Category: Uncategorized

Very good sentences

Nearly all of the biggest challenges in America are, at some level, a housing problem. Rising home costs are a major driver of segregation, inequality, and racial and generational wealth gaps. You can’t talk about education or the shrinking middle class without talking about how much it costs to live near good schools and high-paying jobs. Transportation accounts for about a third of the nation’s carbon dioxide emissions, so there’s no serious plan for climate change that doesn’t begin with a conversation about how to alter the urban landscape so that people can live closer to work.

Those are from Conor Daugherty in the NYT, via the excellent Kevin Lewis.

A central bank digital currency is not a good idea, redux

The introduction of a central bank digital currency (CBDC) allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself, but relies on investment banks to do so. We derive an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC. During a panic, however, we show that the rigidity of the central bank’s contract with the investment banks has the capacity to deter runs. Thus, the central bank is more stable than the commercial banking sector. Depositors internalize this feature ex-ante, and the central bank arises as a deposit monopolist, attracting all deposits away from the commercial banking sector. This monopoly might endangered maturity transformation.

Here is the NBER working paper by Jesús Fernández-Villaverde, Daniel Sanches, Linda Schilling, and Harald Uhlig.  Here is my earlier Bloomberg column with similar themes.

The missionary roots of liberal democracy

I had not known of this important piece.  From 2012, by Robert D. Woodberry, at the National University of Singapore:

This article demonstrates historically and statistically that conversionary Protestants (CPs) heavily influenced the rise and spread of stable democracy around the world. It argues that CPs were a crucial catalyst initiating the development and spread of religious liberty, mass education, mass printing, newspapers, voluntary organizations, and colonial reforms, thereby creating the conditions that made stable democracy more likely. Statistically, the historic prevalence of Protestant missionaries explains about half the variation in democracy in Africa, Asia, Latin America and Oceania and removes the impact of most variables that dominate current statistical research about democracy. The association between Protestant missions and democracy is consistent in different continents and subsamples, and it is robust to more than 50 controls and to instrumental variable analyses.

For the pointer I thank Ann Swidler.

Willingness to be Paid: Who Trains for Tech Jobs?

Here is a new paper from Joy Buchanan, Emergent Ventures winner:

Having a larger high-skill workforce is good for economic productivity, so it is useful to understand how workers self-select into high-paying technology jobs. This study examines how workers on the margin decide whether to pursue tech jobs, including a precise control for the opportunity cost of time. The most important determinant of the reservation wage for college students to do computer programming is whether they enjoy it or not. Another subjective influence, whether subjects like math or not, predicts self-confidence. Most students, including females and minorities, are willing to learn a new computer programming language, for a sufficiently high wage. Neither randomly assigned encouragement nor extra information on the programming task increases willingness to participate or increases confidence.

I often say that economics is too often solely the study of incentives, whereas real world problems end up solved because entrepreneurs opt for a potent mix of selection and incentives.  Selection is often the more important part of that brew.  Get people doing what they like, and you cannot boil a stone into a turnip.  It is also noteworthy from the paper that a lot of people really do not seem to like programming.

In praise of art books

Running out of things to read?  Do you ever have the sneaky feeling that books might be overrated?  Well, for some variation at the margin try reading art books.  That’s right, books about art.  Not “how to draw,” but books about the content and history of art.  Some of them you might call art history, but that term makes me a little nervous.  Just go into a good art museum, and look at what they are stocking in their bookstore.  Many of them will be picture books, rather than art history in the narrower, more scholarly sense of that word.

Art books offer the following advantages:

1. They are among the best ways to learn history, politics, and yes science too (advances in art often followed advances in science and technology).  Even economic history.  Since the main focus is the art, they will give you “straight talk” about the historical period in question, rather than trying to organize the narrative around some vague novelty that only the peer reviewers care about.

2. They are often very pretty to look at.  You also feel you can read them in small bites, or you can read only a single chapter or section.  The compulsion to finish is relatively weak, a good thing.  You can feel you have consumed them without reading them at all, a true liberation, which in turns means you will read them as you wish to.

3. They have passed through different filters than most other books, precisely because they are often “sold into the market” on the basis of their visuals, or copyright permissions, or connection with a museum exhibit, or whatever.  Thus they introduce variation into your reading life, compared to say traditional academic tomes or “trade books,” which increasingly are about gender, race, and DT in an ever-more homogenized fashion.

4. They are among the best ways of learning about the sociology of creativity and also “the small group theory” of history.

5. These books tend not to be politically contentious, or if they are it is in a superficial way that is easily brushed off.  (Note there is a whole subgenre of art books, from theory-laden, left-wing presses, with weird covers, displayed in small, funky Manhattan or Brooklyn bookstores where you can’t believe they can make the rent, where politics is all they are about.  Avoid those.)

6. A bookstore of art books is almost always excellent, no matter how small.  It’s not about comprehensiveness, rather you can always find numerous books there of interest.

7. Major reviewing outlets either do not cover too many art books, or they review them poorly and inaccurately.  That suggests your “marginal best book” in the art books category is really quite good, because you didn’t have an easy means to discover it.

8. You might even wish to learn about art.

9. This whole genre is not about assembling a reading list of “the best art books.”  Go to a good public library, or museum bookstore, and start grabbing titles.  The best museum bookstore I know of is at the Metropolitan Museum of Art in New York.

10. It is also a very good introduction to the histories and cultures of locations such as China and India, where “straight up” political histories numb you with a succession of names, periods, and dynasties, only barely embedded in contexts that make any sense to you.

Wednesday assorted links

The bureaucratization of U.S. foreign policy

The NSC [National Security Council] was established in the 1947 National Security Act, which named the members of the council: president, vice president and secretaries of state and defense. The function of the council “shall be to advise the president with respect to the integration of domestic, foreign, and military policies relating to the national security.” The law required regular meetings…

Mr. Kissinger grew the council to include one deputy, 32 policy professionals and 60 administrators. By my count, alumni of his NSC include two secretaries of state, four national security advisers, a director of national intelligence, a secretary of the Navy, and numerous high-ranking officials in the State, Defense and Treasury departments as well as the Central Intelligence Agency.

But the NSC has only continued to expand. By the end of the Obama administration, 34 policy professionals supported by 60 administrators had exploded to three deputies, more than 400 policy professionals and 1,300 administrators.

The council lost the ability to make fast decisions informed by the best intelligence.

Here is more from John Lehman (WSJ).

Apply for Emergent Ventures

The application form is here, lists of previous cohorts of winners are here.  And please note there are two special tranches:

Progress Studies tranche, and a tranche for:

“advancing humane solutions to those facing adversity – based on tolerance, universality, and cooperative processes”

And might anyone be interested in working on the issue of why production speeds for infrastructure and so many other projects have slowed down so much?

There has been a very impressive group of winners to date.

Tuesday assorted links

1. Review of a new and apparently impressive biography of Frank Ramsey.

2. Arnold Kling on public intellectuals.

3. Update on the World Bank paper controversy.  And here is the paper.

4. “…the power costs less to generate in India than the cheapest competing fossil fuel—coal—even with subsidies removed and the cost of construction and financing figured in, according to the Indian government and industry trackers.”  (WSJ)

5. Is Tesla better off without a traditional supply chain?

6. Oren Cass starts new group to challenge free market fundamentalism.

How Japan avoided a bond market panic

This paper explores the history of Japanese fiscal policy over the past two decades with the aim of better understanding where previous forecasts have erred. As such, Japan provides an important case study of how a country facing intense fiscal pressures can avoid a hyperinflation or financial panic. We find that there were three key forces that likely improved Japan’s fiscal situation relative to more pessimistic predictions. First, the Japanese government has shown remarkable ability to hold down per capita expenditures on social pensions and healthcare. Second, the Japanese government has been able to raise taxes substantially. Third, the remarkable monetary policy pursued by the Bank of Japan has resulted in a dramatic decline in the amount of government bonds held by the private sector.

That is the abstract of a 2017 paper by Mark T. Greenan and David E. Weinstein.  You will note that the Japanese government just announced that the Japanese economy contracted at an annualized rate of -6.3% (not a typo) last quarter.  Of course, maybe they should have just kept on borrowing money forever.  As you can see from the recent tweet of Krugman, many of the Keynesians now favor stimulative policy all the time, even at full employment, with no need for eventual consolidation.

And the next time you see a calculation of a multiplier, ask yourself if the entire time horizon is being considered.  Usually not.

Via the excellent and reality-based Wojtek Kopczuk.

Monday assorted links

Why is VC Twitter so peculiar?

Here is an email from an anonymous MR reader, on exactly that question:

– VCs are in the business of speculating about the future and identifying underestimated trends. They are subjective to evolutionary pressure that selects for heterodoxy.

– As capital supply increases, the importance of differentiation on other axes increases. VCs have a growing incentive to personally market their product.

– VCs lack conventional bosses who could sanction them if they say something ill-advised on Twitter.

– VCs face some of the most asymmetric return distributions of any profession. Two instances of being correct can outweigh being wrong in every other case.

– Much of what supposedly-controversial VCs say is not actually contrarian but widely shared but repressed since most people have a strong disincentive to attract opprobrium. This disparity heightens the oddity of VC twitter.

– Unlike many occupations that profess to be about ideas but often put form above substance, VCs in some substantial sense actually are. What can seem like naivete is often a genuine engagement with the basic questions.

– Therefore, in our shared pursuit of novel ideas, we should give thanks to VC Twitter. Which category of Twitter users is most similar?

Should we expect those seeking VC money to tweet in similarly idiosyncratic ways?  They too face long odds on particular projects and tend to end up in equity-heavy positions.  Should the most “conservative” tweeters be those with high perks but no job security, for instance still untenured professors?  Heads of philanthropic foundations?

Overall, I find it striking that most individuals use Twitter for “double down” strategies, rather than “portfolio diversification” insurance strategies.  For instance, people who pursue overall risky courses of career action don’t play it safe on Twitter as a kind of career fall-back or insulation.  Perhaps that means at the margin “marketing” is more scarce and valuable than “insurance,” and thus start-ups — and venture capitalists — should pay heed to that.

Sunday assorted links

1. “Burundi’s parliament has voted to pay $530,000 (£400,000) to President Pierre Nkurunziza and provide him with a luxury villa when he leaves office.

2. The Body Shop: “And there’s only three questions to get a job. It’s, ‘Are you authorized to work in the U.S.? Can you stand for up to eight hours? And can you lift over 50 pounds?’”

3. Here is a new NIMBY song, a kind of anti-recommended.  The tree song, people are calling in on Twitter.  A reflection of our time?

4. Elizabeth Bruenig on epilepsy (NYT).

5. The Get Smart “cone of silence” is now a commercial reality (NYT).

6. How to donate a piece of your brain to science — while you’re still alive.

7. Six hundred U.S. citizens right now quarantined on 15 military bases in this country.