Category: Uncategorized

“Religious Festivals and Economic Development”

The article subtitle is “Evidence from the Timing of Mexican Saint Day Festivals,” and the authors are Eduardo Montero and Dean Yang.  Here is the excerpt:

Does variation in how religious festivals are celebrated have economic consequences? We study the economic impacts of the timing of Catholic patron saint day festivals in Mexico. For causal identification, we exploit cross-locality variation in festival dates and in the timing of agricultural seasons. We estimate the impact of “agriculturally coinciding” festivals (those coinciding with peak planting or harvest months) on long-run economic development of localities. Agriculturally coinciding festivals lead to lower household income and worse development outcomes overall. These negative effects are likely due to lower agricultural productivity, which inhibits structural transformation out of agriculture. Agriculturally coinciding festivals may nonetheless persist because they also lead to higher religiosity and social capital.

My n = 1 experience in San Agustin Oapan (Guerrero, Mexico) is strongly consistent with this hypothesis.  Another factor is that the most talented individuals in the village typically are selected to fulfill leadership and ceremonial roles at the festivals, and that costs them a good deal of money (they are expected to pick up the expenses).  Those are precisely the individuals who might start small businesses and otherwise undertake beneficial commercial activities, but now they are starved of liquidity.

My podcast with Dwarkesh Patel

Dwarkesh writes me:

“Your interview for The Lunar Society is out! Extremely fun & interesting throughout!!! Thank you so much for your time!
Watch on YouTube. Listen on Apple PodcastsSpotify, or any other podcast platform. Read the full transcript at the episode website.
 
Here are some…quotes from the interview:

Dwarkesh Patel   Somebody comes in, and they’re very humble.Tyler Cowen   Immediately I’m suspicious. I figure most people who are going to make something of themselves are arrogant. If they’re willing to show it, there’s a certain bravery or openness in that. I don’t rule out the humble person doing great. A lot of people who do great are humble, but I just get a wee bit like, “what’s up with you? You’re not really humble, are you?”Tyler Cowen   But we’ll be permanently set back kind of forever. And in the meantime, we can’t build asteroid protection or whatever else. It’ll just be like medieval living standards: super small population, feudal governance, lots of violence, rape. There’s no reason to think like, oh, read a copy of the Constitution in and 400 years, we’re back on track. That’s crazy wrong…

Dwarkesh Patel   What do you think podcasts are for? What is happening?Tyler Cowen   To anaesthetize people? To feel they’re learning something? To put them to sleep. So they can exercise and not feel like idiots. Occasionally to learn something. To keep themselves entertained while doing busy work of some kind.”

Recommended.

Will a nuclear weapon be launched in combat by the end of 2023?

This prediction is from Manifold Markets. Metaculus gives similar odds to a similar question. These are serious predictions.

In a 2019 post I pointed out that expert surveys (not markets) suggested the annualized probability of a nuclear war was on the order of  ~1%–and I thought that was worryingly high. We are now at ten times that level. This is very, very bad.

Why energy price policy is hard

That is the topic of my latest Bloomberg column.  The core problem is that if you let prices go up “too much” (i.e., to where they ought to be), many people will stop paying their bills.  We don’t in fact have the political economy in place to enforce the wealth transfer to the public utility:

You might think, as I do, that utilities should take a relatively tough stance on delinquents. Still, the realities of politics can intervene. By one estimate, Truss’s plan would lead to average energy bills of £2,500, compared to £3,548 with no plan.

That is quite a difference, and many people might have trouble paying the higher amount. They might be able to pay more, but at what cost? Fewer pub visits? No satellite TV? Would people in fact choose such austerity? Customers know that if enough of them do not pay their bills, it would be very difficult to cut off service to such a large part of the electorate, especially with winter approaching.

By way of comparison, consider the current water crisis in Jackson, Mississippi. The town’s water utility is undercapitalized, and almost one-third of customers are behind on their bills . About one-sixth of customers are not even receiving bills. Yet it would be politically unfeasible for Jackson’s elected officials to cut off all those users, regardless of whether it would ultimately be more humane.

The fact is, it’s not always possible to increase prices. Especially if you are unable to collect any payment at all from many customers.

The problem is worse yet. Once customers are in the habit of not paying their utility bills, it gets harder to collect payment, even if future prices are much lower. Customers might expect the no-payment-necessary regime to continue, and to organize with that goal in mind. This is a common problem in lesser developed nations.

I do not favor the extensive UK energy subsidies, which unduly distort relative price signals, but they have to be understood in this context.  Their net cost, relative to the alternatives actually on the table, is not nearly as large as it looks.

Wednesday assorted links

1. The end of senior politics in China?

2. A prediction market on prediction market approval.

3. New genetic results on ASD and ADHD overlap.

4. Redux: my 2017 post on Putin and Nord Stream.

5. New Brink Lindsey Substack.  And new Sam Hammond Substack.

6. “Contact queuing on the Kazakh border for the second day says that locals have a business where they get two cars in the queue and then let people cut in between them. Selling spots for $500 and can do as many as they want. “So you get why I’ve been here two days,” he says.”  Link here.

White, Male, and Angry

From the bottom to the top of society, white men are angry. This paper provides a reputation-based rationale for this anger. Individuals care about their social reputation and engage in belief-motivated reasoning. In the presence of uncertainty, white men tend to have too high an opinion of their group, whether they belong to the elite or not. When new information reveal that the elite is biased in favor of white men, their reputation of all white men decreases causing a payoff loss and the anger that comes with it. I also show how policies in favor of disadvantaged groups can be supported by some white men and opposed by some individuals from the minority when social reputation is taken into account. Reducing white men’s privileges can have a very different effects from disclosing the advantage this group enjoys.

That is the abstract of a new paper by Stephane Wolton.  The piece has some subtle and oft-overlooked ideas, and it comes via the subtle Kevin Lewis.

Tuesday assorted links

1. Lookism in TikTok.  Which visual features predict video success?

2. This is slightly worrying for the diehard Brexit haters.

3. Ezra Klein and Patrick Collison podcast, self-recommending.

4. What exactly what was the new economic policy news event for the UK on Monday?

5. Potential tools of chess cheating, here and here.  Good thing no one does this stuff!  On top of that, the devices probably do not even exist.  Nor might any similar devices exist.

6. Income robustly predicts self-regard emotions.

NASA Reduces Existential Risk!

Congratulations to NASA for a direct hit on an asteroid with the goal of shifting its orbit and proving the feasibility of protecting the planet. A great step for mankind!

Tyler and I use asteroid defense as an example of a true public good in our textbook, Modern Principles. Here’s the video from our textbook. Not quite so dramatic but funnier!

The overreaction to the Truss macro policy

It has been extreme:

I know an unpopular economic policy when I see one. And the consensus among economists about the tax cuts and deregulations announced last week by UK Prime Minister Liz Truss is almost universally negative. Larry Summers noted: “I think Britain will be remembered for having pursued the worst macroeconomic policies of any major country in a long time.” Willem Buiter described it as “totally, totally nuts.” Paul Krugman is skeptical. As Jason Furman summed it up: “I’ve rarely seen an economic policy that is as uniformly panned by economic experts and financial markets.”

That is from my latest Bloomberg column.  I certainly can see reasons why one might oppose the plan, but the skies are not going to fall:

I see no evidence that the markets are beginning to doubt the UK’s ability to repay its debts. The UK, and earlier Great Britain, has arguably the best debt repayment history of all time (though it did default on some of its debts to Italian lenders in the 13th century). It even repaid its extensive debts from the Napoleonic Wars, though they were more than 200% of GDP.

There are different ways you might measure the marginal cost of UK government borrowing, but I don’t see any measure where it is high and under many measures it is negative in real terms.  Remember when people used to tell us this meant there was no major problem on the fiscal side?

I do criticize the Bank of England for not doing more to reign in inflation, plus the government should have coordinated better with the Bank.  And don’t forget this:

The Truss plan offers many admirable deregulations, including an attempt to get the UK economy to build more residential structures, as it so badly needs. It is difficult to say now just how successful this plan will be, but it is definitely a step in the right direction, as are most of the other deregulations, including lifting the ban on onshore wind generators. By calling the Truss plan the worst thing ever, commentators make it unlikely that these ideas will get the approbation they deserve.

Recommended.

Monday assorted links

1. Why are New Yorkers eating dinner at earlier times? (NYT)

2. Jacques Dreze has passed away.

3. Kindergarten rank matters.

4. CIA launches first podcast.

5. “Its people would benefit from something approximating “state capacity libertarianism with Somali
characteristics.””

6. Median home value on Martha’s Vineyard rose from 700k to $1m over the span of the last year.  A local’s dissection of local NIMBYism.

7. How is drug decriminalization going in Oregon?

The economic policy that is Liz Truss

Liz Truss is facing her first cabinet row as she prepares to increase immigration to boost economic growth.

The prime minister is pushing for wide-ranging reform of Britain’s visa system to tackle acute labour shortages and attract the best talent from across the world.

In the coming weeks she intends to raise the cap on seasonal agricultural workers and make changes to the shortage occupations list, which will allow key sectors to recruit more overseas staff.

Truss has told colleagues that she is keen to recruit overseas broadband engineers to support the government’s pledge to make full-fibre broadband available to 85 per cent of UK homes by 2025. It has also been suggested that she could ease the English-language requirement in some sectors to enable more foreign workers to qualify for visas.

Jacob Rees-Mogg, the business secretary, has told colleagues he would support the changes only if they were shown to increase GDP per capita.

Here is the Times of London (gated) article.  Truss has a very definite plan to boost both high-skill immigration and building in Britain,  perhaps the two best policies for boosting growth.  And yet the silence from many of those who ought to approve has been deafening.  To be clear, it remains an open question whether Truss will be able to push through the relevant policies — but at least she is trying!

*Indigenous Continent*

The author is Pekka Hämäläinen, and the subtitle is The Epic Contest for North America.  Rich with insight on ever page, might it be the best history of Native Americans?  At the very least, this is one of the two or three best non-fiction books this year.  How is this for an excellent opening sentence:

Kelp was the key to America.

Here is another excerpt:

Spain had a momentous head start in the colonization of the Western Hemisphere, but North American Indians had brought Spanish expansion to a halt; in the late sixteenth century there were no significant Spanish settlements on the continent — only petty plunder regimes.  North America was still essentially Indigenous.  The contrast to the stunning Spanish successes in Middle and South America was striking: how could relatively small Native groups defy Spanish colonialism in the north when the formidable Aztec, Inca, and May Empires had fallen so easily?  The answer was right in front of the Spanish — the decentralized, kinship-based, and egalitarian political regimes made poor targets for imperial entradas — but they kept missing it because the Indigenous nations were so different from Europe’s hierarchical societies.  They also missed a fundamental fact about Indigenous warfare: fighting on their homelands, the Indians did not need to win battles and wars; they just needed not to lose them.

The general take is that pushing out the Native Americans took longer than you might think, and also was more contingent than you might think.  The decentralized nature of North American Indian regimes was one reason why the Spaniards made more headway in Latin America than anyone made in North America.

To be clear, I am by no means on board with the main thesis, preferring the details of this book to its conceptual framework.  Too often the author heralds the glories of a Native American tribe or group, and along the way lets it drop that they numbered only 30,000 individuals, as was the case for instance with the Iroquois.  If you didn’t know the actual history of this world, and had read only this book, you would be shocked to learn that Anglo civilization was on the verge of subjugating one-quarter of the world.  Or that England had learned how to “take care of Ireland” in the seventeenth century, and it was only a matter of time before similar techniques would be applied elsewhere.  And it is not until p.450 that the author lets on how much technological progress the Westerners had been making throughout; somehow that part of the story is missing until the very end.

I cannot quite buy that “The Native Reservations were a sign of American weakness, not strength,” though I can see how they might be both (p.408).

Yet I think you can simply put all this aside and still get full value — and then some — from this book.  Among its other virtues, it is an excellent treatise on the 17th century and its energetic, exploratory nature.  Or for another example, I loved the p.152 discussion of whether Indians wanted the settlers to fence in their animals (the fences cut off travel paths for deer and other hunted animals, though the fences kept the settlers’ animals from destroying native crops).  The discussions of equestrianism are consistently excellent.

In the first twenty years of the United States, fights with Indians absorbed 5/6 of overall federal expenditure (p.343).

Here is a good NYT story about the book and its reception.  I would say that a Finnish white guy even tried to pull this off is a positive signal about its quality, at least these days.

As recently as 2019, his epic Lakota America: A New History of Indigenous Power was an MR “best book of the year.”  You don’t have to buy the whole story, and so I conclude that Pekka Hämäläinen is one of the more important writers of our time.