Senior state department officials who would normally be called to the White House for their views on key policy issues, are not being asked their opinion. They have resorted to asking foreign diplomats, who now have better access to President Trump’s immediate circle of advisers, what new decisions are imminent.

…“My nagging suspicion is that the White House is very happy to have a vacuum in the under-secretary and assistant secretary levels, not only at state but across government agencies, because it relieves them of even feeling an obligation to consult with experts before they take a new direction.”

Here is the article, solve for the equilibrium…

Today I spoke at Brookings India on Online Education and India. One of the things I discussed was how online technology and AI can dynamically adjust content to the needs of an individual learner. An Indian firm, Mindspark, is a leader in mathematics education that is synchronized to an individual student’s actual ability regardless of grade. The ubiquitous Karthik Muralidharan with co-authors Abhijeet Singh and Alejandro Ganimian have an important paper doing a RCT on Mindspark, finding large gains in math ability and also in Hindi ability for students who win vouchers to the program. David Evans at Development Impact the World Bank blog has an excellent post on the Mindspark RCT.

I want to focus on a different issues: the personalization of education is especially important in India because classes often contain students of widely different abilities. Here’s a graph from Muralidharan et al. showing the student’s grade along the horizontal axis with the student’s actual ability on the vertical axis. The students are drawn from a sample of Delhi public schools.

Grades

The graph shows two things of importance. First, if most students were operating at grade level the dots/students would be clustered around the blue line. But very few students in grade 6 are operating at a grade 6 level–most are operating at a grade 3 or 4 level and some even at a lower level. The distribution of ability level in the same grade is extreme. No math teacher can be expected to teach students in the same class who are operating at grade levels 2-7. Even if the teacher teaches to the level of the average student the material will go over the heads of many. As a result, many students do not progress. Indeed, the second point is shown by the red line, the best-fit line for academic growth. The growth in achievement is slower than the growth in the standard. As a result, over time students fall further and further behind the standard.

Keeping all students in the same grade at a similar level of ability would be excellent and the best way to do this is by teaching to a student’s actual ability but the only way to do that on an economical basis is through online learning and AI technology.

There’s two versions of this.

1. One or a small group of entrepreneurs owns the robots.

2. The government owns the robots.

I see how we get from where we are now to 1. How would we get to 2, and is 2 better than 1?

That is a comment and request from Mark Thorson.  It’s embedded in a longer thread, but I suspect you can guess the context.

I would focus on a prior question: what is government in a world where everything is done by the robots?  Say that most government jobs are performed by robots, except for a few leaders (NB: Isaac Asimov had even the President as a robot).  It no longer makes sense to define government in terms of “the people who work for government” or even as a set of political norms (my preferred definition).  In this setting, government is almost entirely people-empty.  Yes, there is the Weberian definition of government as having a monopoly on force, but then it seems the robots are the government.  I’ll come back to that.

You might ask who are the residual claimants on output.  Say there are fifty people in the government, and they allocate the federal budget subject to electoral constraints.  Even a very small percentage of skim makes them fantastically wealthy, and gives them all sorts of screwy incentives to hold on to power.  If they can, they’ will manipulate robot software toward that end.  That said, I am torn between thinking this group has too much power — such small numbers can coordinate and tyrannize without checks and balances — and thinking they don’t have enough power, because if one man can’t make a pencil fifty together might not do better than a few crayons.

Alternatively, say that ten different private companies own varying shares of various robots, with each company having a small number of employees, and millions of shareholders just as there are millions of voters.  The government also regulates these companies, so in essence the companies produce the robots that then regulate them (what current law does that remind you of?).  That’s a funny and unaccustomed set of incentives too, but at least you have more distinct points of human interaction/control/manipulation with respect to the robots.

I feel better about the latter scenario, as it’s closer to a polycentric order and I suspect it reduces risk for that reason.  Nonetheless it still seems people don’t have much direct influence over robots.  Most of the decisions are in effect made “outside of government” by software, and the humans are just trying to run in place and in some manner pretend they are in charge.  Perhaps either way, the robots themselves have become the government and in effect they own themselves.

Or is this how it already is, albeit with much of the “software” being a set of social norms?

Replacing social norms by self-modifying software –how big of a difference will it make for how many things?

Here are some names that could fit the bill according to the folks at DB:

Kevin Warsh – currently a visiting fellow at the Hoover Institution, he served on the Board of Governors from 2006 until 2011. The report described him as “an experienced private financial market practitioner with strong Republican credentials”.

Jerome Powell – a current Fed governor “viewed as having conventional/centrist views about the economy and markets with slightly hawkish leanings”.

John Taylor – an economics professor at Stanford whose views “would fit with Republican views for a more rules-based Fed.” But, the report added, “his policy leanings — more aggressive rate increases and the stronger dollar that would result — would work against Trump’s pro-growth agenda.”

John Cochrane – another professor, from the University of Chicago with conservative leanings, whose “recent research has delved into more unorthodox topics, such as whether Fed policy rates and inflation could be positively related, i.e., that low policy rates may lead to low inflation and vice versa.”

That is from Jessica Dye at the FT, expect the list of names to evolve with time.

That is the new and excellent book by Jonathan Buchsbaum, offering the first comprehensive history of the debates over free trade and the “cultural exception,” as it has been called.  It is thorough, readable, and goes well beyond the other sources on this topic.

To be sure, I disagree with Buchsbaum’s basic stance.  He views “advertising dollars” as something attached to Hollywood movies like glue, giving them an unassailable competitive advantage, rather than an endogenous response to what viewers might wish to watch.  The notion that French or other movie-makers could possibly thrive by innovating and exploring new quality dimensions seems too far from his thought.  And he writes sentences such as: “France sought quickly to regulate multiplex development,” yet without wincing.

Perhaps his best sentence is the uncharacteristic: “Other commentators during the 1980s observed wryly that the only real European films were U.S. films, for only U.S. films succeeded in crossing borders in Europe.”

He spends a fair amount of time criticizing me, usually a positive feature in a book.  Furthermore, he delivers very strongly on the basic history and narrative, and draws upon a wide variety of sources.  So this one is definitely recommended to anyone with an interest in these topics.

That is the theme of my latest Bloomberg column, here is the opening bit:

“Why should it be different this time?” That’s the most common response I hear when I raise concerns about automation and the future of jobs, and it’s a pretty simple rejoinder. The Western world managed the shift out of agricultural jobs into industry, and continued to see economic growth. So will not the jobs being displaced now by automation and artificial intelligence lead to new jobs elsewhere in a broadly similar and beneficial manner?

And:

Consider, for instance, the history of wages during the Industrial Revolution. Estimates vary, but it is common to treat the Industrial Revolution as starting around 1760, at least in Britain. If we consider estimates for private per capita consumption, from 1760 to 1831, that variable rose only by about 22 percent. That’s not much for a 71-year period. A lot of new wealth was being created, but economic turmoil and adjustment costs and war kept down the returns to labor. (If you’re wondering, “Don’t fight a major war” is the big policy lesson from this period, but also note that the setting for labor market adjustments is never ideal.)

By the estimates of Gregory Clark, economic historian at the University of California at Davis, English real wages may have fallen about 10 percent from 1770 to 1810, a 40-year period. Clark also estimates that it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all.

From that turmoil, we also received Marxism and agricultural subsidies for generations!  Do read the whole thing

Thursday assorted links

by on February 16, 2017 at 2:38 am in Uncategorized | Permalink

China has banned almost 7m people from taking flights and high-speed trains over the past four years as a penalty for not repaying their debts, the country’s Supreme Court has announced.

The penalty system is part of efforts to build a nationwide “social credit” system that will eventually rate every Chinese citizen by collecting big data on financial, legal or social misdeeds. The debtors’ travel ban has been touted as an important first step for building the structural links needed to implement such a comprehensive monitoring programme.

“We have signed a memorandum . . . [with over] 44 government departments in order to limit ‘discredited’ people on multiple levels,” Meng Xiang, head of the executive department of the Supreme Court, told state media on Wednesday.

…In addition to not paying debts on time, one can also be blacklisted for lying in court, hiding one’s assets and a host of other crimes. The Supreme Court said on Tuesday it was working on adding new forms of penalties.

Here is the FT story by Yuan Yang.  Keep in mind that the country does not have a real personal bankruptcy law, nor well-developed credit institution penalties, so this is viewed as one of the few options available.

*The Complacent Class* event

by on February 15, 2017 at 11:52 am in Books, Uncategorized | Permalink

Katherine Mangu-Ward will interview me, here are the details.  That is March 6, 6:00pm7:00pm, Founders Hall Auditorium George Mason University – Arlington Campus, 3351 Fairfax Drive, Arlington.

complacentclassphotocover

 

One of my favorites, David was great, here is the link to the podcast, video, and transcript.  Here is the opening summary of the chat:

Named one of the most influential Jewish thinkers of our time, Rabbi David Wolpe joins Tyler in a conversation on flawed leaders, Jewish identity in the modern world, the many portrayals of David, what’s missing in rabbinical training, playing chess on the Sabbath, Srugim, Hasidic philosophy, living in Israel and of course, the durability of creation.

Here are a few bits:

WOLPE: So as my friend Joseph Telushkin says, “Polygamy does exist in the Bible, it’s just never successful.” David does have many wives, and very strained and interesting and complex relationships with women. David has the most complicated and most described relationships with women of any character in the Hebrew Bible.

Those qualities that can be negative, in David are to some extent positive. One of the things that draws David out of the charge of simple narcissism is that he really listens, he pays attention — he pays attention to women over and over again. He listens to what they say and changes himself because of it. And that’s not a characteristic of men in the ancient world or the modern one that you can rely on.

And:

COWEN: So again, I’m an outsider in this dialogue, but say I were thinking of converting to Judaism and I were asking you about Hasidic philosophy. Now in terms of some social connections, I probably would fit better into your congregation than into a Hasidic congregation. But if I ask you, on theological grounds alone, is there a reason why I should be hesitant about Hasidic philosophy? From the point of view of theology, what do you think is the greatest weakness there, or your biggest difference with it, given how much you like Heschel?

And:

COWEN: How would you alter or improve rabbinical training?

WOLPE: I’ve given this a lot of thought. Let me just mention one area. When I speak to rabbinical students, I tell them all the time that the single most valuable commodity you have as a rabbi . . . you can answer that yourself, and then I’ll tell you what I think: your voice. Most people are going to come in contact with you when you speak to them. Not all of them, but most. There’ll be more people who come to your services than the number of people at whose bedside you will sit as they die.

And yet, most rabbis — most people — don’t know how to speak.

There is much more at the link, including about Israeli TV, where to visit in Israel, whether King David parallels Trump, the future of biblical commentary in a world of context-less social media, whether Canadian Jews are more likely to stick with the faith, whether Los Angeles is underrated, what is beautiful and significant in Islam, and the Iran nuclear deal and the settlements, among other topics.  Self-recommending…

And again, here is David Wolpe’s most recent book David: The Divided Heart, which was the centerpiece for the first part of the discussion.

The Pathology of Domestic Aid

by on February 15, 2017 at 5:19 am in Uncategorized | Permalink

Arvind Subramanian, Chief Economic Adviser to the Government of India, and co-authors have a nice summary of the effect of internal domestic aid on governance (the longer version is a chapter in the excellent Indian Economic Survey.) The bottom line is this:

The evidence suggests that all the pathologies associated with foreign aid appear to manifest in the context of intra-country transfers too

In particular, using one measure of aid to states, Redistributive Resource Transfers or RRT the authors find:

rrtHigher RRT seem to be associated with:

  1. Lower per capita consumption
  2. Lower gross state domestic product (GSDP) growth
  3. Lower fiscal effort (defined as the share of own tax revenue in GSDP)
  4. Smaller share of manufacturing in GSDP, and
  5. Weaker governance.

Causality likely goes both ways of course but using an instrumental variable of distance to New Delhi (which correlates with transfers) the authors find suggestive evidence, as shown in the figure, that transfers are a cause of weaker governance.

It’s interesting to read an official government report which discusses instrumental variables!

For years, muscular dystrophy patients in the United States have been purchasing the drug deflazacort — used to stabilize muscle strength and keep patients mobile for a period of time — from companies in the United Kingdom at a manageable price of $1,600 a year.

But because an American company just got approval from the Food and Drug Administration to sell the drug in the United States, the price of the drug will soar to a staggering $89,000 annually, the Wall Street Journal reported last week.

Because the FDA restricts the importing of drugs from overseas if a version is available domestically, patients are stuck with the new, expensive version. This makes deflazacort the perfect case for advocates of international drug reciprocity — a reform that would make it easier for consumers to buy drugs that have been approved in other developed countries.

That is the introduction to an interview with yours truly in the Washington Post. I discuss thalidomide and the race to the bottom argument. Here is one other bit:

IT: Do you have any thoughts about the potential for FDA reform under this new administration and Congress?

AT: Peter Thiel’s speech at the Republican National Convention reminded us that we used to take big, bold risks — like going to the moon. Today, to say a project is a “moon shot” is almost a put-down, as if going to the moon never happened. We have become risk-averse and complacent, to borrow a term from my colleague Tyler Cowen. The result of the incessant focus on safety is playgrounds without teeter totters, armed guards at our schools and national monuments, infrastructure projects that no longer get built, and pharmaceutical breakthroughs that never happen.

The new administration is unpredictable, but when it comes to the FDA, unpredictable is better than business as usual.

The administration has yet to appoint a great FDA commissioner. Early names floated included Balaji Srinivasan, Jim O’Neill, Joseph Gulfo, and Scott Gottlieb but Srinivasan seems to have removed himself from the running. O’Neill would be great but I don’t think the US is ready, so that leaves Gulfo and Gottlieb. My suspicion is that Trump will like Gulfo because of Gulfo’s entrepreneurial experience but, as I said, the new administration is unpredictable.

Max Méndez Beck phrased it this way:

what do you think is the most multicultural (minimal segregation while having great ethnic diversity) city in the world?

Toronto springs to mind as a candidate, but it is increasingly expensive and perhaps more ethnically segregated than it used to be or at least more segregated by income and class.  Montreal is gaining on it by this metric.  Sydney is likely in the top ten, but too many parts are posh to be #1.  Sao Paulo has so many ethnicities, but when you get right down to it they are all Brazilians.  Don’t laugh, but Geneva might be in the running, both because of immigrants crowded near the center and the city’s international organizations.  But perhaps I will settle on Brooklyn, which if it were its own city would be the fourth largest in the United States.  (I love Queens, but have a harder time calling it a city.)  Brooklyn has recent arrivals from almost the entire world, and even the very nicest of neighborhoods are usually not so far from the poorer areas.  Still, if you refuse to count Brooklyn, it is striking that Montreal has a real chance of topping this list: wealthy enough to bring in foreigners, not so wealthy as to price them away.

Yes, the survey of “works of reaction” will continue, at what speed I am not sure.  I picked up Julius Evola, in particular his Revolt Against the Modern World, because of a recent NYT article claiming Evola’s influence over Steve Bannon.  I don’t consider the cited evidence for a connection as anything other than tenuous, but still the book was only a click away and Evola was a well-known Italian fascist and I’ve been reading in that area anyway (read in areas clusters!).  I read about 70-80 pages of it, and pawed some of the rest.  I was frustrated.  Upon revisiting the book, here is the passage I opened up to at random:

If on the one hand the original synthesis of the two powers is reestablished in the person of the consecrated king, on the other hand, the nature of the hierarchical relationships existing in every normal social order between royalty and priestly case (or church), which is merely the mediator of supernatural influences, is very clearly defined: regality enjoys primacy over the priesthood, just as, symbolically speaking, the sun has primacy over the moon and the man over the woman.

He then went on about sacrifices and “the priestly regality of Melchizedek.”  In later life, Evola sported a monocle over his left eye, and if you are wondering he did have a reputation as an anti-feminist theorist.  Oh give me the clarity of Mosley and Dugin!

I’ve been pawing through de Maistre and de Bonald as well, I’ll let you know if I find anything interesting there.  In the meantime, someone needs to write an Atlantic article about the much-neglected connection between Alt Right and mystical ideas.

Tuesday assorted links

by on February 14, 2017 at 2:24 pm in Uncategorized | Permalink