Tyler Cowen

Deaton on Deaton

by on October 13, 2015 at 1:43 pm in Data Source, Economics, Science | Permalink

It was during my time at Bristol that John Muellbauer and I worked together on our book. The computer facilities at Bristol were terrible — the computer was a mile away, on top of a hill, so that boxes of punched cards had to be lugged up and down. I was told to get a research assistant, which was sensible advice, but I have never really figured out how to use research assistance: for me, the process of data gathering — at first with paper and pencil from books and abstracts — programming, and calculation has always been part of the creative process, and without doing it all, I am unlikely to have the flash of insight that tells me that something doesn’t fit, that not only this model doesn’t work, but that all such models cannot work. Of course, this process has become much easier over time. Not only are data and computing power constantly and easily at one’s fingertips, but it is easy to explore data graphically. The delights and possibilities can only be fully appreciated by someone who spent his or her youth with graph paper, pencils, and erasers.

Given how far it was up the computer hill, I substituted theory for data for a while, and wrote papers on optimal taxation, the structure of preferences, and on quantity and price index numbers, but I never entirely gave up on applied work.

The entire biographical essay is of interest (pdf).

Tuesday assorted links

by on October 13, 2015 at 12:07 pm in Uncategorized | Permalink

1. The world’s first airport for drones is being built in…Rwanda.

2. Clive Crook reviews Dani Rodrik on economic method.

3. Robber uses Uber for getaway car.  Gets caught.  And how many students cheat?

4. The Fairfax police understand search theory, sort of.

5. Did the number of people enrolled in the health care exchanges drop by fifteen percent?

6. Was Du Runsheng the world’s most influential economist?


Ben Casselman has a good piece on this question, here is one excerpt:

During the strong labor market of the mid-1990s, only 1 in 5 minimum-wage workers was still earning minimum wage a year later. Today, that number is nearly 1 in 3, according to my analysis of government survey data. There has been a similar rise in the number of people staying in minimum-wage jobs for three years or longer…

Even those who do get a raise often don’t get much of one: Two-thirds of minimum-wage workers in 2013 were still earning within 10 percent of the minimum wage a year later, up from about half in the 1990s. And two-fifths of Americans earning the minimum wage in 2008 were still in near-minimum-wage jobs five years later, despite the economy steadily improving during much of that time.

The piece is of interest throughout.

Angus Deaton update

by on October 12, 2015 at 6:59 pm in Economics | Permalink

1. Justin Wolfers on Deaton.

2. Chris Blattman on Deaton.

3. Binyamin Appelbaum on Deaton.

4. A Fine Theorem on Deaton.

5. Cassidy on Deaton.

A brilliant selection.  Deaton works closely with numbers, and his preferred topics are consumption, poverty, and welfare.  “Understanding what economic progress really means” I would describe as his core contribution, and analyzing development from the starting point of consumption rather than income is part of his vision.  That includes looking at calories, life expectancy, health, and education as part of living standards in a fundamental way.  I think of this as a prize about empirics, the importance of economic development, and indirectly a prize about economic history.

Think of Deaton as an economist who looks more closely at what poor households consume to get a better sense of their living standards and possible paths for economic development.  He truly, deeply understands the implications of economic growth, the benefits of modernity, and political economy.  Here is a very good non-technical account of his work on measuring poverty (pdf), one of the best introductions to his thought.

He brought a good deal of methodological individualism to the field of consumption studies, most of all by using household surveys more than macroeconomic data.

I think of this as a prize for “a whole body of work” rather than for one or two key papers.  David Leonhardt has a good NYT summary of some his work and its deep underlying optimism about the situation of the poor in the global economy.

Here is the popular version of the Committee statement, here is the more detailed version (pdf), an excellent overview.

Deaton was born in Scotland but has taught at Princeton for some time.  Here is Deaton on Wikipedia.  Here is Deaton’s home page.  Here are some recent working papers, he even has published in Review of Austrian Economics, an interesting review of Bill Easterly on experts.  Here are previous MR mentions of Deaton, there are many of them.  Here is Deaton on Google Scholar.  Here is a Russ Roberts EconTalk with Angus Deaton.  I think of Deaton as someone who is relatively willing to share himself with the world, let’s hope the Prize doesn’t ruin that openness.  Here is 21 minutes of Angus on YouTube, on his core ideas.

He is married to Princeton economist Anne Case, a notable scholar in her own right and sometimes a co-author with Deaton.  Here are their co-authored papers, many dealing with South Africa.

Deaton has long had a special working relationship with India and South Africa.  Here are his key pieces on measuring poverty and poverty reduction in India.  Here is his work on the Indian health survey.  Here is his 2010 AER piece on how to measure poverty globally in a consistent manner, by the way he suggests that asking people should be part of the answer.

He also has written on gender discrimination within the family in developing nations.  Some of his work has helped direct our attention to the viability of cash transfers as a way of fighting poverty.

At first, say circa 1980, he was known for his work in developing Almost Ideal Demand Systems for analyzing consumer expenditures; much of this early work was with Muellbauer.  That made a big splash, but it was more of a theoretical and technical advance than what was to follow.  One message was that studies based on the idea of a “representative consumer” were likely to prove misleading.

It is interesting to note the trajectory of his career, as Alex noted on Twitter.  He first did theory, then filled in the numbers and did empirics, applying the theory.  Eventually he took theory + empirics and used it to tackle some of the big issues of poverty and development.

Here is his long survey piece on foreign aid and growth.  He favors the move away from project evaluation, is skeptical of instrumental variable methods, and believes that RCTs need to be supplemented with a better theoretical understanding of mechanisms.  He knows a lot about many, many topics.

I do not know him, but he is described by many as a colorful character.  Dani Rodrik has strong praise for Deaton as a teacher.

Here are short, popular essays by Angus Deaton; you can call that the “what he really thinks page.”  He is critical of the Republican war against ACA and connects that topic to Downton Abbey.  He argues for regional price indices for the United States.  He discusses American inequality and why it is often ignored as an issue.  He warns against the creeping regulation of science.  And he considers why the Stern report had a greater impact in the UK than in America.

I very much liked Deaton’s recent book The Great Escape, which focuses on how modernity revolutionized standards for consumption.

This award is no surprise at all and he has been on the short list for a while.  Is it a slight surprise that Deaton won this prize on his own?  Many thought he would be paired with Anthony Atkinson, but I see Deaton as worthy of a stand-alone prize and Atkinson’s chance has not passed him by.  In any case, Tirole was a stand-alone prize too, so maybe in that regard there has been a shift in the Swedish regime.

Last but not least here is Alex’s post on Deaton.

His very good point does not receive enough attention:

“I thought that the zero interest rate, the decrease in the price of oil, the depreciation of the euro, the pause in fiscal consolidation, would help more than they have”, he said.

Perhaps we should consider the possibility that many of the European economies are at margins where “one offs” just don’t help very much.  That is perhaps easiest to rationalize in a multiple equilibria model where investors are waiting for signs that the European economies are truly committed to growth, but not finding so many such signs.  And this:

But Mr Blanchard, who departed the IMF two weeks ago, said radical visions for a full-blown “fiscal union” would not solve fundamental tensions at the heart of the euro.

“[Fiscal union] is not a panacea”, Mr Blanchard told The Telegraph. “It should be done, but we should not think once it is done, the euro will work perfectly, and things will be forever fine.”

The article is here.  Today is Nobel day! (later)

Sunday assorted links

by on October 11, 2015 at 3:20 pm in Uncategorized | Permalink

1. Laura Miller on Neil Strauss.

2. “They called me The Book.”  The story of a super face recognizer.

3. Anand on Fischer.

4. Singapore Post tests drone delivery.

5. Henry Kissinger on Vietnam.

Yesterday Alex outlined the facts, which I take to be not in dispute.  Firms at the frontier have seen significant productivity gains, the others not so much.  Alex calls this a “lack of innovation diffusion” and considers whether IP law might be one cause.

My framing is somewhat different.  The result reminds me of the international trade literature on why so few firms export.  The notions of increasing returns to scale, and fixed costs to trade abroad, provide the beginnings of an answer.  In such a setting, let’s say the world has become more globalized, more IRS, and more based on learning curves, much of those trends being attributable to information technology.  In that case we would expect a growing bifurcation of firm productivity outcomes, just as we find a strong bifurcation of export outcomes, with a relatively small percentage of firms doing most of the international trade, or innovating, as the case may be.  The “only a small percentage of firms export” and the “only a small percentage of firms are on the productivity frontier” may sometimes even be the same way of describing the same basic fact.

The on the ground reality I observe is that the large, famous, exporting firms put together fantastic O-Ring teams of talent in a way the smaller, medium-size enterprises do not.  That is the relevant diffusion barrier, but of course there may be limits on that diffusion as well.  Eliminating barriers across firms is a good idea but not enough either.

And does the presence of relatively strict IP law subsidize such O-Ring teams, or limit their diffusion?  You can argue it either way.

With fewer and fewer young Argentinians getting married for real, groups of friends in their 20s and 30s are instead paying around $50 (£32) each to attend staged events.

“It all started two years ago with a group of friends: we realized we hadn’t been to a wedding in a long time because hardly anybody is getting married anymore,” says 26-year-old publicist Martín Acerbi. Together with four friends from the university town of La Plata, 32 miles (50km) south of the capital city of Buenos Aires, Acerbi decided to organize a fake wedding instead.

To their surprise the event was a roaring success, and the one-off wedding became a business: Acerbi and his friends founded the Falsa Boda company in November 2013 – and have had steady work ever since.

The company hires real wedding locations, caterers and DJs for the parties, Acerbi said. “These wedding professionals have become our strategic allies, we organize it like it’s the real thing, except the marriage itself is fake,” he said.

Hired actors play the bride, groom and a surprise third party: a spurned lover or secret boyfriend who arrives “unexpectedly” – and with dramatic results.

“Our guests get all the fun of a wedding party with none of the commitment, or the problem of finding someone who is actually getting married,” says Acerbi.

A typical “fake wedding” hosts about 600 or 700 paying guests, with soap-opera style drama and a party lasting until 6am the next morning – the normal timetable for a real wedding in hard-partying Argentina.

The full story is here.

The trouble with most of our social thinking is that, being done in terms of eighteenth century rationalism, it takes dynamism for granted and assumes that the chief social problems are those of knowing what you want and how to get it.  The chief social problem is that of generating and unifying the social will that creates activity, change and what we have been wont to call progress.

That is from his 1940 book The Dynamics of War and Revolution, p.53.  It’s an ever so slightly fascistic version of a common critique of neoclassical economics.  Is it entirely wrong?

Diane Coyle mentions some possible picks:

Environmental economics: Partha Dasgupta, William Nordhaus

Update: Twitter folks strongly recommend adding Martin Weitzman in this category.

Growth: Paul Romer, Robert Barro

Inequality: Anthony Atkinson, Angus Deaton

Innovation (and much else): Will Baumol (now 93!)

Econometrics: David Hendry

All good guesses.  I’ll add Diamond and Dybvig for banking, and possibly an early grant to Banerjee, Duflo, and Kremer for development and RCTs.  That would make economics look scientific, for a year at least.  I expect Bernanke, Woodford, and Svensson to get a prize as well for monetary economics, although probably not right now.  It is too close to Bernanke’s memoir and Svensson’s tenure at the Swedish central bank.

Here is a WSJ list.  What do you think?  Since I’ve never once been right about a particular year, trying to pick someone would only curse them.  The award will come this Monday of course.

I enjoyed many passages in this book, here was my favorite:

As well as these untranslatable terms, I have gathered synonyms — especially those that bring new energies to familiar phenomena.  The variant English terms for ‘icicle’ — aquabob (Kent), clinkerbell and daggler (Wessex), cancervell (Exmoor), ickle (Yorkshire), tankle (Durham), shuckle (Cambria) — form a tinkling poem of their own.  In Northamptonshire dialect ‘to thaw’ is to ungive.  The beauty of this variant I find hard to articulate, but it surely has to do with the paradox of thaw figured as restraint or retention, and the wintry notion that cold, frost and snow might themselves be a form of gift — an addition to the landscape that will in time be subtracted by warmth.

Also of note is the discussion of how places names in Gaelic (and many other languages and dialects) are becoming unintelligible, even if much of Gaelic is surviving.  And so:

The nuances observed by specialized vocabularies are evaporating from common usage, burnt off by capital, apathy and urbanization.  The terrain beyond the city fringe has become progressively more understood in terms of large generic units (‘field’, ‘hill’, ‘valley’, ‘wood’).  It has become a blandscape…It is not, on the whole, that natural phenomena and entities themselves are disappearing, rather that there are fewer people able to name them, and that once they go unnamed they go to some degree unseen.

Definitely recommended, buy it here.

Inquiring minds wish to know for the purposes of the next few days…I have my own views, but first would love to hear yours.

Friday assorted links

by on October 9, 2015 at 12:15 pm in Uncategorized | Permalink

1. Is alcohol the savior of college football?

2. Why does Toronto snub Scarborough?

3. Tsinghua beats MIT in engineering rankings.

4. The persistence of human capital.

5. Why aren’t the moderate gun owners heard?

6. Does money help the lives of children?

7. Don’t focus on the critique of Bryan Caplan, or even the discussion of mental illness, this is an interesting short essay on the limits of the economic method, via Gordon.

8. Alan Krueger on a $15 minimum wage.  He wouldn’t do it.

Model this, basketball defense

by on October 9, 2015 at 10:59 am in Sports, Television | Permalink

The veteran forward [Jared Dudley] explained concessions are sometimes necessary and the Suns purposely awarded opponents easy buckets occasionally to speed games up, which he emphasized the Wizards are not considering.

Here is more from Jorge Castillo, who is writing about the desire of the Wizards to speed up their offense, and take more three point shots, and all that entails.

Is the way forward here to model the Suns, the Wizards, Dudley, or all of the above?