Month: July 2023
German deindustrialization crisis of the day
New orders at the country’s engineering companies, long a bellwether for the health of Germany Inc., have been dropping like a stone, falling 10 percent in May alone, the eighth consecutive decline. Similar weakness is apparent across the German economy, from construction to chemicals.
Foreign interest in Germany as a place to invest is also receding. The number of new foreign investments in Germany fell in 2022 for the fifth year in a row, hitting the lowest point since 2013.
“One sometimes hears about ‘creeping deindustrialization — well, it’s not just creeping anymore,” said Hans-Jürgen Völz, chief economist at BVMW, an association that lobbies for Germany’s Mittelstand, the thousands of small- and medium-sized firms that form the backbone of the country’s economy.
And this:
Only four of the 100 most-cited scientific papers on AI in 2022 were German. That compares with 68 for the U.S. and 27 for China.
“Germany has nothing to offer in any of the most important future-oriented sectors,” said Marcel Fratzscher, the head of Germany’s DIW economic institute. “What exists is old industry.”
The power of technology to transform an economy — or leave it behind — is apparent when comparing the trajectories of Germany and the U.S. over the past 15 years. During that period, the U.S. economy, driven by a boom in Silicon Valley, expanded by 76 percent to $25.5 trillion. Germany’s economy grew by 19 percent to $4.1 trillion. In dollar terms, the U.S. added the equivalent of nearly three Germanys to its economy over that period.
*Oppenheimer*, the movie
Well, you know how the story ends so there are no real spoilers. I will say I found about thirty minutes of excellent movie in a three hour experience. The best material starts when the test bomb goes off. There is remarkably little about the social, intellectual, or scientific excitement at Los Alamos — a serial Netflix installment would have done a better job with that. The dialogue is choppy and poor throughout. Most of all, the movie spends about two hours fleshing out McCarthyite themes in what I found to be a very repetitive and uninsightful manner. I have seen what — five?? — movies that do the same. Even Woody Allen did a better job of this in his The Front. The various male-female relations all seem so hurried. There was too much music.
So I give this one a thumbs down. I do like that it forces the viewer to think more about nuclear weapons, and I am sure many people will learn some history from it. The movie definitely has its uses, but overall I enjoyed Mission Impossible 7 more.
Friday assorted links
1. Oregon drug decriminalization is not going as well as expected (Atlantic).
2. The future of Eden Center in Falls Church.
4. Why are so many kosher restaurants so bad?
5. “…a pre-registered experiment randomizing Pennsylvania residents (n=5,059) to staggered interventions encouraging news consumption from leading state newspapers. 2,529 individuals were offered free online subscriptions, but only 44 subscribed…” Link here.
6. Rasheed Griffith podcast with Craig Palsson on Haitian economic history.
7. Shruti interviews Peter Boettke on Austrian economics and the knowledge problem.
Afghanistan potential supply elasticity fact of the day
A decade earlier, the U.S. Defense Department, guided by the surveys of American government geologists, concluded that the vast wealth of lithium and other minerals buried in Afghanistan might be worth $1 trillion, more than enough to prop up the country’s fragile government. In a 2010 memo, the Pentagon’s Task Force for Business and Stability Operations, which examined Afghanistan’s development potential, dubbed the country the “Saudi Arabia of lithium.” A year later, the U.S. Geological Survey published a map showing the location of major deposits and highlighted the magnitude of the underground wealth, saying Afghanistan “could be considered as the world’s recognized future principal source of lithium.”
Here is more from The Washington Post.
The EJMR doxxing issue
The only summary I have seen is from Karlstack, noting that he is siding against the doxxers and has defended EJMR in the past. Most of the people who care already know the details, so I won’t repeat them. I will however add a few observations:
1. I don’t read EJMR, so however bad it is, or however useful it sometimes may be, is a closed book to me. It is not the next marginal thing I might read if I had more time. And I have never posted there. So my comments should not be taken as reflecting any deep knowledge of the site itself. I would rather listen to Wings songs, if that is what it came down to.
2. The soon to be published paper supposedly reveals IP addresses of many EJMR posters. This seems wrong to me, noting that many posters (presumably) are making entirely innocent observations, or if not innocent remarks nonetheless remarks that should not be doxxed. They may wish to criticize a colleague or superior, or express a repugnant political opinion. Or whatever.
2b. What about posters from Turkey, China, Russia and elsewhere, who have expressed political opinions? Isn’t this point enough on its own to settle the matter?
2c. Two side notes — first, I am delighted to see that GMU does not appear in the list of top baddies — and yes we do have a large graduate program. I strongly suspect we have significantly better mental health. Perhaps the rest of you could learn something from us?
2d. All those “nice” real economists who write such terrible things — and people say I am the Straussian! Instead, I am the one who teaches you Straussian codes.
3. It is often possible to turn an IP address into an identity of a specific person. There is a raging debate about various statistical methods for doing this, presumably to be done by non-authors of the paper. It seems wrong to me to offer weakly coded information to the world on matters that were originally confidential, even if (let us say) ten percent of the posters were engaging in illegal libelous or harassing activities. The others were not.
There are always ways of identifying some IP addresses and tying them to specific humans, even if the above-mentioned statistical methods do not succeed. (No, I am not going to mention them, but they do not require rocket science.)
4. GPT-4 says it is hacking. (The answer I received included: “It is both unethical and illegal, as it infringes on various privacy and computer misuse laws.”) But what does it know? The fact that, through mistakes of the hosting site, some of the information was semi-public may change the legal status of the hacking claim, but I don’t think it alters the moral issues. What if Amazon, by mistake, left a bunch of credit card numbers out there to be scraped, and then you picked them up? That is still the wrong thing to do, even if those card numbers were used to order nasty books.
5. Some significant percentage of hostile on-line posters are mentally ill, or whatever other word you may wish to use. (There is plenty of good evidence for mental health problems being rampant in economics academia.) In other cases, these individuals may simply have a very different understanding of social reality, whether or not they would count as mentally ill. I believe in generosity of spirit and behavior toward the mentally ill, rather than taking their worst pronouncements and spreading them around and immortalizing them. I would not go running down the halls of Bellevue with a tape recorder, and then post the contents on-line, with possible voice identification, on the grounds that the shouted ravings were “toxic.” Not even if the ravings were accompanied by written posts.
6. It is striking to me how little regard cancel culture has for the mentally ill, for bipolar individuals, for schizophrenics, and also for many autistics. These individuals, at least at times, have very different standards for what they will say publicly. I don’t believe in punishing them per se for those different standards, though I do believe in trying to help or educate them when possible. I don’t believe in doxxing them.
7. If a platform is say 20 percent malicious libel and harassment (not making this claim about any specific place!), and that same platform is 20 percent the mentally ill (with who knows what degree of overlap?), I don’t believe in pulling down the entire curtain on the whole thing and exposing everybody, or exposing a significant share of those on the platform. That is deontologically wrong. Instead, you ought to find a way of dealing with the problems from the first twenty percent without so seriously harming the interests of the second twenty percent, the mentally ill ones. I don’t believe in promoting toxic behavior against the mentally ill, just to punish some earlier toxic behavior, much of which was done by the non-mentally ill.
So — and I do not say this lightly — I believe the authors of the paper under consideration are behaving unethically, and I hope they will retract their work and then destroy it.
The manufacturing delusion?
From an excellent feature article from The Economist:
It is far from clear such [manufacturing] jobs can be brought back—no matter how much governments spend. For a start, the manufacturing wage premium has fallen sharply. Production workers’ wages in America now lag behind those of similar service-sector workers by 5%. Moreover, the sort of high-tech factories that America and Europe are attempting to attract are highly automated, meaning they are no longer a significant source of employment for people with few qualifications…
According to the IMF, the gap between manufacturing and services productivity growth has shrunk in many countries since the turn of the millennium. In China and India its direction has flipped, with services productivity rising faster. Moreover, services are a broad church, ranging from teaching to tech. The latter boasts extremely fast productivity growth, which may soon be propelled further by artificial intelligence.
Recommended.
Thursday assorted links
1. Sam Bowman on UK catch-up growth.
2. A Grazie Sophia Christie essay. On envy, but many other things too.
3. Och Modr ich well ein Ding han (Brahms, can you follow the Kölnisch dialect?)
4. Arnold Kling on The Overhead Revolution.
The disinflation as American triumph
That is the theme of my latest Bloomberg column, score one for the Quantity Theory as well, here is one excerpt:
Enter the notion of “credibility.” A long-standing tradition in macroeconomics, sometimes called rational expectations, suggests that a truly credible central bank can lower inflation rates without a recession. If the central bank announces a lower inflation target, and most people believe the central bank, wages and prices adjust in rough sync with demand. All nominal variables move upward at a slower pace, markets continue to clear, and the economy keeps chugging along. Because individuals in markets believe the disinflation process is for real, they are willing to act in accordance with it in their pricing and wage-demand decisions.
Although rational expectations theory has undergirded several Nobel Prizes (see Robert E. Lucas and Thomas Sargent, for example), most mainstream economists these days do not believe in it as a general approach. The critics might be behavioral economists who scorn the notion that individuals are rational in their market decisions, or they might believe that full credibility is rarely if ever present. After all, do we not live in an age of low trust and mixed quality governance? Over the last year, for instance, I have been party to numerous conversations suggesting the Fed will be afraid to pursue disinflation out of fear of inducing a recession and indirectly electing Donald Trump as president.
And yet it seems the credibility has been there, and so we can give plaudits to various parts of the federal government, including President Biden, for supporting Powell and the Fed. At no point did the president intervene to bash the central bank or send a mixed message, and so the disinflation had implicit stamps of approval from majorities in both parties. It is often the job of Congress to complain, but there were no serious moves made against the independence of the Fed, even if Elizabeth Warren and a few others squawked.
As for the commentariat, a diverse array of economists ranging from the Keynesian Paul Krugman to many conservative economists recognized that rate increases and disinflation were necessary and had to be done with promptness and fortitude. And so credibility reigned.
Granted, the rational expectations view is not always correct — and a recession somewhere down the road isn’t out of the question — but at least in this instance America pulled together and did the job. This sequence of events, which is continuing, should serve as a lesson to those predicting either the decline of America or the creeping polarization and paralysis of our politics. The disinflation can serve as Exhibit A for American optimism and a demonstration that we are still capable of making our own future.
Can the UK and EU pull off the same?
Austin Vernon on electric vehicles > hybrids
From my email, I will not indent but please note this is all from Austin:
“I don’t agree with electric vehicle mandates or subsidies, but the recent push against pure battery electric vehicles from free market commentators is bizarre. The arguments against them because of mineral shortages, battery shortages, or manufacturing emissions completely abandon free market principles. These arguments will lead to failure because they are obviously wrong after minimal investigation.A more effective argument would be that electric cars are so popular and production is growing so fast that there is no need for mandates. The market will provide the goods through better technology, increased output, and substitution. A company like GM will have no chance of paying its debt if it doesn’t make compelling electric cars. Then hammer home use cases that make no sense for batteries, like a farmer that needs a semi-truck for harvest. It will run nearly 24/7 for a week or two and then sit idle for the rest of the year. An electric truck would impose a significant economic penalty while barely saving emissions.Some of the errors:1. The majority of electric vehicles in the world use lead-acid batteries, not lithium-ion batteries. Low-speed electric vehicles are popular in China even though the government does not love them. They start at $1000 and might have 100 km of range. They are the Model T of electric cars, except with much better performance at a fraction of the cost of the Model T. They are modern marvels of economic growth. We don’t have these vehicles in rich countries because they would be illegal, and we can afford higher-performance vehicles. There are some exceptions, like golf carts in Peachtree City, GA.2. Electric cars are a great value. Low-speed electric vehicles obviously provide value to have so many sales. Something like a Tesla Model 3 has the performance of a BMW 3 series with a total cost of ownership more like a Camry. The next generation of electric cars that Chinese automakers and Tesla are designing will have highway-capable performance with an ownership cost below any gasoline car available and entry level purchase prices.3. The market is screaming for batteries that don’t use nickel or cobalt, and companies are delivering. Even Tesla thinks 2/3 to 3/4 of their cars will use lithium iron phosphate batteries. Only luxury vehicles and some semi trucks will use nickel batteries (and cheaper manganese might substitute for some of the nickel). The performance of lithium iron phosphate battery vehicles has improved because companies are figuring out how to make their cars more efficient and remove unnecessary packaging and structure from the packs to reduce weight. Sodium-ion batteries lack the performance of lithium batteries but are much better than lead-acid batteries that power most electric cars. Consumers will happily trade up as they get richer.4. We can build more factories and mines. Look at all the factory announcements! There is lots of lithium in the Earth’s crust! Let the market cook!5. The leading companies are now profitable without subsidies. Protectionists, unions, and car makers that still aren’t good at making battery cars drive lobbying for subsidies.6. The price of an item signals information about its availability! The need for scale is driving new manufacturing technology. Tesla hopes to produce 20 million cars yearly (car sales are ~80 million globally). They recently highlighted improvements like motors that use iron magnets instead of rare earth ones, higher voltage systems to reduce copper wiring, and a novel assembly technique to reach this scale. These are in addition to previously announced simplifications in battery manufacturing and a focus on lithium iron phosphate batteries. Electric cars need to be inexpensive to sell in the tens of millions. And that means using cheap, available materials that use less energy and labor to produce.7. Hybrid cars are an engineering travesty. They are more expensive and complex than either an internal combustion car or a pure electric car. There will be adequate fast chargers with a seamless experience now that almost every major North American carmaker is adopting Tesla’s chargers. A hybrid owner pays thousands of dollars more for a car, has to go to gas stations, needs oil changes, etc. A battery car owner might fast charge a few times a year while they eat lunch or shop when their vehicle range isn’t enough for the day’s driving. The battery car is way more convenient. Even many cases like semi trucks can get by with pure batteries because there is plenty of time to charge during government-mandated breaks. Someone with work or leisure that requires frequent highway driving for hours straight but doesn’t have mandated breaks should buy a regular gasoline car.8. Two-wheel and three-wheel vehicles are popular globally. But they are not big enough to support complicated hybrid powertrains. Highway-speed motorcycles are challenging to electrify. Mopeds, rickshaws, and e-bikes are easy.9. A new battery cathode technology might increase energy density and dramatically reduce battery costs. But this technology isn’t necessary to electrify ground vehicles on economics and consumer preference alone.10. Few people care about emissions in their revealed preferences. It’s all about selling stuff people want to buy. Governments will remove mandates if electric cars aren’t ready for the median voter. The worst case for freedom is that electric cars are incredibly successful, and we hurt the outliers that still need gasoline or diesel vehicles. Broadly attacking electric cars doesn’t help!”
Mental health and European economics departments
We study the mental health of graduate students and faculty at 14 Economics departments in Europe. Using clinically validated surveys sent out in the fall of 2021, we find that 34.7% of graduate students experience moderate to severe symptoms of depression or anxiety and 17.3% report suicidal or self-harm ideation in a two-week period. Only 19.2% of students with significant symptoms are in treatment. 15.8% of faculty members experience moderate to severe depression or anxiety symptoms, with prevalence higher among nontenure track (42.9%) and tenure track (31.4%) faculty than tenured (9.6%) faculty. We estimate that the COVID-19 pandemic accounts for about 74% of the higher prevalence of depression symptoms and 30% of the higher prevalence of anxiety symptoms in our European sample relative to a 2017 U.S. sample of economics graduate students. We also document issues in the work environment, including a high incidence of sexual harassment, and make recommendations for improvement.
That is from a new paper by Elisa Macchi, Clara Sievert, Valentin Bolotnyy, and Paul Barreira.
Wednesday assorted links
Progress
Mass incarceration fundamentally altered the life course for a generation of American men, but sustained declines in imprisonment in recent years raise questions about how incarceration is shaping current generations. This study makes three primary contributions to a fuller understanding of the contemporary landscape of incarceration in the United States. First, we assess the scope of decarceration. Between 1999 and 2019, the Black male incarceration rate dropped by 44%, and notable declines in Black male imprisonment were evident in all 50 states. Second, our life table analysis demonstrates marked declines in the lifetime risks of incarceration. For Black men, the lifetime risk of incarceration declined by nearly half from 1999 to 2019. We estimate that less than 1 in 5 Black men born in 2001 will be imprisoned, compared with 1 in 3 for the 1981 birth cohort. Third, decarceration has shifted the institutional experiences of young adulthood. In 2009, young Black men were much more likely to experience imprisonment than college graduation. Ten years later, this trend had reversed, with Black men more likely to graduate college than go to prison. Our results suggest that prison has played a smaller role in the institutional landscape for the most recent generation compared with the generation exposed to the peak of mass incarceration.
Here is the full article, via a loyal MR reader. The causes of this advance should be a greater topic of discussion.
The new LLaMa 2 from Meta
Here is one way to access it, so what do you all think?
The politics of neuroticism and unhappiness
2/ …the increasing ideological differences on these measures are far larger and more numerous pic.twitter.com/UTl87O1wtS
— Zach Goldberg (@ZachG932) July 14, 2023
I’ve said this before, but the evidence for the proposition continues to mount: current political debate in America cannot be understood without the concept of neuroticism — as a formal concept from personality psychology — front and center.
And also as I’ve said before — neurotic isn’t the same thing as wrong!
Perhaps more importantly yet, even if a political ideology has a dominant vibe, the variance of temperaments within that ideology remains high, and high relative to the differences across ideologies. I wonder whether, as the “vibes” of particular ideologies become more public and more salient through social media, whether this does not lead to partial secessions? (Is Nate Silver one example of this?)
Imagine a future — or how about a present — where “people with a positive attitude” is actually an organizing intellectual and ideological principle? Yes, that world can be ours, we need only to will it so.
Matt Yglesias on European politics
The deeper reason, though, is that Europe has kind of killed off politics. So much power now rests at the EU level, but the EU doesn’t conduct a recognizable form of democratic politics. Voting for the European Parliament has what David Schleicher terms a “second-order” pattern, where Spanish voters will cast their votes in the European Parliament elections as a way of voicing approval or disapproval for the performance of the prime minister in Madrid. The same is true in Italy, Poland, and so forth.
Regardless of the actual election results, the Parliament is always controlled by a grand coalition with a senior center-right bloc and a junior social democratic bloc. The European Commission — the EU’s version of a cabinet — guarantees each country one Commission slot, so the actual composition of the Commission is a mess based on who controls which country at any given time. And the prime ministers of even small and mid-sized EU countries don’t see moving up to Brussels as a promotion the way American governors become senators or cabinet secretaries run for president.
It’s not exactly an “undemocratic” system, but it’s very depoliticized. You don’t have clear partisan coalitions or a real policy debate, you don’t have incumbents worrying about reelection or ambitious opposition figures looking to gain power. And I think this has consistently undermined Europe’s ability to think clearly about tradeoffs and strike win-win bargains.
That is from this longer (gated but worth it) post on why America has leapt out ahead of Europe in the last few decades.