not happy with my criticism:

I suggested that the Swordmaiden unsubscribe as she (like her hero Trump) does not seem to engage in critical thinking. Related: Russia (as a dictatorship) benefits from confusion and disinformation, much as the U.S. (as a democracy) suffers. Support truth.

** Speaking of not caring about people, I’m pleased to see the wheels falling off Facebook, as Zuckerberg’s business model of using your data against you and hiring sockpuppets to attack his critics (via… yes, “fake news”) backfires. I hope that the UK’s seizure of internal memos reveals more Facebook manipulation, if only to force people to recognize it. The result? “Zuckerberg’s could be the first in history to collapse simply because its citizens logged out.“

I went to dinner with some friends in San Francisco about a week ago. In the process, I learned a little more about how our data are tracked, traded and used to solicit our time and money.

The key is that my friends used “car share” services to get to and from the restaurant. (In the past, we might have walked to a local restaurant, but “cheap and seamless” makes it very easy to “tap the app” and get a ride.)

At one point in the past, I had Uber on my phone, but I had never used Lyft deleted Lyft’s app off my phone months ago. so imagine my surprise when I got this email the next day: 

So there are two possible reasons why I got this email from out of the blue the Borg:

1. Some remnant of the deleted Lyft App on my phone was tracking where I was going and matched my physical presence to that of the Lyft driver.
2. My location was matched with a Lyft driver, which then triggered an “account update” email to me that I had never signed up for.

I think that #2 is more likely, but both options are bad in the sense that they reveal the degree to which Americans (without knowing it) and Chinese (often knowing it, but not caring) are being tracked in their daily movements. (Tracking is probably also happening in the EU, but  GDPR makes that harder as well as illegal.)

How pervasive is this loss of privacy and gain in stalking? Read this article outlining how our data are collected, traded, aggregated and used to advertise to us. Then read this one on how “restaurant waiting list” apps are being used to record what we eat (digital menus), with who (location data!), and for how much (credit card bills). Finally, read this industry profile* of how a “decentralized internet” will weaken aggregation services and  platforms such as Google, Facebook and Amazon that track our browsing, logins, friends, finances and so on.**

My one-handed conclusion is that companies and governments are collecting far more data on your location, friends, activities and (probably) thoughts than you will ever suspect. The panopticon is now.

Postscript: Just a few days ago, I bought a swimsuit in a used-clothing store in Southern California. When I wanted to pay, the cashier asked me for my mobile phone number. “Why? You want to call me in the Netherlands?” “No, don’t worry,” he said. So I guess that the NSA, Facebook and Amazon are going to have to wait a bit longer to know what color swim trunks I wear.

* If you want to give them your identity; for some reason, I read it without signing up.

** I was annoyed to hear Mark Zuckerberg say “Now we’re going to change Facebook’s whole mission, as a company, in order to focus on [more community and connection]” as that’s a lie. Facebook, like Google, is an advertising company that makes 90+ percent of its revenues from advertisers who pay for access to your personal and “community” data.

I grew up in the 1980s at the height of Reagan’s arms race with the Soviets, wars in Central America, Iran-Iraq and Afghanistan, and propaganda campaigns that portrayed “the other” as greedy capitalists or colorless apparatchiks (depending on what side of the Wall you were looking at). 

1989 marked the beginning of the end of that Cold War, with the 1991 dissolution of the USSR as a definitive end point in the rivalry between capitalism and command-and-control economies. Capitalism dominated the 1990s nearly everywhere (Cuba, Ethiopia and North Korea were a few exceptions) as the Chinese, Russians and many other “Marxist-Leninist” political systems gave more space to free markets while withdrawing from state capitalism.

Improvements in living standards helped many people (and especially the poor) who had suffered the consequences of dogma, but these results did not last very long or accelerate everywhere, as new problems emerged. To understand why, I need to introduce a framework.

In 2006, Douglass C North, John Joseph Wallis, and Barry R. Weingast published “A Conceptual Framework for Interpreting Recorded Human History” [pdf], one of my favorite papers (later expanded into a book) on political economy. In it, North et al. explain two different political-economic equilibria. In a “natural state” a “limited access order” persists in which political power is used to create economic (monopoly) power and thus rents (super profits) to those lucky enough to control such economic entities. Citizens, workers and entrepreneurs suffer in these circumstances from shoddy goods, low wages, and a lack of opportunities, respectively. (This system is also known as one of crony capitalism.)

In the other equilibrium is an “open access order” in which political and economic power are separated, meaning that someone with economic power cannot use it to gain political power (and vice-versa) due to a robust set of institutions that promote competition rather than cronyism. Open access orders are responsible for strong economic growth and legitimate political rule because those with good ideas are able to prosper while idiots with famous last names cannot get ahead. Only a handful of countries have strong systems of open access because it’s very tricky to break the “iron grip” of politicians on commerce and businesspeople on politics. (North et al. hypothesize that a transition might occur when rulers decide that rules are a good way to protect their wealth from their greedy successors.)

This paper has helped me think about governance and markets for several years. It explains why Trump — a fraud and cheat — is so dangerous as a leader: He uses his political power to enrich himself and his cronies. The paper also explains the “interesting” struggles in Russia and China between  those newly rich who want to keep their wealth and those with political power who want to take it. Putin has returned to its natural state after the failed liberalizations of the 1990s. Xi has welcomed the rich into political cooperation but also strengthened State-Owned Enterprises (SOEs) against domestic and foreign competition.

So these ideas lead to my point of this post, i.e., that we’ve begun a new Cold War between populists who favor limited-access capitalism (state-led cronyism) and liberals who favor competitive, open access capitalism. On the populist side we have the corrupt governments of Hungary, Turkey, Iran, Egypt, China, Brazil and most of the world. On the liberal side are Scandinavian countries, Singapore, and Canada where markets are (mostly) free and fair. In the middle are countries that are advancing (the Baltics, South Korea, Germany), falling (the US), or struggling (Mexico, southern Europe, et al.).

My one-handed opinion is that populists will continue to tell citizens that they are “the best” and foreigners (and their “unfair trade”) are dirty while those same “leaders” enrich their cronies and destroy national wealth while liberals struggle with citizens mislead by get-rich fantasies promulgated by insta-celebrities and populist propaganda. Although I am sure that populists will impoverish citizens, I am not so sure what will happen when citizens see past the lies. Will they revolt as the French did in 1789 and the Romanians in 1989? Will they attack foreign scapegoats? Will they just get poorer? No matter their action, I know from North et al.’s framework that populism will ultimately lead to economic stagnation and a further separation between the haves and have-nots. Sad.