Personal-Brand Journalism

The Washington Post (hardly a disinterested spectator) looks at the phenomenon, focusing on Andrew Sullivan.

It’s not clear that Sullivan’s relatively slow start as his own boss says much about the prospects for others who want to do the same, says Rick Edmonds, the media-business analyst for the Poynter Institute, a journalism education organization. Greenwald, Silver, Mossberg and the others, he notes, have deep-pocketed backers who can afford to sustain years of losses and experimentation.

I have thought about the issue of “Information wants to be free but people need to get paid” for close to 20 years now. Here are my views, as articulated in 2001.

One alternative that cannot be exhausted soon enough is banner advertising. I have been eager to see this concept die since it first was introduced in 1995. Another alternative that I believe should be euthanized is the subscription model for individual periodicals. The marginal cost of distributing the publications online is zero, so subscription models are very difficult to sustain. Finally, there is the alternative of micropayments, meaning small payments for access to particular slices of information. I am now persuaded by Clay Shirky’s argument that the mental transaction costs involved in micropayments are too high to make micropayments workable.

Ultimately, I think that a new form of content aggregator might get away with charging for subscriptions. The Washington Post is a content aggregator, but it is based mostly on its legacy model. On the Internet, you could become a very different aggregator. You could negotiate with individuals and publications around the world to obtain the ability to bundle their content into a subscription service. As a consumer, I might pay $10 a month to a service that offers me everything I like to read. But I am unlikely to pay even $2 a month to read just on blogger or to get behind one newspaper’s paywall. As I put it in 2001,

For an economic model, I continue to recommend the idea of “clubs.” A club would provide content aggregation, recommendation, and annotation services. Journalists would be paid by clubs, rather than by individual publications. For a consumer, joining a club will provide access to value-added services relative to online content. Most of the articles that you are able to read when you join a club may be freely available without joining the club. What your membership fee would give you is better access to individual authors, as well as to indexing tools and cross-reference tools. Some of these tools would be provided by community members, as in the Amazon book lists. The raw content is not what you are paying for. The haystack is free. But if you want help finding the needle, you have to join the club.

Over the years, I have become a bit less optimistic about the “club” model and more inclined to predict an outcome in which journalists require patronage for support. In some sense, Andrew Sullivan is using a patronage model. However, I think that patronage is most likely to come in the form of support from a few wealthy donors than from a broad base of subscriber-donors.

The Case Against Y = f(K,L)

1. You want to use it to explain incomes. But you end up having to make up all sorts of alternative types of capital in order to do so.

2. It makes it seem as if you found a planet identical to earth and inhabited only by hunter-gatherers, that you could give them all the equipment that we use to make a brand-new Honda, combine this K with their L, and produce said Honda.

3. In general, it completely overlooks the path-dependency and context-dependency of the value of capital and of labor skills. Fischer Black’s theory of economic fluctuations is focused on the fact that people make investments in an uncertain environment, and sometimes a lot of those investments turn out sour. The way I would put it is that people start down paths expecting them to lead one way, and then the paths do not lead where they want.

In general, it might be better to think of production “paths” rather than production functions. The path enabling the hunter-gatherers to build a Honda would be long and complex. It would include general-purpose technologies, like language, writing, electric motors, the internal combustion engine, computer chips, and radio-frequency communication. It would include the accumulation of human skills, know-how, infrastructure of various kinds, business norms, and regulations.

The Scourge of Communism

Freedom House reports,

Eurasia has declined to the point where its political rights scores are lower than those of any other region. Russia’s authoritarian regime committed fresh outrages in 2013…It also employed bullying tactics to discourage neighboring countries from initialing agreements with the European Union.

I looked at this report on freedom in the world in light of my essay that used the Fraser Index of economic freedom as an indicator of the quality of governance. Economic freedom and political freedom do not always coincide. Hong Kong and Singapore rank near the top in terms of economic freedom, but they are only partly free in the Freedom House measure.

I used a two-factor model to explain the Fraser Index: country size (larger countries tend to have poorer scores) and national-average IQ (higher IQ tends to be correlated with higher scores).

Looking at the Freedom House index, a third factor stands out: Communist legacy. If you want a country not to be free, regardless of size of national-average IQ, give it a Communist government or a history of Communism.

There does exist a negative correlation between political freedom and size, in that the percentage of countries ranked free is higher than the percentage of the world’s population accounted for by countries that are ranked free. However, China may account for most of that negative correlation.

My guess is that if you want to find a country without political freedom, first look for a country with a Communist legacy. After you’ve gone through those, move on to countries with low national-average IQ. Once you have done that, I am not sure that population size will matter.

The Raj Chetty Paper on Income Mobility

If you have only seen the blogosphere coverage and not read the paper, co-authored with Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, then here are some findings you have missed.

the strongest predictors of upward mobility are measures of family structure such as the fraction of single parents in the area. As with race, parents’ marital status does not matter purely through its e ects at the individual level. Children of married parents also have higher rates of upward mobility if they live in communities with fewer single parents.

and

high upward mobility areas tend to have higher fractions of religious individuals and greater participation in local civic organizations.

and

no systematic correlation between mobility and local labor market conditions, rates of migration, or access to higher education.

The authors emphasize that these are correlations, not causal relationships. Still, these results seem more promising for social-conservative policy wonks than for progressive ones.

The Gift of Health Insurance

Megan McArdle writes,

There may be something seriously wrong with our understanding of who the uninsured are, and what they are willing and able to buy in the way of insurance. I don’t know exactly what the fault may be in our understanding. But if the numbers [of previously uninsured signing up for Obamacare] stay this low, I’d say we need to reassess the state of our knowledge about the uninsured — and the vast program we created to cover them.

This reminds me of an essay that I wrote over 10 years ago, called Health insurance do-nots.

In America is Crazy, I wrote that our health care policy reflects mental illness. The fundamental problem is that we believe that health insurance is something that only should be received as a gift — never obtained for oneself. Thus, we immediately assume that when a family does not have health insurance, they are to be pitied for not having received the gift, rather than being blamed for not having taken responsibility.

After the Census report was announced, the evening News Hour on PBS featured a young man (he appeared to be about 30) without health insurance who had been diagnosed with melanoma. The focus of the feature was the financial hardship that the man was going to have to undergo, including putting his family deeply into debt.

While I truly feel sorry for this man, I have so say that the worst of the financial burden of his illness was avoidable. When he was healthy, he could have obtained health insurance. Instead, he chose to spend his income on other things. He was a health insurance “do-not.”

However, the thrust of the story was not, “Let this be a lesson to you. Buy health insurance, because you never know when you may need it.” Instead, as in the Times editorial, the PBS story treated the man as a victim because he did not have employer-provided or government-provided health insurance.

To deal with the problem of health insurance do-nots, I wrote that

some form of catastrophic health care coverage ought to be mandatory

I was naive at that time, thinking that the government could mandate basic catastrophic coverage. The political process instead works in the direction of mandating gold-plated coverage. It works in the direction of rewarding politicians who make the most outlandish promises (“it will lower cost, you can keep your doctor,” etc.), rather than in the direction of rewarding politicians who tell people the truth about the cost of health care or who dare to raise the issue of individual responsibility.

Jonathan Haidt Podcast

With Russ Roberts. An excerpt:

if you expand the moral domain as I did and you are interested in group loyalty and respect for authority and the idea of making things sacred, boy, these things don’t make a lot of sense from reciprocal altruism. But they make perfect sense if you think about tribes competing with other tribes. And if you think as Darwin did that group cohesion matters when you have intergroup competition. So, what I’m saying here is that almost all human nature can be explained without group selection. We are 90% chimps. Chimps are not really group-selected. So, as Frans de Waal says, all the building blocks of human morality can be found in chimps. And I think almost all can. So that’s the 90% chimp. But I think that, beginning with Homo heidelbergensis, which is about 800,000 years ago, beginning with that species, which is thought first to tame fire, have campsites, hunt large game cooperatively, bring it back to the campsite, butcher it–well, this group probably also, they had spears. They probably also were engaged in intergroup conflict. And it’s this species that also begins to have cumulative cultural evolutions–the first signs of culture building on previous innovations. So, that I think was our Rubicon–Homo heidelbergensis, 800-500,000 years ago. So that opens up the possibility of true group selection aided by gene culture co-evolution. Now, bees are group selected. The bee doesn’t live or die based on its ability to outcompete other bees. Bees live and die based on the hive’s ability to prevail over other hives. So that’s what I mean by we are 10% bee.

Russ chimes in:

one of the things I think libertarians sometimes miss, which is our desire to be part of something larger than our self. I think the Left romanticizes, say, our democracy or political process and takes away some of the realities of it to make it look more appealing than it actually is. But I think libertarians have no ability, almost no ability, to even appreciate the idea of the body politic or collective decision-making. And I understand the harm of it, the dangers of it. But it seems to be an important part of our humanity in lots of ways. And for some people, their political persuasion is their religion; for other people, their sports is their religion; and for some folks, their literal religion is their religion.

Russ and I are both fans of Haidt’s work. See this review essay, where I stirred Haidt’s ideas around, ultimately leading to my e-book.

The Next Financial Crisis

Tyler Cowen writes,

When the U.S. real estate bubble burst in the late 1980s, there was a downturn in output and employment but no financial crisis. No capital markets froze up for instance and risk premia never deviated much from normal in the first place. And if that late 1980s-like path is what someone is predicting for the Nordics, Canada, or Singapore, well maybe so. I’m not predicting it myself but I certainly can see that within the realm of the plausible.

Much is within the realm of the plausible. Too much.

If you are a creditor of a government or of a large bank, your thoughts are probably along the lines of, “All of the governments and regulators of the world are doing everything that they can to prevent me from suffering from a default. So I’ll just hang in there.”

That is one equilibrium. But it is easy to transition to another equilibrium. Suppose that, in spite of all the best efforts of the same folks who were not able to stop the financial crisis of 2008, there is a large painful default by any one of the countries on Tyler’s list. If that happens, then a likely scenario is that all of the rest will go down very quickly.

The current policy approach perhaps reduces the probability of any one nation or one bank going under. However, it increases the probability of a huge, horrible, systemic collapse. A benefit of reducing government budget deficits is that it helps to reduce the probability of this Armageddon scenario. Even if you believe that reducing government deficits is painful austerity, from my perspective the benefit exceed the costs.

Explain This

Jaison R. Abel, Richard Deitz, and Yaqin Su write,

the broader V-shaped pattern in the underemployment rate over the past two decades is also consistent with new research arguing that there has been a reversal in the demand for cognitive skills since 2000. According to this research, businesses ramped up their hiring of college-educated workers in an effort to adapt to the technological changes occurring during the 1980s and 1990s. However, as the information technology revolution reached maturity, demand for cognitive skill fell accordingly. As a result, during the first decade of the 2000s, many college graduates were forced to move down the occupational hierarchy to take jobs typically performed by lower-skilled workers.

They refer to a paper by Beaudry, Green, and Sand.

This is an important observation. Some possible explanations:

1. The empirical finding is mistaken. If you do the analysis correctly, the demand for cognitive skills has not reversed. Perhaps jobs that are classified as not requiring a college degree in fact have become much more cognitively challenging. [note: I am not claiming that the empirical analysis is incorrect. I just want to include that as a possibility.]

2. Assume that the distribution of jobs in terms of skill requirements has remained approximately fixed. Assume, perhaps reasonably, that college selects students on the basis of cognitive ability, but it does nothing to change the distribution of skills or ability. As more students go to college, this means more low-ability students go to college, and they wind up in the same jobs that they would have obtained without going to college.

3. There has been an actual deterioration in the quality of college education, at least relative to the needs of employers. An individual who graduated in 1995 was more likely to have gained skills in writing and thinking than if that same individual had graduated in 2005.

A Statistic to Know

Last fall, Jesse Colombo wrote,

it is important to realize that around 50 percent of the SP500’s earnings are generated overseas

This means that our stock market is to some extent decoupled from our economy. Statistics like ratios of corporate profits to GDP are not necessarily going to be indicative of movements in income shares. Imagine a foreign subsidiary getting profits without generating and GDP whatsoever.

Larry Summers on Sectoral Productivity Disparities

He says,

people with higher wages now work more hours than people with lower wages. The time series tracks the cross section. Over time, as we have all gotten richer, the number of hours worked for many people has risen

and also

the simple fact is that the relative price of toys and a college education has changed by a factor of ten in a generation

Pointer from Timothy Taylor.

How do you connect these dots? One way is to scream “We need more government!” Because look at the inequality! Look at the low productivity in education and health care, and we know government ends up running the low-productivity sectors!

I had another way to connect the dots. You could say that the cost of living has gone way down for people who do not measure their self-worth by the prestige of the college to which their kids go and the breadth of their health insurance coverage. Many people can now afford what they think is a decent lifestyle without earning so much in the labor market. However, the anointed look at such people and say, “But you must attend an elite college. But you must have health insurance that covers all manner of medical services, not just major medical.”