Category: Uncategorized

What should be taught more in the first-year graduate sequence in economics?

by  Tyler Cowen in

Or maybe just taught more period?  For microeconomics, I have two very definite picks:

1. Price discrimination.  They do it to you more and more!  Or perhaps you are striving to do it to others.  This is typically covered in a first-year sequence, but how many second-year students really have mastered when it is welfare-improving or not?  How it relates to product tying?  When it is sustainable against entry or not?

This seems like a highly relevant real world topic covered only in passing, noting that at the Principles level Cowen and Tabarrok give it full attention.

2. Tax incidence.  Covered thoroughly in public finance sequences, but usually only in passing in first-year sequences.  But just about everything is a problem in tax incidence!  Any change in relative prices gives rise to tax incidence issues, and aren’t relative price changes central to economics?

How can you analyze minimum wage economics, for instance, without a strong background in tax incidence theory (and empirics)?  What if someone says “that minimum wage hike — the associated gains are just captured by the landlords!”  Right or wrong?  Under what conditions?  Good luck!

Grad students these days aren’t learning enough micro theory.

And for macroeconomics?  I have a definite nomination:

3. Say’s Law.  Yes I have read Keynes, and furthermore John Stuart Mill understood as early as 1829 that Say’s Law doesn’t hold if there is a big increase in money hoardings.  But often there isn’t a big increase in money hoardings!  And then what people call “increases in aggregate demand” very often are more fundamentally “increases in aggregate supply.”  Long-, medium- and short-term considerations to be tossed in as further complexities.  Ngdp boosts can come through either nominal or real variables, etc.

There are still lots and lots of people — at all levels — who don’t have a firm handle on these matters.  And Twitter has made this worse.

Which topics do you think should be given additional coverage?

Wednesday assorted links

by  Tyler Cowen

1. Minerva Schools, for those of you who haven’t heard of it.  And Woolf University.

2. “The implication of the birthday paper is that, at the height of the pandemic, there were not very big differences in private behavior according to party, even if public behavior was different.” Link here.

3. Wikipedia page for Zemmour.  I much prefer liberalism, but he might become globally known soon.  And political discrimination as civil rights struggle (an approach you will regret if you pursue it, mark my words).

4. Eli Dourado on enhanced geothermal energy.  And Austin Vernon on geothermal.

5. DARPA for biomedicine update.

6. The authoritarian (and doomed) management style of Lina Khan.

In which ways are Democratic economists Democrats? (or not)

by  Tyler Cowen in

In a series of tweets (try this one), Matt Yglesias has been arguing that academic economists are far more Democratic than the U.S. population as a whole, though less left-wing than most other academics.  I agree with his claims, which are backed by plenty of data, but I wish to add some further thoughts.

Very often political views follow our socioeconomic class and the peer groups we are trying to impress or join.  Thus those claims from Matt are true for American policies only.  If you took a leftish (but not Marxist radical) Democratic U.S. economist, and asked that person what Mexico should do to improve, I think the answers would include the following:

1. Build state capacity to win the drug war, legalize or decriminalize some drugs too.

2. Make it easier for firms in the informal sector to enter the formal, taxed sector, and thus make it easier for them to grow.

3. Invest more in education for underprivileged Mexican youth.

4. End the state monopolies in industrial products.

5. Do something about corruption (but what?).

6. Diversify the economy away from Pemex and fossil fuels.

7. Maintain NAFTA and try to maintain and indeed rebuild the health of the earlier democratization.

Now, that is pretty much the same as my list!  To be sure, the rhetoric on some of these proposals, such as #2 and #3, would be different coming from this imaginary leftish Democratic economist.  (Lots more talk about “inequality” on #2 and more about the benefits of regulation on #3, for instance, whereas I would stress the benefits of firm growth.)  But I don’t think the substance of the proposals would be all that different.

Whether you wish to say the leftish economist has a right-wing perspective on Mexico, or vice versa, is a moot point.  Or are we all centrists on Mexico?  There is in any case a reasonable coincidence of policy recommendations once you remove people from their immediate socioeconomic environment.  And surely that makes the Democratic economists just a little suspicious to the non-economist intellectual Democrats, as you can see from the Twitter fury directed at Matt Y. for what were purely factual claims.

There is a reason why they call it “the Washington Consensus.”  I can assure you that the World Bank and IMF economists are not a bunch of Republican wanna-bees.  But the Washington Consensus works, at least on average.

If you asked a non-economist Democratic voter what Mexico should do, I am not sure what answers you would get.  But it is hardly obvious you would get the above list (I’d love to see this done as a study and compared to the Republican answers).  Maybe the non-economist would talk about foreign aid more?  Immigration more?  I really don’t know.  But they probably are not very aware of the dismal productivity performance of Mexican SMEs and what a problem that is, and probably not very aware of the various state monopolies.  They probably would mention corruption, however, and also public safety and winning the fight against the drug gangs.

When it comes to U.S. disputes, the Democratic economist probably would be more “off the rails” than the typical Democratic voter (sorry, you’ll have to find your own links here, there are plenty), if only because that person is more aware of the socioeconomic conflicts and more aware of what one is supposed to believe.  The more symbolic the dispute, the further from the median voter the Democratic economist is likely to be.  But that is the education doing the work, not the economics background.

If you want to get a Democratic economist making sense, just get that person talking about some other country, follow most of the policy advice, and remove the word “inequality” and a few other catch phrases.

Interestingly, there is a subset of Republican economists who don’t talk sense no matter what the country under consideration.  For instance, they might think that “income tax cuts for Mexico” would do a lot of good.  In this sense they are the more consistent “cosmopolitan ideologues,” taking that phrase as a truly joint concept.  Since most economists are Democrats, perhaps examining “the remnant Republicans” is selecting for excessively consistent ideology.  The remnant Republicans are less likely to insist that “every country is different,” a’ la Dani Rodrik.  If they were so flexible, they probably wouldn’t still be Republicans.

As a final note, I fear we are entering a world so “well-informed” about affective polarization, and with Woke concepts so globalized, that at some point the majority of the Democratic economists won’t talk sense on Mexico any more either.  But we are not yet there — maybe in five to ten years?  Maybe never?  And where will the Republican remnant end up?

Scientists discover spiders are eating snakes all over the world

by  Tyler Cowen in

“They can outfight snakes 10 to 30 times their size,” says the University of Basel in Switzerland.

According to a new meta-analysis study, perhaps snakes should be fearful of spiders. It seems arachnids like to chow down on the reptiles, all over the world.

The study, published in The Journal of Arachnology, has the straightforward title Spiders (Arachnida: Araneae) Feeding on Snakes (Reptilia: Squamata). The researchers looked at 319 reports of spiders feeding on snakes from every continent except Antarctica. Most of the events occurred in the US and Australia.

The data showed that spiders representing 11 different families have been observed eating snakes. “That so many different groups of spiders sometimes eat snakes is a completely novel finding,” lead author and arachnologist Martin Nyffeler said in a Monday news release from Switzerland’s University of Basel. Guess we can add the discovery to our Surprising Insect Dining Habits file, alongside praying mantises eating hummingbird brains.

Here is the full story, via Shaffin.

Tuesday assorted links

by  Tyler Cowen

1. Taiwan and TSMC dependence.

2. Claims about necks.

3. Replicable mask results.

4. Rigged for thee but not for me?

5. Can individual investors beat the market?

6. “With low level of infections, vaccines may (depending on testing strategy, but especially with universal or random testing) appear ineffective simply because of randomness due to false positives that would constitute most of the positive outcomes” Link here.

Abolishing tenure is the least of my proposals

by  Tyler Cowen in

In my latest Bloomberg column I attempt to design an ideal university from scratch.  The point is not that all schools should be this way, rather this is the experiment I would like to see at the margin:

I would start with what I expect students to know. They should be able to write very well, have  a basic understanding of economics and public policy, and a decent working knowledge of statistical reasoning. I would give a degree to students who demonstrated “B-grade” competence in all of these areas; what now goes for passing C-minus work wouldn’t cut it.

Most important, the people who write and grade the students’ tests would not be their instructors. So students would have to acquire a genuine general knowledge base, not just memorize what is supposed to be on the exam.

Next, each student would have the equivalent of a GitHub certification page. If you learned three programming languages, for example, or won a prize in a science fair, that would go on your page as a credential. But it would not count as a credit toward graduation. Some students could finish their degrees in a year or two even if their pages were not adorned with many accomplishments, while others might fill their pages but get no degree.

My imaginary school would not have many assistant deans, student affairs staff or sports teams. The focus would be on paying more money to the better instructors.

And:

Instructors would not have tenure, but would have to compete for students — by offering them classes and services that would help them graduate and improve the quality of their certification pages. Teachers would be compensated on the basis of how many students they could attract, in a manner suggested long ago by Adam Smith, who himself lived under such a system in 18th-century Scotland.

The very best instructors could earn $300,000 to $400,000 a year…

The school would hire online instructors too, many of them from poorer countries and working at lower wages. So you might take French from a tutor in Senegal, or have a high school teacher from Tamil Nadu read your essays and offer writing tips. I am a big believer in face-to-face instruction, but in my school it would have to compete with online instruction. For this reason, I think my school would have a much more diverse faculty and instructional base than any other institution of higher education. None of the instructors would be required to have any undergraduate or advanced degrees.

The goal is to introduce competition across as many different margins as possible.  There would be an “all on-line” option as well, offered to anyone in the world, though of course the on-line degree might be worth less as judged in the market place.

One issue I did not have time to get into is how the school would “shadow price” its different services to students.  Access to different services has to be priced somehow, so should the school hand out total vouchers to each student for use within the school?  Should the on-line and also face-to-face classes be priced at marginal cost (plus mark-up)?  Or do positive externalities from class cohesion mean that the face-to-face classes should be priced at some additional discount?  To what extent should factors other than this shadow price system be used to allocate access to classes?

Wyoming fact of the day

by  Tyler Cowen in

Wyoming—the first US state to grant a charter to a crypto bank—has approved legal status for a decentralized autonomous organization (DAO), the American CryptoFed DAO, according to an announcement on Sunday. The organization, which has a mission to introduce a new monetary system, now becomes the first legally recognized DAO in the U.S.

It comes after Wyoming lawmakers voted in March to pass a bill allowing DAOs to be officially registered in the state. The law affords these entities—which are governed by smart contracts and dispense with the hierarchical control structure seen in traditional companies—the same rights as a limited liability company. The bill came into effect on July 1, 2021.

Just think — limited liability for “a company managed by nobody”!  And:

The DAO law also solidifies Wyoming’s reputation as the most crypto-friendly U.S. state. Last year, it was the first in the US to issue a state charter for crypto banks and has already licensed two: Kraken and Avanti.

Here is the full story, via Shaffin Shariff.

A new study of crypto ownership

by  Tyler Cowen in

Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.

And:

Moving from a lower category of education to a higher one increases the probability, on average, of recognising at least one cryptocurrency by around 8.7 to 11.1 percentage points…Being a man in the US increases, on average, the probability of knowing
about at least one cryptocurrency by between 9.6 and 12.1 percentage points.

That is from a recent paper by Raphael Auer and David Tercero-Lucas, via Shaffin Shariff.  Data are from 2019.

Facts and uncertainties about ear wax

by  Tyler Cowen in

Our attitude to ear wax is in some ways surprising. A review of impacted ear wax estimates that 2.3 million people a year in the United Kingdom suffer problems with wax needing treatment, with some 4 million ears being syringed annually.2 This makes it possibly the the most common therapeutic procedure carried out on any part of the body. Symptoms of excessive wax or impaction, especially in the elderly, include not only hearing loss but tinnitus, dizziness, infections, social withdrawal, poor work function and mild paranoia. Other problems include general disorientation and loss of an aural sense of direction. With unilateral wax, sounds can appear to be coming from the wrong side, leading to accidents as a driver or especially as a pedestrian. Inappropriate self-treatment (or even treatment by health professionals) can cause perforated eardrums and in very rare cases cochlear damage, leading to nystagmus and sensorineural deafness. In spite of this catalogue of harms, the clinical profile and management of excessive wax are poorly understood. The evidence base is poor and inconsistent, leading to few strong recommendations, even relating to the most commonly used treatments.

Low esteem for ear wax is surprising in other ways too. As a substance, it is unique in the human and mammalian body. This is due to its position in our sole anatomical cul-de-sac. Everywhere else on our body surface, dead and redundant skin cells fall off or are scrubbed away when we wash. In the ear canal – which points forwards and downwards and might otherwise turn into a dermatological garbage dump – ear wax binds these together, along with other assorted detritus that may have entered from the world outside. It is then moved up to the exit by jaw movements and as a result of the skin of the canal slowly moving outwards like an escalator. Wax also prevents multiplication of micro-organisms and infection. It is as essential as sweat and tears, although perhaps not quite as vital as blood. Wax is also fascinating in its own right.

Imagine an ear wax post that is not solely about Q-tips! (Have you ever wondered why they have to be so dangerous?  Can’t you just put them in a little way?  Or is there some indivisibility here?  I have never understood the anguished warnings here.  If you are not using Q-tips at all, you only have to put them in a little way to pull out a lot of earwax, right?  Solve for the equilibrium!)

Here is more by John Launer, about ear wax throughout, via Michelle Dawson.

Sunday assorted links

by  Tyler Cowen

1. Culture wars are long wars.  And is it the Left that has jacked up the culture wars?

2. More Scott Sumner movie reviews, he is always right.

3. Cleaner air has contributed one-fifth of U.S. maize and soybean yield gains since 1999.

4. Do we enjoy our stereotypes?

5. Police officer plays Taylor Swift song to try to block video.

6. “Demisexual people only feel sexually attracted to someone when they have an emotional bond…“

*The Volga: A History of Russia’s Greatest River*

by  Tyler Cowen in

The author is Janet M. Hartley from LSE, here is one excerpt:

…the religious composition on the Volga is complex.  Finno-Ugric settlers originally followed shamanistic beliefs, although many converted, at least nominally, to Orthodoxy after they became subjects of the Russian Empire.  The ruler and the elite in Khazaria probably converted to Judaism sometime in the early ninth century.  Kalmyks in the south and south-east of the Volga were Buddhists (the only Buddhists in Europe).  The Bolgar state, the Golden Horse and the khanates of Kazan and Astrakhan were, or became, Muslim.  the Russian and Soviet states were conscious of the potential threat of Islam in the Volga region from the time of the conquest of Kazan in 1552.  The history of the Volga is, in part, the history of (often forced) conversion to Orthodoxy by the Russian government and the reaction to this of the local inhabitants.  In many cases, the conversion process was incomplete or, in the case of Islam, could be reversed.  The remoteness of much of the Volga countryside attracted Old Believers — that is, schismatics from the Russian Orthodox Church who did not accept the changes in liturgy and practice in the middle of the seventeenth century.

Recommended.