Month: February 2020
2. Additional results on migration and wages (The Economist).
4. The relentless bid? (from 2014)
Here is a new paper from Joy Buchanan, Emergent Ventures winner:
Having a larger high-skill workforce is good for economic productivity, so it is useful to understand how workers self-select into high-paying technology jobs. This study examines how workers on the margin decide whether to pursue tech jobs, including a precise control for the opportunity cost of time. The most important determinant of the reservation wage for college students to do computer programming is whether they enjoy it or not. Another subjective influence, whether subjects like math or not, predicts self-confidence. Most students, including females and minorities, are willing to learn a new computer programming language, for a sufficiently high wage. Neither randomly assigned encouragement nor extra information on the programming task increases willingness to participate or increases confidence.
I often say that economics is too often solely the study of incentives, whereas real world problems end up solved because entrepreneurs opt for a potent mix of selection and incentives. Selection is often the more important part of that brew. Get people doing what they like, and you cannot boil a stone into a turnip. It is also noteworthy from the paper that a lot of people really do not seem to like programming.
Running out of things to read? Do you ever have the sneaky feeling that books might be overrated? Well, for some variation at the margin try reading art books. That’s right, books about art. Not “how to draw,” but books about the content and history of art. Some of them you might call art history, but that term makes me a little nervous. Just go into a good art museum, and look at what they are stocking in their bookstore. Many of them will be picture books, rather than art history in the narrower, more scholarly sense of that word.
Art books offer the following advantages:
1. They are among the best ways to learn history, politics, and yes science too (advances in art often followed advances in science and technology). Even economic history. Since the main focus is the art, they will give you “straight talk” about the historical period in question, rather than trying to organize the narrative around some vague novelty that only the peer reviewers care about.
2. They are often very pretty to look at. You also feel you can read them in small bites, or you can read only a single chapter or section. The compulsion to finish is relatively weak, a good thing. You can feel you have consumed them without reading them at all, a true liberation, which in turns means you will read them as you wish to.
3. They have passed through different filters than most other books, precisely because they are often “sold into the market” on the basis of their visuals, or copyright permissions, or connection with a museum exhibit, or whatever. Thus they introduce variation into your reading life, compared to say traditional academic tomes or “trade books,” which increasingly are about gender, race, and DT in an ever-more homogenized fashion.
4. They are among the best ways of learning about the sociology of creativity and also “the small group theory” of history.
5. These books tend not to be politically contentious, or if they are it is in a superficial way that is easily brushed off. (Note there is a whole subgenre of art books, from theory-laden, left-wing presses, with weird covers, displayed in small, funky Manhattan or Brooklyn bookstores where you can’t believe they can make the rent, where politics is all they are about. Avoid those.)
6. A bookstore of art books is almost always excellent, no matter how small. It’s not about comprehensiveness, rather you can always find numerous books there of interest.
7. Major reviewing outlets either do not cover too many art books, or they review them poorly and inaccurately. That suggests your “marginal best book” in the art books category is really quite good, because you didn’t have an easy means to discover it.
8. You might even wish to learn about art.
9. This whole genre is not about assembling a reading list of “the best art books.” Go to a good public library, or museum bookstore, and start grabbing titles. The best museum bookstore I know of is at the Metropolitan Museum of Art in New York.
10. It is also a very good introduction to the histories and cultures of locations such as China and India, where “straight up” political histories numb you with a succession of names, periods, and dynasties, only barely embedded in contexts that make any sense to you.
The unemployment rate for young college graduates exceeds that of the general population, and about 41 percent of recent college graduates — and 33.8 percent of all college graduates — are underemployed in that they are working in jobs that don’t require a college degree, according to new data from the Federal Reserve Bank of New York.
Here is more from Elizabeth Redden. The sad thing is, this is evidence of meritocracy, not a stinking economy.
4. When did “Big Hair” peak? The data.
6. U.S. higher education has a foreign money problem (my Bloomberg column).
The excellent Random Critical Analysis has a long blog post, really a short book, on why the conventional wisdom about health care, especially in the United States, is wrong. It’s a tour-de-force. Difficult to summarize but, as I see it, the key points are the following. (I also drawn on It’s still not the health care prices.)
1. Health care spending is well predicted, indeed caused, by income.
Notice that the United States doesn’t look unusual when income is measured at the household level, i.e. Actual Individual Consumption, which measures the value of the bundle consumed by households whether the bundle items are bought in the market or provided by governments or non-profits. (AIC also avoids some issues with GDP per capita when a country has lots of intellectual property and exports, e.g. Ireland).
2. The price of health care increases with income but at a slower rate than income.
As a result of the above:
3. The price of health care relative to income is lower in rich countries, including the United States.
Let that sink in, health care prices are lower relative to income in richer countries. Health care in the United States is cheaper relative to income than in Greece, for example.
Since spending is going up faster than income but prices are not it must be the case that quantities are also increasing with income.
4. The density of health care workers (number of workers) and intensity (what the workers do) increases with income.
RCA: Rich countries consume much more cutting edge health care technology (innovations). For every 1% increase in real income, we find a 1-3% increase in organ transplant operations, a 1-2% increase in pacemaker and ICD implants, a 1-2% increase in the density of medical imaging/diagnostic technology, and likely similar patterns for all manner of other new technologies (e.g., insulin pumps, ADHD prescriptions, etc.). Obviously, these indicators are just the tip of the iceberg. Still, where data of this sort are available, they tend to be highly consistent with extreme income elasticity (particularly newer, more expensive forms of health care). In the main, costs rise because this technological change tends to requires a lot more people in hospitals and providers’ offices to deliver this increasingly complicated array of health care (surgical procedures, diagnostics, drugs, therapies, etc.).
A bottom line is that health care spending in the United States is not exceptional once we take US income into account.
RCA’s analysis is consistent with the Baumol effect and my analysis with Helland in Why Are the Prices So Damn High (we have some minor differences with RCA on physician incomes but neither of our analyses depend on that point). A big point is that RCA and Helland and I argue that the rising price sectors are not crowding out consumption of other goods. We can and are buying more of other goods even as we spend more on health care and education. Or, as RCA puts it:
…these trends indicate that the rising health share is robustly linked with a generally constant long-term increase in real consumption across essentially all other major consumption categories.
It is true that the United States has a convoluted payment system which results in absurd and enraging bills. Fixing the pricing system could generate more equity and efficiency but RCA’s analysis tells us that billions are at stake, not trillions. A corollary is that as other countries reach current US levels of income their health care spending will look more like the United States does today.
See RCA for much more.
We demonstrate empirically that measures of novelty are correlated with but distinct from measures of scientific impact, which suggests that if also novelty metrics were utilized in scientist evaluation, scientists might pursue more innovative, riskier, projects.
That is from Jay Bhattacharya and Mikko Packalen in a new NBER working paper and scientific innovation and stagnation.
They point out that Eugene Garfield, the scientist behind the development of citation count, did not think it should be used to evaluate individual scientists. Overall, citations encourage too much work in crowded, “approaching peak” areas, rather than developing new ideas. In lieu of citations, the authors suggest using textual analysis to determine how much a paper is building on new ideas rather than on already intensively explored ideas.
The NSC [National Security Council] was established in the 1947 National Security Act, which named the members of the council: president, vice president and secretaries of state and defense. The function of the council “shall be to advise the president with respect to the integration of domestic, foreign, and military policies relating to the national security.” The law required regular meetings…
Mr. Kissinger grew the council to include one deputy, 32 policy professionals and 60 administrators. By my count, alumni of his NSC include two secretaries of state, four national security advisers, a director of national intelligence, a secretary of the Navy, and numerous high-ranking officials in the State, Defense and Treasury departments as well as the Central Intelligence Agency.
But the NSC has only continued to expand. By the end of the Obama administration, 34 policy professionals supported by 60 administrators had exploded to three deputies, more than 400 policy professionals and 1,300 administrators.
The council lost the ability to make fast decisions informed by the best intelligence.
Here is more from John Lehman (WSJ).
“advancing humane solutions to those facing adversity – based on tolerance, universality, and cooperative processes”
And might anyone be interested in working on the issue of why production speeds for infrastructure and so many other projects have slowed down so much?
There has been a very impressive group of winners to date.
4. “…the power costs less to generate in India than the cheapest competing fossil fuel—coal—even with subsidies removed and the cost of construction and financing figured in, according to the Indian government and industry trackers.” (WSJ)
The only way to beat the AIs is to join with them. Our cyborg future is well illustrated in this video from Bertolt Meyer who has an artificial arm that he has hacked to control other devices.
I am in the process of building a device (the “SynLimb”) that attaches to my arm prosthesis instead of the prosthetic hand. The SynLimb converts the electrode signals that my prosthesis picks up from my residual limb into control voltages (CV) for controlling my modular synthesizer. The SynLimb thus allows me to plug my prosthesis directly into my snythesizer so that I can control its parameters with the signals from my body that normally control the hand. For me, this feels like controlling the synth with my thoughts. I show the prototype(s), explain how we put it together and how it works, and do a little demo.
In one way this is obvious. There is very little difference between sending electrical signals from the brain to the hand and then using the hand to control the synthesizer and sending electrical signals from the brain through the artificial hand directly to the synthesizer. As Meyer notes the whole process feels very natural. The fact that it is obvious and natural will make adoption very quick.
Hat tip: John Backus
This paper studies the effects of the EU’s General Data Protection Regulation (GDPR) on the ability of firms to collect consumer data, identify consumers over time, accrue revenue via online advertising, and predict their behavior. Utilizing a novel dataset by an intermediary that spans much of the online travel industry, we perform a difference-in-differences analysis that exploits the geographic reach of GDPR. We find a 12.5% drop in the intermediary- observed consumers as a result of GDPR, suggesting that a nonnegligible number of consumers exercised the opt-out right enabled by GDPR. At the same time, the remaining consumers are more persistently trackable. This observed pattern is consistent with the hypothesis that privacy-conscious consumers substitute away from less efficient privacy protection (e.g, cookie deletion) to explicit opt out, a process that would reduce noise on remaining consumers and make them more trackable. Further in keeping with this hypothesis, we observe that the average value of the remaining consumers to advertisers has increased, offsetting most of the losses from consumers that opt-out. Our results highlight the externalities that consumer privacy decisions have both on other consumers and for firms.
Our best tool is to compare Labour’s 2019 manifesto against the Sanders’ economic platform. Doing so makes clear that Bernie is more radical than Corbyn on economics, both in absolute terms and relative to their countries’ respective politics.
Take the size of government. The Manhattan Institute’s Brian Riedl calculates that Sanders’ promises would add $97.5 trillion to spending over a decade, taking total annual US government spending to around 70% of GDP and more than doubling the size of the federal government. Even if climate investments prove a one-off, spending would settle at a massive 64% of GDP. That’s far higher than Labour’s planned 44% and even France’s current 57% (itself the highest in the OECD).
A look at certain individual spending areas also underlines just how radical the Sanders agenda is. Like Labour, he wants government-funded free public higher education. Unlike Labour, he’d also forgive all existing student debts. On climate change and infrastructure, Labour planned for £400 billion investment over 10 years (about 20% of current annual UK GDP). Sanders wants to invest $16.3 trillion over 15 years (about 75% of current annual US GDP.) On healthcare, both want government spending to expand to cover all medical treatment, prescription charges, long-term care for the elderly, and dentistry. But only Sanders would explicitly ban private health insurance (Labour did consider that proposal but held off in the end).
True, Corbyn and McDonnell favoured nationalising buses, railways, the energy sector, water, and parts of the broadband network. Corbyn even wanted free government-funded broadband for all. But even here the results of Sanders’ pledges would bring similar results. He would set up “publicly owned” and “democratically controlled” broadband networks. And his Green New Deal would bring most public transport under government control and deliver effective public ownership of energy production.
When it comes to financing their promises, Sanders is arguably more radical again. Labour planned to only borrow to invest, raising the deficit by about 2% of GDP per year. But Bernie’s tax plans get nowhere near fully funding his agenda. Absent further broad-based tax rises, Riedl calculates annual borrowing would soar to around 30% of US GDP if his spending plans were implemented…
Combined with national insurance, Labour’s top marginal income tax rate would have been 52%. Sanders’ top federal income tax rate alone would be 52%, bringing a top combined top rate of around 80% once state and payroll taxes are considered. Sanders wants a new wealth tax too, another option Labour shirked. And while Labour wanted to raise the UK’s main corporation tax rate to 26%, Bernie would opt for 35% with a broad base.
That is from Ryan Bourne of Cato, and yes there is more at the link.
I would put it this way: right now we are sampling the offer curve of left-wing intellectuals and activists for “prioritizing climate change” vs. “mood affiliation,” and…let us hope for the best!
Here is Daron Acemoglu on Bernie Sanders.
Tufts University’s Jonathan M. Tisch College of Civic Life today announced the creation of a new, non-partisan Center for State Policy Analysis (cSPA) to ensure that lawmakers and residents in Massachusetts have access to the best information on effective public policy.
cSPA will conduct detailed, independent analyses of current legislative issues and ballot questions in Massachusetts and will widely share this research with the public. The Center aims to partner with experts at Tufts University and beyond to provide real-time analysis that informs legislative debates and helps voters better understand the stakes of ballot initiatives.
Former Boston Globe data-journalist Evan Horowitz will serve as cSPA’s executive director…
Horowitz is also an Emergent Ventures winner, congratulations on the new center!
This paper explores the history of Japanese fiscal policy over the past two decades with the aim of better understanding where previous forecasts have erred. As such, Japan provides an important case study of how a country facing intense fiscal pressures can avoid a hyperinflation or financial panic. We find that there were three key forces that likely improved Japan’s fiscal situation relative to more pessimistic predictions. First, the Japanese government has shown remarkable ability to hold down per capita expenditures on social pensions and healthcare. Second, the Japanese government has been able to raise taxes substantially. Third, the remarkable monetary policy pursued by the Bank of Japan has resulted in a dramatic decline in the amount of government bonds held by the private sector.
That is the abstract of a 2017 paper by Mark T. Greenan and David E. Weinstein. You will note that the Japanese government just announced that the Japanese economy contracted at an annualized rate of -6.3% (not a typo) last quarter. Of course, maybe they should have just kept on borrowing money forever. As you can see from the recent tweet of Krugman, many of the Keynesians now favor stimulative policy all the time, even at full employment, with no need for eventual consolidation.
And the next time you see a calculation of a multiplier, ask yourself if the entire time horizon is being considered. Usually not.
Via the excellent and reality-based Wojtek Kopczuk.