Month: June 2014
Assorted links
1. Chinese rent-seeking benches with spikes. Or are they just clearing the market?
2. Anti-strike drones, via South Africa.
3. Good Iceland photos, including one puffin and some ponies.
4. More on the economics of Brat. And more here. And a dress code for class.
5. Stagnationist ideas take over the mainstream.
Growth mindsets
Scott Young writes:
In logarithmic domains, two mindsets are important. In the beginning, high-growth phase, the emphasis needs to be on maintaining long-term habits. Since growth is fast initially, care needs to be taken so that it won’t slide back down once effort is removed.
In the later, low-growth phase, the emphasis needs to be on habit breaking. Since low-growth is often caused by calcifying routines, deliberate effort needs to be taken to break out of that comfort zone.
In exponential domains, the mindset of resilience and endurance are critical. Since feedback is sparse and generally negative during the initial part of the curve, it takes dedication to persist. Part of the reason, entrepreneurs are often consumed by their own vision is that it helps block out the negative feedback until they can reach the exponential part of their growth.
There is more here, and for the pointer I thank R.
Do recessions make us more racist?
Speculative perhaps, but interesting nonetheless and it does not seem out of accord with broader historical experience:
When the economy declines, African Americans are more likely to be seen as “Blacker” and to bear stereotypical features, according to a new study by psychology researchers at New York University. Their findings, which appear in the journal Proceedings of the National Academy of Sciences, suggest that economic duress may spur racial discrimination.
The first test ran like this:
…subjects who more strongly believed in resource competition between Whites and Blacks had a lower threshold for identifying mixed-race faces as Black than did subjects who did not hold these zero-sum views.
However, the design of this study only allowed the researchers to test the correlation between perceived scarcity and race perceptions. To test the casual effect of scarcity on such race perceptions, the researchers conducted a second experiment, with a new set of subjects.
There is discussion of the other tests at the link. The source paper is here. For the pointer I thank Charles Klingman.
The Moral Inversion of Economic Thinking
In a delightful, short article on Economics and Morality, Timothy Taylor asks why economics has a reputation for leading to corruption:
Political science, history, psychology, sociology, and literature are often concerned with aggression, obsessiveness, selfishness, and cruelty, not to mention lust, sloth, greed, envy, pride, wrath, and gluttony. But no one seems to fear that students in these other disciplines are on the fast track to becoming sociopaths. Why is economics supposed to be so uniquely corrupting?
Arnold Kling gives one answer:
I think that economics is singled out for opprobrium because of the way that it challenges the intention heuristic. The intention heuristic says that if the intentions of an act are selfless and well-meaning, then the act is good. If the intentions are self-interested, then it is not good.
I would put the point more directly. Economics is detested because it doesn’t just study vice it shows that some vices have good consequences. The moral inversion of economic thinking begins early, in Mandeville’s scandalous and wicked book the Fable of the Bees, which aimed to show how private vices can lead to public benefits. Later, of course, Adam Smith would make a similar point in The Wealth of Nations with his metaphor of the invisible hand and his famous admonition that “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”
The private vice, public virtue theme is not limited to self-interest and microeconomics. Keynes was an admirer of Mandeville as an early discover of the paradox of thrift. Namely, that in some situations the virtuous behavior of saving can lead to public ruin and the vice of consumption can lead to riches. Paul Krugman continues to make this point today with his admonition that economics is not a morality play. Krugman offends traditional morality when he writes:
As I’ve said repeatedly, this is a situation in which virtue becomes vice and prudence is folly; what we need above all is for someone to spend more, even if the spending isn’t particularly wise.
Economists understand composition fallacies: a sum of light feathers is not necessarily light, a sum of bad actions isn’t necessarily bad and a sum of good actions isn’t necessarily good.
It’s no surprise that Hayek was another fan of Mandeville and also an opponent of traditional morality (also here) because Hayek recognized that nominally bad actions and beliefs can lead to good outcomes (“spontaneous order”) and that nominally good actions and beliefs can lead to bad outcomes (“the atavism of social justice”).
Even more recently we see Tim Geithner making the argument against morality:
“…in a panic, to rescue people from the risk of mass unemployment, you’re going to be doing things that look like you’re helping the arsonists…”
Standard morality, as Kling argues, often stops at intentions while economists are interested in consequences. Consequentialist philosophers also look at consequences but economists have the tools to trace interactions as they sort themselves into an equilibrium. Equilibrium outcomes may be very far from intentions. As a result, we find that economists often places themselves and their discipline in opposition to standard morality.
What turns students away from political moderation?
…the more engaged students are with faculty members and academics, the more their views moderate toward the center. But the more students become engaged in student activities, the more the liberals become more committed as liberals and conservatives become more committed as conservatives.
There is more information here.
Assorted links
1. Venezuelan markets in everything.
2. The choices Harvard Business School made for on-line education.
3. Scott Sumner on the quest for the free lunch.
4. How Delaware nudged students into going to college. And nudging commuters to avoid peak times.
NASA is Looking for a Few Good Economists
NASA has a call for research in the economics of space exploration:
This NRA seeks empirical economic research projects, historical analog research, concepts for
encouraging further economic activity in space, and unique stimulatory activities that promote
novel private/commercial uses of space, new private/commercial space opportunities, and
emerging private/commercial capabilities in suborbital, orbital or deep space environments that
enable discoveries, development and applications from these environments.
Specific topics of interest include:
- Historical Economic Studies in the following areas:
- Economic history of NASA programs;
- Long term historical impact of the space program;
- Economic and business histories of American private sector space enterprises (including companies, societies, and projects);
- Economic histories of historical analog activities for space exploration (including detailed investigations into the financing of historical expeditions, settlements, and transportation infrastructure projects).
- Current and Near-Term Trends, Analyses and Concepts for accelerating American space development, in the following areas:
- Utilizing market mechanisms, private sector partnerships, and expanding markets to serve non-traditional commercial entities;
- Promoting broader uses of space for public and/or economic benefit, including job creation and/or workforce development, and maintaining American leadership in the global space marketplace;
- Encouraging engagement on space activities from citizen makers, crowd-funders, citizen explorers, and participation of innovators from non-traditional sectors that can have a transformative effect on future private/commercial space developments;
- Identifying and evaluating economic applications of space systems design to earth-scale economic analysis, including integrated modeling of globalized economic systems and earth systems science;
- Examining competitive stresses, potentials for public benefit, and issues affecting NASA or the nation in the commercial space arena;
- Monitoring, investigating and reporting on opportunities enabled by the rapidly growing national and international entrepreneurial space communities;
- Assessing the adequacy of economic assessment and evaluation tools and methods for space architectures;
- Conducting case studies of space development projects that can be used to inform NASA on the opportunities and impediments to economic development in space.
- Economics, Systems Analysis, and Projections, in orbital and deep space development; lunar development, asteroid development, and Mars development.
The economists speak once again
What would we do without the economists?:
Brazil will beat Germany to win soccer’s World Cup and also will score the most goals, according to a survey of economists across 52 countries.
The tournament’s host nation eclipsed Germany and Argentina as the top choice among 171 economists from 139 companies in a Bloomberg News poll published today. The Latin American country is also tipped to find the net the most times, topping Argentina and Spain.
Projections of a sixth World Cup victory for Brazil mesh with bookmaker odds and forecasts based on economic models created by Goldman Sachs Group Inc., UniCredit SpA and Danske Bank A/S. Paddy Power Plc and Ladbrokes Plc both rank Brazil as favorite, at odds of 3/1.
There is more here. Even better would have been a survey of the economist bloggers. In any case, here is a related survey from The Upshot.
Artistic musts
Not long ago, a group of people were sitting around a New York City Laotian restaurant and a challenge was made. The challenge was to create a list of a particular kind, drawing upon the wisdom of the groups. The producer of the dare (not myself, the person wishes to remain anonymous) put it like this:
…these are MUSTS, not “here’s something I like.” You aren’t recommending, you are obligating. That is a much larger responsibility and I urge you to use it with extreme caution. Also, adding to the list constitutes a commitment to take in the list [emphasis added by TC], with the one caveat.
There is currently no food or visual art on the list. We briefly discussed adding some food but I think it was going to get out of hand, plus Amazon can’t drone you tacos from Tyler’s favorite gas-station Mexican restaurant. If the food or visual art is in NYC and readily accessible it could be considered.
Yes, we all obliged ourselves to consume the resulting list. And what did we put on it?
Primer (movie)
[I am going to remove Upstream Color from the list. I think it’s a better movie than Primer, and I would watch it again twice back to back right now, but it’s less of a cultural touchstone. ]The Power Broker (book)
Nature’s Metropolis, especially Chapter 3 (book)
“Blink” (episode of Dr. Who from TV)
Before Sunrise trilogy (movies)
A State of Wonder: The Complete Goldberg Variations 1955 & 1981 (music)
The Forever War (book)
A Deepness in the Sky (book)
[Redacted and I agree that the first book, A Fire Upon the Deep, is excellent but not as good as this. All voices say the third book is a pass]Prisoners of War (TV series, Israeli)
Loveless (music, 1991 album by My Bloody Valentine)
The Lives of Others (movie)
[there was some controversy around this one]Thought of You (animated short)
Persona (movie, Ingmar Bergman)
The Godfather (movie)
Beethoven String Quartet Opus 132 (music)
What would you add to such a list? Of course from this list I do not endorse every pick, but I can report that I do not have “too much extra work to do.”
The economics of Brat
House Majority Leader Eric Cantor just lost a historic primary race — to an economist. Prof. David Brat chairs the Department of Business and Economics at Randolph-Macon College, a liberal arts school in Ashland, Virginia. Vox read over some of his academic research, and it helps give you a sense of what the politician at the center of tonight’s political earthquake believes.
…take Brat’s paper “Economic Growth and Institutions: The Rise and Fall of the Protestant Ethic?” Here, Brat makes the argument (amusingly citing the liberal economist Brad DeLong) that the spread of Protestantism in Europe was a key cause of European nations being wealthier than other countries. “Give me a country in 1600 that had a Protestant led contest for religious and political power,” he writes, “and I will show you a country that is rich today.”
In “Cross-Country R&D and Growth: Variations on a Theme of Mankiw-Romer-Weil,” Brat and a co-author argue that countries with stronger domestic research and development bases are likely to be wealthier (though research spilling over from one country to another can narrow the gap). In a second co-authored paper, he suggested that countries that remain democracies for longer periods of time tend to experience somewhat higher levels of economic growth.
Brat also seems to be a fan of Deirdre McCloskey on economic method. The full story is here.
Assorted links
1. On the economic consequences of the UK leaving the EU. Not so good.
2. “Confiscated in Sichuan.”
3. David Brooks on The New Right.
4. Robot-worker ratio by country.
5. What is introversion anyway? (the piece is kind of a mess, but worth a ponder anyway).
New MRU course on the economics of the Soviet Union
It is taught by Guinevere Liberty Nell, and you will find it here. Here is Guinevere’s biography:
Guinevere Liberty Nell earned an MA from the University of Warwick in Soviet economic history after studying the subject independently for several years, as well as studying and publishing in the field of Austrian economics. She is the author of Rediscovering Fire: Basic Economic Lessons from the Soviet Experiment (Algora, 2010) and Spontaneous Order and the Utopian Collective, which focuses on Lenin’s utopian ideas and the early years of the Soviet experiment (Palgrave-Macmillan, 2014).
We will have a class (mostly by me) on International Finance , coming soon, other offerings too.
Will computer facial recognition take away our ability to lie?
Upon testing, the system developed by Bartlett managed—in real time—to identify 20 of the 46 facial movements described in the FACS, according to a March report by Bartlett in Current Biology. And, even more impressive, the system not only identifies, but distinguishes authentic expressions from false expressions with an accuracy rate of 85 percent, at least in laboratory settings where the visual conditions are held constant. Humans weren’t nearly as skilled, logging an accuracy rate of about 55 percent.
Yes, Bartlett incorporated a lie detector into the facial recognition technology. This technology promises to catch in the act anyone who tries to fake a given emotion or feeling. Facial recognition is evolving into emotional recognition, but computers—not just people—are the ones deciding what’s real. ( If we add voice detection to face recognition, we end up with a complete lie detection package.)
…So we can begin to imagine a near future in which we’re equipped with glasses that not only recognize faces and voices, but also truths and lies—a scenario that would provoke a revolution in human interaction. It would also constitute a serious limitation on the individual’s autonomy.
Speculative, but we can expect these techniques to improve.
How easy will it be to turn around Pemex?
Not that easy. Here is one excerpt from a generally interesting article:
The failure of Pemex and its government overseers to invest in the latest drilling and exploration technology is partly to blame for the decline. A critical issue for the future of Pemex is manpower. The company is overstaffed with unskilled workers whose jobs are guaranteed for life and understaffed with engineers and skilled laborers, says Marcelo Mereles, a former Pemex director and now a partner at EnergeA, a consultancy.
‘Cultural handicap’
“Pemex continues to have a very big cultural handicap,” Mereles says. “The government has converted Pemex into a very bureaucratic company that operates like a government office and not like an international oil company.”
Pemex’s ability to compete with foreign companies will also be hampered by deficiencies in Mexico’s educational system.
“We’ve all heard the excellent news about Mexico’s great potential in the energy sector, but the question is, who’s going to do it?” said Rangel, of the hydrocarbons commission. “We have few universities committed to oil production, petrochemicals, chemical engineering or physics. And we produce few engineers.”
Until now, petroleum engineers’ main potential employer in Mexico was Pemex, and they could earn more money abroad.
Of course it is hard enough to turn around bad, already-private companies. The new reforms, allowing Pemex to undertake shared ventures with private partners (Chevron being one example on tap), are all to the good. But Pemex itself is not about to suddenly become an economic tiger. It is scary to hear this, although fortunately it is likely to prove wrong:
As President Peña Nieto put it to Pemex employees in March, “The energy reform is the most important economic change in Mexico in the last 50 years.”
Afghan real business cycle theory
For the past decade, billions of dollars in American aid poured into one of the world’s poorest countries, providing previously unimaginable opportunities to thousands of Afghan workers.
Now, the boom is over. The Afghan economy, which had been expanding by as much as 14 percent a year, has slumped. Growth this year is expected to be just 3.2 percent, according to the World Bank. That slowdown reflects the declining American spending and also apprehension about security.
There is more here, tragic throughout. I like to say to my students “no matter how many good arguments you think you have against real business cycle theory, it explains an overwhelming preponderance of the business cycles in the history of the human race.”
And don’t get any silly ideas from seeing the word “spending” in that text above. This is an RBC story, and while nominal rigidities may well play a further role in the contraction, ups and downs in the real demand for Afghani products is the driving factor. If an economist wins a Nobel Prize and suddenly is in stronger demand on the lecture circuit, that is mainly an “RBC boom” for that economist, not a Keynesian mechanism just because others are “spending more” on him or her.