Supply chain failures and the O-Ring

Difficulties in the global supply chain are a recurrent news item since the beginning of fall. The result has been that many pundits or politicians have argued for new policies that spout platitudes such as the need to “rethink trade“. For my part, all I could think of was the O-Ring theory of development developed by Michael Kremer.

The name for that theory is taken from the 1986 Challenger disaster, in which the failure of one small, inexpensive part caused the shuttle to explode upon take-off. Generally, the theory is applied to questions of development and speaks to high complementarities between inputs. Suppose the economy is divided into multiple sectors that exchange intermediaries goods between them (i.e. all firms are dependent on each other). Each of these goods can be labelled as n and producing these goods require skills q. However, each sector buys multiple different n as intermediary goods. For example, this would mean that sector “Vincent” buys goods from sectors “Joy”, “Jeremy” and “James” to produce the “Vincent” goods.

Imagine now that q is the percentage chance that n is produced with sufficient quality so that it bears its full market value (in which case, 1-q is the probability that n is produced so poorly that it gets a zero-price). This means that, to produce its goods, sector “Vincent” needs sectors “Joy”, “Jeremy” and “James” to produce high-quality goods. If one of the intermediary goods “Vincent” buys from the other is inefficient, all of Vincent’s production is worthless. Hence, the analogy to the O-Ring of the Challenger disaster.

So what’s the link with the supply chain failures you ask? Well, its pretty straightforward: the O-Ring theory implies that the impact of a bottleneck has a multiplicative effect on other productions. Now, everyone may be excused for thinking that I simply explained in a complex way something that is simple (i.e. dont half-ass things). However, this way of formulating is very helpful because of q.

If q is the probability of a badly-performed task, what determines q? Some could say its the pandemic, but that would be incorrect. An article in Nature shows that COVID-19 has yielded widely disparate effects on supply chains in different countries. If it was global, it should be roughly similar everywhere. Ergo, some local factors must be in play. Local factors of relevance would be laws on shipping such as the Jones Act in the United States or the public ownership of ports in many western countries. By preventing cabotage and limiting foreign ships, such as in the Jones Act, there is little excess capacity in the American shipping industry available when demand shocks occur. By being more bureaucratically rigid, ports may be unable to adapt to unforeseen events (which is why there are papers in transportation economics that show that privatizing ports tends to increase productivity and reduce shipping costs notably by speeding turnarounds).

Each of these local factors have to do with local policies that reduce q and tend to increase the likelihood of failures (i.e. bottlenecks) which then reverberate on total output (beyond the narrow supply chain sector). From this, I get to a simple: complications that we attribute to the COVID crisis are more likely the results of local factors.

EWED Recommends Gifts 2021

Economists know that holiday gift-giving is inefficient. However, if it’s going to happen anyway then we try to help on the margin with our personal recommendations. First, I will explain the products that writers liked this year, and then I will list the books. I thank the writers for participating in this exercise for a second time (see last year).

Not-Books

Jeremy made strong case for portable batteries that allow you to charge your electronics. As he said, you could be someone’s battery hero! This product would make a nice tidy box to wrap for an adult and it’s under $40. Are men hard to shop for?

For stocking stuffers, Zachary recommends a children’s music CD by Laurie Berkner. Your kid will start asking for something on repeat, so why not make sure it’s something good? Zachary also reminds us to consider nostalgic wrapped snack foods.

Scott gives two solid options that are affordable and small. A keychain light for adults and a spinner toy for kids. You can buy the plastic spinners in bulk and give them out to a whole family or neighborhood of kids at the same time. A more substantial adult gift would be a folding bicycle.

I recommended a pair of running shoes and, even though this might no longer be the “hot” gift, AirPods. Some people still don’t have AirPods, and it makes a tidy package. Or, maybe your teen lost one of their ear pieces over the last year?

James reminds us to order products ahead of time because of looming supply chain delays. He also suggests some internet paid subscriptions. If you don’t want to deliver a physical wrapped package, then buying someone a year-long subscription to one of these Substacks is a great idea.

Note that the tungsten cubes you are seeing in the news are not EWED-endorsed gifts.

Books

Jeremy highlights a brand new economics book, Career and Family, about the changes in women’s labor force participation throughout the 20th century.

Yesterday, I recommended Liberty Power about American abolitionists for adults and The Voyage of the Dawn Treader for school-aged kids (in which, also, a slave trade is abolished).

Scott recommends How the Irish Saved Civilization. For many people, Scott’s book is probably a safer choice than mine because its scope is wider. Liberty Power would make a great gift for someone who reads so much that they have already finished How the Irish Saved Civilization.

James has given us a few suggestions. For fun, Murder-Bears, Moonshine, and Mayhem: Strange Stories from the Bible to Leave You Amused, Bemused, and (Hopefully) Informed. James found 4 Hour Body and 4 Hour Chef to be useful.

As a final note, a lot of my professor friends are getting the Remarkable II as a paper-reading-writing tablet. It seems superior to an iPad or previous tablets. Some functionality requires an extra data plan subscription.

Joy on Books 2021

The non-fiction book for adults I recommend this year is Liberty Power by historian Corey Brooks. If you have ever cared about social justice or affecting change, then wouldn’t you be curious to know how the abolitionists really did it around 1850? How, practically speaking, did a handful of people with moral convictions rid the United States of legal slavery? Abolitionists were striving and scheming to use the newly minted American democratic political system to their advantage even though they were in the minority. One of their big decisions was to start a third political party after they grew frustrated with slavery-complicit Northern Whig politicians. I blogged here about the connection with current politics.

I had a huge gap in my knowledge of American history before reading this book. Nothing that happened between George Washington and the Civil War seemed interesting, until this book created a narrative that I cared enough about to follow. History books might not be the perfect gift for everyone, but I bet no one in your family already has it!

Another book I reviewed earlier is Emily Oster’s The Family Firm, which any parent of young children would probably find helpful if they like research.

When I’m not reading for work, I read to my kids. I strongly recommend, for kids aged 6-12, The Voyage of the Dawn Treader. This ties into Liberty Power, because the main characters abolish the slave trade on one of the islands they sail to!

Before reading Dawn Treader, you should certainly start with the book that sets up the world, The Lion The Witch and the Wardrobe. I have a tip for younger kids: start reading this book right at the point where Lucy walks into the wardrobe for the first time. Younger kids won’t miss the first few pages that explain how the 4 children came to be in the old house.

For 4yo and 5yo kids, I recommend Aesop’s fables. These are short and self-contained. There are many versions of fable books for kids with good illustrations.

In addition of my specific plug for the Narnia series, I encourage parents to read fantasy with children. I see a lot of children’s books that promote science or STEM-readiness. My son enjoys learning about dinosaurs and nature, however I am certain that he’s learned the most from the conversations we have had about adventure stories.

Reading to your kids is costly in terms of time. We have limited time, so let me make an argument for dropping some of the other competing activities. I speak as someone who professionally teaches hundreds of college students to program. Those games that try to trick 5-year-olds into “programming” are less valuable than reading and discussing fantasy stories.

Inspire them with the story of a ship sailing to unknown islands. Talk about how a lovable band of flawed characters can escape from a clever magician. What your child will need to be able to do when they are 20 is read and comprehend a textbook that explains a totally new technology that no one alive today understands. Then they will need to think of creative ways to apply that technology to real world problems.

Give the Gift of Cooking and Murder-Bears

What is the point of reading non-fiction?

Hopefully it is entertaining, and you feel like you are learning something, though usually it is hard to recall much of a book a year after you read it. The best you can usually hope for is that it makes you look at the world differently. But how often does a book actually clearly change what you do?

While there are dozens, perhaps hundreds of books that changed how I think, Tim Ferriss’ books stand out for actually changing how I act. It was after reading The 4 Hour Body that I finally starting going to the gym every week, and it was after reading The 4 Hour Chef that I started to really cook.

Giving anything fitness-related as a gift can be dicey, so of the two I’d recommend The 4 Hour Chef as a gift. Its huge, its pretty, and its not just a book of recipes (though it has lots of them)- it is what made me think I no longer need recipes.

If instead you’d rather forget about big self-improvement books and just go for fun/entertaining, my best recommendation you’ve probably never heard of is Murder-Bears, Moonshine, and Mayhem: Strange Stories from the Bible to Leave You Amused, Bemused, and (Hopefully) Informed.

As a said as part of a review of my favorite non-fiction last year, its funny but not just funny. Its not just trying to highlight the craziest stories, its also full of lessons about how to read potentially confusing passages. “Murder-Bears” is a reference to the end of 2 Kings ch 2:

From there Elisha went up to Bethel. As he was walking along the road, some boys came out of the town and jeered at him. “Get out of here, baldy!” they said. “Get out of here, baldy!” He turned around, looked at them and called down a curse on them in the name of the Lord. Then two bears came out of the woods and mauled forty-two of the boys

What to Read: Claudia Goldin’s Career and Family

A better battery is an excellent gift, but for the gift that never needs recharging, a book is always a great idea. So this week Joy asked us to recommend a book. Again, this would be great as a gift or for yourself!

My recommendation is a very new book: Claudia Goldin’s Career and Family, which just came out this month. Confession: the book is so new, that I’ve only read about half of it so far! But this book is, as they say, self-recommending.

Goldin has spent almost her entire academic career studying the history of women’s participation in the US labor force. I think it’s fair to say that there is no person living today that knows more about the subject, possibly no one ever. This book is her attempt to sum up much of her research into a cohesive narrative about the changes in women’s labor force participation throughout the 20th century.

Her 2006 AEA Ely Lecture, “The Quiet Revolution,” was an earlier attempt to explain these long changes, and it is highly readable still today. Her 2014 AEA Presidential Address, “A Grand Gender Convergence,” is also excellent (watch the video of it too!). But this book brings all the ideas together into a complete narrative, tracking five cohorts of women and their experience in the labor force from 1900 to 2000. The last of these five cohorts matches the title of her book, the generation of women that entered the labor force since 1980 and now have a reasonable chance of achieving both an career and a family, rather than having to chose between the two.

This does not mean, and certainly Goldin would not say, that the journey is over and all is well for women today. Goldin focuses primarily on college graduates in this story, since they are the group most well-positioned to achieve the goal of having a career and a family. Obviously there are still challenges, and Goldin spends some time discussing one that the COVID pandemic revealed but was always there: the challenge of finding affordable childcare.

If you want a taste of the book, you can read or watch her 2020 Feldstein Lecture, “Journey Across a Century of Women.” But really the story is so complex that it does take a book to explain it all.

Continue reading

Book Recommendation: “How the Irish Saved Civilization”

It is hard to wrap our minds around how rapid and thorough was the loss of literate culture throughout Europe after the collapse of the Roman political and economic order. As of 400 A.D, the Pax Romana held throughout the whole Mediterranean world, and up through what is now France (“Gaul”) and England. The immense depth and breadth of classical knowledge comes through, for instance, in the works of Augustine. Writing just as the barbarian wave was starting to overrun the empire, Augustine casually alludes to a wide range of Greek and Roman philosophers, historical events, skilled medical procedures and a long list of metals and precious stones, knowing that his contemporary readers would be familiar with all these things.

All this changed after 406. On the last day of that year, the Rhine River, which formed the border between the Roman empire and the Germanic tribes to the north and east, froze solid.  A vast horde of barbarians began to surge across the border, overwhelming the thin force of Roman frontier guards. Every German man was a warrior, and their armed women followed closely behind. The invaders quickly spread south through Gaul and into Italy, Spain, and North Africa, looting and doing the generally disruptive sorts of things that invading barbarians do. Rome itself was sacked in 410.

In an orderly, diverse pre-industrial economy, there are enough slaves and peasants toiling away at the bottom of the pyramid to support a reasonable number of merchants, priests and aristocrats who can carry on higher culture. But with societal collapse in the fifth century, and new class of overlords who knew and cared little about literacy, centuries of Greek and Roman learning were nearly lost to most of Europe. In this bare survival situation, nobody had the leisure or drive to learn to read and appreciate literature, and to do the physical copy of manually copying  manuscripts which was necessary before the printing press.

The big, bright, exception, which is the subject of Thomas Cahill’s book, was the newly minted set of monasteries in Ireland. The Irish had been thoroughly pagan (think human sacrifice) and thoroughly illiterate until Patrick brought Christianity to them in the middle of the fifth century. Cahill describes the Irish mindset in detail, and how Patrick appealed to its best elements.

(Patrick’s story is very dramatic and monumental in its impact, but I won’t try to summarize it here in the interests of space.  Just one quote:  “The greatness of Patrick is beyond dispute: the first human being in the history of the world to speak out unequivocally against slavery. Nor will any voice as strong as his be heard again until the 17th century”).

The few monasteries on the European continent saw little value in the ancient non-Christian Greek and Roman writers, so those works were not reproduced. The Irish had a more eclectic attitude, and happily copied whatever texts came their way, including “pagan” authors like Plato.

The final step in this cultural saga is that starting around 600 many of these Irish monks, along with their precious manuscripts, made their way back to Gaul and northern Italy. They established their monasteries, which served as outposts of literacy, and they started to educate the local kings and  warlords and their children. And that is how “the Irish saved civilization”.

Anyone with an inquiring mind should enjoy this book. It manages to be deeply erudite and deeply engaging, giving depth portraits of representative personages in the late Roman empire, the Irish before and after Patrick, and key leaders in the succeeding centuries. One thing the author points out is that life in the later Roman empire was not typically much fun unless you were in the oppressive, narcissistic upper upper crust. Although we may rightfully mourn the loss of classical learning, for the vast majority of its inhabitants, the demise of the empire and its tax collectors was maybe not such a tragedy.

Cahill further makes the case that the fusion of Patrick’s Christianity with Irish sensibilities gave rise to a richer, healthier spirituality than could be found in Roman-type Catholicism:

Patrick could put himself – imaginatively –  in the position of the Irish. To him, no less than to them, the world is full of magic. One can invoke the elements – the lights of Heaven, the waves of the sea, the birds and the animals – and these will come to one’s aid, as in the incantation of [Patrick’s famous prayer] the “Breastplate”. The difference between Patrick’s magic and the magic of the druids is that in Patrick’s world all beings and events come from the hand of a good God, who loves human beings and wishes them success. And though that success is of an ultimate kind – and, therefore does not preclude suffering – all nature, indeed the whole of the created universe, conspires to mankind‘s good, teaching, succoring, and saving.

Patrick… could assure you that all suffering, however dull and desperate, would come to its conclusion and would show itself to have been worthwhile.

… Christ has trodden all pathways before us, and at every crossroads and by every tree the Word of God speaks out. We have only to be quiet and listen.

…This sense of the world as holy, as a Book of God – as a healing mystery, fraught with divine messages – could never have risen out of Greco- Roman civilization, threaded with the profound pessimism of the ancients and their Platonic suspicion of the body as unholy and the world as devoid of meaning.

Go watch Dune

That’s the column this week. No ad hoc economic theory, no deep insight into the profession. No silly sports talk. Just a recommendation to watch a beautiful looking and sounding movie. Allow yourself to get invested in the world they are building. Reward their willingness to be sufficiently faithful to a masterpiece while also having the maturity to know that much of the intrigue, as designed in the book, wouldn’t translate to the screen.

They’re building a world where a single commodity is so valuable, and it’s supply so inelastic, that it serves as the fulcrum for an entire galaxy. Worries about peak oil feel like fretting about a possible shortage of student selfies when compared to the economics of spice. The political economy is coming, don’t you worry. For the moment though, just take in a cool movie.

Go watch Dune.

Joy Recommends Running Products

Late October is a nice time to get outside in Alabama. I have answered the primal call to suburban moms and signed up for a 5K running race at the end of the month. To make running practice safe and fun, I dropped a few hundred dollars this month on products.

Now that I’m old, my first concern is not injuring myself. Having good new shoes that absorbs some of the impact from running is important. I went to a local running store and ended up getting Asics Gel Nimbus.

I really like them. Amazon link. It seems like the price ($150) in the boutique store and the Asics website and Amazon is all the same.

Assuming you are not considering getting these shoes for yourself, do not buy a woman running shoes for Christmas, obviously, unless you’ve discussed it with her. You could buy a family member the other big purchase I made for running: AirPods.

Many people already have AirPods but I’ll review them anyway. I bet there are at least 10 people out there just like me who view them as newfangled and unnecessary.

My primary reason for getting them was so that I can listen to music while I run and not have the annoying headphones cord in my face. They are great for running. By the way, I got the cheapest version since I only use them occasionally.

AirPods are more than wireless headphones.  They are smart. They allow you to take hands free phone calls when your phone is two rooms away (which can be a reason to keep them in even when you are not listening to music). They respond to voice commands and prompt you on what to say. Maybe I shouldn’t be, but I was surprised by how easy it was to start using them.

I use a free application called RunKeeper. Without any fiddling from me, the AirPods give me useful feedback on my run from RunKeeper. I don’t have to stop the music or pull out my phone to get this feedback. It just knows, and the AI is correct about what I want to hear when.

While I was at the Apple store getting AirPods, I considered getting an Apple Watch. It turns out that the Apple Watch does not have a long range from the phone. So, I cannot run a mile away from my phone and still get all services on the Watch. Since I’m not a serious runner, I did not want to spend hundreds of dollars on a new watch plus pay for a separate cellular plan for the device. I run while holding my small-ish iPhone.

Apple Watch records your heart beat. I can be a privacy grump, even though I use a lot of tech. Apple Corp. can C it’s way right out of my vital signs. I don’t even want data on my heart rate and sleep patterns, for myself. I’m already mentally overloaded, so I don’t want more data to think about.

Here’s a song I like to put at the beginning of my running song playlist: https://www.youtube.com/watch?v=FxmkYugYu7Q

Lastly, for your holiday shopping list, I will make one plug for the shirts in our Blog Store. These make a fun gift for math majors or Econ Ph.D. folk.

Gen Z on TikTok

I did an informal survey among undergraduate students. This is not a representative sample of American youth. Before answering the question “How is TikTok affecting your peers?” they had just heard about the TikTok recommendation algorithm. Answers might have been slightly different if they had not been primed to think about the app from a business perspective.

Most of the answers were negative, both among students who use TikTok themselves and especially from students who are staying off of the app. Some answers presented both a positive and a negative reply.

Here is one of the more positive replies:

“TikTok is affecting my peers in a few different ways. On the positive side, people can learn very useful things on the app. On the negative side, it can be very time consuming. I have heard from many friends how they have wasted a lot of their time on TikTok when they could have been doing something more productive.”

Some students emphasized the social aspect:

“TikTok is one of the biggest social platforms amongst my friends and I. When we hangout, we are creating our own TikToks, but when we are apart we are able to share videos with each other. TikTok for me is a big rabbit hole that I find myself spending way too much time on.”

Also, they believe that this platform, more so than the original social networks, allow a new user to break out. “The idea that a normal, average person can post on TikTok and have a likelihood of it becoming viral is what has launched the platform.” I can see how a 20-year-old today would think Twitter is less fun because it is hard for a newcomer to get noticed.

Some students mentioned the addictive aspect of TikTok:

“I see a lot of my peers stay on the app for long periods of time. I can’t count the amount of times people say something about how they didn’t realize they were scrolling for an hour before they looked at the clock.”

“I have three friends back home who are being affected by Tik Tok in the worse way possible. All they do is watch Tik Toks all day and has even affected their sleep schedule cause they can’t put their phone down. It’s hard to see my friends sucked in the rabbit hole.”

“Personally, I have had to set screen time limits for TikTok through my phone’s settings because I can easily spend extended periods of time of the app without even realizing it; and even then, sometimes, I even override the limits I have set in place because I want to see even more content.”

The funniest line award goes to: “I personally hate TikTok and think it is rat poison.”

I wonder how the responses might have differed if I had asked a similar question to college students about TV and video games 20 years ago.

I use Twitter frequently. Maybe I spend more time on it than I should, and I don’t support as many paid media outlets as I might otherwise. Thus, the non-Twitter world is less rich for today’s college students.

For balance, here’s how Big Tech helped me in the past week. I needed to help my son build a model rocket from a kit. Some stranger kind young man had made an excellent YouTube video detailing how to make this rocket. This video really helped me, and the man should get the satisfaction of one more watch on his views count.

Stocking Stuffers: First Mover Advantage & Nested Utility Functions

I have two gift recommendations for you this year. Typically, I purchase a lot of very practical items. My wife makes fun of me for requesting tools and hardware as gifts – but hopefully the following list will provide some crossover between practicality and good gift ideas.

Depending on your family’s traditions both of these gifts are stocking stuffers.

1) Laurie Berkner CDs

Having children means that you hear opinions and preferences from more people. And children are sure to share those opinions. When you’re in the car, I recommend that you strike first with 2 different CDs (or mp3 albums) by Laurie Berkner. Laurie Berkner is a singer songwriter who creates outright good children’s music. She has variety and produces earworms that are not too bad to have around. The Ultimate Laurie Berkner Band Collection is a crowd-pleaser. If you’ve got a more intense personality and your children can handle it, then I strongly recommend The Dance Remixes. It rocks.

The idea here is game theoretical. Your children are going to find something that they like. A lot. Odds are good that waiting for them to encounter something won’t bode well for your happiness once they find it. Take the first-mover advantage and introduce them to Laurie Berkner. They’ll get hooked and you’ll be stuck listening to a lot of children’s music. But at least it will be good/tolerable that you also enjoy… Unlike some other alternatives

2) Highly Specific Treats

We live in a rich society. Most of us walk the store aisles implicitly saying ‘no’ to the vast majority of goods. Even the ones that we like. Take the opportunity that the holiday season provides and say “yes” to getting some special treats. These treats fall into two categories: 1) “Nostalgic Treats” & 2) “I’ve never tried it”.

1) Sharable Nostalgic Treats

When I was about 4-5 years old, I remember getting great big bags of pretzels that were covered in a mustard powder (“mustard pretzels”). As it turns out, they are only a regionally available product and I never saw them again after my family moved from Tennessee. But 33 year old me thought “Surely, the internet has them”. And indeed they do! I made this purchase at a per-unit price that I would not typically indulge. However, I got to share the story and the experience with my family. It pleased me to share a deep memory with them and it pleased them to get a ‘special’ snack. For me, it was mustard pretzels. For my wife, it was a bulk pack of Heath and Skor bars.

2) I’ve never tried it

Separately, while watching Captain America and the Winter Soldier, it occurred to me that I had never knowingly had Turkish Delights. So, I found a variety pack of fancy ones. First, they’re delicious and you feel fancy while eating them. Second, this is 21st century America. What’s the point in saying that we’re rich if we’re not willing to act like it a little? Maybe it’s not Turkish Delights for you. Maybe it’s Pilipino rice candies or Mexican Tamarind candies. Make sure that you get a couple of new treats and share them with others. The purchases are much more worth the price when you consider the nested utility function among your loved ones.