Tyler Cowen

The co-authors on this paper (pdf) are Andrew Leigh and Mike Pottenger, here is the abstract:

The paper estimates long run social mobility in Australia 1870–2017 tracking the status of rare surnames. The status information includes occupations from electoral rolls 1903–1980, and records of degrees awarded by Melbourne and Sydney universities 1852–2017. Status persistence was strong throughout, with an intergenerational correlation of 0.7–0.8, and no change over time. Notwithstanding egalitarian norms, high immigration and a well-targeted social safety net, Australian long-run social mobility rates are low. Despite evidence on conventional measures that Australia has higher rates of social mobility than the UK or USA (Mendolia and Siminski, 2016), status persistence for surnames is as high as that in England or the USA. Mobility rates are also just as low if we look just at mobility within descendants of UK immigrants, so ethnic effects explain none of the immobility.

Social mobility is indeed difficult to pull off.  Hat tip goes to Ben Southwood.

They used to say this couldn’t be done:

We construct genomic predictors for heritable and extremely complex human quantitative traits (height, heel bone density, and educational attainment) using modern methods in high dimensional statistics (i.e., machine learning). Replication tests show that these predictors capture, respectively, ~40, 20, and 9 percent of total variance for the three traits. For example, predicted heights correlate ~0.65 with actual height; actual heights of most individuals in validation samples are within a few cm of the prediction. The variance captured for height is comparable to the estimated SNP heritability from GCTA (GREML) analysis, and seems to be close to its asymptotic value (i.e., as sample size goes to infinity), suggesting that we have captured most of the heritability for the SNPs used. Thus, our results resolve the common SNP portion of the “missing heritability” problem – i.e., the gap between prediction R-squared and SNP heritability. The ~20k activated SNPs in our height predictor reveal the genetic architecture of human height, at least for common SNPs. Our primary dataset is the UK Biobank cohort, comprised of almost 500k individual genotypes with multiple phenotypes. We also use other datasets and SNPs found in earlier GWAS for out-of-sample validation of our results.

While I don’t find “within a few centimeters” to be especially impressive, the question is still “what’s next?”

The authors on the paper are Louis Lello, Steven G Avery, Laurent Tellier, Ana Vazquez, Gustavo de los Campos, and Stephen D. H. Hsu.

Wednesday assorted links

by on September 20, 2017 at 2:40 pm in Uncategorized | Permalink

That is the theme and title of my latest Bloomberg column.

Larry was in superb form, and we talked about mentoring, innovation in higher education, monopoly in the American economy, the optimal rate of capital income taxation, philanthropy, Hermann Melville, the benefits of labor unions, Mexico, Russia, and China, Fed undershooting on the inflation target, and Larry’s table tennis adventure in the summer Jewish Olympics. Here is the podcast, video, and transcript.

Here is one excerpt:

SUMMERS: Second, the VIX — people tend to underappreciate this. The volatility of the market moves very much with the level of the market. The reason is that if a company has $100 of debt and $100 of equity, and then the stock market goes up, it’s 50/50 levered.

If the stock market goes up by $100, then it has $100 of debt and $200 of equity and it’s only one-third levered. So when the stock market goes up, its volatility naturally goes down. And the stock market has gone way up over the last 10 months. That’s a factor operating to make its volatility go significantly down.

It’s also the case if you look at surprises. The magnitude of errors in the consensus estimates of company profits or the consensus estimates of industrial production or what have you, numbers have been coming in close to consensus to an unusual degree over the last few months.

I think all those things contribute to the relatively low level of the VIX, but those are more in the way of ex post explanations. If you had told me everything that was going on in the world and asked me to guess where the VIX would be, I would expect it to have been a little higher than it is right now.

And:

COWEN: If there’s an ongoing demand shortfall, as is suggested by many secular stagnation approaches, does that mean monopoly cannot be a major economic problem because that’s from the supply side, and that the supply side constraint isn’t really binding if you think of there as being multiple Lagrangians. Forgive me for getting technical for a moment. Do you see what I’m saying?

SUMMERS: That wouldn’t have been the way I’d have thought about it, Tyler, but what you’re saying might be right. I think I’d be inclined to say that, if there’s more monopoly, there’s more money going to monopoly firms where there’s a low propensity to spend it, both because the firms don’t invest and because the owners of the firms tend to be rich or endowments that have a low propensity to spend.

So the greater monopoly power, to the extent that it exists, is one factor operating to raise savings and reduce investment which contributes to demand shortfalls and secular stagnation.

I also think that there’s likely to be less entry in competition in markets that aren’t growing rapidly than there is in markets that are growing rapidly. There’s a sense in which less demand over time creates its own lack of supply.

And:

COWEN: What mental qualities make for a good table tennis player?

SUMMERS: Judging by my performance, qualities that I do not possess.

[laughter]

SUMMERS: I think a deft wrist, a certain capacity for concentration, and a great deal of practice. While I practiced intensely in the run-up to the activity, there were other participants who had been practicing intensely for decades. And that gave them a substantial advantage.

Recommended!

If you think you know someone who is very smart, Larry is almost certainly smarter.

Japan (America) fact of the day

by on September 20, 2017 at 2:21 am in Law, Medicine | Permalink

So consider the amount of standard daily doses of opioids consumed in Japan. And then double it. And then double it again. And then double it again. And then double it again. And then double it a fifth time. That would make Japan No. 2 in the world, behind the United States.

That is from German Lopez at Vox.

…teenagers are increasingly delaying activities that had long been seen as rites of passage into adulthood. The study, published Tuesday in the journal Child Development, found that the percentage of adolescents in the U.S. who have a driver’s license, who have tried alcohol, who date, and who work for pay has plummeted since 1976, with the most precipitous decreases in the past decade.

The declines appeared across race, geographic, and socioeconomic lines, and in rural, urban, and suburban areas.

…Between 1976 and 1979, 86 percent of high school seniors had gone on a date; between 2010 and 2015 only 63 percent had, the study found. During the same period, the portion who had ever earned money from working plunged from 76 to 55 percent. And the portion who had tried alcohol plummeted from 93 percent between 1976 and 1979 to 67 percent between 2010 and 2016.

Teens have also reported a steady decline in sexual activity in recent decades, as the portion of high school students who have had sex fell from 54 percent in 1991 to 41 percent in 2015, according to Centers for Disease Control statistics.

Teens have also reported a steady decline in sexual activity in recent decades, as the portion of high school students who have had sex fell from 54 percent in 1991 to 41 percent in 2015, according to Centers for Disease Control statistics.

Here is the Tarah Barampour WaPo story.  Is it evolutionary psychology pushing us more into a more stable mode of behavior for safe circumstances, or perhaps teens being more aware of the need to build their resumes?  Or something else altogether different?

These developments are mostly positive, both as symptoms and as active causal agents, and yet…

Somewhere along the line there is a positive social payoff from risk-taking, including sometimes from teenagers.  How would rock and roll evolved in such a world?   Who is to help undo unjust social structures?  The graybeards?

Not really.  Here is John Cochrane:

The Irish bank [holding Apple profits] can lend the money anywhere. It can buy US mortgage backed securities, it can lend the money wholesale to US banks who lend it out to US businesses. It can even lend the money to Apple US. If Apple or any other US company wants to invest, they can borrow from the Irish bank. Conversely, if profits are repatriated to US banks, those banks can lend the money overseas.

Here is the full story.

Addendum: There are some very good points in the comments.

Grant, a former Auburn University sorority girl, founded Rushbiddies in 2009 after helping see her own daughter through a successful recruitment week at Auburn. She now works with girls, and usually also their moms, in private consultations in person or over the phone (prices start at $100 for a 90 minute session) and through group workshops, covering everything from what to wear to what to say. She’ll also suggest who to ask for recommendations and how to get in if your GPA is under 3.0—essentially preparing girls for every scenario, question, dress code requirement, and trap that will come up.

That is by Alyssa Giacobbe.

Tuesday assorted links

by on September 19, 2017 at 12:33 pm in Uncategorized | Permalink

The economics of Graham-Cassidy

by on September 19, 2017 at 1:20 am in Economics, Law, Medicine | Permalink

It is good for forcing some fiscal discipline on health care, but state governments are fiscally too weak to take over America’s public sector health care finance.  That is the message of my latest Bloomberg column.  Here is one excerpt:

There is another problem with state experimentation in this context. So many health-care problems are on the supply side, namely weak incentives for quality care, barriers to entry and innovation, and regulations that raise costs but don’t improve safety. Ideally policy experimentation could cover all of these dimensions, but almost all of the debate is on the side of financing and insurance coverage. With a more or less fixed set of supply-side institutions, simply pushing more financing decisions into state governments may not produce much, if any, improvement.

So overall the reform doesn’t seem to be feasible.  But here is the part to bug you:

It is a legitimate worry that Graham-Cassidy might cut health-care benefits in an unequal fashion, but the bill may be more egalitarian than it at first appears. Due to the embedded formulas, the bill redistributes resources to red states, in particular states that have not already accepted the Medicaid expansion from Obamacare. Often those are rural states, some of them in economic decline. Favoring such states does have an egalitarian aspect, even if the Republican Party isn’t very effective in explaining the policy in those terms.

The biggest losers from Graham-Cassidy are likely New York and California, two states with very costly Medicaid rolls. That might appear anti-egalitarian, but is it really? The beneficiaries in those states tend to be relatively young, and thus their human capital endowments, in the form of future life enjoyment, are usually quite high. All things considered, a 28-year old lower middle-class immigrant in Los Angeles is arguably better off than a 61-year-old in Nebraska with $100,000 in the bank. Giving a benefit to the red state individual actually may reflect the more egalitarian sentiment, although that’s not usually how health-care policy discussions are framed by either Democrats or Republicans.

Like it or not, the forward-looking perspective is probably the correct one here.  One not altogether illogical response is to treat this as a reductio ad absurdum on egalitarian ideas.  Another response is to base health care policy more on efficiency, and again to discard the egalitarian ideal, which in turn would resurrect some chance of being able to defend redistribution toward the young.  What doesn’t make sense is to invoke egalitarian ideals only selectively, as people are fond of doing.

Here is one proposal:

What if I told you that the credit rating companies already had a system to verify identities before opening new accounts — but, because this would be a minor inconvenience, and a drag on their profits, they only allow this status to last for 90 days for any given account unless a police report can be filed, and furthermore, while they may claim that they’ll do this, it’s not actually a legal requirement? From a Krebs on Security piece from 2015 (as ever, Krebs is two years ahead of the zeitgeist):

“With a fraud alert on your credit file, lenders or service providers should not grant credit in your name without first contacting you to obtain your approval — by phone or whatever other method you specify when you apply for the fraud alert … Fraud alerts only last for 90 days, although you can renew them as often as you like. More importantly, while lenders and service providers are supposed to seek and obtain your approval before granting credit in your name if you have a fraud alert on your file, they’re not legally required to do this.”

That’s right: a solution to the ongoing insane catastrophe which is the American credit system already exists. The infrastructure and process for it is already in place. But thanks to regulatory capture, an inability to understand the scale of data hacks that modern technology enables, or sheer incompetence, it only exists on a case-by-case, opt-in, short-term solution.

Obviously everybody should have this verification — “two-factor authentication,” if you will — turned on and kept on. This would not be a panacea, of course. Security hipsters will loudly protest that phones and email are terrible second authentication factors that no one should even consider using. Phone and email are not ideal, but the point is, universalizing this existing solution would hugely improve matters for a relatively trivial cost.

That is from Jon Evans.  I still would like to know what is the social cost of identity theft.  Furthermore, what is the cost of identity theft as a ratio of the cost of some people simply not paying borrowed money back?

Everyone is all a-flutter on this issue, and attacking Equifax, but I am looking for more reliable information before voicing an opinion.

*The Color of Money*

by on September 18, 2017 at 2:08 pm in Books, Economics, History | Permalink

The author is Mehrsa Baradaran, and the subtitle is Black Banks and the Racial Wealth Gap.  Here is one excerpt:

Not only were black bankers stuck in a perpetual money pit, but they were often cast as the villains when thing went wrong.  That their loans went primarily to the black middle class and were out of reach of the majority of blacks sometimes made black banks the targets of criticism.  Abram Harris was one of these critics.  Harris was the first nationally renowned black economist and the first to do a comprehensive study of black banks, called The Negro as Capitalist (1936).  Harris headed the Howard economics department from 1936 to 1945, when he became the first black economist at the University of Chicago.  He was recruited there by Frank Knight…Harris had held Marxist sympathies while at Howard, but with his move to Chicago, his economic philosophy became more traditional.

Here is Wikipedia on Harris.  As for Baradaran, I found this to be “two books in one.”  First, it was an OK and useful but not original look at the evolution of the racial wealth gap.  Second, it was a very interesting but interspersed history of black banking in America.  Overall recommended.  Here is the book’s home page.

Monday assorted links

by on September 18, 2017 at 12:26 pm in Uncategorized | Permalink

Reed Hastings, the Netflix CEO who co-founded the company long before “streaming” entered the popular lexicon, was born during a fairly remarkable year for film. 1960 was the year Alfred Hitchcock’s Psycho astounded and terrified audiences, influencing a half-century of horror to come. It was a year of outstanding comedies (Billy Wilder’s The Apartment), outstanding epics (Stanley Kubrick’s Spartacus) and outstandingly creepy thrillers (Michael Powell’s Peeping Tom—a close cousin of Psycho).

But in the vast world of Netflix streaming, 1960 doesn’t exist. There’s one movie from 1961 available to watch (the original Parent Trap) and one selection from 1959 (Compulsion), but not a single film from 1960. It’s like it never happened. There aren’t any movies from 1963 either. Or 1968, 1955 or 1948. There are no Hitchcock films on Netflix. No classics from Sergio Leone or François Truffaut. When Debbie Reynolds died last Christmas week, grieving fans had to turn to Amazon Video for Singin’ in the Rain and Susan Slept Here. You could fill a large film studies textbook with what’s not available on Netflix.

Netflix’s selection of classic cinema is abominable—and it seems to shrink more every year or so. As of this month, the streaming platform offers just 43 movies made before 1970, and fewer than 25 from the pre-1950 era (several of which are World War II documentaries). It’s the sort of classics selection you’d expect to find in a decrepit video store in 1993, not on a leading entertainment platform that serves some 100 million global subscribers.

The bottom line is that streaming rights are expensive, whereas for shipping around DVDs the company can simply buy a disc.  Alternatively, you could say that the law for tangible media — such as discs — is less infested with special interests than the law for digital rights?  What does that say about our future?

Here is the article, via Ted Gioia.