Interesting stuff

  1. Listen: Student debt in the US is broken, universities are taking advantage and the debt forgiveness is deeply regressive — but popular with Democratic activists who are often indebted college grads. More on the games universities play with “aid” (it’s more like price discrimination).
  2. Listen: Raj Chetty on the prosperity opportunities from mixing children of different economic classes. Bonus (explore!): Data on future outcomes (income, marriage, incarceration) by where you grew up.
  3. Read: Bill Gates explains how free online teaching resources help teachers and kids
  4. Read: A economics nobel laureate is “looking into” California water markets. The first thing he should do is read my 2013 paper, “All-in-Auctions for Water” [pdf].
  5. Read: Retire early by treating your job like an investment and reconciling financial advice from books with research from professors.
  6. Read: America’s disaster agency (FEMA) is so dysfunctional that stricken regions need to hire consultants to navigate the bureaucracy.
  7. Read: The Dutch welcomed Chinese PhD students (“Netherlands was only too happy to bring in those Chinese students. A confidential memo from September 2010, sent by the Ministry of Foreign Affairs to the Ministry of Education, says: ‘Attracting talented Chinese PhD students to the Netherlands is an important spearhead in the Dutch strategic knowledge agenda.’”)… who then took their knowledge back to the Chinese military. Whoops.
  8. Read about entrepreneurs trying to put cargo on sailing ships.
  9. Read: The rich get richer: “Tutoring has become a weapon in the global arms race in education. There’s no limit to what some parents will pay.”
  10. Read: How to fix social media (use groups — as suggested in my paper on group cooperation)

H/T to BB

An alternative to Marxist explanations of inequality

Long ago (in 2006!), I wrote a blog post proposing that property taxes should replace other taxes (e.g., on income). Some people suggested that I was following in the footsteps of Henry George (1839-1897), a self-taught economist who proposed a single tax on land as a replacement of all other taxes. I had never heard of George (!) and disagreed on taxing land (his idea) vs taxing land+improvements (mine), but I made a note to look him up some day.

Well, this weekend brought that day, and I started to read his Progress and Poverty (1879) — the third (!) most popular book of the 19th century. (It’s available for free download due to its expired copyright.)

While reading, I realized that (a) George was just as upset about inequality and poverty as Marx but that (b) he identified an equally — and perhaps more realistic — “engine of inequality” — land and other natural resources (water, oil, minerals and metals).

NB: George wrote without knowledge of Marx’s work (Vol I was published in German in 1867 and English in 1887) — and vice versa (Marx was very sick in the years before his death in 1883), so we’re talking about a classic case of “ships passing in the night.”

Marx had focussed on capitalists using their marker power to take advantage of a “reserve army of labor” that was oversupplied due to the Malthusian trap, but he undermined his own argument (this is distilling thousands of pages, some not written by Marx, and not always in agreement) by claiming that capital would get richer over time but still command enough market power (via “scarcity rents”) to continue to take advantage of labor.

Anyways, I am fascinated by George’s claim that those who own land/resources can take advantage of both capital and labor due to their control of the scarcer resource. Economists say that such control allows the owner to charge (or make) “rents,” i.e., profits that cannot be competed away through competition.

The value of land, for example, depends on “location, location, location,” so landlords in Amsterdam need not fear competition from landlords in Halfweg (a small town outside A’dam). The same can be said for owners of water in some parts of California vs those with water in Missouri, or owners of natural gas these days in Europe. Transport and other technology can bring competition, but it’s not nearly as easy to bring competition against land as it it is against labor (“I’ll hire that guy just off the bus”) or capital (“I can borrow money from that guy”).

My one-handed conclusion is that George was onto something when he identified land (and resources) as a source of rents, and thus a driver of inequality due to the extra profits and market power of those owners. His proposal to tax such rents and distribute them to citizens also makes sense, which is why I proposed such taxes as a way to fund basic income in 2014.

I can’t wait to read more of his book 🙂

Interesting stuff

  1. Are you listening to understand or listening to reply? Listen to this podcast episode.
  2. In 2019, I wrote a post (“Sleepwalking into the Matrix“) about the rise in demand for escape from the crashing climate (and economic decline) meeting a rise in supply from firms offering escape into a matrix-like environment (now known as the “metaverse”). This recent newsletter gives an interesting (scary) update on the firms pushing on the supply side (as well as the emptiness of all the tech promises).
  3. Read: China’s surveillance state is going all out to control its citizens
  4. Listen: This podcast on little Japanese kids running errands gives a lot of insight into the role of urban design and how design for kids is entirely different from design for cars.
  5. Listen: The Booming, Unregulated Marketplace for Abortion Pills [in the US]… should surprise nobody in its existence and everyone in its avoidable dangers. Legalize it!
  6. Listen: Roland Fryer Refuses to Lie to Black America
  7. Watch: I want to grow old in a dementia village like this.
  8. Read: The most damaging farm products? Organic, pasture-fed beef and lamb
  9. Read: How the EU “conjures” emergency money from elsewhere (old wine in new bottles)
  10. Read: A data-journalist reflects on his firing from Faux News (after calling AZ for Biden). One observation: Unable to sell large, diverse audiences to advertisers, news outlets increasingly focus on developing highly habituated users. To cultivate the kind of intense readers, viewers or listeners necessary to make the addiction model profitable, media companies need consumers to have strong feelings. Fear, resentment and anger work wonders. It helps news outlets create deep emotional connections to users not just as users of a product, but as members of the same tribe…. news that is bad for your audience’s ideological in-groups is clickbait kryptonite. In such a competitive marketplace, riling people up against the other side isn’t enough. You’ve also got to create a safe space for consumers to plop down and contentedly contemplate ads for beet-based nutrient powders, reverse mortgages and copper underpants. If you challenge their assumptions or suggest that their avatars in the culture war are wrong or losing, they may leave for competitors who offer more complete protection from harsh realities.

Me (2008): “The end of abundance.” Macron (2022): “Oui.”

NN mentioned that Macron used a familiar phrase in a speech last month:

“What we are currently living through is a kind of major tipping point or a great upheaval … we are living the end of what could have seemed an era of abundance … the end of the abundance of products of technologies that seemed always available … the end of the abundance of land and materials including water,” he said.

In the original French, he said:

Les Français face à “une grande bascule que nous vivons”, Emmanuel Macron a employé l’expression “fin de l’abondance” pour qualifier la période.

…which emphasizes his focus on a “new normal” in which fewer natural resources (and potentially the damages of climate chaos and the political strife that entails) will lead to a change in living.

In my dissertation (2008, page 2), I wrote:

Note that a club good is similar to a private good with excess supply, i.e., supply greater than demand at a zero price. In both cases, non-rivalry or excess supply can end: Club goods become rival with congestion; excess supply ends when supply is less than demand at a price of zero. Although there is no need to manage demand with abundance, the end of abundance can lead to problems if institutions of abundance do not change to ration demand when there is congestion or excess demand at zero prices (Ciriacy-Wantrup and Bishop, 1975).

In fact, I liked this phrase so much that I made it the title of my 2011 book (free PDF since 2020 :), which came with the following blurb:

In a past of abundance, we had clean water to meet our demands for showers, pools, farms and rivers. Our laws and customs did not need to regulate or ration demand. Over time, our demand has grown, and scarcity has replaced abundance. We don’t have as much clean water as we want. We can respond to the end of abundance with old ideas or adopt new tools specifically designed to address water scarcity.

So that’s what I said around 10 years ago, but how does it line up with Macron’s thought? (Or, more properly, did Macron understand my point?)

He did, as my point was that growing water scarcity would either lead to (a) necessary changes in lifestyles to reflect scarcity, or (b) shortages due to people ignoring (the admittedly faint) signals of water scarcity.

Those signals are not faint to anyone paying attention, but Americans, seem determined to rush in the wrong direction: moving from places with water to places without it. (This is partially due to an ongoing failure to reflect water scarcity in utility water prices as well as an inadequate and counterproductive regulatory regime with respect to groundwater and agricultural demand.)

Is the long delay between my pronouncement (I’ve been taking Moses lessons) and action? As someone who sees the glass as half-empty, I tend to see (or worry about) issues long before other people do (another case-in-point: cyber crime), and it’s taken me awhile to realize that (a) some people need more time to worry about stuff and (b) lots of people will never worry (consequences or not). Politicians, as leaders (rather than vote-whores), have an important role in highlighting issues and calling for action — looking at you Jimmy! Of course, they need to be careful about getting out too far in advance of voters (Obama’s flip flop on gay marriage is a clear example), so it’s impressive to see Macron stepping up on the need to change expectations and actions.

My one-handed conclusion is that leaders such as Macron are right to talk about an end of abundance, as that fact is bringing consequences, and failure to engage with facts will only make more people (especially the poor) more miserable. Bien dit, Monsieur President!

Interesting stuff

  1. Read: The number of Americans exposed to extreme heat will rise by a factor of 13 (from 8 to 100 million) in the coming decades. Related: Europe is not ready for heat.
  2. Watch: A really cool visualization of how (productive) city centers subsidize (unproductive) suburbs.
  3. Watch John Oliver on the fraud of carbon offsets (he sets up his own certification company!). I wrote about this issue 13 years ago!
  4. Listen: The best “defense” for technical analysis (of stocks) that I’ve heard
  5. Listen: Should Public Transit Be Free? (Good discussion)
  6. Follow the Money specializes in investigative journalism. In this article, they make the case for supporting journalists trying to uncover corruption, malfeasance, etc., ending with a link to ±10 outlets in Europe that can use support. I sent $50/each to four of them, and I encourage you to also give (or otherwise support) such efforts. There are a lot of bad actors out there (T***p being one of the worst in a “free” country), and citizens need help to defeat them or reduce their harms.
  7. Read: How to buy a sari in Lahore (“hostile territory” for some)
  8. Watch: Episode 3 (of 4) about how US zoning-guidelines screwed up Vancouver’s development
  9. Read: Member States sabotage public scrutiny of EU-funds worth hundreds of billions of euros (=corruption invitation)
  10. Think: Not all energy sources are alike (I fixed the title):

Nederland

Some thoughts from my train ride home…

I live in a country known for tulips, clogs and weed.

The reality is obviously different.

“We are a blunt people,” but heaven forbid you talk directly.

Past disasters has forced cooperation, but present comfort avoids confrontation.

Maybe just take a vacation?

The farmers pollute land and water to export cheap meat.

The politicians argue over coalition agreements down to the last detail, but then ignore the elephant standing in the Tweede Kamer.

Festivals are joyous but don’t slip in the slush of smashed drink cups.

Drugs are legal — not. The mafia kills. Parties are great. Love your dealer.

Education separates the promising and the workers. Elite fraternities plan insider trades; the poor get ahead, turning internships into jobs.

Cars are everywhere, but we love bikes.

The Dutch are totally green — unless it costs extra.

The handelskultuur puts profits over people, with exceptions for gay marriage and vegan junk food.

Welcome refugees, but not too many. There’s a housing crisis. Romanian farm workers are fair game for exploitation.

It’s obvious that politics has a problem with responsibility, when Rutte is on his fourth, Wilders preens for foreign donors, and Thierry echoes his collaborator ancestors.

Nederland has fought the sea for centuries, but most citizens are ignorant of the battles to come.

Gehackte? Yes! and cheap.

Sure the Belgians are disorganized, but are they hypocrites?

I’d rather live here — especially since the weather is better than in California — but I wonder if shared spaces will replace parking places.

God made the Earth and the Dutch made the Nederland, but who will act if everyone is on “burn out”?

Interesting stuff

  1. Listen to this funny (on purpose?) guy talk about the pros and cons of 100% honesty. (He’s had a few bad dates…)
  2. Watch this video on why vegetable protein is healthier than animal protein
  3. Read: Watching TV makes dementia worse
  4. Read: Lawns are sterile deserts that guzzle water and chemicals
  5. Listen: Will MacAskill on morality and our future
  6. Listen: A lawyer explains the extreme activism of the US Supreme Court (fuck). Related: Listen to this extremely lucid critique of the “woke gatekeepers” (aka the elites) who are undermining real progress on addressing poverty and inequality.
  7. Read: Amazon’s quest to possess all your data expands. Related: European governments are getting in trouble for using spyware on their citizens
  8. Read: The business of digital face filters
  9. Read: Mosquitoes are really good at finding food (us!)
  10. Read: Interesting! “Pop stars on life after the spotlight moves on

H/T to PB

Price gouging or shortage. Choose one.

During a weekend in Berlin, I was speaking with a few Germans who spontaneously mentioned their angst at potential blackouts and loss of heating in the months ahead. Their anxiety reflects current discussions over falling supplies of Russian natural gas against a background of the need to burn less coal, an ideological decision (post Fukushima) to shut down functional nuclear stations, and the many impacts of drought (less hydropower, problems with shipping coal on drying rivers, etc)

What bothers me is the government’s waffling around how to deal with these problems (similar to governments all over Europe) in an attempt to avoid the price increases necessary to balance falling supply with demand. These price increases are often condemned as “gouging” by the “eat-your-cake-and-have-it” crowd that cannot stand the real politiek of Dismal Scientists.

Politicians are legitimately worried that poor people will suffer with 200% increases in their energy bills and terrified that voters might punish them for failures that (mostly) have nothing to do with political decisions. (Some politicians are allowing higher prices but sending extra money to the poor; this is my advice. Others are capping price increases or sending money to all energy users, which is counterproductive and stupid.)

But the overall dynamic, it seems, is for politicians to limit price increases in order to “protect” people and hoping that some miracle of supply (Putin dying?) or demand (a majority of people voluntarily reducing use) will close the gap.

It is said that second marriages demonstrate the triumph of hope over experience, and some second marriages work. But many do not — feeding discussions and debates of “I told you so” from various in-laws.

In this case, price controls as a strategy of hope are unlikely to work, which will lead to the blackouts that many fear.

At that point, politicians will throw up their hands and say “we did our best but the world is unfair and you now have to suffer, but don’t blame us.”

This is not just cowardly, but a dereliction of duty.

Not so long ago, politicians were happy to shut down entire economies and lock people at home to stop the spread of Covid (the Chinese are still at it), so why is this different? I’d say it was because politicians were able to borrow huge sums on fighting Covid; when it comes to energy, that strategy won’t work, since more spending would just raise prices in a fight over a fixed quantity of energy. Politicians didn’t ask people to pay more for Covid (those debts come due later), and they cannot  will not ask people to pay more for energy, so they close their eyes and hope that the light at the end of the tunnel is not a speeding train.

My one-handed conclusion is that it’s better to allow price gouging scarcity pricing to avoid shortages than holding prices too low and hoping for a miracle. Hope is not a plan; using higher prices to ration energy is.

Addendum (11 Sep): The Economist has a good article on how to reduce the damage from high prices. The main points are (1) do NOT cap prices and (2) transfer money to poorer households.

  1. Higher prices will reduce quantity demanded (“walking down the demand curve”) and demand (“demand destruction”) while encouraging supply (“walking up the supply curve” as well as shifting supply out, e.g., restarting German nuclear plants). Caps on prices will encourage demand and discourage supply, leading to shortage.
  2. When it comes to helping the poor, cash transfers are much more useful, since they can use money in many ways whereas “cheap energy” only helps in a limited way.

Finally, I will add that California already made the biggest mistake (capping retail prices while wholesale prices soared) back in 2000-01. It didn’t go well.

Crops, speculation and starvation

Farmers are having a hard time in Europe. Production (“yield”) is falling due to drought:

  1. In this video [in Dutch], an organic farmer near Amsterdam discusses the low yields of crops in drought-hardened clay soil. (We are in his CSA.)
  2. Meanwhile, English farmers complain that householders are not being told to use less water. The farmers think that hosepipe (outdoor-watering) bans would “free” water for suffering crops. Sadly, I think the water companies oppose the hosepipe ban because they earn far more from selling water to households. Farmers would pay them little or nothing in the current system (raise prices! water markets!) so food security is getting short shrift.

I could easily find many more examples from around the world, since various chaoses (droughts, floods) are disrupting agriculture everywhere.

The traditional hedge against food insecurity is storage (“after 7 years of fat, come 7 years of lean”), but markets are more efficient for storage if they can replace local losses at a reasonable price.

The criterion of “local losses” vs “market supply” is usually easy to meet, as global agricultural production is, by definition, far greater than any local production, but it weakens if/when many crops are failing in many places and/or politicians “protect” their citizens by banning exports that could help other citizens. As of June 2022, 34 countries were doing this.

The criterion of “reasonable price” brings me to the title of this post, i.e., to the role of speculators in markets.

In general, market traders and speculators help markets by smoothing spikes in supply and demand. They buy when prices are low and sell when prices are high; they arbitrage between markets where prices are not well matched (usually due to legal or logistical barriers); they bet on future scarcity… and thereby reduce it.

But some speculators go farther, pursuing profits in ways that can destabilize markets:

We spoke to experts, whistleblowers and industry veterans, who expressed concerns that current levels of speculation may be driving and exacerbating price increases. Experts also helped to identify how structural weaknesses have remained unaddressed since the 2007-2008 food crisis, and how attempts by regulators to curb excessive speculation since then have withered in the face of determined industry lobbying.

In the past, I have dismissed these types of claims, since speculators — who often trade “paper” commodities without any intention of taking physical possession of the underlying good — do not represent “final” (in-the-mouth) demand. I assumed that a speculator buying @ $50 per unit would have to sell @ $30 per unit if that price represented physical demand, but my “equilibrium” thinking was wrong. Here’s why.

If the speculator buys at $50, then there’s less supply for other buyers. If that supply is greater than remaining demand, then prices will fall in equilibrium (when everything is lined up and matched); if supply is lower, then prices will rise in equilibrium.

But what about “before equilibrium”? At that point, buyers are not sure of where prices will end up. They are not sure of supply (more drought? more trade restrictions?), and demand can rise if others are buying due to panic, new crop failures and/or greater risk aversion (i.e., buying to store), so it’s easily possible that prices can keep rising.

Few buyers will be able to hold out for lower (hoped for) equilibrium prices when there’s a risk of (a) higher prices and/or (b) falling short in meeting known future needs.* So those buyers will jump in “early” and “high” to avoid the chance of a future disaster.

In these cases, the speculators can make a killing.

tl;dr: If speculators “mop up” supply by purchasing at low prices at the start of a crisis, then they can resell for profit before they are forced to take delivery (the “chicken game” in game theory). If buyers are afraid of losing out to faster buyers (a “prisoners dilemma” in game theory), then some will  buy quickly, at “spectator prices,” to avoid the risks of even higher prices  — or no food at all.

Market note: Unlike the case with a non-perishable commodity like silver whose supply and demand is not time sensitive (remember the Hunt Brothers), food is perishable (hence the haste and angst over Ukrainian crops) and overall demand (“hunger”) is easier to predict, so the speculators can forecast demand, supply and shortfalls.

None of these “squeeze the hungry” trades are ethical, but they are legal. Although it might be tempting to regulate them, such actions can easily backfire (law of unintended consequences) or fail (food is traded in global markets without a single regulator).

What if some traders denounce speculation, as a means of helping the poor? That won’t help as long as others don’t care — or care more about their poor  (another prisoners dilemma) — so that’s no solution.

My one-handed conclusion is that fragile food markets and volatile prices** mean that many people will spend more on food while others go hungry or starve.

H/T to PB


* Governor Gray Davis signed long-term contracts in the middle of California’s 2000 energy crisis, locking the state into  high prices for a decade or more.

** Don’t mix up cause and effect here! Far too much food is used as biofuel and animal feed. Excess emphasis on industrial agriculture increases crop-risk-failure. Climate chaos is disrupting all farms. This “speculators-will-fuck-you” post wouldn’t exist without those three causes increasing risk!

Addendum (6 Sep): An interesting (but over-hostile-to-markets) article on this topic

Interesting stuff

  1. Read: An increasingly popular retirement plan is figuring civilization will collapse before you have to worry about it or (for a brighter side?) listen to Why the end of civilisation might just be the beginning of a better one
  2. Read: The Age of Algorithmic Anxiety
  3. Read: Atmospheric levels of PFAS (a chemical byproduct) now exceed the EPA’s maximum health standards. PFAS are now, like carbon, a global public bad that will affect everyone, everywhere. Since PFAS include 4,700 chemicals that are used everywhere in everything it will be hard to reduce or regulate their use, but it’s possible, since it means going back to pre-1960 manufacturing methods (e.g., “no plastic”). Is it probable? Not in my opinion. What’s the likely future then? Maybe mass sterility. #theProblemSolvesIteself :-\
  4. Read: Lessons for improving public health with good urban design (e.g., ventilation in and between buildings) have been forgotten in an attempt to squeeze more people in less space. That’s probably a false economy when one considers the resulting spread of diseases. Related: Using AI to re-imagine streets, mostly by replacing cars with people-friendly spaces. Also related: An experiment adding trees to squares [in Dutch] that are normally without dropped temperatures by 5-6C (e.g., from 28 to 23C). Start planting!
  5. Read: “Social” media is straining and killing our sense of social reciprocity. It’s better to talk with friends instead of “liking” their posts.
  6. Listen: How McCarthy led to Trump (via Roy Cohn’s advice to “lie aggressively).
  7. Watch: Why Many Cities Suck (But Dutch Cities Don’t)
  8. Watch: Gas stoves are worse then you think — and the industry is even more evil than I imagined…. <sigh>
  9. Watch: How North America fucks up transit (and land use)

H/T to PB