Thursday assorted links

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"#1. And Scott Sumner on macro and complacency. "

"I used to ask my class whether the cost of living had actually increased if both wages and prices rose by exactly 10%. And over 95% always got it wrong, claiming that the cost of living had not actually increased. (Actually, it rose by 10%.)"

Umm, isn't that a nominal increase but a real no change. So, that seems like a trick question.

Yeah, there are a lot of subtleties there. Nominal cost of living went up, but real cost did not. But oops, if you clarify which one you're referring to, the question is a lot easier.

Plus, thanks to the miracles of progressive taxation, a 10% increase in (nominal) wages is not a 10% increase in purchasing power. Are we talking about net wages or pretax wages? If I got a 10% raise but prices went up by 10%, I can actually buy a little less than I did before.

A good student would note that they have been given explicit information on the change in prices and therefore reasonably conclude that they are being tested on their knowledge of the difference between real and nominal cost of living. And say what 95% of them did.

WRT #1, I think Scott's broader point is that the public doesn't actually have an opinion about any of these issues. This is even true in the case of inflation because of a misunderstanding: they want less supply side inflation, but the fed doesn't control supply side inflation.

The money quote:

Most people only understand the concept of supply side inflation; they have absolutely no understanding of demand side inflation. Hence they think inflation is bad because it lowers their real income, but that’s only true of supply side inflation. Even worse, the Fed only controls demand side inflation, so Fed policy has no impact on the only kind of inflation the public understands.

I'm glad I never took a class from Summer, because I don't understand the money quote either. Why doesn't demand side inflation lower real income?

How can an increase in demand cause a reduction in real income across a society-wide level? If you have an economy at capacity, increase money supply by 100%, you have demand side inflation of 100%, but there's no adjustment to the real income level...you know, assuming the normal stuff.

"3. Marketplace feature on which are the robot-proof jobs."

This feels like the Murray Gell-Mann effect.

A good chunk of list B is already highly automated. Has anyone in the McKinsey Global Institute, been in a modern factory?

From column B:
"Packaging and Filling Machine Operators and Tenders"

An average Filling machine operator tends the machine and is the human presence when an alarm that the automated system can't handle is triggered. Sure they'll also clean and handle certain tasks that it's not economical to automate. It's quite possible you'll go from 1 operator per unit op, to 1 operator per line. Or 1 operator per line to 1 operator per wing. But frankly, there's just not a lot of low hanging fruit to automate in that position.

The only way you can completely remove a human from the loop is to have an AI system. And if you've got an AI system column A is endanger.

1. Is this true: Paul Volcker tamed runaway inflation and saved capitalism. Or is this true: Paul Volcker drove interest rates to excess and did long-term damage to productivity and economic growth and contributed to the deindustrialization of America and a high level of inequality. Is this true: Paul Volcker is an American hero and deserves America's highest award. Or is this true: Paul Volcker almost destroyed America and should be imprisoned or deported.

6. Another liberal displays their intelligence by being unable to understand the theme of Idiocracy.

Only a liberal would use the plural pronoun "their" when the singular "his" is correct (conservative).

I'm too lazy to check gender.

When in doubt, always use the generic 'he' or 'his' unless referring to countries or ships. I'm not an old-timer either.

From the article:

"Over dinner, Judge told me that he now fears “Idiocracy” was a little optimistic — maybe the country won’t even exist in 2505. Then he told me the best story of the night. He was location-scouting for the movie at a reform school, though he didn’t know it was a reform school at the time. He looked around and thought the students there looked, in his words, “kinda stupid,” and figured they might be of use to him."

What a charming individual.

It's not as if Mike Judge failed to spell out his Social Darwinian theory of dygenic selection for IQ at the beginning of "Idiocracy:"

https://www.youtube.com/watch?v=YwZ0ZUy7P3E

The 2006 movie that people really failed to get the point of, however, was "Borat."

Next, the New York Times can treat us to more articles about how "Borat" revealed the raging anti-Semitism at the heart of Red State America.

Too much Willy Staley (whoever he is) and too little Mike Judge. I knew he was clueless with his one sentence dismissal of King of the Hill. This guy is like the sportswriters who think their opinions are more important than the games they are paid to describe.

I haven't missed the NYT in 30+ years. Too bad, it used to be a good newspaper.

What if we are all wrong on inflation in which is completely a population growth, especially a working age population, reality in the modern economy? It would explain a lot of the 1970s where the working population is growing at the highest point in the post WW2 years. For all its problems the job growth was higher that decade than all other post WW2 decade! (Notice the 1950s is one of the lowest so we must have working age populations.)

So it really doesn't matter the Fed interest rate, but the fact working age populations in the developed nations is almost flatline so it is hard to create long term inflation in the economy. (Notice oil prices lost in the Great Recession.)

#3. They get one important thing right:

"Plenty of lower-paid jobs, like tree pruning, which requires physical dexterity and maneuvering in unstructured environments, cannot be easily or cheaply replaced by machines."

Yep. Physical dexterity and maneuvering in the environment are, indeed, big barriers to automation. Robots are poor at both, which is why they're ideally suited to factory automation (a single, well-defined, highly-repetitive task done in a fixed location).

But I'd dispute some of their other claims:

"Computers are starting to read medical images just as well as radiologists. But radiologists add value in other ways machines can’t: by communicating with patients and integrating medical information into diagnoses and treatment plans."

Communicate with patients? And devise treatment plans? Radiologists? It seems to me that the main protection radiologists have against automation are regulations and the political strength of the medical guild.

Also, contrary to the claim in the article, the work of waiters is not easy to automate. Yes, their tasks could be replaced by self-service (ordering by app). But it's been possible to replace waiters by self-service basically forever -- with customers ordering and picking up their food at the counter. So far, though, people are willing to pay for table service by a human, and *that* is 0% automatable. I'm also skeptical of their relatively high 'automatable' ratings for 'Web Developers', 'Speech Pathologists', and 'Physical Therapy Assistants'. Yes, you could give people video-based therapy instructions instead of a live therapist, but again, that's been possible for decades (with VHS tapes and DVDs) and those jobs haven't gone away.

In the future, everybody will be a personal trainer.

I think that a video game personal trainer that can use cameras to get a 3D view and correct your form, and perhaps tell how hard you are working and use a large database to recommend exercises, notice poor posture or biomechanics or imbalances in muscle strength or a lack of agility or balance would be competitive with personal trainers. I am not sure how economical or feasible such a thing would be.

#1 podcast is not with Pethokoukis, but with Stripe CEO. Can you please fix the link?

Not sure I buy the methodology behind #3. Financial Advisors are already near 100% automated. They say 30% max. Meanwhile Speech Pathology requires considerable human interaction and yet that ranks high in their list of automatability.

Oh, #5 so very, very much.

My god, 7 hours, and still not Pethokoukis at the link... I can't take this much longer

I don't find the #5 very convincing. Sure location-specific land in popular/productive places has become more expensive over time. But land price increases are just distributional changes in wealth, with one person's/firm's increased cost becoming another person's increased income. Owners of land may capture a lot of wealth as those who generate the wealth use it to bid up land values, but that just transfers the income from one group to the next. Thus, facebook, Google, etc. generate income with capital and labor and some Bay Area land, and much of that income and wealth generation is used by employees to bid up San Francisco housing prices. Google creates the wealth, and the previous owners of the land there get a piece of that pie. The alternative is housing shortages with high productivity Google employees unable to purchase the property and having inefficiently long commutes, etc.

Doesn't the Bay Area already have housing shortages and inefficiently long commutes for Google employees?

Sure, but at least for available housing, those willing to pay for it, the owners of existing housing end up with a chunk of the Google income--it is not just lost.

The issue is not that the income is lost, it's that it accrues in the form of rent to somebody who played no part in the wealth creation in the first place.

The alternative proposed isn't fixation and shortages as result, but shifting the burden of taxation to the unimproved value of value of land which will:

1) Stimulate more housing construction as incentives to build have been increased (hence no shortages)
And
2) Shift the accrued rents to the government from the landowner (who played a greater part in increasing the productivity that bidded up the values in the first place)

What? It still not Pethokoukis in #1. I don't want the link fixed - I want the far side fixed. I want an actual conversation with Pethokoukis. I love that guy.

#1 Jim links to the actual talk on his blog. Here's the transcript and correct links: https://www.aei.org/publication/americas-complacency-problem-a-long-read-qa-with-tyler-cowen/

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