Òscar Jordà, Björn Richter, Moritz Schularick, and Alan M. Taylor have a new and somewhat unsettling NBER paper on that topic:

Higher capital ratios are unlikely to prevent a financial crisis. This is empirically true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between countries. We reach this startling conclusion using newly collected data on the liability side of banks’ balance sheets in 17 countries. A solvency indicator, the capital ratio has no value as a crisis predictor; but we find that liquidity indicators such as the loan-to-deposit ratio and the share of non-deposit funding do signal financial fragility, although they add little predictive power relative to that of credit growth on the asset side of the balance sheet. However, higher capital buffers have social benefits in terms of macro-stability: recoveries from financial crisis recessions are much quicker with higher bank capital.

Here is Christopher Balding on whether China is deleveraging.

Christina, an apparent MR reader, asked me whether it is really true that AI helps military defense more than military offense, as was previously argued by Eric Schmidt.  I can think of a few parallel cases:

1. In chess, AI clearly has helped the defense.  Top computer programs never play 32-move brilliant sacrifice victories against each other, a’ la Mikhail Tal.  Most games are drawn, and a victory tends to be long and protracted.  (Do note it is sometimes better to get the war over with and lose right away.)

2. In the NBA, analytics have helped offense more, for instance by showing that more attempted shots should be three-pointers.  Analytics of course is not AI, but you can consider it a more primitive form of using information technology to improve decisions.

3. It is interesting to ponder the differences between chess and the NBA as potential analogies.  In chess, the attack often “plays itself,” as the player with the initiative may be following fairly standard strategies of bringing the Queen and some lesser pieces in the neighborhood of the opposing King, or maybe just capturing material.  Finding the correct defense is often a more complex matter, and the higher quality of the chess-playing programs thus boosts defense more than offense.  Besides, under perfect information chess is almost certainly a draw, and the use of AI asymptotically approaches that outcome.

In professional basketball, the offense typically has more options and permutations, and given any offensive decisions, the defense often respond in fairly typical fashion, such as lunging at the player attempting a shot, or doubling Stephen Curry as he crosses the half-court line.  In those cases where the defense has more options, however, analytics conceivably could help basketball defense more than offense.  A (hypothetical) example of this would be using game tape and AI to see which kinds of tugs on the jersey best disrupt the shot or rhythm of the team’s leading scorer.  That said, most of the action seems to be in honing the options for the offense.

4. Is warfare more like chess or more like the NBA?

I believe the USA has more options in most of its conflicts, and thus AI will help the United States, at least at first.

In the Second World War the Nazis had more options than their opponents.  In the Civil War and American Revolution, however, the available offense was more static and predictable, and AI for those fighting forces might have helped the defense more.  In the Iran-Iraq war I suspect the defense had more options too.  Terror groups have more meaningful options than the forces defending against terror, and thus AI might help terror groups more than the defense, at least provided they had equal access to the data and to the technology (which is doubtful at this point, still as part of the exercise this is useful).

5. One important qualifier is that the chess and NBA examples already assume a game is on to be played.  A war, in contrast, is started as a matter of volition on at least one side.  If AI creates a new arms race of sorts, where one side at times opens up a decisive lead, that may provoke more decisions to engage and thus attack.  The mere fact that AI increases the variance in the power gap between the two sides may increase the number of attacks and thus wars.

So there is more to this question than meets the eye at first, and I have only begun to engage with it.

Addendum: AI is also spreading in the legal world, will this help defendants or plaintiffs more?

But it is also a question of history and, more specifically, of how welfare states in the rest of the world developed alongside warfare. European welfare states began in Prussia at the end of the 19th century, when war with France required the mobilisation of a large number of civilians. Britain’s welfare state has its origins in the discovery that many of the men who presented themselves to recruiting offices during the Boer war were not healthy enough to fight. Before the second world war, British liberals would have seen the creation of a government-run national health service as an unwarranted intrusion of government into private life. After 1945 it seemed a just reward for a population that had suffered.

In America this relationship between warfare and health care has evolved differently. The moment when the highest proportion of men of fighting age were at war, during the civil war (when 13% of the population was mobilised), came too early to spur the creation of a national health system. Instead, the federal government broke the putative link between war and universal health care by treating ex-servicemen differently from everyone else. In 1930 the Veterans Administration was set up to care for those who had served in the first world war. It has since become a single-payer system of government-run hospitals of the kind that many Americans associate with socialised medicine in Europe. America did come close to introducing something like universal health care during the Vietnam war, when once again large numbers of men were being drafted. Richard Nixon proposed a comprehensive health-insurance plan to Congress in 1974. But for Watergate, he might have succeeded.

That is from The Economist.

Tennis sentences to ponder

by on March 23, 2017 at 2:49 am in Education, History, Sports | Permalink

[Andre] Agassi pauses when asked if he and his wife [Steffi Graf] sometimes hit a few balls in Vegas – for old time’s sake? “No. It sounds a nice idea. But as soon as you hit the first couple of balls you remember you can do this. But you’re also reminded of what you can’t do. I just thank God I played the game long enough to enjoy lots of good moments. It gave a lot and it took a lot. I think me and tennis are about even now.”

Here is the full interview, interesting throughout.

If you recall, Robert D. Putnam, in his last book, expressed surprise that Chetty and Hendren, et.al. (2014) did not find evidence of a decline in intergenerational mobility.  Putnam predicted that researchers would find such evidence soon enough.  After all, it seems the returns to education have been rising, geographic mobility has been falling, market concentration is up slightly, life expectancy is behaving in funny ways, and regional disparities seem to have grown.  Chetty and Grusky, et.al. (2016) seemed to paint a more pessimistic picture than did his work from a few years ago, and now we have a new paper by Jonathan Davis and Bhashkar Mazumder:

We demonstrate that intergenerational mobility declined sharply for cohorts born between 1942 and 1953 compared to those born between 1957 and 1964. The former entered the labor market prior to the large rise in inequality that occurred around 1980 while the latter cohorts entered the labor market largely afterwards. We show that the rank-rank slope rose from 0.27 to 0.4 and the IGE rose from 0.35 to 0.51. The share of children whose income exceeds that of their parents fell by about 3 percentage points. These findings suggest that relative mobility fell by substantially more than absolute mobility.

So far this seems to be the current version of the final word.  The authors also argue, by the way, that Chetty (2016) is somewhat too pessimistic, though correct in suggesting mobility has indeed fallen.

By the way, this seems to be the best link for a download.

A new study in press at the Journal of Hand Therapy (yes, a real thing) finds that millennial men may have significantly weaker hands and arms than men the same age did 30 years ago.

Researchers measured the grip strength (how strongly you can squeeze something) and pinch strength (how strongly you can pinch something between two fingers) of 237 healthy full-time students aged 20 to 34 at universities in North Carolina. And especially among males, the reduction in strength compared to 30 years ago was striking.

This surprised me:

But today, older millennial men and women are roughly equal when it comes to grip strength.

Here is the full story, by Christopher Ingraham, via Sonal Chokshi.

Written for the 40th (!) anniversary of the Cato Institute, here is the clinching summary paragraph:

So we’re going to see a kind of intellectual war, and possibly war in other, more violent forms too. That war, using that word in the broadest sense possible, will be between today’s amazing accumulated stock of human capital — and the emotional momentum behind authoritarianism, which is encouraged by the political fraying that stems from underlying fears of disruption.

The piece has other points of interest.

The value of household services was equal to about 37% of GDP in 1965, but is currently equal to about 23% of GDP.

That is from Timothy Taylor.

The structure of Bombay is intimately tied to the history of the United States in ways that illustrate the long arc of globalization. At the heart of Bombay, around the Oval Maidan, on which cricket games are often played, one can see many of Bombay’s iconic Victorian buildings including the University of mumbai-high-court-and-rajabai-clock-tower-mumbai-indiaBombay, the Bombay High Court and the Rajabai clock tower. These buildings and many others were begun in the late 1850s and 1860s during the Bombay boom; a boom brought about by America’s Civil War.

The U.S. South began the civil war by embargoing cotton exports and burning 2.5 million bales of cotton in order to create a shortage and bend the world to its will. The embargo didn’t lead to Britain’s support, however, and by the time the South realized it had shot itself in the foot the North imposed its own blockade. Cotton prices skyrocketed–between 1860 and 1863-1864 prices rose by a factor of four on average and at times by a factor of 10. As cotton exports from the United States fell, exports from Persia, Egypt and especially India boomed. As Sven Beckert put it:

The bombardment of Fort Sumter…announced that India’s hour had come.

In India farm land was switched over to cotton, railroads and telegraphs were built uniting cotton producing areas in Bihar with cotton’s chief trading center and port, Bombay. Production and exports boomed. Vast fortunes were made from the cotton trade and the speculation it engendered; fortunes that were plowed into universities, libraries and many of the great buildings that mark Mumbai today. In fact, the Back Bay Reclamation project began at this time so some of the very ground that Mumbai sits upon has its roots in the American Civil War.

Influences flowing in the reverse direction were at least as strong. The decline in cotton exports from the South created mass unemployment in Great Britain and it was not out of the question that Britain would side with the South. Beckert quotes the investment bank Baring Brothers:

In the spring of 1862, Baring Brothers Liverpool expressed their view that war between the United States and Great Britain was less likely “provided we get a large import from India.”

Fortunately, increased Indian cotton production alleviated the “Cotton famine” and reduced the South’s bargaining power. Thus, “Indian cultivators and merchants played a small role in contributing to Northern victory in the Civil War.”

General Robert Lee’s surrender at Appomattox ended the Bombay boom. As news of Lee’s surrender spread, market prices crashed and speculative fortunes were lost. The railways and the telegraphs, however, now linked India to the world. And at the heart of Bombay, the universities, the libraries and the civic institutions endured making Bombay, Urbs Prima in Indis.

…the [English] census of 1851 for the first time registered a majority as living in urban areas…the rest of the world remained overwhelmingly rural, perhaps one-tenth of humanity living in towns.  The exceptionalism persisted throughout the century.  In 1890, 61.9 percent of the population of England and Wales dwelled in towns with at least 10,000 inhabitants, while the figure for the country second on the list, Belgium, was 34.5 percent, France staying at 25 percent, China at 4.4 percent.; by 1900, the metropolitan region of Manchester — including satellites such as Bolton, Oldham and Stockport — contained the largest concentration of human population on the planet.

That is from the at times quite interesting Fossil Capital: The Rise of Steam Power and the Roots of Global Warming, by Andreas Malm.  It is most interesting on steam power and the history of energy, not the treatment of current environmental debates.

Who’s complacent?

by on March 19, 2017 at 12:28 pm in Education, History, Philosophy, Science | Permalink

Not Jordan Peterson:

Raised and toughened in the frigid wastelands of Northern Alberta, Jordan Peterson has flown a hammer-head roll in a carbon-fiber stunt plane, piloted a mahogany racing sailboat around Alcatraz Island, explored an Arizona meteorite crater with a group of astronauts, built a Native American Long-House on the upper floor of his Toronto home, and been inducted into the coastal Pacific Kwakwaka’wakw tribe.

He’s been a dishwasher, gas jockey, bartender, short-order cook, beekeeper, oil derrick bit re-tipper, plywood mill labourer and railway line worker. He’s taught mythology to lawyers, doctors and businessmen, consulted for the UN Secretary General’s High Level Panel on Sustainable Development, helped his clinical clients manage depression, obsessive-compulsive disorder, anxiety, and schizophrenia, served as an advisor to senior partners of major Canadian law firms, identified thousands of promising entrepreneurs on six different continents, and lectured extensively in North America and Europe.

With his students and colleagues, Dr Peterson has published more than a hundred scientific papers, transforming the modern understanding of personality, and revolutionized the psychology of religion with his now-classic book, Maps of Meaning: The Architecture of Belief. As a Harvard professor, he was nominated for the prestigious Levinson Teaching Prize, and is regarded by his current University of Toronto students as one of three truly life-changing teachers.

…Dr. Peterson’s online self-help program, The Self Authoring Suite, featured in O: The Oprah Magazine, CBC radio, and NPR’s national website, has helped tens of thousands of people resolve the problems of their past and radically improve their future.

Here is more, and for the pointer I thank Adam Kazan.

In 1947 British forces set off here the largest non-nuclear explosion on record, blowing up what was left of Hitler’s island fortress.

That is from the new (and recommended) book Heligoland: Britain, Germany, and the Struggle for the North Sea, by Jan Ruger.

Here is further information, the blast was estimated to be one-third the power of Hiroshima, note that Heligoland is a holiday resort once again.

Northern Ireland of course is much smaller than the southern Republic:

The difference between north and south — in 1926, for example — was crucial, agricultural and manufacturing sectors of the economy playing very different roles in the two jurisdictions.  Almost 35 percent of the workforce in Northern Ireland were engaged in manufacturing, while under 10 percent were engaged in the nationalist Free state; nearly two-thirds of Ireland’s manufacturing employment was in the north.

That is from Richard English, Irish Freedom: The History of Nationalism in Ireland, pp.348-349.  (By the way, this is one of the best books I’ve read in months.  It is a subtle treatment of politics, history, religion, and most of all political psychology; it is especially strong on why the Unionist movement in the north never has perished and why a formal reunification of the two Irelands would be so hard to pull off.)

We also can learn that “In 1969 output per head in the [Northern] region was still around one-fifth higher than in the Republic.”  And in 1984, living standards in Northern Ireland were about 25 higher than in the south.

Today “Northern Ireland’s per capita GDP is similar to that of the Border region of Ireland which is about 38 per cent lower than the national average.”

On Twitter, I suppose that would be #MNIGA.

He was superb, here is the transcript, audio, and video.  We considered satire as a weapon, Harvard, long-distance running, Washington vs. NYC, Daniel Ellsberg and Edward Snowden, Caribbean culture and intellectual history, and of course Malcolm’s mom, among other topics.  His answers are so fluid and narrative they are hard to excerpt, but here is one bit from him:

COWEN: Overrated or underrated, the idea of early childhood intervention to set societal ills right?

GLADWELL: Overrated because to my mind it’s just another form . . . it became politically impermissible to say that certain people in society would never make it because they were genetically inferior. So I feel like that group, it’s like, “All right, we can’t say that anymore. We’ll just move the goalpost up two years.” And we’ll say, “Well, if you don’t get . . .” Or three years — “If you don’t get the right kind of stimulation by the time you’re three, basically it’s curtains.”

Why is that argument, which we decided we didn’t like it when they set the goalpost at zero, and somehow it’s super-important and legitimate and chin-stroking-worthy when they moved the goalpost to three. Truth is, people, it’s not over at three any more than it was over at zero. There are certain things that it would be nice to get done by the age of three. But if they’re not, the idea that it’s curtains is preposterous. It’s the same kind of fatalism that I thought we had defeated in the . . .

If you want to say that the goalpost should be at 30, then I’m open to it.

I asked what changes he would make to higher education:

GLADWELL: OK. I would establish a set of baseline criteria for admissions, and then I would have a lottery after that. So if you’re in the top 2 percent of your high school class — 5 percent, whatever cutoff we want — following test scores at a certain point, whatever cutoff we want, some minimum number of other things you do — you just go into the pot and we’re pulling out names. I’d probably triple or quadruple the size in the next 10 years, open campuses — probably two other campuses in the United States, one overseas.

I had this idea, I’m not sure how you’d do it, where I think that it would be really, really useful to ban graduates of elite colleges from ever disclosing that they went to an elite college.

I thought the Steve Pearlstein material was perhaps Malcolm’s highlight, but you need to read it straight through.

Here is a very short bit from me:

Most of my questions will be quite short, but my first question will be really, really long. Since everyone knows you and your work so well, I asked myself, “Who is Malcolm Gladwell?” And I tried to come up with an answer. I’ll give you my answer, and then you can correct me or add to that, and this will take a little while.

Definitely recommended.