by Tyler Cowen
on January 24, 2012 at 12:22 pm
1. Dan Drezner has a very good post on the future of the United States.
2. Is cybersecurity a public good?
3. Tom Vanderbilt on driverless cars, and the new world of private aerial drones.
4. The 57-page Summers memo on fiscal stimulus (pdf, btw I have not read it yet). Kevin Drum adds comment.
5. Is there a connection between social values and economic stagnation?
the article, while well written, boils down to “make things easier for single moms”. I can’t help but think the opposite. It pains me to say but I think it’s now been proven than if you incentivize something you get more of it.
What we need is a policy that makes single motherhood utterly unbearable. Shame, total lack of support etc. This is the only way we can reduce stories like the one described.
The out-of-wedlock birth in 1920 was sub 2%. Bring back words like “bastard”. It will be awful in the short term (truly awful, i don’t look forwards to this at all) but it *will* create a paradigm shift
IMHO farmer’s comment is reminiscent of misguided arguments based on the Peltzman effect. True, helmets and seat-belts incentivize people to drive riskier but we are all still better off with them than without them.
There sure is risk compensation but risk homeostasis is an iffy assumption.
For. The. Win. Very good reply, Rahul.
Why do you say we’re better off with them than without them. One recent study concluded that airbags kill more people than they save. Seat belts are a closer question, and maybe they do some good. But pedestrians’ lives matter as much as drivers’, at least to me. I believe the data on helmets show that they save lives, but only by making motorcycle riding unpleasant, so people do less of it.
Motorcycle helmets kill kidney failure patients.
Assuming they were donors. Also no they don’t since kidney injury or disease do.
Very early in airbag development, they were killing quite a few people. Just how recent was this recent study?
It’s not that airbags kill more people than they save — that’s a mangling of the National Academy of Science report that suggested that CAFE has killed more people than airbags have saved.
No blood for oil — repeal CAFE!
Is there any good evidence of a Peltzman effect in the area of automobile transportation? Are people driving faster and more recklessly than before in response to the greater protection cars offer in the event of a crash? Although it is a great hypothesis, I am unpersuaded that it is true. Likewise, I am unpersuaded that punishing women for having children at out of wedlock at young ages will make any noticeable difference. This is largely a values issue that cannot be altered through societal punishment.
People are certainly driving faster, but there are loads of confounds.
You don’t think the death penalty for out-of-wedlock childbirth would have a noticeable effect?
No, that would work. Looking down on people who are, for the most part, already at the bottom of society will not work, however.
You or I looking down on them wouldn’t make any difference. Their peers and other people they know looking down on them, on the other hand, would make a big difference.
While I’m sure that some births to unmarried, teenage moms were concealed, I’m even more sure that social pressure and parental guidance prevented a much larger number of such births in prior centuries. Saying that behavior cannot be altered is just wrong – we just don’t have the nerve to do it anymore. We used to teach values in public schools. Now such values are labeled “religious” and discarded.
We don’t have to punish it. We just have to remove any rewards. The subcultures most vulnerable to it must provide the social pressure.
It is punished, severely. The rewards are meager. However, some find that the punishment isn’t appreciably different than the anguish they already experience, so the meager rewards are actually an improvement on life. We can squabble all we want about the punishment vs reward, but the outcome we want is only controlled by removing the anguish that leads to profit by childbirth.
I hope we’re driving faster. I call that increased quality of life.
The Peltzman effect predicts a major increase in accident rates as seatbelt usage goes up.
But since the Peltzman article seat belt use has gone from a few percentage points to nearly 90% while the accident rate has fallen almost every year.
Where are the accidents that Peltzman predicts???
Agree with farmer: Discussions of the Pelzman effect on car safety are not relevant. The statistics are completely different. There was no massive growth in accidents correlated with helmets and seat belts. There has been massive growth in the number of single mothers.
Right of way for pedestrians in crosswalks leads to higher pedestrian deaths.
Somebody once joked we should replace automobile airbags with metal spikes; nobody would ever tailgate or speed again. Can’t remember who first said it.
We probably need more positive incentives to be married with children, but I don’t believe we need additional negative incentives to being a single mother.
The single mothers and children have plenty of incentive to be married, it’s the fathers that don’t want to be fathers where the current system breaks down. And I think there is plenty of incentive at the middle class level and above to for fathers to, at a minimum, provide financial support. Where the current system is dysfunctional is at the poor end. The only approach the state does is apply pressure for financial support, since the poor have no money, there isn’t any pressure on them to provide any kind of support. Perhaps as a society we should force father’s to spend a certain amount of time with their children. It sounds totalitarian, but is it any worse than forcing father’s to spend money on their children?
The incentives to be married have weakened over time. Conservatives often blame this on the decline of religious and traditional patriarchal values in society, as well as government subsidy for unmarried parents. Female participation in the work force has certainly altered the marriage calculus for half the population. I wonder where the true causes lie?
The cause of the decline of marriage is more social than governmental. This suggests that policy may not be the best tool for reversing it.
The biggest disincentives to marriage are alimony, child support, and community property. Our divorce laws are based on social structures that are centuries old and gone. Alimony needs to be eliminated, community property needs to be replaced with equitable division, and child support will be more fair when custody decisions are more fair.
“child support will be more fair when custody decisions are more fair.”
What you have a problem with the Father being the presumptive ‘worst parent’ and also the one deemed most financially responsible?
IMO the best insurance is the male pill. The government should give a bounty of a billion dollars to whoever brings one to market.
Pretty sure the US Patent System would take care of this one. The male pill would have a huge market.
Agreed. But maybe the government should heavily subsidize its use for lower income folks.
“You can’t get pregnant. I’m on the male pill.”
Nobody would lie about a thing like that.
Looking at Japan, I think it makes more sense to push for more marriage rather than fewer illegitimate children. Japan and a good portion of western Asia (and looking at the CDC data, Asians in the US) have very low numbers for out-of-wedlock births. Combined with later marriages and fewer marriages it’s led to a near catastrophic population problem. Just reducing the number of women having children outside of marriage might trade one demographic problem for another.
On a side note about seatbelts and motorcycle helmets: If you don’t wear them, the paramedic who treats you probably hates you. Not a paramedic myself, but I’ve known enough of them to hear this multiple times over. They’re professionals who do their best, but I’d have to say it’s not a good idea to annoy the person trying to save your life.
“and motorcycle helmets: If you don’t wear them, the paramedic who treats you probably hates you.”
I’m going out on a limb here, but I’m going to assume that motorcyclists who don’t wear helmets aren’t the type of person to be overly concerned with what the paramedic is going to think.
Both data points indicating intelligence level for those types of people. Spoiler alert: it ain’t good.
“Both data points indicating intelligence level for those types of people.”
But on the other hand their actions are rational. Obviously, if your brain isn’t worth as much you shouldn’t spend as much effort protecting it, neh?
Most motorcyclists don’t get full coverage insurance unless they have a lien. Anything that totals the bike will likely kill the rider.
I’m convinced though that the way to make our roads safer is to force every cager to get a motorcycle license. Nothing destroys the sense of invulnerability better than riding a skate.
I sold my bike after I moved to Chicago. It’s suicide to ride here. I miss riding but my wife is relieved. Four accidents and no broken bones or blood.
> I’m convinced though that the way to make our roads safer is to force every cager to get a motorcycle license.
> Nothing destroys the sense of invulnerability better than riding a skate.
What do the words “cager” and “skate” mean?
Regarding Chicago are you blaming the drivers or the weather?
The outcomes that Brooks is trying to address are long-term (there are no short-term outcomes in systems change). Maddie might be fucked, but her kid doesn’t have to be. By making it “easier” for a single mother (to either join the labor force or go to college by being able to afford and access quality care), her child has the opportunity to start out on the right path life at the age when it really matters. This isn’t incentivizing women to get pregnant out of wedlock, it’s breaking a poverty cycle – now that’s the kind of paradigm shift we need. Future skilled labor force and savings on tax expenditures, 18% ROI, yadda yadda yadda… is the link of investment in early childhood education to economic development the new global warming?
4. Mankiw also comments:
With regard to point 5, Brooks in effect argues for capitalism for candy making and socialism for schooling. It reveals the infernal lightness of his grip on the roots of production under capitalism and the roots of corruption under socialism. If he can grasp that socializing finance and production has established a deeply corrupt market for coercion in the capital markets, why would he expect anything different in education? Education is crying out for a big dose of capitalism, it is the only hope for that woman, or anyone else…
“Education” has gotten a big dose of capitalism over the last thirty years and is thriving because of it. Learning is another matter.
What profit incentive is there in teaching skills to an individual who has a poor track record in decision making, and as a result of these poor decisions requires greater investment relative to the potential return than other individuals her age? She’ll need to learn the skills missed while starting a family, as well as make up the experience she’s missed working low-skills jobs since she entered the workforce. Meanwhile, she’s less able to pay back that educational investment because she has fewer working years remaining and greater obligations on her time during those years, single motherhood being job in itself that takes probably takes working much overtime off the table. Add to that the most difficult variable raised by the Adam Davidson piece–after all this education and training, she may not have talent it takes to perform the job for which all this money has been spent in training.
What capitalists would make that investment? None in their rational minds, I’m sure. They could find a better investment almost anywhere. But there is still a need to improve the lot of individuals like this single mother, both for her sake and for society at large. If only some institution existed to take on that risk…
Educating the poor is plenty profitable – as long as you subsidize consumption. There is no need for a larger government role.
I find it hard to believe that she needs anything more than could be learned at a decent community college to advance significantly in her career.
So we make iphones in China not because they can rouse 1000s of slave laborers overnight to work 80 hour weeks with not worker protections, but because westerners don’t do enough math homework. Got it.
On the iPhone thing, my eventual question was, does that story say anything about anything other than iPhones? We are talking about one of the few things that needs that kind of scale. It is purchased by so many people and so standardized that it requires low design turnover.
“but because westerners don’t do enough math homework. Got it.”
Just to clarify, the article itself, says that statement amounts to ‘baloney’.
“Why? Because American college students don’t like doing homework.
So, America is doomed, right?
To be honest, this sounds like a lot of pious baloney. As Michael Beckley points out in a new article in International Security, “The United States is not in decline; “
A line that Drezner approvingly quotes:
“The United States is not in decline; in fact, it is now wealthier, more innovative, and more militarily powerful compared to China than it was in 1991.”
I’m not quite sure how to interpret this. The ratio of US to Chinese GDP was roughly 20 to 1 in 1991, and it’s roughly 2 to 1 now. So exactly how is it that the US is now wealthier compared to China than it was in 1991?
Maybe in absolute terms?
If car A starts at 4 mph and is accelerating at 2mph/s, and car B starts at 80 mph and accelerates at 2.1mph/s, in 40 seconds, car B will be going almost twice as fast as car A, but car A will never catch up.
China went from roughly $1Trillion to $7T from 1991 to 2011.
The US went from roughly $8T to $13T from 1991 to 2011.
So China gained $6T and the US gained $5T, so I think the statement is wrong. Though not by a lot.
It’s $1T to $7T and $6T to $15T. So it is an accurate statement if wealth means absolute nominal GDP. But of course there’s inflation…
In the context of the article, the relative decline in this sense was Drezner referring to Beckley referring to Johnson who looked at the nominal GDP data to 2006, extrapolating that China would not start catching up in nominal GDP until 2014 at the earliest, using “a very optimistic unchanging estimate for PRC GDP growth of 10%/year” and 3.5% for the US. (with alternate scenarios 8%/3.5% and 8%/4% pushing the date to the 2020’s and 30’s)
Of course, he was completely confused about real rates and nominal rates. The very next year, China’s nominal (USD) growth rate was 28.8% vs 4.8% for the US, resulting in a “catching-up” the very next year. (The real rates being 14.2% and 1.9% respectively, heading into the recession)
Maybe a little fact checking is in order, if not by our friends in the international affairs, then at least the economist.
Drezner may also be referring to increases in per capita wealth rather than national wealth.
A man is 40 and is betrothed to a 10 year old girl in an arranged marriage. But he can’t marry her since he is four times as old. He waits five years. He’s 45 and she’s 15. Now he’s only three times as old as the girl. They wait fifteen years. He’s 60, she’s 30. Now he’s only twice as old as that girl.
How long does he have to wait until they are the same age?
Who knows if China will ever surpass the US, and who cares? I wouldn’t mind being the second wealthiest man in the world, or live in the second wealthiest country. But China’s massive population is impoverished. They probably need the rest of the century to get to our standard of living. No one can tell me their growth is sustainable. They’re running out of everything except slaves.
Yes the assumption that China will catch up and pass the US is just that an assumption. However, it’s probably a much more reasonable assumption than the one in the 1980’s that Japan would surpass the US. But I don’t believe for a moment that China’s growth rates will continue at such a high level. Many developing countries experience high growth and the high growth always disappears as they get richer. They pick the low hanging fruit till it’s all gone. However, China has such a large population that it wouldn’t surprise me if their GDP is higher than the US’s before growth comes down to low levels.
We have many more bailouts than we had in 1990, more foodstamps too! So shut up, this is the best of all possible worlds. Look how much smarter our fed is now! And all the new freedoms enjoyed by people in bagdad and we couldn’t even afford a tsa or dept of homeland security back then! See how wealthy we have become!
After 1991, the services of marcus wolf (former Stasi head) became available to us. So now that Americas police state has secured this man services we americans are clearly much better off. Small improvements like this have led to a marginal revolution.
5) There are ways to conceive of education that take a page from earlier societies, in which what one learned was directly applied to one’s own community. This doesn’t mean we go back to being primitive (unless of course nothing is done in the next decade), it means we take that principle and apply it to the potential for wealth creation that exists at community levels. Neither public nor private schools really fulfill that function. The goal is for local community to reflect the world it aspires to, and the base for wealth creation begins at the point of lateral skills exchange, in which what we learn is also applied to validation of the skills of others. While this part is not monetary, monetary economies grow out of the knowledge products we create at the local level. The modern factory with its complex machines made it obvious (to me) that there are not enough monetary links in the present, even with local manufacturing. However, by easing regulations, more people could participate in small business endeavour in the years when they need money the most. Lateral skills exchange would go a long way to ease their burdens as they age. In terms both monetary and non-monetary, we would move ahead primarily through entrepreneurship of our own skills.
1. Dan Dreszer asks what has he missed. He has missed that if someone’s growth in an area is higher than your own, then no matter how far they are behind you, they are catching up. I don’t really see how it could be otherwise. He also seems to have missed that Brazil is not in North America. And he appears to have missed that China’s spending a smaller percentage of GDP on military expenditures than the US is a strength, not a disadvantage.
“And he appears to have missed that China’s spending a smaller percentage of GDP on military expenditures than the US is a strength, not a disadvantage.”
Absolutely! They are getting the same amount of protection (no one attacking them) at less cost.
The question isn’t how much we pay for no attacks. The question is how likely are we to get attacked if we cut. I don’t believe the rise of Al Qaeda while we were cutting our military was a coincidence. When John Kerry proposed adding two combat divisions, I thought how wonderful it would have been had we never cut them. There’s no question we can spend less on our military, but how much less? Threats rise when we fall.
As for threats to China, they have their own internal problems to worry about. Their government will fall within ten years. Their economy is on the edge of a cliff. They are losing control.
But no one outside of China really has a good idea how much China spends on its military. And anyway spending less on your military than your competitors is a great advantage right up to the point where you need the military. Then it suddenly becomes a significant disadvantage. I think Canada & Iceland are pretty safe not spending much, I’m not convinced of the case for anyone else.
I think we’ve reached the tipping point where every major power is rich enough and the economies interconnected enough for real war to be a very bad idea. World Police style interventions, sure…but they’re peanuts. Is there any real chance China will have to fight Russia, India, or Japan? Not really.
Imagine the world economy goes through another one or two sharp contractions followed by years of malaise. I could see the wealth through conquest route looking more attractive in this scenario.
They would just need to be convinced that wealth is overrated. Certainly world power economic policy suggests that is already a common belief.
“I think we’ve reached the tipping point where every major power is rich enough and the economies interconnected enough for real war to be a very bad idea.”
Both WW1 & WW2 were also very bad ideas. So I’m not convinced that the outcome of a war being potentially very bad will stop a war from happening.
“I think we’ve reached the tipping point where every major power is rich enough and the economies interconnected enough for real war to be a very bad idea…. Is there any real chance China will have to fight Russia, India, or Japan?”
Jan Gotlib Bloch for you on Line #1.
I love Brooks.
He cite this:
” As a survey of nearly 10,000 Harvard Business School grads by Michael Porter and Jan Rivkin makes clear, to get companies to locate their plants in the U.S., Obama is going to have to simplify the tax code, cut corporate rates, streamline regulations, make immigration policy more flexible and balance the budget over the long term
Will someone tell me how these policies will solve this problem:
Parlier earns about $13 an hour. She’d like to become one of the better-paid workers in the plant, but, in today’s factories, that requires an enormous leap in skills. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.
There is a massive disconnect here.
It won’t. That’s his point. Social change is necessary.
That Drezner linked article is flat-out wrong regarding engineers. America does produce engineers – TOO MANY of them, rather than the too few that is asserted in his text and by companies.
If government ends the ability of companies to simply not hire any American engineers so that they can pay slave labor wages to foreigners with an H1 visa, that “issue” slams shut tomorrow. There’s no production of hi-end manufacturing skill because there haven’t been any high-end manufacturing jobs.. you can’t just walk over and say “Hey, where’s all my TIG welders at?” with no investment in internships, partnerships with schools, consistent business growth, etc.
Also, Dan’s intended point is that there’s no HIGH-end skills.. when what the NYT article regarding Apple shows is that Apple uses slave labor to produce their Ipad. That’s the definition of a low-end skill, despite Dan’s assertion otherwise.
My MS degree is in industrial engineering. There’s more than enough very skilled graduates in that field, but the issue is that NO JOBS EXIST, so we have to scramble to other professions upon leaving school.
One other thing : American kids do like doing homework. I’ll take the top American kids over the top kids from every other country, every day of the week. I find it bizarre that Dan actually sources WSJ but ignores Murdoch’s hand of evil: That thing is a cherrypicked dataset spewing Republican excuses for H1 visa policies designed to undercut middle class wages.
Very true but certain people just like to ignore reality
“America does produce engineers – TOO MANY of them” – If that were the case we would see a drastic decline in the salaries of engineers. Engineers are still highly paid.
“If government ends the ability of companies to simply not hire any American engineers so that they can pay slave labor wages to foreigners with an H1 visa” – H1 Visa candidates are paid the prevailing wage rate, and that is validated as part of the Visa process including re-validating when the Visa’s are renewed. Furthermore there are only around 300K H1B Visas and only a fraction of those are engineers.
“My MS degree is in industrial engineering. There’s more than enough very skilled graduates in that field, but the issue is that NO JOBS EXIST”
That’s just not true. My company has hired 3 or 4 newly graduated engineers in the last 90 days. If you are willing to relocate and accept an offer in the $40K range and have a 3+ GPA you can likely get a job somewhere within 90 days.
$40k?!? That is far too low. My company pays in the $70s for mech E’s, and over $80k for Chem E’s.
I can throw garage doors into trucks for nearly 30k a year. Why bother getting a degree for only 10k a year more?
4. Keith Henessey has some thoughts – http://keithhennessey.com/2012/01/24/waste-60b/
IBD has more – http://news.investors.com/Article/598816/201201241859/embarrassing-revelations-in-larry-summers-memo.htm
But is anyone really surprised by Zero?
5. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.”
I’m sure she’d have to know how to maintain a tolerance of 0.25 microns but would she really have to know any of those other things? She would have to be able to use bits of the computer language but I doubt she would need any deep knowledge. Very few people know how an engine and drive train work but they can drive a car and change a tire. Maybe some very basic trig and basic knowledge of metal. Would that require academic courses? No, but that’s the system we’ve set up. It’s that system that keeps her down, not any inherent difficulty of acquiring useful knowledge.
It’s that system that keeps her down, not any inherent difficulty of acquiring useful knowledge.
Brooks and others have chosen to forget that, not so long ago, big companies trained their own rising stars. My own father just graduated high school, but when he began working his way up the production chain after WW2, Dupont paid for him and other promising employees to take targeted colledge coursework so they could learn the skills they would need with each promotion. They paid the travel expenses to the course site and paid for the course itself. Over the course of 30+ years Dupont built a skilled workforce to suit their specific needs, one Maddie at a time.
But in an age when nothing matters except returning value to the shareholders, this inconvenient bit of history is swept under the rug.
Now young people are expected to gamble $20-$50k and sacrifice 4-6 years of their productive lives on the slender “maybe” of a job someday. It needs to become the reverse: get the entry-level job and put the degree together piece-by-piece over time. The employer helps create a tailor-trained workforce, and gets employee loyalty in return.
It works. Honest. I grew up with it.
Not a “slender” maybe. If you get a degree in a hard science, engineering or, really, anything math/logic intensive, you are quite capable of getting a good job (CBBB aside, or so he says.) You might have to move or work outside of your narrow specialty, but reasonable employment will be found. Of course, a degree (particularly a weak one) in history, English, the various flavors of ethnic studies and the like are, of course, a huge gamble at the academic tenure roulette table.
Also, in reply to “Unsympathetic” above, H1Bs clearly aren’t the issue because I can bypass them pretty trivially by outsourcing entire projects to an overseas firm. That gives a cut to a middleman, of course, but it’s still competitive for simpler work.
Re: “Is cybersecurity a public good?”
The entire public good model in economics is nonsense. Almost nothing is a public good until the day government decides it should be, it then takes a private good and makes it into public good by making it less excludable and less rivalrous, through a process that is itself a public good.
What Drezner misses:
1. Persistent high unemployment is not going down and does not appear to need to do so in order for the wealthy to maintain their perks.
2. Persistent low interest rates and very, very high public deficits, plus monetary printing, call into question the soundness of the dollar, the de facto world currency.
3. Most private deleveraging is straight up default.
4. Student loans are strangling the 20s-somethings and 30-somethings, doubly problematic when there are few jobs with which to service them. That destroys both capital and consumption.
5. Oil and natural gas production are up, but crude oil production worldwide has been stuck since about 2004, and there’s not much hope for robust growth. The huge rise in prices since 2004 has not returned more production. Worldwide, oil exports are falling, and more of the shrinking supply is going to China and India, which can afford expensive oil because it doesn’t waste it hypercommuting in SUVs. There are other forms of energy, but few of them are as easy to transport and energy-dense as oil. Natural gas is neither.
6. The US political system, to the extent it ever worked, is irredeemably broken and cannot respond to the public’s bailout anger and war exhaustion. There is growing realization that the United States is, basically, a criminal organization dedicated to murder and theft and is essentially immune to public discontent, anger, fear, or anything else.
7. The Boomers are retiring, and no serious Medicare reforms are being proposed. This will break the bank.
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