Instead of Deposit Insurance?

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Clive Crook writes,

banks should be made to pledge assets as collateral, in sufficient quantity to cover their deposits and other short-term liabilities. A rule to this effect could replace conventional deposit insurance (with premiums in effect collected upfront in the form of haircuts on the collateral).

Read the whole thing. Pointer from Mark Thoma. Crook is reviewing a book by Mervyn King. I will have to read the book, because I do not understand the concept.

I think of an ordinary bank as having loans as assets. Its liabilities consist of deposits and equity. You can think of the assets as already “pledged” to the depositors, and if the depositors can be paid off, then the shares in the bank have positive value. It sounds like what King is talking about is an intermediary (a government agency?) that manages the way that these assets are pledge in a way that better protects depositors. Again, I will have to read the book.

A Workable Phone Spam Filter?

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A commenter writes,

I switched my landline to a VOIP service called ‘Callcentric’ years ago. It’s been great for me. Really cheap. Lets me block unwanted calls. Voice mails are sent to me as email attachments. Setting up the VOIP box initially require a little technical messing around, but that’s been the only drawback.

Several other commenters offered suggestions. I have some questions.

1. This seemed like the best solution to me. What are the worst drawbacks?

2. We have a phone on each floor of our house. Can we use one VOIP box with multiple phones?

3. Are there useful articles out there that describe the process of using VOIP for this purpose?

4. Are there useful articles out there about choosing a VOIP box?

A World with B’s and C’s

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The comments on my Three Axes to Explain Terrorism post inspired what I am going to say here.

1. I believe that human population includes both B’s and C’s. B’s are inclined temperamentally or ideologically to use violence to control others. C’s are not so inclined, and they seek ways for people to interact peacefully.

2. If there were no B’s in the world, C’s could adopt a simple rule of never engaging in violence. However, such a rule when followed by C’s produces a very bad equilibrium if there are B’s in the world, because it leaves the B’s unchecked.

3. To check B’s, C’s must be willing to commit violence against B’s. This makes C’s a bit like B’s, but I do not believe that this implies total moral equivalence. As one commenter put it,

The distinguishing factor is intention. The civilized nation should be motivated towards living peacefully so long as that is a live option. It does not intend harm to non-combatants and does as much as it can to avoid civilian casualties – the barbarian groups murder non-combatants in gruesome ways for shock value.

4. One of the mechanisms that C’s will use is a state and its government. When C’s organize a state and its government, they create institutions that seek to constrain the government’s ability to use violence, so that it is only used to protect against B’s. These institutions are necessarily imperfect, but this does produce a more civilized (and libertarian) outcome than (2).

5. The apparatus of a state can be taken over by B’s. See the Soviet Union or Nazi Germany. That is a major risk of (4).

6. In his comment, Handle writes,

progressive politicians and the leaders of majority Islamic countries are trying to convince [both Islamophobes and radical Islamists] that there is no link between Islam and political violence, and, at least tacitly, if we can all just get people on all sides to shut up and quit insisting there is such a link, then it will quickly cease to exist and we can reify the claim and bootstrap a decoupling into existence.

In other words, if you deny that Islam is connected to B’s, then that will be self-fulfilling. Conversely, if you insist that Islam is connected to B’s, then that will be self-fulfilling.

Unfortunately, I do not think it’s that simple. In the story about the Belgian prison, the WaPo reporter wrote

Proselytizing prisoners used exercise hours and small windows in their cells to swap news, copies of the Koran and small favors such as illicit cellphones. Gradually, they won over impressionable youths

[my emphasis]. If the prisoners had become C’s as a result, that would be fine. But instead they turned into worse B’s.

7. I do not believe that we can rely solely on the Koran to turn Muslims into C’s. I do not believe that we can rely solely on the Bible to turn Jews or Christians into C’s.

8. I think that C inclinations must be reinforced by a web of institutions, including families, the state, and civic associations of all kinds. My concern with Islam is that it privileges religion ahead of everything else, which reduces the ability of other institutions to play their civilizing role.

9. I have a similar concern about progressivism, in that it privileges the state ahead of everything else. As Yuval Levin points out in his forthcoming book, The Fractured Republic, progressives seem to extol the individual and the state, while opposing churches, corporations, and every other intermediate institution.

Megan McArdle on Economic Dislocation

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She scolds,

There is no better example of the folly of the elites than the current fashion for a universal basic income among both liberals and libertarians. Instead of trying to figure out something hard, like how to build an economy that provides adequate work for everyone, the idea is to do something easy, like give them checks.

To which I reply, better to do something easy than something stupid. And if you assign the task “build an economy that provides adequate work for everyone” to technocrats and politicians, they will come back with something stupid.

Leave the hard work of actually creating jobs to entrepreneurs. I do not promise that they will “provide adequate work for everyone,” but they will tend to create patterns of sustainable specialization and trade. As for government policy, my first thought on jobs policy is always to reduce the payroll tax and to de-link health insurance from employment.

Comments on Uber’s Value Proposition

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A commenter writes,

It’s not that *SOFTWARE* suddenly let Uber and Lyft do things previously undreamt of so they took over the old fuddy-duddy cab business. It was a power play.

If one of the standard cab companies had wanted to operate like Uber, the city administration which licenses cabs would have shut them down immediately. Because “That isn’t how cab companies operate” and to hell with your fancy software and lineup of venture capitalists. But Uber never tried to operate as a cab company. It just merrily put up ads and flyers and signed up drivers and was happily ferrying passengers hither and yon while the established cab companies were trying to get somebody in city government to answer the damned phone and listen to a complaint. By the time the typical city bureaucracy reacts to the existence of Uber, it’s generally gotten itself established in most users’ minds as old and legitimate, and very few cities have the … anatomical features …. needed to clamp down. So Uber prevails.

We had a useful discussion of this in my high school econ class the other day. I made a point similar to the commenter’s, that Uber’s success consisted of changing taxi regulations to allow unlicensed cars and drivers to operate.

There are many other areas where one can imagine a profitable business model could be generated by getting rid of regulations that restrict would-be suppliers from entering the market. For example, suppose that you set up an Uber that connected prostitutes with customers, and it became accepted and popular, so that the authorities decided against shutting it down. Or an Uber for capable but unlicensed health care providers. Or an Uber for liquor. Or an Uber for medications, including medications not approved by the FDA.

One student looked up the market valuation of Uber and found it to be somewhere north of $50 billion. Where does that value come from? (My first thought, by the way, is investor irrationality.)

If what Uber has is a superior algorithm for dispatching cars, then taxi companies could simply hire software developers to build such an algorithm. I don’t think that is the answer. Of course, I remember that when Amazon said that it was going to branch out from books to selling everything, somebody remarked that it would have difficulty competing with Wal-mart, because it is cheaper to start with Wal-mart’s logistics system and build a web site than it is to start with Amazon’s web site and build a logistics system. It is worth thinking about how Amazon managed to overcome that apparent disadvantage, but that is a separate post.

A student pointed out that the remarkable accomplishment of Uber was convincing riders that it is safe to use. “Can you imagine what my mom would have said a few years ago if I told her that I was using my phone to find a stranger to pick me up in a car? And yet people are ok with that now.”

I think that is the real key to Uberizing an industry. Take a business where the public has come to fear unregulated service providers, and find a way to overcome that fear before the incumbents find a way to use the political system to stifle the business.

Why don’t competitors come in until Uber’s profit margin shrinks? The students think that Uber has powerful brand recognition. One way to think about this is to ask why competitors do not come in to challenge Google.

I think that the analogy between Google and Uber breaks down because consumers do not pay to use Google. To take customers from Google, you have to offer consumers something at the same price (free) that provides a better user experience. That’s tough.

To compete with Uber, what you have to offer consumers a similar user experience at a lower price. That strikes me as not so hard to do.

Can Google Sell You a Landline?

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They say,

Landlines can be familiar, reliable and provide high-quality service, but the technology hasn’t always kept up. That’s why today, we’re introducing Fiber Phone as a new option to help you stay connected wherever you are.

Following the link, I see

Privacy controls like spam filtering, call screening and do-not-disturb make sure the right people can get in touch with you at the right time.

Spam filtering for phone calls. Verizon refuses to give that to me. The most they will do is filter 10 numbers. I get spam phone calls from more than 10 numbers in less than 48 hours.

Google does not have its fiber service in my neighborhood. But I would pay up for the spam filtering service if they could somehow provide it.

Tyler Cowen Talks with Jonathan Haidt

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Self-recommending. Here is one excerpt:

Whenever there was an empire, the empire always ran into trouble. At that point, there are those who say, “Our misfortunes are because we have lost the ways of the elders. The gods are punishing us for departing from the wisdom. We need to return!” Those are the people I would bet who if you could transplant them, they would grow up to be more conservative. They feel the moral decay. They feel the loss of the tradition.

Here is another:

The basic fact about moral argument is that we’re not really listening to each other, we’re not actually open to reasoning. We start with our gut feeling or our partisan loyalty, and at that point we become lawyers. We’re really good at being lawyers and knocking down the other guy’s arguments, and giving them our own…

Once it becomes left versus right over Obamacare, it doesn’t matter however good your arguments are, I’m not listening. I’ve got my team, and we’re on a mission to defeat your team.

But read the whole thing.

Martin Gurri on Donald Trump

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He writes,

The right level of analysis on Trump isn’t Trump, but the public that endows him with a radical direction and temper, and the decadent institutions that have been too weak to stand in his way.

The American public, like the public everywhere, is engaged in a long migration away from the structures of representative democracy to more sectarian arrangements. In Henri Rosanvallon’s term, the democratic nation has devolved into a “society of distrust.” The reasons, Rosanvallon argues, are deep and structural, but we also have available a simple functional explanation: the perception, not always unjustified, that democratic government has failed to deliver on its promises.

Recall that Gurri wrote The Revolt of the Public, which predicted the revolt against the establishment that Trump represents.

Read the whole post, which includes this:

The charts show Ted Cruz and Marco Rubio, Trump’s chief opponents, drowning deep below the awareness threshold. They and their messages were largely nonexistent to the public.

Why Are Taxis Inefficient?

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James Hamilton writes,

A new study by Judd Cramer and Alan Krueger at Princeton found that only 40% of the miles that taxis drive in Los Angeles and Seattle are spent carrying a passenger someplace the person wants to go. By contrast, for UberX the numbers are 64% and 55% for the two cities, respectively. In terms of hours worked, taxi drivers in San Francisco spend only 38% of their work hours with a passenger on board. For UberX, that number is 55%.

Why should this be the case? One possibility that comes to me is the different economic model. My guess is that taxi companies make much of their money by renting to taxi drivers the vehicles and the taxi licenses. Maximizing the number of rides is not such an issue for them. But Uber gets a share of money on every ride, and that is where their revenue comes from, so they have no choice but to put a lot of effort into maximizing the number of rides.

Honor, Face, Dignity, and Victimhood

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Jorg Friedrichs writes [UPDATE: link fixed],

In short, status is more salient for honor and face than for dignity cultures. In honor cultures, hierarchy is like a “pecking order” with “cockfights” rife among status-anxious rivals because the honor code requires defending honor against real or perceived challenges from peers. In face cultures, hierarchy is engrained in the collective consciousness of the group and status anxiety cannot burst into conflict because people must know their place. In dignity cultures, self-worth is a birthright so status and, by implication, status anxiety should matter less.

There is a lot of interesting, speculative discussion along these lines.

On a related note, in a recent Cowen-Haidt discussion, Jonathan Haidt brought up one of his old posts.

I just read the most extraordinary paper by two sociologists — Bradley Campbell and Jason Manning — explaining why concerns about microaggressions have erupted on many American college campuses in just the past few years. In brief: We’re beginning a second transition of moral cultures. The first major transition happened in the 18th and 19th centuries when most Western societies moved away from cultures of honor (where people must earn honor and must therefore avenge insults on their own) to cultures of dignity in which people are assumed to have dignity and don’t need to earn it. They foreswear violence, turn to courts or administrative bodies to respond to major transgressions, and for minor transgressions they either ignore them or attempt to resolve them by social means. There’s no more dueling.

Campbell and Manning describe how this culture of dignity is now giving way to a new culture of victimhood in which people are encouraged to respond to even the slightest unintentional offense, as in an honor culture. But they must not obtain redress on their own; they must appeal for help to powerful others or administrative bodies, to whom they must make the case that they have been victimized.