Month: November 2021
So I called someone smart (Tyler Cowen, an economist, author, and professor at George Mason University) to explain the dynamics to me.
“Inflation right now is still transitory in that we can choose to end it,” Cowen told me. The Federal Reserve could disinflate and raise interest rates—mortgage interest rates today remain well below 3%—though that risks starting a recession.
Cowen explained that the reason the inflation-wary are still pretty quiet is that all the anti-Obama Republicans were so wrong in 2008. After the Obama-era bailout during the Great Recession, Republicans were convinced inflation would run rampant. And they said so. A lot. But inflation stayed mostly in control. “They all got egg on their faces after that,” Cowen said. “So the crowd that would complain now, they’re whispering about it but not shouting yet.” (Larry Summers and Steve Rattner have sounded the alarm.)
“I think the inflation will last two to three years, and it will be bad,” Cowen said. But really grim hyper-inflation à la Carter-era, he thinks is unlikely. It could only happen if the Federal Reserve decides it’s too risky to trim the sails of cheap money. “I’d put it at 20% chance that the Fed will think, ‘Trump might run again, and we don’t want Biden to lose . . . history’s in our hands, so we’ll wait to tighten.’ And then it just goes on, and then it’s very bad.”
But a recession is also bad. It’s hard to sort it all out. “As the saying goes, ‘If you’re not confused, you don’t know what’s going on,’” Cowen told me.
That is from the Bari Weiss Substack, other topics are considerd (not by me) at the link.
Gunther the German shepherd spent a recent morning playing with his tennis ball, rolling in the grass, slobbering a little and napping a lot. Later, he had a “meeting” with the real estate agents selling his Miami mansion that his handlers bought from Madonna.
And of course Gunther was wearing his very best faux diamond dog collar for the meeting — his real gold collar is back at his main home in Tuscany. As crazy as it sounds even by Florida’s standards, Gunther VI inherited his vast fortune, including the eight-bedroom waterfront home once owned by the “Material Girl” singer, from his grandfather Gunther IV. At least that’s what the handlers who manage the estate say.
The Tuscan-style villa with views of Biscayne Bay went on sale Wednesday for $31.75 million — a whopping markup from the purchase two decades ago from the pop star for $7.5 million. The home also boasts a gilded framed portrait of Gunther IV over the living room fireplace.
The dog’s lineage dates back decades to when Gunther III inherited a multimillion-dollar trust from late owner German countess Karlotta Liebenstein when she died in 1992. Since then, a group of handlers have helped maintain a jet-setting lifestyle for a succession of dogs. There are trips to the Milan and the Bahamas, where the latest Gunther recently dined out at restaurants every evening — his handlers like to make sure he’s well socialized.
A chef cooks his breakfast each morning made of the finest meat, fresh vegetables and rice. Sometimes he enjoys caviar, but there’s never any kibble in sight. He travels by private jet, works on obedience skills daily with his trainer and sleeps in a lavish round, red velvet bed overlooking the bay.
“He lives in Madonna’s former master bedroom,” said real estate agent Ruthie Assouline who nabbed the listing with her husband Ethan for the 1.2-acre (0.5 hectare) property in a row of a half-dozen waterfront homes next to a public county park and on the same street where Sylvester Stallone once lived.
“He literally sleeps overlooking the most magnificent view in an Italian custom bed in the former bedroom of the greatest pop star in the world.”
Here is the full story, via Fred Smalkin.
That is the topic of my latest Bloomberg column, here is one excerpt of some super-simple (but neglected) arguments:
Education is another area where Friedman’s ideas seem newly relevant. Friedman was a strong supporter of school choice, but over time the movement stalled, as a variety of studies showed scholastic gains from school-voucher programs that were either modest, zero or negative. Advocates for school choice then moved on to the argument that vouchers allow parents to choose the kind of education they want for their children, whether or not test scores go up. That argument, too, went nowhere.
Then came the pandemic, when millions of American parents encountered a public school system that didn’t seem to care too much about educating their children. Schools stayed closed or offered inferior remote instruction, and generally followed their own bureaucratic imperatives. All of a sudden, home schooling, charter schools, private schools, micro-schools — in short, an entire host of “school choice” alternatives — rose in popularity. It remains to be seen how much those trends will stick, but Friedman may yet win this intellectual battle, at least partially.
And it’s not just the bureaucracy, it’s what’s taught in the classroom. Consider critical race theory and other instructional practices affiliated with wokeism. Whatever your views on this movement, it seems clear that it provokes strong and perhaps irresolvable differences among parents, teachers and administrators. Within a single public school district, those matters will probably never be settled to everyone’s satisfaction. Rather than pursuing a polarizing “fight to the death,” perhaps all sides can see that the case for school choice is stronger and more compelling than they had thought.
There are periodic attempts to knock Milton Friedman off his pedestal. For the most part, however, his legacy remains strong.
And who was the guy who predicted the recent problems with the FDA?
GoodFellows podcast, from Hoover, and of course I interview them back a bit too. Crypto and Ethiopia are among the topics we cover…a very good time was had by all…
The Biden administration has rebranded its Build Back Better plan as part of a strategy to fight inflation. By subsidizing essential services like child care, the argument goes, American families and the broader economy will experience relief from the rapidly rising cost of living.
Yet something doesn’t add up. Consider that the current proposal would also dramatically shift the cost structure of child care upward with regulations mandating higher salaries, greater credentials and compliance with federal “quality standards.” Having made child care more expensive, it then proposes socializing over 90 percent of the cost for a subset of middle- and lower-income households. This won’t reduce rising prices so much as mask them. And with informal child care providers, including religious organizations, at risk of being crowded-out, the true availability of low-cost child care could even contract.
This is an extreme example of what we call “Cost Disease Socialism” — addressing the increasing costs of supply-constrained goods and services by spreading the price among American taxpayers while leaving the cause of the underlying costs unaddressed.
That is from an excellent piece by Sam Hammond, Daniel Takash, and Steve Teles (NYT).
Greg Caskey is my student and a Ph.D. Candidate in his 4th year. He focuses on applied microeconomics, economic development, and political economy, particularly regarding the role of China in the developing world. His job market paper, “Chinese Development Lending & the Amplification Effect”, examines the effects of Chinese official lending and foreign aid upon the political institutions of 100+ developing nations. Using a variety of estimators on panel data over the period of 2002-2017, he finds an “amplification effect” with respect to Chinese development flows. While Chinese aid amplifies the existing institutional orientation of both autocratic and democratic recipient nations, this effect exhibits a greater magnitude in autocracies, as sampled autocratic recipients become more autocratic in their institutional orientation, relative to sampled democratic recipients becoming more democratic.
His dissertation is Three Essays on the Role of China in the Developing World, and one chapter considers Chinese policy toward the Uighurs. Greg has several publications and also revise-and-resubmits at good journals, please let me know if you would like my letter of recommendation for him! He is a great teacher too with lots of experience.
3. Questions that are rarely asked: “Does It Matter if I Eat the Stickers on Fruits and Vegetables?” (NYT) And does it matter for FDA regulatory issues?
5. David Kedrosky on the greatest paper in economic history of all time (by Peter Temin…in his opinion).
7. David Brooks on the national conservatives (Atlantic).
In front of Open AI, this was recorded circa May 2021, I quite liked the exchanges, recommended, and Sam is super-sharp, you can listen here.
Here’s a recent news headline, Can Biden Deliver on His Promise to Expand Housing Vouchers? The link discusses Biden’s efforts to increase housing vouchers which subsidize low-income households to help them rent a home on the private market. Housing vouchers are a solidly Democratic proposal. Moreover, as far as I can tell, there are few people advocating to replace vouchers with public housing. The progressive think tank Center on Budget and Policy Priorities has this to say about vouchers:
Housing Choice Vouchers sharply reduce homelessness and other hardships, lift more than a million people out of poverty, and give families an opportunity to move to safer, less poor neighborhoods. These effects, in turn, are closely linked to educational, developmental, and health benefits that can improve children’s long-term life chances and reduce costs in other public programs.
Here’s the Urban Institute:
The federal Housing Choice Voucher Program plays a critical role in helping to address housing needs for extremely low-income households. Its most important advantage is that vouchers give recipients the freedom to choose the kinds of housing and the locations that best meet their needs. As a consequence, many voucher recipients live in healthy neighborhoods that offer social, educational, and economic opportunities for themselves and their children….even for African Americans and Hispanics, vouchers perform better than public and assisted housing projects in giving families access to low-poverty and racially mixed neighborhoods.
Notice how often the words “opportunity”, “freedom” and “choice” appear. Indeed the testimony from the Urban Institute refers to “the freedom to choose.” Excellent.
I agree with these conclusions. Now here is what is strange. Exactly the same arguments apply to school vouchers and school choice. School vouchers give students the freedom to choose the kinds of schooling and locations that best meet their needs. Yet, while many on the left agree that vouchers are superior to public housing, which tends to freeze the poor into low-quality, poorly maintained housing in poor neighborhoods with a host of cognate problems, they are more reluctant to support education vouchers as superior to public schooling. But all the arguments against public housing also apply to public schooling. Public Housing=Public Schooling. (The right are also strangely reluctant to take credit for housing vouchers even though they have mostly worked in just the way that Milton Friedman would have predicted!)
It’s unclear to me why housing vouchers became accepted on the left but education vouchers are still regarded as suspect. Or to put it the other way, it would be useful to study how housing voucher won over the left.
I look forward to the day when a headline reads, Can the Democratic President Deliver on Her Promise to Expand Education Vouchers?
I’ve long been suspicious of the “deep deep” roots theory of southern Italian stagnation, given the Neapolitan Enlightenment in the 18th century. This explanation, however, at least in principle makes more sense to me:
The provincial gap in human capital at the time of Italy’s unification is a plausible explanation for the North–South divide of the following decades. We show that the roots of the literacy gap that existed in 1861 can be traced back to Napoleonic educational reforms enacted between 1801 and 1814. We use exogenous variation in provincial distance to Paris to quantify effects, linking the duration of Napoleonic control to human capital. If the south had experienced the same Napoleonic impact as the north, southern literacy rates would have been up to 70 percent higher than they were in 1861.
That is from M. Postigliola and M. Rota in European Review of Economic History. Might Napoleon be underrated?
I’ve been thinking about the article on MAD you linked to: Haller & Fry’s “The Math is Bad”. Their point — that you have to run the game theory for the case where a surprise first launch has already occurred — is interesting.
I agree MAD looks bad in that scenario. But I think the authors misunderstand why. And therefore their proposed solution — harden & build more capability — won’t work.
From a MAD point of view it’s incredibly stupid to put all your Minuteman missiles in a vast empty area no one cares about. Obviously the better placement would be to intermix the missiles with major urban centers.
There’s a reason the Minutemen aren’t scattered about New York, Chicago, Los Angeles, Houston, et all, and it’s not because our 1950’s leaders were stupid. It’s because we’re the good guys (or at least we were), and the good guys are inherently at a disadvantage when it comes to fighting.
It is at least possible to imagine a US president, facing either confirmed missiles in the air or the immediate aftermath of a successful first strike on the minutemen, might ask themself, at least for a moment, “what would be best for (my grandchildren) humanity?” rather than resignedly push the red button whilst saying “even though this won’t help anything, MAD requires I now launch more missiles.”
From that perspective, it really doesn’t matter how formidable our second-strike capacity is. Our enemies will *always* question our willingness to launch a return strike (on no doubt much messier targets). Indeed, during the cold war, even the allegedly inhuman Soviets worried about the human element, creating and possibly even implementing the famous Doomsday machine referenced in Dr. Strangelove in an attempt to prevent some wishy-washy comrade from choosing, in the heat of the moment, to avoid exterminating all life on the planet.
That doesn’t mean MAD is invalid, however.
There is another important component to the deterrent that Haller and Fry don’t consider: it may be that use of nuclear weapons even with no return strike is still not a survivable event. Even if fallout/nuclear winter effects prove mild, a first strike on even the smallest scale would upend the world. There is no leadership in any nation (save possibly North Korea) that could reasonably expect to survive the consequent metaphorical fallout.
This was put a little more pithily in the 1995 film “Crimson Tide,” when Denzel Washington says to Gene Hackman, “In the nuclear world, the true enemy is war itself.”
That is from Andy Lewicky.
Here is the audio, video, and transcript — David has a studio in his home! Here is part of the CWT summary:
He joined Tyler to discuss what makes someone good at private equity, why 20 percent performance fees have withstood the test of time, why he passed on a young Mark Zuckerberg, why SPACs probably won’t transform the IPO process, gambling on cryptocurrency, whether the Brooklyn Nets are overrated, what Wall Street and Washington get wrong about each other, why he wasn’t a good lawyer, why the rise of China is the greatest threat to American prosperity, how he would invest in Baltimore, his advice to aging philanthropists, the four standards he uses to evaluate requests for money, why we still need art museums, the unusual habit he and Tyler share, why even now he wants more money, why he’s not worried about an imbalance of ideologies on college campuses, how he prepares to interview someone, what appealed to him about owning the Magna Carta, the change he’d make to the US Constitution, why you shouldn’t obsess about finding a mentor, and more.
Here is an excerpt from the dialogue:
COWEN: Why do so many wealthy people have legal backgrounds, but the very wealthiest people typically do not?
RUBENSTEIN: Lawyers tend to be very process-oriented and very systematic, and as a result, they tend not to take big leaps of faith because you’re taught in law school to worry about precedent. Precedent is not what makes entrepreneurs successful. You have to ignore precedent, and you’ll break through walls and say you can’t be worried about what the precedent was.
If you’re worried about precedent, you’ll never make a leap of faith to create a company like Apple or a company like Amazon. Lawyers tend to be more, I would say, tradition-oriented, more process-oriented, and more precedent-oriented than great entrepreneurs are.
COWEN: You seem to be in good health. What if someone makes the argument to you, “You would do the world more good by not giving away money now, but investing it through private equity, earning whatever percent you could earn, and when you’re a bit older, give much more away. You can always give more to philanthropy five years down the road.”
RUBENSTEIN: Of course, you never know when you’re going to die, and COVID — we lost 700,000 Americans in COVID. I could have been one of them. I’m 72 years old. If you wait too long to give away your money, you might find your executor giving it away. Secondly —
COWEN: But you could even write that into your will if you wanted. You’d have more to give away, maybe 15 percent a year.
RUBENSTEIN: Yes, but if you take the view that happy people live longer, and if giving away money while you’re alive and you’re seeing it being given away makes you happier, you might live longer. Grumpy people, my theory is, don’t live as long. Happy people live longer.
If giving away money and having people say to me, “You’re doing something good for the country,” makes me feel good, it might make me live longer. If I waited till the last moment to give away the money, it might be too late to have that feel-good experience.
And please note that David has a new book out, The American Experiment: Dialogues on a Dream.
5. Scott Alexander on ivermectin, recommended.
6. How modern universities “deconstruct” their students. Mostly I disagree (are we really that effective?), but interesting.