Category: History

Density is Destiny: Economists Predict the Far Future

In a paper that just won the JPE’s Robert Lucas Prize, Desmet, Krisztian Nagy and Rossi-Hansberg model the evolution of the world economy over the next 400-600 years! Is it laughable or laudatory? I’m not entirely sure. The paper does have an insight that I think is very important, in addition to a number of methodological advances.

If we look around the world today we see that the places with the densest populations, such as China and India, are poor. But in the long-run of history that doesn’t make sense. As Paul Romer, and others, have emphasized, ideas are the ultimate source of wealth and more people means more ideas. As a result, innovation and GDP per capita should be higher in places and times with more people. The fact that China and India are poor today is an out-of-equilibrium anomaly that happened because they were slower than the West to adopt the institutions of free markets and capitalism necessary to leverage ideas into output. China and India weren’t relatively poor in the past, however, and they won’t be relatively poor in the future. With that in mind, a key long-run prediction of Desmet, Krisztian Nagy and Rossi-Hansberg becomes clear. If people are not allowed to migrate then the places that are densest today will not only equal the West, they will overtake the West in innovation and productivity.

One of the key determinants of these patterns is the correlation between GDP per capita and population density. As we mentioned above, the correlation is negative and weak today, and our theory predicts that, consistent with the evidence across regions in the world to-day, this correlation will become positive and grow substantially over the next six centuries, as the world becomes richer. Two forces drive this result. First, people move to more productive areas, and second, more dense locations become more productive over time since investing in local technologies in dense areas is, in general, more profitable. Migration restrictions shift the balance between these two mechanisms. If migration restrictions are strict, people tend to stay where they are, and today’s dense areas, which often coincide with developing countries, become the most developed parts of the world in the future…. In comparison, most of today’s high-productivity, high-density locations in North America, Europe, Japan, and Australia fall behind in terms of both productivity and population.

Thus, if migration restrictions are strict, density is destiny and the dense parts of the world will rule. But what if migration restrictions are loosened?

… if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three.

It’s much better to remove migration restrictions today because we get to a much richer world, faster. In addition, population is better distributed in accordance with natural amenities. All is not perfectly rosy, however, in the free migration scenario. So let’s conclude with a few sentences that would make Hari Seldon proud.

[in the free migration scenario]…growth in utility drops substantially in the short run as many people move to areas with high real GDP; hence these areas be-come more congested and become worse places to live (lower amenities). This initial loss in growth is, however, compensated in the long run by a large surge in productivity growth after year 2200.

Has the Tervuren Central African museum been decolonized?

In a word, no.  They shut the place down for five years and spent $84 million, to redesign the displays, and what they reopened still looks and feels incredibly colonial.  That’s not an architectural complaint, only that the museum cannot escape what it has been for well over a century.  Most of the 180,000 art objects there were either stolen or bought under terms of implicit coercion.  There is an Africa Gallery covering the crimes of King Leopold in the Congo, but it is easy enough to be transfixed by the art and not really take it in.  How about a full room near the entrance devoted to the anti-imperialist E.D. Morel?  And while there are now more art works from the post-colonial period, there is no room devoted to the often very impressive art worlds of Central Africa today.  Having more African people talk on screens was nice, but it doesn’t do the trick.  The colonial still seems glorious, and the post-colonial mediocre.

Despite DRC demands, I do understand that the repatriation of the objects themselves would not be wise, given the current state of the DRC.  In 1976-1982, 114 objects were in fact restituted, but most of them ended up stolen (NYT).  For me preserving the art comes first, and furthermore the current DRC government is hardly a legitimate spokesperson for the historic civilizations of the region.  But might the museum at least have presented the issue in some morally conscious manner?

Before you walk into the museum proper, there is a room devoted to all the sculptures and displays now considered too colonial or too racist for the current museum.  Of course this draws more attention to them, and furthermore the dividing lines are by no means always clear.  That said, there is a double irony, namely that some of the items in this room are sufficiently obnoxious that their display represents a better apology than any part of what is intended as apology.

This is still all much better than the past, when at one time a human zoo of 267 enslaved Congolese was put on display here, in fact that was the inaugural exhibit in 1897.  At least there is now a memorial to those of the enslaved who died of influenza.  And the plaque “Belgium Brings Civilization to the Congo” has been taken down.  Yet this:

The rapacious monarch’s monogram dots the walls of the palatial museum on the former royal estate, which he used to drum up investment for his colonial ventures at the 1897 World Exhibition.

Oh, and there are colonial statues built into the walls:

One was of black children clinging to a white missionary. Another was of a topless African woman dancing.

They cannot be removed because of cultural heritage laws in Belgium.

The animal displays also no longer seem of our time, more about size and stuffing and the conquest of nature rather than with much of a notion of environmental or biodiversity or animal welfare awareness.

It is nonetheless a spectacular museum, the best chronicle anywhere for the Central African artistic achievement by an order of magnitude, and one of the best and most interesting places in Europe right now.  It is worth the rather convoluted one hour trip you must take from Brussels, or if you are visiting Waterloo it isn’t far away at all.  For all its flaws (or in part because of them?), go if you can.

The art aside, the other lesson is imperialism and colonialism cast a longer shadow than you might at first think.  The realities of cultural constipation remain underrated.

Was concentrated big business behind the Nazi rise?

No, there isn’t much evidence for that now-common claim:

As I show below, the claim that big business contributed to the rise of the Nazi Party is simply inconsistent with the consensus among German historians. While there is some evidence industrial concentration contributed in Hitler’s ability to consolidate power after he was appointed chancellor in 1933, there is no evidence monopolists financed Hitler’s rise to power, and ample evidence showing industry leaders opposed his ascent.

Here is the longer essay, with much more additional detail, from the soon-to-be-better-known Alec Stapp.

The Spirit Level Delusion

The Spirit Level by Wilkinson and Pickett made a big splash a decade ago by showing many correlations between inequality and various problems. In a recent talk, Pickett summarized the thesis of the book with the graph at right.

Even at the time, however, there were peculiarities in the data–for example, some countries were dropped without explanation and data with different definitions were spliced together–as pointed out by Christopher Snowdon in the Spirit Level Delusion. Adding in a few more countries, for example, made many of the correlations disappear.

Snowdon now has a nice post with another test. Suppose we run the same or similar regressions using today’s data? If the relationships are robust we ought to see the same correlations or even stronger correlations given the increase in inequality.

Here, for example, is a key graph from The Spirit Level on inequality and life-expectancy.

If, however, we use the same countries but today’s most up-to-date figures on inequality and life-expectancy we find no correlation.

If we add the four countries that are unequivocally richer than Portugal and were excluded from The Spirit Level for no good reason (South Korea, Hong Kong, Slovenia and the Czech Republic (now known as Czechia)), there is a statistically significant association with inequality but it is in the opposite direction to that predicted by The Spirit Level hypothesis, with greater inequality correlating with longer life expectancy (r2=0.145, R=0.385, p-value=0.0495).

After examining a variety of data. Snowdon summarizes:

In summary, most of the biggest claims made by Wilkinson and Pickett in The Spirit Level look even weaker today than they did when the book was published. Only one of the six associations stand up under W & P’s own methodology and none of them stand up when the full range of countries is analysed. In the case of life expectancy – the very flagship of The Spirit Level – the statistical association is the opposite of what the hypothesis predicts.

If The Spirit Level hypothesis were correct, it would produce robust and consistent results over time as the underlying data changes. Instead, it seems to be extremely fragile, only working when a very specific set of statistics are applied to a carefully selected list of countries.

It’s certainly possible that inequality has a causal effect on various issues (both positive and negative) but it seems that such effects are small and subtle enough to require much more than cross-sectional country-level data to uncover.

*Culture in Nazi Germany*

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

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

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

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

The man who catalogues the Royal Family

Long before there was such a thing as “Big Data,” there was Tim O’Donovan, a retired insurance broker who has meticulously tabulated the British royal family’s engagements with pencil and paper every day for 40 years.

In a row of old-fashioned leather-bound ledgers, in a wisteria-fringed house in the village of Datchet, just west of London, he has amassed an extraordinary collection of raw data. The Autumn Dinner of the Fishmongers’ Company, convened in October by Princess Anne? It’s in there. The opening of the Pattern Weaving Shed in Peebles, Scotland? Of the Dumfries House Maze? Of a window at the Church of St. Martin in the Bull Ring? Noted.

Mr. O’Donovan, 87, is not part of the hurly-burly of royal commentary. Not only is he not active on social media, he claims never to have seen it. (“I am glad to say I don’t have anything to do with it,” he said, a bit starchily. “Everything I’ve heard about it is negative.”)

Every year, Mr. O’Donovan releases a comparative table listing the number of engagements attended by the highest-ranking royals, setting off a flurry of barbed commentary in the British news media. The feeding frenzy comes because Mr. O’Donovan, intentionally or not, has effectively invented a metric of how much the members of the royal family work.

He does it for fun, as his hobby:

Born into a family of avid collectors, he hungered in his 40s to undertake a statistical project; he had been impressed by a man who used public records to tabulate the waxing and waning popularity of baby names, publishing his findings once a year in a letter to the editor of The Times of London. He found his fodder in the Court Circular, an account of the royals’ engagements that appears in The Times of London. He decided to clip each one, paste it in a ledger and run the numbers, releasing his first results at the end of 1979.

Here is more from Ellen Barry (NYT).  Here is an article on digital hoarders.

Evidence for the Continental Axis Hypothesis

One of the most striking hypotheses in Jared Diamond’s Guns, Germs, and Steel was that technology diffused more easily along lines of latitude than along lines of longitude because climate changed more rapidly along lines of longitude making it more difficult for both humans and technologies to adapt. Thus, a long East-West axis, such as that found in Eurasia, meant a bigger “market” for technology and thus greater development.

A few pieces of evidence are suggestive:

Laitin and Robinson (2011) and Laitin et al. (2012) report that linguistic diversity has been historically more persistent across lines of latitude than longitude, suggesting that population movements were more prevalent East-West relative to North-South. Ramachandran and Rosenberg (2011) report similar evidence based on the geographic distribution of genetic variation. While these studies speak to greater movements of populations East-West relative to North-South, they do not speak directly to the diffusion of technologies and development. Alternatively, Olsson and Hibbs (2005) provide a cross-country analysis in which a variable measuring East-West orientation of major landmasses correlates significantly with present-day income levels. This finding explicitly links continental orientation to income levels. However, it does not speak directly to the  mechanisms (e.g., more diffusion of technologies) leading to this correlation.

In Did Technology Transfer More Rapidly East-West than North-South?, from which I just quoted, Pavlik and Young offer more direct evidence on the natural direction of technological diffusion:

We employ Comin et al.’s (2010) data on ancient and early modern levels of technology adoption in a spatial econometric analysis. Historical levels of technology adoption in a (present-day) country are related to its lagged level as well as those of its neighbors. We allow the spatial effects to differ depending on whether they diffuse East-West or North-South. Consistent with the continental orientation hypothesis, East-West spatial effects are generally positive and stronger than those running North-South.

Very cool!

Tech and economic growth in the Book of Genesis

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

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

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

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

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

There is much more at the link.

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

1. There are more angels.

2. Satan plays a larger role.

3. There is virtually no literary suspense.

4. Adam is not made in God’s image.

5. There is considerably less complexity of narrative perspective.

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

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

8. The Abraham story is more central.

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

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

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

The Mormon asymptote?

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

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

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

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

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

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

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

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

Which changes in economic policy are actually going to happen?

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

A second pattern from U.S. history is that the federal government generally likes to hand out benefits perceived as “free.” This dates at least as far back as the establishment of Social Security in the Great Depression, when the initial benefit recipients weren’t paying taxes into the system.

I therefore expect federal government action on subsidized child care, preschool programs and paid family leave, all financed by increases in budget deficits rather than higher taxes. Such policies would hand out goodies to millions of families, and appeal to women in particular.

Again, ask the basic questions. Is there “pro-family” rhetoric emanating from both left and right? Yes, whether it is the socialist proposals from Matt Bruenig or paid family leave bills introduced by congressional Republicans. Can you imagine members from both parties claiming these issues as their own? Yes. Is there the possibility of free goodies being handed out? Again, yes, as the national debt held by the public is now over $16 trillion.

I consider also tech regulation, trade issues, immigration, Medicare for All, and the Green New Deal, with only the first of those likely to see big changes.

Toward a theory of random, concentrated breakthroughs

I don’t (yet?) agree with what is to follow, but it is a model of the world I have been trying to flesh out, if only for the sake of curiosity.  Here are the main premises:

1. For a big breakthrough in some area to come, many different favorable inputs had to come together.  So the Florentine Renaissance required the discovery of the right artistic materials at the right time (e.g., good tempera, then oil paint), prosperity in Florence, guilds and nobles interested in competing for status with artistic commissions, relative freedom of expression, and so on.

2. To some extent, but not completely, the arrival of those varied inputs is random.  Big breakthroughs are thus hard to predict and also hard to control.

3. A breakthrough in one area increases the likelihood that further breakthroughs will come in closely related areas.  So if the coming together of the symphony orchestra leads to the work of Mozart and Haydn, that in turn becomes an inspiration and eases the path for later breakthroughs in music, not just Mahler but also The Beatles, compared to say how much it might ease future breakthroughs for painting.

4. Some breakthroughs are very very good for economic growth, such as the Industrial Revolution.  But most breakthroughs do not in any direct way boost gdp very much.  The Axial age led to the creation of significant religions and intellectual traditions, but the (complex) effects on gdp are mostly lagged and were certainly hard to see at the time.

5. Even if Robert Gordon is right that we will never have a new period of material progress comparable to the early 20th century for improving living standards, the next breakthrough eras still might be very important.

6. One possibility is that the next breakthrough will be some form of brain engineering.  People might be much happier and better adjusted, but arguably that could lower measured gdp by boosting “household production” in lieu of market activity.  At the very least, gdp figures may not reflect the value of those gains.

7. Another candidate for the next breakthrough would be institutional changes that make ongoing international peace much more likely.  That would have some positive effects on gdp in the short run, but its major effects would be in the much longer run, namely the prevention of a very destructive war.

8. Judged by the standards of the last breakthrough, the current/next breakthrough is typically hard to see and understand.  It almost always feels like we are failing at progress.

9. When a breakthrough comes, you need to ride it for all it is worth.  Arguably you also should embrace the excesses of that breakthrough, not seek to limit them.  It is perhaps your only real chance to mine that mother lode of inspiration.  So let us hope that Baroque music was “overproduced” in the early to mid 18th century, because after that production opportunities go away.  For that reason, “overuse” of the internet and social media today may not be such a bad thing.  It is our primary way of exploring all of the potential of that cultural mode, and that mode will at some point be tamed and neutered, just as Baroque music composition is now dormant.

10. Progress in (many forms of) science may be more like progress in Baroque music composition than we comfortably like to think.  But I hope not.

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

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

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

And then for the 1960s:

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

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

But later on, by the 1970s:

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

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

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

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

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

Table of contents

1. A new pro-business manifesto

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

3. Are CEOs paid too much?

4. Is work fun?

5. How monopolistic is American big business?

6. Are the big tech companies evil?

7. What is Wall Street good for, anyway?

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

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

Here is part of the Amazon description:

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

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

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

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

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