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Is education overrated?  Or did the real industrial revolution not come until the latter part of the nineteenth century?  Or maybe a bit of both?  Here is new research by B. Zorina Khan (pdf):

Endogenous growth models raise fundamental questions about the nature of human creativity, and the sorts of resources, skills, and knowledge inputs that shift the frontier of technology and production possibilities. Many argue that the nature of early British industrialization supports the thesis that economic advances depend on specialized scientific training, the acquisition of costly human capital, and the role of elites. This paper examines the contributions of different types of knowledge to British industrialization, by assessing the backgrounds, education and inventive activity of the major contributors to technological advances in Britain during the crucial period between 1750 and 1930. The results indicate that scientists, engineers or technicians were not well-represented among the British great inventors, and their contributions remained unspecialized until very late in the nineteenth century. For developing countries today, the implications are that costly investments in specialized human capital resources might be less important than incentives for creativity, flexibility, and the ability to make incremental adjustments that can transform existing technologies into inventions that are appropriate for prevailing domestic conditions.

For the pointer I thank David Levey.

Wednesday assorted links

by on July 20, 2016 at 12:58 pm in Uncategorized | Permalink

1. A survey of the evidence on alphabetic discrimination.  It is real.

2. What went wrong with the Concorde?

3. Where does the New Jersey Italian-American accent come from?

4. Data on retirement insecurity: “The percentage of workers very confident about having enough money for a comfortable retirement, at record lows between 2009 and 2013, increased from 13 percent in 2013 to 22 percent in 2015, and, in 2016 has leveled off at 21 percent. The percentage of workers somewhat confident increased from 36 percent in 2015 to 42 percent in 2016, while the percentage not at all confident decreased from 24 percent in 2015 to 19 percent in 2016.”  And here is a complex discussion of SSA estimates.

5. The new science of cute the culture that is Japan — “Nobody is cute in Shakespeare.”

6. “It seems to me that news events over the past twelve months or so have put a strain on those who are inclined to view human nature as good.

Tuesday assorted links

by on July 19, 2016 at 1:45 pm in Uncategorized | Permalink

1. How sex workers verify the identities of their clients.

2. Chat at the Institute for Economic Affairs with Stephen Davies.  We covered Brexit, Trump, the great stagnation, why you won’t live to 800, cultural diversity, and much more.  I wasn’t holding back for this one, and some crowd members were appalled.

3. David Beckworth interviews Bob Hall.

4. Africa’s motorcycle taxi.  And Chris Blattman on botox and related matters Romer.  And Paul Romer on Paul Romer.

5. Has China reached peak urbanization?

6. Against dichotomies for understanding Turkish society — Jenny B. White from 2015.

Yes, globalization, immigration, and wage stagnation are all factors, not to mention the cultural issues.  But there is another culprit: inadequate savings.  This, by the way, helps explain why so much of the Trump support comes from relatively old people.  Here is one bit from my Bloomberg View column today:

Social Security is already the primary source of income for retired Americans, yet Social Security benefits for the elderly average only $16,000 a year, and traditional private-sector pensions have dwindled in importance.

When it comes to comparative retirement security, in an international comparison the United States finished 19th for three years in a row. Even relatively optimistic assessments suggest that only about 28 percent of American households will be able to maintain their pre-retirement living standards.

…As for today’s 45-to-69-year-olds, only 36 percent claim to be engaging in net savings. And only 45 percent of all people earning $75,000 to $100,000 a year claim to have net positive savings, as measured in 2012. That helps explain why the typical Trump voter in the Republican primaries earned a relatively high income of about $72,000 a year and still worried about his or her economic future.

We all know that falling incomes often have more political salience than low incomes.  Furthermore this weakness of the American economy does not show up in either gdp or unemployment statistics.  My conclusion is this:

Trump is himself often portrayed as impetuous. It is less commonly remarked that he may be in part the result of a broader and larger impatience that has plagued American society for decades.

Do read the whole thing.

Addendum: Here is commentary from Kevin Drum but I do not think he rebuts the estimates that consumption levels will be declining, often significantly, for a big chunk of this population.

Households making $25,000-$35,000 a year spend ninety-two more minutes a week online than households making $100,000 or more a year in income, and differences vary monotonically over intermediate income levels.

That is from a new NBER paper by Boik, Greenstein, and Prince.  Do note that the authors adjust for age and other demographic variables.

The upshot is that the real “undervalued” services from the internet come from its risk-sharing properties, not from the supposed lack of pricing of internet services.  If something bad happens to you, well…there is always the internet to fall back upon, at least provided you still can afford the connection.  This also means that business cycles are not quite as painful as before, but also that labor markets will be slower to adjust.

Some also may find in this fact an optimistic statement that “real life” (ha ha) has more to offer than the internet, with the caveat that real life is expensive.

The data in this very interesting paper also indicate that Chat has largely collapsed since 2008 as a way of spending time on the internet, internet time devoted to news sites has fallen from 10% to 5%, and social media and video are on the rise.

Here is my previous post “Let them eat ideology!”

Monday assorted links

by on July 18, 2016 at 11:50 am in Uncategorized | Permalink

1. Dani Rodrik on Turkey’s baffling coup.

2. A tale of our times, from Eli Dourado.  “I don’t blame him for his lifestyle, economically it makes sense.”

3. China is relying all the more on credit and state fixed investment.

4. Food at Bowdoin vs. food at Vassar.

5. Profile of Martha Nussbaum.  “Last year, Nussbaum had a colonoscopy. She didn’t want to miss a workday, so she refused sedation. She was thrilled by the sight of her appendix, so pink and tiny. “It’s such a big part of you and you don’t get to meet these parts,” she told me. “I love that kind of familiarization: it’s like coming to terms with yourself.”

6. There is no great fraud stagnation in the sharing economy.

Here is my next column from Bloomberg View, here is one excerpt:

The broader and more disturbing implication is that the entire global economy may be more vulnerable to mood swings. Our peers influence our moods, but today’s peers are more global than ever because of social media and the spread of satellite and cable television. That could make a given mood swing in one nation or region more potent and further-reaching than before.

Insofar as pessimistic moods spread across borders more readily, the notion of safe havens will weaken. There is a longstanding result in financial research that in bad times national stock markets move together more closely, and in ways that may not be justified fully by fundamentals. It is now common for some cross-country stock indices to have correlations as high as 0.8, which was unprecedented several decades ago. In the 1970s those same correlations might have been 0.4 or lower yet.

Unfortunately, contagion may be more dangerous than in the past, because right now the world is not in such an ideal place…

As for finance and investment, higher contagion rates will mean that many assets have higher systemic risk and lower diversification value, because they are not well insulated from the travails of the global economy. “Decoupling” is now recognized to be largely a myth. That may be one reason why negative nominal yield securities are so popular and seem to be sustainable, contrary to expectations but a few years ago.

The growing contagion of mood swings also may be a factor behind the slowdown in economic globalization. Why go to the trouble of investing abroad, for instance, if those assets do not yield much risk protection compared to one’s home market?

The most disturbing possibility may be that in today’s world, bad moods spread across borders more readily than good moods. The most nefarious sign of this is the apparent effectiveness of social media in radicalizing some people at a distance and turning them into violent perpetrators.

Do read the whole thing.

Bryan Caplan writes:

The fact that Londoners showed little sympathy for Brexit is telling: People who experience true mass immigration first-hand tend to stop seeing it as a problem.  “Backlash,” as Tyler Cowen calls it, is a symptom of insufficient migration – the zone where immigrants are noticeable but not ubiquitous.  I know he disagrees, but I honestly can’t figure out why.

The post makes many other different and interesting points, but I’ll stick with this one.  Here goes:

1. Had the UK had much freer immigration, London would be much more crowded.  With truly open borders, people would be sleeping on the sidewalks in large numbers.  London itself would have turned against such a high level of immigration, which quickly would have turned into a perceived occupation.

2. Changes often have different effects than levels: “Where foreign-born populations increased by more than 200% between 2001 and 2014, a Leave vote followed in 94% of cases. The proportion of migrants may be relatively low in Leave strongholds such as Boston, Lincolnshire, but it has soared in a short period of time. High numbers of migrants don’t bother Britons; high rates of change do.”

In other words, had there been higher levels of immigration into non-London parts of the UK, the backlash may well have been stronger yet.  For a careful reader of the Caplanian corpus, that is in fact a Caplanian point and I am surprised it did not occur to Bryan.

3. The highest quality and most easily assimilating immigrants will be attracted to London and the greater London area.  Packing Birmingham with London-style levels of immigration won’t give you London-style immigrants, nor will it turn Birmingham into London.

4. London already has a population pre-selected to like immigration.  Spreading London-like levels of immigration to the rest of England wouldn’t make immigration as popular elsewhere as it is currently in London, even if that immigration went as well elsewhere (which would not be the case, see #3).

5. Post 1980s, England underwent a very rapid and significant change with respect to the number of immigrants it allowed to stay in the country.  If that wasn’t fast enough for the open borders idea to avoid a backlash along the way, then perhaps the new saying ought to be “Only whiplash avoids backlash.”  But that won’t exactly be popular either.

There is a very simple interpretation of current events, including of course the Trump movement in the United States.  It is “the backlash effect against immigration is stronger than we used to think, and we need to adjust our expectations accordingly.”  When Bryan writes “I know he disagrees, but I honestly can’t figure out why”, I think he is simply afraid to stare that rather obvious truth in the eye.  In any case, it’s staring rather directly at him.

Here is my first column for Bloomberg View (more on that transition soon), on the research of Erik Myersson:

In autocracies, successful coups often improve economic performance, perhaps by replacing an incompetent or malevolent leader. In democratic countries, however, a successful coup is associated with lower per capita growth rates by an average of 1 to 1.3 percentage points per year over the following decade. On average, these coups reverse beneficial economic reforms, especially for the financial sector.

When a coup does overthrow a democratically elected government, it tends to bring a military leader and significant changes in policy, and not usually for the better. There are long-run correlations of such successful coups against democracies with lower investment, lower schooling and higher infant mortality.

…for failed coups in democracies the more general historical results are quite different. In fact, they are difficult to distinguish from no economic growth effects at all. Given the various imprecisions of statistics, this does not prove that failed coups will have no growth effects, but it can be said that the numbers give us no clear reason to be worried, at least not over the 10-year time horizon chosen by Meyersson. This may be one reason why asset markets do not seem to be panicking over the failed Turkish coup attempt.

To be sure, there are some possible or even likely short run effects of the recent turmoil, such as declines in tourism or foreign investment. Still, the data as a whole are showing that the long-run fundamentals of democracies with failed coups tend to reassert themselves within the 10-year time horizon, and those short-run disruptions end up mattering less than we might think.

Do read the whole thing.  You will note that shares of the Turkish closed end mutual fund are still up about thirteen percent for the year (FT link), though down 2.5 percent at Friday’s close.

Now if Turkey had left the European Union, that would be a different matter altogether…

Sunday assorted links

by on July 17, 2016 at 7:32 am in Uncategorized | Permalink

Saturday assorted links

by on July 16, 2016 at 12:48 pm in Uncategorized | Permalink

1. “My most important advice here is stark and politically very incorrect: Don’t give too much weight to the social importance of the issue; instead, do what captures your intellectual interest and creative imagination.” That is from Avinash Dixit (pdf).

2. How Viennese culture shaped Austrian economics, includes a video on what a painting can tell us about Austrian economics.

3. A simple guide to Brexit trade negotiations, a very good piece with many lessons.

4. Singapore is getting its own Michelin Guide.

Here is Naunihal Singh, writing at Monkey Cage a few years ago:

More fundamentally problematic, however, is the assumption that popular opinion has an impact on coups. Although this claim is common in political science, there is no evidence to support it. Over the course of writing my book, “Seizing Power: The Strategic Logic of Military Coups,” I spent 300 hours talking with participants in 10 coup attempts in Ghana and statistically analyzed the determinants of every coup attempt and outcome in the world from 1950 to 2000. Based on this evidence, I argue that there is no reason to believe that military factions hesitate to attempt coups when popular opinion is against them, or that coup attempts are more likely to fail when the populace is opposed.

Over the course of this research, I observed that conspirators devoted very little consideration during coup plotting to the question of how the population would react. Coup makers are largely convinced that their cause is just (even when the coup comes from a partisan or personal interest), and that they will have widespread popular support for their actions, with perhaps limited opposition coming from entrenched special interests.

…there is no relationship between economic growth rates and the likelihood of a coup. Similarly, there is no relationship between regime type and coup attempts. Even though democracies are presumed to have higher levels of legitimacy than other kinds of political regimes, they were no more or less likely to experience coup attempts. Lastly, coup attempts were actually more likely to occur during presidential election years, which suggests that conspirators were acting to thwart the popular will rather than being constrained by it.

…The bottom line is that the dynamics of a coup attempt are almost entirely internal to the military.

Read the whole thing.  Nam Kyu Kim dissents from some of those propositions.  Note that since early 2015, Turkish growth rates have been in the four to six percent range, hardly miserable.

Go to this link, and click on “Coup-proofing in Turkey.”  (Or try here.)  It is a recent 2006 account of what the Turkish government has tried to do to make the country coup-proof, by Gokhan Bacik and Sammas Salur.  They tried many institutional changes toward that end.  Here is one paragraph:

In terms of coup-proofing, the first issue is the military aspect. Gül is now the commander of the armed forces. First of all, any high level military appointment requires his consent. All major military appointments and promotions also require his official endorsement. Yet, the traditional alliance between the president and the army against the government was dissolved. In the past, the corridor between the army and the president worked so far as an instrument of influence over the political elites. The formula “army plus the president”, to remind six of the former presidents were generals, put the government into a restricted zone. Thus, by the fall of presidency, the officers lost a very important historical corridor that kept them legally in the political game. Now, putting aside a third costly option they should either obey the president or stop. Ironically, as a result of this situation, weekly meetings are scheduled between the prime minister and chief of staff as no routine tête-à-tête meeting ever took place before. The lack of such a regular meeting in the past was basically the army’s autonomous position. Gül’s presidency, a man out of the traditional Kemalist quota, weaken the traditional role of army vis a vis political elites.

It doesn’t seem it worked!  The paper nonetheless makes for interesting reading.  It talks about increasing power for the courts, changes to the intelligence services, increasing reliance on the police, and other attempted coup-proofing strategies in Turkey.  Note that in the past Turkish military coups have been relatively bloodless and swift; we’ll see if that is still the case.  If things do turn violent, which seems at least possible given what I am right now seeing on my TV screen, that suggests in some cases “coup-proofing” may be overrated.

Friday assorted links

by on July 15, 2016 at 11:53 am in Uncategorized | Permalink

1. Do you have a doppelganger?  The chance is higher than you might think.

2. What do scientists report as some of the main problems facing science?  Hint: one of them is “not enough money.”

3. Why pharma opposes pot legalization: “…in the 17 states with a medical-marijuana law in place by 2013, prescriptions for painkillers and other classes of drugs fell sharply compared with states that did not have a medical-marijuana law. The drops were quite significant…”

4. Mike Pence’s economic voting record.

5. Is Britain done as a Western power?  And the Financial Times and Cardiff Garcia do an overrated vs. underrated podcast with me, starts at 8:15.  (Self-recommending.)

6. From last year, my chat with Peter Thiel.

This is tentative, and I still will make further changes, so by all means please leave your suggestions in the comments.  The list is long, so I am putting it under the fold… Read More →