Tag: economics

Payday

It is difficult to track or even imagine all the ways in which a cycle of steady, progressive depletion of funds shaped Americans’ experiences of labor and leisure in towns and cities at the moment when this cycle first took root. The reverberations were undoubtedly broad. For starters, the combination of weekly reckonings and diminishing resources could be felt in the workplace. It may well have induced workers to accept more overtime work (when the choice was theirs) later in the week, which might have contributed to the weekly rise in textile output after Thursday. Labor records from a Massachusetts mill in the early 1850s show a decided spike in overtime pay at the end of a week, and especially on Saturdays. But the weekly pay system had an even greater impact beyond the walls of the workshop and the factory, in the proliferating commercial venues where wage earners spent their money. Pay weeks, rent weeks, and the different Sabbath observances of Christians and Jews all shaped the urban lending industry and in turn structured the microfinances of ordinary life. Although interest rates were calculated by the month, borrowers had to repay the full interest on a loan even when they redeemed pledges after a week, as they often did. More generally, the rhythms of the pawning week, in tandem with the pay period on which it depended, became a feature of the urban timescape, determining when working people had money to spend and when they could gain access to their valued possessions. Like taverns and boardinghouses, pawnshops registered this calendar with special sensitivity, but the pay week shaped more than just business cycles; it shaped urban experience.

Economics Nobel

should go to Ryan Petersen for unclogging the port of LA:

A miracle occurred this week. Everyone I have talked to about it, myself included, is shocked that it happened. It’s important to

Understand what happened

Make sure everyone knows it happened

Understand how and why it happened

Understand how we might cause it to happen again

Update our models and actions

Ideally make this a turning point to save civilization

That last one is a bit of a stretch goal, but I am being fully serious. If you’re not terrified that the United States is a dead player, you haven’t been paying attention – the whole reason this is a miracle, and that it shocked so many people, is that we didn’t think the system was capable of noticing a stupid, massively destructive rule with no non-trivial benefits and no defenders and scrapping it, certainly not within a day. If your model did expect it, I’m very curious to know how that is possible, and how you explain the years 2020 and 2021. That initial tweet got 16k retweets and 33k likes, and even the others got 1000s of likes as well, so this successfully got many people’s attention. It’s worth paying attention to the details here, as this was crafted in order to spread and be persuasive, and also crafted to make people angry or to blame anyone. It’s a call to positive action. In particular, I notice these characteristics:

Starts with a relatable physical story of a boat ride, and a friendly tone.

Tells a (mostly manufactured) story that implies (without saying anything false) how the ride led him to figure these things out, which gives rhetorical cover to everyone else for not knowing about or talking about the problem. We can all decide to pretend this was discovered today.

Then he invokes social consensus by saying that ‘everyone agrees‘ that the bottleneck is yard space. Which is true, as far as I can tell, everyone did agree on that. Which of course implies that everyone also knows there is a bottleneck, and that the port is backed up, and why this is happening. The hidden question of why no one is doing much about this is deflected by starting off pretending (to pretend?) that the boat ride uncovered the problem.

Describes a clear physical problem that everyone can understand, in simple terms that everyone can understand but that doesn’t talk down to anyone. He makes this look easy. It is not easy, it is hard.

Makes clear that the problem will only get worse on its own, not better, for reasons that are easy to understand.

Makes clear the scope of the problem. The port of Los Angeles effectively shuts down, we can’t ship stuff, potential global economic collapse. Not clear that it would be anything like that bad, but it could be.

Gives a decision principle that’s simple, a good slogan and again can be understood by everyone, and that doesn’t have any obvious objections: Overwhelm the bottleneck.

Gives a shovel-ready solution on how to begin to overwhelm the bottleneck, at 0 cost, by allowing containers to stack more.

Gives more shovel-ready solutions on top of that, so that (A) someone might go and do some of those as well, (B) someone can do the first easy thing and look like it’s some sort of compromise because they didn’t do the other things, (C) encourage others to come up with more ideas and have a conversation and actually physically think about the problem and (D) make it clear the focus is on finding solutions and solving problems, and not on which monkey gets the credit banana.

Makes it clear solutions are non-rivalrous. We can do all of them, and should, but also do any one of them now.

Gives a sense of urgency, and also a promise of things getting better right away. Not only can you act today, Sir, you are blameworthy tomorrow if you do not act, and you will see results and rewards tomorrow if you do act. Not only reactions to the announcements, physical results on the ground. That’s powerful stuff.

Ends by noting that leadership is what is missing. You could be leadership and demonstrate you’re a good leader, or you can not do that and demonstrate the opposite. Whoever solves this is the leader.

All of it is due to zoning. Zoning kills.
2021-11-05: Things are better, but far from resolved, and of course the story is more nuanced than it first appeared:

it seems clear that Ryan noticeably improved the situation, but the situation is far from solved. Solving it will be a long term process, and we’ll be playing bottleneck tennis as solving one problem highlights others and makes them worse. There’s still lots of low-hanging fruit on the logistics front, starting with Ryan’s change only being implemented in Long Beach and not Los Angeles. There’s also signs of other solutions starting to come online, and that could be helped along in terms of making it shovel-ready and finding the right physical solutions.

2022-02-15: This profile makes the case that things are much more complicated, and Ryan doesn’t understand things as well as he should. Or perhaps they’re just jealous that Flexport has a much nicer UI:

For most everyone else in the logistics business, it was exasperating. “When Ryan Petersen does his interviews, people in the industry typically get upset because he tends to simplify things a lot. He appears sometimes uninformed”. Container stacking had limited impact. Petersen’s bolder proposals, such as the creation of a government-sponsored railhead depot, remain untouched. “There isn’t a silver bullet for this.”

2022-10-06: Flexport also stepped up for Masks in a huge way

When the pandemic hit and we saw there are not enough masks in our hospitals, I found that to be totally unacceptable at a civilization level. We owe this to our first responders, to our doctors. If you asked me to go in there without a mask with some weird disease that might kill me and that no one knows anything about, to serve these patients, I don’t know if I could. These are real heroes that were willing to do it. If you don’t have masks and the doctors don’t show up for work, civilization collapses pretty soon after that. That was very unacceptable to me. I rallied a team at Flexport and we stepped up.

A big part of why there were not enough masks is because all the world’s airplanes were grounded during the pandemic. They were not really flying to China. 50% of the world’s air freight flies in the belly of passenger planes. If those passenger planes are grounded, there is no air freight capacity. We found there were lots of masks available in China. They have ramped up production, but we don’t have air freight to get them in. The rest of the world, as far as I can tell, looked at that problem, put their hands up, and said, “Eh, fuck. I guess our doctors are going to suffer. Let’s watch this on TV and see what the people are saying.”

If you listen to the problem statement, 50% of the world’s plane flies in the belly of passenger planes and those are grounded right now. The solution is so obvious. Look at all the planes that are grounded. I managed through investor networks and connections that I have been fortunate enough to build over the years. I called the airline CEOs and I was like, “Hey, can we use your planes? We are going to go get some masks to save America’s hospitals.” One hundred percent of them said yes. United Airlines gave us free flights. Atlas Airlines gave us a 747 for free. We were getting Dreamliners for a 200k round trip. Ask your super-rich friends if that is a good deal on a private plane, a round trip to China on a Dreamliner. We flew 83 planes, completely full. We filled the overhead bins and the seats. In the end, we shipped 500m masks to America’s hospitals.

It was like, “Wait a minute. Why are we the ones doing that? We’re not supposed to be in that industry.” The value in that lesson for the whole world is naïve optimism. Try it. Let’s see if we can solve the problem. You can do more than you think you can. It was very inspiring for everybody at Flexport to see, “Whoa, this is working. We actually made this happen.”

Differences in differences

The Nobel Prize goes to David Card, Joshua Angrist and Guido Imbens. If you seek their monuments look around you. Almost all of the empirical work in economics that you read in the popular press is due to analyzing natural experiments using techniques such as difference in differences, instrumental variables and regression discontinuity. The obvious way to estimate the effect of the minimum wage is to look at the difference in employment in fast food restaurants before and after the law went into effect. But other things are changing through time so circa 1992 the standard approach was to “control for” other variables by also including in the statistical analysis factors such as the state of the economy. Include enough control variables, so the reasoning went, and you would uncover the true effect of the minimum wage. Card and Krueger did something different, they turned to a control group. Pennsylvania didn’t pass a minimum wage law in 1992 but it’s close to New Jersey so Card and Kruger reasoned that whatever other factors were affecting New Jersey fast food restaurants would very likely also influence Pennsylvania fast food restaurants. The state of the economy, for example, would likely have a similar effect on demand for fast food in NJ as in PA as would say the weather. In fact, the argument extends to just about any other factor that one might imagine including demographics, changes in tastes, changes in supply costs. The standard approach circa 1992 of “controlling for” other variables requires, at the very least, that we know what variables are important. But by using a control group, we don’t need to know what the other variables are only that whatever they are they are likely to influence NJ and PA fast food restaurants similarly. Put differently NJ and PA are similar so what happened in PA is a good estimate of what would have happened in NJ had NJ not passed the minimum wage. Thus what Card and Kruger estimated the effect of the minimum wage in New Jersey by calculating the difference in employment in NJ before and after the law and then subtracting the difference in employment in PA before and after the law. Hence the term difference in differences. By subtracting the PA difference (i.e. what would have happened in NJ if the law had not been passed) from the NJ difference (what actually happened) we are left with the effect of the minimum wage. Brilliant!

Lockdown Effectiveness

1: Various policies lumped together as “lockdowns” probably significantly decreased R. Full-blown stay-at home orders were less important than targeted policies like school closures and banning large gatherings. Talking about which ones were “good” or “bad” is an oversimplification compared to the more useful questions of when countries should have started vs. stopped each to be on some kind of Pareto frontier of lives saved vs. cost.

2: If Sweden had a stronger lockdown more like those of other European countries, it probably could have reduced its death rate by 50-80%, saving 2500+ lives.

3: On a very naive comparison, US states with stricter lockdowns had ~20% lower death rates than states with weaker ones, and ~0.6% more GDP decline. There are high error bars on both those estimates.

4: Judging lockdowns by traditional measures of economic significance, moving from a US red-state level of lockdown to a US blue-state level of lockdown is in the range normally associated with interventions that are debatably cost-effective/utility-positive, with error bars including “obviously good” and “pretty bad”. It’s harder to estimate for Sweden, but plausibly for them to move to a more European-typical level of lockdown in the early phase of the pandemic would have very much cleared the bar and been unambiguously cost effective/utility-positive.

5: It’s harder to justify strict lockdowns in terms of the non-economic suffering produced. Even assumptions skewed to be maximally pro-strict-lockdown, eg where strict lockdowns would have prevented every single coronavirus case, suggest that it would have taken dozens of months of somewhat stricter lockdown to save one month of healthy life. This might still be justifiable if present strict lockdowns now prevented future strict lockdowns (mandated or voluntary), which might be true in Europe but doesn’t seem as true in the US.

6: Plausibly, really well-targeted lockdowns could have been better along every dimension than either strong-lockdown areas’ strong lockdowns or weak-lockdown areas’ weak lockdowns, and we should support the people trying to figure out how to do that.

7: All of this is very speculative and affected by a lot of factors, and the error bars are very wide.

Construction remains terrible

The Problem
Construction is error-prone, expensive, and suffers delays. The government thinks construction productivity has slightly decreased since 1960. It just needs some clever engineering and solutions, but which ones? This post will focus on the ubiquitous single-family home.

Why Things Aren’t Getting Better
The combination of consumer tastes, low dollar value per volume building components, and the complexity of buildings inhibit efforts to scale.

nevertheless, there’s a constant stream of “innovation” that will supposedly solve this, but that remains unlikely. For example, this lego-like modular construction

COVID Civilizational Shift

What we have learned — what we were forced to learn — during the COVID lockdowns has permanently shattered these assumptions. It turns out many of the best jobs really can be performed from anywhere, through screens and the internet. It turns out people really can live in a smaller city or a small town or in rural nowhere and still be just as productive as if they lived in a tiny one-room walk-up in a big city. It turns out companies really are capable of organizing and sustaining remote work even — perhaps especially — in the most sophisticated and complex fields. This is, I believe, a permanent civilizational shift. It is perhaps the most important thing that’s happened in my lifetime, a consequence of the internet that’s maybe even more important than the internet. Permanently divorcing physical location from economic opportunity gives us a real shot at radically expanding the number of good jobs in the world while also dramatically improving quality of life for millions, or billions, of people. We may, at long last, shatter the geographic lottery, opening up opportunity to countless people who weren’t lucky enough to be born in the right place. And people are leaping at the opportunities this shift is already creating, moving both homes and jobs at furious rates. It will take years to understand where this leads, but I am extremely optimistic.

Better Crowdfunding

On Kickstarter you contribute to a project and if a contribution threshold isn’t reached you get your money back. The Kickstarter contract is useful but it’s still easy for a good project to fail because there are many equilibria with non-funding. For example, if I think that you won’t contribute then I may decide not to contribute and if I don’t contribute then you may decide not to contribute. Neither of us can do better by contributing, given the other person is not-contributing, and so non-contributing is a Nash equilibrium. Now introduce refund bonuses which pay out only if the threshold is not reached. Now if I think that you won’t contribute then I want to contribute, to earn the refund bonus, and the same is true for you. The only equilibria in the crowdfunding game with refund bonuses have the project being funded. Thus, a nice feature of refund bonus game is that in equilibrium the refund bonuses are never paid! Without refund bonuses only ~30% of socially valuable projects succeed (perhaps coincidentally almost the exact same as on Kickstarter). But with refund bonuses the success rate increases 60% and it doesn’t much matter much what type of refund bonuses are used!

AI Labor Supply

61.6% of the working-age population were active in the labor force, either working in jobs or looking for them. That is essentially unchanged from the summer of 2020. Wages are soaring. In May, average wages grew at a 6.1% annual rate. In April, they grew at an 8.7% annual rate. Employers are boosting wage offers in order to attract and retain workers, who are increasingly difficult to attract and retain.

Unable to find enough workers, Lee’s Famous Recipe Chicken, installed an automated voice system to take orders. The system never fails to upsell customers on fries or a drink, which has boosted sales. There’s no longer a need for a person to take orders at the drive-thru window. “It also never calls in sick. There’s no way we’re going back.”

A massive shift to delivery and virtual kitchens triggered by the pandemic may mean that some restaurants and some customers will be more willing to use technology that once seemed unfamiliar. Using an app to order at a restaurant table could mean that, eventually, fewer servers will be needed.

Amazon Workers Spoke

Workers at Amazon’s warehouse in Bessemer, Alabama, voted by a margin of more than 2 to 1 not to join a union. It’s a heavy blow for the Retail, Wholesale and Department Store Union, for the wider labor movement, and for the many politicians and activists who wanted the union’s push to succeed. But the workers have spoken — and all of the groups on the other side should be listening to the message. Instead, many rejected the result and attacked the process, almost as though an election is to be respected only if you win. When Republicans did that after the presidential election, they were rightly condemned. The idea that the overwhelming majority of workers in Bessemer were intimidated or bamboozled into voting against their interests — as unionization proponents have suggested — is not only implausible; it’s insulting, as though workers couldn’t possibly be so foolish to have voted against it, so they must have been coerced or tricked. Nonsense.

Innovation Wealth

People who don’t look any deeper than the Gini coefficient look back on the world of 1982 as the good old days, because those who got rich then didn’t get as rich. But if you dig into how they got rich, the old days don’t look so good. In 1982, 84% of the richest 100 people got rich by inheritance, extracting natural resources, or doing real estate deals. Is that really better than a world in which the richest people get rich by starting tech companies? Why are people starting so many more new companies than they used to, and why are they getting so rich from it? The answer to the first question, curiously enough, is that it’s misphrased. We shouldn’t be asking why people are starting companies, but why they’re starting companies again. In 1892, the New York Herald Tribune compiled a list of all the millionaires in America. They found 4047 of them. How many had inherited their wealth then? Only @20% — less than the proportion of heirs today. And when you investigate the sources of the new fortunes, 1892 looks even more like today. Hugh Rockoff found that “many of the richest … gained their initial edge from the new technology of mass production.”