Assorted links

by on March 29, 2015 at 12:34 pm in Uncategorized | Permalink

1. Sam Cooke with the Soul Stirrers (music video).

2. How much does time spent with your kids matter, ages 3-11 edition?

3. The myth of Europe’s little ice age.

4. The intangible corporation.  And competition and working conditions, a rebuttal to me from Stumbling and Mumbling.

5. There is no great stagnation.

6. Yuval Levin on what conservatives and libertarians share.

The problem is that Mr. Tsipras has not convinced his creditors that he is serious about reform or that his team is remotely on top of the detail. He needs a game-changer. This should, indeed, be a rupture — but with his left faction, not his creditors.

That is from Hugo Dixon, file it under “Scream it From the Rooftops.”  You will note, by the way, that the far-left faction accounts for 30 to 40 of the 149 coalition seats in the Greek parliament, so such an action would not be easy.  It is still not too late, however, if only…

Paul Krugman has had a few posts on this question, most recently this one, the first one here.  Krugman is right in asserting a major role for air conditioning, but there is a subtle framing point which is sometimes neglected.  The most on-point study is this piece from Jordan Rappaport (pdf):

U.S. residents have been moving en masse to places with nice weather. Well known is the migration towards places with warm winters, which is often attributed to the introduction of air conditioning. But people have also been moving to places with cooler, less-humid summers, which is the opposite of what is expected from the introduction of air conditioning. Nor can the movement to nice weather be primarily explained by shifting industrial composition or by elderly migration. Instead, a large portion of weather-related moves appear to be the result of an increased valuation of nice weather as a consumption amenity, probably due to broad-based rising per capita income.

Overall Rappaport concludes that “nice [warm] weather is a normal good” is the more important driving force behind the movement to the Sun Belt than is air conditioning per se, though of course air conditioning makes nice warm weather all the nicer.  Evidence from compensating differentials also indicates that “…the decreased discomfort from heat and humidity afforded by air-conditioning has not been the primary driver of the move to nice weather.” (p.26)

From 1880 to 1910, Americans overall are moving to places with bad (cold) weather.  In the 1920s they start moving, on net, to places with nicer weather and that trend has not let up.  The arrival of affordable air conditioning in the postwar era bumps this up a bit, but the main trend already was in place.  Furthermore air conditioning has been in the south for quite a while now, but migration in that direction continues.  In his second post on the topic, Krugman refers to this as a “gradual adjustment” to AC, but it seems to better fit the nice weather as a normal good story.  We’ll know more if we see this migration continuing, but I expect it will.  At some point it won’t be plausible to call the ongoing movement a “lagged response” to the introduction of air conditioning, but again it will fit the normal good story pretty smoothly.

Note also that life expectancy is notably higher in warm weather than cold weather.  Deschenes and Moretti conclude (pdf): “…The longevity gains associated with mobility from the Northeast to the Southwest account for 4% to 7% of the total gains in life expectancy experienced by the U.S. population over the past thirty years.”

That again points toward a “normal good” explanation, with air conditioning playing a supporting role.

That all said, if you look at the larger political debate going on here, Krugman is correct in arguing that lower taxes are the not main reason for this migration, even though the median voter in these states probably approves of such relatively low tax rates.  In any case, there is a clearer and better version of the weather hypothesis which can be put forward.

Addendum: David Beckworth adds commentary and some fascinating maps.

Assorted links

by on March 28, 2015 at 1:14 pm in Uncategorized | Permalink

1. Michael Spence on whether equities are overvalued.

2. Does a year of NYU now cost $71,000?

3. 422 free art books from the Met.

4. Richard E. Wagner on Gordon Tullock, and more here.  And are most occupational licensing boards now illegal?

5. What is the Chinese view of TPP?

6. Switzerland and the history of liberty.

7. Leavened bread repurchase agreements.

Hat tip: Daniel Altman.

Education in Mao’s China

by on March 28, 2015 at 3:02 am in Books, Education, History | Permalink

Advancement in China’s school system was highly competitive, and the odds of reaching the top of the educational ladder were very steep.  Of the 32.9 million children who entered primary school in 1965, only 9 percent could expect to enter junior high school.  Only 15 percent of junior high school entrants, in turn, could expect to graduate and enter high school.  Among the highly selected groups that graduated from academic high schools, only 36 percent could expect to enroll in a university.  Of those who entered primary school in 1965, only 1.3 percent could expect to attend an academic high school, and only one-half of 1 percent could expect to attend university.

Of course the Caplanian point is that China managed a lot of post-1979 economic growth with what was fundamentally a not very educated generation.

That excerpt is from Andrew G. Walder’s China Under Mao: A Revolution Derailed, my previous post on this excellent book is here.

Edward Hugh writes:

So, what do you do about the problem of secular stagnation? Again here there is divergence of opinion. Some still seek to treat the phenomenon as if it were a variant of the liquidity trap issue. Most notable here is Paul Krugman, who continues to hope that massive quantitative easing backed by strong fiscal stimulus will push the economy back onto a healthy path. But if the issue is secular stagnation, and the root is population ageing and shrinking, it is hard to see how this can be. The fact that Japan is just about to fall back into deflation 2 years after applying a monumental Quantitative Easing problem seems to endorse the idea that the problem may have no “solution” in the classical sense of the term.

There is this:

Finland has transited from being a country with a significant goods trade surplus, to being one with a structural deficit.

Even the current account balance has now turned negative.

And the country’s Net International Investment Position is also turning negative.

With pictures at the link.

Hugh’s conclusion is this:

At the end of the day, only two things can be said with a fair degree of certainty: short term fiscal austerity won’t make any significant improvement and could help make things worse (this whole discourse is based on a misunderstanding about the problem) while short term stimulus won’t stimulate.

More sensible than most of what you will read on this topic.

Sentences to ponder

by on March 27, 2015 at 1:21 pm in Philosophy | Permalink

From Will Wilkinson:

Reminder: The much greater mystery is why people don’t go on shooting sprees or crash planes on purpose ALL THE TIME.

Assorted links

by on March 27, 2015 at 12:09 pm in Uncategorized | Permalink

1. There is no great stagnation, Jell-O edition.

2. Plans for a new Egyptian capital.

3. Physics in 100 years (pdf, recommended)

4. When is the best night to see a playWhy are the new comedies choosing plot over jokes?

5. The Straussian take on Kimmy Schmidt, Plato, and the cave.  Plus a cult survivor comments on Kimmy.

Here is one excerpt from his very interesting post:

I get and very much like the skeptical, anti-theoretical thrust of Strauss. I like his deep wariness of ideal theorizing, his exhortations to pay attention to the political life we are always already living. He’s right to see reasoning with others about about how to live as an inherently political activity. He’s right to insist on honoring the distinctive excellences of those sensitive to the texture of real political life and expert in its ceaseless negotations. He’s right that social scientific theories about politics are less politically valuable then good political judgment, and that people who think they’re going to govern “scientifically” are dangerously stupid. (Paraphrasing, here.) And, yes, when philosophy is merely a handmaiden to the dogmas of our age, pursued under the “ecumenical supervision” of the universities, it is profoundly compromised. To be a philosopher is not to have a job you clock in and out of. To be a philosopher is simply to be, philosophically, always. Right! But the Socratic life is the one very best life? The naturally right, life? Nope. Nope. I’ve read and read and never quite follow how we end up there. I mean, I think this is a great life, beyond wonderful. But nope.

Anyway, Strausseans are strangely obsessed with this idea that the philosophical life, so construed, is the best human life, full stop, and are therefore obsessed with the tension between the best life, which is in the business of exposing bullshit, and the political life, which is built on it.

I am very happy to order this book in advance, I hope Will lets me know when that is possible.

I was pleased to have been invited to deliver one of the comments at Elizabeth Anderson’s Tanner lectures at Princeton a few weeks ago.  I have put the comment on my home page here.  I introduce the topic in this manner:

I won’t summarize her views, but I will pull out one sentence to indicate her stance: “Here most of us are, toiling under the authority of communist dictators, and we don’t see the reality for what it is.” These communist dictators are, in her account, private business firms. That description may be deliberately hyperbolic, but nonetheless it reflects her attitude that capitalist companies exercise a kind of unaccountable, non-democratic power over the lives of their workers, in a manner which she thinks is deserving of moral outrage.

Here is one bit from my response:

This may sound counterintuitive or even horrible to many people, but the economist will ask whether workers might not enjoy “too much” tolerance and freedom in the workplace, at least relative to feasible alternatives. For every benefit there is a trade-off, and the broader employment offer as a whole might involve too little cash and too much freedom and tolerance. To oversimplify a bit, at the margin an employer can pay workers more either with money or with freedom and tolerance, which we more generally can label as perks. Money is taxed, often at fairly high rates, whereas the workplace perks are not; that’s one reason why a lot of Swedish offices are pretty nice. It’s simple economics to see that, as a result, the job ends up with too many perks and not enough pay, relative to a social optimum. I doubt if our response to this distorting tax wedge, which can be significant, should be to increase the perks of the workers rather than focusing on their pay.


In fact there are some reasons why labor-managed firms may give their workers less personal freedom. The old-style investment banking and legal partnerships expected their owner-members to adhere to some fairly strict social and professional codes, even outside the workplace. More generally, when workers are motivated to monitor each other, through the holding of equity shares, monitoring becomes easier and so corporations engage in more of it. Again, the main issue is not controlling bosses vs. freedom-seeking workers.

Do read the whole thing.

Assorted links

by on March 26, 2015 at 1:33 pm in Uncategorized | Permalink

1. How poor are the poor?

2. Are hospitals the villain?

3. The Prospect survey of favorite thinkers (I am pleased to be on the list).

4. Russian troll markets in everything.

5. It seems lottery winners may be happier after all.

I may not follow any of your suggestions, but just thought I should ask for advice, for my dialogue with Peter next week.  I am the interviewer, he is the interviewee, more or less.  #CowenThiel

Derek Lowe on CRISPR, from the comments

by on March 26, 2015 at 12:21 pm in Science | Permalink

Derek writes:

As a scientist in the biopharma world, I can tell you this this does indeed seem very close to being done in humans, and that there is a very high (but still not perfect) chance of success. CRISPR/Cas9 is the real deal, and there are others competing for its spot as well (such as zinc-finger TALEN technology, whose discoverers have just called for a similar moratorium on human germ-line work). There’s no need to whisper about possible Nobel Prizes in this area – the only difficulty for the Nobel committees will be figuring out how to divide the credit and who exactly to recognize.

The first human applications would surely be the obvious single-mutation genetic diseases. In most cases, this would be done best as germ-line work, followed by in vitro fertilization. The children born after such a process would, of course, pass their altered/repaired DNA to their own offspring, and it’s this possibility that has people worried, in case we get it wrong, or in case we start messing around for more arguable traits. (Fixing these problems after you’ve become a fully sized human is harder, because you have to find a way to treat enough cells in the body to make a lasting difference).

Many of the possibilities that people are most worried about are harder to pin down, though. There’s no single gene for height, for example, or intelligence (or Alzheimer’s or diabetes, for that matter, to stick with the fixing-what’s-broken part of the landscape). Many of the really sticky issues are still a bit downstream, awaiting a better understanding of the human genome, but the big fundamental one is indeed here now: the first deliberate editing of the human genetic inheritance. Tyler’s absolutely right about that one – it could be done right now by anyone with the nerve to do it.

Here is Derek’s website.

One of the most remarkable discoveries of economics is that under the right conditions competitive markets allocate production across firms in just that way that minimizes the total costs of production. (You can find a discussion of this remarkable property in Modern Principles. See also this MRU video.)

One of the necessary conditions for this result is that firms must face the same input and output prices. If one firm is subsidized and another taxed, for example, then resources will be misallocated and total costs will increase. In a pioneering paper, Klenow and Hsieh measure misallocation across firms in China, India and the United States and they find that micro misallocations can have large, macroeconomic effects. In particular, if capital and labor were allocated as well in China and India as they are in the United States then output in those countries would double.

We can get some intuition for the costs of resource misallocation by looking at water in California. As you may have noticed at the grocery store, almonds are in demand right now whether raw or in almond milk. Asian demand for almonds is also up. As a result, in the last 10 years almond production in California has doubled. That’s great, except for the fact that almond production uses a huge amount of water and water in CA is severely mispriced and thus misallocated.

In my previous post, I pointed out that agriculture uses 80% of the water in California but accounts for less than 2% of the economy. So how much water does almond production alone use? More water is used in almond production than is used by all the residents and businesses of San Francisco and Los Angeles combined. Here’s a chart from Mother Jones:

(Aside: Some of this water is naturally recycled so net use is likely somewhat lower but a lot of water in California is now being pumped from the aquifer and that water isn’t being replenished.)

At the same time as farmers are watering their almonds, San Diego is investing in an energy-intensive billion-dollar desalination plant which will produce water at a much higher cost than the price the farmer are paying.  That is a massive and costly misallocation of water.

In short, we are spending thousands of dollars worth of water to grow hundreds of dollars worth of almonds and that is truly nuts.

Hat tip: Walter Olson.