Tuesday assorted links


#5 Only cucks worry about Arabs.

You are my Muse.

Only cucks worry about Nazis.

You mean cucks like me?

If nincompoops yelling utter nonsense cause you to piss yourself . . .

Anyhow, I love you, man. Yet, you're not my Muse.

#6. It's depressing this even needs to be said. But you just linked to this because they name-dropped you, right?

I thought "there is a literature on everything" was actually Cowen's Second Law. But maybe I am misremembering...

Keep in mind that Tyler Cowen (TM) is a brand name.

It's not an unreasonable hypothesis. Forests that get periodic fires growth healthier than ones that don't. I could see how an unexpected disaster could prune a region of less productive capital and thereby replace it sooner with higher quality capital. It also might expose weaknesses in the capital stock that wouldn't have normally been resolved or discovered by the everyday process of capital aging out and being replaced by newer capital.

And here’s for the top 10% of disasters:

Kind of strange that they find little impact from the bulk of disasters, isn't it? I mean if a disaster is an unexpected exogenous event then you should have a clear negative impact to GDP from it. Yet you only can find that clear negative by restricting yourself to the top 1% of disasters...the worst of the worst.

I'm wondering if the positive impact is masked by the GDP of large countries. In other words Harvey might have a more measurable boost to Texas's state GDP rather than the US as a whole.

Generally, it is better to reallocate capital to more productive uses than to destroy it. In a natural disaster, capital goods are physically destroyed. The everyday process is that the entity they are owned by goes bankrupt or sells them and they are repurposed to other uses . The only time the physical destruction would be advantageous would be if (say) a building needed to be demolished, because then you would get the demolition for free. And maybe not even then since a controlled demolition might be way easier to clean up then a demolition caused by a natural disaster.

In theory the frictionless economy is constantly comparing existing capital to potential new capital. Should, say, the pizza place start seeing lower profit margins the ovens will get sold off for scrap and the cash invested into new machines that produce products of higher margins (Korean fish taco machines?). In theory bankruptcy would almost never happen, as capitalist see losses start to accumulate, they would shut down less productive capital before it gets anywhere near bankruptcy. Bankruptcy would happen only in cases where there's a sudden and dramatic market change that catches some company totally unawares with a perfect storm of negativity (say a huge pharma company wakes up one day to find not one but three of their biggest blockbuster drugs are suddenly rendered irrelevant by another company's miracle cure AND three more huge drugs in the pipeline turn out to fail in testing).

Reality is that many businesses are able to hold on to bad ideas and failing capital for a long time. A 'mom and pop' business can sputter along and never hit bankruptcy provided they can keep generating enough cash to keep the lights on. Middle managers love their departments and pet projects and it is hard for upper management to see that they aren't as necessary as might appear. 'Pruning' then that happens on top of traditional market forces could, in theory, push some of the borderline capital off the cliff so to speak.

Generally, it is better to reallocate capital to more productive uses than to destroy it. In a natural disaster, capital goods are physically destroyed

Are they? Flooded cars can be melted down for scrap metal. Rubble can be recycled or even just used as fill. Even things like furniture, appliances and personal goods can be sold off at flea markets. Most natural disasters do not, I suspect, actually destroy as much capital as one would initially think.

A car is almost always a much more valuable object than the scrap metal it is made from. I've never heard of anyone using rubble from disaster sites, due to the potential for hazardous materials within. Furniture and appliances are usually broken. It can be fixed but that requires an expenditure of capital. In the aftermath of Katrina there were people who made a living rehabbing flooded fridges. That's better than buying all new fridges, but it's still worse than not having to rehab any fridges at all.
Natural disasters might not destroy AS MUCH capital, but they still destroy capital.

That’s better than buying all new fridges, but it’s still worse than not having to rehab any fridges at all

Before disaster there were 100 fridges on average 5 years old. Assume ten year useful life we can say that's equal to an economy with 50 brand new fridges. 100 fridges get thrown away after disaster. Let's say 75 brand new ones are purchased and rehabbers rehab 25 of them. Let's say a rehabbed fridge is equal to a used fridge 5 years old. The economy now has what would be 87.5 new fridges.

I think what might be missing here is we might have a psychological bias against replacing older capital. A disaster might be able to function as a scale tipper that pushes people to retire and replace stuff they probably should have without the disaster but were holding off irrationally.

GDP is not wealth.

Disasters are clearly wealth reducing, but the purchases to replace the broken windows likely would've gone to other uses without the disaster.

On average the broken window is not replaced with a used window but a brand new window. If you say a window has a useful life of ten years then a massive storm that breaks a lot of windows in a town means a year later the town is full of windows with 9 years left on their life rather than 5 years.

yeah, and you still destroyed a bunch of windows with 5 years left on their life.
What could you have allocated that capital to in the 5 intervening years you otherwise could have waited until replacing the window?

Don't concede the point so easily Hazel Meade, I think, weighted by number of people, that disasters do raise GDP. Case in point: all countries affected by World War 2.

Maybe it was more that governments started having more important things to do than fuck around with domestic price controls and agricultural subsidies.
There's nothing like a good war to distract technocrats from their central planning.

Except the Trump presidency.

But I thought Krugman told us natural disasters were good for the economy!

Isn't the natural disaster story better told by stocks and flows? Even if a natural disaster did temporarily increase production in the form of "shovel-ready" rebuilding, the stock of assets and goods has decreased beforehand, so total economic welfare is really unlikely to improve from a natural disaster. Plus, presumably at least some of that labor could've gone toward work that would've been productive sans disaster anyway.

He did say that, but he meant "only through January 20, 2017."

Since then I've become a massive cuck!

According to today's WSJ, repairs and reconstruction are part of GDP but the losses they correct aren't subtracted.

Yes, that makes sense. That's why GDP is only part of the story.

GDP is the total goods and services produced in the economy in a time period. If an economy replaces 1,000 broken windows with new windows, then for that year GDP includes 1,000 new windows for whatever a new window is worth. However, if each person with a broken window would have made 100 trips to Starbucks but didn't because they instead had to buy new windows, then GDP will fall by 100*1000 = 100,000 Starbucks drinks. Assuming these things are of equal value then GDP in theory should not fall at all.....just shift from one type of output to another.

Welfare wise the economy is worse off, those 1000 people would have rather made a trip to Starbucks every 3 days or so but instead had to use their money to replace a window. If having a new window was so important to them they would have just done it anyway so people would have preferred the economy that made more Starbucks and less new windows but as measured by GDP they could be equal.

So is this one of those things that Krugman actually said, or one of those things that have been taken out of context by 5 different iterations of poor blogging and is now taken as a token of faith by anti-Krugman people?

What, you're going to tell me the right wing trollosphear might suffer lapses in judgement when it comes to reading things in proper context. Shame!

This is a reasonable question to ask, and perhaps he has not made the point so generally. This post on 9/11 expresses the idea that destruction can do economic good:

"Ghastly as it may seem to say this, the terror attack -- like the original day of infamy, which brought an end to the Great Depression -- could even do some economic good."


This reasoning that destruction can cause "economic good" would have to apply to a natural disaster, right? All of his points in that article would seem to apply to natural disasters.

Here he seems to be bragging about Japan's post-tsunami GDP growth due to rebuilding:

"So Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast."


So, in short, while my original comment was a quick, snarky dig at Krugman's logic based on my memory, I don't think he's explicitly generalized an economic benefit to natural disasters. But he seems to have a history of arguing that disasters, natural or not, can help economies via the destruction and rebuilding of assets, by focusing on the flows and ignoring the stocks.

Naa, he gives stocks their due as opposed to flows:

From the 9/11 article:

About the direct economic impact: The nation's productive base has not been seriously damaged. Our economy is so huge that the scenes of destruction, awesome as they are, are only a pinprick. The World Trade Center contained 12 million square feet of office space; that's out of 375 million square feet in Manhattan alone, and 3.5 billion in the United States as a whole. Nobody has a dollar figure for the damage yet, but I would be surprised if the loss is more than 0.1 percent of U.S. wealth -- comparable to the material effects of a major earthquake or hurricane.

The other article is just comparing the growth rates of GDP for Q1 of 2012 against Q1 of 2011 for 6 countries. Noting that Japan was spending massively for rebuilding is fair balance. To have kept silent on that would have given the reader the deceptive impression that Japan had stumbled upon some type of magic economic policies to generate growth. Does that 'focus on flows'? Sure but we compare GDP growth all the time. You could just as rightly point out that Japan's wealth per capita is less than the US so even though they enjoyed higher growth than the US that quarter the US was still better off on a per capita basis.

If you want to make a big deal about that then you should get critical of sports coverage where they tell you last nights score. Who won last night may mean nothing when compared to the team's accumulated ranking through the season.

What the hell do you think your post has to do with canceling out "“Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.”"

You're assuming 'some good' means cost is outweighed by the benefits. I don't see him saying that.

The logic is really simple and stating it correctly would greatly improve the debate. Even if one disagrees with it or its application in a given situation.

Normal time - Destruction is not good. Bastiat correcting people about broken windows applies here.

Time of crisis - There is coordination failure. Nobody is placing orders, as everyone is expecting that the other person is going to cut back. This crisis can be instigated by a genuine loss(people realize housing sector has been overvalued and there is a correction), but this genuine loss can be overshadowed by a coordination loss it triggers as everyone moves to a worse equilibrium.

So in this time, even digging a hole and then putting it back could be an improvement,*but it is far from the optimal way* to kickstart things into a better equilibrium. one can channel the money to productive things like infrastructure, if you are against government spending, you can give cheques to people or you can do NGDP targeting).

I think there's two angles here. The first angle is demand side, the demand for rebuilding generates economic growth and the second side is supply.

On the demand side, we are assuming the economy is suffering from a lack of demand for some reason hence the sudden surge of recovery spending helps mop up some of those unemployed resources. Some Keynesian theories assume modern economies are naturally stuck in a state of unemployment unless there is a constant gov't policy to maintain full employment, others say the period of unemployment is a temporary event which should be offset by temporary gov't action. I think the problem with this angle is that it assumes bad policy as a norm or it assumes the natural event somehow is able to time itself to arrive just at the right moment of unemployment. In the first case the solution should be to establish full employment. If that is the case then rebuilding can't generate employment, it can only shift it.

On the supply side the angle would be that the disaster would become an opportunity to replace capital that was worn and inefficient with shiny new capital. The Freedom Tower is probably a better office building than the WTC was. If 9/11 had not happened, though, NYC would almost certainly have not opted to replace the WTC with the Freedom Tower.

BTW, has anyone ever thought about what to do with skyscrapers like the WTC buildings when they reach the end of their useful lives? People do demolish buildings in order to build new ones from scratch but is the concept behind 100+ story buildings that they will essentially be around forever and will never simply demolished and replaced?

The natural disaster and economic crisis need not be at the same. Krugman's point is that it can only be helpful if they *are* at the same time, (otherwise Bastiat's point holds - disaster is bad for economy without kickstarting effects). Further, natural disaster is far from optimal way to move away from a bad equilibrium. Many policy measures(see NGDP targeting) are a better way.

I was only talking of temporary demand shortages.

The permanent shortfalls, sometimes called secular stagnation, are less well understood and only a recent phenomena. I dont think Keynesians have ever advocated for permanent stimulus, in fact the government might need to play an opposite role during good times.

opportunity to replace capital that was worn and inefficient with shiny new capital

What does this even mean?
Yeah, you can replace and upgrade equipment, but what's actually happening is that capital goods depreciate (i.e. the capital is being lost over time anyway), and thus you may want to replace them eventually. But that stills requires an expenditure of capital. It doesn't make sense to replace things just for the sake of replacing them. If it was efficient to replace the goods after the disaster, it was efficient to replace them before it.

Maybe what you are trying to get at here is sunk costs - sometimes people are reluctant to reallocate resources away from inefficient uses, because they're still trying to recoup their investment instead of just cutting their losses and reinvesting in something new. By destroying whatever actually worthless thing it was people sunk their investment into, it prompts people to write-off losses and reallocate still existing capital into better investments.

The permanent shortfalls, sometimes called secular stagnation, are less well understood and only a recent phenomena. I dont think Keynesians have ever advocated for permanent stimulus, in fact the government might need to play an opposite role during good times.

There's a school of thought called Post-Keynesianism that, ironically, thinks the 'true' meaning of Keynes theory was that modern economies are naturally in permanent shortfalls hence need constant gov't policy to ensure full employment. This is often seen as a radical stance but it does seem consistent with the fact that modern first world economies also seem to be in a permanent state of fiscal deficit. This theory long predates the fretting about 'secular stagnation' that was new during the Great Recession.

Maybe what you are trying to get at here is sunk costs – sometimes people are reluctant to reallocate resources away from inefficient uses, because they’re still trying to recoup their investment instead of just cutting their losses and reinvesting in something new. By destroying whatever actually worthless thing it was people sunk their investment into, it prompts people to write-off losses and reallocate still existing capital into better investments.

This would be a psychological example. Grandpa refuses to give up the pizza place he owns. It would make more money as something else, he even has offers but he won't give it up. The hurricane comes and floods it out and now he's willing to make the break releasing old capital to a new, more productive use. Absent the hurricane, the pizza place might have lingered another 10 years before Grandpa finally kicks the bucket and the kids sell off his place. That's ten years of loss potential net income from the 'better' use of that capital lost.

I suspect there's more subtle examples of market failure. For example, suppose you have a bad layout of an entire suburban community. Even with rational agents, it's unlikely you're going to get everyone to go along with a massive rearrangement of the streets, utility lines and so on. But if all the houses are suddenly gone the cost of doing those fixes suddenly drops to almost zero since everyone will be rebuilding from the ground up anyway.

On the individual level have you never heard of someone who suffered some setback like getting laid off who then unlocks a career path that is in fact much more lucrative than what he had before? It doesn't follow from that people losing their job is better for their financial health but it can imply a certain bit of random disaster sprinkled through life stimulates robustness to adversity that pays off more in the long run than long periods of absolute stability with only predictable and well behaved risk functions.

#4. Because the real science is hidden behind paywalls, but bullshit is easily available for free.
This issue does not only affect autism information. It affects virtually all scientific information on the internet.

Not only behind paywalls, but also written in language that seems almost designed to prevent non-academics from understanding it, whereas pseudoscience is written specifically in ordinary language, only occasionally using a scientific-sounding wording or phrase that isn't intended to be understood, but makes it looks more like real science.

There's a few issues where that's actually a good idea. But mostly not. Especially on topics related to public health, you want the general public to get accurate information.

#4 Probably because it is still so poorly understood? Even Slate Star had a very good discussion on the variance of opinion regarding cause, expression (as severity) and diagnosis of this condition. 50 years from now we will look back and say it was all so obvious and academic but I think faced with something like this parents are experiencing a measure of desperation. In the face of not knowing what to do, they try anything.

#5 "The major production companies, Keshet and Reshet, which create programs for the biggest broadcast channel, Channel 2, struggle to break even; they hope to tumble into profit by selling properties abroad."

Sounds to me like a similar problem Hollywood and even streaming is having these days. They are having to get an ever greater share of their profits abroad due to slumping demand at home. Also...they produce a lot just plain crap.

#6 Amazing this has to be said.

Regarding #4, there is some new evidence being explored that autism may be caused by DNA abnormalities that occur partially due to the geometry of DNA (wrapped up in a ball with different parts of the strand tangent) and possibly retrotransposons. A portion of the DNA might jump to someplace else in the genome causing a defect. This may explain why autism is so wide in scope and also why psychologists have been essentially unarmed in understanding the array of resulting conditions.

"50 years from now we will look back and say it was all so obvious and academic but I think faced with something like this parents are experiencing a measure of desperation. In the face of not knowing what to do, they try anything."

Indeed. And there are plenty of snake-oil salesmen ready to profit, self-deluded "experts", and even well-meaning people hoping to help whether or not they are themselves helpless.

My thinking is that either there is some as-yet-unidentified environmental toxin causing it - given that the effects are often subtle it would be hard to isolate.
Or, were have recessive neanderthal genes popping up in the genome - the neanderthals may have had increased technical abilities but reduced language capacity, which is sort of similar to autism symptoms.
Or it's just a statistical illusion caused by increased diagnosis rates.

An environmental toxin (or combination of them) would be my first guess but I believe lifestyle changes in coordination with increasing average age of first pregnancy could also be factors. My reasoning is that this is very much an isolated phenomena of the developing world that we can see...even though this is perhaps because of the limits of statistics (and survival of the subjects) coming out of everywhere else.

*developed world, not developing

That would still be consistent with my neanderthal theory, since neandertal genes are more represented in developed countries.

(Should be noted that they are mapping *native* populations, not immigrants, so in the Americas those dots are for Native Americans only). African populations were not surveyed.

It is my understanding that the Medieval myth of "changelings" was caused by superstitious peasants having autistic children and not knowing what was wrong with them. Given the prevalence of the changeling myth in Europe, one might be led to believe that autism was just as common back then as it is now.

Comparing to other ancient cultures, such as Asian or African, might be illuminating. If they have the same kind of legends, maybe its universal.

Tell me, Hazel, how did these Neanderthal genes just arrive here in developed countries? Particularly as the percentage of them in the population has been dropping

This is already missing the first point- the breadth of symptoms that are now called autism is of such a wide range that it is definitely not one cause. The number of kids classified as mentally retarded has dropped enormously as the rush to get kids classified as autistic has a Rain Man effect where the label can mean the kid is an idiot savant of some sort.

With autism it doesn't help that an expensive, labor-intensive treatment called ABA, which some people consider abusive, but could easily be done by a parent, is supported by a government licensing scheme paired to their exclusive and expensive training that allows them to print money, while a peer-review cartel of the same people that profit from the work gets the "science" published.

When the science is a scam, the scams get really bad.

4. There's been a pretty large environmental change. When I was a lad children would be beaten for talking. Now people get worried when children don't talk.
If you go to a supermarket, you can see adults not just talking to children, but asking their opinion. A complete change from how it used to be. Personally, it makes me anxious and I want to dive in and say, "Stop encouraging these children to talk! It's just going to get them beaten!" But I reassure myself that the evidence indicates children are beaten much less often these days.

6. I suppose there's a big but to this general rule: if austerity has taken hold of people's senses, a good disaster could release them from the bondage. Full expensing could help too. https://www.bloomberg.com/view/articles/2017-08-29/how-a-good-tax-reform-goes-bad

#6 Except when they are...

Sorry. If responding to Tyler's post "Except when they do..."
In any event, this is not to say the results there are generalizable at all and on average they almost surely do not. But there is at least precedent.

Also don't forget how London was reborn after the Great Fire of 1666, and how all the defeated nations of WWII leapt from the ashes...

#1: It is not only Haitians that we receive in droves in Chile nowadays; Venezuelans,Colombians,Peruvians and Bolivians are coming in big numbers too. Dominicans were coming in like that as well until recently, but the government established visa requirements for them. Now there is a new airline which main business model is flying to Haiti to bring immigrants.

The difference with prior migrations is that Haitians do not speak Spanish,are not very educated, and have become quite visible, since many of them work selling things on the street. It does not help their case that many come with diseases we had not seen for a while, like tuberculosis; we even had the first case of leprosy in many decades, when a recent immigrant was diagnosed in a hospital in the south of the country. Some are linking a recent verified spike in AIDS cases to Dominican and Haitian immigration.

Politicians are facing pressure to restrict their coming, and a new migratory bill was sent to Congress, which would help authorities restrict their entering into the country.

My condolences. I hope the Haitians get kicked out soon. Do you know if they are worse than Somalis?

4: If Alex had posted this, he would've accompanied it with breathless commentary about the revolutionary wonderful treatments for autism that are being developed by entrepeneurs, such as chelation and MMS. And how awful the FDA is for trying to put the kibosh on them.

5. But Yizhar’s daughter-in-law Nitza Ben-Ari, a literary scholar, told me, “We no longer see them. If you asked me what the West Bank or Gaza looks like today, I wouldn’t know, and it’s next door, really.” It is difficult to empathize with a disembodied other.

6. "Though disaster risk reduces the expected rate of return to physical capital, risk also serves to increase the relative return to human capital. Thus, physical capital investment may fall, but there is also a substitution toward human capital investment. Disasters also provide the impetus to update the capital stock and adopt new technologies, leading to improvements in total factor productivity." -Toya and Skidmore http://onlinelibrary.wiley.com/doi/10.1093/ei/40.4.664/full

Could it be that this topic is more complicated than blanket statements? Wealth of nation, death toll, and type of event.

#3 i can't find a link to the podcast on the page on mobile. Do you have to subscribe?

#3 Loved this podcast. Many interviewers ask you roughly the same questions, and I'm happy to hear your variations on the answer, but this guy asked some questions that were both different and interesting.

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