Month: October 2022
Monday assorted links
2. The relative academic decline of American Jews. Update: Note there may be some confusion between “students” and “faculty” in the data behind the chart.
3. One set of instructions for how to cheat at chess (YouTube).
4. King Charles’s taste in art.
5. Tamil Nadu: “Two-thirds of this deficit was made up within 6 months after school reopening. Further, while learning loss was regressive, the recovery was progressive. A government-run after-school remediation program contributed ~24% of the cohort-level recovery, and likely aided the progressive recovery.”
Why so much drug use in the United States?
That is a question from a loyal reader, and he does not mean pharmaceuticals rather illegal drugs. I can see a few hypotheses:
1. Americans consume more of almost everything. Including health care. We are simply a nation of consumption, for longstanding cultural reasons and supported by our higher wealth and our ability to save through human capital and rising asset prices, thus enabling more spending. So we are going to spend more on illegal drugs too. In fact illegal behavior with the prescription drugs themselves is one of the fastest-growing drug problems in the United States.
1b. Americans also take way more legal prescription drugs than their counterparts in other countries. Under one estimate, Americans consume 80 percent of the world’s painkillers.
2. Corporate interests, including Big Pharma, are in America relatively strong, including politically strong, and relatively prominent in advertising. Some of those companies have worked hard to accustom you to the idea that you ought to “take something.”
3. America has borders with Mexico and the Caribbean, which makes it harder to keep out illegal drugs.
4. Price! (Duh) Somewhere recently I saw price estimates for cocaine in various countries (might anyone recall the link?). It was cheaper in the United States than elsewhere. We are a large market, have economies of scale, and are great at retail and marketing. Many other things are cheaper here to, which in turn brings us back to #1.
5. Compared to say Germany or Denmark, there are fewer people “looking out for you.” Americans are more likely to move away from family and friends, and more likely to live “in the middle of nowhere.” We are lonelier, maybe not at the median but on the left hand side of the distribution. Our demand for therapists is pretty high too.
6. Student life can be more competitive in the United States than in Canada or Europe, and that may induce many Americans teens to use amphetamines, which are more popular in America.
7. America is in general a high-variance country, due to large market size, ethnic diversity, relatively open and competitive markets, and the looseness of many of its social norms. A higher-variance country will have many more people clustered in the unsatisfactory behavior patterns.
7b. Along related lines, American teens are more frequent users of illegal drugs than are European teens. But American teens also have amongst the lowest rates of smoking and drinking. So some of us are very disciplined, others much less so, again reflecting the high variance of both inputs and outcomes.
8. Americans are keener to try new products, relative to most of the rest of the world. Along these lines, we have relatively big problems with the newer opioids and synthetic drugs. Heroin historically has often been a bigger problem in Europe, and that is hardly a new drug. In era of new drugs, as we currently are living in, this will nudge the balance toward Americans doing drugs more.
9. American teens have more disposal income to spend, compared say to European teens. This may come from either jobs or from parental allowances. Furthermore, the European youth, especially in Italy, are more likely to live at home for many more years. That probably limits illegal drug use. Americans are more likely to go away for college to “a campus,” and “a dorm,” a horrible institution if you think about it for too long.
What else?
Nigeria fact of the day
Nigeria’s petrol spending will eat up more federal spending than federal spending on health, education and welfare combined.
Here is more from The Economist, about the pending election, interesting more generally.
Sunday assorted links
1. Guy who knew Lee Harvey Oswald and his wife is publishing a book soon.
2. City charters really matter. And the same guy — Austin Berg — runs a YouTube channel on Rare African Vinyl.
3. Does an overreliance on English hinder cognitive science?
4. US will support sending ‘multinational rapid action force’ to Haiti.
5. “When not on vacation my life is boring and my nighttime dreams are dull. On vacation, time slows down and my life becomes full of novel events, and this triggers much more intense and vivid dreams at night. I have a hard time estimating the importance of this factor, but it might well be more important than all of my daytime utility during the vacation.” Link here.
6. “Pensions may be in trouble, but long term debt is great for governments. So long, that is, as the government doesn’t turn around and bail out everyone to whom it sold long term debt!” Link here.
Driving Buy: Pollution, Customers and Development
The literature on air pollution continues to grow. In an impressive paper, Bassi et al. show that firms in Uganda locate on busy roads, Busy roads are more polluted but there are more customers driving and they rely on direct customer acquisition, rather than advertising or marketing, to get customers.
Location choice thus entails a trade-off between pollution exposure, which we verify to be mainly driven by road traffic, and access to customers. We also use our survey data to argue that the benefits can be explained primarily by the fact that, as it is typically the case across the developing world, firms sell locally through face-to-face interactions and do not have any other means to access customers than to be as visible as possible to them. Therefore, proximity to busy roads is essential.
Locating along busy roads increases profits per worker but reduces life expectancy of workers by about two months. A two month loss in life expectancy is substantial. Uganda is so poor (GDP per-capita ~$720), however, that the authors find that an (imaginary) policy of randomly allocating firms would not be cost-effective. Randomly allocating firms, however, is only one potential policy–others include using more buses or instituting a congestion tax. India has higher per capita GDP than Uganda so if all else were equal many such policies would pay in India. One type of “firm” that I have seen locate on congested roads in India is beggars and street sellers. It’s obvious that they go where the customers are but at the price of locating in very polluted areas.
I argued in India recently that reduced pollution could increase GDP. I continue to think that is true on the margin–there is some low-hanging fruit.
In other pollution news. It is clear that pollution papers are becoming a growth industry and thus there are bound to be green jelly bean problems. I haven’t read either closely but I did note that Roy et al. find that pollution increases mutual fund errors and Du finds that pollution increases racist tweets. Well, maybe. The new pollution literature is credible but remember to trust literatures not papers.
Overrated or underrated?
Ramagopal asks: Peter Bauer, Mises, Joan Robinson
1. Peter Bauer is underrated. He was a brilliant development economist who wrote seminal early and detailed books on the rubber sector and also networks of West African trade. He also recognized the importance of the informal sector early on. He then moved into a more polemic mode, writing books on market-oriented development strategies and very critical of foreign aid. I believe at the time he was largely correct about foreign aid, though I would recognize also that since then the quality and effectiveness of foreign aid has improved considerably, most of all because the receiving governments have on average improved in quality.
His family had a coat of arms, linked above at his name.
I once met Bauer at a seminar at NYU, way back when. He reminded me of a character from LOTR and he had a thick mane of white hair. I believe Bauer was also one of the first well-known economists to come out as gay.
2. Mises is underrated. His 1922 book Socialism is still the best and also historically most important critique of socialism, ever. His earlier articles about the impossibility of economic calculation under socialism are among the most important economics articles, ever. Those are already some pretty important contributions, and yet he is often talked of as a crank, perhaps because in part some of his followers were indeed cranks.
Liberalism I quite like. His book Bureaucracy is underdeveloped but still pretty interesting, and his hypotheses about the logic of cascading interventionism, if not entirely correct, still are an important contribution to public choice. They do explain a lot of the data. Human Action is big, cranky, and dogmatic, but for some people a useful tonic and alternative to the usual stuff. I can’t say I have ever really liked it, and in an odd way the whole emphasis on “Man acts” undoes at least one part of marginalism. The early Theory of Money and Credit was a pretty good early 20th century book on monetary theory.
Hayek somehow ended up as “the reasonable face of classical liberalism,” but in fact Mises was far more politically correct by current standards.
Obviously there is a sliver of people who very much overrate Mises. Here is a guy who hardly anyone rates properly. I’m still sticking with considerably underrated.
3. Joan Robinson’s Theory of Imperfect Competition was a very important book, and it laid the groundwork for a lot of later thinking about market structure, both geometrically and conceptually. But she didn’t understand actual economics, was a Maoist, and seemed to like the regime of North Korea. So I have to say overrated. Her Accumulation of Capital also was no great shakes, though hardly her greatest sin. Her growth theory was far too Marxian, and far too fond of “Golden Rule” constructs, which are mechanistic rather than insightful as models ought to be. Her writings in Economic Philosophy were not profound. So she has one truly major contribution, but I can’t get past the really bad stuff.
Investment advice from Russell Napier
First of all: avoid government bonds. Investors in government debt are the ones who will be robbed slowly. Within equities, there are sectors that will do very well. The great problems we have – energy, climate change, defence, inequality, our dependence on production from China – will all be solved by massive investment. This capex boom could last for a long time. Companies that are geared to this renaissance of capital spending will do well. Gold will do well once people realise that inflation won’t come down to pre-2020 levels but will settle between 4 and 6%. The disappointing performance of gold this year is somewhat clouded by the strong dollar. In yen, euro or sterling, gold has done pretty well already.
Here is the full discussion, interesting throughout. He also says to expect widespread capital controls. To be clear, none of this is investment advice from me.
Saturday assorted links
2. “none of the countries that shared land borders w/ poland in 1989 (i.e. ussr, czechoslovakia, east germany) are around in 2022” Link here.
3. How Brian Eno created Music for Airports.
4. The Norwegian Century may continue unhindered (for now).
5. Correspondence of Quine now on-line.
6. One ranking of the safest cities in America. Why isn’t Provo on the list? In fact Provo’s crime rate seems to be not so low for the state of Utah.
German fiscal policy vindicated
And since German politicians have insane views on fiscal policy, they will probably say that the current experience actually validates their prior two decades of excessively tight fiscal policy. In reality, the current situation mostly shows that Germany wasted an opportunity to take advantage of a prolonged period of negative interest rates to create a national high-speed rail network³ and to make massive investments in home insulation.
That is from a Matt Yglesias Substack, gated but worth paying for. I agree Germany should have spent more on home insulation, but there are several ways of doing that in terms of the macro fiscal picture.
The broader point is that the current situation does in fact validate Germany’s prior two decades of tight fiscal policy. I think most of us agree that you should run budget surpluses in relatively good times, and budget deficits in relatively bad times. It now turns out those were in fact the relatively good times. The Germans worried that might be the case, and now it turns out they were right.
Did Bernanke and all that QE cause the current inflation?
That is the topic of my latest Bloomberg column, here is one excerpt:
Sometimes it is alleged that this “Bernanke inflation” was channeled into asset prices, such as equities and crypto, rather than retail or consumer prices. That hypothesis doesn’t fit the data, either. During most of Bernanke’s tenure, stock prices were broadly within historical norms, considering such measures as price-earnings ratios. Some particular stocks were overpriced, as is always the case, but stocks as a whole were not crazy high. As for crypto, inflation rates are much higher today — and crypto prices have been collapsing, not soaring.
More generally, it doesn’t make sense to talk of inflation or new money as being “trapped” in one particular sector. Assume for the sake of argument that somehow inflation was concentrated in the crypto sector. You might think that sellers of crypto could just turn around, take their sales receipts, and buy more crypto. Why would you act that way? If you are bullish on crypto, why initially sell at all? Even if you did end up selling, your initial crypto sale and subsequent purchase will more or less offset each other in the crypto sector.
The reality is that, if the new inflationary monetary injection somehow flowed first into the crypto sector, it would soon find its way into the broader economy and push up prices across the board.
Another claim I hear is that the Fed simply did too much quantitative easing, which was eventually going to catch up to the economy. It’s like pumping too much air into a balloon; sooner or later it has to burst.
But monetary policy does not work that way. It does have lags, but a major inflationary episode leads to noticeable increases in inflation in a bit more than a year, as has been shown by the research of Milton Friedman and others. The effects of new monetary policy do not sit idle for a decade or more.
No, in other words.
Catching up with the news cycle
1. The British government has done a fiscal policy U-Turn, but yields are back up again. I am not suggesting those market prices are the final verdict, but I do take that as a sign that the issue all along has been a) the competence of the government and its decision-making procedures, and b) general difficulties facing the UK, and not the absolute size of the fiscal policy changes under consideration.
2. The U.S. semiconductor chip controls on China are quite significant. Like price controls on Russian gas, they will either raise or lower the probability of war, and thus I find them difficult to evaluate. That does not mean we should do nothing, but it does mean I don’t have a very strong judgment. It might accelerate Chinese self-sufficiency in chip development, or perhaps accelerate an attempt to seize TSMC in Taiwan. Or it might simply cripple a major geopolitical rival. How good are the models and the empirics that we use to evaluate such situations? Not very good.
3. I’ve long considered Sunflowers a much overrated van Gogh painting. There were even longstanding debates over whether one version of it (not the version that was just attacked by eco-terrorists) was a fake, a sign that it actually isn’t the artist’s most subtle work. It seems it was a fake, but it took people a long time to figure this out. His portraits or sketches of shoes are often much better.
Friday assorted links
Telemedicine is Dying
Bloomberg: Prior to the Covid era, telehealth accounted for less than 1% of outpatient care, according to the Kaiser Family Foundation. Telehealth services have since surged, at their peak accounting for 40% of outpatient visits for mental health and substance use.
Unfortunately, as I warned last year telemedicine is being wound back as regulations which were lifted for the pandemic emergency are put back into place.
Telemedicine exploded in popularity after COVID-19 hit, but limits are returning for care delivered across state lines.
…Over the past year, nearly 40 states and Washington, D.C., have ended emergency declarations that made it easier for doctors to use video visits to see patients in another state, according to the Alliance for Connected Care, which advocates for telemedicine use.
…To state medical boards, the patient’s location during a telemedicine visit is where the appointment takes place. One of MacDonald’s hospitals, Massachusetts General, requires doctors to be licensed in the patient’s state for virtual visits.
I know people who have had to travel over the Virginia/Maryland border just to find a wifi spot to have a telemedicine appointment with their MD physician. Ridiculous.
….telemedicine innovations pioneered during the pandemic should remain as options. No one doubts that some medical services are better performed in-person nor that requiring in-person visits limits some types of fraud and abuse. Nevertheless, the goal should be to ensure quality by regulating the provider of medical services not regulating how they perform their services. Communications technology is improving at a record pace. We have moved from telephones to Facetime and soon will have even more sophisticated virtual presence technology that can be integrated with next generation Apple watches and Fitbits that gather medical information. We want medical care to build on the progress in other industries and not be bound to 19th and 20th century technology.
Plod has a bunch of questions
From my request for requests, here goes:
– What does the NYT do well? And conversely what are they bad at?
– What is your theory on the rising lack of male ambition?
– Why do modern fantasy authors (Martin, Rothfuss, others) not finish their works?
– If you were chief economist czar of the US, what is the policy would you implement first? In the UK?
– Will non-12-tone equal temperament music ever become popular?
– What do you think will become of charter cities like Prospera?
I will do the answers by number:
1. The New York Times can publish superb culture pieces, most of all when they are not pandering on PC issues. Their music and movie reviews are not the very best, but certainly worth the time. International coverage is high variance, but they have plenty of articles with information you won’t find elsewhere. Some of the finest obituaries. The best parts of the Op-Ed section are indispensable, and the worst parts are important to read for other reasons. Perhaps most importantly, the NYT has all sorts of random articles that are just great, even if I don’t always like the framing. Try this one on non-profit hospitals.
On the other side of the ledger, the metro and sports sections I do not very much read (probably they are OK?). The business section has long been skimpy, and is not currently at its peak. Historical coverage with racial angles can be atrocious. The worst Op-Eds are beyond the pale in their deficient reasoning, and there are quite a few of them. On “Big Tech” the paper is abysmal, and refuses to look the conflict of interest issues in the eye. They just blew it on a new Covid study. The book review section used to be much better, I think mainly because it has become a low cost way to appease the Wokies.
2. Male ambition in the United States is increasing in variance, not waning altogether. But on the left hand side of that distribution I would blame (in no particular order): deindustrialization, women who don’t need male financial support anymore, marijuana, on-line pornography, improved measurement of worker quality, the ongoing rise of the service sector, too much homework in schools, better entertainment options, and the general increasing competitiveness of the world, causing many to retreat in pre-emptive defeat.
3. Male fantasy writers do not finish their works because those works have no natural ending. There is always another kingdom, a lost family member, a new magic power to be discovered, and so on. And the successful fantasy authors keep getting paid to produce more content, and their opportunity cost is otherwise low. Why exactly should they tie everything up in a neat bow, as Tolkien did with the three main volumes of LOTR?
4. For the United States, I would have more freedom to build, massive deregulations of most things other than carbon and finance, and much more high-skilled immigration, followed by some accompanying low-skilled immigration. For the UK I would do broadly the same, but also would focus more on human capital problems in northern England as a means of boosting economic growth.
5. Non-12-tone equal temperament music is for instance very popular in the Arabic world, and has been for a long time.
6. I have been meaning to visit Prospera, but have not yet had the chance to go. I expect to. My general worries with charter cities usually involve scale, and also whether they will just get squashed by the host governments, which almost by definition are dysfunctional to begin with. Most successful charter cities in history have had the support of a major outside hegemon, such as Hong Kong relying on Britain.
Subsidizing lower gas consumption
1) Why is all of the policy discussion in Europe focused on subsidizing consumption of gas rather than on subsidizing the reduction in consumption of gas. The latter approach is consistent with the German/European policy of moving to greater reliance on renewable energy. Subsidizing reduction in consumption also reduces the risk of shortages if the Northern winter is severe. The policy is straightforward to implement for households but is a little more difficult for to implement for businesses as some may profitably choose to reduce employment and or output which would be politically difficult. However, this problem can be remedied with he combination of, for example, an employment subsidy together with the subsidy paid for reduced use of gas.
That is from my email, from economist Don Harding.