Flying the Friendly Skies (Today and in the Past)

It’s almost summer. About half the US population has at least one dose of a COVID vaccine. For many Americans that haven’t had their employment impacted by the pandemic, their bank accounts are flush with cash and they are ready to do one thing with that cash: travel. See family and friends. See something other than the inside of your own home.

And for many Americans traveling this summer, they will fly. The airlines, no doubt, will appreciate your business. At this time last year, the world had so radically shifted that Zoom’s market cap was bigger than the 7 largest airlines in the world. In May 2020, air passenger traffic in the US was less than 10% of traffic in 2019. Today, we’ve recovered a lot, but we are still only back to about two-thirds of normal levels. And since airplanes are just a marginal cost with wings, flying all their planes at close to full capacity is crucial for airlines to return to profitability. They really need you to fly the friendly skies this summer.

One of the reasons that so many Americans are able to fly in today is because flying is, compared to historical prices, very cheap.

How cheap is flying to today compared to the past? Let’s look at some historical price data for flights.

Continue reading

DarkSide Goes Too Far with Colonial Pipeline Ransomware Attack

The ransomware attack on the Colonial fuel pipeline that supplies the U.S. East Coast is such a rich story it is hard to know what to discuss in a brief blog post. As anyone who gets news feeds knows, the software that took out Colonial is supplied by a (probably Russia-based) criminal enterprise called DarkSide. DarkSide’s business model is called “Ransomware-as-a-Service” (RaaS). They partner with affiliates who use the software to perform the actual attacks. The affiliates get paid something like 10-25% of the ransom money.

An article by Sophos Labs, a company that fights ransomware, gives details on how these attacks work. Typically, an attacker gets initial access to a company’s system by tricking some employee into revealing passwords or other critical information (“phishing”). The attacker then spends two or three months roaming around inside the systems, building up credentialling to get more and more access. They steal (“exfiltrate”) sensitive information like accounting, personnel, and R&D. This table shows some of the “tools” used in these attacks:

When it’s showtime, they encrypt the information on the company computers, which typically makes operations grind to a halt. They then demand ransom (in the form of Bitcoin). If the ransom is paid, they will send the victim a decryption program to allow them to decrypt their files.  If their demands are not met, they will publicly release the stolen, sensitive information. So this extortion is a double threat, to both operations and information exposure.

Here is an example of (I believe) an actual ransom demand note:

(Sorry, the text is hard to read).  DarkSide is professional in their own way. They assure their victims that they really will get their data restored if the ransom is paid: “…We value our reputation. If we do not do our work and liabilities, no one will pay us. This is not in our interests. All our decryption software is perfectly tested and will decrypt your data. We will also provide support in case of problems.”   Think of that, a help desk for your ransomware.

DarkSide likes to align themselves with Robin Hood, kind of: “Take from the rich, and give to the poor  keep it”. They claim to be apolitical, just in it for the money, and to not target nonprofits. They even offer to donate money to charities, so we can all feel good about this. (Charities typically refuse to accept stolen money, though).

In most cases, it is far cheaper for the victim to pay the ransom than to tough it out and try to scramble to restart their systems cold and to risk exposure of sensitive information.  DarkSide, after all, has its reputation to protect, so they scale the ransom demands accordingly, but make sure the victims hurt if they do not pay.

Forbes cybersecurity expert Davey Winder explains that with the Colonial hack, however, Darkside (and the affiliate who did the actual hacking) stirred up something of a hornet’s nest.

If you cut off gasoline supplies to the Washington, D.C. area, you better think through the consequences. I am sure that top national security officials were grilled by top top government officials as to “How could this happen?”, and, “You aren’t going to let them get away with this, are you?”. After some days of public waffling on the issue, it seems Colonial did pay DarkSide some $5 million. But..apparently DarkSide did not get to keep the loot, though it is hard to know what is real and what is public theater.

According to Winder,

DarkSide was effectively forced into retreat by alleged law enforcement or unspecified government disruption of the publicity blog and the ransom negotiation dark web site.

The main Russian-language criminal forum that acted as a recruitment post for potential affiliates banned all ransomware groups from advertising. The cryptocurrency wallets used by DarkSide were, it has also been said, found and funds exfiltrated.

You can follow some of the links in the paragraph above for more of the details here. (Most people may not realize the Bitcoin is not as private as imagined. Every transaction is out in public view; although technically the identities of transactors is cloaked behind anonymous user’s ID numbers, sophisticated data analysis programs can be used to trace transactions pretty reliably).

DarkSide has announced some “nicer” guideline for its further extortions. It seems like the good guys at least partially won that battle, but the war goes on. Winder further comments:

The business model will change, just as it has always evolved, but it won’t go away. Why would it when there are so many big corporate targets out there continuing to make the mistakes that let these attackers onto their networks?

If I were king, this is what I might do: Sentence the CEO of any company which is successfully hacked to six months in prison. Overnight, you would see corporate priorities magically realigned, necessary resources allocated, internal security protocols enforced, and so on. I predict the incidence of such hacking would drop by an order of magnitude within three months of such an “executive order”.

The Revealed Preferences of the National Hockey League

American sports leagues are different from their international counterparts for a variety of reasons, but perhaps the simplest and most important is that they exist as singular entities, otherwise natural cartels whose network effects are explicitly codified as clubs whose barriers to entry ensure a steady stream of profits so long as their sport remains sufficiently popular. Negotiating against player unions of varying levels of organization, they routinely negotiate collective bargaining agreements that neatly establish the division of proceeds between capital and labor.

A common mistake made is questioning the choices made by teams as if they were independent firms competing against each other in a ruthless marketplace for economic survival like Sony, McDonalds, or Manchester United, when in fact their survival is largely pre-ordained by the cartel, their choices salient only to the prestige and short-term windfall profits of annual trophies.

Tom Wilson plays for the Washington Capitals, which happens to be my favorite team in the National Hockey League. He is extremely good at hockey. He scores goals, makes good choices in transition, plays commendable defense, and is extremely adept at physically hurting other players. It is for this last bit that he has received the most attention. His team gains a notable advantage when he is on the ice simply because the other team must allocate a disproportionate amount of their attention to where Wilson is and their own relative vulnerability. The other teams in the league, and many of their players, are increasingly of the publicly held opinion that this advantage is not gained in a manner within the rules of the game. Tom Wilson is a cheating bully who threatens the safety of every other player beyond an acceptable level who simply must be stopped immediately.

To be clear, they do not believe this.

The other teams and their players believe he is dangerous (he is). But they clearly do not think he is too dangerous. Tom Wilson is occasionally suspended or fined, his salary donated to charity. The players’ union (the NHLPA) has worked tirelessly to minimize the punishments he incurs for physically injuring the other members of the same union. The other teams within the league cartel has never once imposed a punishment on his employing team. Based on the relatively modest punishments doled out and the minimal interest the players union has in ensuring their members’ physical safety, it would be foolish to conclude that the NHL views Tom Wilson as a net negative or even symptomatic of a net negative institution within hockey.

The NHL sells hockey. Their cartel members aren’t competing with each other, they are competing as a league against other sources of entertainment, principally other sports. They are competing for attention. Three John Wick movies have left me convinced that violence is an excellent means of eliciting attention. The NHL isn’t punishing Tom Wilson or the Washington Capitals because every time he punches a player prone on the ice in the back of their neck, the possibility that a player may be paralyzed or killed receives twenty-five fold the attention that Connor MacDavid receives for being the most skilled player I’ve ever seen.

To be clear, the NHL doesn’t sell hockey or violence, they sell a bundle of goods that includes athletic skill, regional identity, cultural identity, and violence. Compared to the other major US sports, it’s not unreasonable to consider the violence within hockey to be the bundle component that overlaps the least with other competing products and, as such, contributes the most, at the margin, to their share of the market. Violence may literally be the most profitably thing the NHL sells.

Every time Tom Wilson or another players seriously injures a player, possibly ending a career or reducing the quality of the rest of their life, people will speculate on what sort of event will cause the NHL to change the nature of their sport, but I don’t know why there is any uncertainty.

They’ll change when revenues decline because fans prefer less violence in their sports entertainment consumption or when young athletes with brief peak earning windows express willingness to receive smaller wages in exchange for safer working conditions. Such things have been happening steadily for the last 25 years with all of the major sports, but hockey has put itself in a uniquely bad position to continue transitioning away from selling violence, one what may demand that teams earn smaller profits, and players smaller wages, in the short run in order to enjoy greater success in the long run. I guess it could happen naturally through artful negotiation, earned trust, and thoughtful planning.

You ever know a joke that you know only a small fraction of people will understand, but you tell it anyway?

If you are ever in Birmingham AL…

Alabama is not a top international tourist destination, and I’m not going to argue that it should be. However, if you are ever in Birmingham, AL…

The restaurant scene if amazing. There are really excellent James Beard award winning restaurants. You can find authentic Southern cooking and BBQ. This is one of the most affordable places to make a foodie weekend. BhamNow curates some good articles on local restaurant news.

Our most famous place is the Birmingham Civil Rights Institute. The struggle for civil rights put Birmingham on the map (I don’t mean in a good way).

Something to understand about the city is that it’s small and easy to get around by car. You can do lots of things in one day. You could quickly go from the Civil Rights Institute over to the Art Museum (free admission).

If you like history or big machines then you will appreciate being able to walk through Sloss Furnaces. This is what remains of a real 20th century blast furnace. Unlike the Art Museum, I would say come see it now before it gets demolished or closed.

Also related to the defunct iron and steel industry is the park around the giant Vulcan statue. The park offers a great view of the city. There is a small museum about digging iron ore out of Red Mountain and how people could die in the steel mills. At this point I will mention, for our international audience, that Birmingham was named after the city in England. We aspired to be the “Birmingham of America”.

If you want to hike Red Mountain, a giant network of hiking trails is just a 15-minute drive from the city. The dirt is red. You can tell this was a rich iron seam. Two other good hiking spots are Ruffner Mountain and Moss Rock Preserve. None of the mountains around here are dramatic, but these are nice places to go when the weather is good. You might want to hike so you can justify eating more.

For kids, I recommend Railroad Park. It’s a nice city park where freight trains go by regularly. Birmingham was not built around a river – it was built around a railroad. Close by is the McWane Science Center that has lots of hands-on exhibits for kids. I would not recommend McWane for adults, although their IMAX movie offerings could be of interest and the Pizitz Food Hall across the street is fun.

If you live in the American South and have not yet visited Birmingham for a weekend, then you are missing out! Of course there are many more things I could say about the city, but just what I listed above will keep you busy.

Not all robots have faces

Through Twitter, I have become aware of the SNOO. I’m quoting SNOO literature

Unfortunately, babies don’t sleep well on flat, still beds in totally quiet rooms. In fact, over 50% of

babies still wake up once a night after 6 long months. That’s a problem because poor baby sleep

causes the #1 new parent stress: EXHAUSTION!

SNOO gives a perfect 4th trimester of gentle shushing and rocking…all night long. And, it quickly

responds to your babies’ fussies with stronger sound and jiggly motion…

The bed hears your baby cry and rocks them back to sleep! I can probably count the number of times I have slept through the night in the past 6 years on two hands. If used wisely, this machine sounds like an incredible gift to families. (I can also see problems if used unwisely.) If the baby is crying for longer than 3 minutes, then the machine turns off and the expectation is that a parent needs to step in.

This reminds me of Tyler Cowen’s book Average is Over.

Continue reading

When will housing prices fall?

US housing prices shot up during the pandemic. People spending all day at home wanted bigger houses, and the Fed fueled their demand with low interest rates. But home owners didn’t want to sell- the total number of homes on the market is less than half what it was a year ago. This combination of rising demand & falling supply has sent prices way up & cut the time homes spend on the market.

Contrary to popular belief, its actually rare for economists to make market forecasts and most of us aren’t especially well-equipped to do so- but I’m going to try anyway! I think home prices will almost certainly stop growing so quickly, and may actually fall, within two years.

Why? The end of the pandemic, the rise of new construction, and the end of low interest rates.

Continue reading

Let’s Talk About Inflation

You’ve probably seen the headlines. Corn prices are double what they were a year ago. Lumber prices are triple. You can find all kinds of other scary examples. Is runaway inflation just around the corner? Is it already here?

And yet, measures of prices that consumers pay are much more stable. The most widely tracked measure, the CPI-U, is up 4.2% over the past year. That’s through April — and keep in mind that it’s starting from a low base since March-May 2020 saw falling prices). The Personal Consumption Expenditures index, often preferred by economists, is up just 2.3% (though that’s only through March).

So what gives? Do these consumer measures understate inflation in some way? Or is the increase in commodity prices telling us that consumer prices will increase soon?

Let’s take that second question first. Do higher commodity prices necessarily lead to higher consumer prices? The answer is a clear no. First, we can see that in the data. The producer price index for all commodities (such as corn and lumber) is up 12% over the year (through March, with April data coming out tomorrow). That’s a big increase. But as the chart below suggests, that probably will not lead to 12% increases in consumer prices. It probably won’t even lead to a 5% increase in consumer prices.

Notice two things about this chart. First, commodity prices (the red line) are much more volatile than consumer prices, both on the upside and downside. Second, there really isn’t much of a lag, if any. The direction of change is similar in both indexes, almost to the month. When producer commodity prices go up, consumer prices also go up, that very same month, but not by the same amount. So all of that 12% increase in producer prices is probably already reflected in consumer prices.

Why might this be? Simple supply and demand analysis (hello Econ 101 critics!) can tell us why.

Continue reading

Bracing for the Swarm of “Charismatic” Cicada Bugs

In the Mid-Atlantic region of the U.S., there are two basic types of cicadas. One type appears every year, but in small numbers. One bug up in a tree can fill a whole block with its buzzing sound. But every seventeen years, the periodic cicadas, also (incorrectly) called “17-year locusts”, emerge and drown out every sound but their own. They can make a residential neighborhood sound like an airport. The seventeen year swarm is due to emerge any day now.

Continue reading

You simply must go

There is no shortage of travel media. A million writers, marketers, and eternally-aspirational “influencers” are desperate for your ear, while a litany of airlines, trainlines, and cruiselines are more than happy to take you there. Every year there is a new place that “you simply must go”, it’s “transformative”. Places that remain untouched. Places that are now safe to go. Places that are exciting or sandy or have the best seafood you’ve ever had. All desperate to tell you where to go, where you have to go.

It’s all very stupid. Not because you shouldn’t travel, quite the contrary. No, it’s all stupid because there are more places to go than you’ll have months on this earth. There are so many interesting, wonderful places to go, most of which you’ve never been to and never will. You really don’t need that much advice. You just need to go to as many places as you can, which means economizing on your limited resources, which are invariably time and money.

We’re all getting vaccinated and it’s time to get outta here. So where do I think you should go? I have no idea, but here is how I travel:

  1. I write a list of places I/we want to go. It has to be at least 15-20 deep and I try to update it twice a year.
  2. I try to identify pockets of time when we can travel months in advance, the bigger the window, the better.
  3. When its time to book a trip, I just start googling airfare for places on the list and write down numbers.
  4. Whatever is currently the best price opportunity (not just the cheapest) we go and then cross it off the list when we get back. This is a fuzzy “within-destination” estimation. Nashville is always going to be cheaper than Paris, but if Paris is $400 cheaper than the last few times we looked, then that’s a better choice than Nashville at half the price.

That’s the search protocol. Then there is the single most important rule: Never pay for something that you don’t want. This is essentially an “off-season” rule.

  1. Only go to places with beaches in the winter if you don’t want to actually sit in the sand all week.
  2. Only go to the mountains in the summer, unless you plan on skiing everyday.
  3. Avoid large American cities around major holidays.
  4. Avoid ALL large cities around New Years.
  5. Avoid anywhere hosting an All-Star Game, Super Bowl, etc. Same goes for Kentucky during the major horse races unless you have a ticket.
  6. I’d say avoid Spring Break and Beach Week destinations, but is that seriously something you’d even consider? Please.

Simple rules once you are there.

  1. Find a hotel/airbnb walking distance from public transportation.
  2. Walk everywhere you can.
  3. Walk everywhere you intend to drink alcohol.
  4. Eat most meals standing up, sitting outside, or at the bar.
  5. Don’t spread your food budget evenly. It’s better to have one super expensive meal and 13 meals at trailers, trucks, and kiosks.
  6. Go to a local sporting event
  7. Go to the library
  8. Go to bookstores and junk stores, even antique stores, but never knick knack stores. Intentionally adorable is not the same thing as quirky or idiosyncratic.
  9. Drink what the locals are drinking.
  10. Find something they make there, maybe tour a factory or brewery or lavender field.
  11. If there is a major university, see if they have a History PhD program. If they do, see if there are students who will give you a walking tour for cash. I’ve done this twice and it was awesome. Don’t do this in Rome, the student will be arrested and fined.
  12. Find the art they care about that tourists don’t. Opera, theater, symphony, spoken word. If it sucks leave at intermission.
  13. Most tourist traps are traps but sometimes they are the Blue Lagoon hot springs in Iceland and you should actually go.
  14. Keep walking. Bring good socks and shoes, maybe a couple knee sleeves. Advil. Hydrate.

I don’t know where you should go, just go. You can probably still get a reasonable flight to Toronto or Berlin or Greenville and you should just go.

Covid Pandemic Diary Part 2

I pick up from my previous post in May 2020.

That tweet from early May captures some of the joys and frustrations of working from home with small children. It was hard to get work done. My career suffered. At the same time, in my case, there were happy moments. My kids got more time with me and also with each other. One reason I didn’t go crazy is that we could get outside and the weather was decent throughout “lockdown”.

Something that happened quietly is that two-income parents hired private nannies and never mentioned it on social media. I know there are lots of families who did not do that and had a hellish year trying to parent while working from home. In my case, daycare was back open in June with extra health precautions.

Late Spring was a time when it seemed like the United States might be the worst-performing country. Certain parts of Asia were models of efficiency and cooperation, by comparison.

Late May is when I breathlessly tweeted that I had purchased a box of masks. Finally, the supply caught up with demand. Masks became plentiful and cheap. That helped us find ways to be together without such a high chance of spreading germs.

July 2020 – My public school system (which had gone virtual in the Spring) announced that elementary parents would have a choice of in-person (with masks) or virtual for the Fall. Our schools have been open all year (with masks) and no major outbreaks.

High school and middle school students did more forced remote days than elementary-aged kids. I really appreciated the creativity and flexibility. Remote school is harder on younger kids (and parents of younger kids).

I emailed my city representative to ask for a drive-through testing site in our city. He said he would bring it up at the council meeting that night. Within two weeks, they had done it! This was incredible. I did not expect that because of one request this would suddenly just happen. I suppose there were enough people who wanted it already. It probably helped that city council elections were right around the corner and he could take credit for doing something helpful. Twice in 2020, I used my city hotline to get an appointment for a Covid test.  

In August, my university got ready to bring students back for some in-person classes, while also offering remote options for every class. The campus sprouted one-way walking stickers and masks were required everywhere.

Economists moved conferences online. On September 10, 2020 I stayed up a little late to catch one of my Chinese colleagues presenting at the ESA worldwide virtual conference. My daughter didn’t want to stay in bed, so I let her stare at the Zoom meeting for a bit.

I have said nothing so far about politics in 2020, the year of politics. The televised debate between President Trump and now-President Biden in September of 2020 was a stressful event for me. If we can’t even speak to each other, then no amount of good ideas will help us solve problems. That sad moment in American history made me more determined to maintain this blog as a place to talk about ideas.

The Fall of 2020 was when intellectual soldiers like Alex Tabarrok were alerting us to the fact that we could have vaccines if the government would let us. I was following that news and doing some signal-boosting. Some of my friends on social media announced that they were participating in vaccine trials – thanks!

My university offered rapid tests to employees at the end of the Fall semester. It almost felt like a miracle to be able to just know in 15 minutes if I was carrying Covid or not (yes, I know about the false negatives).

There were moments in peak-wave when local hospitals were full because of Covid. Alabama’s worst month as measured by deaths was January 2021. When Covid was spreading widely in December 2020, I believe a lot of people did not expect that vaccines would be available so soon in the future. On the margin, a few more people might have foregone holiday parties if they had known.

Vaccines became available to medical professionals around January 2021. That was exciting news, since we had all been feeling bad about the doctors and nurses treating infectious Covid patients.

Earlier than I expected, I was able to get the Pfizer vaccine because of my “educator” status in the state of Alabama. It is convenient that I live near UAB hospitals. They had the technology for cold storage and administering the Pfizer vaccine. It was a huge relief to get the vaccine while teaching in-person classes. Since I had been following vaccine news closely, it felt like a huge achievement.

There was a period of time when conversation among my neighbors and colleagues revolved around the vaccine. Water cooler talk was “which one did you get?” or “did you have side effects?”  People told stories about how a friend called to tell them that one place had extra doses at the end of the day. Even when it was technically reserved for old people only, some young people found connections. One of my students told me he wouldn’t be in class because he was going to drive 6 hours to another state to get a vaccine. I don’t want to make the system sound corrupt, because it largely was not. It’s just a fact that some places couldn’t distribute all of their doses to the people who were designated for them. It was better to get the leftovers into arms than waste them.

I treasured that energy, and I miss it. Now, in May 2021, after all the work that went into producing vaccines, Americans are refusing to show up for shots.