New York

 

New York is the classic metropolis and when you stand in Times Square you feel that you are in the centre of the world.

Most great cities have a similar aspect – the river upon which it originates provides a bearing and context. I love Liverpool in part because the two Mersey tunnels preserve the unique skyline (and provide a clear view of where I got married).

Liverpool – the city of my adoption and my affection

New York – and when I say New York I obviously mean Manhattan – is special because there is no dominant waterfront. The fact that it’s an island makes it inward looking, and instead of being in a city to judge by itself, you feel that you are at the centre of all cities, and therefore all modern civilization.

My first trip to New York was via bus from Washington DC. We were offloaded in Chinatown and it was freezing cold, so we went straight into the nearest diner for coffee and doughnuts. After dumping our bags in the hostel we raced to the Empire State Building and caught the last elevator ride up. What was damp rain at street level was snowfall at the top. Romantic, and majestic.

I call myself a citizen of the world and New York the capital of the world, Jack Reacher (in Gone Tomorrow, p. 16)

My last trip was to present a paper at the Eastern Economic Association annual conference. The keynote was delivered by Ed Glaeser, the world’s leading economist on cities. He is a sharp, dazzling speaker, and watching him perform with a New York City backdrop was a thrill. Satisfying, and triumphant.

The city as the engine for social change and increasing well-being is one of the truly great triumphs of our amazing ability to form social groups and collectively take advantage of economies of scale (West, 2017, p.186).

What I love most about cities is the juxtaposition of energy and possibility and the amount of personal space they provide. An atomised city provides a certain sanctity. Here’s how to spend time alone in NYC.

Cities are the crucible of civilization, the hubs of innovation, the engines of wealth creation and centres of power, the magnets that attract creative individuals, and the stimulant for ideas, growth, and innovation. (West 2017, p.215).

They incubate immense wealth creation by permitting specialisation and market exchange. Consider David Schmitdtz (2023, p. 101):

In a village, a poor man’s son might grow up to be a doctor, but no one will push the frontier of oral surgery. Why not? Because in villages there aren’t enough customers. Specialized trades emerge only where a customer base is large enough to sustain them. To find specialists, we go to a commercial hub such as London. In London, someone who might otherwise be the village carpenter can specialize in crafting violins. Economies of scale make possible fine-grained specialization, thereby fostering new heights of excellence.

I like cities for the same reason that Frank Renzo does, in Sebastian Faulks’ ‘On Green Dolphin Street’,

I like the fact that it’s impersonal. No one troubles you. That’s what cities are for.

The downside of this, of course, is the potential to slip out of life, unnoticed. Cities come with costs.

They are the prime loci of crime, pollution, poverty, disease, and the consumption of energy and resources. Rapid urbanization and accelerating economic development have generated multiple global challenges ranging from climate change and its environmental impacts to incipient crises in food, energy, and water availability, public health, financial markets, and the global economy (West 2017, p.215).

But surely we can agree that the solutions to these modern problems must include (i) energy efficiency; and (ii) wealth. Thus cities are crucial.

Of course most cities develop along trading routes, and the best cities are historic ports.

“In port cities, arts proliferate and people innovate because ports are hubs or commerce; they are where cultures meet” (David Schmidtz, 2023, p. 101)

Each trip to New York is a combination of revisiting favourite eateries and seeking new ones.

I recommend:

  • Ivan Ramen – (New York Times, one of my favourite episodes of Chef’s Table). I’ve only been the spin off, Slurp Shop, but enjoyed it immensely.
  • Sombrero – ok, this isn’t particularly impressive cuisine but when you come from the UK, and the alternative is a chain such as Tortilla or Chiquitos, it’s nice to sit in a Mexican restaurant, with a wide range of tequilas, and full plates of decent fare. My main motivation for my first visit was the proximity to my hotel, but I went back a second time for familiarity. Not a strong recommend, but a place close to my heart.
  • Xi’an famous noodles – I vouch for the Spicy Cumin Lamb burger, but there’s a lovely depth of heat and lip tingling joy across the menu.

To try:

Recommended bars:

  • The Turnmill – this is the official bar of the Everton FC NYC supporters club. What’s better than a packed pub in a foreign city, on a matchday, covered in TVs, full of fellow fans? Savour the crisp walk of anticipation from the subway ready to sink a cold pint at 10am. Bizarre, but worth doing.
  • The Garret
  • Employees Only

Things to do:

  • Take a ferry from pier 11 to Dumbo, visit the Time Out Market (in particulate take the lift up to the bar for a view across the terrace) and then walk back across the Brooklyn Bridge

I’m not sure when I’ll next go back to NYC. But I miss it.

Poker

I don’t play poker but I have a couple of friends that do. I recently asked them what resources they’d recommend for people wanting to get into it, and thought I’d share their advice.

Scenarios

Course introduction

The scenario method is a useful, creative, and increasingly popular way for managers to reframe their perspective and improve their organisational resilience. The course shows how to recognise the driving forces that will affect the future business context and consider the present-day implications. By building detailed and imaginative narratives, participants will learn how to confront uncertainty and become more confident in conditions of change. The lecture content contains the cutting-edge practice of the scenario method and the blended approach permits flexibility, agility, and collaborative project work.

Pre-course activities

Here is a pre course quiz.

You probably don’t want to take movie recommendations from me, but if you wanted to watch something before the course that will help your understanding of key learning outcomes, I recommend: Children of Men (2006)

 

Course content
Public resources

  • Oxford Scenarios Programme, Webinar, September 2017 – this provides an excellent overview of two fascinating case studies: Rolls Royce and the Royal Society of Chemistry.

For my report on SMRs see here. For my analysis of the situation in Belarus see here.

Before using my flight from Lebanon as an example of the instinctive (but anxiety inducing) desire to assign probabilities to uncertain events, I used the example of Everton’s 2023 relegation battle. To learn about that, see these two articles:

Here is a recording of my webinar from December 2022 on Scenario Planning for the Energy Industry:

In 1997 Wired published an article called “The Long Boom” in which Peter Schwartz and Peter Leyden provided a “history of the future 1980-2020”. You can read it here.

Recommended further reading:


Learning Objectives: Build and use scenarios. Think creatively about alternate futures. Link scenario planning to strategic issues. 

Why is the scenario method so important? Because, as Adam Martin mentioned in his interview with Peter Boettke, in economics the emphasis on choice is because we live in a world of scarcity. The conditions of uncertainty, however, also means that we require imagination. Scarcity and uncertainty are the context. Choice and imagination are the consequence.

Wiggle Room

Group activity: The Balkan Wiggle-Room Index, October 2020

Here is a nice dashboard of different positions:

Learning Objectives: Generate a scorecard assessment of different countries macroeconomic position.

Cutting edge theory: Establish current indicators for an under studied location.

Transition economics

Learning Objectives: Understand the socialist calculation debate. Consider the empirical record of different transition economies.
Lecture handout: Transition Calculation*

The training scene from Rocky IV demonstrates the difference between the USSR (technologically sophisticated but lacking in heart) and the US (backward but free).

https://youtu.be/1oDTNEEu3Rw

  • Audio: Planet Money, “Peanuts and Cracker Jack
    • What are the main factors that determine the earnings of a vendor?
    • Why is it better to have the vendors decide on who does what, rather than senior management?
    • How much entrepreneurial profit comes from working harder than others?

One of my favourite ruminations on the differences in economic systems.

  • Further reading: “Havana or Prague” in Hitchens, Christopher, (2010) Hitch-22: A Memoir, New York: Twelve
Lecture handout: Transition Shock*

There’s a big difference between queuing for basic necessities, and queuing in excitement about the first McDonalds in Moscow:


These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 12 of ‘Economics: A Complete Guide for Business‘.

Foreign Investment

Case: Porter, M., and Ketels, C., “Indonesia: Attracting foreign investment” Harvard Business School case no. 9-708-420, January 11th 2013 (£)

Case preparation: Foreign Investment in Indonesia, May 2016

The 2023 Christmas edition of The Economist included a fascinating account of extended market order, economic development, and the role of capitalism in Indonesia:

Tyler Cowen wants to fund the following question:

  • What should Widodo do? Indonesia is a large, populous middle-income country. It faces no major near-term security threats. It has a small manufacturing base and no major non-commodity export sectors. What is the best non-bureaucratic 10 page economic development briefing document and set of prescriptions that one could write for Indonesia’s president?

Here’s my analysis of Belarus, using many complementary concepts.

Also see my page on Country Competitiveness Dashboard.

Learning Objectives: Consider the role of foreign investment in economic development. Perform a country competitiveness exercise.

Focus on diversity: Asli Demirguc-Kunt is Chief Economist for Europe and Central Asia at the World Bank.

Spotlight on sustainability: This session reveals how policy makers can incorporate social factors in a development plan

Debt crises

Reading: Blustein, P., 2005, “And the Money Kept Rolling In” Public Affairs (pp.39-60)

Discussion question: As of July 1998 should the IMF suspend their program in Argentina, or continue their support?

Textbook Reading: Chapter 8 (Section 8.3; pp. 278-280) and Chapter 10 (Section 10.4; pp. 357-366)

Although I use Chapter 3 as the pre reading for this class, I highly recommend the full book: “And the Money Kept Rolling In (and Out)”. Here’s The Economist’s summary. To better understand the dynamics of a sovereign debt crisis, use this model from The Economist.

Instructor Resource: “Argentina: What Happened Next?” January 2014

Argentina’s default in 1998 reveals some downsides to convertibility, such as the fact that Argentina was being affected by US monetary policy. But convertibility had long been abandoned – after all Argentina had engaged in exchange rate controls to boost exports, were holding Argentinian government bonds as reserves (not just USD), and providing lender of last resort services to domestic banks.

Ultimately I think we can point to several key problems:

  • High growth rates masking the deficit and debt problems – which possibly generated a lot of hubris.
  • The “sudden stop” reversal of capital flows due to Russia’s default in 1998.
  • Fiscal policy being too loose in the 90s (when they should have been running a surplus) but then too tight in 2000/1.
  • Post child syndrome affecting the incentives of both Argentina and the IMF.

What’s happened since?

When Javier Milei became President of Argentina in December 2023 there was lots of discussion about how he would fix monetary issues. Several economists have advocated dollarisation and the abolishment of the central bank. For example:

For my assessment of Milei’s first year in office, see:

I recommend this interview with Milei:

Activity: Complete the Stock Market Crash worksheet
Recommended audio

In this podcast Rasheed Griffith interviews Manuel Hinds, the former Finance Minister of El Salvador, and the man who designed their 2000 dollarization policy.

A 2016 episode of the podcast Planet Money looked at sovereign debt crises, and is well worth a listen. The title was “A Hedge Fund, A Country, And A Big Sailboat“. In 2023 they followed up with “A black market, a currency crisis, and a tango competition in Argentina” which I also recommend.

I also recommend listening to Tyler Cowen’s interview with Pierpaolo Barbieri, the CEO of Uala, where they discuss Argentina’s reforms as well as a broader look at the Latin American start up prospects and culture (start at 22:55).

Recommended reading

For a thorough account of how the IMF conducts their support plans, see:

Lecture handout: Financial Stability*

The key goal for monetary authorities is credibility: [Credibility flashcard]

What constitutes an optimal currency areas? [Optimal Currency Areas flashcard]

Learning Objectives: Understand the causes of a sovereign debt crisis. Understand the role international agencies play in managing a debt crisis.

Focus on diversity: The highly influential paper on sovereign debt tipping points was co authored by Carmen Reinhart, a Cuban-born economist who became Chief Economist of the World Bank in 2020.

Currency crises

Case: “Currency Crises” Harvard Business School case no. 9-799-088

  • Discussion question: Which countries are on the verge of a currency crisis?

Textbook Reading: Chapter 8 (Section 8.3; pp. 278-280) and Chapter 10 (Section 10.4; pp. 357-366)

To get a good understanding of how currency crises occur, and their implications, see Yegor Gaidar’s 1999 article on “Lessons of the Russian Crisis for Transition Economies“.

For an assessment of whether the UK looks as though it is on the verge of a currency crisis, as of October 2022, see:

The key goal for monetary authorities is credibility: [Credibility flashcard]

What constitutes an optimal currency areas? [Optimal Currency Areas flashcard]

Learning Objectives: Understand the causes and triggers of a currency crisis. Consider indicators that predict a currency crisis.

Banking crises

Reading: Diamond, D.W., and Dybvig, P.H., 1983, “Bank Runs, Deposit Insurance, and Liquidity”, Journal of Political Economy, 91(3):401-419
Lecture handout: Banking crises*

Textbook Reading: Chapter 7 (Section 7.3; pp. 216-225)

For an example of a Ponzi scheme that focused on single women, before Charles Ponzi had even been born, listen to:

For an inside look at how contagion effects in the tech industry, as well as the (unexamined) role of deposit insurance, see this account of the SVB run:

It’s remarkable how that period seemed to pass without a major escalation. Compared to the global financial crisis,  the scale of individual bank failures was massive.

Learning Objectives: Understand the origins of money. Understand seminal models of bank runs. 

Cutting edge theory: Making assessments of digital and crypto currencies.

Behavioural economics

Lecture handout: Behavioural economics*

Textbook Reading: Chapter 11

Here is an explanation of the Birthday Paradox (and here is an intuitive proof). Notice that the probability calculation assumes a uniform distribution (i.e. that there’s a 1/365 chance of being born on any given day). In fact, birthdays in July, August and September are more common than other months.

This applet allows you to play multiple games of the Monty Hall problem. An article in the Smithsonian Magazine asks “When Did Girls Start Wearing Pink?

I used a pixelated image for an example of confirmation bias, and so I found it very interesting to see this example of bias contained within AI trained super resolution:

This article contends that the typical story about the McDonald’s lawsuit is wrong:

And I’ve seen some reports that a judge subsequently reduced the award, and they ultimately settled for around $500,000.

Here is more on the McDonald’s case:

Case:Sun: A CEO’s Last Stand”, Business Week, July 26th 2004 (£)
Instructor Resource: A List of Behavioural Anomalies, March 2011
Activity: Complete this Sun Microsystems quiz

The identification of behavioural anomalies has often been used as a justification for government intervention. But as Mike Munger warns,

“Every flaw in consumers is worse in voters”

Therefore we should be skeptical of fixing market failures through democracy.

Recommended books:

  • Poundstone, William (2010) Priceless: The Hidden Psychology Of Value Oneworld
  • Kahneman, Daniel (2011) Thinking, Fast and Slow Farrar Straus and Giroux

Recommended articles:

  • Lambert, Craig “The Marketplace of Perceptions”, Harvard Magazine, March-April 2006 – A summary of chief insights from behavioural economics and neuroeconomics
  • Poundstone, W., (2011) “Prospect Theory” (Chapter 16) and “Ultimatum Game” (chapter 18) from Priceless: The Hidden Psychology of Value, One World – Good introductions to key concepts
  • Tabarrok, A., “A Phool and His Money” Review of PHISHING FOR PHOOLS: The Economics of Manipulation and Deception, by George A. Akerlof and Robert Shiller, Princeton University Press – A defence of standard economic theory against behavioural claims
Learning Objectives: Apply a range of examples of behavioural anomalies to real business situations. Understand behavioural anomalies in light of an ecologically rational framework.