Today is Ziva’s birthday. Happy Birthday, Ziva! She’s ten years old today.

She is somewhat camera-shy and getting a good picture of her is difficult so I seized this opportunity to post a picture of her. She’s staring at something in the doorway. What is it? We don’t know.

Ziva is a lovely dog, sweet-tempered and loving and an extremely good companion. She is so well-behaved by nature you hardly notice how hard it is to get her to do what you want her to do rather than what she wants to do.

At Notes On Liberty Vincent Gelloso presents data suggesting that, due to inadequacies of the pre-World War II data, the widely accepted “U”-shaped model of income inequality in the United States is wrong:

In our paper, we highlight how the state-level data is conceptually superior to the federal-level data. The problem that we face is that we cannot convert those measures into adjustments for the national level of inequality. All that our data do is suggest which way the bias cuts. While we find this unfortunate, we highlight that this would unavoidably alter the left side of the curve in the first graph of this blog post. The initial level of inequality would be less than it is now. Thus, combining this with the criticisms made for the post-1960 era, we may be in presence of a U-curve that looks more like a shallow tea saucer than the pronounced U-curve generally highlighted. The U-curve form is not invalidated (i.e. is it a quadratic-looking function of time or not), but the shape of the curve’s tails is dramatically changed.

I find that even more damning of the present day than the conventional model. For one thing it doesn’t suggest a return to the status quo ante but a relatively new phenomenon.

I’m less enthusiastic about stock buybacks than the editors of the Wall Street Journal are:

Stock buybacks are the latest bipartisan piñata, whacked by politicians on the left and right who misunderstand capital markets. A refresher course is in order lest Congress stampede and undermine the investment needed for growth.

Repurchasing shares is simply one way a company can return cash to owners if it lacks better ideas for investment. Tax reform increased corporate cash flow by cutting tax rates and letting companies repatriate their cash held overseas by paying a one-time tax rate of 15.5%.

Using Federal Reserve data, Dan Clifton of Strategas Research Partners estimates that companies repatriated $730 billion in 2018. CEOs have deployed that for multiple purposes including new investment, debt reduction, pension contributions, employee bonuses, wage and dividend increases and stock repurchases.

This is a policy success. Mr. Clifton calculates that capital expenditures by S&P 500 companies grew about $75 billion in 2018, the fourth-biggest annual gain since 1991. Average wages are growing by at least 3.4% year over year, the fastest rate in a decade.

Maybe it’s just me but I think that stock buybacks are in a different category than other forms of business capital investment. Other forms are ways of making the company more valuable. Stock buybacks do nothing to make the company more valuable. Their intent is, presumably, to make the stock more valuable per remaining share.

If managers can think of nothing to make their companies more valuable, perhaps those companies need better management. It isn’t said enough but among our gravest problems today is bad corporate management. That takes all sorts of forms including being stupid, greedy, lazy, unimaginative, or just lacking in guts. Are all corporate managers bad? No. But too many are. Reforms in corporate governance are long overdue. Our present laws date to the days before so much stock was held by mutual funds, pension funds, and top management.

I think that the prescription of the editors of the Washington Post is inadequate:

A SURGE IN illegal border crossings, especially by Central American parents and children seeking asylum in the United States, has been seized on by administration officials as justification for President Trump’s emergency declaration and border wall. The spike in numbers is a genuine humanitarian crisis but not one that would best be addressed by adding more border barriers. Mitigating the migrant flow requires, first and foremost, a renewed focus on improving the conditions driving migrants to leave their home countries. Unfortunately, the administration is doing the opposite.

While I agree that President Trump’s border wall doesn’t address root causes, I don’t see any solutions coming from the editors of the WaPo, either. For one thing they don’t understand what the real problems in Mexico and Central are. They’re taking the claims of the migrants at face value but those claiming asylum are just telling border officials what they must to claim refugee status. In fact they’re economic migrants, something that is obvious from what they do once granted asylum. That tells us what needs to done which is three-fold.

First, we need to tighten workplace enforcement. Our eVerify system needs to be expanded and tightened and the penalties for not conforming with them need to be increased so that no immigrant can work in the U. S. without express permission. Second, reduce aid to the governments of those countries. Those governments are corrupt, criminal, protectionist, and nativist almost beyond imagining. Granting them financial aid just exacerbates the problem.

The people of the countries of Central America need and deserve our aid; their governments do not. That presents a challenge for federal aid. Governments prefer to deal with governments.

The third thing we need to do is promulgate the message that we will enforce our laws. That will be the greatest challenge of all.

Here’s something I didn’t know. The United States’s strongest export is $100 bills. Not credit. Actual, physical hundred dollar bills. From Binyamin Appelbaum at the New York Times:

America’s most profitable export product is not oil or medicine or Hollywood movies or Boeing airplanes. It is a small green piece of paper with Benjamin Franklin on the front.

Last year, the United States exported $65.3 billion of its currency — mostly $100 bills.

The world needs an international currency, and the dollar is the obvious candidate because the United States, for all its economic troubles, remains the hub of the global economy. United States government debt is the world’s most popular investment, and the bonds can be purchased only with dollars. Oil is the world’s dominant trade good, and it also is priced and sold in dollars. Much like Facebook, everybody uses dollars because everybody uses dollars.

The popularity of paper dollars, however, requires a little more explanation. Most modern money is notional: Wealth is stored on computers; payments are made electronically.

I cannot remember the last time I owned or even held a $100 bill.

Yet foreign demand for the bills known as Benjamins has surged even as the domestic use of dollars has declined. The number of $100 bills in circulation roughly doubled between 2008 and 2017, and experts estimate a vast majority are in foreign hands.

I’m not sure what this means but I suspect it is telling us that the level of criminality and corruption has reached unimaginable levels and in a wide array of troubled places in the world including Mexico, Venezuela, Brazil, Congo, Iran, Iraq, Syria, Afghanistan, North Korea, and China people, especially public officials, are putting their loot into the form of $100 bills all the better to spirit it away undetected. They are the currency of criminality.

I don’t have a great deal more to add to this story other than to observe that the demand of $100 bills will make counterfeiting them even more attractive. The more of them are in circulation, the more space there is for phonies.

Here’s a product category of which I was unaware and which I find pretty interesting—industrial wearables. From New Equipment Digest:

The age of the connected industrial worker has been a long time coming. It began in the 1990s, the availability of affordable mobile technology that wirelessly linked people across the plant around the world. Gradually, over the last two decades, the Industrial Internet of Things has allowed greater numbers of machines to communicate with each other almost instantaneously. The logical next step for manufacturers is to merge humans and machines.

The article goes on to describe a number of new products in the category, mostly headsets. Safety strikes me as being a major concern.

I found this story from NPR heartening. The people of a village in the west of England stepped in to buy the town’s pub to prevent it from being sold to developers:

The Packhorse pub sits in the tiny village of South Stoke in the west of England amid rolling hills dotted with sheep. For more than a century and a half, it played a crucial role in the village and marked milestones in the lives of local families.

Gerard Coles, who was born half a mile from the pub and now brews cider nearby, started coming to the Packhorse when he was 15 and underage, sometimes with his school teacher for lunch.

“The chap who came to put in our new gas main said he was conceived in the back garden,” recalled Trevor John, a retired accountant, who has lived here for almost 30 years.

But in 2012, Punch Taverns, a corporation that owns about 1,300 pubs across the United Kingdom, sold the Packhorse so it could be converted to housing and office space.

It’s a familiar story. Pubs close all the time in the United Kingdom, victims of changing lifestyles and the rising value of real estate. In fact, locals say the Packhorse would be worth twice as much as housing and office space as it was operating as a pub.

But villagers feared without the Packhorse, there would be no place in town for people to gather. So in 2012, John, Coles and others in the village created a grass-roots campaign called “Save the Packhorse.” They set out to preserve the pub and eventually raised funds to buy it.

and they did. The bought the pub and the property and are rehabbing it to keep it going as a pub.

I think I’ve been in the Packhorse. If it’s where I think it is it’s just south of Bath.

I would genuinely like to believe the findings reported on in this article at MIT News:

As long as democracy has existed, there have been democracy skeptics — from Plato warning of mass rule to contemporary critics claiming authoritarian regimes can fast-track economic programs.

But a new study co-authored by an MIT economist shows that when it comes to growth, democracy significantly increases development. Indeed, countries switching to democratic rule experience a 20 percent increase in GDP over a 25-year period, compared to what would have happened had they remained authoritarian states, the researchers report.

“I don’t find it surprising that it should be a big effect, because this is a big event, and nondemocracies, dictatorships, are messed up in many dimensions,” says Daron Acemoglu, an MIT economist and co-author of the new paper about the study.

but it filled me with so many questions that I turned to the paper itself for answers. Among the questions I had were

• Are their findings circular? In other words do the metrics being used to determine whether a country is democratic precondition the results? After reading the paper and doing a little research I was satisfied that its findings were not circular.
• What specific mechanisms produce the difference? Those are summarized in this passage from the paper’s conclusion:
  

  The channels via which democracy raises growth include greater economic reforms, greater investment in primary schooling and better health, and may also include greater investment, greater taxation and public good provision, and lower social unrest. In contrast to the equally popular claims that democracy is bad for growth at early stages of economic development, we find no heterogeneity by level of income. There is some heterogeneity depending on the level of human capital, but these effects are not large enough to lead to negative effects of democracy for low human capital countries.

• What is the direction of causality? On his subject I remain unsure.
• Are the findings robust? By this I mean do small improvements in democratization result in economic improvements and are there decreasing returns to scale. The paper does not really address this question.
• Does Freedom House’s index of freedom serve as a reasonable first order approximation of per capita income? The answer to that is clearly “yes”.

One of the things I would point out is this graph:

Note the timeframe of the graph. If we truly desire a return to robust economic growth we might consider the sources of that decline.

Another observation I would make is that all of the countries that are most democratic are also quite small and the very most democratic also have very high levels of social cohesion, levels we cannot hope to match here.

I see that the editors of the Washington Post have fallen for Mark Zuckerberg’s song and dance on reforming Facebook hook, line, and sinker:

MARK ZUCKERBERG and his company have been plagued over the past few years by a series of scandals prompting critics to urge users to “delete Facebook.” Now, Facebook has an answer: It will delete itself.

The social network is not going anywhere, of course. But it will become, if a 3,200-word announcement Mr. Zuckerberg released Wednesday is to be believed, much less of one. The site will allegedly transform from an open conversations platform to a “privacy-focused communications platform” revolving around end-to-end encryption and commercial transactions. Facebook’s focus since its founding has been to connect the world. This week, the company decided it would rather connect each of us to a small group of our friends. The change matters.

But the problem with Facebook doesn’t derive from its use as a platform for disseminating fake news. It stems from Facebook’s fundamental business model. It makes money by selling intel about you to others. As long as it does that violating your privacy will be how it stays in business.