Climate change may be more expensive than we think
That is the topic of my latest Bloomberg column, here is the closing bit:
I am struck by the costs of climate change suggested in the UN’s Intergovernmental Panel on Climate Change report, hardly a source of denialism. Its cost estimate — “1 to 5% of GDP for 4°C of warming” — is relatively reassuring. After all, global GDP is right now growing at more than 4 percent a year. If climate change cost “only” 4 percent of GDP on a one-time basis, then the world economy could make up those costs with less than a year’s worth of economic growth. In essence, the world economy would arrive at a given level of wealth about a year later than otherwise would have been the case. That sounds expensive but not tragic.
Unfortunately, that is not the right way to conceptualize the problem. Think of the 4 percent hit to GDP, if indeed that is the right number, as a highly unevenly distributed opening shot. That’s round one, and from that point on we are going to react with our human foibles and emotions, and with our
highly imperfect and sometimes corrupt political institutions. (Libertarians, who are typically most skeptical of political solutions, should be the most worried.)
Considering how the Syrian crisis has fragmented the EU as well as internal German politics, is it so crazy to think that climate change might erode international cooperation all the more? The true potential costs of climate change are just beginning to come into view.
Tuesday assorted links
Get your money for nothin’ get your chicks for free
The manager of Dire Straits earned a percentage of their royalties and he’s selling a big chunk of it to the public. For $3,970–a little cheaper if you buy in bulk–you can get 1/925 of an asset which has been paying around $296,992 per year over the last year for an annual return of about 8%* (corrected from earlier)–that’s pretty good and the prospectus argues that growth in streaming and a forthcoming Mark Knopfler tour will increase royalties.
I think it would be pretty cool to hear Sultans of Swing on the radio and shout “turn it up!” because you knew were earning but only accredited investors need apply. In related news Matt Levine has an excellent piece on accredited investor rules and his alternative:
- Anyone can also invest in any other dumb investment; you just have to go to the local office of the SEC and get a Certificate of Dumb Investment. (Anyone who sells dumb non-approved investments without requiring this certificate from buyers goes to prison.)
- To get that certificate, you sign a form. The form is one page with a lot of white space. It says in very large letters: “I want to buy a dumb investment. I understand that the person selling it will almost certainly steal all my money, and that I would almost certainly be better off just buying index funds, but I want to do this dumb thing anyway. I agree that I will never, under any circumstances, complain to anyone when this investment inevitably goes wrong. I understand that violating this agreement is a felony.”
- Then you take the form to an SEC employee, who slaps you hard across the face and says “really???” And if you reply “yes really” then she gives you the certificate.
- Then you bring the certificate to the seller and you can buy whatever dumb thing he is selling.
Do moving and making big decisions tend to happen together?
We use exogenously determined, long-distance relocations of U.S. Army soldiers to investigate the impact of moving on marriage. We find that marriage rates increase sharply around the time of a move in an event study analysis. Reduced form exposure analysis reveals that an additional move over a five year period increases the likelihood of marriage by 14 percent. Moves increase childbearing by a similar magnitude, suggesting that marriages induced by a move are formed with long-term intentions. These findings are consistent with a model where the marriage decision is costly and relocation lowers the costs to making this decision. Our results have implications for understanding how people make major life decisions such as marriage, as well as the cost of migration.
That is from a new paper by Susan Payne Carter and Abigail Wozniak. It’s as if the move jolts you out of complacency and activates your long-term planning modules. Here are some bits from the paper, as assembled by an MR reader:
– …marriage rates rise sharply shortly before and in the first two months after a move.– Additional moves encourage marriage, raising the likelihood of marriage and of having children present as dependents.– The likelihood of marrying prior to five years of Army service rises by 8 percentage points with an additional domestic move, representing an increase of 14 percent from the mean marriage rate.– We first considered a model in which relocation likely requires investment in thinking about long-term plans that may simultaneously lower the cost of considering other types of long-term commitments, like marriage.– This suggests that the decision to marry may be affected by other events requiring long-term planning. This in turn implies that a disruptive event, like a relocation, may actually strengthen family ties rather than strain them.
For the pointers I thank two MR readers.
Reihan Salam on the immigration crisis
Here is Reihan in the WSJ (good photos!):
…we need to recognize that the immigration debate isn’t really about immigrants. In truth, it’s about the children of immigrants.
…Like it or not, we are a country with an implicit social contract. If we welcome you in as part of the flock, we also welcome your offspring. In past eras, high immigration levels were matched by high native birthrates. The end result was that, even if immigrants had large families, these second-generation youth were greatly outnumbered by the descendants of the native-born. Investing in the next generation meant investing in the children of immigrants, yes, but also in the children of natives, who, by virtue of their numbers, would set the cultural tone.
Collapsing native birthrates have changed the picture, setting off a cultural panic among the likes of Rep. Steve King, the Iowa congressman who infamously tweeted, “We can’t restore our civilization with somebody else’s babies.”
Here is Reihan’s new book Melting Pot or Civil War?: A Son of Immigrants Makes the Case Against Open Borders. Here is Katie’s sketch of my blurb:
Out today, and definitely recommended!
Monday assorted links
F.A. Hayek: Economics, Political Economy and Social Philosophy, by Peter J. Boettke
In the Great Thinkers in Economics series, buy it here. Here is a related podcast. This book is the result of Pete thinking about Hayek for now 35 (!) or so years. There are good criticisms of me on pp.61-65.
World War II and African American Socioeconomic Progress
Here is a job market paper from Andreas Ferrara, University of Warwick:
This paper argues that the unprecedented socioeconomic rise of African Americans at mid-century is causally related to the labor shortages induced by WWII. Results from combining novel military and Census data in a difference-in-differences setting show that counties with an average casualty rate among semi-skilled whites experienced a 13 to 16% increase in the share of blacks in semi-skilled jobs. The casualty rate also has a significant reduced form effect on cross-state migration, wages, home ownership, house value, and education for blacks. Using survey data from 1961, IV regression results indicate that the economic upgrade, which is instrumented with the semi-skilled white casualty rate, is also associated with an increase in social status. Both black and white individuals living in treated counties are more likely to have an interracial friendship, live in mixed-race neighborhoods, and to have reduced preferences for segregation.
Via John Holbein.
Syverson on Productivity
The FRB of Richmond has a great interview with Chad Syverson:
EF: Some have argued that the productivity slowdown since the mid-2000s is due to mismeasurement issues — that some productivity growth hasn’t been or isn’t being captured. What does your work tell us about that?
Syverson: It tells us that the mismeasurement story, while plausible on its face, falls apart when examined. If productivity growth had actually been 1.5 percent greater than it has been measured since the mid-2000s, U.S. gross domestic product (GDP) would be conservatively $4 trillion higher than it is, or about $12,000 more per capita. So if you go with the mismeasurement story, that’s the sort of number you’re talking about and there are several reasons to believe you can’t account for it.
First, the productivity slowdown has happened all over world. When you look at the 30 Organization for Economic Co-operation and Development countries we have data for, there’s no relationship between the size of the measured slowdown and how important IT-related goods — which most people think are the primary source of mismeasurement — are to a country’s economy.
Second, people have tried to measure the value of IT-related goods. The largest estimate is about $900 billion in the United States. That doesn’t get you even a quarter of the way toward that $4 trillion.
Third, the value added of the IT-related sector has grown by about $750 billion, adjusting for inflation, since the mid-2000s. The mismeasurement hypothesis says that there are $4 trillion missing on top of that. So the question is: Do we think we’re only getting $1 out of every $6 of activity there? That’s a lot of mismeasurement.
Finally, there’s the difference between gross domestic income (GDI) and GDP. GDI has been higher than GDP on average since the slowdown started, which would suggest that there’s income, about $1 trillion cumulatively, that is not showing up in expenditures. But the problem is that was also true before the slowdown started. GDI was higher than GDP from 1998 through 2004, a period of relatively high-productivity growth. Moreover, the growth in income is coming from capital income, not wage income. That doesn’t comport with the story some people are trying to tell, which is that companies are making stuff, they’re paying their workers to produce it, but then they’re effectively giving it away for free instead of selling it. But we know that they’re actually making profits. We might not pay directly for a lot of IT services every time we use them, but we are paying for them indirectly.
As sensible as the mismeasurement hypothesis might sound on its face, when you add up everything, it just doesn’t pass the stricter test you would want it to survive.
And he makes an excellent point about the potential productivity growth from AI
…it seems that with some fairly modest applications of AI, the productivity slowdown goes away. Two applications that we look at in our paper are autonomous vehicles and call centers.
About 3.5 million people in the United States make their living as motor vehicle operators. We think maybe 2 million of those could be replaced by autonomous vehicles. There are 122 million people in private employment now, so just a quick calculation says that’s an additional boost of 1.7 percent in labor productivity. But that’s not going to happen overnight. If it happens over a decade, that’s 0.17 percent per year.
About 2 million people work in call centers. Plausibly, 60 percent of those jobs could be replaced by AI. So when you do the same kind of calculation, that’s an additional 1 percent increase in labor productivity; spread out over a decade, it’s 0.1 percent per year. So, from those two applications alone, that’s about a quarter of a percent annual acceleration for a decade. So you only need maybe six to eight more applications of that size and the slowdown is gone.
Read the whole thing. There’s no fluff in this interview. Syverson packs every answer with substantive content.
Claims about alcohol
Alcohol is responsible for over one in 20 of all deaths worldwide, according to the most recent edition of a World Health Organization (WHO) report that comes out every four years.
The Guardian writes that the report found that roughly three million deaths in 2016 can be attributed to alcohol, of which 2.3 million were men and 29 percent were caused by injuries (including everything from accidents to car collisions and suicides) rather than health problems. Other recorded causes of death included digestive disorders (21 percent) and cardiovascular diseases (19 percent), as well as “infectious diseases, cancers, mental disorders” and other conditions caused by alcohol intake, CNN added.
According to the WHO data, approximately 7.2 percent of premature deaths worldwide are linked to alcohol, and as well as 5.3 of all deaths in general.
Obviously murky and multiple causalities will make any of these numbers debatable. Still, I guess this explains why debates over alcohol so command the headlines these days and make alcohol the number one social issue?
Congestion pricing is not just slanted toward the elite
From Luz Lazo at The Washington Post:
The average user [of the optional toll lanes] is younger than 45 and has a household income of less than $100,000 a year, according to a new survey.
About 60 percent of the frequent users said they have household incomes of less than $100,000, and a similar share have a bachelor’s degree or higher. About one-third of those users said they don’t mind the tolls because their employers pick up the bill, according to the survey.
And this:
They are loyal Amazon customers who get a package from the online retailer at least once a month.
“They don’t mind paying a fee for convenience services and similarly don’t mind paying for tolls,” Bell said.
Congestion pricing in the D.C. area has been a major success. And many of its benefits are overlooked. Consider me, a relatively well-educated and high-income user of the roads. After a few years, I still can’t figure out how to use the new Beltway lanes, and when they let me get off where I want to, or not. So I have never used them once. Still, they clear the rest of the road for me.
Sunday assorted links
1. Do earthquakes make people more religious?
3. Why are books so long right now? (contra common claims about the shortening of attention spans, I would sooner say the variance of attention spans has gone up).
4. Alone with Elizabeth Bishop.
5. “John McDonnell said Labour would set up Public Ownership Unit in the finance ministry “immediately” on entering government, and that in some cases investors might not be compensated.” Link here.
6. Which tech tools do you need for travel? (NYT) I would add to the list an eye mask and a reliable, very portable umbrella.
How to have a good conversation
Here is an excerpt from Tim Herrra in the NYT, under the title “Three [sic] Tips to Have Better Conversations“:
To be a true conversation superstar, try these tips:
Be attentive and give eye contact.
Make active and engaged expressions.
Repeat back what you’ve heard, and follow up with questions.
If you notice something you want to say, don’t say it. Challenge it and go back to listening.
For bonus points, wait an hour to bring up that thing you didn’t say earlier.
And keep in mind that when you say something declarative, seek out the other person’s opinion as well.
Those seem mostly wrong to me, and perhaps better targeted at the median USA Today reader who has to make small talk at a company picnic. I would suggest some slightly different tips, admittedly not for everyone in all situations:
1. Set up the conversational premise so you, and the other person, have easy outs, if it is not a good match.
2. Don’t assume the conversation will last an hour. Rapidly signal what kind of conversation you are good at, if anything going overboard in the preferred direction, again to establish whether the proper conversational match is in place.
3. If you notice something you want to say, say it.
4. Be worthy of a good conversation.
Rinse and repeat. I would stress the basic point that most conversations are bad, so your proper goal is to make them worse (so they can end) rather than better.
What is conversation for anyway? I don’t even recommend being charming, or trying to be charming, unless a work situation is forcing you to do so. Let yourself be sullen when the mood beckons. Feel free to let eye contact lapse. Don’t repeat back what you’ve heard. Say something surprising. Be willing to go meta. Most of all, try to establish a “we actually can have a more genuine conversation than we thought was going to be possible” level of understanding, taking whatever chances are needed to get to that higher level of discourse.
By the way, do not use alcohol, not if you wish to learn something or maximize your powers of discrimination.
Ethiopia fact of the day
Here is another reason to be optimistic about the country:
In Ethiopia, once among Africa’s top five countries for child marriage, the practice has dropped by a third in the past decade, the world’s sharpest decline, says the World Bank. The government wants to eradicate child marriage entirely by 2025.
In contrast:
Three out of four girls in Niger are married before they are 18, giving this poor west African country the world’s highest rate of child marriage. The World Bank says it is one of only a very small number to have seen no reduction in recent years; the rate has even risen slightly. The country’s minimum legal age of marriage for girls is 15, but some brides are as young as nine.
That is all from The Economist.
The forthcoming Chinese charter city?
From Bloomberg BusinessWeek:
The government intends to ring-fence Port City from Sri Lanka’s legal system to facilitate currency movement and create favorable tax and investment incentives. Harsha de Silva, a state minister who once campaigned against the project but is now one of its most vocal supporters, is involved in drafting the separate legal structure. “This must be a top-10 city for doing business in the world,” he says. “Otherwise, what’s the point?” Sri Lanka is currently ranked 111 out of 190 nations on the World Bank’s ease-of-doing-business index.
And here is the take on one of the nearby port projects:
Today, Hambantota handles about one ship a day, not enough to make it commercially viable, and wild elephants regularly breach the perimeter fencing. At a nearby airport, which CCCC also helped build during Rajapaksa’s administration, the only commercial flight was canceled in June because of frequent peacock strikes and low demand.
Is it fair to call all this a “hegemon charter city“?