What crypto people get wrong

That is the topic of my latest Bloomberg column, here is one excerpt:

If anything, crypto is more likely to hurt the currencies of countries that are doing very poorly, such as Venezuela. Fiat currency won’t just go away, so over the long run crypto could actually boost the value of the dollar by stifling the rise of potential competitors.

A second point, oft neglected in the crypto community, is that crypto prices won’t continue to go up forever at high rates. It doesn’t matter whether money supply deflation is built into a crypto system, or that new and valuable uses will be discovered each year. At some point the market will figure out the value of crypto and incorporate that information into a high level of price for those assets. From then on, expected rates of return will be — dare I say — normal.

Compare the crypto market to the art market, which for a long time didn’t grasp the potential value of an Andy Warhol painting. For years, prices went up a lot. At this point, however, a liquid market remains, and the expected value of an investment in Warhol is not necessarily better or worse than the value of an investment in other well-known works of art.

It is an entirely defensible (albeit contested) view that the market still hasn’t appreciated the full value of crypto. This state of affairs may yet endure for some while, but it will not last for decades.

The irony is that so many of the arguments made by crypto types imply especially low pecuniary rates of return on crypto. To the extent crypto is useful as collateral or for liquidity purposes, people will be more willing to hold crypto at lower pecuniary rates of return, just as they are willing to hold cash, or just as the collateral uses for U.S. Treasury bonds raise their price and lower their expected rates of return.

If we eventually arrive at a world in which equities are expected to rise by say 5% to 7% a year, and Bitcoin by say 1%, then that will be a sign crypto has made it. The more general point is that while crypto has been a highly unusual asset class for its entire history, it won’t act like an unusual asset class forever.

And this:

Satoshi and Vitalik Buterin are not only significant innovators, but also the two most important monetary economists of our time.


The CDC is broken, our regulatory state has been failing us

I was surprised by how good this NYT piece was, for instance here is one of the better diagnoses of the problem, or at least part of it:

Allen disputes the notion that she and her colleagues are doing work that the C.D.C. itself should be doing; in fact, she says, the task force and the federal agency have worked closely together. But she acknowledges that the interdisciplinary approach of the collaborative — it consists not only of doctors and public-health professionals but also of political scientists, economists, lawyers and M.B.A.s — enables it to spot problems that the federal institution can’t necessarily see. Infection control is a good example. “This is not a public-health problem, or even a medical one,” she says. “It’s an issue of organizational capacity.” The C.D.C. is not equipped to identify organizational issues, let alone resolve them.


Around half of the agency’s domestic budget is funneled to the states, but only after passing through a bureaucratic thicket. There are nearly 200 separate line items in the C.D.C.’s budget. Neither the agency’s director nor any state official has the power to consolidate those line items or shift funds among them. “It ends up being extremely fragmented and beholden to different centers and advocacy groups,” says Tom Frieden, who led the C.D.C. during the Obama administration.

How about this?:

This funding system also hobbles emergency-response efforts, because there is no real budget for the unexpected.

Highly recommended, one of the best pieces of this year, here is the full article by Jeenen Interlandi.


After nearly two decades of hardcore drug addiction — after overdoses and rehabs and relapses, homelessness and dead friends and ruined lives — Gerod Buckhalter had one choice left, and he knew it.

He could go on the same way and die young in someone’s home or a parking lot, another casualty in a drug epidemic that has claimed nearly 850,000 people like him.

Or he could let a surgeon cut two nickel-size holes in his skull and plunge metal-tipped electrodes into his brain.

More than 600 days after he underwent the experimental surgery, Buckhalter has not touched drugs again — an outcome so outlandishly successful that neither he nor his doctors dared hope it could happen. He is the only person in the United States to ever have substance use disorder relieved by deep brain stimulation. The procedure has reversed Parkinson’s disease, epilepsy and a few other intractable conditions, but had never been attempted for drug addiction here.

The device, known as a deep brain stimulator, also is recording the electrical activity in Buckhalter’s brain — another innovation that researchers hope will help locate a biomarker for addiction and allow earlier intervention with other people.

Here is the full story.

The looks gap in earnings

…the magnitude of the earnings disparities along the perceived attractiveness continuum, net of controls, rivals and/or exceeds in magnitude the black-white race gap and, among African-Americans, the black-white race gap and the gender gap in earnings.

Here is the full paper.  Here is an earlier MR post on lookism, and here.  Two points are worth making here:

1. It is often the educated (and often left-wing) coastal elite that commits the most lookism and also enforces it through internal norms of dress, thinness, etc..  Yet they are so desperate to believe they are better people than competing white interest groups (amazing how unself-aware they are about how obvious this is) that they just don’t want to bring looksism to your attention.  Upon presentation, this will receive the “yes, that’s bad too” treatment, and then it won’t be talked about any more.  Looksism will continue unabated, and indeed it may intensify as some other isms decline.

2. It is worth keeping this information in mind when trying to hire people or find untapped sources of talent.

Via the handsome Kevin Lewis.

The best mask-wearing study so far?

Mask-wearing has been a controversial measure to control the COVID-19 pandemic. While masks are known to substantially reduce disease transmission in healthcare settings (Howard et al 2021), studies in community settings report inconsistent results (Brainard et al 2020). Investigating the inconsistency within epidemiological studies, we find that a commonly used proxy, government mask mandates, does not correlate with large increases in mask-wearing in our window of analysis. We thus analyse the effect of mask-wearing on transmission instead, drawing on several datasets covering 92 regions on 6 continents, including the largest survey of individual-level wearing behaviour (n=20 million) (Kreuter et al 2020). Using a hierarchical Bayesian model, we estimate the effect of both mask-wearing and mask-mandates on transmission by linking wearing levels (or mandates) to reported cases in each region, adjusting for mobility and non-pharmaceutical interventions. We assess the robustness of our results in 123 experiments across 22 sensitivity analyses. Across these analyses, we find that an entire population wearing masks in public leads to a median reduction in the reproduction number R of 25.8%, with 95% of the medians between 22.2% and 30.9%. In our window of analysis, the median reduction in $R$ associated with the wearing level observed in each region was 20.4% [2.0%, 23.3%]. We do not find evidence that mandating mask-wearing reduces transmission. Our results suggest that mask-wearing is strongly affected by factors other than mandates. We establish the effectiveness of mass mask-wearing, and highlight that wearing data, not mandate data, are necessary to infer this effect.

That is a new paper by Gavin Leech, et.al., recommended.  And here is the tweet storm version of the paper.

Long-term gene–culture coevolution and the human evolutionary transition

It has been suggested that the human species may be undergoing an evolutionary transition in individuality (ETI). But there is disagreement about how to apply the ETI framework to our species, and whether culture is implicated as either cause or consequence. Long-term gene–culture coevolution (GCC) is also poorly understood. Some have argued that culture steers human evolution, while others proposed that genes hold culture on a leash. We review the literature and evidence on long-term GCC in humans and find a set of common themes. First, culture appears to hold greater adaptive potential than genetic inheritance and is probably driving human evolution. The evolutionary impact of culture occurs mainly through culturally organized groups, which have come to dominate human affairs in recent millennia. Second, the role of culture appears to be growing, increasingly bypassing genetic evolution and weakening genetic adaptive potential. Taken together, these findings suggest that human long-term GCC is characterized by an evolutionary transition in inheritance (from genes to culture) which entails a transition in individuality (from genetic individual to cultural group). Thus, research on GCC should focus on the possibility of an ongoing transition in the human inheritance system.

That is by Timothy M. Waring and Zachary T. Wood, via a loyal MR reader.

Basil Halperin on sticky wage vs. sticky price models

Here is a long post, full of insight and citations, basically arguing that sticky wage models are better for macro than sticky price models.  Sticky wage models had been deemphasized because real wages seemed to be acyclical, but sticky prices can’t quite do the work either.  The post is hard to summarize, but my reading of it is a little different than what the author intends.  My takeaway is “Sticky wages for new hires are the key, and we didn’t have real evidence/modeling for that until 2020, so isn’t this all still up in the air?”  I am a big fan of the Hazell and Taska piece, which I consider to be one of the best economics contributions of the last decade, but still…I don’t exactly view it as confirmed and all nailed down.  I do believe in nominal stickiness of (many not all) wages, but I still don’t think we have a coherent model matching up the theory and the empirics for how nominal stickiness drives business cycles.  I thus despair when I see so many dogmatic pronouncements about labor markets.

For the pointer I thank João Eira.

North vs. South India?

The data set used by Paul and Sridhar starts with the year 1960, when per capita income in Tamil Nadu was 51 per cent higher than UP’s. In the early 1980s, this difference had narrowed to 39 per cent. However, over the following decades the gap began to rapidly grow, and in 2005 an average resident of Tamil Nadu earned 128 per cent more than an average resident of Uttar Pradesh. (Statistics available online suggest that by 2021 the gap has increased to almost 300 per cent.)

Taking the South as a whole and the North as a whole, the book found that while the two regions differed only by 39 per cent in terms of per capita income in 1960-61, forty years later the gap had widened to 101 per cent. Now, in 2021, the gap has widened much further. Currently, the average annual per capita income of the four northern states profiled by Paul and Sridhar is about US $4,000, and of the four southern states, in excess of US $10,000, or roughly 250 per cent higher.

The data analysed by Paul and Sridhar show that there are two areas in which the South has done much better than the North. First, with regard to human development indicators such as female literacy rate, infant mortality and life expectancy. Second, in areas critical to economic development such as technical education, electricity generation, and quality and extent of roads. The first set of factors prepares healthier and better educated citizens to participate in the modern economy, while the second set enables much higher rates of productivity and efficiency in manufacturing and services.

Paul and Sridhar also found that the South fares substantially better than the North on governance indicators.

Here is the full piece by Ramachandra Guha, interesting throughout, with a pointer to Alice Evans, via Paul Novosad.

Saturday assorted links

The Edward Nelson books on Milton Friedman

Two volumes, such a wonderful book, for sure one of the best of the year.  Not quite a biography, more a study of Friedman’s career, but his career was his life so this is a wonderful biography too.  Here is one excerpt:

Friedman was a student of business cycles who was prone to say that he did not believe there was a business cycle.  He was a trenchant critic of reserve requirements as a monetary policy tools and a strong advocate of financial deregulation, yet he had many favorable things to say about moving to a regime of 100 percent reserve requirements.  he stressed the looseness of the relationship between money and the economy, yet critics saw his policy prescriptions as predicated on a tight relationship.  He criticized in detail the way the Federal Reserve allowed the money stock to adjust to the state of the economy, yet he was often characterized as treating empirical money-stock behavior as exogenous.  He made fundamental contributions to the development of Phillips-curve theory, yet he was averse to conducting discussion of inflation prospects using Phillips-curve analysis.  He spent much of his first two decades as a researcher working on labor unions and the use of market power in setting prices, yet for the subsequent five decades he found himself accused by critics of predicating his economic analysis on an atomistic labor market, a one-good model, or perfectly competitive firms.

Here is Scott Sumner on the book.  Highly recommended, here is the Amazon link, and volume II.