Category: History

How did the IR community get Russia/Ukraine so wrong?

In proper Tetlockian fashion, I thought I would look back and consider how well IR experts did in the time leading up to the current war in Ukraine.  In particular, how many of them saw in advance that a war was coming?  And I don’t mean a day or two before the war started, though there were still many commentators in denial at such a late point.

Where to start?  One might look at the mid-2021 words of the very smart Daniel Drezner:

Wertheim thinks that Ukraine could trigger a great-power war. Meh. In 2021 we have already had one round of Putin brandishing the sword on Ukraine, Biden standing firm, and the situation de-escalating. NATO’s deterrent power seems important to the region. To be honest I would be more worried about flash points in the Pacific Rim.

Drezner lived in the Donbas region for some while in the 1990s, so he is hardly a stranger to the relevant issues.

More recently Chris Blattman, who is also very able and very smart, wrote in February that Putin probably was not going to attack.  Chris has just published a very well-received major book titled Why We Fight: The Roots of War and the Path to Peace.  Chris does not pretend he is a Ukraine/Russia expert (“I know very little about Ukraine or Russia”), but he does command the literature on war and violent conflict with very real authority.

John Mearsheimer is one who foresaw the very real possibility of a war against Ukraine.  I think he is quite wrong about NATO as the provocation, but if you are grading him on predictions alone obviously he wins some serious kudos.

See also this Scott Alexander post, though mainly I am looking for somewhat earlier predictions.  By December 2021 a lot of us knew because it was pretty obvious (as for Scott’s puzzlement over me, due to the information flows I am sometimes in, I am not always in a position to make all my predictions fully public).

Garry Kasparov is another one who was right about the motives and the willingness of Putin to engage in further violent conquest, and I will return to him later.  Garry knows a lot of IR, but of course he is not an IR scholar in the academic sense of that term.

Who were the other voices speaking up with urgency?  IR voices?  Comments are open and I hope you can guide me to the very best commentators who got this one right.

When I google “who predicted Russia war against Ukraine” I get Mearsheimer, a retired Russian general, and a blind psychic, but no bevy of IR scholars.

You might argue that IR scholarship is not about prediction, just as some macroeconomic theories themselves imply  that recessions cannot be generally predicted.  Still, if IR scholars understand this region reasonably well, many more of them should have been raising red flags, no pun intended.  There is no analog of the efficient markets hypothesis here, so IR work should not be so far from some degree of predictive accuracy.  Not so many scholars (of various kinds) predicted the collapse of the USSR, and I think it is absolutely correct to conclude they did not understand the late 1980s USSR very well.  The same can be said of the earlier Iranian revolution, which also was not widely predicted.

As for further instances of getting it wrong, how about Obama’s famous gaffe in the 2012 debate with Mitt Romney, mocking Romney for his fear of Russia and cold war mentality? While Obama was a President and not an IR scholar, this was toward the end of his first-term and his was a “presidency of expertise” like few others have been.  Obama was not irresponsibly “winging it” with his sarcastic take on Russian danger, rather it was a common point of view, especially among Democrats and Democratic political science experts at that time.

Or consider this more recently:

During Burns’ Senate confirmation hearing in February, he said that, as CIA director, he would have “four crucial and inter-related priorities.” They were: “China, technology, people and partnerships.” Russia was not on that priorities list.

Again, he is not an IR scholar but still:

To be fair, few people in Washington were bothered by that at the time. The city was far more obsessed, on a bipartisan basis, with China and its ambitions.

Overall, on a scale of one to ten, how would we grade the performance of IR scholars on the Russia-Ukraine war?  2?  2.5?

What are some possible reasons for those individuals so consistently missing the boat on this issue?  I see a few options:

1. The IR community is mostly Democrats, and they were unprepared for the narrative that Putin might invade under Biden but not Trump.  They too much had mental models where the evil of Putin works through Trump.

2. Perhaps the IR community doesn’t put enough emphasis on historical continuity and persistence.  Russia has been messing around in Ukraine since at least Catherine the Great during the 18th century.  Since that time, how many of those years has Ukraine been a semi-free, autonomous nation?  Hardly any.

3. The IR community is risk-averse, and preserving of its academic reputations, and thus its members are less willing to make bold predictions than say pundits are.  You might even think that is good, all things considered, but it will help explain the missed predictions here.

4. Perhaps partly for ideological reasons, it is hard for much of the IR community to internalize how much Putin (correctly?) thinks of the Western Europeans as cowards who will not defend themselves.  The Western European nations are supposed to represent reasonable ways of running a polity, committed to social democracy above all else, and that is what so many academics believe as well.  It might be hard for them to see that Western Europe has been full of folly, including with respect to nuclear energy and also collective defense.

5. Amongst academic and many of the scholars outside of academia but on the fringes, thoughts about evil are channeled into domestic directions, such as Trump, guns, “the right wing,” and so on.  Maybe there isn’t enough mental energy to stay sufficiently alert about possible evils elsewhere.  Along related lines, we don’t always have the background in the humanities, and history, to recognize that a certain kind of destructive evil still is possible in today’s world.

What else?

Listing those five points returns my attention to Kasparov, who has been banging the drum about Putin for quite a few years now and telling us Putin is going to do something like this.  Garry is often considered an “extremist” by academics, or “not one of the club,” but it seems to me he has been entirely right and most of them entirely wrong.  I know Garry, and can report that he really is able to pierce the veil on 1-5 very clearly.  Perhaps that helped him see what was coming.  For instance, Garry is strongly anti-Trump, but he doesn’t let that distract him from other issues of relevance.  He also knows Russian history and the humanities very well, and his understanding of evil is well-calibrated to yield good predictions in situations like this.

I’ve also found that many individuals from the Baltic states, with real skin in the game, have had an appropriate level of suspicion about Russia for a long time.  Anecdotally might this broadly Baltic view be more correct than the weaker suspicions held by the IR scholars?

Addendum: I’ve heard a few people claim that Putin is just an irrational madman and that he lies outside the sphere of prediction altogether.  Well, the action in Ukraine had very definite and very direct precursors, including other invasions of Ukraine!  It hardly seems like a pure black swan.  Furthermore, a lot of the Russian public supports or at least tolerates the invasion.  “Putin’s propaganda,” some cry, but all that same machinery of censorship and propaganda was not enough to get the Russian public to trust the Sputnik vaccine, which very likely would have saved many of their lives.  So these events are not just about Putin by any means.

Also, if you are curious as to where I think things stand now, here is a good and interesting thread on the current state of the war and where it might be headed.

The Unfairness Doctrine

The great George Will hits another one out of the ballpark with some useful reminders:

Government pratfalls such as the Disinformation Governance Board are doubly useful, as reminders of government’s embrace of even preposterous ideas if they will expand its power, and as occasions for progressives to demonstrate that there is no government expansion they will not embrace.

…Using radio spectrum scarcity as an excuse, even before the Fairness Doctrine was created, Republicans running Washington in the late 1920s pressured a New York station owned by the Socialist Party to show “due regard” for other opinions. What regard was “due”? The government knew. So, it prevented the Chicago Federation of Labor from buying a station, saying all stations should serve “the general public.”

In 1939, Franklin D. Roosevelt’s administration conditioned one station’s license renewal on ending anti-FDR editorials. (Tulane Law School professor Amy Gajda’s new book, “Seek and Hide: The Tangled History of the Right to Privacy,” reports that earlier, FDR had “unsuccessfully pushed for a code of conduct for newspapers as part of the Depression-era National Recovery Act and had envisioned bestowing on compliant newspapers an image of a blue eagle as a sort of presidential seal of approval.”)

John F. Kennedy’s Federal Communications Commission harassed conservative radio, and when a conservative broadcaster said Lyndon B. Johnson used the Gulf of Tonkin incident in 1964 as an excuse for Vietnam escalation, the Fairness Doctrine was wielded to force the broadcaster to air a response.

Hat tip: Don Boudreaux at Cafe Hayek.

The fall of Sri Lanka

After the end of a devastating 26-year civil war in 2009, the island of 22mn had the makings of an Asian economic success story. Under governments run by the powerful Rajapaksa family, annual economic growth peaked at 9 per cent. By 2019, the World Bank had classified the island as an upper-middle income country. Sri Lankans enjoyed a per capita income double that of neighbours such as India, along with longer lifespans thanks to strong social services such as healthcare and education. The country tapped international debt lenders to rebuild, becoming a key private Asian bond issuer and participant in China’s Belt and Road Initiative.

And yet now everything is in tatters (that passage is from a very good FT piece).  Here is one bit:

Sri Lanka’s reserves have fallen from $7.5bn in November 2019 to the point where finding $1mn is “a challenge”, Wickremesinghe, the new prime minister, said in an address last week. This has meant shortages of not only fuel but food and medicine, with hospitals forced to postpone surgeries. The country has the worst inflation in Asia at about 30 per cent in April and the currency has almost halved in value since it was floated in March. The UN Development Programme says that nearly half the population is in danger of falling below the poverty line, and warns of a looming humanitarian crisis as the urban poor and former middle class begin to cut back on meals.

And:

“Most people are down to one meal a day”, says her neighbour, Mohammad Akram, “but are embarrassed to admit it.”

I believe we have not yet internalized how rapidly a middle income country can fall from grace and into utter chaos.

That is now, this was then, Taiwan edition

Words matter, in diplomacy and in law.

Last week President Bush was asked if the United States had an obligation to defend Taiwan if it was attacked by China. He replied, “Yes, we do, and the Chinese must understand that. Yes, I would.”

The interviewer asked, “With the full force of the American military?”

President Bush replied, “Whatever it took” to help Taiwan defend itself.

A few hours later, the president appeared to back off this startling new commitment, stressing that he would continue to abide by the “one China” policy followed by each of the past five administrations.

Where once the United States had a policy of “strategic ambiguity” — under which we reserved the right to use force to defend Taiwan but kept mum about the circumstances in which we might, or might not, intervene in a war across the Taiwan Strait — we now appear to have a policy of ambiguous strategic ambiguity. It is not an improvement.

Here is the full 2001 Wapo Op-Ed — can you guess who the author was?  Hint: a prominent Senator at the time.  Via tekl.

Vodou Economics on the NYT on Haiti

From Craig Palsson, an expert in the economic history of Haiti and also fluent in Creole.  Here goes:

My main argument is The New York Times is trying to expand from the paper of record to the academic journal of record. This is not the first time NYT has done this. The 1619 project had the same ambitions and similarly ignored academic standards. While I am an academic, I don’t see this as an existential threat. But I do think it has consequences. The 1619 project is now influencing academic work and school curricula…

To me, the biggest problem with the articles is a shocking lack of nuance and too much causal language for conclusions we cannot make. We can see this in the article titled, Invade Haiti, Wall Street Urged. The U.S. Obliged. Even that title lacks nuance and uses strong causal language…

The NYT article barely even considers the other motivations for invading Haiti. It alludes to political instability, but do you come away from that article understanding that the caco forces that resisted the Occupation were the same ones overthrowing the government before the invasion? It mentions the US paranoia that Germany might try to take over Haiti. But do you read the article and understand that Germans controlled about 80% of Haiti’s commerce? Or that the invasion happens during World War I, when Europe warned about German businesses operating in Latin America?

There is much more at the link, and Craig shows how the articles are geared to deliver a particular kind of selective moral message about guilt and blame, not to give the reader a decent understanding of Haiti and its history.  A lot of the series focuses on the terrible French decision to extract reparations from Haiti, starting in the 19th century.  You will not be taught, however, that Haiti and the Dominican Republic have diverged significantly since 1960, and since then the DR has become one of the wealthier nations in Latin America and Haiti has collapsed politically and is mired in extreme poverty, probably the worst in this hemisphere.  Perhaps that divergence since 1960 needs to be addressed and cannot simply be reduced to much earlier imperialist crimes.  There is even a massive Haitian decline since the 1990s, a time of relative hope.

I am not a “New York Times hater,” and would readily admit and indeed emphasize that significant parts of the newspaper are much, much better than anything else out there.  But on particular topics, you just know you are being taken for a ride.

*21st Century Monetary Policy*

I am pleased to have received an autographed copy of this very carefully done work.  I think it is (by far) the best treatment of what the Fed has been up to since the 1970s, at least on the monetary policy front.  There really isn’t anyone who would know better than Ben, keeping in mind he was not only Fed chair but also a top, possibly Nobel-quality monetary economist and also economic historian.  The clarity and writing quality are high.

In one way, however, this is an unusual book — there is remarkably little “of Ben” in the book.  To be clear, Ben already has published his personal memoir.  Still, if most of this book had been written by someone else, I would not have known.  Or maybe that is what it means to “put Ben in this book.”  Imagine Elon Musk writing a book on rocketry and focusing on the rockets.

In any case recommended.  Here is a good David Leonhardt NYT review.  It is striking to me how few reviews there are so far — why?  Therein lies a lesson too, though I have yet to figure out what it is.

The stuff of horror movies?

Though the trend is a positive one:

We study the intergenerational persistence of inequality by estimating grandmother-mother associations in the loss of a child, using pooled data from 119 Demographic and Health Surveys in 44 developing countries. Compared with compatriots of the same age, women with at least one sibling who died in childhood face 39% higher odds of having experienced at least one own-child death, or 7 percentage points at age 49. Place fixed effects reduce estimated mortality persistence by 47%; socioeconomic covariates explain far less. Within countries over time, persistence falls with aggregate child mortality, so that mortality decline disproportionately benefits high-mortality lineages.

That is from a new NBER working paper by Frances R. Lu and Tom Vogl.

Why don’t nations buy more territories from each other?

Here is a rather underwhelming list of such purchases in recent times.  West Germany buys three islands from the Netherlands in 1963?  Pakistan buys Gwadar from Muscat and Oman in 1958.  America buys the Danish West Indies in 1916.  In 1947, though the Soviet Union bought part of Lapland in Finland to enable a hydroelectric plant.

We all know about the Louisiana Purchase.  But that’s it since 1916!?  Is Wikipedia failing us?  I don’t think so.

Are there really no good Coasean trades between the two Irelands?  Israel and the Palestinians?  Armenia and Azerbaijan?  How about Chile selling Bolivia a wee bit of coastline?  I can think of a few reasons why territory purchases are these days so hard to pull off.

1. Incoming revenue is subject to a fiscal commons effect.  Some crummy noble does not get to spend it on himself.  And voters take government revenue for granted in most cases, and so do not perceive an increase in their expected retirement benefits from selling land to foreign powers.

2. In earlier times, a lot of land transactions were motivated by “they’re going to take it from us anyway, sooner or later.”  Did Napoleon really think he could hold on to all that land?  No.  He wisely got out, though sadly subsequent French governments did not do “buy and hold.”  Not to mention the Florida Purchase Treaty and Guadalupe Hidalgo.  At least until lately, wars of conquest have been in decline and that has meant a corresponding decline in country-to-country land transactions as well.

3. First mass media and then social media have succeeded in making land boundaries more focal to the citizenry.  Say Northern Ireland today wanted to sell a single acre to the Republic of Ireland.  This would be seen as a precedent, rife with political implications, and it would be hard to evaluate the transaction on its own terms.  Trying to sell a county would be all the more so.  Just look at the map — should there really be so much of “Northern” Ireland to the south of ROI?  Donegal, Derry, etc. — status quo bias, are we really at an optimum point right now?

4. Contested territories today often involve low levels of trust.  Selling pieces of the Irelands back and forth is likely enforceable (but does ROI want any of it?), but an Israel-Palestine deal is not.  Israel prefers to simply move the goalposts by increasing the settlements in the westward direction.  What is really the gain from pressuring one of the Palestinian leaders to sign a piece of paper recognizing this?  Most likely it would ensure his assassination and simply enflame tensions further.  Both parties might prefer unilateral action over a deal.

5. Land in general is far less valuable than in earlier times.  In theory, that could make it either easier or harder to sell land, but if some of the transactions costs (see above) are constant or rising in magnitude, that will make it harder.  Let’s say Colombia raised the funds to buy back part of the Darien gap — whoop de doo!  The country has plenty of empty land as it is.  The whole notion of Lebensraum, and I don’t just mean in its evil Nazi form, has taken a beating since World War II.

6. Russia and China block some deals that might make sense, or maybe America blocks them too.  Just run a Google search on “Arctic.”  China is doing the investing, but we won’t let them own it.  Russia doesn’t want America to own it.  Everything thinks Canadian control or ownership doesn’t amount to much.  Indigenous groups claim parts of it, but they cannot exercise effective control.  And so the whole region and issue festers and stagnates.

7. Consider a deal that does make sense: the U.S. buying Greenland from the Greenlanders and also Denmark.  Can we really in essence pay the 56,000 or so residents to give up their country and territory?  I am no expert on the politics there, but I suspect they are unwilling to vote their pocketbook.  (For one thing, I don’t see them posting a price on eBay or holding a garage sale.)  How about skipping the vote and just offering them free condos in Miami?  Let’s do it!  Still, you can see the problem.

What else?  And can you think of any current issues where a transactional approach might actually work?

China’s Bizarre Authoritarian-Libertarian COVID Strategy

It’s difficult to understand China’s COVID strategy. On the one hand, China has confined millions of people to their homes, even to the extent of outlawing walking outside or having food delivered. Many thousands of other people have been taken from their homes and put into quarantine centers. On the other hand, vaccination is not mandatory! I can understand authoritarianism. I can understand libertarianism. I have difficulty understanding how jailing people, potentially without food, is ok but requiring vaccinations is not. (Here’s a legal analysis of China’s vaccine policy.) Moreover, put aside making vaccines mandatory because as far as I can tell, China has only recently started to get serious about non-coercive measures to vaccinate the elderly. The Washington Post notes:

The vaccination drive has been mild compared to some of the other pandemic-control measures and did not prioritize the elderly. Some younger people have been required to get vaccinated for their jobs, but vaccination of retirees remains optional. Incentives like eggs, grains and other foodstuffs — a staple of China’s vaccination drive since last year — are now being bolstered by home checkups, mobile clinics and the widespread mobilization of public servantsto ensure the elderly get shots.

China is shutting down factories costing its economy trillions of dollars and the best they come up with to get elderly people vaccinated is egg incentives???!

It’s difficult to understand what the Chinese leadership is thinking. It’s conceivable that the Chinese vaccines are much less effective than we have been led to believe but that seems unlikely. As far as we can tell the Chinese vaccines are not quite as good as the mRNA vaccines but good enough to prevent severe disease and pass FDA approval in the United States. My best guess is that President Xi Jinping is so powerful and insulated from reality and alternative viewpoints that he is just soldiering on either oblivious to the pain and foolishness of his policies or indifferent, much like Mao before him during the great famine.

My Conversation with the excellent Chris Blattman

Here is the audio, transcript, and video, we did this one face-to-face.  Here is part of the summary:

What causes war?…Chris and Tyler also cover why he doesn’t think demographics are a good predictor of a country’s willingness to go to war, the informal norms that restrain nations, the dangers of responding to cyberattacks, the breakdown of elite bargains in Ethiopia, the relationship between high state capacity and war, the greatest threats to peace in Ireland, why political speech isn’t usually a reliable indicator of future action, Vladimir Putin’s centralized motives for invading Ukraine, why he’s long on Colombia democratically — but not economically, why more money won’t necessarily help the Mexican government curb cartel violence, the single-mindedness necessary for bouldering, how Harold Innis’s insights about commodities led Chris to start studying war, how the University of Chicago has maintained a culture of free inquiry, and more.

And from the dialogue:

COWEN: If you look at the marginal cases — since there are some wars — there’s a bunch of cases, even if unusual, where someone is right at the margin. At the margin, what are the factors that are most likely to account for the explanatory variation in whether or not a country goes to war?

BLATTMAN: For me, the one that people talk the least about that strikes me as the most important is how concentrated is power in the country. What’s holding back someone from considering all of the implications of their actions on other people, should they decide to take their society to war?

It’s maybe the most important margin in history, and it’s maybe the one that no one of my tribes — which are political economists — think and talk the least about. It’s the one that — in journalism, people leap to psychological explanations, and they try to understand the psychology of leaders, but they don’t try to understand the way in which they’re constrained. So, it’s this combination of the most important and the most ignored.

COWEN: So federal societies are less likely to go to war?

Interesting throughout.  And I am very happy to recommend Chris’s new and important book Why We Fight: The Roots of War and the Path to Peace.  And here is my earlier 2018 Conversation with Chris.

What should I ask Leopoldo López?

I will be doing a Conversation with him, do read his whole Wikipedia page but here is part of it:

Leopoldo Eduardo López Mendoza (born 29 April 1971) is a Venezuelan opposition leader. He co-founded the political party Primero Justicia in 2000 with Henrique Capriles and Julio Borges and was elected mayor of the Chacao Municipality of Caracas in the regional elections held in July 2000. He is the National Coordinator of another political party, Voluntad Popular, which he founded in 2009…

In September 2015, he was found guilty of public incitement to violence through supposed subliminal messages, being involved with criminal association, and was sentenced to 13 years and 9 months in prison.

He served seven of those years and now is free and has left Venezuela.  He is also an economist, with a Kennedy School background, and has written a book on energy issues.

So what should I ask him?

The Myth of Primitive Communism

AEON: Today, many writers and academics still treat primitive communism as a historical fact. To take an influential example, the economists Samuel Bowles and Jung-Kyoo Choi have argued for 20 years that property rights coevolved with farming. For them, the question is less whether private property predated farming, but rather why it appeared at that time. In 2017, an article in The Atlantic covering their work asserted plainly: ‘For most of human history, there was no such thing as private property.’ A leading anthropology textbook captures the supposed consensus when it states: ‘The concept of private property is far from universal and tends to occur only in complex societies with social inequality.’

A Yagua (Yahua) tribeman demonstrating the use of blowgun (blow dart), at one of the Amazonian islands near Iquitos, Peru. JialiangGao www.peace-on-earth.org

In fact, although some tribes had communal sharing of (some) food, most did not. Private property, far from being unknown, was normal among all hunter-gatherers that have been studied. Manvir Singh writing in Aeon continues:

Agta hunters in the Philippines set aside meat to trade with farmers. Meat brought in by a solitary Efe hunter in Central Africa was ‘entirely his to allocate’. And among the Sirionó, an Amazonian people who speak a language closely related to the Aché, people could do little about food-hoarding ‘except to go out and look for their own’. Aché sharing might embody primitive communism. Yet, Hill admits, ‘the Aché are probably the extreme case.’

More damning, however, is a starker, simpler fact. All hunter-gatherers had private property, even the Aché….Individual Aché owned bows, arrows, axes and cooking implements. Women owned the fruit they collected. Even meat became private property as it was handed out. Hill explained: ‘If I set my armadillo leg on [a fern leaf] and went out for a minute to take a pee in the forest and came back and somebody took it? Yeah, that was stealing.’

Some proponents of primitive communism concede that foragers owned small trinkets but insist they didn’t own wild resources. But this too is mistaken. Shoshone families owned eagle nests. Bearlake Athabaskans owned beaver dens and fishing sites. Especially common is the ownership of trees. When an Andaman Islander man stumbled upon a tree suitable for making canoes, he told his group mates about it. From then, it was his and his alone. Similar rules existed among the Deg Hit’an of Alaska, the Northern Paiute of the Great Basin, and the Enlhet of the arid Paraguayan plains. In fact, by one economist ’s estimate, more than 70 per cent of hunter-gatherer societies recognised private ownership over land or trees.

Moreover, the sharing that some hunter-gatherers practiced was functional rather than ethical.

Whatever we call it, the sharing economy that Hill observed with the Aché does not reflect some lost Edenic goodness. Rather, it sprang from a simpler source: interdependence. Aché families relied on each other for survival. We share with you today so that you can share with us next week, or when we get sick, or when we are pregnant.

take away the function and the sharing disappeared, often brutally:

In their book Aché Life History (1996), Hill and the anthropologist Ana Magdalena Hurtado listed many Aché people who were killed, abandoned or buried alive: widows, sick people, a blind woman, an infant born too soon, a boy with a paralysed hand, a child who was ‘funny looking’, a girl with bad haemorrhoids. Such opportunism suffuses all social interactions. But it is acute for foragers living at the edge of subsistence, for whom cooperation is essential and wasted efforts can be fatal.

None of this should be surprising to anyone familiar with the property-rights tradition of Demsetz and Barzel. The primitive communism of hunter-gatherers is no different in principle from the primitive communism of the wifi service at Starbucks, the modern day police and fire departments, or the use of Shakespeare’s works. As Barzel put it, “New rights are created in response to new economic forces that increase the value of the rights.” Thus, in this respect, there are no major differences among peoples, only differences in transaction costs, externalities, and technologies of inclusion and exclusion.

My excellent Conversation with Thomas Piketty

Lots of disagreement in this episode, though always polite.  Here is the transcript, video, and audio.  Here is part of the summary:

He joined Tyler to discuss just how egalitarian France actually is, the beginning of the end of aristocratic society, where he places himself within French intellectual history, why he’s skeptical of data from before the late 18th century, how public education drives economic development, why Georgism isn’t sufficient to address wealth inequality, the relationship between wealth and cultural capital, his proposal for a minimum inheritance, why he turned down the Legion of Honor, why France should give reparations to Haiti despite the logistical difficulties of doing so, his vision for European federalism, why more immigration won’t be a panacea for inequality, his thoughts on Michel Houellebecq’s Submission, and more.

Here is one excerpt:

COWEN: If I visit every major country in Europe, what I observe is the highest living standard is arguably in Switzerland — Norway and Luxembourg aside. Switzerland has one of the smallest governments, and they attempt relatively little redistribution. What is your understanding of Switzerland? What if someone said, “Well, Europe should try to be more like Switzerland. They’re doing great.” Why is that wrong?

PIKETTY: Oh, Switzerland. It’s a very small country, so it’s about the size. . . . Actually, it’s smaller than Île-de-France, which is a Paris region. Now, if you were to make a separate country out of Île-de-France, GDP per capita, I think, would actually be higher than Switzerland. Of course, you can take a wealthy region in your country and say, “Okay, I don’t want to share anything with the rest of the country. I’m going to keep my tax revenue for me. I’m going to be a tax haven based on bank secrecy.” That’s going to make you 10 percent or 20 percent richer. I’m not saying —

COWEN: It’s been a long time since Switzerland relied on bank secrecy, right? Following 9/11, that Swiss advantage largely went away.

PIKETTY: Oh, that’s wrong. Oh, you’re wrong on this.

We talk about Matt Rognlie and Greg Clark as well.  Recommended, this was fun for me to reread.

Additive Growth

That is a new and quite interesting paper by Thomas Philippon.  Here is the abstract:

Growth theory is based on the assumption of exponential total factor productivity (TFP) growth. Across countries and time periods I find that TFP growth is actually linear. Unlike the exponential model, the additive growth model provides useful medium-term forecasts of TFP. It also explains the TFP slowdown and the volatility puzzle, and predicts falling real interest rates. For the distant future the model predicts ever increasing increments in standards of living but with growth rates that converge to zero. For the distant past the model suggests that the size of TFP increments has changed in the late 1600’s, the early 1800’s, and around 1930.

Or consider this presentation:

Initial trend growth is around 2.5%. After 40 years, TFP doubles, and since increments are constant, the trend growth rate is half of what it used to be. After 60 years later, it is only one percent.

And:

…the process of US TFP increments has only one break over the past 130 years, around 1930, following the large-scale implementation of the electricity revolution…For the UK, I find two breaks between 1600 and 1914. The first is between 1650 and 1700, when growth becomes positive. The second is around 1830. These breaks are consistent with historical research on the first and second industrial revolutions…

The author argues that linear TFP growth holds for Thailand, Taiwan, and Korea as well, and indeed for all recent countries with data for TFP.

As Philippon puts it informally “New ideas add to our stock of knowledge; they do not multiply it.”

As stated above a very interesting paper, but I do have some worries.  First, his model fits “TFP” better than gdp growth per se, which (at least until recently) does appear to be exponential in advanced economies.  If I read the author’s pp.21-22 correctly, he is suggesting (speculatively) that 20th century gdp growth received an artificial inflation from improvements in educational achievement that perhaps are unlikely to be replicated.  Maybe, but the broader predictions of the theory — including on gdp growth — require further consideration.

Second, is TFP even “a real thing”?  Or is it a meaning-poor residual, based on arbitrary distinctions between “innovation” and “investment”?  Maybe the ongoing trend is simply that more innovation is embodied in concrete investments, thus causing TFP to measure lower?  Too much of the paper takes the TFP concept for granted.

Nonetheless worth a real ponder.