Weekend reading links

1. As Beijing commits to eschewing the use of real estate market to stimulate the economy, its effects on the local government finances will be felt immediately. Land sales account for as much as 38% of local government financing. And this comes at a time when local government finances are deep in deficit.

2. Working hard does not translate into being effective. Counter-intuitive in the world where the amount of time worked is seen as a measure of your productivity and commitment. 

Sample this, 

Charles Darwin ambled into his study around 8am and worked a good hour and a half before taking a break to read the mail. He did another 90 minutes before noon and then, after a walk and an afternoon nap, another briefish stint before dinner. As Mr Pang writes, if Darwin had been working in a company today, “he would have been fired within a week”. Yet he still managed to write 19 books, including On the Origin of Species, one of the most famous books in the history of science. Henri Poincaré, the great French mathematician, wrote 30 books and 500 papers by following the less than blistering pace of a roughly four-hour day. The prolific Dickens wrote from 9am to 2pm, with a break for lunch.

This is a great essay that seeks to over-turn conventional wisdom on working long hours.

3. Nice tribute to Martin Weitzmann in The Economist. I am inclined to believe though having been passed over by the Nobel Committee in favour of William Nordhaus, he will have the last laugh in the most important environmental debate of our times,

In 1974, early in his career, he wrote a paper that became a foundation stone of every course on public economics. It posed the question: how should regulators rein in pollution? Should they issue (tradable) pollution permits to firms, thereby picking a quantity? Or should they tax polluters, thereby picking a price?... Mr Weitzman assumed that predicting the reaction of prices to a regulated quantity, and vice versa, is partly guesswork. Which you should regulate depends on the relative costs of mistakes. If getting the quantity of pollution slightly wrong would be costlier, then quantity should be pinned down, with prices allowed to work themselves out. If a slightly errant price can do more damage—say, because the need to buy expensive permits could put many firms out of business—then a tax, fixed at a safe level, is the way to go. Uncertainty was the theme that ran through Mr Weitzman’s career...

Perhaps the biggest debate in environmental economics in recent years has concerned discount rates. By how much should you mark down the environmental damage of pollution to take account of the fact that it comes mostly in the future? Mr Weitzman assumed that the correct discount rate is itself uncertain. He demonstrated mathematically that whatever rate is chosen, uncertainty means it should decline over time. The further you peer into the future, the lower your discount rate should be... William Nordhaus carefully prices the potential damage from global warming using an economic model, discounts it appropriately (he favours a relatively high rate) and compares the result to the costs of reducing emissions today. His models suggest that policymakers should implement a carbon tax starting at around $30-40 per tonne of carbon dioxide and tolerate warming this century of over 3°C, compared with temperatures in pre-industrial times. Mr Weitzman thought this approach problematic. Climate change, he argued, does not lend itself easily to cost-benefit analysis. Despite advances in climate science, the sensitivity of global surface temperature to atmospheric carbon dioxide remains uncertain. Even if the central case is that a given amount of pollution produces a manageable eventual rise in temperatures, a cataclysmic event, such as global warming of over 6°C, remains worryingly possible. Cost-benefit analysis, he showed, can break down in these conditions. His “dismal theorem” proved that with fat-tailed distributions, and under certain mathematical assumptions about people’s preferences, society should be willing to pay unlimited amounts today to avoid catastrophic risk.

4. The financialisation story marches on with Apple, sitting on over $200 bn worth surplus cash reserves, raising $7 bn in debt. It plans to use the money for general corporate purposes, a euphemism for share buybacks and dividends. 

5. Gillian Tett points to some interesting stats. On technology induced changes, 

Data from the Milken Institute, for example, suggests that while just 2 per cent of the US population lives on a farm today, that figure was 40 per cent in 1900 and 98 per cent in 1800.

And on labour mobility in the US,

While 6.1 per cent of Americans were moving between counties or states each year back in 1990 (and in previous decades, this was almost certainly far higher), in 2017, that figure dropped to 3.6 per cent. And when workers do leave depressed areas today, they typically relocate to places with a similar profile rather than to megacities or high-growth hubs.