Windows 8.1: The Good

Prequel post.

* The Charms. Probably no better idea was ever devised for touchscreen computers. They will be missed in Windows 10. Seriously, the whole idea-search, print, share, go to Start or go to relevant Settings from anywhere was brilliant.
* The split-screen. This is not a built-in feature in either Android or iOS and is quite useful.
* Switching back and forth between apps by swiping right (and, for multiple apps, by swiping first right then left again).
* A full-screen Photos app.
* A full-screen (PDF and TIFF) Reader app that can rotate pages and save them..
* Printing works like in regular Windows, not via stupid specialty requirements like in iOS or stupid Cloud services like in Android. So I am told, printing works like in regular Windows even for RT.
* An option to view Windows store apps on the taskbar or have either large or small taskbar icons.
* The Weather app is a good place for rough guides to seasonal temperature and precipitation patterns in various places around the globe.
* A decent video-taking app (Movie Moments) is available in the Windows App Store.
* Help and Tips (installed by default) provides a partly offline list of what you can do with Windows 8, which is better than no help at all.
* The Metro Alarm, Sound Recorder, and HERE and Bing Maps apps work well on a tablet (certainly more so than their desktop equivalents, which require a mouse to use).
* Windows Speech Recognition (English only, foreigners!) isn’t half-bad, especially if you allow it to practice listening to your voice.
* The whole concept of an app store with pre-approved (thus, no viruses) full-screen apps that aren’t too dependent on what goes on in the desktop.
* Two (or three, depending on what computer you have) ways to turn off your computer (the Charms are much more useful for touchscreens).
* Various legacy desktop applications, such as Notepad and Paint (even though there are good Metro replacements for them) are still a nice gesture to show that Microsoft still cares.

This is for the 1 month that Windows 8.1 will continue to stay relevant.

True Facts About World History

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* Just before Columbus, the island of Tenochtitlan-Tlatelolco contained a population roughly the same as that of the island of Hispaniola. It also contained ten times the population of the capital of the Inca empire.
* The Japonic-speaking Korean farmer settlement of the islands of Japan, which finally brought agriculture to those islands, took place after the end of the Western Zhou and during the rise of the first Korean kingdoms. Both the Koreanic and Japonic-speaking Koreans were, unlike the Chinese, speakers of a non-Sino-Burman language, but the language families, if they have any common origin at all, diverged exceedingly long ago. The Japonic language family split up from the late first millennium BC. The Jomon predecessors of the modern Japanese had a small (Cambodian-level), but noticeable amount of Melanesian ancestry, but were well within the East Asian racial cluster. The Ainu, the group carrying the largest proportion of Jomon ancestry, may preserve some trace of the Jomon language in their language.
*Of the four great empires of India from 322 BC to 1947 AD, only one was Hindu. Two were Muslim, one was Christian, and one was Buddhist.
*The first people in Madagascar were not Black. They were Austronesian. The Austronesians began their migration out of Taiwan only after the unification of Egypt under Narmer.

List of Modern Empires

The term empire is defined here. Even though the post was written more than two years ago, I still feel like I wrote it a week or two ago.

There are no empires in the Western hemisphere.

1. China, obviously.
2. Laos
3. Sudan
4. Morocco
5. Turkmenistan (non-negligible number of Uzbeks within its territory).
6. Uzbekistan (non-negligible number of Tajiks within its territory).
7. Chad
8. Cameroon
9. Republic of Congo
10. Equatorial Guinea
11. Zimbabwe (the elections there are an obvious farce).
12. Ethiopia (uncompetitive elections).
13. Djibouti (uncompetitive elections).
14. Eritrea seems to be an empire, rather than the nation-state of the Eritrean people.

Belarus doesn’t count, because it is the nation-state of the Belorussian people and there’s no substantial difference between Belorussians and Russians. I haven’t heard of any Russian separatist movement in Belarus. Kazakhstan doesn’t count because it is the nation-state of the Kazakh people.

Syria would have counted before the war, but doesn’t anymore, as the Kurds have broken away. The Islamic State doesn’t count, because its ethnic cleansing has forced all those who don’t want to live under it out of its territory. Vietnam doesn’t count because the ethnic groups other than the Vietnamese are too small.

Burma isn’t an empire; it’s a mess.

Measuring Economic Growth Using Engels’ Law

In the second sentence of this fine paper linked to by Tyler Cowen, I saw a reference to Engel’s Law, the stylized fact that when income rises, the proportion of income spent on food falls. I, in my firm conviction that all laws should be tested, thought to examine this by using FRED.

The proportion of national income spent on food in the United States:
Screenshot (15)
So this is the implied (per capita) economic growth over this time:
Screenshot (16)
http://research.stlouisfed.org/fred2/graph/?g=1eZu

Works pretty well, I guess. Implies stronger growth in the 1980s and weaker growth after the Great Recession than usually accepted.

Adam Smith’s Agricultural Paradox

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According to Adam Smith, classical economist, in his Wealth of Nations,

 

In agriculture, the labour of the rich country is
not always much more productive than that of the poor; or, at least, it
is never so much more productive, as it commonly is in manufactures. The
corn of the rich country, therefore, will not always, in the same degree
of goodness, come cheaper to market than that of the poor. The corn of
Poland, in the same degree of goodness, is as cheap as that of France,
notwithstanding the superior opulence and improvement of the latter
country. The corn of France is, in the corn-provinces, fully as good,
and in most years nearly about the same price with the corn of England,
though, in opulence and improvement, France is perhaps inferior to
England. The corn-lands of England, however, are better cultivated than
those of France, and the corn-lands of France are said to be much
better cultivated than those of Poland. But though the poor country,
notwithstanding the inferiority of its cultivation, can, in some
measure, rival the rich in the cheapness and goodness of its corn, it
can pretend to no such competition in its manufactures, at least if
those manufactures suit the soil, climate, and situation, of the rich
country. The silks of France are better and cheaper than those of
England, because the silk manufacture, at least under the present high
duties upon the importation of raw silk, does not so well suit the
climate of England as that of France. But the hardware and the coarse
woollens of England are beyond all comparison superior to those of
France, and much cheaper, too, in the same degree of goodness. In Poland
there are said to be scarce any manufactures of any kind, a few of those
coarser household manufactures excepted, without which no country can
well subsist.

-In fact, France was substantially less physically productive in agriculture than England in the eighteenth century, and Poland was a bit more productive in agriculture than France. This paradox of agriculture applies even unto this day, with America, which has much higher agricultural productivity than, say, Russia, also having much higher agricultural product prices than Russia. This is due to labor costs in the U.S. being much higher than in Russia (by roughly five to tenfold in nominal terms), while the difference in physical output per worker in agriculture is much smaller. This is because a typical American worker has many more options than a Russian one, leading to farms paying much more to attract workers in America. However, the prices of tropical food products (quality-adjusted) may well be a little higher in Russia than in the U.S. due to PPP being much more likely to apply to tradeable goods.

The Tightwad Fed

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In January 2012, the U.S. Federal Reserve announced a 2% PCE price level “goal” in these words:

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances.

Let’s see how the PCE price level is doing more than three years later.
pceindexlevel
The Fed is not on track to meet its goal anytime soon. And that’s putting it mildly.

The Money Illusion

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The real:

Screenshot (12)
Screenshot (14)
Pay especial attention to the period after the Great Recession. Compare that period to previous recessions, especially those recessions after 1972.
The nominal:
Screenshot (11)
Screenshot (13)
You can understand my reason for suspecting that the vulgar complaint about “real wage stagnation” is really the money illusion at work and is directed at nominal wage stagnation.

Wages, Recessions, Productivity

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To understand why wages do not fall during the vast majority of recessions is to understand the difference between micro- and macro- economics.*

Charted on a Micro 101-style Price & Quantity (most of the time, filled only with supply and demand curves) graph, the labor market in recessions looks like this:
Screenshot (10)
http://research.stlouisfed.org/fred2/graph/?g=1cPe
Basically, labor supply shocks. Now, we know recessions are not labor supply shocks (this is because job openings fall during recessions, BTW). The Great Recession was not the Great Vacation. Workers didn’t just walk off their jobs, causing their employers to bid their wages upwards. We know involuntary unemployment is real. Alright, maybe the U.S. is always in a Brazilian-style hyperinflation. How about real wages?
Screenshot (9)
http://research.stlouisfed.org/fred2/graph/?g=1cPf
The 1991 recession is the circle in the middle. The Great Recession and 2001 recession still look mostly like giant vacations. So what’s going on?

If you model the labor market as something that could be explained by micro principles, you would get something like this during a recession (assuming the labor supply curve is fairly price-insensitive, which, in real terms, in strongly inflationary recessions, it generally is):

labormarketrecession

Indeed, the post-Soviet depression did look something like this, though there was still substantial disequilibrium in the labor market, though much less than during the U.S. Great Depression, especially when one accounts for job openings.

The key to understanding this is the difference between physical (per-worker, per hour) and economy-wide (per labor force participant) productivity.

Physical productivity (how much physical output a worker can produce per hour) does not change significantly in most firms during a recession.

Economy-wide productivity is something quite different. A taxi driver of the same physical productivity would receive a much higher real wage in the United States than in Bangalore for doing physically the same work. Why is this? It is because the productivity of a few key industries often matters far more than the productivity of many small ones in determining everyone’s real wages. Examples of this include the oil industry in Russia and Qatar, the finance industry in New York City and the diamond-mining industry in Botswana.

If the physical productivity of only a few key firms and sectors is affected in recessions, then, if the recessions are not the result of tight money, the recessions should mostly show up not in falling employment (though that may happen), but in a rising price level. Indeed, in Russia, unemployment growth since August has only been by a percentage point, while real wages have plummeted. Due to the resource-disallocating effect of a downward economy-wide productivity shock, unemployment may, of course, still rise during a highly inflationary recession. But, while real output fell in early 1990s Russia as much as it did in the United States during the Great Depression, unemployment in early 1990s Russia never breached 15%. In the United States, unemployment breached 20%. This, despite the fact that there were far more and far more labor-intensive malinvestments to be liquidated in Russia than in the United States. This was because real wages collapsed in early 1990s Russia due to the hyperinflation there, while the Great Depression was largely a demand-side, deflationary depression caused by money hoarding and bank failures.

Why do firms almost never cut nominal wages during a recession? It is because, while economy-wide productivity may be falling, the physical productivity of the vast majority of firms may be rising. Indeed, it is quite possible for the physical productivity of all firms to be rising and for economy-wide productivity (per labor force participant) to be falling at the same time. Output per labor force participant may be falling while output per worker may be rising. This is what happened in the U.S. economy in general in the Great Recession, though not for all firms or industries.

As the Lord Keynes points out, when nominal wages are cut by an employer, employees cut their physical productivity. But why do workers cut physical productivity when changes in economy-wide productivity are adjusted not by rising prices, but by falling nominal wages? After all, is not money neutral?

This is where Irving Fisher’s “money illusion“, of which Scott Sumner talks about, comes into play. It was crucial during the Great Depression (and important during the Great Recession), but was unimportant in the 1973-5 recession and the Russian experiences (except in 2008 Q4-2009 Q1, when unemployment rose sharply due to wage stickiness resulting from this illusion). When workers see a nominal wage cut coming from their employer, they take it as meaning that their employer wants them to work less physically productively, as there is nothing about these wage cuts that necessarily apply to the world outside their employer. However, when the same real wage cut comes from rising prices outside their employer, the employees see that there is nothing special about their employer or their predicament, as prices have risen for everyone, no matter where they might be employed. For an individual firm, labor supply curves are fairly horizontal. Even a small reduction in the price of labor caused solely by a decrease in labor demand causes a much smaller quantity of labor to be supplied in a typical firm. However, a much less price-sensitive (more vertical) labor supply curve applies for the entire labor market. For the broader economy, this results in nominal GDP cuts exacerbating the labor market disequilibrium (unemployment) caused by disallocation of resources during the recession, and, thereby, exacerbating real GDP cuts due to employers not being so self-disrespectful as to cut their workers’ physical productivity. Thus, the appearance of “great vacations”.

The point? Don’t be afraid of high inflation/NGDP growth. Russia (and Belarus) managed just fine until the recent oil price shock with years of it after the Great Recession. Greece could have done so, too, had the European Central Bank let it.

*Yes, exaggeration, I know. But that’s about half of it.

Definitions of Factor Intensity

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Land: Anything not of human origin and not capital.
Land-intensive: Requiring much land per worker or per unit of capital.
Example: Primary industry in Argentina, 18th century.
Labor-intensive: Requiring much labor per unit of land or capital.
Example: Agriculture in China and Japan, 18th century.
Example: Manufacturing in Belarus, Mauritius, Ukraine, and Malaysia is believed to be this.
Capital: Anything not directly consumed, but increasing the productive abilities of labor and land.
Capital-intensive: Requiring much capital per unit of labor.
Example: U.S. manufacturing, c. 2008.
Capital: Accumulated unconsumed portion of expenditure minus depreciation.
Capital-intensive: Requiring much capital per unit of labor or TFP.
Example: Manufacturing in North Korea and Russia, c. 1980.
TFP: Anything that isn’t differences in employment as a percentage of the population and differences in accumulated unconsumed portion of expenditure minus depreciation. It could be land, for all anyone cares. It’s not counted as unconsumed portion of expenditure, right?

To encourage clear thinking.