Month: February 2024
Early French economics, my lecture notes
Early French moralists, some of them Jansenists:
Pierre Nicole, La Rochefoucauld, etc. Invisible hand, idea of “mechanism”
Pascal, Pensées, 1669, probability and expected value
17th century mercantilism, Louis XIV, Colbert
18th century, Galiani (Italian), French debates on bread and bread prices
1748, Montesquieu, Spirit of the Laws, analysis of commerce
Diderot, Voltaire, Encyclopedia, rationalism
Beccaria (Italian), law and economics
Physiocrats (they bore me)
Turgot, 1767, liberal principles, stresses accumulation
Condorcet – stresses growth and progress
1789 French Revolution, Napoleon
Much of French economic thought ends up libertarian, e.g., the Ideologues
J.B. Say, Say’s Law, 1803, passim
French pick up on different strands in Smith
Fourier, Proudhon, and Utopian Socialism
1830 — Bourbon Restoration
1838 – Augustin Cournot
1844 – Jules Dupuit, French engineering tradition
Bastiat and free market tradition
1860 — Anglo-French Free Trade Treaty
1873 — Leon Walras, marginalism and general equilibrium theory
Tuesday assorted links
Trump’s threat to let Putin invade NATO countries
I don’t usually blog on “candidate topics,”or “Trump topics,” but a friend of mine asked me to cover this. As you probably know, Trump threatened to let NATO countries that failed to meet the two percent of gdp defense budget obligation fend for themselves against Putin (video here, with Canadian commentary). Trump even said he would encourage the attacker.
Long-time MR readers will know I am not fond of Trump, either as a president or otherwise. (And I am very fond of NATO.) But on this issue I think he is basically correct. Yes, I know all about backlash effects. But so many NATO members do not keep up serious defense capabilities. And for decades none of our jawboning has worked.
Personally, I would not have proceeded or spoken as Trump did, and I do not address the collective action problems in my own sphere of work and life in a comparable manner (“if you’re not ready with enough publications for tenure, we’ll let Bukele take you!” or “Spinoza, if you don’t stop scratching the couch, I won’t protect you against the coyotes!”). So if you wish to take that as a condemnation of Trump, so be it. Nonetheless, I cannot help but feel there is some room for an “unreasonable” approach on this issue, whether or not I am the one to carry that ball.
Even spending two percent of gdp would not get many NATO allies close to what they need to do (and yes I do understand the difference between defense spending and payments to NATO, in any case many other countries are falling down on the job). I strongly suspect that many of those nations just don’t have effective fighting forces at all, and in essence they are standing at zero percent of gdp, even if their nominal expenditures say hit 1.7 percent. Remember the report that the German Army trained with broomsticks because they didn’t have enough machine guns? How many of those forces are actually ready to fire and fight in a combat situation? It is far from obvious that the Ukraine war — a remarkably grave and destructive event — has fixed that situation.
The nations that see no need to have workable martial capabilities at all are a real threat to NATO, and yes this includes Canada, which shares a very large de facto Arctic border with Putin, full of valuable natural resources. Even a United States led by Nikki Haley cannot do all the heavy lifting here. What if the U.S. is tied down in Asia and/or the Middle East when further trouble strikes? That no longer seems like such a distant possibility. And should Western Europe, over time, really become “foreign policy irrelevant,” relative to the more easternmost parts of NATO? That too is not good for anybody.
With or without Trump’s remarks, we are likely on a path of nuclear proliferation, starting in Poland.
People talk about threats to democracy in Poland, and I am not happy they have restricted the power of their judiciary. But consider Germany. The country has given up its energy independence, it may lose a significant portion of its manufacturing base, its earlier economic strategy was to cast its lot with Russia and China, AfD is the #2 party there and growing, and the former east is politically polarized and illiberal, among other problems. Most of all, the country has lost its will to defend itself. That is in spite of a well-educated population and a deliberative political systems that in the more distant past worked well. You can criticize Trump’s stupid provocations all you want, but unless you have a better idea for waking Germany (and other countries) up, you are probably just engaging in your own mood affiliation. On this issue, “argument by adjective” ain’t gonna’ cut it.
The best scenario is that Trump raises these issues, everyone in Canada and Western Europe screams, they clutch their pearls and are horrified for months, but over time the topic becomes more focal and more ensconced in their consciousness. Eventually more Democrats may pick up the Trump talking points, as they have done with China. Perhaps three to five years from now that can lead to some positive action. And if they are calling his words “appalling and unhinged,” as indeed they are, well that is going to drive more page views.
The odds may be against policy improvement in any case, but by this point it seems pretty clear standard diplomacy isn’t going to work. I am just not that opposed to a “Hail Mary, why not speak some truth here?” approach to the problem. Again, I wouldn’t do it, but at the margin it deserves more support than it is getting. Of course it is hard for the MSM American intelligentsia to show any sympathy for Trump’s remarks, because his words carry the implication that spending more on social welfare has an unacceptably high opportunity cost. So you just won’t find much objective debate of the issues at stake.
If you’re worried about Trump encouraging Putin, that is a real concern but the nations on the eastern flank of NATO are all above two percent, Bulgaria excepted. Maybe this raises the chance that Putin is emboldened to blow up some Western European infrastructure? Make a move against Canada in the Arctic? I still could see that risk as panning out into greater preparedness, greater deterrence, and a better outcome overall. Western Europe of course has a gdp far greater than that of Putin’s Russia. they just don’t have the right values, in addition to not spending enough on defense.
So on this one Trump is indeed the Shakespearean truth-teller, and (I hope) for the better.
Lithium
WEF 2002: The world could face lithium shortages by 2025, the International Energy Agency (IEA) says, while Credit Suisse thinks demand could treble between 2020 and 2025, meaning “supply would be stretched”.
Reuters 2023: Lithium producers are growing anxious that delays in mine permitting, staffing shortages and inflation may hinder their ability to supply enough of the battery metal to meet the world’s aggressive electrification timelines.
GEP 2023: Lithium faces supply shortages due to past underinvestment amid surging electric vehicle demand.
This list could easily be extended. In contrast here from Nat Bullard’s presentation is data on battery prices per kilowatt-hour. Note that almost all of the above is very short-term extrapolation from the price increase in 2022. As Tyler says, do not underrate the elasticity of supply.
But I haven’t yet given you my favorite headline on this topic, an all-time classic:
Lithium Price Crash Could Trigger Shortages From 2025
A periodic reminder of your pending competitive inadequacy
Many people think “I will do […], AI will not anytime soon do [….] as well as I will.” That may or may not be true.
But keep in mind many of us are locked into a competition for attention. AI can beat you without competing against you in your task directly. What AI produces simply might draw away lots of attention from what you hope to be producing. Maybe looking Midjourney images, or chatting with GPT, will be more fun than reading your next column or book. Maybe talking with your deceased cousin will grip you more than the marginal new podcast, and so on.
This competition can occur even in the physical world. There will be many new, AI-generated and AI-supported projects, and they will bid for real resources. How about “AI figures out cost-effective desalination and so many deserts are settled and built out”? That will draw away resources from competing deployments, and your project will have to bid against that.
I hope it’s good.
The California tax burden is driving people out
That is the topic of my latest Bloomberg column, here is one bit:
California’s highest income tax rate is 13.3%. That is in addition to a top federal tax rate of 37%. California also has a state sales tax rate of 7.25%, and many localities impose a smaller sales tax. So if a wealthy person earns and spends labor income in the state of California, the tax rate at the margin could approach 60%. Then there is the corporate state income tax rate of 8.84%, some of which is passed along to consumers through higher prices. That increases the tax burden further yet.
And this:
Researchers Joshua Rauh and Ryan Shyu, currently and formerly at Stanford business school, have studied the behavioral response to Proposition 30, which boosted California’s marginal tax rates by up to 3% for high earners for seven years, from 2012 to 2018. They found that in 2013, an additional 0.8% of the top bracket of the residential tax base left the state. That is several times higher than the tax responses usually seen in the data.
These high-earning California residents seem to have reached a tipping point: Maybe many of them could afford the extra tax burden, but at some point they got fed up, read the signals and decided the broader system wasn’t working in their interest.
Overall, Proposition 30 increased total tax revenue for California — but not nearly as much as intended. Due to departures, the state lost more than 45% of its windfall tax revenues from the policy change, and within two years the state lost more than 60% of those same revenues.
Be long energy infrastructure, find the truly scarce input there
Governments around the world are intensifying scrutiny on the building of data centres over fears that their huge energy usage is putting excessive pressure on national climate targets and electricity grids.
Ireland, Germany, Singapore and China as well as a US county and Amsterdam in the Netherlands have introduced restrictions on new data centres in recent years to comply with more stringent environmental requirements.
The threat to new projects is highest in Ireland, a hotspot for server farms built by cloud computing companies such as Google and Microsoft, because of its low tax rate and easy access to high-capacity subsea cables through which global internet traffic is run.
A decision by the country’s energy and water regulator in 2021 to limit new data connections to the electricity grid is now having a “material impact at the ground level”, said Hiral Patel, head of sustainable and thematic research at Barclays and lead author of a report on data centres.
Data centre operators Vantage, EdgeConneX and Equinix had permits for new projects in Dublin rejected by local authorities last year. Ireland’s data centres are set to account for 32 per cent of national electricity demand in 2026, the International Energy Agency forecast last month.
The environmental impact of data centres — huge facilities that hold the servers that create the online storage for the data of millions — has become a growing issue around the world.
Loudoun County in the US state of Virginia, and Germany have recently introduced curbs that include limiting permits for data centres in residential areas, or requiring them to contribute renewable energy to the grid and reuse waste heat.
Here is more from Kenza Bryan at the FT.
Monday assorted links
1. Speculative speculations on how consciousness emerges.
2. The new, forthcoming Neal Stephenson.
3. What Michael Nielsen suggests I ask him.
4. Cousins are disappearing. I have (had?) four of them?
5. “People in the meeting later told others in frustration that his winding process and irritability were making it more difficult to reach decisions about the border.” Brutal throughout.
6. Argentina’s political gender gap is widest among young people.
7. Four different Super Bowl ads incorporated UFO themes. As I once heard from a member of the U.S. military: “Ten years from now, everyone will believe in either demons or aliens.”
Nash’s Contributions to Mathematics
Nash won the Nobel prize in Economics for his 2-page proof of Nash equilibrium, among the slightest of his achievements. Nash’s truly staggering contributions were in his embedding theorems, according to Gromov “one of the main achievements of mathematics of the twentieth century”. In this excellent talk, Cédric Villani gives an accessible guide to these theorems for mere mortals. Villani is a Fields medal winner, a French politician, and a character, all of which adds to the talk.
What I’ve been listening to
Why I don’t like Fischer Random 960
As you may know, a major tournament is going on right now, based on a variant of Fischer Random rules, sometimes misleadingly called “Freestyle.” Subject to some constraints, the pieces are placed into the starting position randomly, so in Fischer Random chess opening preparation is useless. You have to start thinking from move one. This is a big advantage in a game where often the entire contest is absorbed into 20-30 moves of advance opening preparation, with little or no real sporting element appearing over the board.
Yet I don’t like Fischer Random, for a few hard to fix reasons:
1. Most of the time, at least prior to the endgame, I don’t understand what is going on. Even with computer assistance. I could put in five to ten minutes to study the position, and get a sense of the constraints, but as a spectator I don’t want to do that. As a relatively high opportunity cost person, I am not going to do that.
1b. Classical chess sometimes generates positions where one does not really understand what is going on. Then it is thrilling, precisely because it is occasional. A perpetual “fog of war,” as we receive in Fischer Random, just isn’t that thrilling. In the opening, for instance, I don’t even know if one player is attempting “a risky strategy.” I am not sure the player knows either. And I don’t feel that watching more Fischer Random would change that, as there are hundreds of different possible opening positions, mostly with different properties.
2. The younger players have a notable advantage, because they are better at calculating concrete variations and rely less on intuition. (We already see this in the current results.) Experience is simply worth much less in this very novel format. For any one tournament, that is an interesting intrigue. But over time it is a bore, as if only rookies and sophomores could win NBA titles. In fact what spectators enjoy watching is Steph Curry going up against Lebron James, or the analogs in chess. We want to see Magnus meet Fabiano again, not watch two eighteen-year-olds slug it out. Sorry, Pragga! You’ll have your day in the sun.
3. Fischer Random cuts off chess from the rest of its history. That is otherwise a big advantage of chess over many other games and contests. I like seeing that a player’s move is connected to say an idea from Tal in the early 1960s, or whatever. I like “Oh, the Giuoco Piano is making a comeback at top levels,” or “today’s players are more willing to sacrifice the exchange than in the 1970s,” and so on.
4. I get frustrated seeing all those Kings sitting on F1, not able to castle in the traditional sense. There are rules for castling in Fischer Random, but it feels more like pressing the “hyperspace” button in the old Space Invaders video game than anything else. Who wants to see a Knight on C1 for twenty-five moves? Not I.
5. I agree that current opening prep is insanely out of control. I am fine with the remedy of 25-minutes per player Rapid games, or anything in that range, with increment of course. Those contests are consistently exciting and they are not forced draws (you can play something weird against the Petroff, or to begin with) nor are they dominated by prep.
6. If you don’t want to watch Rapid, I would rather randomize the first few opening moves than the placement of the pieces. If you don’t control the first three (seven? ten?) first moves, once again opening prep becomes much tougher. So what if some games start with 1. b4 b6? The resulting position is still playable for both sides and furthermore it still makes intuitive sense to chess spectators. Of course the computers would restrict this randomization to sequences that still are playable for both sides. The very exact nature of current chess opening prep in fact implies you need only a very small change in the rules to disrupt it, not the kind of huge change represented by Fischer Random.
That all said, I am all for experimentation, it’s just that some of them should be strangled in the crib.
Sunday assorted links and stuff
1. Lookism in sentencing decisions.
2. An autonomous vehicle was set on fire by a crowd in San Francisco. In some alternate universe, a small drone would emerge from the burning vehicle and strike them all down.
3. Have you noticed that Michelle Obama was, less than 24 hours ago, up to #3 in the betting markets for likelihood of being the next U.S. President? She was at about 7%. Now it is Gavin Newsom who is #3 at about ten percent. At the same time, the NYT Editorial page, other MSM sources, and Hillary Clinton all seem to be turning on Biden, on the issue of age of course. I would not place too much emphasis on that seven percent number, or that ten percent number, as I suspect there is private information at work here — either private information that Biden is toast, or private information that he isn’t toast. The problem is I don’t know which. Still, this is a live issue.
It is also a good test of public intellectuals. Obviously, the issue is not just about Biden’s current competency (which I cannot judge — articulateness is overrated!), but also a) how the public perceives him, b) how his staff and other countries perceive him, and c) how matters will be four to five years from now, when he is still President, if he is still President. (Start by reading Shakespeare on political leadership.) If you’re defending Biden, for reasons related to your expected value calculations, I hope at least you are being honest with yourself about your Straussianism here. But please do add to your calculations the notion that the American public is pretty fed up with this kind of response from our mainstream political institutions.
One possible lesson here is that our political establishment really cannot coordinate on making needed changes. The other possible lesson is that they can. I am prepared for Bayesian updates, as my status quo assessments by necessity will be disturbed.
4. Susie Essman is a comic genius (NYT).
5. A three-minute clip on how various top chess players walk into a tournament entrance. Can you guess who shows up last?
What should I ask Michael Nielsen?
I will be doing a Conversation with him. No description of Michael quite does him justice, but here is Wikipedia:
Michael Aaron Nielsen (born January 4, 1974) is a quantum physicist, science writer, and computer programming researcher living in San Francisco.
In 1998, Nielsen received his PhD in physics from the University of New Mexico. In 2004, he was recognized as Australia’s “youngest academic” and was awarded a Federation Fellowship at the University of Queensland. During this fellowship, he worked at the Los Alamos National Laboratory, Caltech, and at the Perimeter Institute for Theoretical Physics.
Alongside Isaac Chuang, Nielsen co-authored a popular textbook on quantum computing, which has been cited more than 52,000 times as of July 2023.
In 2007, Nielsen shifted his focus from quantum information and computation to “the development of new tools for scientific collaboration and publication”, including the Polymath project with Timothy Gowers, which aims to facilitate “massively collaborative mathematics.” Besides writing books and essays, he has also given talks about open science. He was a member of the Working Group on Open Data in Science at the Open Knowledge Foundation.
Nielsen is a strong advocate for open science and has written extensively on the subject, including in his book Reinventing Discovery, which was favorably reviewed in Nature and named one of the Financial Times’ best books of 2011.
In 2015 Nielsen published the online textbook Neural Networks and Deep Learning, and joined the Recurse Center as a Research Fellow. He has also been a Research Fellow at Y Combinator Research since 2017.
In 2019, Nielsen collaborated with Andy Matuschak to develop Quantum Computing for the Very Curious, a series of interactive essays explaining quantum computing and quantum mechanics. With Patrick Collison, he researched whether scientific progress is slowing down.
Here is Michael’s Notebook, well worth a browse and also a deeper read. Here is Michael on Twitter. So what should I ask him? (I’m going to ask him about Olaf Stapledon in any case, so no need to mention that.)
Sticky norms
Shanhong Luo, a professor at Fayetteville State University, studies the factors behind attraction between romantic partners, including the norms that govern relationships. In a paper published in 2023 in Psychological Reports, a peer-reviewed journal, Dr. Luo and a team of researchers surveyed 552 heterosexual college students in Wilmington, N.C., and asked them whether they expected men or women to pay for dates — and whether they, as a man or a woman, typically paid more.
The researchers found that young men paid for all or most of the dates around 90 percent of the time, while women paid only about 2 percent (they split around 8 percent of the time). On subsequent dates, splitting the check was more common, though men still paid a majority of the time while women rarely did. Nearly 80 percent of men expected that they would pay on the first date, while just over half of women (55 percent) expected men to pay.
Surprisingly, views on gender norms didn’t make much of a difference: On average, both men and women in the sample expected the man to pay, whether they had more traditional views of gender roles or more progressive ones.
Here is more from the NYT.
How much of our boom has been an immigration boom?
Matt Yglesias directed me to a new CBO report, which confirms that immigration explains the recent GDP boom:
In our projections, the deficit is also smaller than it was last year because economic output is greater, partly as a result of more people working. The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration. As a result of those changes in the labor force, we estimate that, from 2023 to 2034, GDP will be greater by about $7 trillion and revenues will be greater by about $1 trillion than they would have been otherwise. We are continuing to assess the implications of immigration for revenues and spending.