Month: January 2023
The major revolutions I have seen in my lifetime
The nature, size of impact, and time horizons on all these vary greatly, but here is my list:
1. Moon landing, 1969. Most of the impact still not felt, except for satellites. My parents did let me stay up late at night to watch it.
2. The collapse of communism (1989-????). Poland is a lovely country to visit, Shanghai is amazing. I flew to eastern Europe once I could in 1989.
3. The rise of Asia. Japan and South Korea starting around the time of my birth. The rise of China for sure, and currently the rise of India is a likely addition.
4. Feminization, ongoing, no firm date. Impact plenty.
5. The realization of the internet. Hard to date, but I’ll say the 1990s and ongoing.
6. The smartphone — 2007. Impact in your face. Bought an iPhone the first day, was mocked by MR readers as an “Apple fan boy.”
7. Effective Large Language Models/AI. Impact still to be seen.
The “African population explosion” is perhaps next in line…
*The Kural*
Or Tiruvalluvar’s Tirukkural, translated with a preface by Thomas Hitoshi Pruiksma, just published by Beacon Press. This poem, a staple (the staple?) of Tamil literature, is believed to have been composed between the third and fifth centuries AD. The poem covers issues of wisdom, ethics, virtue, wealth, and love. I cannot compare this version to the Tamil original, but it reads nicely and is attractively placed on the page.
Excerpt:
Is she a siren a rare peacock a woman in jewels —
My heart quakes
As if on attack with an army of sirens — the look
She gives when I look
I did not know death but now I do —
Fierce feminine eyes
They don’t fit this young woman — these eyes
That kill those looking
Is it death an eye a deer — her gaze
Contains all three
There should be some extra indentation after each two lines. And does anyone has a link to the whole thing recited in Tamil, I cannot readily find this on YouTube.
Sprouting Cities: How Rural America Industrialized
We study the joint process of urbanization and industrialization in the US economy between 1880 and 1940. We show that only a small share of aggregate industrialization is accounted for by the relocation of workers from remote rural areas to industrial hubs like Chicago or New York City. Instead, most sectoral shifts occurred within rural counties, dramatically transforming their sectoral structure. Most industrialization within counties occurred through the emergence of new ”factory” cities with notably higher manufacturing shares rather than the expansion of incumbent cities. In contrast, today’s shift towards services seems to benefit large incumbent cities the most.
That is from a new paper by Fabian Eckert, John Juneau, and Michael Peters. A Jeffersonian might think that was a big part of what made America so great earlier in the 20th century? Whereas today, at least for the Jeffersonian…?
Why I think graduate programs should keep macro in the first-year sequence
I have heard that MIT is pushing macro out of their required first-year sequence, noting I am not sure what the ex post regime will look like. But in general I am macro-sympathetic, for the following reasons:
1. Many economics graduate students are from emerging (or retrogressing) economies, and macro issues are truly important for them.
2. Many graduate students are from “developed” economies (with apologies to Peter Thiel), and macro issues are truly important for them. In America we had a major financial crisis in 2008-2009 and rampant inflation more recently. It is hardly the case that all the problems have been solved.
3. Macro is the main vehicle for teaching people about economic growth, which is probably the most important topic in economics.
4. The Fed has a very good economics staff, and probably that tradition will be harder to continue if macro is taken out of first-year sequences.
5. You might argue that standards in macro are looser, by the nature of the field. I would suggest it is easier to advance a new idea in macro, perhaps for the same reason? Along related lines, macro still has more singly-authored papers, a sign that the field requires less conformity of ideas.
6. If you write down a short list of the candidates of “Greatest Economist ever,” did they not all do macro? Doesn’t that tell us something?
That all said, I would make macro sequences “more practical,” more about economic growth, more about economic history, and less about dynamic programming than is often currently the case.
Saturday assorted links
1. When is impulsive behavior adaptive?
2. Robert Colville on the morality of economic growth.
3. Do “fairy circles” come from plant competition and self-organization?
4. “YouTubers said they destroyed over 100 VHS tapes of an obscure 1987 movie to increase the value of their final copy. They sold it on eBay for $80,600.” Link here.
5. Transcript of my St. Andrews talk on EA. Recommended. And Nietzsche on EA, as done by GPT.
6. Who self-identifies as Native American?
7. Alas Melvyn Krauss has passed away, RIP. He was generous enough to let me sit in on his NYU class way back when.
8. Ross D. on euthanasia, more than just his prior column (NYT).
Should we now conclude that the euro is just fine?
No, and that is the topic of my latest Bloomberg column:
The core difficulties of the euro arise when two circumstances coincide: There are deflationary pressures, and economic conditions vary greatly among the nations of the euro zone. The good news is that neither of these circumstances currently prevails. That is also the bad news.
Inflation rates have been high, especially in the euro zone, and are expected to be higher than 9% for December 2022. Inflation brings problems of its own (more about that later), but in the short run it does not lead to huge unemployment and loan defaults. If anything, it helps out some debtors.
During the 2011 crisis, there was massive deflationary pressure on the Greek banking system, endangering its solvency. The Greek government’s deposit guarantees were not entirely credible either, so many people withdrew their deposits, increasing pressure on both the government and the banks. Whatever problems euro zone nations may have today, they are not those.
A second issue in 2011 was that some nations were doing much better than others. Germany had a relatively strong economy, while Greece and Italy’s were relatively weak. Greece, Italy and some of the other “periphery” nations would have preferred a weaker euro, to boost their exports, but the strength of Germany and some of the other more prosperous euro-zone nations limited euro deprecation.
Today, problems in the euro zone are more evenly distributed. Current data indicate a shallow rather than deep recession, but countries such as Germany still face real challenges. The euro, in turn, has been relatively weak, which has limited some of the downside risk faced by the euro-zone economies…
Unfortunately, those mechanisms postpone but do not eliminate the core problems with the euro zone. First, if the zone works better in inflationary times, politicians committed to it will become more attached to higher rates of inflation. That will make it harder for the European Central Bank to achieve its goal of price stability.
And:
The second problem is this: High inflation eventually brings a process of disinflation, and during those disinflations real interest rates are often high. The ECB hikes nominal interest rates, and as inflation diminishes those rates rise in real, inflation-adjusted terms. In other words, some deflationary pressures are brought to bear on the system.
Those deflationary pressures are exactly what the euro zone does not handle well. Italy in particular faces ongoing fiscal problems, and if its government had to borrow at much higher real rates of interest, its current fiscal path may not prove sustainable. It might be forced to cut government spending and/or raise taxes, which would lead to the kind of downward spiral that characterized the earlier euro-zone crisis.
Diverging economic fortunes for euro zone nations may reemerge as well…
So I think people are being a bit too optimistic about Croatia joining the eurozone.
The Pile of Talent test
The economist Tyler Cowen suggests a thought experiment to illustrate this point.
Take out a piece of paper. In one column, list all of the major problems this country faces—inequality, political polarization, social distrust, climate change, and so on. In another column, write seven words: “America has more talent than ever before.”
Cowen’s point is that column B is more important than column A. Societies don’t decline when they are in the midst of disruption and mess; they decline when they lose energy. And creative energy is one thing America has in abundance.
Here is the full Atlantic piece from David Brooks, mostly about reason to be optimistic about America. Of course there is even a stronger version of The Pile of Talent test that you could run for the world as a whole.
Friday assorted links
1. Orthodox Jews 18 percent of U.S. kidney donors.
2. So much Adderall! Has to be screwy. And presumably many people get it without prescriptions.
3. Redux: My 2021 talk at OpenAI — recommended. And Arnold Kling on ChatGPT.
4. The Economist on whether economics has run out of big new ideas. And should MIT be abolishing first-year macro in the graduate sequence?
5. “Contactless Real-Time Heart Rate Predicts the Performance of Elite Athletes.”
6. “Norway is a wealthy and egalitarian country with a homogeneous educational system, yet achievement gaps between students at the 90th and 10th percentiles of parental income and between students whose parents have at least a master and at most a high school degree are found to be large (0.55–0.93 and 0.70–0.99 SD), equivalent to about 2 to 2.5 years of schooling, and increasing by grade level. ” Link here. vtekl.
7. “A pair of Indian men broke a Guinness World Record by visiting all seven continents in 3 days, 1 hour, 5 minutes and 4 seconds.” Like wise men, they started in Antarctica.
8. Paul Johnson, RIP (NYT).
Ask the beast
“why does tyler cowen mean when he says something is “Straussian”?”
That is perhaps the question I have received the most often over the last five years, subbing in “what” for “why.” And, via Jeremy Davis, here is the answer he received:
Tyler Cowen is an economist and author who is known for his use of the term “Straussian” to describe certain ideas or perspectives. The term “Straussian” is a reference to the political philosopher Leo Strauss, who was active in the mid-20th century. Strauss is known for his belief that there is a fundamental tension between reason and tradition, and that the best way to understand political ideas is to look at the underlying assumptions and hidden meanings that are present in the text.
When Cowen says something is “Straussian,” he typically means that it is characterized by a focus on underlying principles and hidden meanings, rather than surface-level appearances. He might also be referring to the ideas of Leo Strauss, who is known for his emphasis on the study of classical texts and his belief that political philosophy should be grounded in an understanding of the great works of the past.
In general, when Cowen uses the term “Straussian” he is using it as an adjective to describe a perspective or approach that is characterized by an emphasis on careful reading, attention to detail, and an appreciation for the complexity of ideas. It is often used by Cowen to point out that some perspectives are not as straightforward as they seem, and that there is always more to be discovered if we look beneath the surface.
Now you can stop asking!
Ryan Bourne reports from the AEA meetings
During the first full morning of the conference (Friday), I decided to note down some rough compliance figures . With the health warning that this only reflects the experience of sessions I attended, compliance initially was about 90 percent for those I judge to be in their 40s and younger and only about 30 percent among over 50s.
Now, I am less interested in the debate about the efficacy of mask wearing or indeed whether individuals choose freely to wear one based on their subjective judgements of the risks, costs, and benefits. What was interesting to me is that at an AEA *population*-level, compliance rates with the rule appeared negatively correlated with the age-related risks of COVID-19 itself. At this stage when those risks are well known, that strongly suggests a lot of signaling going on, whether that be potential job market applicants looking to signal their compliant personalities, masks as a political statement, or something else. What it does not show is some well-grounded understanding of “the science.” It was little surprise that, as the weekend wore on, and given their experience in the rest of the city, all groups’ adherence to the rule waned.
And this:
To summarize: there were roughly three times as many sessions featuring papers on each of race, gender, and climate as there were sessions on the topics of inflation or growth. For the conference as a whole, that means 13.2 percent of all sessions featured gender issues, 12.6 percent climate, 12.4 percent race, against just 4.4 percent for inflation and growth (some sessions featured more than one of these listed topics).
Here is more, and note I have seen reports on Twitter that the AEA lost almost a million dollars on this conference. When will there be an inquiry into how this decision — the very strict Covid-related requirements — was made? Probably never.
The economics of non-competes
That is the topic of my latest Bloomberg column, here is one excerpt:
The value of noncompete clauses is easy to illustrate. Say you run a hedge fund. Many members of your trading team will have partial access to your firm’s trading secrets, and if they leave they can take those secrets with them. In the absence of noncompete agreements, firms would be more likely to “silo” information — becoming less efficient and less able to pay higher wages.
Nondisclosure agreements for workers in such positions are common, but they are difficult to enforce — making noncompete agreements more relevant. How exactly might you find out if some other newly created hedge fund is using your trading algorithms?
Or say you are a sales company with a customer list, or a nonprofit with a donor list. An employee who sees those lists could use that information to start a competing business, or take that information to competitors. It seems reasonable in such cases to restrict the ability of employees to “jump ship.”
If noncompetes are banned outright, to repeat, the effect will be less information-sharing within the company. New workers in particular, who have not demonstrated their long-term loyalty, will have a hard time getting access to information and getting ahead. More senior employees will have the advantage, hardly a formula for boosting economic opportunity.
I call for federalism and piecemeal regulation of the practice, not the all-out federal ban proposed by Lina Khan’s once again overreaching FTC.
My St. Andrews talk on Effective Altruism
About 25 minutes of talk, the rest is Q&A — recommended!
Thursday assorted links
2. Five trends that will shape urban Africa.
3. Is the Fed losing money on QE?
4. Do Asian-Americans have the world’s highest life expectancy?
5. On immigration (and authority) Daniel Klein is correct.
6. Can ChatGPT pass medical licensing exams? Speculative GPT thoughts. And “I taught ChatGPT a language.” And “The return of the Socratic method, at scale and on demand.” Get ready people! “Rewrite this article so it sounds like a human.” And Chat GPT recommends the best books on AI. Get with the program! Yes, I mean you. Only yesterday I found the beast very helpful in prepping questions for Glenn Loury (thanks Glenn, that was a great episode!).
7. Roman vs. modern concrete, updated and revised.
Powell: The Fed is Independent but for that Reason Must be Limited
An excellent and forceful speech by Federal Reserve Chair Jerome Powell. He defends the Fed’s independence but clearly and directly argues that the only way that deal can be credible is if the Fed stays out of big political issues.
…the case for monetary policy independence lies in the benefits of insulating monetary policy decisions from short-term political considerations.1 Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors. I believe that the benefits of independent monetary policy in the U.S. context are well understood and broadly accepted.2
…It is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day.4 Taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence.
…Addressing climate change seems likely to require policies that would have significant distributional and other effects on companies, industries, regions, and nations. Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections.
At the same time, in my view, the Fed does have narrow, but important, responsibilities regarding climate-related financial risks. These responsibilities are tightly linked to our responsibilities for bank supervision.6 The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change.
But without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.7 We are not, and will not be, a “climate policymaker.”
My excellent Conversation with Katherine Rundell
One of my favorite CWTs, here is the audio, video, and transcript. Here is part of the summary:
She joined Tyler to discuss how she became obsessed with John Donne, the power of memorizing poetry, the political implications of suicide in the 17th century, the new evidence of Donne’s faith, the contagious intensity of thought in 17th century British life, the effect of the plague on national consciousness, the brutality of boys’ schooling, the thrills and dangers of rooftop walking, why children should be more mischievous, why she’d like to lower the voting age to 16, her favorite UK bookshop, the wonderful weirdness of Diana Wynne Jones, why she has at least one joke about Belgium in every book, what T.S. Eliot missed about John Donne, what it’s like to eat tarantula, the Kafka book she gives to toddlers, why The Book of Common Prayer is underrated, and more.
Here is one excerpt:
COWEN: Now, you have two books, Rooftoppers and Skysteppers, about rooftop walking. Some might call them children’s books. I’m not sure that’s exactly the right description, but what is the greatest danger with rooftop walking?
RUNDELL: Oh, it’s falling off.
COWEN: What leads you to fall off? If you’re rooftop walking, if you were to fall off, what would be the proximate cause of that event?
RUNDELL: Philippe Petit, who is, of course, one of the great roof walkers of the world and the man who strung the wire between the Twin Towers in 1977, talks about vertigo as a beast that has to be tamed piece by piece, that can never be overcome all at once.
Vertigo, he says, is not the fear that you will fall. It is the fear that you will jump. That, of course, is the thing that, when you are roof walking, you are taming. You are trying to unmoor your sense of danger and of not being able to trust yourself not to jump from your sense of beauty and the vision of a city that you get up high.
I roof-walk for very practical reasons: to see views that would otherwise be not really available to me in an increasingly privatized City of London.
And:
COWEN: For you, what is most interesting in Donne’s sermons?
RUNDELL: The thing I find most interesting would be the radical honesty that he has — that you will find in so few other sermons of the time — about the difficulty of finding God. He is a man who writes often with certainty about the idea of reaching the infinite, the divine. But he also writes this famous passage where he says, “I summon God and my angels, and when God and the angels are there, I neglect them for . . .” I forget what it is. “The sound of a carriage, a straw under my knee, a thought, a chimera, and nothing and everything.”
That sense that, even though he had a brain that could control incredibly rigorous poetry, he did not have a brain that would control itself in prayer. He offered that to his congregation as a vulnerability and a piece of honesty that so few sermoners of the time — who thought of themselves more as a regulatory ideal that should never admit vulnerability — would offer.
Definitely recommended. And Katherine’s recent book Super-Infinite: The Transformations of John Donne was perhaps my favorite book of last year.