Debate Is A Waste Of Time, We Just Want Biases Confirmed In Media We Consume

Tim Worstall at Pando points to the findings of the 2014 Clark Medalist Matthew Gentzkow.

A first set of Gentzkow’s papers studies political bias in the news media.  In “What Drives Media Slant? Evidence from U.S. Daily Newspapers” (Econometrica, 2010), Gentzkow and co-author Jesse Shapiro use textual analysis of a large set of newspaper articles to classify content as more Republican or more Democrat (“media slant”).  This is done using statistical analysis of phrases that differentially show up in Republican versus Democrat Senators’ speeches in the Senate. These constructed measures of media slant match well with conventional wisdom and with other, more ad-hoc and subjective newspaper political classification. Gentzkow and Shapiro then use these measures to estimate demand for newspapers, and to model the newspaper owner’s choice of media slant. They find that most of a newspaper’s media slant can be explained by the preferences of its readers rather than by the tastes of its owner.  The second part of the paper tries to sort out whether the bias of individual papers is driven by “demand” – i.e. the political biases of their target audience – or “supply”, i.e. the idiosyncratic preferences of the owners. They find that it is mostly demand.

This paper is one of a few cited by the AEA in their report but well worth reading. It shines an interesting light on people who break into fits over billionaire media owners / death of public journalism etc.

This is a cool chart: mondo_times_conservativeness_rating

Public Service Survival From A Few Week’s Ago On RNZ Insight

One of the things I like to write about is the difference between how people think power is distributed in New Zealand as opposed to how it actually is distributed.

The common narrative places politicians – elected every 3 years – at the top of the pyramid in terms of political power. The more realistic situation is that for every policy, someone in Wellington starts with a blank Word document.

Every so often, the genuine political power base speaks out when something offends them. This Radio New Zealand Insight program is a direct “insight” into what public servants think “free and frank” advice means and how the National government is apparently “harming democracy” by creating an environment where senior public officials supposedly are scared of speaking their minds to Ministers.

There is also a really good meta explanation of the public service – it “protects the public from politicians” (to roughly paraphrase) and it “serves democracy”. This is lofty stuff.

I can’t believe I missed this. Sometimes the evidence is hiding in plain sight. The election this year is a distraction, the real election was the incoming crop of policy analysts across all departments and agencies.  Have a listen:

Most Foreign Investment Is A Gift Of Capital To The Host Country

Foreign investment is awesome because almost always, the asset that is sold to a foreigner ends up getting bought back for cents on the dollar by a local investor or institution once the cheap money financing the acquisition dries up.

See: Japanese investment all around the world in the 1980′s – in particular, how developers on Australia’s Gold Coast completely rinsed Japanese banks for tens of millions of dollars in development financing that was subsequently written off.

Bernard Hickey is on the money here – let’s help Chinese capital bankroll new developments. An Australian-style rule that says if you want to buy property here you have to finance a new development would solve a few policy problems with one stroke of the pen.

English, in his pre-Budget speech this week, touched on the thorny issue of Auckland’s need for small, affordable homes close to the city centre. He said council planners had effectively blocked the mass development of “shoebox” apartments by requiring floor plans no smaller than 40sqm and balconies of 8sqm.

He said these restrictions meant rents for apartments were $80 a week higher than necessary. Developers say there is large demand, often from Chinese investors, for apartments closer to 20sqm than 40sqm.

English has rightly pointed out that not everyone dreams of living in the quarter-acre pavlova paradise of old. An ageing population of couples starting families later, smaller families, and where both young and old live alone, need smaller more affordable homes.

One solution is to encourage an influx of capital from China to build thousands of these homes. There are signs it is happening. The 52-level tower planned for the empty space next to the Sky Tower is financed by Shanghai businessman Furu Ding. The $350 million project will include a 302-room hotel and apartments. This week, Beijing developer Fu Wah won the right to build a $200m five-star hotel on the Wynyard Quarter site occupied by Team New Zealand.

This is great stuff. Millions of dollars of margin will flow into Auckland’s construction sector and tens of millions of dollars of margin will flow into building material suppliers from just these two projects.

Foreign investment is awesome because almost always it involves a gain on sale for a local entity to a foreign entity. Then, when they inevitably lose their low interest financing, there’ll be a buying opportunity for a local entity. Nothing to worry about, move out of the auction room please.

QZ Interviews Thomas Piketty

The Atlantic’s digital media project QZ interviews the author of Capital in the Twenty First Century, Thomas Piketty.

There have been some American reviewers who have found your book to be very deterministic in assessing the inevitability of inequality and the challenges of constructing an effective response. Is there an undiscussed assumption about political economy behind the book?


But there is a whole continuum of possible policy response! I don’t recognize myself at all in these reviews… I am not fatalistic at all, I certainly don’t believe that it’s all or nothing response. What’s probably inevitable is [investment returns being] bigger than [economic growth], that’s economics. In terms of politics, everything is possible, nothing is inevitable. [The United States] has a property tax which is a pretty big wealth tax. I would prefer it to be a progressive tax that was proportional and I would prefer it to be on net wealth rather than the gross value of real estate—if you take someone whose house is $500,000 and they have a mortgage liability of $490,000, his net wealth is $10,000, I would propose he would pay no property tax, no wealth tax. Right now he is paying as much property tax as someone with no mortgage who inherited his apartment 20 years ago. My premise is not to tax to destroy the wealth of the wealthy, it’s to increase the wealth of the bottom and the middle class.


I am not terribly impressed by people who know for sure what will happen or not. What would they have said in 1900 or 1910? I’m sure many of them would have said there will never be a federal income tax because of the constitution. For a large country like the US—the US is one quarter of world GDP—the US has ample power to put sanctions on Swiss banks. You know, five years ago, people were saying it’s not possible to break bank secrecy in Switzerland, but you know, you put the right sanctions, you break it.

The bolded sections are mine, but this interview is a very interesting insight into Thomas Piketty’s political thought process.

He sees the world through the oppressor/oppressed axis, as Arnold Kling would have it. As a progressive, nothing in his answers to these questions from QZ strikes him as unreasonable or terrifying. He’s just suggesting policy responses that would help those poor people being oppressed by oligarchs.

Better Explanations Are A Waste Of Time

NZIER economist Shamubeel Eaqub interacts with the public at large over at, discussing house prices in Auckland amongst other things.

The comments devolve into anti-economist derp, without any discussion of the actual topic at hand. The benefits of interaction with the general voting public are significantly over-estimated.

Comment sections on almost every website are terrifying. It’s amazing how illogical most participants are, and of course you have to be on the look out for someone invoking Godwin’s Law.

Social media and commenting on blogs has set back the progress of thought a generation. Too many stupid people are sharing their opinions and influencing others who won’t spend the time reviewing the literature, reading long books on the issue written by experts or even acknowledging that maybe, just maybe, someone has a more informed opinion than they do and should be at least considered before they explode in an outburst of derp.

This isn’t an endorsement of technology driven wonk-led policy formation. It’s more of a call to take a minute to think before participating in a discussion. Most issues are way more complex than they seem – and the intuitive, easy answers run the risk of being completely opposed to reality and how the world actually works.

The Problem With Better Explanations

The problem with “better explanations” is that they’re still tainted by political bias. No matter how hard the author tries, there’ll still be some slant in the line of questioning if it’s an interview or conclusions if it’s a detailed examination of an issue.

The conceit that the world can be made a better place, simply through “better explanations” of complex issues that cause substantial disagreement amongst “experts” who have spent their career on that specialist subject, is obviously stupid.

Reproducing Cliff Notes versions of complex issues for general consumption doesn’t actually increase the number of people who understand an issue or understand the risks of claiming to understand an issue when you actually don’t.

Smart people can be really stupid sometimes. Having a post-graduate education doesn’t always mean having a greater understanding of your subject matter. In fact, in very complex areas, the deification of qualifications over experience when it comes to policymaking in complex systems is extremely risky.

There is an awful lot of pretense at knowledge on the internet. This past fortnight, with the brainfarting I’ve read from all corners of the internet on the issue of high frequency trading, is a prime example.

I’m not sure what the audience for this sort of content is, but there’s something inherently wrong with “better explanations” and “making complex ideas more accessible”.

Occam’s Razor applies, but only up until a point. Many one-liners written by “trained and skilled” journalists miss the wood from the trees.

If there’s one thing that an education in economics has taught me, it’s that the assumptions underlying many models can easily break down if you ask the right questions.

We have to remember that a model of how the world works is still just a model and not a living, breathing, accurate representation of reality.

It can help us understand or explain something, but making the jump to clear policy recommendations or rules to alter market micro structure arrived at organically is dangerous business.

Non-Voters, Inequality, Cognitive Dissonance

I be rockin’ J’s or
I be rockin’ Taylors
I got lots of flavors, my kick game is major
More kicks than the players, call me up I’m scorin’
Hit it like a free throw, tongue out like I’m Jordan
Smiley, Miley, come swing the thing right by me
Gotta a joint if you wanna get stoned, got choppers if they wanna try me
Pro athlete I’m not no wannabe
Waitress asked how many bottles? I said 23

A million people didn’t vote at the last election. There’s nothing wrong with that!

But the cognitive dissonance amongst young people with regard to wealth and income inequality is the reason nothing will ever change.

For all of the emoting about how #inequality is such a bad thing, the main thing on their minds is how to make more money or get into the housing market where they can benefit from asset-price inflation courtesy of supply restrictions and willingness of banks to lend on property.

“Sent from my iPhone” is the impenetrable obstacle for the modern left. Their values are literally 180 degrees away from what many young people care about. There is no chance of breaking through consumerism and brand centric culture. The winner take all entertainment market has seen to that. Many good people on the left don’t even understand the basics of power distribution in society, sociology isn’t the bunk that I used to think it was.

Independent books, records, bands, fashion labels – whatever – they’re basically a rounding error when compared to mass market entertainment. Decentralised accessory marketing in the form of Instagram, Tumblr or Twitter is essentially an unpaid marketing job performed by millions of people around the world.

Behavioural change that rejects these ideas is the way forward for the people who hold these ideas, but they  run into a brick wall when they realise that for what they actually want to happen, they need to stop feeding the beast.

It’s almost like people arrive at political ideas without thinking how their day-to-day behaviour and that of their household is essentially underwriting the things they allegedly dislike. It’s funny to observe from the outside. Winners in winner-take-all markets will only earn higher rewards in the future IMHO.

Freedom Of Speech

Freedom of speech no longer means what most people would think it to mean. It doesn’t exist. If your opinion is not equal to the one the collective hive mind of Twitter believes is the correct one, you’ll face trial by social media. Homogeneity of thought doesn’t help the marketplace of ideas at all. Screaming louder than the other person doesn’t help highlight where their logic is incorrect!

The best argument against democracy can be found in the idea of trial by social media. Stuff comments, Twitter brainfarts, I can’t believe these people have an equal vote. I’m reminded of the Arthur Miller play “The Crucible” when I read about some of the antics of modern day Danforth-like Twitterati (at least as portrayed in the play) . How did so many people become so horrible and mean, when they don’t need to be to make a point? They could try education instead of character assassination?

Cost Efficiency And Warehouse-Scale Computers

“The Datacenter as a Computer” is a very detailed look at treating data centres as warehouse-scale computers. A massive data centre is treated as one big computer. A cool perspective for sure.

If you want a technical overview of how these massive data centres are put together, this is your weekend reading. There are also interesting points made about the economics of warehouse-scale computing.

One of the things that jumps out at me is how cheap IT infrastructure components are in the United States relative to New Zealand. Fixed costs cut both ways I suppose.

Economics, Technology, Wellington, NZ