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Friday assorted links

Problems with the TFP concept, from my new paper with Ben Southwood

Here is another excerpt from “Is the rate of scientific progress slowing down?”:

First, many scientific advances work through enabling a greater supply of labor, capital, and land, and those advances will be undervalued by a TFP metric. Let’s say someone invents a useful painkiller, and that makes it easier for many people to show up to work and be productive. Output will rise, yet that advance will show up as an increase in labor supply, rather than as an increase in technology or scientific knowledge. Similarly, a new method for discovering oil may boost output, but that will be classified as an increase in oil supply, even though it does properly represent a form of scientific progress. TFP is best at measuring scientific and technological advances that are superimposed on top of an existing supply of the other factors of production. If, for instance, you imagine a series of capital and labor resources at a factory, and someone develops a new formula for combining those resources more effectively, this will be picked up very effectively by standard TFP measures.

The more general problem is that many scientific and technological advances are embodied in concrete capital goods. Again, the TFP measure does best when the supply and nature of capital is fixed, and a new idea makes that capital (and associated labor) more effective. But what happens when the new idea is itself embodied in a concrete capital good? If a hospital equips its surgeons with iPads, or with Augmented Reality glasses, to make them more effective in the operating room, as a first order effect that measures as an increase of capital expenditures by the hospitals rather than as an innovation. Health and later output will increase, but will we really know if it is due to better ideas or just more investment? It will appear to measure as new investment. Capital expenditures and TFP are not so easily separated, whether at the conceptual or the practical measurement level.

Similarly, separating TFP from labor expenditure is not always so simple either. If a worker generates and carries forward a new scientific idea for producing more with a given amount of labor, that measures the same way as the worker being taught greater conscientiousness and producing more. Yet the former is (ideally) TFP and the latter is not, but both will count as an increase in the quality of labor input in the same way.

Here is my original post on the paper.  Here is the paper.

Progress Studies tranche of Emergent Ventures

Due to a special grant, there has been a devoted tranche of Emergent Ventures to individuals, typically scholars and public intellectuals, studying the nature and causes of progress.

Here are the winners of those awards so far:

Pseudoerasmus, for general excellence and his on-line writings on progress and development. He has donated the funds to the Economic History Society.

Alice Evans, Professor, King’s College London, for her work on social change and despondency traps, and podcasting, and general excellence.

Jason Crawford, to boost his writings and career as public intellectual on topics of progress and the benefits of economic growth and industrialism.  Here is his blog The Roots of Progress.

Tanner Greer, to help him move from Taiwan to Virginia/GMU, and to write a book on the last twenty years of U.S. history and its significance.  Here is Tanner on Twitter.

Adam Green, budding public intellectual, to study the pre-implantation genetic testing of embryos.

Ville Vesterinen, Finland, to produce podcasts and YouTube videos on the nature of progress and economic growth.

Leopold Aschenbrenner, 17 year old economics prodigy, to spend the next summer in the Bay Area and for general career development.  Here is his paper on existential risk.

Byrne Hobart, to write a book on technological progress with Tobias Huber.

Saloni Dattani and ,Sam Bowman, to set up a website on progress and progress studies, possibly a progress-related podcast.

Here is further information on the progress studies tranche of Emergent Ventures.

I’ll be announcing more winners soon, from the regular rather than the progress studies tranche of Emergent Ventures (both remain open).

Tuesday assorted links

1. North Korean restaurants in Russia fail to draw diners.

2. Repeat link, but corporate taxes do seem to discourage investment.  Just in case you had forgotten, or in case you had starting believing that correlation implies causation, or that lack of correlation implies lack of causation.  Or something like that.

3. EV winner Lama Al Rajih works with Culdesac, a start-up that just premiered (WSJ), devoted to walkable, carless residential neighborhoods.

4. Caplan responds to Garett Jones on open borders.

5. Here is a serious pro-Morales take covering recent events in Bolivia.

6. Transcript of new Peter Thiel talk.

The real inflation inequality of our time

That is the topic of my latest Bloomberg column, and it is not (mainly) about rich and poor:

Consider people who love to consume information, or, as I have labeled them, infovores. They can stay at home every night and read Wikipedia, scan Twitter, click on links, browse through Amazon reviews and search YouTube — all for free. Thirty years ago there was nothing comparable.

Of course, most people don’t have those tastes. But for the minority who do, it is a new paradise of plenty. These infovores — a group that includes some academics, a lot of internet nerds and many journalists — have experienced radical deflation.

Here is another bit:

So who might be worse off in this new American world?

People who like to spend time with their friends across town are one set of losers. Traffic congestion is much worse, and so driving in Los Angeles or Washington has never been such a big burden. In-person socializing is therefore more costly. On the other hand, the chance that you have remained in touch with your very distant friends is higher, due to email and social media. Those who enjoy less frequent (but perhaps more intense?) visits are on the whole better off for that reason. It is easier than ever to go virtually anywhere in the world and have someone interesting to talk to.

Another group of losers — facing super-high inflation rates — are the “cool” people who insist on living in America’s best and most advanced cities. Which might those be? New York, Los Angeles, San Francisco? You can debate that, but they have all grown much more expensive. Many smaller cities, such as Austin, Washington and Boston, are going the same route.

And this summary point:

What is the common theme here? It is that those who love or need “the new” are often doing relatively well. Those who value the old standbys — the crosstown friend, the Manhattan brownstone, the uncomplicated visit to the local doctor to have a broken ankle set — are in a more dubious position.

There is much more at the link.  You might also see my earlier 1998 Kyklos article with Alex, “Who Benefits from Progress?“, and my book The Age of the Infovore.

Classical musical recordings of the year

We are approaching the year-end “best of” lists, so why not start with the one you care about least?  I had a very good year for classical music listening, with the following as new discoveries:

John Cage, Two2, by Mark Knoop and Philip Thomas, now perhaps my favorite Cage work?

Alvin Curran, Endangered Species, two CDs of jazz and popular song classics but done with piano distortion, plenty of spills and turns, a genuinely successful hybrid product.

James Tenney, Changes: 64 Studies for Two Harps, more listenable than you might think.

As for old classics, the Marek Janowski recording of Bruckner’s 4th is my favorite in a crowded (and impressive) field, recommended as a Bruckner introduction too.

This year I also started to enjoy Szymanowski for the first time, though that remains a work in progress.

I usually do a Fanfare meta-list, namely the recordings recommended the most by the critics of this outlet for classical music reviews.  This year there were three clear winners represented on the lists of multiple reviewers:

Poul Ruders, The Thirteenth Child (Danish opera, sung in English).

Feodor Chaliapin, The Complete Recordings, 13 CDs (not my thing).

Wilhelm Furtwängler, The Radio Recordings, 1939-1945 [sic].  James Altena writes: “…layers of aural varnish have been stripped away to uncover the true glories of one incandescent performance after another, from the conductor’s most inspired period of music-making during the horrors of the Nazi regime and World War II.”  Other critics concur, so political correctness has not yet come to classical music reviewing.  If you are reluctant to spend so much money, you can always try the Furtwängler 1942 “Hitler’s birthday” recording of Beethoven’s 9th and see how offended you feel.  So far I can’t bring myself to buy this one.  (By the way, even the Nazis still played Fritz Kreisler’s cadenza to the Beethoven violin concerto…Kreisler was Jewish).

I’ll turn to other musical genres soon.

Germany wind power fact of the day

In the first nine months of 2019, developers put up 150 new wind turbines across the country with a total capacity of 514MW — more than 80 per cent below the average build rate in the past five years and the lowest increase in capacity for two decades. The sharp decline has raised alarm among political leaders, industry executives and climate campaigners.

“For the fight against climate change, this is a catastrophe,” said Patrick Graichen, the director of Agora Energiewende, a think-tank in Berlin. “If we want to reach the 65 per cent renewables target we need at least 4GW of new onshore wind capacity every year. This year we will probably not even manage 1GW.”

The problem was two-fold, he said: “The federal states have not made available enough areas for new wind turbines, and those that are available are fought tooth and nail by local campaigners.”

Here is more from Tobias Buck at the FT.

Sunday assorted links

1. Chilean citizen lasers take down drones.

2. Those new service sector jobs is this a Straussian reference to the Rolling Stones song?

3. “Lotto lout Michael Carroll reveals he is ‘happier now’ working seven days a week as a £10-an-hour coalman after blowing £10m jackpot on drink, drugs and brothels (and claims he slept with 4,000 women).”  Link here.

4. BallerBusters “calls out” the phony rich people who in fact don’t have much money (NYT).

5. They let 70 different teams study the same fMRI results, you can imagine what happened.

Saturday assorted links

1. Pain in Japanese cinema.

2. Converting dog years into human years kind of like a price index problem Eric Weinstein would say use gauge theory.  Yet “The new formula says a canine’s human age = 16 ln(dog age) + 31.”

3. Is the Fed permanently stepping up its involvement in money markets?

4. Alexey Guzey on sleep fallacies.

5. Is a living whale worth $2 million in fighting climate change?

6. The worst economic policies of any candidate in my lifetime: “Democratic presidential candidate Elizabeth Warren has unveiled sweeping tax proposals that would push federal tax rates on some billionaires and multimillionaires above 100%.” (WSJ)

Wojciech Kopczuk on wealth taxation

His comment on Saez and Zucman is one of the best pieces of policy economics I have read in the last few years.  Many of the main arguments have been debated on Twitter, or expressed by Larry Summers, so here I will stick with a few side points that have not received full attention.

First, if you hate monopoly rents, excess IP income, and the like, you should not be in love with a wealth tax, at least not in the steady state!  A wealth tax hits the base and the safe rate of return as well.  Ideally the anti-monopoly crowd should most of all favor higher taxes on net income.  Not taxes on wealth.

Second, a wealth tax will encourage the shifting of much more production into non-profit institutions, or perhaps even into nationalizations of industry.  Lots of hospitals would switch back to the not-for-profit form, not obviously a beneficial development in my view.

As a side note, many more non-profits would hire famous musical acts to play at their donor galas.  The quality of champagne and cheese at those events will rise too.  There would be much more pressure on non-profits to create private (non-taxed) benefits for their donors.  I predict government regulation of non-profits would end up rising considerably as well, and not for the better.

Privatizing government assets such as land or spectrum would become more difficult — people would buy only at much lower prices.  So the wealth tax is a recipe for greater statism in more ways than one.

Third, under a wealth tax Jeff Bezos would have lost de facto control over Amazon some time ago.

Those are my words rather than Kopfczuk’s, do read his entire paper.

I would add one final point.  I think we are at the margin where advocacy of a wealth tax is more of a performative exercise — “we hadn’t poked rich people in the eye with this rhetorical needle yet, therefore I won’t really speak against it” — than any kind of substantive analytic debate.

Friday assorted links

Thursday assorted links

The Google checking account?

Google will soon offer checking accounts to consumers, becoming the latest Silicon Valley heavyweight to push into finance.

The project, code-named Cache, is expected to launch next year with accounts run by Citigroup Inc. C -0.70% and a credit union at Stanford University, a tiny lender in Google’s backyard.

Big tech companies see financial services as a way to get closer to users and glean valuable data. Apple Inc. introduced a credit card this summer. Amazon.com Inc. has talked to banks about offering checking accountsFacebook Inc. is working on a digital currency it hopes will upend global payments…

Google’s approach seems designed to make allies, rather than enemies, in both camps. The financial institutions’ brands, not Google’s, will be front-and-center on the accounts, an executive told The Wall Street Journal. And Google will leave the financial plumbing and compliance to the banks—activities it couldn’t do without a license anyway.

Here is more from Peter Rudegeair and Liz Hoffman at the WSJ.