This week’s links are a bit short as I’m off work and spending the day (Friday) at Lord’s to watch the England-West Indies test, a match beautifully poised for an exciting result which is now, inevitably, looking like it will be spent sitting in the rain and hoping for fifteen minutes of play. Oh joy. Anyway, before giving my raincoat a workout, here are the links, with apologies for any morning-brain-syndrome in evidence.
- The Economist rehabilitates the Ponzi scheme. The idea of a Ponzi scheme is that you promise investors an exceedingly high return, and pay them by constantly inducing new entrants to the scheme, paying existing investors with money raised from the new ones. It works only as long as there is a stream of new entrants: as soon as it dries up it falls apart. It has the reputation of being a particularly unscrupulous scam, but the Economist makes the point that this is basically how pensions work; and to some extent the London housing market. This doesn’t make them a complete scam (well, London housing might be): they might have found a context in which Ponzi schemes work – when new entrants are always possible. Of course, an aging population and a desire to hermetically seal the country from them might undermine that case…
- Long-time readers will know that my favourite paper of the last few years was Nick Bloom’s Firming Up Inequality. In it, he points out that most of the observed increase in inequality in the US comes between firms, rather than within them, which I have long thought was driven by outsourcing and specialisation – consider that while Wall Street firms employed cleaners directly in the 1950s, they now contract cleaning out to firm of cleaners with much lower profitability. Neil Irwin at the NYT takes this example to investigate inequality and mobility in the workforce by comparing a cleaner from Apple today with one from Kodak in the 1980s. The latter is now one of their Executives, while the former has virtually no chance of achieving the same. A fantastic read.
- So, it appears that Chris Blattman is writing a book. And that someone should tell him about The Old Reader.
- Lee makes the case for low-bar education interventions: in contexts where virtually no-one learns, we should be happy with any interventions that work, even if they have a low ceiling on what they achieve. That’s how the development sector treats poverty, so why is it so resistant to the idea for education?
- One of my friends insists that I have more in common with Tyler Cowen than I am willing to admit, a charge I absolutely dispute. The only thing worse would be if he insisted I had much in common with Tyler’s co-blogger, Alex Tabarrok, which is why I reacted with fear and horror when he released a teaching video using my favourite example for explaining the Balassa-Samuelson effect, haircuts. It’s really good though.
- Right, time for me to cut this short, as the cricket (or, more accurately, the rain delays) are calling. But before I go, The Ringer has an appreciation of MTV Unplugged. Virtually every member of my generation with a functioning eardrum has heard Kurt Cobain howling the last lines of Where Did You Sleep Last Night?, so we have a lot to thank Unplugged for.
Have a great weekend, everyone!