Month: December 2019

News of the Weird

SlateStarCodex sums it up:

You might already be following the Navy UFO thing: over the past few years, the Navy has encouraged its pilots to come forward with UFO accounts, signal-boosted the reports, and sponsored UFO research organizations, as if they’re trying to stoke interest for some reason. Now the plot gets weirder: a Navy scientist has filed a patent for a quantum superconducter antigravity drive capable of UFO-like feats of impossible aeronautics. When the Patent Office rejected it as outlandish, the Chief Technical Officer of naval aviation personally wrote the Patent Office saying it was totally possible and a matter of national security, after which the Patent Office relented and granted the patent. The patent thanks UFO researchers in the acknowledgements, includes a picture of a UFO recently sighted by Navy pilots, and does everything short of print in capital letters ‘THIS COMES FROM A UFO’. Scientists who were asked to comment say the proposed drive is “babble” and none of the supposed science checks out at all. Has the Navy fallen victim to conspiracy-peddlers, are they deliberately trying to stoke conspiracy theories for some reason, or what?

Germany fact of the day

Germany owns no nuclear weapons. It renounced the very idea when it reunified in 1990. But if war were to break out in Europe today, German pilots could clamber into German planes, take off from Büchel Air Base in Rhineland-Palatinate and drop nuclear bombs on Russian troops.

The Luftwaffe can do that thanks to Nato’s nuclear-sharing scheme, under which America quietly stations nuclear bombs across five countries in Europe.

Here is more from The Economist, mostly covering Turkey and the tactical nuclear weapons stored there.

*The Korean Mind: Understanding Contemporary Korean Culture*

This is a weird book, published primarily in Singapore, and somehow not fitting the canons of what people “are supposed to do” (NB: it is not at all racist, just bolder in its cultural generalizations than is currently in vogue).  Nonetheless I learned a great deal from the book, while taking some parts with a grain of salt.  Here is one interesting bit of many:

Since 1948 the government in North Korea has been dominated by people from North Hamkyong Province, where the late Il Sung Kim, founder of the North Korean regime, was active as a guerrilla leader during World War II.  Since that time people from the North Korean provinces of Hwanghae and Kangwon, which are the closest to South Korea, have been virtually banned from high government offices because they are considered untrustworthy and unfit.  In South Korea government has been controlled mostly by natives from North Kyongsang Province in the Youngnam (formerly Shilla) region.

…Ongoing competition and conflicts between people from Cholla and Kyongsang Provinces are said to be serious enough that they have significant negative impact on national politics, the economy, and life in general.

The author is Boye Lafayette de Mente, and he seems to know a lot about Korean bowing.  Do note the book is mainly about South Korea.  Reviewers, by the way, complain that there are significant mistakes in the Korean characters.  Recommended nonetheless, albeit with caveats, you can buy it here.

Friday assorted links

1. New species of beetle named after Greta Thunberg.

2. D.C. Fontana, the best of the Star Trek script writers, has passed away (NYT).

3. “Taken together, the evidence suggests that digitization occurs in prediction because it circumvents processing bottlenecks surrounding people’s ability to simulate outcomes in hypothetical worlds.

4. The return of freestanding bath tubs.

5. Recent debates over inequality measures (The Economist, recommended).

6. Bob Zoellick on what kind of Chinese cooperation has been induced by engaging with China (pdf).

Principles for Amazon (and other?) censorship

That is the topic of my latest Bloomberg column, here is one excerpt:

Focus on whether the merchandise contributes to further understanding, one way or another, rather than whether it might embody evil.


This principle runs counter to how the world of social media works, I realize. “Cancel culture” tends to issue decisions based on the worst aspects of a product, writer or public figure, because that is what is endlessly circulated and condemned. But there is another way of thinking about the problem — namely, by focusing on the positive.

It is still possible, for example, to buy Adolf Hitler’s “Mein Kampf” on Amazon, either through third-party merchants or Amazon itself. That book is more offensive than an Auschwitz bottle opener, as it directly calls for the extermination of the Jews and the conquest of Europe, and it probably still inspires neo-Nazis today. Nonetheless, I hope “Mein Kampf” continues to be for sale.

For all of its evil, “Mein Kampf” is an essential document for understanding the rise of Nazism and Hitler. As such, it should be allowed in spite of its potential downside. There is both intrinsic and utilitarian value in maximizing public access to as much knowledge as possible.

In contrast, it is hard to argue that an Auschwitz-themed mouse pad has anything positive to offer, whether to our historical knowledge or otherwise. At best, it is an act of obnoxious trolling and thus it was appropriate for Amazon to take it down.

It is fine to watch Leni Riefenstahl and listen to Richard Strauss, for instance.  But most private platforms — if they can — should ban sheer trolls.

Are we undermeasuring productivity gains from the internet?, part II

From my new paper with Ben Southwood on whether the rate of progress in science is diminishing:

Similarly, the tech sector of the American economy still isn’t as big as many people think. The productivity gap has meant that measured GDP is about fifteen percent lower than it would have been under earlier rates of productivity growth. But if you look say about the tech sector in 2004, it is only about 7.7 percent of GDP (since the productivity slowdown is ongoing, picking a more recent and larger number is not actually appropriate here). A mismeasurement of that tech sector just doesn’t seem nearly large enough to fill in for the productivity gap. You might argue in response that “today the whole economy is incorporating tech,” but that doesn’t seem to work either. For one thing, recent tech incorporations typically involve goods and services that are counted in GDP. Furthermore, there is a problem of timing, namely that the U.S. productivity slowdown dates back to 1973, and that is perhaps the single biggest problem for trying to attribute this gap mainly to under-measured innovations in the tech sector.

Other research looks at “worst case” scenarios from the mismeasurement of welfare adjustments in consumer price deflators and finds a similar result: a significant effect that nonetheless does not reverse the judgement that innovation has been slowing. 

The most general point of relevance here is simply that price deflator bias has been with productivity statistics since the beginning, and if anything the ability of those numbers to adjust for quality improvements may have increased with time. For instance, the research papers do not find that the mismeasurement has risen in the relevant period. You might think the introduction of the internet is still undervalued in measured GDP, but arguably the introduction of penicillin earlier in the 20th century was undervalued further yet. The market prices for those doses of penicillin probably did not reflect the value of the very large number of lives saved. So when we are comparing whether rates of progress have slowed down over time, and if we wish to salvage the performance of more recent times, we still need an argument that quality mismeasurement has increased over time. So far that case has not been made, and if you believe that the general science of statistics has made some advances, the opposite is more likely to be true, namely that mismeasurement biases are narrowing to some extent. 

You will find citations and footnotes in the original.  Here is my first post on whether the productivity gains from the internet are understated.

Claims about real rates of return

With recourse to archival, printed primary, and secondary sources, this paper reconstructs global real interest rates on an annual basis going back to the 14th century, covering 78% of advanced economy GDP over time. I show that across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been “stable”, and that since the major monetary upheavals of the late middle ages, a trend decline between 0.6-1.8bps p.a. has prevailed. A consistent increase in real negative-yielding rates in advanced economies over the same horizon is identified, despite important temporary reversals such as the 17th Century Crisis. Against their long-term context, currently depressed sovereign real rates are in fact converging “back to historical trend” – a trend that makes narratives about a “secular stagnation” environment entirely misleading, and suggests that – irrespective of particular monetary and fiscal responses – real rates could soon enter permanently negative territory. I also posit that the return data here reflects a substantial share of “nonhuman wealth” over time: the resulting R-G series derived from this data show a downward trend over the same timeframe: suggestions about the “virtual stability” of capital returns, and the policy implications advanced by Piketty (2014) are in consequence equally unsubstantiated by the historical record.

That is from a new paper by Paul Schmelzing, via the excellent Kevin Lewis.

Why Don’t We Know More About the Subway Cost Disease?

Alon Levy has a good deck based on data he collected covering 205 projects in 40 countries on why subway costs are so expensive in the United States compared to much of the rest of the world.

One of the points he makes is that a significant fraction of cost varies across countries which means “the explanation should be institutional and not geologic or geographic. This is difficult and requires qualitative research, since N is about 40.”

Costs are lower in poorer countries but Levy argues that GDP per capita is not a big factor once differences in type of subways are accounted for, I find that surprising and somewhat difficult to believe.

Levy’s major factor is simply that Americans and New Yorkers in particular don’t know much about how things are done elsewhere. In Europe, when a city builds a subway it can look to ten or twelve examples in three to four nearby countries for best practices. New Yorker’s don’t look anywhere else and say things like “New York has a more built-out commuter rail network than London,” as MTA chair Pat Foye recently claimed. In one way, this is good news because Levy argues that if Americans adopted European practices such as separating design from construction and simplifying station construction they could cut costs significantly.

Levy is to be lauded for his pioneering work on this issue yet isn’t it weird that a Patreon supported blogger has done the best work on comparative construction costs mostly using data from newspapers and trade publications? New York plans to spend billions on railway and subway expansion. If better research could cut construction costs by 1%, it would be worth spending tens of millions on that research. So why doesn’t the MTA embed accountants with every major project in the world and get to the bottom of this cost disease? (See previous point). Perhaps the greatest value of Levy’s work is in drawing attention to the issue so that the public gets mad enough about excess costs to get politicians to put pressure on agencies like the MTA.

Is the inequality of intelligence increasing?

“The inequality that matters,” as they used to say:

In a large US-representative adolescent sample, a Flynn Effect was found for IQs ≥ 130, and a negative effect for IQs ≤ 70

IQ changes also differed substantially by age group

A negative Flynn Effect for those with low intellectual ability suggests widening disparities in cognitive ability

Findings challenge the practice of generalizing IQ trends based on data from non-representative samples

So maybe yes — beware!

Here is the paper, via the excellent Kevin Lewis.

Are we undermeasuring productivity gains from the internet? part I

From my new paper with Ben Southwood on whether the rate of scientific progress is slowing down:

Third, we shouldn’t expect mismeasured GDP simply from the fact that the internet makes many goods and services cheaper. Spotify provides access to a huge range of music, and very cheaply, such that consumers can listen in a year to albums that would have cost them tens of thousands of dollars in the CD or vinyl eras. Yet this won’t lead to mismeasured GDP. For one thing, the gdp deflator already tries to capture these effects. But even if those efforts are imperfect, consider the broader economic interrelations. To the extent consumers save money on music, they have more to spend or invest elsewhere, and those alternative choices will indeed be captured by GDP. Another alternative (which does not seem to hold for music) is that the lower prices will increase the total amount of money spent on recorded music, which would mean a boost in recorded GDP for the music sector alone. Yet another alternative, more plausible, is that many artists give away their music on Spotify and YouTube to boost the demand for their live performances, and the increase in GDP  shows up there. No matter how you slice the cake, cheaper goods and services should not in general lower measured GDP in a way that will generate significant mismeasurement. 

Moving to the more formal studies, the Federal Reserve’s David Byrne, with Fed & IMF colleagues, finds a productivity adjustment worth only a few basis points when attempting to account for the gains from cheaper internet age and internet-enabled products. Work by Erik Brynjolfsson and Joo Hee Oh studies the allocation of time, and finds that people are valuing free Internet services at about $106 billion a year. That’s well under one percent of GDP, and it is not nearly large enough to close the measured productivity gap. A study by Nakamura, Samuels, and Soloveichik measures the value of free media on the internet, and concludes it is a small fraction of GDP, for instance 0.005% of measured nominal GDP growth between 1998 and 2012. 

Economist Chad Syverson probably has done the most to deflate the idea of major unmeasured productivity gains through internet technologies. For instance, countries with much smaller tech sectors than the United States usually have had comparably sized productivity slowdowns. That suggests the problem is quite general, and not belied by unmeasured productivity gains. Furthermore, and perhaps more importantly, the productivity slowdown is quite large in scale, compared to the size of the tech sector. Using a conservative estimate, the productivity slowdown implies a cumulative loss of $2.7 trillion in  GDP since the end of 2004; in other words, output would have been that much higher had the earlier rate of productivity growth been maintained. If unmeasured gains are to make up for that difference, that would have to be very large. For instance, consumer surplus would have to be five times higher in IT-related sectors than elsewhere in the economy, which seems implausibly large.

You can find footnotes and references in the original.  Here is my earlier post on the paper.

Airline markets in everything

Out of the many repulsive things about air travel, airline food probably ranks high. But not for AirAsia.

Asia’s largest low-cost carrier is betting people love its food so much that it opened its first restaurant on Monday, offering the same menu it sells on flights. It’s not a gimmick, either: AirAsia, based in Malaysia, said it plans to open more than 100 restaurants globally within the next five years.

The quick-service restaurant’s first location is in a mall in Kuala Lumpur. It’s called Santan, meaning coconut milk in Malay, which is the same branding AirAsia uses on its in-flight menus.

Entrees cost around $3 USD and include local delicacies such as chicken rice and the airline’s signature Pak Nasser’s Nasi Lemak dish, a rice dish with chilli sauce. Locally sourced coffee, teas and desserts are also on the menu.

Here is the full story, via Michael Rosenwald.  P.S. Pablo Escobar’s brother is now selling a folding smart phone.

Wednesday assorted links

1. Kittyconomics (teaching economics through cat videos).

2. Imagery on good vs. bad banknotes.

3. “This contains official information about the upcoming Harvard Graduate Students Union – United Auto Workers strike. Strikers will stop work on the first hour of December 3rd.

4. “We won’t deal with millionaires,” says Sean Hoey, managing director of the facility, run by International Bank Vaults (IBV). “We will be dealing only with billionaires.”  Article link.

My Conversation with Daron Acemoglu

Self-recommending of course, most of all we talked about economic growth and development, and the history of liberty, with a bit on Turkey and Turkish culture (Turkish pizza!) as well.  Here is the audio and transcript.  Here is one excerpt, from the very opening:

COWEN: I have so many questions about economic growth. First, how much of the data on per capita income is explained just simply by one variable: distance from the equator? And how good a theory of the wealth of nations is that?

ACEMOGLU: I think it’s not a particularly good theory. If you look at the map of the world and color different countries according to their income per capita, you’ll see that a lot of low-income-per-capita countries are around the equator, and some of the richest countries are pretty far from the equator, in the temperate areas. So many people have jumped to conclusion that there must be a causal link.

But actually, I think geographic factors are not a great explanatory framework for understanding prosperity and poverty.

COWEN: But why does it have such a high R-squared? By one measure, the most antipodal 21 percent of the population produces 69 percent of the GDP, which is striking, right? Is that just an accident?

ACEMOGLU: Yeah, it’s a bit of an accident. Essentially, if you think of which are the countries around the equator that have such low income per capita, they are all former European colonies that have been colonized in a particular way.


COWEN: If we think about the USSR, which has terrible institutions for more than 70 years, an awful form of communism — it falls; there’s a bit of a collapse. Today, they seem to have a higher per capita income than you would expect a priori, if you, just as an economist, write about communism. Isn’t that mostly just because of what is now Russian, or Soviet, human capital?

ACEMOGLU: That’s an interesting question. I think the Russian story is complicated, and I think part of Russian income per capita today is because of natural resources. It’s always a problem for us to know exactly how natural resources should be handled because you can do a lot of things wrong and still get quite a lot of income per capita via natural resources.

COWEN: But if Russians come here, they almost immediately move into North American per capita income levels as immigrants, right? They’re not bringing any resources. They’re bringing their human capital. If people from Gabon come here, it takes them quite a while to get to the —

ACEMOGLU: No, absolutely, absolutely. There’s no doubt that Russians are bringing more human capital. If you look at the Russian educational system, especially during the Soviet time, there was a lot of emphasis on math and physics and some foundational areas.

And there’s a lot of selection among the Russians who come here…

The Conversation is Acemoglu throughout, you also get to hear me channeling Garett Jones.  Again, here is Daron’s new book The Narrow Corridor: States, Societies, and the Fate of Liberty.