The US offers a limited number of H1-B visas annually, these are temporary 3-6 year visas that allow firms to hire high-skill workers. In many years, the demand exceeds the supply which is capped at 85,000 and in these years USCIS randomly selects which visas to approve. The random selection is key to a new NBER paper by Dimmock, Huang and Weisbenner. What’s the effect on a firm of getting lucky and wining the lottery?
We find that a firm’s win rate in the H-1B visa lottery is strongly related to the firm’s outcomes over the following three years. Relative to ex ante similar firms that also applied for H-1B visas, firms with higher win rates in the lottery are more likely to receive additional external funding and have an IPO or be acquired. Firms with higher win rates also become more likely to secure funding from high-reputation VCs, and receive more patents and more patent citations. Overall, the results show that access to skilled foreign workers has a strong positive effect on firm-level measures of success.
Overall, getting (approximately) one extra high-skilled worker causes a 23% increase in the probability of a successful IPO within five years (a 1.5 percentage point increase in the baseline probability of 6.6%). That’s a huge effect. Remember, these startups have access to a labor pool of 160 million workers. For most firms, the next best worker can’t be appreciably different than the first-best worker. But for the 2000 or so tech-startups the authors examine, the difference between the world’s best and the US best is huge. Put differently on some margins the US is starved for talent.
Of course, if we play our cards right the world’s best can be the US best.
I look for founders who are scrappy and formidable at the same time (a rarer combination than it sounds); mission-oriented, obsessed with their companies, relentless, and determined; extremely smart (necessary but certainly not sufficient); decisive, fast-moving, and willful; courageous, high-conviction, and willing to be misunderstood; strong communicators and infectious evangelists; and capable of becoming tough and ambitious.
Some of these characteristics seem to be easier to change than others; for example, I have noticed that people can become much tougher and more ambitious rapidly, but people tend to be either slow movers or fast movers and that seems harder to change. Being a fast mover is a big thing; a somewhat trivial example is that I have almost never made money investing in founders who do not respond quickly to important emails.
Also, it sounds obvious, but the successful founders I’ve funded believe they are eventually certain to be successful.
Here is the full blog post — agree or disagree?
That is the topic of my latest Bloomberg column, here is one excerpt:
In other words, the frontier areas for overcoming wage stagnation are several-fold. First is a greater freedom to build, so that housing supply can rise and prices can fall. That also would enable more upward mobility by easing moves to America’s more productive (but also more expensive) regions. Second are steps to lower the cost of medical care through greater competition and price transparency. Third, American higher education is hardly at its optimum point of efficiency, innovation and affordability.
If those sectors displayed some of the dynamism and innovativeness of that marks America’s tech sector, the combination of declining prices and rising quality could give living standards a boost. And since rent, health care and tuition tend to be higher shares of the incomes of poorer people, those changes would help poorer people the most.
Think of it as a rooftops piece, combined with a discussion of why wages actually have seen slow growth as of late.
Overall I do not regard this as good news:
We examine the educational backgrounds of more than 2,900 members of the U.S. cultural elite and compare these backgrounds to a sample of nearly 4,000 business and political leaders. We find that the leading U.S. educational institutions are substantially more important for preparing future members of the cultural elite than they are for preparing future members of the business or political elite. In addition, members of the cultural elite who are recognized for outstanding achievements by peers and experts are much more likely to have obtained degrees from the leading educational institutions than are those who achieve acclaim from popular audiences.
There is now transcript and audio from the Holberg debate in Bergen, Norway, courtesy of the CWTeam, here is their summary of the event:
This bonus episode features audio from the Holberg Debate in Bergen, Norway between Tyler and Slavoj Žižek held on December 7, 2019. They discuss the reasons Slavoj (still) considers himself a Communist, why he considers The Handmaid’s Tale “nostalgia for the present,” what he likes about Greta Thunberg, what Marx got right about the commodification of beliefs, his concerns about ecology and surveillance in communist states like China today, the reasons academia should maintain its ‘useless character,’ his beginnings as a Heideggerian, why he is distrustful of liberal optimism, the “Fukuyama dilemma” we face, the importance of “empty manners,” and more.
COWEN: You know the old joke, what’s the difference between a Communist and a Nazi? Tenure.
ŽIŽEK: You mean university tenure?
COWEN: Yes. It’s a joke, but the point is you don’t need Communism. You are much smarter than Communism.
I would describe the proceedings as “rollicking,” including the segment about “smoking the prick.”
The Arthashastra, the science of wealth and politics, is one of the world’s oldest treatises on political economy. Written by Kautilya, legendary advisor to the Indian King Chandragupta Maurya (reign: 321–298 BCE), the Arthashastra has often been compared to Machiavelli’s The Prince and has been a touchstone in Indian political economy for well over a thousand years.
Vijay Kelkar and Ajay Shah, two long-time advisors to the Indian government, have written the new Arthashastra, In Service of the Republic: The Art and Science of Economy Policy. In Service doesn’t go into great detail on current policies in India (Joshi’s Long Road is the best recent overview), it instead distills timeless wisdom on the making of political economy.
When faced with a potential government intervention, it is useful to ask three key questions. Is there a market failure? Does the proposed intervention address the identified market failure? Do we have the ability to implement the proposed intervention?
Public policy failures are born of: (1) The information constraint; (2) The knowledge constraint; (3) the resource constraint; (4) The administrative constraint; and (5) The voter rationality constraint. These five problems interact, and jointly generate government failure, of both kinds; pursuing the wrong objectives and failing on the objectives that have been established.
A government organization that is riven with corruption is not one which was unlucky to get a lot of corrupt people. It is one where the rules of the game facilitate corruption.
The competitive market process should force the exit of low-productivity firms. This does not happen when the low-productivity firms violate laws–e.g. a low productivity firm may emit pollution, while the high-productivity firm incurs the higher costs associated with the pollution control required in law….When enforcement capabilities, of laws or of taxes, are improved…production will shift from low-productivity firms to high-productivity firms. This reallocation will yield GDP growth, in and of itself.
There are two pillars of intervention in banking in India. On one hand, the state regulates banking. In addition, the Indian state produces banking services through the ownership of bank….There are conflicts between these two [pillars]. Regulation by the state may be indulgent towards its own entities….this calls for strong separation between the two pillars.
Kelkar and Shah are especially concerned with policy making in the Indian context of low state-capacity:
A policy pathway that is very successful in (say) Australia may not work in India as it is being placed in a very different setting. Envisioning how a given policy initiative will work in India requires deep knowledge of the local context.
If the fine for driving through a red light is Rs 10,000, there will be pervasive corruption. Jobs in the highway police will be sought after; large bribes will be paid to obtain these jobs. There will be an institutional collapse of the highway police. It is better to first start with a fine of Rs 100, and build state capacity.
(On that theme see also my paper with Rajagopalan, Premature Imitation.)
In Service to the Republic is the book that every policy maker and future policy maker should be given while being told, “before you do anything, read this!”
Addendum: I will be in India next week and after a visit to Agra and Hampi, I will be giving some talks at Ramaiah University in Bangalore and later in the month at the Indian School of Public Policy.
In economics many articles are subjected to multiple rounds of refereeing at the same journal, which generates time costs of referees alone of at least $50 million. This process leads to remarkably longer publication lags than in other social sciences. We examine whether repeated refereeing produces any benefits, using an experiment at one journal that allows authors to submit under an accept/reject (fast-track or not) or the usual regime. We evaluate the scholarly impacts of articles by their subsequent citation histories, holding constant their sub-fields, authors’ demographics and prior citations, and other characteristics. There is no payoff to refereeing beyond the first round and no difference between accept/reject articles and others. This result holds accounting for authors’ selectivity into the two regimes, which we model formally to generate an empirical selection equation. This latter is used to provide instrumental estimates of the effect of each regime on scholarly impact.
That is from a new NBER paper by Aboozar Hadavand, Daniel S. Hamermesh, and Wesley W. Wilson. This is exactly the kind of work — critical, data-driven self-reflection about science — what Progress Studies wishes to see more of.
As Tyler argued last week one of the most common analytical inaccuracies on Twitter is to blame the Fed for being too conservative with monetary policy over the last few years. I see this problem on both the left and the right. One of the ways the argument goes is as follows::
This month’s unemployment rate is lower than last month’s unemployment rate. Thus, we could not have been at full employment last month.
Monetary policy should be less conservative. If only we had been more aggressive earlier, we could have reached where we are sooner and made millions of people better off.
All of this is wrong. To begin, full employment does not mean the lowest possible unemployment rate. We are at full employment when we are at the natural rate of unemployment and as Milton Friedman wrote:
The ‘natural rate of unemployment’….is the level that would be ground out by the Walrasian system of general equilibrium equations, provided there is imbedded in them the actual structural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the cost of gathering information about job vacancies and labor availabilities, the costs of mobility, and so on.
The natural rate can change over time, even in a sustained direction, as the structural characteristics of the economy change, as demand, supply, demographics, information and so forth change. Change does not mean disequilibrium. When the production of apples is bigger this year than last year we don’t jump to the conclusion that last year the apple market was out of equilibrium. Similarly, the fact that unemployment was lower this year than last year does not mean that we weren’t at full employment last year.
The point of Friedman’s 1968 piece was that monetary policy can’t do much to influence the natural or full employment rate. Thus, the second half of the argument also doesn’t follow. In other words, it doesn’t follow from the fact that unemployment is declining that monetary policy last year could have achieved this year’s unemployment rate last year. My children are taller this year than last year but that doesn’t mean I could have accelerated their growth by feeding them more last year.
Monetary policy can make a big difference in arresting a negative spiral of declining spending leading to declining income leading to declining spending….Keynes was right. Scott Sumner was also right to call for more aggressive monetary policy in 2008-2010. But that was a disequilibrium event, now long over. When children are starving, you can get them to grow faster by feeding them more, but don’t try using that rule in normal times. Today we are in normal times. The economy has been growing steadily for over a decade. We are not in a downward spiral and wages and prices are not stuck at 2008 levels. In fact, since the end of the recession a large majority of workers are in new jobs! Indeed, a good chunk of the labor force has retired since 2008 to be replaced by entirely new workers. Nothing sticky there.
Standard macro models do not imply that monetary policy can always lower unemployment. (I can’t believe I have to write that in 2020 but the great forgetting is well upon us). Indeed, the standard models, as Tyler discussed, are all about testing and deepening our understanding of the Friedman list, most notably “the cost of gathering information about job vacancies and labor availabilities.” Bottom line is that nobody ever said that we had to like the Walrasian equilibrium but like it or not, monetary policy can’t do much to change it.
M.B. Malabu, travel grant to come to the D.C. area for helping in setting up a market-oriented think tank in Nigeria.
Nolan Gray, urban planner from NYC, to be in residence at Mercatus and write a book on YIMBY, Against Zoning.
One other, not yet ready to be announced. But a good one.
Here are previous MR posts on Emergent Ventures.
In Why Online Education Works I wrote:
The future of online education is adaptive assessment, not for testing, but for learning. Incorrect answers are not random but betray specific assumptions and patterns of thought. Analysis of answers, therefore, can be used to guide students to exactly that lecture that needs to be reviewed and understood to achieve mastery of the material. Computer-adaptive testing will thus become computer-adaptive learning.
Computer-adaptive learning will be as if every student has their own professor on demand—much more personalized than one professor teaching 500 students or even 50 students. In his novel Diamond Age, science fiction author Neal Stephenson describes a Young Lady’s Illustrated Primer, an interactive book that can answer a learner’s questions with specific information and also teach young children with allegories tuned to the child’s environment and experience. In short, something like an iPad combining Siri, Watson, and the gaming technology behind an online world like Skyrim. Surprisingly, the computer will make learning less standardized and robotic.
In other words, the adaptive textbook will read you as you read it. The NYTimes has a good piece discussing recent advances in this area including Bakpax which reads student handwriting and grades answers. Furthermore:
Today, learning algorithms uncover patterns in large pools of data about how students have performed on material in the past and optimize teaching strategies accordingly. They adapt to the student’s performance as the student interacts with the system.
…Studies show that these systems can raise student performance well beyond the level of conventional classes and even beyond the level achieved by students who receive instruction from human tutors. A.I. tutors perform better, in part, because a computer is more patient and often more insightful.
…Still more transformational applications are being developed that could revolutionize education altogether. Acuitus, a Silicon Valley start-up, has drawn on lessons learned over the past 50 years in education — cognitive psychology, social psychology, computer science, linguistics and artificial intelligence — to create a digital tutor that it claims can train experts in months rather than years.
Acuitus’s system was originally funded by the Defense Department’s Defense Advanced Research Projects Agency for training Navy information technology specialists. John Newkirk, the company’s co-founder and chief executive, said Acuitus focused on teaching concepts and understanding.
The company has taught nearly 1,000 students with its course on information technology and is in the prototype stage for a system that will teach algebra. Dr. Newkirk said the underlying A.I. technology was content-agnostic and could be used to teach the full range of STEM subjects.
Dr. Newkirk likens A.I.-powered education today to the Wright brothers’ early exhibition flights — proof that it can be done, but far from what it will be a decade or two from now.
I had an excellent time in this one, here is the audio and transcript. Here is the opening summary:
Abhijit joined Tyler to discuss his unique approach to economics, including thoughts on premature deindustrialization, the intrinsic weakness of any charter city, where the best classical Indian music is being made today, why he prefers making Indian sweets to French sweets, the influence of English intellectual life in India, the history behind Bengali leftism, the best Indian regional cuisine, why experimental economics is underrated, the reforms he’d make to traditional graduate economics training, how his mother’s passion inspires his research, how many consumer loyalty programs he’s joined, and more.
Yes there was plenty of economics, but I feel like excerpting this bit:
COWEN: Why does Kolkata have the best sweet shops in India?
BANERJEE: It’s a bit circular because, of course, I tend to believe Kolkata has —
COWEN: So do I, however, and I have no loyalty per se.
BANERJEE: I think largely because Kolkata actually also — which is less known — has absolutely amazing food. In general, the food is amazing. Relative to the rest of India, Kolkata had a very large middle class with a fair amount of surplus and who were willing to spend money on. I think there were caste and other reasons why restaurants didn’t flourish. It’s not an accident that a lot of Indian restaurants were born out of truck stops. These are called dhabas.
BANERJEE: Caste has a lot to do with it. But sweets are just too difficult to make at home, even though lots of people used to make some of them. And I think there was some line that was just permitted that you can have sweets made out of — in these specific places, made by these castes.
There’s all kinds of conversations about this in the early-to-mid 19th century on what you can eat out, what is eating out, what can you buy in a shop, et cetera. I think in the late 19th century you see that, basically, sweet shops actually provide not just sweets, but for travelers, you can actually eat a lunch there for 50 cents, even now, an excellent lunch. They’re some savories and a sweet — maybe for 40 rupees, you get all of that.
And it was actually the core mechanism for reconciling Brahminical cultures of different kinds with a certain amount of social mobility. People came from outside. They were working in Kolkata. Kolkata was a big city in India. All the immigrants came. What would they eat? I think a lot of these sweet shops were a place where you actually don’t just get sweets — you get savories as well. And savories are excellent.
In Kolkata, if you go out for the day, the safest place to eat is in a sweet shop. It’s always freshly made savories available. You eat the freshly made savories, and you get some sweets at the end.
COWEN: Are higher wage rates bad for the highest-quality sweets? Because rich countries don’t seem to have them.
BANERJEE: Oh no, rich countries have fabulous sweets. I mean, at France —
COWEN: Not like in Kolkata.
BANERJEE: France has fabulous sweets. I think the US is exceptional in the quality of the . . . let me say, the fact that you don’t get actually excellent sweets in most places —
And this on music:
BANERJEE: Well, I think Bengal was never the place for vocal. As a real, I would say a real addict of vocal Indian classical music, I would say Bengal is not, never the center of . . . If you look at the list of the top performers in vocal Indian classical music, no one really is a Bengali.
In instrumental, Bengal was always very strong. Right now, one of the best vocalists in India is a man who lives in Kolkata. His name is Rashid Khan. He’s absolutely fabulous in my view, maybe the best. On a good day, he’s the best that there is. He’s not a Bengali. He’s from Bihar, I think, and he comes and settles in Kolkata. I think a Hindi speaker by birth, other than a Bengali. So I don’t think Bengal ever had top vocalists.
It had top instrumentalists, and Ravi Shankar, Ali Akbar Khan, Nikhil Banerjee — these were all Bengali instrumentalists. Even now, I would say the best instrumentalists, a lot of them are either Bengali or a few of them are second . . . Vilayat Khan and Imrat Khan were the two great non-Bengali instrumentalists of that period, I would say, of the strings especially. And they both settled in Kolkata, so that their children grew up in Kolkata.
And the other great instrumentalists are these Kolkata-born. They went to the same high school as I did. There were these Kolkata-born, not of Bengali families, but from very much the same culture. So I think Kolkata still is the place which produces the best instrumentalists — sitarists, sarod players, et cetera.
COWEN: Why is the better vocal music so often from the South?
Definitely recommended, Abhijit was scintillating throughout.
The Lancet Commission on Pollution and Health, an authoritative review with well-over a dozen distinguished co-authors, is unusually forthright on the effect of pollution, most especially lead, on IQ. I think some of their numbers, especially in paragraph three, are too large but the direction is certainly correct.
Neurotoxic pollutants can reduce productivity by impairing children’s cognitive development. It is well documented that exposures to lead and other metals (eg, mercury and arsenic) reduce cognitive function, as measured by loss of IQ.168
Loss of cognitive function directly affects success at school and labour force participation and indirectly affects lifetime earnings. In the USA, millions of children were exposed to excessive concentrations of lead as the result of the widespread use of leaded gasoline from the 1920s until about 1980. At peak use in the 1970s, annual consumption of tetraethyl lead in gasoline was nearly 100 000 tonnes.
It has been estimated that the resulting epidemic of subclinical lead poisoning could have reduced the number of children with truly superior intelligence (IQ scores higher than 130 points) by more than 50% and, concurrently, caused a more than 50% increase in the number of children with IQ scores less than 70 (figure 14).265 Children with reduced cognitive function due to lead did poorly in school, required special education and other remedial programmes, and could not contribute fully to society when they became adults.
Grosse and colleagues 46 found that each IQ point lost to neurotoxic pollution results in a decrease in mean lifetime earnings of 1·76%. Salkever and colleagues 266 who extended this analysis to include the effects of IQ on schooling, found that a decrease in IQ of one percentage point lowers mean lifetime earnings by 2·38%. Studies from the 2000s using data from the USA 267,268 support earlier findings but suggest a detrimental effect on earnings of 1·1% per IQ point.269 The link between lead exposure and reduced IQ 46, 168 suggests that, in the USA, a 1 μg/dL increase in blood lead concentration decreases mean lifetime earnings by about 0·5%. A 2015 study in Chile 270 that followed up children who were exposed to lead at contaminated sites suggests much greater effects. A 2016 analysis by Muennig 271 argues that the economic losses that result from early-life exposure to lead include not only the costs resulting from cognitive impairment but also costs that result from the subsequent increased use of the social welfare services by these lead-exposed children, and their increased likelihood of incarceration.
Now this one is a stunner:
The college income premium—the extra income earned by a family headed by a college gra duate over an otherwise similar family without a bachelor’s degree—remains positive but has declined for recent graduates. The college wealth premium (extra wealth) has declined more noticeably among all cohorts born after 1940. Among non-Hispanic white family heads born in the 1980s, the college wealth premium is at a historic low; among all other races and ethnicities, it is statistically indistinguishable from zero [emphasis added]. Using variables available for the first time in the 2016 Survey of Consumer Finances, we find that controlling for the education of one’s parents reduces our estimates of college and postgraduate income and wealth premiums by 8 to 18 percent. Controlling also for measures of a respondent’s financial acumen—which may be partly innate—, our estimates of the value added bycollege and a postgraduate degree fall by 30 to 60 percent. Taken together, our results suggest that college and post-graduate education may be failing some recent graduates as a financial investment. We explore a variety of explanations and conclude that falling college wealth premiums may be due to the luck of when you were born, financial liberalization and the rising cost of higher education.
That paper is by William R. Emmons, Ana H. Kent and Lowell R. Ricketts, and comes from the St. Louis Fed, not from some bunch of (college-educated) cranks.
Via the excellent Samir Varma.
“What will you do to stay weird?” Ah, how many people responded with claims like:
No offense, but I think if you’re doing a lot of these things consciously and for the expressed purpose of being weird or differentiating yourself from those around you, you’re just a poseur. Truly weird people don’t have to come up with lists like this about how to be weird; they just follow their preferences.
But it’s not about intentionality. Take one of today’s MR stories, namely that universities are tracking the locations of college students to make sure they come to class. That is bad for the weird! So if you are weird, and you like to cut out on class and read Gwern instead (recommended), maybe you shouldn’t go to a school like that.
Going to those schools might be bad for you. Going to those schools might make you less weird. But you don’t have to sit around thinking “I’m going to try to look really weird, as if I were getting a bizarre tattoo, by refusing to attend schools with surveillance.” No, you need only to say “I love Gwern more than class!” And then think through the means-end relationship of how to keep the weird stuff flowing to the weird you.
Thus refusing admission at such schools is part of how you stay weird. But it need not have any element of poseur, artificiality, or deliberate image construction. What you want is to read Gwern instead of attending class, which indeed is weird (and good). At the same time, without artificiality you still to think through ends-means relationships, so you don’t end up stuck in class all day. And thus it is worth thinking about how to keep your freedom to be weird, poseur-free at that.
Thinking that social science explanations require more intentionality than in fact they do is one of the classic mistakes of internet comments.
The students who deviate from those day-to-day campus rhythms are flagged for anomalies, and the company then alerts school officials in case they want to pursue real-world intervention.
But don’t worry:
Carter said he doesn’t like to say the students are being “tracked,” because of its potentially negative connotations; he prefers the term “monitored” instead. “It’s about building that relationship,” he said, so students “know you care about them.”
Here is the full WaPo story by Drew Harwell.