Month: April 2014

Most of the 19th century was a good time for equality (Department of Ahem…)

From “Real Inequality in Europe Since 1500,” (pdf) by Philip T. Hoffman, David Jacks, Patricia A. Levin, and Peter H. Lindert:

Introducing a concept of real, as opposed to nominal, inequality of income or wealth suggests some historical reinterpretations, buttressed by a closer look at consumption by the rich. The purchasing powers of different income classes depend on how relative prices move. Relative prices affected real inequality more strongly in earlier centuries than in the twentieth. Between 1500 and about 1800, staple food and fuels became dearer, while luxury goods, especially servants, became cheaper, greatly widening the inequality of lifestyles. Peace, industrialization, and globalization reversed this inegalitarian price effect in the nineteenth century, at least for England.

If you have been following the recent debates over Thomas Piketty, you might have come away with…um…the opposite impression.  The emphasis there is added by this blogger. As for other countries:

Thus the great grain globalization of the late nineteenth century favored workers’ relative purchasing power in food-importing Western Europe, though not in food-exporting areas.

By the way here is Scott Sumner on consumption inequality.

For the pointer I thank John Nye.

Very good sentences

President Barack Obama will spend the next few days on an awkward mission to Asia. Essentially, he is going to try to tell the Koreans, Japanese, Filipinos and Malaysians that their lives and welfare are more precious to America than those of the Afghans, Ukrainians and Syrians to whose rescue America has recently declined to come. That may not be the truth.

That is from Clyde Prestowitz at the FT.

South Korea safety fact of the day

In South Korea, more than 31,000 people, including 3,000 students, die every year in accidents, accounting for 12.8 percent of the country’s total annual deaths, the highest rate among major developed nations.

Those episodes include everything from car accidents to fires, and it is unclear how much can be attributed to a lack of focus on safety. But there is a general acknowledgment in hypercompetitive South Korea that success is often measured by how quickly and cheaply a job is done, and that spending too much time and resources trying to follow rules is sometimes seen as losing a competitive edge.

Is that efficient or not?  The full story is here.

Rating the FDA by Division

In previous work, I have argued that asymmetric incentives make the FDA too risk averse with the result being excessive drug lag and drug loss. The FDA, however, is not a monolithic agency, it is divided into divisions which oversee different types of drugs. The divisions have different cultures, expectations histories and understandings. In my latest paper, written with Tufts researchers Joe DiMasi and Chris Milne, we put aside the question of global efficiency and ask a different question. How do the FDA divisions rate against one another? What we find is quite surprising: some of the FDA divisions appear to be much more productive than others. From the abstract:

After reviewing nearly 200 products accounting for 80 percent of new drug and biologic launches from 2004 to 2012, the authors find wide variation in division performance. In fact, the most productive divisions (Oncology and Antivirals) approve new drugs roughly twice as fast as the CDER average and three times faster than the least efficient divisions—without the benefit of greater resources, reduced complexity of task, or reduction in safety. The authors estimate that a modest narrowing of the CDER divisional productivity gap would reduce drug costs by nearly $900 million annually. The worth to patients, however, would be far greater if the agency could accelerate access to an additional generation of (about 25) drugs. Greater agency efficiency would be worth about $4 trillion in value to patients, from enhanced U.S. life expectancy. To reap such gains, this study encourages Congress and the FDA to more closely evaluate the agency’s most efficient drug review divisions, and apply the lessons learned across CDER. We also propose a number of reforms that the FDA and Congress should consider to improve efficiency, transparency, and consistency at the divisional level.

Andrew von Eschenbach a former Commissioner of the FDA and Director of the National Cancer Institute and now chairman of the Manhattan Institute’s Project FDA wrote a foreword to our paper. Eschenbach writes:

The authors of this report have taken a giant step…by assembling and analyzing a wide array of publicly available information about the relative performance of individual CDER divisions….Continuous, quality improvement measures routinely used by private industry could serve FDA leadership, sponsors, and patients by discerning factors that contribute to an optimal level of performance and, more important, disseminating such practices to ensure that all divisions achieve that performance. The payoff for such an effort could be enormous.

…Process improvement should not be a controversial proposal. An organization like the FDA—which is over a century old and which has maintained its current, basic organizational framework for decades—requires new tools to adapt to changing circumstances.

…I have enjoyed no greater privilege in my professional career than serving alongside the FDA’s talented staff. Today, the agency has more potential than ever to help the U.S. lead the world in advancing a biomedical revolution, one that will have an impact on every aspect of America’s economy and health-care system by improving health, increasing productivity, and reducing overall health-care costs.

…this report should be viewed as a positive, constructive contribution to a desperately needed dialogue on how to assist the agency in fulfilling this vital national goal.

“Man camps” gain ground

Target Logistics, a Boston-based builder and operator of dormitory-style housing, recently landed a nearly $30 million contract to provide lodging for hundreds of oil-field workers in North Dakota over the next three years.

The deal is the latest example of rising demand for professionally managed “man camps,” sprawling barracks that house mostly male workers at American and Canadian oil sites.

I wonder if they ever serve beans, with or without freshly ground cumin:

The man camps operated by Target Logistics are similar to dormitories, with private bedrooms and either private or shared bathrooms. Residents eat in common dining halls and the facilities often include recreation rooms and gyms. But the company has strict rules, including a zero-tolerance policy for alcohol on the premises. Also, overnight guests are forbidden—including spouses of the workers. (The workers’ permanent homes often are as far as 600 miles away.) The facilities are monitored 24 hours a day and the cleaning staff is instructed to notify management if there is evidence of contraband.

The full story is here.  The camps are very popular with workers, mostly because they are cheaper than renting apartments.

Have immigrants swallowed up New Zealand’s productivity?

By Michael Reddell, the paper is here (pdf):

Despite the huge, decades-long, and continuing deterioration in New Zealand’s relative productivity, the real exchange rate has not, on average, fallen. The persistently (and perhaps increasingly) “overvalued” exchange rate – itself a symptom of imbalances across the economy – is central to understanding why, despite the far-reaching reforms of the late 1980s and early 1990s, the large gap between New Zealand’s standard of living and those in other advanced economies has not even begun to close. The exchange rate hasn’t adjusted largely because average New Zealand real interest rates have, surprisingly, remained so much above those abroad. That gap, in turn, appears to reflect New Zealand’s own choices (including policy ones) which mean that at any particular interest rate (the “world interest rate”) there is a bigger difference here between desired investment spending and the available national savings than is typical abroad. Higher New Zealand real interest rates have simply been the rationing device, reconciling the conflicting desires. There is little evidence that our policy frameworks adversely affect savings more than those in other countries, and little sign that house prices can explain much, if anything, about New Zealand longer-term savings behaviour. By contrast, population growth seems to have been much more important than has previously been recognised. New Zealand’s population growth slowed sharply in the 1970s and 1980s, as more New Zealanders pursued better opportunities abroad. But the marked liberalisation in immigration policy in late 1980s and early 1990s resulted in New Zealand once again experiencing materially above-average population growth.

In combination, the substantial real domestic resources required to accommodate a fast-growing population and the quite modest savings of New Zealanders appears to have crowded out (through higher interest rates and a high average real exchange rate) other productive investment. Materially higher productive investment, especially in the tradables sector, was probably required if the big challenge of catching up again with the incomes of other advanced countries, and reversing the decline in New Zealand’s relative productivity performance, was to be met. If the rate of population growth over the last couple of decades had been materially lower, that would have resulted in lower average interest rates and a much lower real exchange rate. And New Zealanders’ long-term income prospects would, most probably, have been much improved.

Loyal MR readers will know that my writings have long stressed the economic benefits of immigration and indeed I stand by my views.  But might there be something to this argument in the New Zealand context?  You can think of the Kiwis as having invested resources in building up the total of their human capital, rather than maximizing physical capital per resident.  But why is capital not more mobile into the country?  Keep in mind that most of the New Zealand banking system is foreign-owned, for instance, so capital there should not be so constrained by domestic savings, even if you believe in some home market bias.  Given “reach for yield,” and the quite small size of the New Zealand economy, more capital could flow in much more readily (see pp.13-14 in the paper but I am not sure why these effects should hold up in the long run).

And yet the foreign capital does not flow in enough to resolve this problem.  So I suspect this hypothesis, while illuminating in some regards, is ultimately parasitic on some other account of New Zealand’s failure to engage in a productivity catch-up.

Here is one previous post on New Zealand productivity.  See this one too.  I would here also cite “brain drain” factors, even though I do not believe the brain drain argument is true in most cases.

La Ciccia (and some thoughts on role models in universities)

That is a Sardinian restaurant in San Francisco, and it was my pick from the San Francsico dining bleg from last week.  I recommend it highly, focus on the appetizers and the pastas (uni!), as the meat dishes are less interesting.

Much of the table talk was on whether the true function of universities is to expose us to a wide array of vivid role models, so we could reject most of them and accept a few, thereby giving us a motivated path forward in life.  One implication of this is that (lower-level) university athletics might be undervalued, because coaches and even fellow athletes can serve as useful role models in a way that most professors cannot.  The question also arises whether we might have more efficient ways of exposing people to vivid role models than through college or university attendance.  The “so many professors” approach of the university seems stifling and inefficient, not to mention lacking in diversity, once you view the question in these terms.

Is there such a thing as a “professional role model”?  That would mean a person who hasn’t done very much but somehow reflects a lot of positive qualities and can inspire others.  Or is that a contradiction in terms?  Must the role model have actually done something significant?  I believe that professional role models are possible and indeed they exist right now, even if they are not labeled as such.

Is the main function of role models to be accepted and emulated, or to be rejected?  Do not underrate the latter possibility.

Assorted links

*Music at Midnight: The Life and Poetry of George Herbert*

By the Very Revd John Drury.  I mentioned the book favorably in passing once before, but I don’t think I drove home how much I liked and learned from it.  For me it is a clear choice for best book of the year so far.

Here is a pithy bit from Amazon:

Though he never published any of his English poems during his lifetime, George Herbert (1593–1633) is recognized as possibly the greatest religious poet in the language. Few English poets of his age still inspire such intense devotion today.

I was not interested in Herbert per se, so that is further testament to the quality of Drury’s achievement. This volume passes at least one bottom line test for book quality, namely whether I ordered many other books by the same author.  I did.

You can order the book here.  You can find Herbert’s poems here.  This book also shows how much overly restrictive copyright law damages other works of literary criticism, Herbert of course is fully in the public domain.

Nick Beckstead’s conversation with Tyler Cowen

Nick is a philosopher at Oxford and he has worked with Larry Temkin and Nick Bostrom.  He typed up his version of our conversation (pdf), it starts with this:

Purpose of the conversation: I contacted Tyler to learn about his perspectives on existential risk and other long-run issues for humanity, the long-run consequences of economic growth, and the effective altruism movement.

Here are a few excerpts:

Tyler is optimistic about growth in the coming decades, but he doesn’t think we’ll become uploads or survive for a million years. Some considerations in favor of his views were:

1. The Fermi paradox is some evidence that humans will not colonize the stars.
2. Almost all species go extinct.
3. Natural disasters—even a supervolcano—could destroy humanity.
4. Normally, it’s easier to destroy than to build. And, in the future, it will probably become increasingly possible for smaller groups to cause severe global damage (along the lines suggested by Martin Rees).

The most optimistic view that Tyler would entertain—though he doubts it—is that humans would survive at subsistence level for a very long time; that’s what we’ve had for most of human history.


People doing philosophical work to try to reduce existential risk are largely wasting their time. Tyler doesn’t think it’s a serious effort, though it may be good publicity for something that will pay off later. A serious effort looks more like the parts of the US government that trained people to infiltrate the post-collapse Soviet Union and then locate and neutralize nuclear weapons. There was also a serious effort by the people who set up hotlines between leaders to be used to quickly communicate about nuclear attacks (e.g., to help quickly convince a leader in country A that a fishy object on their radar isn’t an incoming nuclear attack).This has been fixed in other countries (e.g. US and China), but it hasn’t been fixed in other cases (e.g. Israel and Iran). There is more that we could do in this area. In contrast, the philosophical side of this seems like ineffective posturing.

Tyler wouldn’t necessarily recommend that these people switch to other areas of focus because people[‘s] motivation and personal interests are major constraints on getting anywhere. For Tyler, his own interest in these issues is a form of consumption, though one he values highly.


Tyler thinks about the future and philosophical issues from a historicist perspective. When considering the future of humanity, this makes him focus on war, conquest, plagues, and the environment, rather than future technology.

He acquired this perspective by reading a lot of history and spending a lot of time around people in poor countries, including in rural areas. Spending time with people in poor countries shaped Tyler’s views a lot. It made him see rational choice ethics as more contingent. People in rural areas care most about things like fights with local villages over watermelon patches. And that’s how we are, but we’re living in a fog about it.


The truths of literature and what you might call “the Straussian truths of the great books”—what you get from Homer or Plato—are at least as important rational choice ethics. But the people who do rational choice ethics don’t think that. If the two perspectives aren’t integrated, it leads to absurdities—problems like fanaticism, the Repugnant Conclusion, and so on. Right now though, rational choice ethics is the best we have—the problems of, e.g., Kantian ethics seem much, much worse.

If rational choice ethics were integrated with the “Straussian truths of the great books,” would it lead to different decisions? Maybe not—maybe it would lead to the same decisions with a different attitude. We might come to see rational choice ethics as an imperfect construct, a flawed bubble of meaning that we created for ourselves, and shouldn’t expect to keep working in unusual circumstances.

I’m on a plane for much of today, so you are getting Nick’s version of me, for a while at least.  You will find Nick’s other conversations here.

Assorted links

1. The Ultimate Warrior was a Randian.

2. Why Tiger Mothers motivate Asian Americans but not European Americans.

3. A 2004 MR post on g > r and the dangers of crude extrapolation, “What happens if we extrapolate current trends to 2050? What will debt to gdp ratios look like around the world?…Among the current Eurozone countries, Germany would fare the worst with a ratio of 307 percent.”  Ireland appeared to be in good shape.

4. This guy has changed his mind about a bunch of things.

5.  Against book chapters.

6. Has the capital-output ratio been rising over time? (in French)

*The 1 Hour China Book*

I enjoyed this book, which is authored by Jeffrey Towson and Jonathan Woetzel.  Here is one excerpt:

Looking at China today, what you don’t see is an integrated continental economy.  You don’t see infrastructure connecting each part of the country, like say in the United States.  That is likely the future but not yet the present.

If you look at the population and the existing infrastructure, what you actually see is a series of “clusters.”  You see local groups of cities with over 60 million people.  For example, Beijing/Tianjin in the North is actually a cluster of 28 cities — all tightly interconnected by roads, rail and other infrastructure.  Qingdao, well known for its beer, is actually part of a 35-city cluster.

Overall, China has more than 20 of these clusters…and each of these clusters is about the size of a European country.  According to government plans, China’s main clusters will cover 80% of GDP and 60% of the population.

The book is compact and useful, but it didn’t take me an hour.