Month: May 2017
*Indiscrete Thoughts*
That is a splendid 1996 book on mathematics and mathematical researchers, by Gian-Carlo Rota. I found philosophical, mathematical, and also managerial insights on most of the pages. It is playful and yet earnestly serious at the same time. Here is one bit:
He [Alonzo Church] looked like a cross between a panda and a large owl. He spoke in complete paragraphs which seemed to have been read out of a book, evenly and slowly enunciated, as by a talking machine. When interrupted, he would pause for an uncomfortably long period to recover the thread of the argument. He never made casual remarks: they did not belong in the baggage of formal logic. For example, he would not say “It is raining.” Such a statement, taken in isolation, makes no sense. (Whatever it is actually raining or not does not matter; what matters is consistence.) He would say instead: “I must postpone my departure for Nassau Street, inasmuch as it is raining, an act which I can verify by looking out the window.”
It is full of the sociology of everyday life, in mathematical communities that is, for instance:
How do mathematicians get to know each other? Professional psychologists do not seem to have studied this question; I will try out an amateur theory. When two mathematicians meet and feel out each other’s knowledge of mathematics, what they are really doing is finding out what each other’s bottom line is. It might be interesting to give a precise definition of a bottom line; in the absence of a definition, we will give some typical examples.
…I will shamelessly tell you what my bottom line is. It is placing balls into boxes, or as Florence Nightingale David put it with exquisite tact in her book Combinatorial Chance, it is the theory of distribution and occupancy.
The author fears the influence of philosophy on mathematics, which led to this paragraph:
Philosophical arguments are emotion-laden to a greater degree than mathematical arguments and written in a style more reminiscent of a shameful admission than of a dispassionate description. Behind every question of philosophy there lurks a gnarl of unacknowledged emotional cravings which act as a powerful motivation for conclusions in which reason plays at best a supporting role. To bring such hidden emotional cravings out into the open, as philosophers have felt it their duty to do, is to ask for trouble. Philosophical disclosures are frequently met with the anger that we reserve for the betrayal of our family secrets.
Definitely recommended, the book also has some of the best and most concrete discussions of Husserl’s philosophy I have seen, along with a meta-account of such, and also there is a discussion of the exoteric and esoteric readings of cosmology and black holes and indeed mathematics too. Here is further information on Gian-Carlo Rota the author.
For the pointer to the book I thank Patrick Collison.
The Belt and Road is How
What a world we live in where the US government rips up trade deals and the Chinese government produces excellent educational videos in favor of free trade, even if they are for propaganda purposes.
Hat tip: Joe Weisenthal.
Wednesday assorted links
1. Freddie now has a blog on education, recommended.
2.Collusion through AI pricing algorithms?
3. Macron was a pianist who played Schumann and Liszt. And FT profile of Arvind Subramanian, another music lover.
4. Allan H. Meltzer has passed away.
5. Might the Industrial Revolution have come to France instead of Britain?
6. Avik Roy interview defending some key aspects of ACHA. I can’t say I’m convinced, but it does have some new and substantive arguments I had not heard before.
My Conversation with Garry Kasparov
Yes, the Garry Kasparov, here is the link to the podcast and transcript. We talked about AI, his new book Deep Thinking: Where Machine Intelligence Ends and Human Creativity Begins, why he has become more optimistic, how education will have to adjust to smart software, Russian history and Putin, his favorites in Russian and American literature, Tarkovsky, his favorite city to play chess in, his match against Deep Blue, Ken Rogoff, who are the three most likely challengers to Magnus Carlsen (ranked in order!) and who might win. Here is one excerpt:
GK: The biggest problem, and I’ve been talking about for quite a while, that we’re still teaching very specific knowledge in the schools. Instead of teaching what, we have to teach how because this knowledge may be redundant 10 years from now. We are preparing kids for the world that will change dramatically. By the way, we already know it will look different. So what’s the point of trying to teach kids at age 10, 11, 12 without recognizing the fact that when they finish college, when they will become adults looking for jobs, the job market will be totally different?
And:
COWEN: …If we look back on centuries of Russian history, do you think there’s something in Russian geography or demographics or geopolitics — what has it been that has led to such unfree outcomes fairly systematically?
Where do you find the roots of tyranny in the history of Russia? Is it a mix of the size of the country, its openness to invasion, its vulnerability, something about being next to a dynamic Europe, on the other side, China? What is it?
KASPAROV: It’s a long, if not endless, theoretical debate based on our interpretation of certain historical events. I’m not convinced with these arguments about some nations being predetermined in their development and alien to the concept of democracy and the rule of law.
The reason I’m quite comfortable with this denial . . . We can move from theory to practice. While we can talk about history and certain influence of historical events to modernity, we can look at the places like Korean Peninsula. The same nation, not even cousins but brothers and sisters, divided in 1950, so that’s, by historical standards, yesterday.
And:
Let’s look at Russia and Ukraine, and let’s look, not at the whole Ukraine, but just at eastern Ukraine. Eastern Ukraine is populated mostly by ethnic Russians. In the former Soviet Union, the borders between republics were very nominal. People could move around, it was not a big deal. Even after the collapse of the Soviet Union, the official state border between Russia and Ukraine was respected, but people still could move around. They didn’t need special visas.
When we look at ethnic Russians born and raised in Kursk and Belgorod on the Russian side and across the border, say in Kharkiv and Dnipropetrovsk on the Ukrainian side, there were people that could be hardly separated anything. They read the same newspaper, Pravda, watched the same television, spoke the very same language, not even accents. But somehow, in 2014, after Putin’s annexation of Crimea and invasion of eastern Ukraine, we saw a huge difference. Most of ethnic Russians in Ukraine signed for the Ukrainian army, fighting against Putin’s invasion, against the same Russians that came from the other side.
It could be a long debate, but I would say that one of the main reasons is that Ukraine experienced in 1994 a gradual transition of power from one president to another after sitting president Leonid Kravchuk lost elections and walked away. Ukrainians somehow got an idea that power is not sacred, and government can come and go, and they can remove it by voting.
And even despite the fact that Ukraine never experienced higher living standards than Russia, people realized that keeping this freedom, keeping this ability to influence their bureaucrats and government through the peaceful process of voting and, if necessary, striking, far more effective than Russia’s “stability” where the same leader could be in charge of the country with his corrupt clique for a long, long time.
On computer chess, I most enjoyed this part of the exchange:
KASPAROV: But I want to finish this because what we discovered in this process . . . I wouldn’t overweight our listeners with all these details. I don’t want just to throw on them the mass information.
COWEN: It’s amazing what people will enjoy, though. You’d be surprised.
Self-recommending! We cover many other topics as well, again you can read or listen here.
And I strongly advise that you buy and read Garry’s wonderful new book Deep Thinking: Where Machine Intelligence Ends and Human Creativity Begins.
Why a Julian Simon fan also should be a Malthusian
Let’s say you’ve read and loved Julian Simon, who stressed mankind’s indefatigable power of creation and innovation. I certainly have. Simon stressed that the cost of producing real resources likely would fall, thereby spreading wealth across mankind. The bad news is that probably should make you a Malthusian.
The classical economists understood very well that the wages to labor cannot for very long exceed the cost of production to labor. And if you are an optimist about the cost of producing copper, tin, and steel, you probably should be an optimist about the cost of bringing more humans into the supply chain for labor. this could happen through:
1. Developing more and better IT to ease outsourcing.
2. Lowering the costs of raising children, so families choose to have more niños. Or subsidize births, just for the heck of it.
3. Building human-like robots, or smart software that performs human-like functions.
4. Encouraging current individuals to work more hours or retire later in life, etc., or just taking in more immigrants of the kind who will compete with native workers and lower their wages.
6. 120 years from now, corporations build artificial wombs and create babies in large numbers in East Timor, for factory work, or military reasons, or to satisfy idiosyncratic philanthropic visions. Or maybe just as gaming companions. They will be bred or drugged so as to enjoy their lives, thereby brunting external criticisms, besides how many of you worry about Mauritania as it is?
7. What else? Chimeras? Aliens? Imports from parallel universes? Of course it is fine to focus on #1-4 and stick with the more commonsensical scenarios.
The Simon fan should not be a pessimist about this broad panoply of alternatives, even if he rejects some of the options as implausible. Whether you like it or not, they all imply various forms of downward pressure on wages in the wealthier countries. There is simply no reason for the technological optimist to think the cost of reproducing labor and labor substitutes should remain high forever. The higher are real wages, the greater the pressures for such innovation! Just visit Nevada — why should all that land remain empty, Australia all the more so? Markets will create more surplus, but the best default presumption is that will be eaten up by the numbers, and not by your special privileged position as a natural-born North American, or whatever you may be.
Of course the optimists wish to have it both ways, but I say no, if you are an optimist about the cost of producing non-human resources, apply similar analysis to the cost of producing substitutes for humans. The classical economists were a lot smarter than they are given credit for these days.
For a useful conversation related to this topic, I thank Bryan Caplan, John Nye, and Robin Hanson, can you guess which one disagreed with me most?
Kinshasa fact of the day
This is Africa’s third biggest city. At 12 million, its population is bigger than London’s. Yet it has almost no connections to the outside world. On normal days, there are only 11 international flights out of Kinshasa per day. At Heathrow, the figure is around 1,400. Apart from the airport, the only other way into this vast megacity is the rickety ferry from neighbouring Congo-Brazzaville. If you were extremely brave, you could try the road to the Atlantic Ocean. But that’s about it. Kinshasa can burn and most of the world doesn’t notice, because Kinshasa is only slightly better connected to the global economy than the North Pole.
And yet somehow it is one of the world’s fastest growing cities. Kinshasa is a particularly extreme example of how Africa is urbanising without globalising. Sixty years ago the whole of sub-Saharan Africa had no cities with a population of more than a million people. Now it has dozens.
But unlike the English peasants who moved to factory cities in the 19th century, or Chinese ones in the 20th, the people moving to African cities are not moving to new global metropolises. Africa’s urbanisation is not driven by economic growth. Instead, people are moving to miserable mega-cities, with crumbling infrastructure and corrupt political systems, and which export almost nothing. Two thirds of Africa’s urban population growth is accounted for by slums.
That is from Daniel Knowles, via Tom Murphy.
Tuesday assorted links
1. The economics of a Palestinian future?
2. My Complacent Class podcast with James Pethokoukis at AEI, and the transcript. And Scott Sumner on The Complacent Class. And Cardiff Garcia podcast with Jason Furman.
3. Space plane touches down after 718 days circling the earth.
5. The background history to Modern Monetary Theory.
The euro isn’t as bad as we all thought
It still was a mistake, most of all for Greece and Cyprus. Yet overall its prospects are looking up, as I argue in my most recent Bloomberg column. Here is the most revisionist passage:
I now think of the 2008-2012 period as unwinding a long-term bubble of overinvestment in the EU periphery, and thus those were special circumstances when virtually all economic policies were radically underperforming. Given that a recurrence of such conditions is unlikely, the euro will do much better in the future.
Along related lines, compare the performance of fiscal austerity now with that earlier period. Greece has been going through an unprecedented fiscal adjustment, with a primary surplus running at 3.9 percent of gross domestic product; yet Greek output, while ailing, has remained roughly stable. Portugal has been cutting back drastically on public sector investment, dropping its public sector deficit from 4.4 percent of GDP to 2.1 percent. Rather than imploding, the economy grew by 1.4 percent.
Of course, fiscal austerity didn’t perform nearly as well in the earlier part of this decade, and neither did the euro. The economic implosion from the unwinding of the bubble was simply too strong, so we should not overgeneralize from the very negative performance during those years.
Here is the most important passage:
One of the original goals of the euro was to tie countries to the European Union and its rules for free trade and free migration. The major EU country that eschewed euro adoption, the U.K., has now voted itself out the union altogether, to its detriment. Estonia and Latvia, which adopted the euro in part for political reasons to tighten their bonds with the EU, still seem secure against potential Russian aggression. The biggest political trouble spots seem to be Hungary and Poland, neither of which are euro members. That may be a coincidence, but it may also reflect a very real psychological tie resulting from the currency adoption.
Do read the whole thing, there are several other arguments at the link.
The Raudat Tahera and the Power of Religion to Induce Cooperation
You won’t find the Raudat Tahera, a beautiful mausoleum for two holy leaders of the Dawoodi Bohra sect of Ismaili Muslims, on any of the standard tourist guides to Mumbai. In part that is because the Raudat isn’t ancient (but like the Akshardham Temple people will be coming to this shrine for hundreds of years so why wait?) and in part because it isn’t a tourist site but an active and revered part of the Dawoodi Bohra community. Not many people seem to know about the Raudat Tahera and today it is literally hidden under a tarp to protect it from nearby construction (more about that later). Nevertheless, the Raudat Tahera is without question one of the best things to see in Mumbai and arguably in all of India.
The marble for the mausoleum was quarried from the same grounds as that used for the Taj Mahal. Most spectacularly, the entire Quran has been inscribed in golden letters on the inside walls with each of the ‘Bismillah’ inscribed using diamonds, emeralds, rubies and other precious stones. The interior is austere and beautiful but hard to capture in photographs (which aren’t permitted except for official purposes). Although of low-resolution the image below actually gives the best feel.
I visited with my wife and son. We came in the morning and we were told to return later that afternoon. When we returned we were treated very courteously and provided a guide, a student from Saudi Arabia. The local community is proud of the mausoleum and although they don’t encourage tourists I believe they were pleased that foreigners wanted to see it. Both men and women need to cover their head.
Aside from the architectural awe and religious interest my pilgrimage to the Raudat was motivated by economics. One of Mumbai’s great problems is that a lot of land is locked up in low-value uses. Rusted factories and ports generate little value on land worth billions, slums look out onto million dollar sea-views, land that could house thousands in sky rise apartments instead holds dozens in dangerously dilapidating structures. The complexity of ownership (who owns a second floor apartment that has been occupied by the same family for generations?), the chaotic land-titling system, the slow court system and the politicization of everything means that solving these problems requires little short of a miracle. Enter Syedna Mohammed Burhanuddin, the holy leader of the Dawoodi Bohra.
Burhanuddin built the Raudat Tahera for his father, the previous Dawoodi leader, and they are now buried there together. Burhanuddin was not just a spiritual leader. He was an astute businessperson and before he died be presented his vision to rebuild the Bhendi Bazaar, the 150 year old warren of crowded and narrow streets and shops behind the Crawford bazaar (hence “b hend i” bazaar) where a majority of the residents are Dawoodi.
ET: To an outsider, [Bhendi Bazaar] holds an old-world charm…But the neigbourhood is so congested and some streets so narrow that cars cannot enter. Virtually every open or unoccupied space has turned into a garbage dump. And almost all the 280 buildings in Bhendi Bazaar look shaky and dilapidated (80% have been declared unsafe).
Burhanuddin’s visionary redevelopment plan requires thousands of people to sell their homes and businesses to the Saifee Burhani Upliftment Trust. Trust, being the operative word. Then they will move out of their crumbling structures into temporary quarters while some 250 buildings spread across 16.5 acres will be torn down and redeveloped. After completion, the old owners will move back in to (part) of the now much larger and better planned area. It’s a big-push plan and, remarkably, it seems to be working.
So far, the Trust has bought 87% of the buildings in the area and construction is active (hence the Raudat Tahera being under a tarp). Holdouts can be a problem but every Dawoodi child who comes of age has to swear loyalty to the Dawoodi leader (now Syedna Mufaddal Saifuddin, son of Burhannudin and the 53rd in the line) and disobedience brings pressure and social boycott.
It’s no accident that the Raudat Tahera is the focal point of the planned new development. Towers of apartments and offices will rise from the Raudat in order of ascending height, framing the Raudat forever and giving everyone a visual reminder of where true power lies.
It’s only a slight exaggeration to say that all of India is looking to the Bhendi Bazaar redevelopment project and praying that it will succeed. Although the billion dollar plan is being funded and run by the private Trust, the Maharashtra state government and Prime Minister Modi have thrown their support behind the plan. The plan, of course, cannot be easily replicated. The Dawoodi are a small, close-knit, geographically concentrated, spiritual group devoted to a holy, charismatic and visionary leader and all of that has been key to solving the holdout problem and creating the trust necessary for large-scale cooperation. Many of the Dawoodi are also successful and well-connected business people. Adil Zainulbhai, former head of McKinsey India and consultant to the Modi government, for example, is counted among their members and sits on the board of the Trust. Nevertheless, even if the Bhendi Bazaar redevelopment plan cannot be easily replicated, if it succeeds the demonstration value of the wealth that can be unlocked with cooperation will be tremendous. And if the plan fails…well that is why people are praying.
Hat tip: David Moo.
How long until another Industrial Revolution would have taken place?
Let’s say that somehow Britain had let its opportunity pass by (lost the wrong war?), or perhaps never had been in the right position at all (no Gulf Stream?). When would the world have seen an Industrial Revolution? Keep in mind Song China came relatively close to having a break through of some kind, but still did not pull it off; some commentators suggest the same about the Roman Empire.
My initial presumption is that “industrial revolutions,” if we can even make the term plural in that way, are remarkably difficult to see through. I offer a few points:
1. Mankind spent about a hundred thousand years before making enough progress to attain the civilizations of Sumeria and Mesopotamia. Along the way, people discovered how to tame fire and use various stones and metals, but still it was a long, tough slog to a point that still was almost 6000 years short of an industrial revolution.
2. I see, in world history, only two regional units being in a position at all to make a run at an industrial revolution, namely Rome and its offshoots, and China. That is discouraging, especially because each of those required a fairly large, semi-unified territorial area. (As an aside, I view “how did China get so big so quickly?” as one of the most under-discussed questions of world history. Try it sometime, it’s better than arguing about Trump or ACA.)
2b. Were the Roman Empire and China actually independent events?
3. I fear what I call “the James C. Scott dead end,” namely that many territories will develop strong enough “state capacity-resistant” units that further Chinas and Romes will be difficult to achieve in terms of the size of the political unit. Imagine a world like Laos or northern Thailand. You may think that is a “mountains effect,” but neither the Great Plains nor Africa developed a China or Rome equivalent in earlier times, or much in the way of a very large or effective political unit. By the way, when is the next James C. Scott book coming out?
4. I also fear the “energy dead end.” The Aztec empire and its precursors created an amazing time, most of all for biotechnology — they bred corn out of a crummy weed, one of mankind’s greatest achievements, and without external grants. Tenochitlan may have been larger and more impressive than any European city, and the residents probably ate better too. Yet they used the wheel only for children’s toys and, more importantly, they stuck with direct uses of solar power. There is no evidence of them coming remotely close to a major deployment of fossil fuels. They did burn coal for fuel, and to make ornaments, but seemed to have no idea of how to put the pieces together to make it an energy source for powerful machines. For most of their purposes, solar energy seemed to work remarkably well, and Mexico had plenty of it. It nourished their food and kept them warm.
5. The economic historian R.C. Allen overrated the role of coal in the British Industrial Revolution, and this has kept many people away from seeing #4. Don’t assign coal a dominant monocausal role in the Industrial Revolution, just have an n-factor model where fossil fuels are one of the binding constraints; circa 2017 we still need them! By the way, here is an Allen essay on the Britishness of the Industrial Revolution, closely related to this blog post. I agree with most of his sentences as stand-alone claims, though he vastly underrates the role of non-energy factors in the bigger picture.
6. The Incas also had a remarkably advanced civilization, in select areas ahead of Europeans and spanning a fairly large geographic area at its peak with plenty of state capacity. They too seemed to be in a cul-de-sac with respect to an industrial revolution, energy again being one factor as best we can tell.
7. Many people fear internecine warfare as preventing an industrial revolution in alternative locales, and while that is a factor, I worry more about “the James C. Scott dead end” and “the energy dead end.” What other possible dead ends are there?
8. At what point was a European/British industrial revolution “in the bag”? 1740? 1600? 1050? If the Brits had failed us, at what point would Japan or Bohemia have picked up the ball and run with it? Seventy years later? Three hundred years? Never?
9. The optimistic perspective is gained from studying the history of the arts. Then one sees European culture as having a series of mini-industrial revolutions, starting in late medieval times and rapidly accelerating progress in painting, sculpture, perspective, bookmaking, goldsmithing, musical instruments, musical notation, paper-making, and many other areas, most of all in northern Italy and also Franco-Flemish territory and a bit later Germany. Bach came before the British “Industrial Revolution” and his genius had a lot of preconditions too! The “special” thing about the British IR is that it overturned Malthusian assumptions, but from the point of view of understanding how the inputs related to the outputs, and how so many new, complex innovations were possible all at once, that is arguably of secondary import. Study Monteverdi, not coal!
For this post I am thankful to a recent lunch conversation with John Nye, Bryan Caplan, and Robin Hanson, of course implicating none of them in these views, though can you guess who disagreed the most?
Monday assorted links
1. Profile of Clayton Christensen.
2. Is Roger Federer more loss averse than Serena Williams?
3. Venice (Italy) bans kebab shops.
4. “Russian website shows unsecured video streams from across Canada.”
5. New and even more shocking results on income stagnation.: “…economists should search for explanations for households’ current financial woes in the youth and childhood of today’s workers. “We are maybe looking at the wrong place for the solution to stagnation in wages and rising inequalities,” Guvenen said. “To understand higher inequality, we should turn and take a closer look at youth.””
6. Fewer than one in one thousand teachers in Colorado is “ineffective” — what a state!
7. With proper calibration, the Comey effect is much smaller than you might think (NYT).
Market Anomalies Fail to Replicate
It’s now well known that many findings in social psychology fail to replicate. Social psychologists have often discovered noise rather than fundamental aspects of behavior. A new paper suggests that many market anomalies also fail to replicate. Hou, Xue and Zhang write:
The anomalies literature is infested with widespread p-hacking. We replicate the entire anomalies literature in finance and accounting by compiling a largest-to-date data library that contains 447 anomaly variables. With microcaps alleviated via New York Stock Exchange breakpoints and value-weighted returns, 286 anomalies (64%) including 95 out of 102 liquidity variables (93%) are insignificant at the conventional 5% level. Imposing the cutoff t-value of three raises the number of insignificance to 380 (85%). Even for the 161 significant anomalies, their magnitudes are often much lower than originally reported. Out of the 161, the q-factor model leaves 115 alphas insignificant (150 with t < 3). In all, capital markets are more efficient than previously recognized.
My EconTalk podcast with Russ Roberts on *The Complacent Class*
Here is a link to the download and partial transcript, Russ is one of the very best interviewers and of course he is a pioneer in the podcast genre. Here is one excerpt:
Tyler Cowen: And I think overall academics are among the most complacent of the complacent groups in American society.
Russ Roberts: Fair enough.
There is more…
Who’s complacent patrol officers?
This study analyzes two decades of data from a municipal police agency and describes the average patrol officer career productivity trajectory. We find that declines in productivity begin immediately after the first year of service and worsen over the course of officers’ careers. After their 20th year, patrol officers generate 88% fewer directed patrols, 50% fewer traffic warnings, 58% fewer traffic citations, 41% fewer warrant arrests, and 57% fewer misdemeanor arrests compared to officers with 1 year of experience. Using a patrol officer productivity metric called Z-score per Productive Time (Z-PRO), we estimate that each additional year of service decreases an officer’s overall productivity by about 2%. Z-PRO also indicates that after 21 years of service, an average officer will be approximately 35% less productive overall than an officer with 1 year of service.
That is from a study by Luke Bonkiewicz, via the excellent Kevin Lewis.
*The Color of Law*
The author is Richard Rothstein, and the subtitle of this excellent and important book is the apt A Forgotten History of How Our Government Segregated America. The upshot is that twentieth century segregation had a lot more to do with government restrictions — and not just government toleration — than many of us had thought. Here is one bit of many:
Calling itself the Peninsula Housing Association of Palo Alto, the co-op purchased a 260-ranch adjacent to the Stanford campus and planned to build 400 houses as well as shared recreational facilities, a shopping area, a gas station, and a restaurant on commonly owned land. But the bank would not finance construction costs nor issue mortgages to the co-op or its members without government approval, and the FHA would not insure loans to a cooperative that included African American members. The cooperative’s board of directors, which included [Wallace] Stegner, recommended against complying with the demand that the cooperative reconstitute itself as an all-white organization, but the membership, attempting to appease the government, voted…to compromise.
And:
At the time [immediate post-war era], the Federal Housing Administration and Veterans Administration not only refused to insure mortgages for African Americans in designated white neighborhoods like Ladera; they also would not insure mortgages for whites in a neighborhood where African Americans were present. So once East Palo Alto was integrated, whites wanting to move into the area could no longer obtain government-insured mortgages.
Furthermore, a bit earlier, many of the New Deal agencies shared a commitment to residential segregation, and were willing to enforce it. Keep in mind that residential integration started moving backwards in 1880, through the middle of the twentieth century.
Recommended, and here is NPR coverage of the book. Here is coverage from Slate. Here is an earlier MR post on the roots of racial segregation in Baltimore.