5. AIG in hindsight.
6. “In fact, though the parents may not realise it, many interviewers watch the parents more closely than the child, Jenny suggests…And if parents bring in a portfolio listing the playgroups and classes their toddler has attended, and the places they have been on holiday – as some do – she doesn’t look at it.” And David Brooks on parental love.
Chad writes me:
What jobs (particularly ones we think of as being inherently beneficial to society) might America have too many of? Political journalism comes to mind this particular month, since we apparently have enough to carefully monitor the Chipotle orders of presidential candidates 19 months before the election. Writers might be another, particularly in a world of self-publishing.
One can imagine lots of reasons for a greater-than-optimal number of people in a particular profession, from government subsidies to cultural biases, but I’m curious if you have a gut feeling about any professions in particular.
A good question, in my view the answer is not so simple. Writers and artists are indeed a possible nomination, but some of the demand for these professions is likely for consumption, which makes the overinvestment difficult to judge. And what about lawyers? Relative to the number of laws and regulations (too many in my view, but take them as given), it is not obvious to me that we have too many lawyers. Someone has to tell companies when it is safe to proceed, or not.
How about too many people selling medical devices and other high margin items? Too many people making alcohol? Too many people raising and selling animal meat? Those would be my picks.
The finance sector is another obvious culprit, but as a fraction of wealth I do not think it is larger than in the past. Admittedly people in the finance sector may be engaging in the wrong activities, but I am not sure the case for fewer employees per se is so obvious. Still, it is another candidate, if only because it (often) involves people selling high-margin items.
At a growing number of campuses, professors now attach “trigger warnings” to texts that may upset students, and there is a campaign to eradicate “microaggressions,” or small social slights that might cause searing trauma. These newly fashionable terms merely repackage a central tenet of the first p.c. movement: that people should be expected to treat even faintly unpleasant ideas or behaviors as full-scale offenses.
Read his whole discussion, but he more or less disapproves. I’ve long wanted to disagree with Chait “from the left,” and it seems this is my chance, I had better grab it while I can.
While teaching Law and Literature this year, I attached very gentle, low key “trigger warnings” to a number of items on the syllabus, namely those dealing with extreme violence, rape, and some other very unpleasant situations. I am glad I did this. I told students that if they preferred to do a substitute assignment, I could arrange that. Is that so unreasonable? There were no takers, but I don’t see it did anyone harm or limited free speech in the classroom (or outside of it) to make this offer. If anything, it may have eased speech a slight amount by noting it is OK to feel uncomfortable with some topics, or at least serving up that possibility into the realm of common knowledge. That struck me as better and wiser than simply pretending we were studying the successful operation of the Coase theorem the whole time.
I don’t doubt that trigger warnings may be misused in some situations by some professors, but overall they seem to me like another small step to a better world. I do agree we need to liberate trigger warnings from the strictures of the PC movement, no argument there.
Addendum: I am pleased to see that GMU was moved into the highest category for university free speech, according to FIRE.
6. Data is the new middle manager (WSJ).
Here is a long and excellent post, whereby Robin outs himself as a strange kind of environmentalist. Do need the whole thing, but here is one summary excerpt:
So, bottom line, the future great filter scenario that most concerns me is one where our solar-system-bound descendants have killed most of nature, can’t yet colonize other stars, are general predators and prey of each other, and have fallen into a short-term-predatory-focus equilibrium where predators can easily see and travel to most all prey. Yes there are about a hundred billion comets way out there circling the sun, but even that seems a small enough number for predators to careful map and track all of them.
“At first they came for the rabbits…and then they came for me.” I find that intriguing, but I have a more marginalist approach, and perhaps one which encompasses Robin’s hypothesis as a special case. The death of human (and other) civilizations may be a bit like the death of the human body through old age, namely a whole bunch of things go wrong at once. If there were a single key problem, it would be easier to find a patch and prolong things for just a bit more. But if we have reason to believe that, eventually, many things will go wrong at once…such a concatenation of problems is more likely to defeat us. So my nomination for The Great Filter, in a nutshell, is “everything going wrong at once.” The simplest underlying model here is that a) problems accumulate, b) resources can be directed to help solve problems, and c) sometimes problems accumulate more rapidly than they can be solved.
This is also why, in many cases, there is no simple “fact of the matter” answer as to why various mighty empires fell in the past. Here is my earlier review of Apocalypto, a remarkable and still underrated movie.
Let’s say that you and a casual friend meet for lunch two or three times a year, but otherwise have little contact. One day you would say to the friend “let’s become Batman and Robin and fight violent crime together in Gotham City, trusting our lives to each other along the way. We’ve built up trust through these lunches, and besides if you say no I will yank the lunches away to your detriment.”
Hardly anyone would think that is a workable arrangement. I would say there was not enough social capital built up in those lunches to make the larger cooperative venture sustainable. Repeatedly citing the social benefits of a Batman-Robin alliance would miss the point of this critique.
I also read people arguing the global trade agreements should be used to enforce carbon emissions policy. Similarly, I believe there is simply not enough political and social capital built into those trade agreements. They are limited and rickety as it stands, and could not sustain the force of initiating what the Chinese would consider to be an act of economic warfare.
Now, let’s consider Greek default. As Wolfgang Münchau suggests (and I think many agree), Greece should default to the IMF but stay inside the eurozone, or alternatively the IMF can just let Greece off the hook. The economics of that argument make sense. But does the IMF have enough embedded political capital to let Greece off the hook, when they deny credit to much poorer countries? Does the IMF have enough capital and credibility to relieve Greece of that debt, and then return to its previous policies of simply not accepting any defaults? What about the poorer countries in the eurozone — poorer than Greece — who do not receive comparable breaks? How is this all supposed to work? Or is it simply asking too much of the IMF?
We are about to learn how much embedded political capital is in the IMF. I say 70-30 this cannot work, it is too late to suddenly turn the IMF into what it ought to be, one problem of many being that the United States simply has not cared enough. Developing…and we’ll know more soon…
2. The esoteric Adam Smith (Dan Klein video). And Tim Harford’s FT piece on what British economists recommend doing.
3. The highest-grossing restaurants in America, via the estimable Chug.
That is the next NBER macro paper at these sessions, by Fang, Gu, Xiong, and Zhou, here is the pdf. The abstract is this:
We construct housing price indices for 120 major cities in China in 2003-2013 based on sequential sales of new homes with the same housing developments. By using these indices and detailed information on mortgage borrowers across these cities, we find enormous housing price appreciation during the decade, which was accompanied by equally impressive growth in household income,e xcept in a few first tier cities. Housing market participation by households from the low-income fraction of the urban population remained steady. Nevertheless bottom-income mortgage borrowers endured several financial burdens by using price to‐income ratios over eight to buy homes, which reflected their expectations of persistently high income growth into the future. Such future income expectations could contract substantially in the event of a sudden stop in the Chinese economy and present an important source of risk to the housing market.
2. What is the best combination of people to achieve maximum height in a human pyramid? (“Questions that are rarely asked”)
That is a new must-read post from Dani Rodrik. Here is a pieced-together excerpt:
…low domestic saving has been the perennial constraint on the Turkish economy…Under Erdogan, the constraint has become ever more binding, as the saving rate (and particularly, the private saving rate) has come down…
So how has Turkey overcome this constraint over the last 12 years? By applying the same recipe of macroeconomic populism it has always relied on to generate growth – by borrowing, especially short-term, to sustain domestic consumption and investment. This strategy typically bears fruit as long as finance is cheap and available. But it comes at the cost of accumulating fragility and increased vulnerability to reversals in financial market sentiment. It often ends up in crisis as the funds dry up.
The novelty under AKP is that the populist strategy was modified in two respects. First, there was much greater reliance on foreign capital inflows and less reliance on printing money. Second, there was a switch from public-sector to private-sector borrowing.
There are useful pictures at the link.