Month: August 2022

Tuesday assorted links

1. How to walk around London.

2. What crypto is doing in Argentina.

3. *Talent* makes the FT Business Book of the Year long list (FT).

4. Scott Sumner on Switzerland.  I would note that Switzerland in the 19th century was not so wealthy, or seen as such a model of success.  So I don’t think the answer is just “the Swiss people,” or for that matter “Swiss political decentralization.”  The Swiss arrangements somehow fit very well into 20th century European economic growth, plus of course the country avoided two World Wars.

5. U.S. procurement is failing on the Stinger missiles front.

6. Long Matt Yglesias post on optimal taxation.  Sadly gated but yes you should pay that tax!

Let’s make this a priority

The European Commission wants to boost output of its own raw materials needed for green energy. Its plans, which are still in their infancy, would lower regulatory barriers to mining and production of critical materials such as lithium, cobalt and graphite, needed for wind farms, solar panels and electric vehicles..

By 2030, EU demand for rare earth materials for wind turbines will increase fivefold, according to the commission, but global supply is only projected to double. Demand for lithium is likely to be almost 60 times as high as current consumption by 2050, according to the EU’s Joint Research Centre. The need for cobalt and graphite could be nearly 15 times higher.

Here is more from the FT.

What should I ask Katherine Rundell?

She is the author of the splendid new book on John Donne, reviewed by me here.  More generally, here is from Wikipedia:

Katherine Rundell (born 1987) is an English author and academic. She is the author of Rooftoppers, which in 2015 won both the overall Waterstones Children’s Book Prize and the Blue Peter Book Award for Best Story, and was short-listed for the Carnegie Medal. She is a Fellow of All Souls College, Oxford and has appeared as an expert guest on BBC Radio 4 programmes including Start the Week, Poetry Please, and Seriously….and Private Passions.

Rundell’s other books include The Girl Savage (2011), released in 2014 in a slightly revised form as Cartwheeling in Thunderstorms in the United States where it was the winner of the 2015 Boston Globe–Horn Book Award for fiction, The Wolf Wilder (2015), and The Explorer (2017), winner of the children’s book prize at the 2017 Costa Book Awards.

And this:

…all her books, and her play, contain a joke at Belgium’s expense…

She is also an avid roofwalker, and more.  Here is Katherine eating a tarantula.

So what should I ask her?

Eternal economic growth and Effective Altruism

Dwarkesh Patel surveys one angle of that debate in this short post, and also here.  More commonly, from EA types I increasingly hear the argument that if an economy grows at [fill in the blank] percent for so many thousands of years, at some point it becomes so massively large relative to the galaxy that it has to stop growing.  It is then concluded that economic growth is not so important, because all it does is help us arrive on the final frontier sooner, and be stuck there, rather than increasing net human well-being over time.  (Then often one hears the follow-up claim that existential risk should be prioritized over growth.)

I am not persuaded by that argument, and here are a few points in response:

1. Growth may involve dematerialization and greater energy efficiency, rather than eating up the galaxy’s resources.  Much of modern growth already has taken this form, with likely more to come.

2. Real gdp comparisons give you good information locally, when comparing relatively similar societies or states of affairs.  The numbers have much less meaning across very different world states, or very long spans of time with ongoing growth.  Comparing say Beverly Hills gdp per capita to Stone Age gdp per capita just isn’t an accurate numerical exercise period.  It is fair to say that the Beverly Hills number is “a whole lot more,” and much better, but I wouldn’t go too much further than that.  They are very different situations, rather than one being a mere exponential version of the other.  The economics literature on real income comparisons supports this take.

This point most decidedly does not prove that “eternal growth” is possible.  It does show that the “you can’t just keep on scaling up” argument against ongoing growth does not get off the ground.  It is really just asserting — without actual backing — that “society couldn’t be very different from it is right now.”  And note that points #1 and #2 are mirror images of each other.

3. In general I am not persuaded by backwards induction modes of moral reasoning.  The claim is that “in period x we will hit obstacle y, therefore let us reason backwards in time to the present day and conclude…”  Backwards induction does not in general hold, either practically or morally, especially across very long periods of time and when great uncertainty is present.  I am not saying backwards induction never holds, but most of these arguments are simply applying some form of moral backwards induction without justifying it.  A simpler and more accurate perspective is that the status quo already is highly uncertain, and we don’t have much of a workable sense of how things will run as we approach a “frontier,” or even exactly what that concept should mean.  And this point is not unrelated to #2.  We are being asked to draw conclusions about a world we cannot readily fathom.

4. The world is likely to end long before the binding growth frontier is reached, even assuming that concept has a clear meaning.  In the meantime, it is better to have higher economic growth.  This rejoinder really is super-simple.

3b. A super-nerdy response might be “are we sure we can’t just find more and more growth resources forever, especially if the final theory of physics is quite strange?”.  It is hard for me to judge that one, but I find #3 much more relevant than any version of this #3b.  Still, if we are going to look that far into the future, I don’t see any reason to rule out #3b.  Which will keep alive the expected value of future economic growth.

5. Often I am suspicious of the method of ‘sequential elimination” in moral reasoning.  It might run as follows: “I can show you that X doesn’t matter, therefore we are left with Y as the thing that matters.”  Somehow the speaker ought to take greater care to consider X and Y together, and to realize that all of the moral reasoning along the way is going to be imperfect.  The “ghost traces” of X may still continue to matter a great deal!  What if I argued the following?: “Pascal’s Wager arguments can be used to show that existential risk cannot be allowed to dominate our moral theories, therefore ongoing economic growth has to be the thing that matters.”  That too would be fallacious, and for similar reasons, even assuming you saw Pascal’s Wager-type arguments as something to be rejected.

A better approach would be “both X and Y are on the table here, and both X and Y seem to be really important.  What kinds of consiliences can we find where arguments for both X and Y work together in similar directions?  And that is where we should put our energies.  More concretely, that might include finding and mobilizing talent, building better institutions, and making sure we don’t end up controlled by a dominant China.

In sum, the case for sustainable economic growth is alive and well, and not at the expense of existential risk.

My EconTalk podcast on *Talent*

With Russ Roberts, here is the link and here the summary:

How do you hone your craft on an everyday basis? It could be writing, meeting with experts, even listening to podcasts, just so long, argues economist and blogger Tyler Cowen, as it makes you better at what you already do. Perhaps more than anything else, he believes, it’s practice that divides middle managers from founders, and mere good hires from the creative obsessives who end up transforming the world. Join Cowen and EconTalk host Russ Roberts for a conversation about Talent, Cowen’s new book on how (and how not) to identify the talented. Hear Cowen explain why, for high-level positions, unstructured interviews are important, why stamina is usually preferable to grit, and why credentials are largely a relic of the past.

Self-recommending…

Monday assorted links

1. Fraudulent markets in everything.

2. “We present evidence that discrimination against Asian-American Airbnb users sharply increased at the start of the COVID-19 pandemic. Using a DiD approach, we find that hosts with distinctively Asian names experienced a 12 percent decline in guests relative to hosts with distinctively White names.”  Link here.

3. New paper on polygenic scores and economic outcomes.

4. “Higher openness mediated the link between adolescent IQ and late life cognition.

5. A plan to save PredictIt?

6. “Ford just raised the price of its electric F-150 by up to $8,500” — coincidence!

7. “…in reality, cynics test lower on cognitive & competency tests.

Might the status of India and Pakistan fundamentally change?

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

The status quo between India and Pakistan is temporary. The world should start thinking about a future in which the two nations have a fundamentally different relationship.

Full reunification, of course, is difficult to imagine. But there are many possible options that fall short of that: a loose confederation, a NAFTA-like trade structure, a military alliance, even a broader regional reconfiguration under which each nation loses some territory but the remaining parts move closer together.

And:

What about arguments on the other side? They are mostly longer-term.

First, it’s worth noting that major changes in borders — whether through conquest, secession or unification — are the historical norm. In this respect, the post-colonial era is an anomaly. One view is that this era of relative stability will continue. Another is that it will prove temporary, and frequent border changes will become common once again — just as the border between Russia and Ukraine is being contested again.

If this second view is correct, India and Pakistan are hardly such longstanding, well-defined nations that they are natural candidates to stay exactly as they are. Both their borders and their political arrangements can quickly change.

Just think how unlikely today’s configuration in the Middle East might have seem fifty years ago.  We now have Iran as the enemy of Israel and America, a democratic Iraq, a devastated Syria, a wealthy UAE friendly with Israel, a rather passive Egypt at peace with Israel, and Lebanon no longer the jewel of the region, among other major surprises.  Get over your recency bias!

I suspect Ethiopians and Eritreans will have a relatively easy time digesting this argument.

Time for Direct Instruction!

Time magazine has a good piece on the massive efforts to return to phonics based reading instruction. The Open Court program mentioned below is a variant of Direct Instruction (DI) which I have written about before (most recently here). As usual, DI works but the teachers don’t like it.

As a teacher in Oakland, Calif., Kareem Weaver helped struggling fourth- and fifth-grade kids learn to read by using a very structured, phonics-based reading curriculum called Open Court. It worked for the students, but not so much for the teachers. “For seven years in a row, Oakland was the fastest-gaining urban district in California for reading,” recalls Weaver. “And we hated it.”

The teachers felt like curriculum robots—and pushed back. “This seems dehumanizing, this is colonizing, this is the man telling us what to do,” says Weaver, describing their response to the approach. “So we fought tooth and nail as a teacher group to throw that out.” It was replaced in 2015 by a curriculum that emphasized rich literary experiences. “Those who wanted to fight for social justice, they figured that this new progressive way of teaching reading was the way,” he says.

A short memoir of Christine M. Korsgaard

Here is her take on what is wrong with philosophy today:

Young people are expected to produce an absurdly large number of papers, preferably published in refereed journals, in order to get tenure, or even in order to get jobs. Some people even try to publish papers in order to get into graduate school. The papers are supposed to be blind reviewed, and these days many referees for journals require that papers should respond to the extant literature on the topic, whether responding to the extant literature enhances the author’s argument in some way or not. Because the sheer mass of the literature is growing exponentially, people draw the boundaries of their specializations more and more narrowly, both in terms of subject matter and in terms of time. The extant literature necessarily becomes the recent literature, which is a philosophically arbitrary category. Big, systematic philosophy of the sort we find in Kant and Aristotle, philosophy that is responsible to the ways in which one’s views in one area fit in with one’s views about everything else, has become nearly impossible, because someone trying to do that kind of work would supposedly have to know the literature in too many different areas

Most of the piece covers her earlier career and other issues, interesting throughout.  This part I found excellent:

I first began to think about this when I began to go around giving colloquium talks in other departments. Often I would meet philosophers whom I had only known in print before. And I was constantly surprised to find that in their questions to me, many of these philosophers seemed more imaginative, more speculative, more playful in their thinking, than they appeared to be in print. Was this just because they were more willing to go out on a limb when they were talking about someone else’s ideas? Or does the very act of committing your ideas to paper somehow clip your wings? I believe that much of the trouble with philosophical writing springs from the author’s failure to strike up the right kind of relationship with his reader, his audience. Above all, much philosophical writing is defensive.

For the pointer I thank Siddharth Muthukrishnan.

Gender Differences in Persistence and Publishing in Economics

We design an experiment to study gender differences in reactions to editorial decisions on submissions to top economics journals. Respondents read a hypothetical editor’s letter where the decision (e.g., revise and resubmit) is randomized across participants. Relative to an R&R, female assistant professors who receive a rejection perceive a significantly lower likelihood of subsequently publishing the paper in any leading journal than comparable male assistant professors. We do not find this gender difference among tenured professors. We consider several mechanisms, pointing to gender differences in attribution of negative feedback to ability and confidence under time constraints as likely explanations.

Here is the full paper by Gauri Kartini Shastry and Olga Shurchkov.  Via the excellent Kevin Lewis.

Sunday assorted links

1. “They found that instead of the human larynx having increased complexity, it has actually simplified relative to other primates, allowing for clearer sound production with less aural chaos.

2. Claims about Chernobyl.

3. Russ Roberts critique of utilitarianism, that is part I, finishes up with part IV.

4. Panopticon + potato chips.

5. Ross Douthat on the CDC and its continuing failures (NYT).

6. DC will require a college degree for daycare workers.

Why Matt Yglesias should be a conservative

“Conservative” isn’t exactly the word I would use, but he chose it, so for now let’s just run with that.  Here is an excerpt from Matt’s Substack (do subscribe!):

In terms of Tyler’s take, while I accept the logic of the view that it’s better to tax consumption than to tax investment, I just don’t buy into the idea that taxing investment is really bad. If I did, I would be a conservative like he is. But I don’t. I also think that, frankly, he always holds Democratic bills to a super-high standard of technocratic rigor while setting a much lower bar for Republican ones — to be generous, he maybe does that to counteract what he sees as a prevailing left bias of econ Twitter.

But to me, taxing investment with one hand while subsidizing investment with another is pretty good, especially paired with deficit reduction and permitting reforms.

Whether taxing investment at high rates is “bad,” or “really bad,” I am not sure.  But it is at least one of those.  Let me lay out a core, simple case for relatively low rates of taxation on capital income.  One can slug it out with the models, but much of the case comes down to two core intuitions:

1. A lot of people are myopic.  That encourages too much consumption relative to investment.  Matt himself frequently cites examples of myopia, in this Substack post it is Doritos chips and also Instagram.

2. A lot of institutions, including corporations, are too risk-averse relative to social returns.  This is the old Arrow-Lind argument.  They won’t take enough chances, and that too stifles some investment.  After all, consumption usually is safer than investment, at least if you know where to take your dinners.  Furthermore, the bureaucratization of society, including much of the private sector, is proceeding apace, so the thrust of the Arrow argument is stronger than it used to be, even though it may be relying increasingly on non-Arrovian mechanisms.

If you favored Operation Warp Speed, chances are you buy into this argument for at least some kinds of investment.

We simply don’t want the tax system to make these biases worse.  And those biases are pretty strong, close to ever present, and fairly universal.

You might add a third argument from time inconsistency:

3. Governments are often not credible, and short-sighted, so they have an excess tendency to tax or confiscate fixed capital investments, even when this is bad in the longer run.

To refer back to Matt’s post,  I am not so keen on the general concept “raise the taxes on capital and make the subsidies for investment even bigger” as an approach  If you wish to subsidize some kinds of investment, do so at the lowest (optimal) rate possible.-  It is simpler, cheaper, involves less deadweight loss, and places less burden on the government to find and implement all of the right tax and subsidy offsets.

I used to favor a zero tax rate of capital, but I no longer hold that view.  There are too many options for reclassifying labor income into capital income and thwarting the purposes of the tax system altogether.  Nonetheless, subject to this constraint, I think taxes on capital should be as low as possible.

John Stuart Mill was considered a “socialist” in his time, but even he thought the tax rate on capital should be zero and governments should tax land and consumption, still a good formula.

I would make a few additional points:

a. You can favor a low rate of capital taxation without thinking the elasticity of savings is very high.  If you tax Amazon less, they will have more money to invest, no matter how savings respond.  Furthermore, capital can flow in from abroad, all the more as the world becomes wealthier (and less politically safe?).

b. Capital investment boosts wages, and the quantity/quality of capital invested per worker is a major long-run determinant of wages.

c. Capital investments produce goods and services, which create consumer surplus for everyone.  If you are tempted to use the words “trickle down” in this discussion, you are not understanding #b or #c.  You really do want to live in the economies with more capital investment per worker.

d. Plenty of Western European governments have relatively favorable taxation for capital income, and still achieve relatively egalitarian outcomes.  I don’t myself put much stock in this point, but if it matters to you fine by me.  A low tax rate on capital income is hardly “giving away the store.”

So Matt should be a conservative.  It is fine if he in turn thinks the alternate views are “bad,” rather than “really bad.”

Amritsar is underrated

The Sikh Golden Temple is for me India’s best sight, far more appealing than the Taj Mahal.  Would you rather see a mausoleum or a living, breathing site full of human joy?  The buildings are remarkably well done and most beautiful at dusk.  The site is clean and largely maintained by volunteers, a triumph of Sikh civil society.  More people should come here!

The surrounding shops in the pedestrian zone are appealing, and the primary touristy element is directed at Sikh and Hindu pilgrims, not to Westerners.

The food is first-rate, even by Indian standards.  Lentils, spinach, mustard leaves, and kulcha soaked with ghee are some of the local specialties.  You can eat butter chicken as it was intended, or fish fry.  The lassis and raitas are almost as good as those in neighboring Pakistan.  Kesar da Dhaba would be my top pick for a restaurant.

And you can stay in a five-star hotel for about $100 a night, excellent swimming pool and restaurant to boot.

From the comments, on corporate tax

How about the corporate minimum tax provisions?

Different rules apply for the determination of income for US tax purposes and for financial reporting purposes. Both are artificial constructs. Who is to say that one is a more accurate indication of “income” than the other? Congress is largely responsible for the difference by creating incentives through the tax code by offering accelerated depreciation, etc. for taxable income for pet projects such as climate related investment.

The AMT provisions of this tax bill create enormous additional complexity. The fact that they are designed to apply to only about 150 large corporations isn’t a way to create an rationale and equitable corporate tax system. Rather, it is designed to punish, in a Robin Hood like manner, the most successful US corporations and to *temporarily* fund spending provisions in the bill. Its complexity will create additional complexity and costs which consumers and investors ultimately bear.

I say *temporary* funding because the corporate AMT is generally an acceleration of regular tax liability. If a corporation pays the AMT, a credit against future corporate regular tax is carried forward. Congress likes to complain about corporations artificially carrying forward financial book income and postponing taxable income. Here, Congress is engaging in the same sort of shenanigan by accelerating current tax revenues at the cost of future revenue. The JCT only estimates additional revenue over a 10-year period. What they don’t report is that the AMT revenue during the first 10 years will reduce tax revenues in the years thereafter. It’s not completely zero sum, but mostly zero sum over a longer period of time.

The extent of public accounting games played by our political *leaders* is shameful.

That is all from Vivian Darkbloom.