The new Edge symposium

by  Tyler Cowen

“What scientific concept would improve everybody’s cognitive toolkit?”

There are 159 responses, starting with Daniel Kahneman and Richard Dawkins.  Kahneman starts off by sounding like Bryan Caplan:

Education is an important determinant of income — one of the most important — but it is less important than most people think. If everyone had the same education, the inequality of income would be reduced by less than 10%. When you focus on education you neglect the myriad other factors that determine income. The differences of income among people who have the same education are huge.

Income is an important determinant of people’s satisfaction with their lives, but it is far less important than most people think. If everyone [TC: in the US?] had the same income, the differences among people in life satisfaction would be reduced by less than 5%.

I’ll read the rest now…

*The Changing Body*

by  Tyler Cowen in

The authors are Roderick Floud, Nobel Laureate Robert W. Fogel, Bernard Harris, and Sok Chul Hong, and the subtitle is Health, Nutrition, and Human Development in the Western World since 1700.  Here is one key sentence:

Chronically malnourished populations of Europe universally responded to food constraints by varying body size.

You can write an important and fascinating 400-page book around that sentence, although it will not hold the attention of all readers.  Here is a good summary article (1/20) on the book.  Here is another excerpt:

Even if it is assumed that the daily number of calories available for work was the same in the United States in 1860 as today, the intensity of work per hour would have been well below today’s levels, since the average number of hours worked in 1860 was 1.75 times as great as today.  During the mid nineteenth century, only slaves on southern gang-system plantations appear to have worked at levels of intensity per hour approaching current standards.

It is interesting to read the authors’ estimates of wage growth from 1750 to about 1820.  Some estimates suggest zero growth, while a more optimistic study shows that in Great Britain real wages rose about 12.5 percent between 1770 and 1818, and that was during the Industrial Revolution or should that be “during the so-called Industrial Revolution”?  Read this piece by Charles Feinstein; the standard of living for the average working class family increased by only 15 percent from the 1780s to the 1850s.  Here is an ungated paper with similar results.  Great Stagnation-like phenomena are not new and as Arnold Kling noted recently, theories of technological unemployment may yet make a comeback.

Here are two blue-footed boobies.

Sendhil Mullainathan to the CFPB

by  Tyler Cowen in

The Treasury Department announced the hiring of senior leadership for the Consumer Financial Protection Bureau. Among the hires: Harvard University economist Sendhil Mullainathan .

The leading behavioral economist of his generation, his research has focused on how people’s biases and weaknesses lead them to make bad economic decisions. He is also a founder, with Esther Duflo and Abhijit Banerjee, of MIT’s Jameel Poverty Action Lab.

His research has provided much of the intellectual foundation for the establishment of the CFPB, which is tasked with making “markets for consumer financial products and services work for Americans.”

Here is more.

*The Anatomy of Influence: Literature as a Way of Life*

by  Tyler Cowen in

That’s the new Harold Bloom book, which has all the strengths and weakness of Harold Bloom books (I am a fan).  Excerpt:

Picasso is reputed to have said he did not care who influenced him but he did not want to influence himself.

Bloom’s books are very good for motivating rereads of classics, in this case Walter Pater, Paul Valery, Shakespeare, Hart Crane, Walt Whitman, Leopardi, and Montaigne’s essay “On Experience,” among others.  Here is a weaker passage:

I recall first reading the poem when I was thirteen, thrilling to Satan and falling in love with Eve.  In those years I fell regularly in love with fictive heroines and encountered Eve after a year of infatuation with Thomas Hardy’s heroines, particularly Eustacia Vye…and Marty South… I all but wept when Marty South cut off her long, beautiful hair, while I joined Milton and Satan in their lust for Eve’s wanton tresses.

Still, he is one of the greatest readers ever, this is probably his last major book, he truly believes in his project, and the point about prompting rereads makes this — whatever its flaws — better than almost anything else you can pick up.

Do demographic changes matter for financial market returns?

by  Tyler Cowen in

Be careful when predictable factors appear to shape financial market returns, but nonetheless this result, written up by Robert Arnott and Denis Chaves,is intriguing:

It seems natural that the shifting composition of a nation’s population ought to influence GDP growth and perhaps also capital markets returns. Entrepreneurialism, innovation, and invention tend to be associated with young adults. Accordingly, GDP growth should perhaps be best when there is a preponderance of young adults in a population. Investing for retirement is associated with middle-age, with a shift in preferences toward bonds with late-middle-age. So, stock and bond returns might be best in populations with growing rosters of these age groups, respectively. Our data – spanning over 60 years and 22 countries in our main tests and roughly 175 countries in out-of-sample robustness checks – support all of our priors.

We confirm what others have already demonstrated, but we extract markedly more statistical significance by adapting a polynomial curve-fitting technique pioneered by Fair and Dominguez (1991), to this new purpose. In our work, we find that a growing roster of young adults (age 15-49) is very good for GDP growth, a growing roster of older workers is a little bad for GDP growth, and a growing roster of young children or senior citizens is very bad for GDP growth.

This is in accord with some of Brink Lindsey’s recent observations.  For the pointer I thank Sami, a loyal MR reader.

*Dance of the Furies*

by  Tyler Cowen in

The author is Michael S. Neiberg and the subtitle is Europe and the Outbreak of World War I.  This book stunned me, in a positive way.  It argues for six main propositions, a few of which can be summarized quickly:

First…few Europeans expected a war and even fewer wanted one.  Europe was not a place of white-hot nationalist passions looking for a spark…Virtually no one in Europe sought a war to correct supposed inequities stemming from the turbulent nineteenth century or as a way to adjust borders.  Even in France, there was no desire for war as a way to avenge the loss of Alsace-Lorraine…

Third, the people of Europe accepted the necessity of war primarily because they believed their wars to be defensive.

Fourth, disillusion with the war…was well in place by the end of the war’s first year.

Sixth, despite their concerns and suspicions, societies kept fighting.  Their reasons for doing so included a desire to avenge the losses of 1914, the quite real threats to their existence which remained from foreign armies, and an awareness that the hatreds unleashed by the war as early as the end of the first month made anything short of total victory or total defeat unthinkable.

I do not have the specialized knowledge required to judge these claims, but I found the evidence cited in the book quite strong and I consider myself provisionally persuaded.  For those versed in public choice economics, and behavioral public choice, Neiberg’s account is  much more intuitive than the popular analyses one often hears.  Definitely recommended.

I also found reading this book to be a depressing experience: Neiberg’s third point implies that a major war in our future is more likely than I had thought.  For instance the German government was scheming aggressively, but the German people genuinely believed, and with some justification given the information they had at the time, that they were fighting a war of defense.

Loser men

by  Tyler Cowen in

David Brooks (don’t forget his new book) writes:

…in 1954, about 96 percent of American men between the ages of 25 and 54 worked. Today that number is around 80 percent. One-fifth of all men in their prime working ages are not getting up and going to work. According to figures from the Organization for Economic Cooperation and Development, the United States has a smaller share of prime age men in the work force than any other G-7 nation. The number of Americans on the permanent disability rolls, meanwhile, has steadily increased. Ten years ago, 5 million Americans collected a federal disability benefit. Now 8.2 million do. That costs taxpayers $115 billion a year, or about $1,500 per household.

…There are probably more idle men now than at any time since the Great Depression, and this time the problem is mostly structural, not cyclical. These men will find it hard to attract spouses. Many will pick up habits that have a corrosive cultural influence on those around them.

The rise in disability comes across a time horizon when jobs are becoming much safer and health care is improving.

I am struck by the difference between how some economists talk about “the job market,” and how they talk about the job market in academia, which of course is the job market they know the most about.

When it comes to the job market in academia, most economists have few hesitations about blaming many of the jobless for their fate and applying extreme meritocratic views.  “He spent seven years finishing.”  “Her specification was not robust.”  “He self-destructed in the interview.”  Or, believe it or not, “We don’t even look at people from that school.”

(And as Robin Hanson noted, there is little talk of redistributing grades, Ph.d.s, enforcing mandatory co-authorship for job market papers, or redistributing other measures of academic accomplishment.)

Nonetheless there is clearly a significant cyclical component to academic unemployment, based largely on state government budgets for higher education; as of a few years ago, seventy-eight percent of students were in the state sector.  If your department doesn’t have a slot, you probably can’t hire anybody, although a willingness to work for (much) less can lead to an adjunct job, even if many people won’t take one.

That cyclical component accounts for a lot of the short-run variation in hiring, but if you’re estimating the response to a demand shock, longer-term supply trends matter too and often they matter a great deal.  If Ph.d. programs were stricter about enforcing standards of quality and relevance, rather than stringing along students to maintain the flow of revenue to the graduate program, the short run negative demand shocks would lead to a much less severe queuing problem.  That’s simple microeconomics, and it should be macroeconomics too.

Furthermore short run negative demand shocks can reveal an unsustainable long-run trend in a new and sudden way, just as they do in financial crises.

When it comes to the jobless it is incorrect — and often hypocritical — to dismiss the common sense talk of traditional meritocratic factors, including structural problems on the supply side.

Addendum: Matt responds to Brooks, but his numbers don’t support his case.  As I’ve argued before, it’s a lot “harder” to get a shift from ten to twenty percent unemployment than it is to get a shift from one to two percent.  The cross-sectional distribution in unemployment, and its recent changes, are fully consistent with and indeed support the notion of major structural problems in the most vulnerable sectors, threshold-triggered by negative demand shocks.  Again, it’s two blades of the scissors, not one.

How to bribe your kids?

by  Tyler Cowen in

From Gareth Cook, here are some tips for how to make the bribes work and avoid the undermining of intrinsic motivation:

Based on what is now known, Pierce and others suggest a set of guiding principles.

Choose a specific, positive behavior. “Have at least three bites of a vegetable every dinner for a week.’’ (Good.) “Don’t annoy me.’’ (Not good.)

Choose smart rewards. Work with your kid to choose the prize, investing them and ensuring it’s one they truly desire. A few selections from the LEGO catalogue were all it took me to solve an Olympian parenting problem: thumb sucking. But a reward need not be large.

Stay positive. In our house, we call them “challenges.’’ It is not about “fixing’’ a negative. Don’t nag. Let it be their choice. Pile on the praise.

Small steps first. Faced with an overwhelming task, start with easy goals, and small rewards, and slowly build. So, you might start with “avoid thumb one day between breakfast and nap.’’ Consider a detailed progress chart.

Those are largely good ideas, whether or not you are bribing your kids.

Nominal shocks

by  Tyler Cowen in

Samoa, the tiny Pacific Ocean island state, is travelling through time to improve its economic prospects.

In a vote of confidence for the Asian century, the country has decided to shift the jagged International Date Line to its east at the end of this year, which will bring it a day closer to Asia and Australasia.

The clocks in Apia, the capital, are 21 hours behind Canberra but only four hours behind San Francisco.

That reverses a decision 119 years ago to move the line to the west, following lobbying by Samoa’s merchants who wanted better to accommodate business with trading ships from the US and Europe.

It is not the first overhaul of a long-standing convention by Tuilaepa Sailele Malielegaoi, prime minister, who in 2009 switched the nation from driving on the right to the left, to align it more closely with the practice in Australasia and Japan.

“In doing business with New Zealand and Australia we’re losing out on two working days a week,” Mr Tuilaepa said. “While it’s Friday here, it’s Saturday in New Zealand and when we’re at church Sunday, they’re already conducting business in Sydney and Brisbane.”

Australia and New Zealand combined account for more than half of Samoa’s imports and more than 85 per cent of total exports, which largely consist of coconut products and fish.

…However, the move has not been universally welcomed, particularly in tourism, as the island will no longer be the last place on earth to see sunset. It will be joining the countries that see the sunrise first.

“After the date change, it will just be another sunset, no longer that special,” said Andrew Tiatia, a tour guide.

Mr Tuilaepa, however, points to another advantage. By flying one hour from American Samoa, on the other side of the date line, it will be possible to celebrate the same day twice and mark birthdays or wedding anniversaries twice over.

I enjoy stories like this more than is reasonably justified.

New York tips

by  Tyler Cowen

1. Tulsi, 211 E. 46th, between 1st and 2nd.  The most authentic Indian food I’ve had in the U.S., ever, get the vegetables.  Not a cheap mom and pop, but by Manhattan standards this is reasonably priced for its quality.  Jones Wood Foundry is an excellent gastropub.

2. Incendies joins Of Gods and Men and Even the Rain as one of my favorite films of the year.  It is French-Canadian, set in Lebanon, and involves a journey of family discovery; I read it as an explicitly Christian movie.

3. Flushing, Queens, Golden Mall, go eat the Chinese food in the basement food court.  For visitors, convenient from LaGuardia airport by taxi.

If you live in New York, or visit frequently, this is my best blog post ever.