Category: Economics

My Conversation with Lex Fridman

2 hours 9 minutes long, Lex is one of the very best interviewers/discussants in the sector.  Here is the video, here is the audio.  Plenty of new topics and avenues, including the political economy of Russia (note this was recorded before the massing of Russian forces on the Ukraine border).  Lex’s tweet described it as follows:

Here’s my conversation with @tylercowen  about economic growth, resisting conformity, the value of being weird, competition and capitalism, UFO sightings, contemporary art, best food in the world, and of course, love, death, and meaning.


Economics in One Virus

Here is John Cochrane, Megan McArdle, Ryan Bourne and myself on the pandemic. Lots of good material. John Cochrane was excellent on testing in a pandemic and why it’s different than medical testing, starting around 22:00. My follow-up also had some good material, our antibodies, our selves.

Ryan Bourne’s book Economics in One Virus is very good.


From Charles Kenny

Friends: I’m writing to tell you about my latest book and ask you to take a look (and share the news).

Your World, Better is written for the smart and engaged middle school student.  It looks at how America and the World has changed since the reader’s parents and grandparents were young: what has happened to health and wealth, homes, school and work, rights and democracy, war and the environment, happiness and depression.   It talks about the things that have gotten better, the sometimes-intensifying challenges that remain, and what readers can do about them.  (Some of you might hear echoes of my earlier book Getting Better –it is a source, but this is a very different text).

I wrote it because my (middle school age) elder daughter’s friends appear largely of the opinion that everything is terrible, and after the last eighteen months it is a little hard to blame them for thinking that. Your World Better is optimistic, but it doesn’t shy away from the considerable problems we face: from inequality through discrimination and depression to climate change and infectious threats.  It is meant to encourage kids to help make the world better: tip them from hopelessness toward action, not into complacency.  I hope you think I get the balance right.

The pdf of Your World Better is available to download in my blog for free.  Or you can buy a kindle version for 99 cents or a hard copy for $8.10.  Any author royalties from those sales will be donated to UNICEF.

Atul Gawande and Zeke Emanuel Now Support Delaying the Second Dose

Many people are coming around to First Doses First, i.e delaying the second dose to ~12 weeks. Atul Gawande, for example, tweeted:

As cases and hospitalizations rise again, we can’t count on behavior alone reversing this course. Therefore, it’s time for the Biden admin to delay 2nd vax doses to 12 weeks. Getting as many people as possible a vax dose is now urgent.

Now urgent??? Yes, I am a little frustrated because the trajectory on the new variants was very clear. On January 1, for example, I wrote about The New Strain and the Need for Speed (riffing off an excellent piece by Zeynep Tufekci).  Still, very happy to have Gawande’s voice added to the cause. Also joining Gawande are the power trio of Govind Persad, William F. Parker and Ezekiel J. Emanuel who in an important op-ed write:

If we temporarily delay second doses …that is our best hope of quelling the fourth wave ignited by the B.1.1.7 variant. Because we did not start this strategy earlier, it is probably too late for Michigan, New York, New Jersey and the other Northeastern states. But it might be just in time for the South and California — the next places the more infectious strain will go if historical patterns repeat.

…Drug manufacturers selected the three- or four-week interval currently used between doses to rapidly prove efficacy in clinical trials. They did not choose such short intervals based on the optimal way of using the vaccines to quell a pandemic. While a three- or four-week follow-up is safe and effective, there is no evidence it optimizes either individual benefit or population protection.

…Some complain that postponing second doses is not “following the science.” But the scientific evidence goes far beyond what was shown in the original efficacy trials. Data from the United Kingdom, Israel and now the Centers for Disease Control and Prevention shows that first doses both prevent infection and reduce transmission. In people with prior infection, experts are beginning to recognize that a second dose could provide even less benefit. Following the science means updating policies to recognize new evidence rather than stubbornly maintaining the status quo.

Emanuel is on Biden’s COVID-19 task force so consider this op-ed running the flag up the flagpole. I predict Topol will fall next.

I would be surprised, however, if the US changes course now–too many people would then ask why didn’t we do this sooner?–but dose stretching is going to be important for the rest of the world. Why aren’t we doing more to investigate fractional dosing? Even if we went to half-doses on the second dose–the full second dose appears to be strong–that would still be a significant increase in total supply.

Addendum: I have argued for sending extra doses to Michigan and other hot spots such as NJ. Flood the zone! The Biden administration says no. Why? Production is now running well ahead of distribution as more than 50 million doses have been delivered but not administered. It would be a particularly good idea to send more single-shot J&J to reach hard to reach communities–one and done.

A Miniature Masterpiece

Superb NYTimes disquisition on a masterpiece of Indian miniature painting. The text, formatting, visuals, all beautifully done–better than any museum exhibit I can recall.

In addition to the subject matter this piece has a lot to say about online education and how news is becoming a winner take-most market. Note what Tyler and I said on endogenous fixed costs in our piece on online education in the AER and consider how many newspapers could put together a display of this quality.

Shaked and Sutton (1987) and Sutton (1998) show that when quality is primarily vertical, meaning that there is a measure of quality such that all consumers agree that higher quality is more preferred, then increased market size does not result in reduced concentration. Instead, as market size increases, firms invest more in quality, which endogenously increases economies of scale and maintains market concentration.

Along related lines, Berry and Waldfogel (2010) show that there are many more restaurants in larger than smaller cities, but even as city size increases by a factor of 10 there is no tendency for the number of newspapers to increase. Larger cities have more restaurants than smaller cities because economies of scale are limited and quality differs “horizontally,” according to taste (thus, larger cities have more diverse restaurants). Yet larger cities are served by roughly the same number of newspapers as smaller cities because quality is more vertical, most newspaper consumers want more coverage, better writers and more features.

Addendum: Tim and Marcos remind of previous items in this series which I also loved, The Birth of the Self Portrait and A Picture of Change.

Claims about Earned Income Tax Credit

The EITC increases the labor supply of mothers, which leads to increases in payroll and sales taxes paid.

The EITC decreases dependence on government transfer spending.

Evaluated over a one-year period, the net EITC cost is only 17 percent of the $70 billion annual budgetary cost.

Evaluated over a longer-time horizon, the net EITC cost is lower and perhaps zero.

The 2009 EITC expansion continued to increase maternal labor supply and earnings.

Here is the forthcoming Journal of Public Economics paper, by Jacob E. Bastian and Maggie R. Jones, via the excellent Kevin Lewis.

$1000 submission fee to the AER?

I saw that circulating as an April Fool’s joke, but is it such a crazy idea?  Here would be a few effects:

1. Submissions would decline, thus liberating some time for editors and referees.  This is valuable in its own right, and furthermore remaining decisions might be made with greater care.  And presumably the remaining submissions would be those with a higher chance of acceptance.

2. To some extent departments would pick up the submission fee.  This would favor researchers in wealthier departments, though whether this is good or bad I am not sure.  And even the most flush departments would find this pretty steep and I don’t think would offer carte blanche reimbursement.

3. It would favor senior and wealthier colleagues over junior colleagues.  That sounds bad to most people, but is it?  Favoring the wealthier senior colleagues might help limit the arms race for “here is my 90-page paper that has performed every possible cross-check of the results.”  It also might lower the return to technique, as younger researchers tend to be more up on the latest math but they are also less broad and by definition less experienced.

4. Graduate students in particular would be less likely to submit, especially from lower-tier departments.  It would be harder for job candidates from the non-top schools to prove themselves by publishing in the AER.

5. Papers would be “shopped around” more to seminars before being submitted.

6. Papers would become longer, which is probably a bad thing.

7. It might select for overconfident economists from wealthier families.

8. The AER would no longer “get all the best papers,” at least as such things are perceived.  That could very well be good!  Why should one journal have such a lock?

Would the AEA take in more revenue with this plan?

What else? What is in fact the optimal submission fee for a journal where publications can be worth tens of thousands of dollars (or sometimes much more) there?  Why should the authors/submitters be charged so little?

Why don’t more people go to college?

This new piece in American Economic Journal: Macroeconomics seems to be channeling some parts of Bryan Caplan’s argument:

Despite increases in the college earnings premium to persistently high levels, investment in college education remains low. We can understand this apparent puzzle by considering the risk of attending college and, in particular, the possibility of failing to graduate. Students with a reasonable probability of completing college already enroll, and for those who do not enroll, the low chance of completion blunts the impact of the rising college premium. In the absence of improved college readiness, our quantitative results suggest that continuing long-standing trends in skill-biased technological change can be expected primarily to increase earnings inequality rather than college attainment.

From Kartik Athreya and Janice Eberly.  The implied discontinuity in the de facto talent distribution also echoes some themes from my own Average is Over.

In Praise of Tyler Cowen and Patrick Collison

Here’s a great video on FastGrants, the fast funding-institution started by Tyler and Patrick Collison to fund COVID research at a speed that could make a difference on the ground. And it did.

Lots of other people stepped in with funding including Arnold Ventures, The Audacious Project, The Chan Zuckerberg Initiative, John Collison, Crankstart, Jack Dorsey, Kim and Scott Farquhar, Paul Graham, Reid Hoffman, Fiona McKean and Tobias Lütke, Yuri and Julia Milner, Elon Musk, Chris and Crystal Sacca, Schmidt Futures, and others.

The list of funded people and projects is long and impressive and while the grants were fast, the payoff is going to last well beyond the pandemic.

Thanks, Tyler and Patrick!

Further estimates on the cost of climate change and global warming

Sea level rise will cause spatial shifts in economic activity over the next 200 years. Using a spatially disaggregated, dynamic model of the world economy, this paper estimates the consequences of probabilistic projections of local sea level changes. Under an intermediate scenario of greenhouse gas emissions, permanent flooding is projected to reduce global real GDP by 0.19 percent in present value terms. By the year 2200, a projected 1.46 percent of the population will be displaced. Losses in coastal localities are much larger. When ignoring the dynamic response of investment and migration, the loss in real GDP in 2200 increases from 0.11 percent to 4.5 percent.

That newly published paper is from Klaus Desmet, Robert E. Kopp, Scott A. Kulp, Dávid Krisztián Nagy, Michael Oppenheimer, Esteban Rossi-Hansberg and Benjamin H. Strauss in American Economic Journal: Macroeconomics.  Am I wrong to feel a little…underwhelmed by those estimates?  Here is an earlier recent paper on other cost estimates.

In praise of Alex Tabarrok

Here’s a question I’ve been mulling in recent months: Is Alex Tabarrok right? Are people dying because our coronavirus response is far too conservative?

I don’t mean conservative in the politicized, left-right sense. Tabarrok, an economist at George Mason University and a blogger at Marginal Revolution, is a libertarian, and I am very much not. But over the past year, he has emerged as a relentless critic of America’s coronavirus response, in ways that left me feeling like a Burkean in our conversations.

He called for vastly more spending to build vaccine manufacturing capacity, for giving half-doses of Moderna’s vaccine and delaying second doses of Pfizer’s, for using the Oxford-AstraZeneca vaccine, for the Food and Drug Administration to authorize rapid at-home tests, for accelerating research through human challenge trials. The through line of Tabarrok’s critique is that regulators and politicians have been too cautious, too reluctant to upend old institutions and protocols, so fearful of the consequences of change that they’ve permitted calamities through inaction.

Tabarrok hasn’t been alone. Combinations of these policies have been endorsed by epidemiologists, like Harvard’s Michael Mina and Brown’s Ashish Jha; by other economists, like Tabarrok’s colleague Tyler Cowen and the Nobel laureates Paul Romer and Michael Kremer; and by sociologists, like Zeynep Tufekci (who’s also a Times Opinion contributor). But Tabarrok is unusual in backing all of them, and doing so early and confrontationally. He’s become a thorn in the side of public health experts who defend the ways regulators are balancing risk. More than one groaned when I mentioned his name.

But as best as I can tell, Tabarrok has repeatedly been proved right, and ideas that sounded radical when he first argued for them command broader support now. What I’ve come to think of as the Tabarrok agenda has come closest to being adopted in Britain, which delayed second doses, approved the Oxford-AstraZeneca vaccine despite its data issues, is pushing at-home testing and permitted human challenge trials, in which volunteers are exposed to the coronavirus to speed the testing of treatments. And for now it’s working: Britain has vaccinated a larger percentage of its population than the rest of Europe and the United States have and is seeing lower daily case rates and deaths.

Here is more from Ezra Klein at the New York Times.

Arguments for Africa

Despite the past centuries’ economic setbacks and challenges, are there reasons for optimism about Africa’s economic prospects? We provide a conceptual framework and empirical evidence that show how the nature of African society has led to three sets of unrecognized “latent assets.” First, success in African society is talent driven and Africa has experienced high levels of perceived and actual social mobility. A society where talented individuals rise to the top and optimism prevails is an excellent basis for entrepreneurship and innovation. Second, Africans, like westerners who built the world’s most successful effective states, are highly skeptical of authority and attuned to the abuse of power. We argue that these attitudes can be a critical basis for building better institutions. Third, Africa is “cosmopolitan.” Africans are the most multilingual people in the world, have high levels of religious tolerance, and are welcoming to strangers. The experience of navigating cultural and linguistic diversity sets Africans up for success in a globalized world.

Here is the NBER paper from Soeren J Henn and James A. Robinson.

Mistrust of the CBO is unfortunately a growing bipartisan avocation

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

Recently the CBO issued a working paper considering what would happen if U.S. government expenditures were to consume an additional 5% to 10% of GDP. The results are pretty grim: By 2030, because of higher taxes and higher borrowing, the level of GDP would be 3 to 10 percentage points lower. The largest losses are suffered by young Americans, who would go through more of their lives with a lower capital stock, leading to lower wages. Worse yet, the losses are highest when the spending is financed by progressive taxation — a very popular idea in today’s Democratic Party.

As with the CBO’s minimum-wage analysis, you may not agree with every aspect of this study. The authors themselves note that it neglects any productivity gains that might follow from the expenditures. Still, these estimates represent a real challenge to those who favor more government spending.

This analysis has mostly been ignored rather than attacked, which is unfortunate for those of us who would prefer a robust debate. In the meantime, “If you can’t even convince the CBO” seems like a good standard of proof for Democrats to accept — and one they themselves insisted on not very long ago.

For the pointer to the new CBO study I thank Corey Frederick Kallen.

Personal bankruptcies have declined during the pandemic

The number of people seeking bankruptcy fell sharply during the pandemic as government aid propped up income and staved off housing and student-loan obligations.

Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit.

By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq…

Economists and bankruptcy lawyers say federal suspensions of evictions, home foreclosures and student-loan obligations have helped limit bankruptcies—though they worry bankruptcy rates could go up after aid ends. Household spending also dropped as people stayed home, canceled travel and socially distanced to avoid the coronavirus. Several rounds of government aid padded incomes with direct payments to households and enhanced unemployment benefits. The personal saving rate rose.

Here is more from the WSJ.