Month: June 2023

A mild return for Danish phrenology?

by  Tyler Cowen in

A new study in Denmark used machine learning techniques on photographs of faces of Danish politicians to predict whether their political ideology is left- or right-wing. The accuracy of predictions was 61%. Faces of right-wing politicians were more likely to have happy and less likely to have neutral facial expressions. Women with attractive faces were more likely to be right-wing, while women whose faces showed contempt were more likely to be left-wing. The study was published in Scientific Reports.

Of course such results rarely replicate across different countries, including the United States.  Here is the full link, via CB.

Vertical migration externalities, or another reason why California taxes are too high

by  Tyler Cowen in

State income taxes affect federal income tax revenue by shifting the spatial distribution of households between high- and low-productivity states, thereby changing household incomes and tax payments. We derive an expression for these fiscal externalities of state taxes in terms of estimable statistics. An empirical quantification using American Community Survey data reveals that the externalities range from large and negative in some states, to large and positive in others. In California, an increase in the state income tax rate and the resulting change in the distribution of households across states lead to a decrease in federal income tax revenue of 39 cents for every dollar of California tax revenue raised. The externality amounts to a 0.27% decrease in total federal income tax revenue for a 1 pp increase in California’s state tax rate. Our results raise the possibility that state taxes may be set too high in high-productivity states, and set too low in low-productivity states.

That is from new research by Mark Colas and Emmett Saulnier, via the excellent Kevin Lewis.

Saturday assorted links

by  Tyler Cowen

1. The Mechanical Turk is increasingly mechanical in fact.

2. Participating in a climate prediction market increases concern about global warming.

3. “Growth in per pupil education spending in the United States was mostly flat until 1918, after which it increased by almost 100% in a brief six-year period.”

4. Taliban markets in everything, “Cash-strapped Taliban selling tickets to ruins of Buddhas it blew up.”

5. Guess who is being blamed for high rates of Swedish inflation?

6. SpaceX hires fourteen-year-old engineer, he is then denied a LinkedIn account.

7. Ross on C.S. Lewis and the weirdness of our time (NYT).  Good Straussian clincher at the very end.

8. Daniel Ellsberg, RIP (NYT).

Using a Quantum Annealer to Solve a Real Business Cycle Model

by  Alex Tabarrok in

From Jesús Fernández-Villaverde and Isaiah J. Hull a new paper:

NBER 31326: We introduce a novel approach to solving dynamic programming problems, such as those in many economic models, on a quantum annealer, a specialized device that performs combinatorial optimization. Quantum annealers attempt to solve an NP-hard problem by starting in a quantum superposition of all states and generating candidate global solutions in milliseconds, irrespective of problem size. Using existing quantum hardware, we achieve an order-of-magnitude speed-up in solving the real business cycle model over benchmarks in the literature. We also provide a detailed introduction to quantum annealing and discuss its potential use for more challenging economic problems.

Wikipedia offers more on quantum annealing:

Quantum annealing starts from a quantum-mechanical superposition of all possible states (candidate states) with equal weights. Then the system evolves following the time-dependent Schrödinger equation, a natural quantum-mechanical evolution of physical systems. The amplitudes of all candidate states keep changing, realizing a quantum parallelism, according to the time-dependent strength of the transverse field, which causes quantum tunneling between states or essentially tunneling through peaks. If the rate of change of the transverse field is slow enough, the system stays close to the ground state of the instantaneous Hamiltonian (also see adiabatic quantum computation).[6] If the rate of change of the transverse field is accelerated, the system may leave the ground state temporarily but produce a higher likelihood of concluding in the ground state of the final problem Hamiltonian, i.e., diabatic quantum computation.[7][8] The transverse field is finally switched off, and the system is expected to have reached the ground state of the classical Ising model that corresponds to the solution to the original optimization problem.

I would not have expected to see a paper like this for many years to come, even decades. I gather that solving the RBC model more quickly is a test case. I can see applications in knapsack problems and auction allocations.

SHRUG 2 for India is out

by  Tyler Cowen in

Here is the home page.

Agglomeration externalities from restaurants

by  Tyler Cowen in

We estimate agglomeration externalities in Milan’s restaurant sector using the abolition of a unique regulation that restricted where restaurants could locate. In 2005, Milan abolished a minimum distance requirement that had kept the number of establishments artificially constant across neighborhoods. We find that after 2005, the geographical concentration of restaurants increased sharply and at an accelerating rate. Consistent with the existence of strong and self-sustaining agglomeration externalities, restaurants agglomerated in some neighborhoods and deserted others, leading to a growing divergence in local amenities across neighborhoods. Restaurants located in neighborhoods that experienced large increases in agglomeration reacted by increasing product differentiation.

That is from a new AER Insights piece by Marco Leonardi and Enrico Moretti.  Here are some ungated copies.  I am myself repeatedly surprised how much the mere location of a restaurant can predict its quality.

Does Germany need more polarization? (from the comments)

by  Tyler Cowen

My perception is that in Germany most major political decisions are not on the ballot: migration, nuclear energy, international, alliances, emission reduction policies to name but a few examples. Whereas people in the Americas worry about polarization, I would argue that Germany’s problem is the opposite. Compared to the historical average German politics is too tame and not polarized enough. Polarized debates were much more endemic when the country debated the Nato Doppelbeschluss, the Kohl era (re-unification) or the Adenauer era (West alliance, later the failed project of a European army). The counterfactual in many of these cases would have been different had the other party been in power. The same is not true for the Merkel era. The word ‘Alternative’ derives from her suggesting that her Euro-crisis management was without alternative. If I may offer one conjecture as to why this is happening, I would argue that the degree of elite convergence is greater than in the Americas. The opinion spectrum covered by public intellectuals is just so much smaller. And with trade unions and the church in decline so is the opinion spectrum covered by the country’s leading non-governmental institutions. (The treatment of that party’s very different initial leadership in the mid 2010’s illustrates this point.) So, in short, my (and many people’s) argument is that as in the Hotelling model ideological conformity of the elites has created the space for a non-ideologically aligned entrant. Naturally, this entrant is more extreme than a more conservative version of the Christian Democrats (and I tend to think that this is so because Christianity forbids you to go down certain tempting, yet inhumane rabbit holes but that is for another day) and of lesser quality because given the current intellectual climate the new party has trouble recruiting elites. Needless to say, you should not vote for this party. But I understand why it exists.

That is from “C.”

The Road to Socialism and Back: An Economic History of Poland, 1939–2019

by  Alex Tabarrok in

For four decades during the latter half of the 20th century, Poland and its people were the subjects of a grand socio-economic experiment. Under the watchful eye of its Soviet masters, the Polish United Workers’ Party transformed the mixed economy of this nation of 35 million into a centrally planned, socialist state (albeit one with an irrepressible black market). Then, in the closing decade of the 20th century, under the leadership of Polish minister of finance Leszek Balcerowicz, the nation was transformed back into a mixed economy.

In this book, we document the results of this experiment. We show that there was a wide chasm between the lofty goals of socialist ideology and the realities of socialism as the Polish people experienced them. We also show that while the transition back from a socialist to a mixed economy was not without its own pain, it did unleash the extraordinary productive power of the Polish people, allowing their standard of living to rise at more than twice the rate of growth that prevailed during the socialist era. The experiences of the Poles, like those of so many behind the Iron Curtain, demonstrate the value of economic freedom, the immiserating consequences of its denial, and the often painful process of regaining lost freedoms.

That’s the opening to an excellent new book (pdf) from the Fraser Institute written by Boettke, Zhukov, and Mitchell. More than an economic history of Poland, this book is also a very good introduction to the economics of socialism.

My Conversation with Noam Chomsky

by  Tyler Cowen in

Here is the audio, video, and transcript.  Here is the episode summary:

Noam Chomsky joins Tyler to discuss why Noam and Wilhelm von Humboldt have similar views on language and liberty, good and bad evolutionary approaches to language, what he thinks Stephen Wolfram gets wrong about LLMs, whether he’s optimistic about the future, what he thinks of Thomas Schelling, the legacy of the 1960s-era left libertarians, the development trajectories of Nicaragua and Cuba, why he still answers every email, what he’s been most wrong about, and more.

I would stress there is no representative sample from this discussion, so any excerpt will not give you a decent sense of the dialogue as a whole.  Read the whole thing, if you dare!  Here is one squib, in fact it is the opener, after which we ranged far and wide:

COWEN: If I think of your thought, and I compare it to the thought of Wilhelm von Humboldt, what’s the common ontological element in both of your thoughts that leads you to more or less agree on both language and liberty?

CHOMSKY: Von Humboldt was, first of all, a great linguist who recognized some fundamental principles of language which were rare at the time and are only beginning to be understood. But in the social and political domain, he was not only the founder of the modern research university, but also one of the founders of classical liberalism.

His fundamental principle — as he said, it’s actually an epigram for John Stuart Mill’s On Liberty — is that the fundamental right of every person is to be free from external illegitimate constraints, free to inquire, to create, to pursue their own interests and concerns without arbitrary authority of any sort restricting or limiting them.

COWEN: Now, you’ve argued that Humboldt was a Platonist of some kind, that he viewed learning as some notion of reminiscence. Are you, in the same regard, also a Platonist?

CHOMSKY: Leibniz pointed out that Plato’s theory of reminiscence was basically correct, but it had to be purged of the error of reminiscence — in other words, not an earlier life, but rather something intrinsic to our nature. Leibniz couldn’t have proceeded as we can today, but now we would say something that has evolved and has become intrinsic to our nature. For people like Humboldt, what was crucial to our nature was what is sometimes called the instinct for freedom. Basic, fundamental human property should lie at the basis of our social and economic reasoning.

It’s also the critical property of human language and thought, as was recognized in the early Scientific Revolution — Galileo, Leibniz — a little later, people like Humboldt in the Romantic era. The fundamental property of human language is this unique capacity to create, unboundedly, many new thoughts in our minds, and even to be able to convey to others who have no access to our minds their innermost workings. Galileo himself thought the alphabet was the most spectacular of human inventions because it provided a means to carry out this miracle.

Humboldt’s formulation was that language enables language and thought, which were always pretty much identified. Language enables what he called infinite use of finite means. We have a finite system. We make unbounded use of it. Those conceptions weren’t very well understood until the mid-20th century with the development of the theory of computation by Kurt Gödel, Alan Turing, and other great mathematicians, 1930s and ’40s. But now the concept of finite means that provide infinite scope is quite well understood. In fact, everyone has it in their laptop by now.

COWEN: Was it the distinction between natural and artificial language that led Rousseau astray on politics?

I will say that I am very glad I undertook this endeavor.

What is the optimistic case for Kenya?

by  Tyler Cowen in

That is the topic of my latest Bloomberg column:

…a locale with a reasonable level of English fluency and an attractive year-round climate will get a lot of attention — and that nicely describes Kenya. Kenya also had a growth rate of about 5.5% last year, despite negative shocks to the prices of imported food and energy. Since 2004, growth rates have been in the range of 4% to 5%.

Kenya also has some geographic advantages. It has an extensive coastline on the Indian Ocean, and research suggests that landlocked countries have worse economic performance. Countries with a coast also find it easier to stay in touch with the rest of the world, and Kenya has relatively easy access to China and India, large markets and sources of capital. In the current geopolitical climate, East Africa is attracting more interest from more sources than is most of West Africa.

In terms of scale, Kenya’s population of about 57 million cannot compete with Nigeria’s 222 million. But East Africa, with almost 500 million people, has a larger population than West Africa.

And if you are looking for the case against, yes there is one:

That said, expensive energy — due in part to taxes and poor regulation — has been a growth drawback.

There are other elements of the case against Kenya. It has had difficulty attracting foreign direct investment, even compared to other African nations. Corruption, regulatory barriers to entry and political instability remain concerns and cannot be dismissed lightly.

Recommended, worth a ponder, there are further arguments at the link.

Game theory and the First World War

by  Tyler Cowen in

By Nobel Laureate Roger Myerson:

Books by Scott Wolford and Roger Ransom show how economic theories of games and decisions can be fruitfully applied to problems in World War I. This vital application offers fundamental insights into the analytical methods of game theory. Public random variables may be essential factors in war-of-attrition games. An assumption that nations can coordinate on Pareto-superior equilibria may become less tenable when nations are at war. Interpreting a surprising mistake as evidence of an unlikely type can have serious consequences. The ability of leaders to foster consistent beliefs within a cohesive society can create inconsistency of beliefs between nations at war.

Just published in the (ungated) Journal of Economic Literature.

New Zealand’s great education decline

by  Tyler Cowen in

A growing proportion of children leave school unable to read an instruction manual or do basic maths. Over the last twenty years, our education system has slipped from being the envy of the world to barely mediocre.

Kiwi students once ranked near the top of international education league tables. In the latest results from the highly rated Progress in International Reading and Literacy Study, Year 5 students placed last among all English-speaking countries and 24th out of all 26 participating OECD countries. Students suffered similar slides in maths and science.

The New Zealand education system is also now one of the most unequal in the world. The gap between the educational “haves” and “have nots” eclipses all our English-speaking OECD peers. All this, despite Government spending per child increasing in real terms by more than 30% since 2001.

Here is more from Roger Partridge (2020).  Here is a 2022 update:

Low attendance at school is another sign the country’s education system is slipping with children from lower socio-economic areas the worst affected, the executive director of the New Zealand Initiative says.

The New Zealand Initiative is a think tank which carries out research to help New Zealand plan for the future.

It has commented on new research by the Education Review Office that shows children are missing school more in New Zealand than other English-speaking countries.

The office found four in ten parents were comfortable with their child missing a week or more of school per term and a third of students did not see going to school every day as that important…

The education system had been declining for 25 years and data backed up his view, such as the Pisa study carried out by the OECD. As an example, in maths the knowledge of a 15-year-old New Zealand student equated to a student aged 13 and a half 20 years ago.

Also from 2022:

In the past 12-18 years, New Zealand’s scores had declined by 23 points for reading, 22 points for science and 29 points for maths. The OECD estimated that 30 points was equivalent to one-year of learning.

Here is the Kiwi establishment being vague about the causes of the literacy decline.  What are the actual reasons for all this?  There are plenty of regions of New Zealand without massive immigration, and they do not seem immune to these trends.

Here is some more circular blah blah blah, calling for a “holistic approach,” and so on.  Does Kiwi culture work best when most of the citizens are more “tough-minded” than what is currently the case?