Category: Books

My Conversation with Raghuram Rajan

Here is the transcript and audio, we covered so much, here is the CWT summary:

How much has the U.S. actually fixed the financial system? Does India have the best food in the world? Why does China struggle to maintain a strong relationship with allies? Why are people trading close-knit communities for isolating cities? And what types of institutions are we missing in our social structure? Listen to Rajan’s thorough conversation with Tyler to dive into these questions and much more.

Here is one excerpt:

COWEN: A lot of observers have suggested to me that the notion of a kind of Anglo-American liberalism as ascendant in India is now a dead idea, that ideologically, India has somehow shifted, and the main currents of thought, including on the so-called right, are just really not liberalism anymore. Do you have a take on that view?

RAJAN: I’m not sure I would agree. I would say that we’ve had a government over the last five years which has elements of the majoritarian, Hindu nationalist group in it. But I would argue the country, as a whole, is still firmly secular, liberal in the Nehruvian idea, which is that we need a country which is open to different religions, to different ethnicities, to different beliefs if we are to stay together.

And democracy plays an important role here because it allows some of the pressures which build up in each community to essentially get expressed and therefore diffuses some of the pressure. So I think India’s ideal is still a polyglot coming together in this country.

COWEN: But someone like Ramachandra Guha — what he symbolizes intellectually — do you think that would be a growing part of India’s future? Or that will dwindle as colonial ties become smaller, the United States less important in global affairs?

RAJAN: I think that an open, liberal, tolerant country is really what we need for the next stage of growth. We are now reaching middle income. We could go a little faster. We should go a little faster there.

Once we reach middle income, to grow further, I think we need an intellectual openness, which only the kind of democracy we have — the open dialogue, a respectful dialogue — will generate the kinds of innovative forces that will take us more to the frontier.

So I keep saying, and I say this in the book, we’re very well positioned for the next stage of growth, from middle to high income. But we first have to reach middle income.

And:

COWEN: Will current payments companies end up as competitors to banks or complements to the banking system? Or are they free riders on the banking system?

RAJAN: I think they’re trying to figure out their space. As of now, sometimes they’re substituting for . . . Certainly, my daughter uses her payment system completely separate from her bank account. But longer term, we’ll find ways of meshing these in and reduce the costs of making payments. Those costs are really too high at this point, and reducing those costs makes a lot of sense.

COWEN: Will banks ever be truly excellent at doing software?

RAJAN: I think we will have a combination of the guys who are truly good at software — the fintech companies — merging with banks who know how to do the financial side. They’ll bring each of their talents together. I’ve seen a lot of fintech people who have no clue as to what finance is really about. And I’ve seen a lot of banks who have no clue as to what tech is about. I think some merger will happen over time.

There is much more at the link.  And here is Raghu’s new book The Third Pillar: How Markets and the State Leave Community Behind.

The Daily Beast Hit Piece on Amazon

The Daily Beast hit piece on Amazon, ‘Colony of Hell’: 911 Calls From Inside Amazon Warehouses, insinuates (while denying that this is what they are doing) that Amazon warehouses are an unsafe space that generates mental health problems. The upshot is this:

Between October 2013 and October 2018, emergency workers were summoned to Amazon warehouses at least 189 times for suicide attempts, suicidal thoughts, and other mental-health episodes, according to 911 call logs, ambulance and police reports reviewed and analyzed by The Daily Beast.

The reports came from 46 warehouses in 17 states—roughly a quarter of the sorting and fulfillment centers that comprise the company’s U.S. network. Jurisdictions for other Amazon warehouses either did not have any suicide reports or declined requests for similar logs.

So how many employees does this cover? No answer. Note also the weasel words, jurisdictions which “did not have any suicide reports or declined requests” are not included. So that could mean that a majority of fulfillment centers reported no serious mental health problems. Basically the report is devoid of useful information.

As far as I can tell from the report, there were no actual suicides at Amazon warehouses during this time period. Nevertheless, let’s try to do some back of the envelope calculations. Amazon has about 125,000 full time workers in its fulfillment centers but in a typical year they will double that during holiday season so say 250,000 employees in a year. The US suicide rate for working age adults is 17.3 per 100,000 so over five years we would expect 216 suicides and many more “suicide attempts, suicidal thoughts, and other mental-health episodes”. Indeed, the National Institute for Mental Health reports that 0.5% of Americans aged 18 years or over attempted suicide in 2016 so we would expect 6,250 suicide attempts in a population of Amazon-sized workers (250000*.005*5=6,250). Of course, the Daily Beast’s numbers don’t cover all fulfillment centers, most suicides wouldn’t occur at work and there are a variety of other issues so cut these numbers down as you see fit. For any reasonable estimate, however, there is no reason, in this data, to think that Amazon’s numbers are in any way unusual for a large employer.

The CDC does have some limited data on suicide by occupation and the real outlier is the construction and extraction industry which has a suicide rate over 50 per hundred thousand, several times the national average.

Moreover, if you really want to find out what it’s like to work at an Amazon fulfillment center don’t look at anecdotes, look instead to the over 5 thousand reviews for this job at Indeed.com which gives Amazon 3.6 stars out of 5. Not stellar but not bad either. Costco, one of the most beloved and best ranked employers in the United States, has a rating of 4.2.

It’s obvious that there is a political impetus to go after big tech companies. Whatever one’s thoughts about that, we shouldn’t let propaganda infect our decisions.

The third cohort of Emergent Ventures recipients

As always, note that the descriptions are mine and reflect my priorities, as the self-descriptions of the applicants may be broader or slightly different.  Here goes:

Jordan Schneider, for newsletter and podcast and writing work “explaining the rise of Chinese tech and its global ramifications.”

Michelle Rorich, for her work in economic development and Africa, to be furthered by a bike trip Cairo to Capetown.

Craig Palsson, Market Power, a new YouTube channel for economics.

Jeffrey C. Huber, to write a book on tech and economic progress from a Christian point of view.

Mayowa Osibodu, building AI programs to preserve endangered languages.

David Forscey, travel grant to look into issues and careers surrounding protection against election fraud.

Jennifer Doleac, Texas A&M, to develop an evidence-based law and economics, crime and punishment podcast.

Fergus McCullough, University of St. Andrews, travel grant to help build a career in law/history/politics/public affairs.

Justin Zheng, a high school student working on biometrics for cryptocurrency.

Matthew Teichman at the University of Chicago, for his work in philosophy podcasting.

Kyle Eschen, comedian and magician and entertainer, to work on an initiative for the concept of “steelmanning” arguments.

Here is the first cohort of winners, and here is the second cohort.  Here is the underlying philosophy behind Emergent Ventures.  Note by the way, if you received an award very recently, you have not been forgotten but rather will show up in the fourth cohort.

*Culture in Nazi Germany*

That is a new and forthcoming book by Michael H. Kater, excerpt:

The book’s first contention is that in order for a new Nazi type of culture to take hold, the preceding forms first had to be wiped out.  This mainly affected the artistic and intellectual achievements most hated by the Nazis, those of the Weimar Republic, whose aesthetic and political hallmark was Modernism.  The police controls Hitler used to carry out purges in political and social contexts were also used against Modernist art forms and their creators…

However, as far as films were concerned, the most acute interest shown by Hitler was in the weekly newsreels.  These embodied for him what film was all about: an ideal instrument for political control.  He regularly commented on newsreels to Goebbels, and had some several cut or modified.  More so than in the case of feature films, Hitler was liable to override any decisions Goebbels had already made on them.  Even long before the war broke out Hitler was adamant that newsreels display the heroic…

Recommended, even if you feel you’ve had your fill of books on Nazi Germany.

Writers vs. entrepreneurs, publishers vs. venture capitalists

Henry Oliver asks:

In what ways are writers and entrepreneurs similar? Why doesn’t publishing have more of a VC structure and attitude? Could authorship be made more productive and better quality with VC in publishing and theatre? Are movies better at this?

Publishing has one feature in common with venture capital, namely that most financed undertakings are failures and the most profitable successes can be hard to predict in advance.  Furthermore, publishers are always on the lookout for the soon-to-be-hot, hitherto unpublished author, the next Mark Zuckerberg so to speak.  And books, like software and also successful social networks, are rapidly scalable.  You can sell millions with a big hit.  But here are a few differences:

1. A lot of VC is person-focused.  The VC company builds a relationship with a young talent, and in some cases the hope is that the second or third business makes it, or that the person can be steered in the proper direction early on.  Authors, in contrast, are more mobile across publishers, and the publisher usually is buying “a book” rather than “a relationship with the author.”  Some wags would say that a publisher is buying a title, a cover, and the author’s social media presence.

2. Entrepreneurs commonly have more than one VC, but authors, for a single book, do not have multiple publishers.

3. For the vast majority of books which do not make a profit, this is evident within the first three weeks of release or perhaps before release altogether.  The publisher may drop its resource commitment to the author very quickly, and even yank the PR people off the case.  This further loosens the bond between the talent (the author) and the funders of the talent (the publisher).  In contrast, VC rounds can last five or ten years, with commitments made in advance and possibly a board seat as part of the deal.

4. Venture capitalists will introduce their entrepreneurs to an entire network of supporting talent and connections.  Publishers will edit and advise on a manuscript, but it is much more of an arm’s length relationship, and a publisher might do very little to bring an author into any kind of network.

5. The major publishing houses are clustered in Manhattan, just as the major venture capitalist firms are clustered in the Bay Area.  But the publishers don’t find a pressing need to have their authors living in or near NYC, though for some other reasons that is convenient for the author doing eventual media appearances.

6. Publishers often care a great deal about an author’s preexisting platforms, such as Twitter followers or ability to get on NPR.  Venture capitalists realize that a very good product can overcome the lack of initial renown.  When Page and Brin started Google, they didn’t, believe it or not, have any Twitter followers at all.  In fact, you couldn’t even Google them.

What else?

Tech and economic growth in the Book of Genesis

That is the topic of my latest Bloomberg column, worth reading as an integrated whole.  Here is one excerpt:

The stories have so much religious significance that it is easy to miss the embedded tale of technology-led economic growth, similar to what you might find in the work of Adam Smith or even Paul Romer. Adam and Eve eat of “the tree of knowledge, good and evil,” and from that decision an entire series of economic forces are set in motion. Soon thereafter Adam and Eve are tilling the soil, and in their lineage is Tubal-Cain, “who forged every tool of copper and iron.”

Living standards rise throughout the book, and by the end we see the marvels of Egyptian civilization, as experienced and advised by Joseph. The Egyptians have advanced markets in grain, and the logistical and administrative capacities to store grain for up to seven years, helping them to overcome famine risk (for purposes of contrast, the U.S. federal government routinely loses track of assets, weapons, and immigrant children). It is a society of advanced infrastructure, with governance sophisticated enough to support a 20 percent tax rate (Joseph instructs the pharaoh not to raise it higher). Note that in modern America federal spending typically has run just below 20 percent since the mid-1950s.

Arguably you can find a story of quantitative easing in Genesis as well. When silver is hard to come by, perhaps because of deflationary forces, the Egyptian government buys up farmland and compensates the owners with grain.

Most of all, in the Genesis story, the population of the Middle East keeps growing. I’ve known readers who roll their eyes at the lists of names, and the numerous recitations of who begat whom, but that’s the Bible’s way of telling us that progress is underway. Neither land nor food supplies prove to be the binding constraints for population growth, unlike the much later canonical classical economics models of Malthus and Ricardo.

There is much more at the link.

Modern Principles of Economics

If you are teaching principles of economics next year do check out our textbook, Modern Principles of Economics.

Modern Principles means modern content and modern delivery. We cover material that many other textbooks ignore, such as how managers should choose between piece rates and tournaments and how firms can increase their profits using clever forms of price discrimination such as bundling and tying. In macroeconomics, we have created a simple yet powerful AD-AS model that combines insights from New Keynesian and Real Business Cycle models. We have also created the Super Simple Solow model which for the first time makes the Solow model of economic growth accessible to principles of economics students.

High-quality videos integrated directly into the textbook make Modern Principles a new kind of textbook, one born in the age of the internet. No other textbook has the quantity and quality of supplementary material available with Modern Principles. Whether you are looking to flip the classroom or just for the occasional video to grab the student’s attention before the lecture, you will find what you need in Modern Principles. The superb course management system also makes it easy to assign videos and grade questions.

Teachers can request a free examination copy here.

Here’s a video overview of Modern Principles of Economics:

*Publisher’s Weekly* on my next book *Big Business*

My subtitle is A Love Letter to an American Anti-Hero, and here is the review:

Cowen (The Great Stagnation), an economics professor at George Mason University, counters complaints of fraudulent corporate behavior, excessive CEO pay, invasions of privacy, oppressive work culture, and corporate influence on government in this spirited defense of big business. He creatively mines polls, economic data, and even social psychology to argue that big business has, on balance, been unfairly judged. Disarmingly, he acknowledges that it’s not perfect—he criticizes the health care industry, notes that corporate cultures have not responded well to sexual harassment, and recognizes threats to privacy from the technology sector—but then he hedges: health care consolidation, he says, is at least partly the result of government regulation; corporations are now responding to sexual harassment; and traditionally generated gossip may well be a bigger threat than breaches of data privacy. Cowen is a smart, original thinker with a knack for reframing criticisms in the context of a larger, utilitarian perspective (drugs produced by pharmaceutical companies save lives, Google Maps gets us where we want to go) that implicitly endorses the current economic system; he comes off more like a lawyer than an ideologue. This analysis is unlikely to convince readers skeptical of big business of its virtue, but it provides food for thought.

Here is information to purchase the book.

Differences in the Quran treatment of the themes from the Book of Genesis

1. There are more angels.

2. Satan plays a larger role.

3. There is virtually no literary suspense.

4. Adam is not made in God’s image.

5. There is considerably less complexity of narrative perspective.

6. Allah does not speak directly, rather it is all coming from Allah.

7. Noah is more of a prophet of doom, and Abraham (“the first Muslim”) is a more important figure.

8. The Abraham story is more central.

9. Isaac is aware that he is slated for sacrifice, and accepts his fate.  (That he is not killed of course you can think of as an “alternative” to the Christ story, namely that the blessed do not have to undergo a brutal, ugly death.)

10. The covenant with God is not national or regional in its origins.

For those points I drew upon my interpretations of Jack Miles, God in the Qu’ran, among other sources.

The Mormon asymptote?

…compared to some other religions, Mormonism is not doing too badly.  Mormonism’s US growth rate of .75 percent in 2017 — kept in positive territory by still-higher-than-average fertility among Mormons — is actually somewhat enviable when compared to, for example, the once-thriving Southern Baptists, who have bled out more than a million members in the last ten years.  Mormonism is not yet declining in membership, but it has entered a period of decelerated growth.  In terms of congregational expansion, the LDS Church in the United States added only sixty-five new congregations in 2016, for an increase of half a percentage point.  In 2017, the church created 184 new wards and branches in the United States, but 184 units also closed, resulting in no net gain at all.

By some estimates (p.7), only about 30 percent of young single Mormons in the United States go to church regularly.  The idea of the Mormon mission, however, is rising in import:

More than half of Mormon Millennials have served a full-time mission (55 percent), which is clearly the highest proportion of any generation; among GenXers, 40 percent served, and in the Boomer/Silent generation, it was 28 percent.

In contrast, “returning to the temple on behalf of the deceased” is falling (p.54).

Mormons are about a third more likely to be married than the general U.S. population, 66 to 48 percent.  But note that 23 percent of Mormon Millennials admit to having a tattoo, against a recommended rate of zero (p.162).

And ex-Mormon snowflakes seem to be proliferating.  For GenX, the single biggest reason giving for leaving the church was “Stopped believing there was one church”.  For Millennials, it is (sadly) “Felt judged or misunderstood.”

That is all from the new and excellent Jana Riess, The Next Mormons: How Millennials are Changing the LDS Church.

Oxford University Press also sent me a copy of J. Brian O’Roark Why Superman Doesn’t Take Over the World: What Superheroes Can Tell us About Economics, which I have not yet read.

Hayek auction markets in everything

Friedrich Hayek’s personal copy of Adam Smith’s Wealth of Nations, complete with pencilled annotations by the champion of free market economics, is to go on sale as part of a trove of personal items being sold by Hayek’s family. Hayek’s typewriter, writing desk, photo albums, passports, a speech signed by former prime minister Margaret Thatcher and a set of cufflinks given to him by ex-US president Ronald Reagan are among the items set to go under the hammer in an online sale at Sotheby’s later this month.

That is from James Pickford at the FT, the Smith copy is estimated to go for £3,000 to £5,000, plus buyer’s premium of course.

*Not Working: Where Have All the Good Jobs Gone?*

That is the new and forthcoming book by David G. Blanchflower, here is one excerpt:

The high-paying union private-sector jobs for the less educated are long gone.  Real weekly wages in April 2018 in the United States were around 10 percent below their 1973 peak for private-sector production and non-supervisory workers in constant 1982-84 dollars.  In the UK real wages in 2018 are 6 percent below their 2008 level.

And:

In the post-recession period underemployment has replaced unemployment as the main indicator of labor market slack.

This is a very good book for anyone wishing to rethink what is going on in labor markets today.  In his view there is plenty more slack, as evidence by sluggish wage behavior.  You can pre-order here, due out in June.

*IBM: The Rise and Fall and Reinvention of a Global Icon*

That is the new and excellent and I am tempted to label definitive book by James W. Cortada.  The author worked at IBM for thirty-eight years, a reasonable qualification to attempt such a tome.  Here is one excerpt:

It is difficult to exaggerate the importance of the Social Security win to the evolution of IBM.  That one piece of business, along with its effects on other agencies and businesses, wiped out the Great Depression for IBM.  That transaction handed IBM a potential market of 20,000 other companies that would need to process social security data.  When the books were closed on IBM’s business in 1937, revenue had increased by 48 percent of 1935’s, and by the end of 1939, by 81 percent of 1935’s.

And then for the 1960s:

IBM’s System 360 was one of the most important products introduced by a U.S. corporation in the twentieth century, and it nearly broke IBM.  A short list of the most transformative products of the past century would include it…

On April 7, 1964, IBM introduced a combination of six components, dozens of items of peripheral equipment, such as tape drives, disk drives, printers, and control units, among others; and a promise to provide the software necessary to make everything work together — a mindboggling total of 150 products…manuals describing all the machines, components, software, and their installations and operation filled more than 50 linear feet of bookshelves.

But later on, by the 1970s:

With ten layers of management, each with staffs, it was probably inevitable that bureaucracy would grow.

The research and background context is amazing and the book is readable throughout.  You can pre-order here.

*Big Business: A Love Letter to an American Anti-Hero*

I am very excited about my next book, due out April 9:

I view this work as an antidote to many of the less than stellar arguments circulating today.  It looks like this:

Table of contents

1. A new pro-business manifesto

2. Are businesses more fraudulent than the rest of us?

3. Are CEOs paid too much?

4. Is work fun?

5. How monopolistic is American big business?

6. Are the big tech companies evil?

7. What is Wall Street good for, anyway?

8. Crony capitalism: How much does big business control the American government?

9. If business is so good, why is it disliked?

Here is part of the Amazon description:

An against-the-grain polemic on American capitalism from New York Times bestselling author Tyler Cowen.

We love to hate the 800-pound gorilla. Walmart and Amazon destroy communities and small businesses. Facebook turns us into addicts while putting our personal data at risk. From skeptical politicians like Bernie Sanders who, at a 2016 presidential campaign rally said, “If a bank is too big to fail, it is too big to exist,” to millennials, only 42 percent of whom support capitalism, belief in big business is at an all-time low. But are big companies inherently evil? If business is so bad, why does it remain so integral to the basic functioning of America? Economist and bestselling author Tyler Cowen says our biggest problem is that we don’t love business enough.

In Big Business, Cowen puts forth an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. He dismantles common misconceptions and untangles conflicting intuitions.

You can pre-order here on Amazon.  Here at Barnes & Noble.  Here at Books a Million.  Here at Itunes.  Here at IndieBound.  From PlayGoogle.  From Kobo.

Here is the publisher’s home page.  Definitely recommended…and if you are a regular MR reader, no more than five to ten percent of this book has already appeared on this blog.