Category: Education

Infant Formula, Price Controls, and the Misallocation of Resources

For the week of April 3, at least 12 states faced out of stock rates higher than 40 percent, including Connecticut, Delaware, Montana, New Jersey, Rhode IslandI’ve been reluctant to write about the shortage of infant formula simply because it’s so tiring to say the same thing over and over again. Obviously, this is a classic case where the FDA should allow imports of any food or baby formula approved by a stringent authority. (Here’s the US Customs and Border Patrol bragging about how they nabbed 588 cases of infant formula from Germany and the Netherlands as if it were cocaine.) Scott Lincicome has an excellent run down which covers not just the FDA but the problems caused by trade regulation and the WIC program as well.

What I want to do is focus on something less discussed: Why does the shortage vary across the country and even city by city?

I believe one reason is implicit price controls, either due to fear of regulatory backlash, regulatory constraints through other programs, or a misplaced desire not to upset consumers.

Price controls create shortages–that much is well known–but they also create a misallocation of goods. No doubt you have seen pictures from the 1970s of long lines of cars waiting to get gasoline. But there weren’t lineups everywhere at all times–rather we had the strange situation where there were shortage of gasoline in some places while, just a hundred miles away, there was plenty. Or shortages one day and surpluses the next.

Prices rationally allocate goods across space and time in response to shifts in demand and supply. If demand increases in one place, for example, prices rise, creating an incentive to bring in supplies from elsewhere. A rising price signals where supplies are needed and creates an incentive to deliver. Or, as Tyler and I put it, A price is a signal wrapped up in an incentive. A price controlled below the market price creates a shortage and it also kills the signaling and incentive function of prices. The result is allocational chaos: Shortages in some places and times and excess supply in other places and times.

In fact, price controls in a capitalist economy give you a window onto a planned economy. If you think of communism as a system of universal price controls this allocation chaos is the essence of why a communist state cannot rationally allocate resources.

Tyler and I discuss allocational chaos in our chapter on price controls in Modern Principles of Economics. See also this excellent video.

Some blurbs for *Talent*, with Daniel Gross

Talent” is what happens when two brilliant and profoundly iconoclastic minds apply their imagination to one of the hardest of all business problems: the search for good people. I loved it.”

–Malcolm Gladwell

“Talent is everything―whether in investing and building startups, or in other creative endeavors. Between product, market, and people, I’ve always bet on the last one as the biggest predictor of success. But while talent may be everywhere, it’s unevenly distributed, and hard to ‘find.’ So how do we better discover, filter, and match the best talent with the best opportunities? This book shares how, based on both scientific research and the authors’ own experiences. The future depends on this know-how.”

―Marc Andreessen, co-founder of Netscape and Andreessen Horowitz

“The most important job of any leader is to find individuals with a ‘creative spark,’ and the potential to discover, invent and build the future. If you want to learn the art and science of spotting and empowering exceptional people, Talent is brimming with fresh insights and actionable advice.”

―Eric Schmidt, co-founder of Schmidt Futures and former CEO of Google

“I do not know of any skills more worth developing than the ability to find exceptional undeveloped talent. I have spent many years trying to get good at that, and I was still astonished by how much I learned reading this book.”

Sam Altman, CEO of OpenAI, formerly of YCombinator

“Two of the premier talent spotters working today, Cowen and Gross have written the definitive history of identifying talent. Anyone who is interested in innovation, entrepreneurship, or the roots of America’s start-up economy must read this book.”Christina Cacioppo is CEO and co-founder of Vanta

You can order here on Amazon or here on Barnes & Noble.


“If economists are so smart, why aren’t they rich?”

Peter Coy (NYT) considers a few hypotheses.  My take here is pretty simple.  Here are three of the main ways to beat market returns:

1. Build a new product and sell it successfully.

2. Assemble and maintain an especially talented team of quants.  (It is a separate but still relevant question at what scale you can do this and thus how rich you can become.)

3. “See” something about the market, at least for a limited period of time, that other people do not and invest accordingly.  That might be falling interest rates, the rise of consumer tech, or the persistence of low inflation (all until recently!).  Note that #3 requires you to have some money in the first place, and for your run to be long enough that you truly become rich.

Putting aside generic demographic factors, there is no particular reason to expect #1 or #2 to be much correlated with expertise in economics.

You might think that #3 is somewhat correlated with expertise in economics, but I don’t think it is very much.  You can pile up a bunch of ancillary reasons why economists might not be practically oriented enough to succeed at #3.  But even putting all that aside, economic theories of “regime change” just aren’t very good!  (It is comparative statics that we excel at, but that knowledge can be replicated and sold cheaply to the rest of the investment community, if it turns out to be valuable.)  So knowing economics won’t correlate much with success at strategy #3.  And some of those non-economists who succeed at #3 are just lucky anyway.

And that is why, dear reader, most economists are not very rich.  You are correct in downgrading their intelligence for these reasons, though there are still some regards in which they are quite smart, such as having ability at hypothesis testing, or perhaps having the ability to ask very good and penetrating questions about economic issues.

The LGBTQ+ earnings gap

There is a new paper on this topic, here is the abstract:

This article provides recent estimates of earnings and mental health for sexual and gender minority young adults in the United States. Using data from a nationally representative sample of bachelor’s degree recipients, I find a significant earnings and mental health gap between self-identified LGBTQ+ and comparable heterosexual cisgender graduates. On average, sexual and gender minorities experience 22% lower earnings ten years after graduation. About half of this gap can be attributed to LGBTQ+ graduates being less likely to complete a high-paying major and work in a high-paying occupation (e.g., STEM and business). In addition, LGBTQ+ graduates are more than twice more likely to report having a mental illness. I then analyze the role of sexual orientation concealment and find a more pronounced earnings and mental health gap for closeted graduates.

That is from Marc Folch at the University of Chicago.

In defense of extremism

That is my latest Bloomberg column, the argument is super-simple:

Calling something “extremist” is not an effective critique. It’s a sign that the speaker or writer either doesn’t want to take the trouble to make a real argument, or is hoping to win the debate through rhetoric or Twitter pressure rather than logic. It’s also a bad sign when critics stress how social media have fed and encouraged “extremism.”

I favor plenty of extremist ideas. For instance, I think that the world’s major cities should adopt congestion rush-hour pricing. (I know, it hardly sounds extreme, but I assure you that many drivers consider it extremely outrageous to have to pay to drive on roads that were free a few hours before.) London and Singapore have versions of congestion pricing, with some success, but given the public reaction and that most other major cities do not seem close to enactment, it has to count as a relatively extreme idea.

I also favor human challenge trials, arguably an even more extreme idea. In human challenge trials, rather than waiting for a virus to infect those vaccinated (randomly) with the placebo, scientists recruit volunteers and infect them deliberately and immediately. This accelerates the speed of a biomedical trial. To many people there is something repugnant about asking for volunteers and then deliberately doing them harm by injecting them with the virus.

Maybe human challenge trials aren’t a good idea. But calling them extreme or repugnant does not help explain why.

We then get into some more “extreme” ideas…

Someone complaining about “extremism” is a likely predictor of an epistemic vice.

A new twins study

An overall twin correlation across thirty-eight measures was r = 0.95, p < .001. In contrast with previous research, the twins’ general intelligence and non-verbal reasoning scores showed some marked differences.

Yes that concerns identical twins raised in separate environments.  Here is the paper by Nancy L. Segal and Yoon-Mi Hur, via the excellent Kevin Lewis.

How strong are the racial preferences of universities?

Using detailed admissions data made public in the SFFA v. Harvard and SFFA v. UNC cases, we examine how racial preferences for under-represented minorities (URMs) affect their admissions to Harvard and UNC-Chapel Hill. At Harvard, the admit rates for typical African American applicants are on average over four times larger than if they had been treated as white. For typical Hispanic applicants the increase is 2.4 times. At UNC, preferences vary substantially by whether the applicant is in-state or out-of-state. For in-state applicants, racial preferences result in an over 70% increase in the African American admit rate. For out-of-state applicants, the increase is more than tenfold. Both universities provide larger racial preferences to URMs from higher socioeconomic backgrounds.

Here is the paper, by Peter Arcidiacono, Josh Kinsler, and Tyler Ransom, forthcoming as an NBER paper.

Learn to Code!

Gallup did a survey of tech boot camp graduates and the results are quite good.

A new study by Gallup and educational technology company 2U provides insight into these outcomes, based on interviews with 3,824 graduates of 2U-powered university boot camps, and helps shed light on what high-quality programs look like. 2U partners with more than 50 nonprofit universities to power their boot camp programs. Over more than a decade, 48,000 students have graduated from 2U-powered boot camps.

The boot camp graduates surveyed reported earning substantially more money one year after graduation than they were earning while attending the boot camp — regardless of whether they had bachelor’s degrees to begin with.

Now that’s a survey result not a causal estimate but tech boot camp graduates without a bachelor’s degree earn nearly as much as computer science graduates even though the tech boot camp is much cheaper and quicker.

Although graduates of 2U boot camps spent between one-quarter and one-third of what bachelor’s degree-holders typically spend on their programs, boot camp graduates reported earning as much or more money in the year after they graduated.

The median 2018 boot camp graduate without a bachelor’s degree reported earning nearly as much ($55,000) in the year immediately after their boot camp as the median computer science bachelor’s degree graduate ($56,421), and they earned roughly $10,000 more than non-computer science majors ($44,033).3

Boot camp graduates with a bachelor’s degree (which accounts for most of the surveyed graduates) earned even higher salaries — about $5,000 more — than their counterparts with less than a bachelor’s degree. Further, boot camp graduates with bachelor’s degrees are outearning U.S. workers of the same age with a bachelor’s degree.

Education is ripe for transformation.

My YouTube viewing habits

Abe emails me:

Tyler, I really enjoyed your recent podcast with Russ Roberts talking about favorite books and reading strategies. On the podcast, you mentioned YouTube a couple of times. I was hoping Russ would ask you about your YouTube habits, but he didn’t, so I thought I’d email to ask. What type of things do you watch on YouTube? Do you have any favorite channels or strategies for finding good content? I think it would be interesting to hear your thoughts on the subject.

My habits here are primitive, and not recommended for most of you sophisticates, but here goes:

1. I don’t subscribe to YouTube channels.

2. I watch some reasonable percentage, at least in part, of what people send me.

3. I watch prospective guests for CWT, to experience their conversational rhythms and mannerisms and “tics.”

4. I listen to music, especially when I am traveling, mostly classical music recitals or “world music,” to use a much-abused phrase.  For many “world musics,” the visual element is all-important.  I love Led Zeppelin, but I don’t click on them in this medium.  Piano and guitar recitals I enjoy much more than orchestral music, at least on YouTube.

5. Sometimes I watch videos on science, or occasionally econometrics.  It is often the best way to learn new concepts in these areas.

6. I watch Magnus Carlsen play BanterBlitz and engage in related chessboard antics in other forums, mostly while I am exercising on the Peloton.  If you understand chess reasonably well, he is one of the greatest entertainers of our time, in addition to being the best chessplayer ever.

7. I don’t listen on speeds other than 1x.  Doing so would disrupt the purposes mentioned above!  If I am just trying to absorb information rapidly, typically I would prefer a book.  The information from #5 usually is difficult enough for me to stick with 1x.  If it is just someone blabbing, typically I care about the true human rhythms of speech, or I just won’t do it.

What else?

New evidence on schooling and pandemic learning

We estimate the impact of district-level schooling mode (in-person versus hybrid or virtual learning) in the 2020-21 school year on students’ pass rates on standardized tests in Grades 3–8 across 11 states. Pass rates declined from 2019 to 2021: an average decline of 12.8 percentage points in math and 6.8 in English language arts (ELA). Focusing on within-state, within commuting zone variation in schooling mode, we estimate districts with full in-person learning had significantly smaller declines in pass rates (13.4 p.p. in math, 8.3 p.p. in ELA). The value to in-person learning was larger for districts with larger populations of Black students.

That is from a new paper by Rebecca Jack, Claie Halloran, James Okun, and Emily Oster.

Emergent Ventures winners, 19th cohort

Avi Schiffman, Harvard University. a second award to Avi, for his Ukraine Take Shelter project.

Carol Vieria de Magelhaes, Brazil and Northwestern University, to support a visiting research internship at Harvard Medical School.

BioDojo House, “A 3 month long co-living community in the Boston/Cambridge area from June-Aug, hosting 6-10 next generation builders & young emerging scientists between 18-25 years old.”

Serene Han, a free speech project, to expand Tor/Snowflake for Russian and other access to the uncensored internet.

Hector Alberto Diaz Gomez, Peru, Amazonas, general career development and travel, and for research into multilingual search engines.

Louise Perry and Fiona Mackenzie, London area, The Other Half, “a feminist think tank with a post-liberal agenda.”

Bridget Pegg, St. Louis and Mizzou, for general career development, and intellectual and policy outreach for Missouri and the broader Midwest.

Marius Hobbhahn, Tübingen, AI safety and for writings on many other topics as well.

Zeel Patel, Harvard and Broad Institute of MIT, applying machine learning to health care through AI.

Dwarkesh Patel, Austin, podcasting and general career support.

Tim Farrelly, Dublin, working on AI and vision issues and for general career development and conference travel.

Yang Zheng, North Hollywood, a project to crowdsource AI problems.

Ben Smith, University of Oregon, from New Zealand.  For his project on “multi-objective reinforcement learning with an exponential-log function.”

Paulina M Paiz, San Francisco/Toronto, travel grant to attend scientific conferences, and to continue with her work using DeepChem.


A devil may care attitude?

A Pennsylvania school district has voted against a parent’s request to launch a satanic group’s After School Satan Club at an elementary school for students who want to participate in an extracurricular program that is non-religious.

In an 8-1 vote Tuesday, the Northern York County School Board based in Dillsburg, Pennsylvania, rejected the request to establish an “After School Satan Club” at the district’s Northern Elementary School.

The agenda for Tuesday’s meeting indicates that Samantha Groome sought to establish the club on a “probationary basis.” A video clip of the school board meeting, obtained by the York Daily Record, shows parents and others gathered in the crowd standing up and erupting into applause after the effort to create the satanic club was defeated.

Groome said she wanted her children to be able to participate in extracurricular activities, but sought a secular alternative to the Joy El Christian club, which operates at nine of the 16 school districts in the county and offers off-campus activities.


The flyer touted some of the activities participants would engage in, including “science projects,” “puzzles games,” and “arts and crafts projects,” and listed “benevolence and empathy,” “critical thinking,” “problem solving,” “creative expression” and “personal sovereignty” as concepts children will learn there. It also asserted that the United States Constitution protects the After School Satan Club’s right to distribute flyers on public school grounds.

Here is the full story, via a loyal MR reader.

Solve for the equilibrium

Google Docs could soon suggest ways to improve the quality of your writing in addition to fixing straightforward grammar and spelling errors, the company has announced. A purple squiggly line will appear under suggestions to help make your writing more concise, inclusive, active, or to warn you away from inappropriate words.

Here is the full story.  Just as Google and Amazon search have become worse, the more general point is that franchise values tend to be cashed in at some point.

My EconTalk podcast with Russ Roberts about books and reading

Here goes!

Intellectual omnivore Tyler Cowen of George Mason University and EconTalk host Russ Roberts talk about their reading habits, their favorite books, and the pile of books on their nightstands right now.

And a transcription is offered for the first half hour.  Here is one early excerpt:

Russ Roberts: Yeah, yeah. You don’t give away–do you lend books out?

Tyler Cowen: Not very often. I don’t own many books. So, I collected books in great numbers when I was an undergraduate, mostly history of economic thought. I thought I would build up this incredible collection of the great economics masterworks. But then I started moving around, and then I moved to Germany for a year and I’m, like, ‘This is not going to work.’ So, what I will do–there’s some economic historians in my department. If I get a history book, I will give it to them because I know they won’t necessarily read it. They’ll use it or not use it for reference. And I don’t feel I’m tricking them into reading a book. But I would be very reluctant to give you a book, Russ. Not that I don’t love you or like you, or both, but I would feel that you would feel obliged to read the book. Correct?

It is immoral to give away books unless you truly feel the recipient should read them!

I enjoyed this segment too:

Russ Roberts: You’re a lunatic.