Month: November 2021

Why is inflation so bad?

That is the theme of my latest Bloomberg column, here is part of the final bit:

I am left with two major worries. First, higher rates of inflation redistribute wealth in a disruptive manner. For better or worse, more and more Americans are employed in the relatively bureaucratic service sector, which includes education, health care and government. If price inflation spikes as high as 6%, most of those workers do not rapidly receive an offsetting wage hike to restore their previous standards of living.

They might get higher pay by getting a new job, or by credibly threatening to leave. But that’s often a tense and unsettling position, from both a personal and professional standpoint. People might even have received stimulus dollars earlier in the pandemic, either directly or indirectly, and thus broken even or come out ahead. Still, with inflation, they will experience a loss of purchasing power, and they will hate it.

The second major worry is that inflation tends to require a subsequent disinflation, if only because people hate inflation so much. And we macroeconomists know that disinflations (or outright deflations) tend to bring recessions. When the U.S. Federal Reserve tightens monetary policy by a significant amount, aggregate demand in the economy falls, leading to losses in output and employment.

Of course, that’s a funny way of explaining why higher rates of price inflation are bad: Essentially, inflation is bad because it has to end. A subtler version of this theory is that workers and voters have only a limited tolerance for disruptions — and when they occur, we end up making blunders in our efforts to get out of them.

The proper critique of inflation is thus quite general. A pandemic is also a disruption, and we’ve made many mistakes in our efforts to end that as well. One of those mistakes, in fact, has been excess inflation. It will not be our last mistake, as we are still building our ever-widening circle of errors.


Tuesday assorted links

1. More on the new antiviral pills.

2. Neurodiversity gets a corporate champion (FT).

3. Apply to be a Hoover fellow, five year contract (or more).  And “We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance.”  Ahem.

4. Ukraine as crypto capital? (NYT)

5. Why were the Trump tax cuts not more stimulative?  Important job market paper by Francesco Furno of NYU.

Increased politicization and homogeneity in NSF grants

  1. This report uses natural language processing to analyze the abstracts of successful grants from 1990 to 2020 in the seven fields of Biological Sciences, Computer & Information Science & Engineering, Education & Human Resources, Engineering, Geosciences, Mathematical & Physical Sciences, and Social, Behavioral & Economic Sciences.
  2. The frequency of documents containing highly politicized terms has been increasing consistently over the last three decades. As of 2020, 30.4% of all grants had one of the following politicized terms: “equity,” “diversity,” “inclusion,” “gender,” “marginalize,” “underrepresented,” or “disparity.” This is up from 2.9% in 1990. The most politicized field is Education & Human Resources (53.8% in 2020, up from 4.3% in 1990). The least are Mathematical & Physical Sciences (22.6%, up from 0.9%) and Computer & Information Science & Engineering (24.9%, up from 1.5%), although even they are significantly more politicized than any field was in 1990.
  3. At the same time, abstracts in most directorates have been becoming more similar to each other over time. This arguably shows that there is less diversity in the kinds of ideas that are getting funded. This effect is particularly strong in the last few years, but the trend is clear over the last three decades when a technique based on word similarity, rather than the matching of exact terms, is used.

That is from a new CSPI (Richard Hanania’s group) study by Leif Rasmussen.

The Paxlovid Paradox

Zvi at LessWrong rounds up the COVID news including this excellent bit on Pfizer’s anti-Covid pill Paxlovid which looks to be very effective but is not yet FDA approved.

The trial was stopped due to ‘ethical considerations’ for being too effective. You see, we live in a world in which:

  1. It is illegal to give this drug to any patients, because it hasn’t been proven safe and effective.
  2. It is illegal to continue a trial to study the drug, because it has been proven so safe and effective that it isn’t ethical to not give the drug to half the patients.
  3. Who, if they weren’t in the study, couldn’t get the drug at all, because it is illegal due to not being proven safe and effective yet. 
  4. So now no one gets added to the trial so those who would have been definitely don’t get Paxlovid, and are several times more likely to die.
  5. But our treatment of them is now ‘ethical.’
  6. For the rest of time we will now hear about how it was only seven deaths and we can’t be sure Paxlovid works or how well it works, and I expect to spend hours arguing over exactly how much it works.
  7. For the rest of time people will argue the study wasn’t big enough so we don’t know the Paxlovid is safe.
  8. Those arguments will then be used both by people arguing to not take Paxlovid, and people who want to require other interventions because of these concerns.
  9. FDA Delenda Est.

What I’ve been reading

1. John Markoff, Whole Earth: The Many Lives of Stewart Brand.  He went from Ayn Rand to Buckminster Fuller, was deeply involved in Native American issues, saw the San Francisco scene arrive, did his share of LSD, and heralded the birth of Bay Area tech culture and also open source software, among other achievements.  Sometimes reads Marginal Revolution.  I enjoyed this book, but of course would defer to Stewart’s own judgment.

2. Bobby Duffy, The Generation Myth: Why When You’re Born Matters Less Than You Think.  Millennials, Gen X, Gen Z, and so on.  The generations just don’t differ that much from each other, at least not in ways that show up as strong effects in the data, adjusting for other demographic features.  This book is a useful corrective to numerous media discussions of these topics.  And yet…I am not entirely convinced.  That I grew up without an internet, for instance, really does seem to shape a lot of my perspectives, in a way that probably will not hold equivalently true for Generation Z.

3. Scottie Pippen, Unguarded, with Michael Arkush. “Michael Jordan was 1-9 in the playoffs before I joined the team.  In the postseason he missed, the Bulls went 6-4.  The Last Dance was Michael’s chance to tell his story.  This is mine.”  Get the picture?

4. Michael Cholbi, Grief: A Philosophical Guide.  I like the book when it veers in this direction: “Antipathy toward grief is a common theme among ancient Mediterranean philosophers.  Greek and Roman philosophers were far more hostile toward grief than we moderns, tending to view grief as, at best, a state to be tolerated or minimized.  For these philosophers, grieving others’ deaths is an unruly condition, a sign that one had become overly dependent on others and lacked the rational self-control characteristic of virtuous individuals.”  I like it less when it veers toward: “Regardless of whether there is duty to oneself to grieve, we have strong reasons of a self-regarding moral nature to grieve.  For grief presents us with a rare opportunity to relate to ourselves more fully, rationally, and lovingly.”

Michael S. Weisbach, The Economist’s Craft: An Introduction to Research, Publishing, and Professional Development.  A straight-up rather than cynical take.

Tao Jiang, Origins of Moral-Political Philosophy in Early China: Contestation of Humaneness, Justice, and Personal Freedom.  Too detailed for me to have time to read right now, but very likely an excellent book (I have browsed it), full of careful study and insight.

Useful is Paul Lockhart, Firepower: How Weapons Shaped Warfare.

Bruce J. Dickson, The Party and the People: Chinese Politics in the 21st Century is a good treatment of exactly what the title promises.

Congratulations to Joshua Broggi of Woolf University

An EV winner I might add, here is the news:

“Our software platform helps organizations meet and maintain regulatory and university standards by handling everything from course creation to degree issuance, so they get full accreditation and all the benefits of being a part of a major university while staying independent.”

Monday assorted links

1. The state of Illinois.

2. Robert Skidelsky reviews some biographies of economists.

3. Summers on Krugman on inflation.  In turn, Krugman on bottlenecks.  And Irvine-Broque.  A nice contrast of views.  And Andolfatto on inflation and the fiscal side.  All very good threads for those interested in money/macro issues.

4. A non-crazy, research-informed thread on how crypto could erode the power of fiat money over time.  How is this for an awesome sentence?: “Rehypothecation is the fractional reserve banking for crypto.”  From the great Tascha.

5. Luca Braghieri.  Very strong job market candidate.

Politicizing Medicine is Dangerous

Politicizing medicine is dangerous. Tens of thousands of people are dead because vaccines became politicized and people chose political identity over rationality. Yet instead of trying to depoliticize medicine, the AMA has doubled down and is going full woke. The AMA’s Advancing Health Equity: A Guide to Language, Narrative and Concepts is so over the top I thought at first it was satire from the BabylonBee. The guide, for example, recommends that instead of talking about poor health among low-income people that physicians should blame “landowners and large corporations” for “increasingly centralizing political and financial power wielded by a few” and limiting “prospects for good health and well-being for many groups.” Put aside that this is at best tendentious and at worst utterly fallacious and just imagine that you are a landowner or work for a large corporation (that’s most of us!). Would you trust a doctor spouting this rhetoric or might you feel that such a doctor doesn’t have your best interests at heart?

Conor Friedersdorf puts it well:

The medical profession won’t remain more broadly trusted than left-wing activists if the two become indistinguishable. And that’s what will happen if doctors follow the guide’s advice. Instead of saying, “Low-income people have the highest level of coronary artery disease,” it urges health professionals to substitute this doctrinaire sentence: “People underpaid and forced into poverty as a result of banking policies, real estate developers gentrifying neighborhoods, and corporations weakening the power of labor movements, among others, have the highest level of coronary artery disease.”

In a section attacking “the narrative of individualism,” the guide posits that health promotion “typically means educating people as individuals,” and urges “shifting this narrative, from the individual to the structural, in order to more fully understand the root causes of health inequities in our society.” It’s already hard enough to get my conservative grandfather to heed his doctors about how best to care for a bad back worn down from decades in construction. A new narrative meant to problematize real-estate developers or individualism would not improve his medical condition, but it would inflame his temper. One wonders if the AMA and the AAMC grasp how many patients of all races and socioeconomic groups (never mind doctors) strongly disagree with the agenda that the two organizations are pushing. Either way, patients will feel put off by doctors who sound like ideologues from a different political tribe.

If the AMA really wants to do something for health equity they should stop trying to police language and instead support nurse practitioners, midwives, physician assistants, and other healthcare professionals who want to expand their practices, lobby for more physicians and an end to the absurd residency bottleneck, and support greater hospital competition. Physician heal thyself.

Photo Credit: Wikipedia.

Christopher DeMuth on national conservatism

I thought the recent WSJ Op-Ed by DeMuth was one of this year’s more important essays.  DeMuth argues that conservatism needs a new [and also older], less libertarian, less cosmopolitan turn.  Here is his core message:

When the leftward party in a two-party system is seized by such radicalism, the conservative instinct for moderation is futile and may be counterproductive. Yet many conservative politicians stick with it, promising to correct specific excesses that have stirred popular revulsion. Republicans will win some elections that way—but what will they do next? National conservatives recognize that in today’s politics, the excesses are the essence. Like Burke after 1789, we shift to opposing revolution tout court.

Why national conservatism? Have you noticed that almost every progressive initiative subverts the American nation? Explicitly so in opening national borders, disabling immigration controls, and transferring sovereignty to international bureaucracies. But it also works from within—elevating group identity above citizenship; fomenting racial, ethnic and religious divisions; disparaging common culture and the common man; throwing away energy independence; defaming our national history as a story of unmitigated injustice; hobbling our national future with gargantuan debts that will constrain our capacity for action.

The left’s anti-nationalism is another sharp break with the past.

Do read the whole thing, as they say.  I cannot summarize his entire argument, but here are some points of push back:

1. It is a mistake to start by defining one’s view in opposition to some other set of views, in this case progressivism.  You will end up with something limited and defensive and ultimately uninspiring.

2. Unlike many classical liberals, I’ve long made my peace with nationalism, but for pragmatic reasons.  I view it as morally arbitrary, but also as the only possible solid foundation for a stably globalized world, given the psychologically collectivist tendencies of most humans.  DeMuth opposes national conservatism to globalization for the most part, but strong nations and strong globalizations go together.  There is talk of “global markets that eclipse the nation and divide its citizens,” but the case needs to be stronger and more specific than that.  National security arguments aside (yes we Americans should produce more chips domestically), which exactly are the global markets that are eclipsing us?  And is it global markets that are polarizing us?  Really?  Which ones exactly and how?

3. Virtually every critic of globalization wants to pick and choose.  There is plenty of “globalization for me, not for thee” in these ideological arenas.  (In similar fashion, I don’t quite get the Peter Thiel bitcoin > globalization point of view….crypto has been quite international pretty much from the beginning, and often at least in spirit directed against national monies.)  And which exactly is the national body we are going to trust with micro-managing globalization?  Some DC bureaucracy that operates as effectively as the CDC and is filled 90% or more with Democrats?  From a national conservative point of view, or for that matter from my point of view, why do that?

4. For better or worse, Biden is far more of a nationalist than DeMuth makes him out to be.  “Confiscating vaccine patents” is the only example given of this supposed excess cosmopolitanism, but hey just look at the allocation of those third doses, something Biden has pushed hard himself.  On many matters of foreign policy, including China, the differences between Trump and Biden are tiny.  And Europe isn’t exactly happy with Biden either.

5. The policy recommendations toward the end of the piece are underwhelming.  Common carrier regulation to prevent Facebook from taking down controversial opinions is the first suggestion.  Whether or not you agree with that proposal, the major social media companies were not doing much in the way of “take downs” as recently as ten years ago.  To return to that state of affairs, but with the whole thing enforced by government (“Some DC bureaucracy that operates as effectively as perhaps the CDC and also is filled 90% or more with Democrats?”), is…uninspiring.

6. The next set of policy recommendations are “big projects” for cybersecurity and quantum computing.  Again, whether or not you agree with those specific ideas, I don’t see why they need national conservatism as a foundation.  You might just as easily come to those positions through a Progress Studies framework, among other views.  And is a centralized approach really best for cybersecurity?  How secure were the systems of the Office of Personnel Management?  Doesn’t the firming up of all those soft targets require a fairly decentralized approach?

7. DeMuth refers to our “once-great” museums as deserving of revitalization.  I would agree that the visual arts of painting and sculpture were more culturally central in earlier decades than today.  But putting aside the National Gallery of Art in D.C. (in a state of radical decline…maybe blame the national Feds?), and the immediate problems of the pandemic, American museums are pretty awesome.  MOMA for instance is far better than it used to be.  If there has been a problem, it is that 9/11 made foreign loan contracts for art exhibits more difficult to pull off, in part for reasons of insurance.  In other words, the contraction of globalization has hurt American museums.

8. I wonder how he feels about crypto, Web 3.0, and the Metaverse?  I think it is perfectly fine to regard the correct opinions on those topics as still unsettled, but is national conservatism really such a great starting point?  Aren’t we going to rather rapidly neglect the potential upside from those innovations?  Shouldn’t we instead try to start by understanding the technologies, and then see if a nationalist point of view on them is going to make sense?

More generally, if you are going to do the NatCon thing, how about embracing the tech companies as America’s great national champions?  Embracing them as your only hope for countering left-wing MSM?  Somehow that is missing from DeMuth’s vision.

So I liked the piece, but I say it is a rearguard action, destined to fail.  We need a more positive, more dynamic approach to a free society of responsible individuals, and that is probably going to mean an ongoing expansion of globalization and also a fairly new and indeed somewhat unsettled understanding of what the nation is going to consist of.  What DeMuth calls “empirical libertarianism,” as he associates with Adam Smith, I still take as a better starting point.

What price the Blue Plaque?

In many places commemorative plaques are erected on buildings to serve as historical markers of notable men and women who lived in them – London has a Blue Plaque scheme for this purpose. We investigated the influence of commemorative Blue Plaques on the selling prices of London real estate. We identified properties which sold both before and after a Blue Plaque was installed indexing prices relative to the median prevailing sales prices of properties sold in the same neighborhood. Relative prices increased by 27% (US$165,000 as of July 2020) after a Blue Plaque was installed but not in a control set of properties without Blue Plaques, sold both before and after a Blue Plaque was installed in close proximity. We discuss these findings in relation to the theory of magical contagion and claims from previous research suggesting that people are less likely to acknowledge magical effects when decisions involve money.

Here is the full article by Peter Ayton, Leonardo Weiss-Cohen, and Matthew Barson, via the excellent Kevin Lewis.

Sunday assorted links

1. “In 2018, there were 20,933 calls to San Francisco’s government complaining about human feces.

2. Does urbanization contribute to depression?

3. China polygenic scores comparison of the day.

4. Informal norms for surfing property rights, a’la Schelling.

5. A Chinese liberal reviews Thomas Piketty.

6. Can you undo your vaccine?

7. Abhijit Banerjee, chef.  And his new cookbook is here.

Economics job market observations

As you may recall, each year I scour the job market websites to see what new job candidates are working on and presenting.  Unlike many years, this year I did not find the top or most interesting papers at Harvard and MIT.  Northwestern and UC Davis seem to be producing notable students.  More broadly, interest in economic history continues to grow, and the same is true for urban, regional, and health care economics.  There were fewer papers on macro than five or ten years ago, and very few on monetary economics or crypto.  Theory papers are rare.  Overall, the women seem to be doing more interesting work than the men.  Many schools seem to be putting out fewer students than usual.  University of Wisconsin at Madison was the website with (by far) the most “pronouns” listed.  I fear that this year’s search was more boring than usual, at least for my tastes, due to hyperspecialization of the candidates and their research topics.  Perhaps the worst offender was papers based on balkanized, non-generalizable data sources.  I’ll be continuing to look at a few more sites.

How the crypto skeptics changed their minds

That is a Walter Frick feature story at Quartz, the other answers are interesting throughout, here is my contribution:

What was your original reaction to cryptocurrencies and blockchain?

Just for a bit of background, I wrote a series of papers on monetary economics, and then a book (Explorations in the New Monetary Economics, with Randall Kroszner) which argued that technological changes were going to fundamentally revolutionize monetary institutions and finance over the next few decades. Those papers start in the mid-1980s and the book comes in the early 90s. So I was primed to see this coming, but in fact utterly failed.

I just wasn’t expecting crypto!

When bitcoin first came out, someone sent me the link and I put it on my blog Marginal Revolution —we were one of the first places to report on it.

But after that, the thing seemed to sour. It looked like a bubble. I didn’t see the use cases for bitcoin. So I became pretty crypto negative. Perhaps I was also turned off by the dogmatism shown by many crypto advocates.

What changed your perspective on blockchain’s potential?

A few things. First, in decentralized finance (DeFi) I began to see viable and important use cases. Superior returns for depositors might now drive broader crypto adoption

Second, after a market price crash, prices came back. That suggested to me this was not just a bubble. Crypto had its chance to go away and never come back, but it didn’t. Third, I have seen incredible energy and vitality in the crypto community. Many of the best discussions are held there, it attracts amazing talent, and the conversations are overwhelmingly positive. All big pluses and signs of a movement that is going somewhere. I am still broadly agnostic, but now see the positive scenarios as more likely than the negative scenarios.

What projects or trends in crypto are you most excited about right now?

DeFi, or Decentralized Finance.

NFTs, not only for the art world but also as a new system of property rights for the metaverse, and as a new method of fundraising.

Use of crypto to lower the costs of sending remittances abroad to poorer countries.

What would you recommend our readers watch / listen to / read / follow to better understand crypto’s potential?

I am learning the most through conversations, meetings, and WhatsApp chatter—I am not sure how that easily can be replicated!

Books and most articles on this topic are simply too out of date, even if they are factually accurate, which is not always the case. The fact that the field is moving so fast is another reason for optimism.

The symposium is a good way to catch up quickly on many different views.