Category: Uncategorized
Wednesday assorted links
My Conversation with Esther Duflo
Self-recommending if there ever was such a thing, here is the audio and transcript. In addition to all of the expected topics, including gender in the economics profession, we even got around to Indian classical music and Bach cantatas (she prefers the latter). Excerpt:
COWEN: Do you worry much that the RCT method — it centralizes authority in too few institutions? You need a certain amount of money. You need some managerial ability. You need connections abroad. It’s not like running regressions — everyone can do it on their PC. Is that, in some way, going to slow down science? You get more reliable results, but there’s much less competition of ideas, it seems.
DUFLO: I think it would be the case if we had not been mindful of this problem from the beginning. And it might still be the case to some extent. But I actually think that we’ve put a lot of effort in avoiding it to be the case.
When you take an organization like J-PAL, just in India we have 200 staff members. And we have, at any given time, 1,000 people running surveys. I say we, but these people are not running my project. These people are running the projects of dozens and dozens of researchers. When I started, I couldn’t have started without having the backing of my team because it was such a risky proposition that you needed to be able to easy risk capital kind of things.
But at this point, because of the infrastructure, it’s much more normal sense. People can get in with no funding of their own, in part because one of the things we are doing as a network is raising a lot of money to redistribute to other people widely. J-PAL has 400 researchers that are affiliated to it, or invited researchers, many of them quite, quite junior.
So that sort of mixture — it was very important to us, and I think we’ve been quite successful at making the tool marginally available. It’s never going to be like running a regression from your computer. But my philosophy is that if you have the drive and you’re willing to put in your own sweat equity, you can do it. And our students and many other students who are not at top institutions are doing it.
And:
COWEN: On the internet, there’s a photo of a teenage Esther Duflo — at least it looks like you — protesting against fascism in Russia on top of a tank, is it?
DUFLO: That was a bus, and it was me. It was me. So that was in 1991. This was not when I lived for one year there. I lived one year in ’93–’94. But this was in ’91. I had gone to Russia about every year since I was a teen to learn Russian. I happened to be there the summer where there was this putsch against Gorbachev. That summer…
And someone gave me that fashizm ne poletit placard and asked me to hold it. And I’m like, “Sure, I’m going to hold it.” So I’m holding my placard. We stayed there for a long time when things were happening. Next time I saw in the evening, my parents called me, “What are you doing?” Because it turned out that that image was on all the TVs in the world. [laughs] And that’s how I very briefly became the face of this revolution.
And:
COWEN: Does child-rearing in France strike you as more sensible than child-rearing in the United States?
DUFLO: Oh very much so, very much so.
COWEN: And why?
DUFLO: You know that book, Bringing Up Bébé?
COWEN: Yes.
DUFLO: I think she picked up on something which rings so true to me, which maybe is a marginal point about the US versus France. In France people are reasonably content to just go with the flow and do what everybody does. Every kid eats the same thing at 4:30, has dinner at the same time, has gone through the same experiences, learned the same songs, and everybody thinks they are totally free. But in fact, they are all on this pretty sensible railroad. And also, they don’t agonize about it.
In the US, child-rearing is one more occasion to make a statement about your identity. You’re the kind of mother that carries the baby, or you’re the kind of mother that puts the baby in a stroller. And somehow it almost can predict what you’re going to think about Donald Trump. That’s crazy. Some people are so concerned about what they do. Not only they feel that they have to invest a ton in their children, and they feel inadequate if they are not able to, but also, exactly what they do creates them as people.
In France that’s not there, and I think that makes everybody so much more laid back, children and adults.
Recommended throughout.
The cultures that are northern Europe
Here are some extensive travel notes, taken from two years living in Munich, working for a Danish company. Excerpts:
I also think I might just sound negative; like theres a negativity bias in frank descriptions about what people and places are like.
And:
The US, its common wisdom that a resume should only be one page. This is like a basic rules of Resumes, and at places I worked, we would throw out resumes that exceed one page. In Europe, it is uncommon for resumes to be merely one page.
European people will put a picture of their portrait on their resume. I found that weird. It seems to imply they think their looks matter, or that I, the resume reviewer, am the kind of person who thinks their looks matter.
And:
My Danish coworkers were complaining about how young people today find nudity awkward. Both of them viewed the acceptance of nudity and human bodies as a traditional value that was disappearing in the modern danish world. One of them said that their sports club makes it a point to do big group bathing together after practice to set a good example for their children. The other told me that at a job he had long ago, the employees went on a ski trip together and they would share beds with their coworkers. He said his bed was so small and his sleeping partner was so big he had to physically hang on to him to stay in the bed. He presented this as a kind of ideal; that thats how things were in the good old days.
And:
I read an article on Scandanavian dating norms, which basically said “Scandanavian people dont date”. The article said in a comedic tone, that Scandanavian people dont date, they just get really drunk with their opposite sex friends, have drunken sex, and then thats it: its a relationship. One of my Scandanavian coworkers said exactly the same thing.
Entertaining throughout, written by Chad, via Lama.
China trade negotiation fact of the day
Brussels has been striving to secure the deal for six years, as it seeks to prove it has the negotiating muscle to broker meaningful agreements with Beijing that can defend European companies from unfair competition.
The European Commission and the bloc’s foreign policy chief signalled a tougher approach to China in March in a landmark document that branded it a “systemic rival” in some areas — an allegation Beijing denies. Ms Weyand, the chief official working for Phil Hogan, the EU’s trade commissioner, said that “we are moving at a snail’s pace on the investment agreement”.
That is from the FT., and of course that hardly counts as much progress. Elsewhere you will see Paul Krugman suggesting Trump has lost the trade war, but I don’t think he comes close to even seeing what the trade war with China is about. No matter what Trump says, the trade war is not about lowering the trade deficit. It is about (for a start) two major considerations: a) ensuring that national security-motivated partial economic decoupling takes place on terms not so unfriendly to America, and b) giving America levers to make sure China does not make such significant inroads into the world’s tech infrastructure, most notably with 5G but not only.
The stipulation of Chinese purchases of American exports, which probably they will not and cannot meet, is in fact a lever to give the United States enforcement power over the less tangible parts of agreement, which is indeed most of the agreement. We want China to be in default of the agreement terms, so we may threaten them with tariffs to enforce compliance elsewhere, and so that is a better rather than worse outcome for the United States.
On the trade war, agnosticism is still the correct opinion, at least so far, as we are not even sure we know of the full agreement, or if America and China are visualizing signing literally different versions of the “same” agreement. And even once (or if) the full text(s) is revealed, we still won’t for some while know how either a) or b) are going, much less relative to the relevant counterfactuals.
In general, I am finding that commentary on the trade war is of relatively dubious value, in part for partisan reasons. The key here is to set aside your political views, and spend a lot of time talking with national security people.
Tuesday assorted links
1. An occupational satisfaction index?
4. Stephen L. Carter best books picks. And Australian best book of the year picks, hardly any overlap with any other lists. Or try these Irish lists. El Pais picks books of the century, very good selections.
Monday assorted links
1. Are they clearing street food out of Bangkok? (NYT)
2. It is actually O’Sullivan’s First Law, not Conquest’s Second Law.
4. Does tough grading keep women out of STEM?
5. Firefighting expenditures in the western U.S.: “The expected net present value of this subsidy can exceed 20% of a home’s value.”
The CFA franc system may be on the way out
Established in 1945, the CFA franc is used in two African monetary zones, one for eight west African countries and the other for six mostly petro-states in central Africa. Since 1999, it has been pegged to the euro, giving the member states monetary stability while supporting trade with Europe.
In return, the members have to keep half of their foreign reserves in France, on which the French treasury pays 0.75 per cent interest.
A French official sits on the board of the regional central bank in both zones, and the currency is printed by France.
Here is more from David Pilling and Neil Munshi at the FT. The French don’t like the optics it seems, and not all of the African nations benefit from losing the option of devaluing their currencies. The nature of the replacement system, however, is not yet clear.
As an aside, occasionally you will meet people who claim this system costs the African nations hundreds of billions of dollars a year, through some kind of under-specified colonial imperialistic theft, combined with Junker fallacies I believe. You can file that one under “Big Time Conspiracy Theories That Most Americans Are Hardly Aware Of.” But I am, and it ain’t true: “…the current deal was actually profitable for the two African central banks because bank-to-bank credit is attracting a negative interest rate of -0.4%, but the central banks are receiving 0.75%.”
That said, if those nations are capable of running their own central banks, flexible exchange rates would indeed be an improvement. Is this one more like public health or electricity?
Public health is no longer an O-Ring production function
In the bad old days, health care in poor countries was just terrible. It wasn’t only the poverty, lack of hospitals and pharmaceuticals, and unsanitary conditions. In addition, doctors gave very bad advice and they also didn’t work very hard, as outlined in this paper. Citizens suffered accordingly.
Those conditions have improved somewhat, but actual health outcomes have improved a lot. You still can’t trust the local medical advice in Tanzania, but guess what? You have much better vaccines, greater access to antibiotics, more NGOs running health clinics, and better health care information, sometimes through the internet. If your kid has diarrhea, let the kid drink water, even unclean water! As for antibiotics (NYT):
Two doses a year of an antibiotic can sharply cut death rates among infants in poor countries, perhaps by as much as 25 percent among the very young, researchers reported on Wednesday.
In other words, the quality of the most important part of health care treatments bypassed the rest of the problems in poor economies and grew rapidly, even in countries with only so-so economic growth. The rate of reduction in child mortality has tripled in many countries since the 1990s, and by no means are those locales major economic winners as say Singapore and South Korea were.
Therein lies one of the most important (and under-reported) global changes in the last twenty years. It is now possible to have a decent public health system in a country with poor or mediocre political and economic institutions.
In other words, public health is no longer such an O-Ring service, an O-Ring service being one where everything has to go right for the service to be of decent quality. And advances are much, much easier when the O-Ring structure no longer rules.
The O-Ring citation is to a famous Michael Kremer paper — a trip to the moon is definitely an O-Ring process, because if one step is off the whole mission probably is a failure. But tasty fish curry is not — you can get a splendid version in some pretty dumpy countries, maybe even a better version in poorer places.
Electricity, however, it seems is still an O-Ring service, as evidenced by the recent power blackouts in South Africa.
What else is likely to become less of an O-Ring good or service in the next few decades to come? And what can we do to hasten such progress? Is there any chance of quality software production making that same kind of transition? Or might some goods and services return to a greater connection with the O-Ring model?
For this post I am very much indebted to a conversation with Garett Jones.
Sunday assorted links
*The Economics Book*
The author is Steven G Medema, and the subtitle is From Xenophon to Cryptocurrency, 250 Milestones in the History of Economics. It is over 500 pages, one page per idea, with lovely color plates next to each page of text. Test both your knowledge of economics and of history of economic thought. For instance, it covers the median voter theorem, linear programming, the socialist calculation debate, and much more. Very well done, and also a good gift book.
You can order it here.
Growing cooperation and inequality
Didn’t everyone used to wish for more and better cooperation? The 1960s left in particular, but pretty much everyone. And isn’t that what we got? And didn’t that — in fact — lead to rather spectacular rises in income inequality?
Consider one implication of the Garett Jones model, which is that more talented people gain more, in percentage terms, from cooperating and working with each other than do less talented people. The mere existence of a (non-universal) export sector is enough to establish this conclusion, but you can see why it is true using other arguments as well. If there are non-linear synergies from bringing together talent, those synergies with be stronger with greater amounts of talent by the very nature of the initial assumptions.
Organizing a high school band brings a modest boost in quality entertainment, but forming the Beatles or Rolling Stones a much much larger gain, again in both absolute and percentage terms. So if it is easier to organize bands of all sorts, income inequality likely will rise.
You are probably aware of the results that the higher wages in super-firms — clusters of lots of talent — relative to normal firms, account for a major share of income inequality. In other words, additional cooperation boosted income inequality.
Or maybe you saw the recent stories “90 percent of growth in high-tech jobs happened in just 5 metro areas.” That too is an instance of greater cooperation, and it has led to more income inequality, with the biggest gains coming in New York City and the Bay Area and a few other places.
More cooperation → → greater income inequality. Think about it.
Be careful what you wish for! Though I very much appreciate the virtues of additional cooperation.
Saturday assorted links
1. Evidence on the loneliness epidemic.
2. Taylor Swift vs. George Soros.
3. Revisiting my 2006 MR post on climate change.
4. Mark Thoma is retiring from University of Oregon after 32 years.
5. Best Chinese music of the decade
6. “We find that firm performance increases when director skill sets exhibit more commonality.”
Another take on q-factors and investment CAPM
Standard consumption CAPM applies a constant discount rate across all stocks, but surely that is odd if different companies face different costs of capital, as indeed they do. Take the companies with a higher cost of capital — in equilibrium they also should have higher rates of return as an offset. And those are (usually) the small stocks, and indeed we know there is a small stock premium (sometimes better expressed as a lower market to book premium) in the finance literature.
But that premium comes from the supply side arbitrage conditions, not from some odd properties of portfolio risk.
You will note that “the investment CAPM says that controlling for a few characteristics is sufficient to explain the cross section of expected returns.” Theory advocates claim that investment CAPM indeed passes that test: “…most anomalies turn out to be different manifestations of the investment and profitability effects.”
That is all from this Lu Zhang paper. Here is my earlier post on q-factors and investment CAPM, still not sure I understand it!
Friday assorted links
Taiwan fact of the day?
This year, the World Bank told current and prospective employees of Taiwanese nationality they must present Chinese travel documents in order to maintain or pursue employment.
Here is more. You will note “Taiwanese law prohibits citizens from maintaining dual citizenship with China.” However upon responding to an inquiry from Axios, the World Bank senior leadership seems to have walked back this policy (for now?).