Category: Uncategorized
What to make of the new U.S.-China trade deal?
That is the topic of my latest Bloomberg column, here is one excerpt:
The U.S. has established its seriousness as a counterweight to China, something lacking since it largely overlooked China’s various territorial encroachments in the 2010s. Whether in economics or foreign policy, China now can expect the U.S. to push back — a very different calculus. At a time when there is tension in North Korea, Hong Kong, Taiwan and the South China Sea, that is potentially a significant gain.
…Currently the U.S. is working hard to keep Huawei equipment out of the forthcoming 5G networks in many countries. (Imagine letting the KGB run the American phone network in say 1980, and you can see what is at stake here.) For that campaign to succeed, even partially, the U.S. needs some credible threats of punishment, such as withholding intelligence or even defense protection from allies. The course of the trade war has made those threats more plausible. If you are Germany, and you see that the U.S. has been willing to confront the economic and military power of China directly, you will think twice about letting Huawei into your network.
A third set of possible benefits relates to the internal power dynamics in the Chinese Communist Party. For all the talk of his growing power, Chinese President Xi Jinping has not been having a good year. The situation in Hong Kong remains volatile, the election in Taiwan did not go the way the Chinese leadership had hoped, and now the trade war with America has ended, or perhaps more accurately paused, in ways that could limit China’s future expansion and international leverage. This trade deal takes Xi down a notch, not only because it imposes a lot of requirements on China, such as buying American goods, but because it shows China is susceptible to foreign threats.
The U.S. still is keeping $360 billion of tariffs on Chinese goods, hardly a propitious sign that China made a great bargain. There is even speculation that China will not report the full deal to its citizens…
It is a common argument that being tough with other countries strengthens the hard-liners in those countries. But in China the hard-liners had been growing in power and influence anyway. This trade war, and the resulting first phase of a trade deal, shows there is a cost to China for being so hard-line.
Do read the whole thing, and note that we still should be agnostic. Nonetheless extreme TDS is preventing people from thinking rationally about this one, and thus I view my column as a correction to most of what you are seeing in MSM.
Damir Marusic and Aaron Sibarium interview me for *The American Interest*
It was far-ranging, here is the opening bit:
Damir Marusic for TAI: Tyler, thanks so much for joining us today. One of the themes we’re trying to grapple with here at the magazine is the perception that liberal democratic capitalism is in some kind of crisis. Is there a crisis?
TC: Crisis, what does that word mean? There’s been a crisis my whole lifetime.
And:
TC: I think addiction is an underrated issue. It’s stressed in Homer’s Odyssey and in Plato, it’s one of the classic problems of public order—yet we’ve been treating it like some little tiny annoyance, when in fact it’s a central problem for the liberal order.
And:
AS: What about co-determination?
TC: There are too many people with the right to say no in America as it is. We need to get things done speedier, with fewer obstacles that create veto points. So no, I don’t favor that.
And:
AS: John Maynard Keynes.
TC: I suppose underrated. He was a polymath. Polymaths tend to be underrated, and Keynes was a phenomenal writer. I’m not a Keynesian on macroeconomics, but when you read him, it’s so fresh and startling and just fantastic. So I’d say underrated.
And:
AS: Slavoj Zizek, the quirky communist philosopher you debated recently.
TC: Way underrated. I had breakfast with Zizek before my dialogue with him, and he’s one of the 10 people I’ve met who knows the most and can command it. Now that said, he speaks in code and he’s kind of “crazy,” and his style irritates many people because he never answers any question directly. You get his Hegelian whatever. He has his partisans who are awful, but ordinary intellectuals don’t notice him and he’s pretty phenomenal actually. So I’d say very underrated.
Here is the full interview, a podcast version is coming too.
Are the ex-royals good enough for Canada?
For example, many of the ways to get permanent residency in Canada require applicants to have specialized skills or high levels of education. Prince Harry trained as a military officer at the Royal Military Academy Sandhurst, but he does not have a university degree, which lawyers said would be a major stumbling block for him.
“I doubt very much they would apply for permanent residency,” said Sergio R. Karas, an immigration lawyer in Toronto. “That would not be a good option for them.”
From the sound of the NYT article by Ian Austen, they will likely enter as “visitors,” a status for which they do not need additional authoritzation.
Wednesday assorted links
1. Residential home services: “Our results show that more stringent licensing regulations are associated with less competition and higher prices but not with any improvement in customer satisfaction as measured by review ratings or the propensity to use the platform again.”
2. Philip Wallace on Andrew Yang.
3. The culture that is Louisiana.
4. The deepest hole we have dug.
My Conversation with the excellent Reid Hoffman
This one is better than the other available conversations with Reid, here is the transcript and audio. Here is part of the CWTeam summary:
Reid joined Tyler to talk about all these leverage points and more, including the Silicon Valley cultural meme he most disagrees with, how Wittgenstein influenced the design of LinkedIn, mystical atheism, what it was like being on Firing Line, why he’s never said anything outrageous, how he and Peter Thiel interpret The Tempest differently, the most misunderstood thing about friendship, how to improve talent certification, what’s needed from science fiction, and his three new ideas for board games.
Excerpt:
COWEN: If we think of Peter Thiel and Elon Musk, they could arguably, by the standards of many people, be called weird. I’ve reviewed all the books you’ve written and a lot of your public talks. I can’t recall you saying a single thing that’s outrageous in any way whatsoever. Why aren’t you weirder?
HOFFMAN: [laughs] Maybe I mask it better. That’s my Straussian element, that I hide my weirdness. I would say that a little bit of it comes down to a theory about what is the right way of evolving discourse.
I think I probably do have a variety of views that people would think is weird. I, for example, think of myself as a mystical atheist, which is neither the full atheist category nor any religious category, but some blend in the middle. Or the fact that I actually think that the notion of capitalism is one of the world’s leading interesting technologies, but it’s not a particularly good philosophy, and you’d think that’s odd for an entrepreneur or an investor, and so forth.
So I have areas where I would say groups of people would think I’m weird. I may not highlight it because I tend to always speak in a way to, how do I think I help us make the most progress? And I would only say the weird things if I thought that was the thing that would result from that.
COWEN: So there are weird things that are in your mind?
HOFFMAN: Yes, yeah.
And:
COWEN: How did your interest in the late Wittgenstein influence the construction and design of LinkedIn? I’m sure they ask you this all the time in interviews.
HOFFMAN: [laughs] All the time. The question I’ve always been expecting. I would say that the notion of thinking about — a central part of later Wittgenstein is to think that we play language games, that the way that we form identity and community, both of ourselves and as individuals, is the way that we discourse and the way that we see each other and the way that we elaborate language.
That pattern of which ways we communicate with each other, what’s the channel we do, and what’s the environment that we’re in comes from insights from — including later Wittgenstein, who I think was one of the best modern philosophers in thinking about how language is core to the people that we are and that we become.
COWEN: What else from philosophy influenced the construction and design of LinkedIn?
Recommended. For help in arranging this Conversation I am very much indebted to Ben Casnocha.
Tuesday assorted links
1. The most checked out books of all time from the New York Public Library. #1 is The Snowy Day, by Ezra Jack Keats.
2. Why gaming is outperforming TV, recommended.
3. Flying has become much cheaper over the last five years (sometimes trotted out as a case of “monopoly,” because the number of major carriers went down).
Big Data+Small Bias << Small Data+Zero Bias
Among experts it’s well understood that “big data” doesn’t solve problems of bias. But how much should one trust an estimate from a big but possibly biased data set compared to a much smaller random sample? In Statistical paradises and paradoxes in big data, Xiao-Li Meng provides some answers which are shocking, even to experts.
Meng gives the following example. Suppose you want to estimate who will win the 2016 US Presidential election. You ask 2.3 million potential voters whether they are likely to vote for Trump or not. The sample is in all ways demographically representative of the US voting population but potential Trump voters are a tiny bit less likely to answer the question, just .001 less likely to answer (note they don’t lie, they just don’t answer).
You also have a random sample of voters where here random doesn’t simply mean chosen at random (the 2.3 million are also chosen at random) but random in the sense that Trump voters are as likely to answer as are other voters. Your random sample is of size n.
How big does n have to be for you to prefer (in the sense of having a smaller mean squared error) the random sample to the 2.3 million “big data” sample? Stop. Take a guess….
The answer is…here. Which is to say that your 2.3 million “big data” sample is no better than a random sample of that number minus 1!
On the one hand, this illustrates the tremendous value of a random sample but it also shows how difficult it is in the social sciences to produce a truly random sample.
Meng goes on to show that the mathematics of random sampling fool us because it seems to deliver so much from so little. The logic of random sampling implies that you only need a small sample to learn a lot about a big population and if the population is much bigger you only need a slightly larger sample. For example, you only need a slightly larger random sample to learn about the Chinese population than about the US population. When the sample is biased, however, then not only do you need a much larger sample you need it to large relative to the total population. A sample of 2.3 million sounds big but it isn’t big relative to the US population which is what matters in the presence of bias.
A more positive way of thinking about this, at least for economists, is that what is truly valuable about big data is that there are many more opportunities to find random “natural experiments” within the data. If we have a sample of 2.3 million, for example, we can throw out huge amounts of data using an instrumental variable and still have a much better estimate than from a simple OLS regression.
Gangs really matter
We study the effects that two of the largest gangs in Latin America, MS-13 and 18th Street, have on economic development in El Salvador. We exploit the fact that the emergence of gangs in El Salvador was in part the consequence of an exogenous shift in US immigration policy that led to the deportation of gang leaders from the United States to El Salvador. Using the exogenous variation in the timing of the deportations and the boundaries of the territories controlled by the gangs, we perform a spatial regression discontinuity design and a difference-in-differences analysis to estimate the causal effect that living under the rule of gangs has on development outcomes. Our results show that individuals living under gang control have significantly worse education, wealth, and less income than individuals living only 50 meters away in areas not controlled by gangs. None of these discontinuities existed before the arrival of gangs from the US. The results are not determined by exposure to violence, lower provision of public goods, or selective migration away from gang locations. We argue that our findings are mostly driven by gangs restricting residents’ mobility and labor choices. We find that individuals living under the rule of gangs have less freedom of movement and end up working in smaller firms. The results are relevant for many developing countries where non-state actors control parts of the country.
That is from a new paper by Nikita Melnikov, Carlos Schmidt-Padilla, and Maria Micaela Sviatschi. Via the excellent Samir Varma.
Urban growth and its aggregate implications
That is the title of a new paper by Gilles Duranton and Diego Puga. This piece goes considerably beyond previous research by having a more explicit model of both urban-rural interactions, and also possible congestion costs arising from more YIMBY. Here are a few results of the paper:
1. If you restricted New York City and Los Angeles to the size of Chicago, 18.9 million people would be displaced and per capita rural income would fall by 3.6%, due to diminishing returns to labor in less heavily populated areas.
2. The average reduction in real income per person, from this thought experiment, would be 3.4%. You will note that NIMBY policies are in fact running a version of this policy, albeit at different margins and with a different default status quo point.
3. If you were to force America’s 11 largest cities to be no larger than Miami, real income per American would fall by 7.9%.
4. If planning regulations were lifted entirely, NYC would reach about 40 million people, Philadelphia 38 million (that’s a lot of objectionable sports fans!), and Boston just shy of 30 million (ditto).
5. Output per person, under that scenario, would rise in NYC by 5.7% and by 13.3% in Boston. That said, under this same scenario incumbent New Yorkers would see net real consumption losses of 13%, whereas for Boston the incumbent losses are only about 1.1%.
6. The big winners are the new entrants. On average, real income would rise by 25.7%.
7. Alternatively, in their model, rather than laissez-faire, if America’s three most productive cities relaxed their planning regulations to the same level as the median U.S. city, real per capita income would rise by about 8.2%.
8. In all of these cases the authors calculate the change in rural per capita income, based on resulting population reallocations.
Recommended, I am very glad to see more serious work in this area.
The U.S. cultural elite
Overall I do not regard this as good news:
We examine the educational backgrounds of more than 2,900 members of the U.S. cultural elite and compare these backgrounds to a sample of nearly 4,000 business and political leaders. We find that the leading U.S. educational institutions are substantially more important for preparing future members of the cultural elite than they are for preparing future members of the business or political elite. In addition, members of the cultural elite who are recognized for outstanding achievements by peers and experts are much more likely to have obtained degrees from the leading educational institutions than are those who achieve acclaim from popular audiences.
That is from a new paper by Steven Brint, et.al., via the excellent Kevin Lewis.
Monday assorted links
1. Coleman Hughes is starting a podcast.
2. How textbooks vary across Texas and California (NYT).
3. Personnel recruitment and retention in the U.S. military.
4. World Bank forecasts 6.3% growth for Ethiopia.
5. Hilary Hahn on daydreaming as a form of practice.
6. Tribute to Roger Scruton. And a short excerpt from my 2011 debate with Scruton on friendship, here is the whole thing.
7. Randian response to Greta, over the top, not recommended.
Sunday assorted links
2. Ethiopia projects 10.8% growth for the coming year.
4. John Cochrane on wealth and taxes, overview.
5. Bestselling albums of the last decade, Abbey Road #1, Michael Jackson #6.
The economic importance of the Middle East?
Or lack thereof?:
Even beyond Iran, the region scarcely registers on multinationals’ profit-and-loss statements. The Middle East and Africa accounted for 2.4% of listed American firms’ revenues in 2019, according to Morgan Stanley, a bank. For European and Japanese companies it was 4.9% and 1.8%, respectively. Middle Easterners still buy comparatively few of the world’s cars (2.3m out of 86m sold globally in 2018). Peddlers of luxury goods like Prada, an Italian fashion house, and L’Oréal, a French beauty giant, book 3% of sales in the Middle East (not counting sheikhs’ shopping trips to Milan or Paris).
The overall regional footprint of Western finance appears equally slight. At the end of 2018 big American banks had $18.5bn-worth of credit and trading activity in the region, equivalent to 0.2% of their assets. This includes JPMorgan Chase’s $5.3bn business in Saudi Arabia and Citigroup’s $9.6bn exposure to the United Arab Emirates (UAE). European banks have, if anything, been retreating. BNP Paribas of France sold its Egyptian business seven years ago and earned a footling €121m ($143m) in the Middle East in 2018. HSBC reports a substantial $58.5bn in Middle Eastern assets, though that is still a rounding error in the British lender’s $2.7trn balance-sheet.
Here is more from The Economist, noting that energy does play a larger role in other economic sectors. If there is any part of the world that could use more multinational activity…
Places to go in 2020
Here is the mostly dull NYT list. Here is my personal list of recommendations for you, noting I have not been to all of the below, but I am in contact with many travelers and paw through a good deal of information:
1. Pakistan, and Pakistani Kashmir. Finally it is safe, and in some way it is easier to negotiate than India. The best dairy products I have eaten in my life, and probably it is the most populous country you have not yet seen, or maybe Nigeria, but that makes the list too. Islamabad is nicer than any city in India, and watch the painter trucks on the nearby highway.
2. Eastern Bali. Still mostly unspoilt, the perfect mix of exoticism and comfort. This island is much, much more than Elizabeth Gilbert, yoga, and hippie candles.
3. Lalibela, Ethiopia. Has some of my favorite churches, beautiful vistas and super-peaceful, and the high altitude of Lalibela and Addis means you don’t have to take anti-malarials. I know a good guide there, here are my Lalibela posts. the central bank forecasts 10.8% growth for the country for next year, so Lalibela is likely to change rapidly.
4. Lagos, Nigeria. A bit dangerous, but immense fun, wonderful music every night, and not nearly as bad as you might be thinking. Africa’s most dynamic city by far and a new modern civilization in the works. Here are my earlier Lagos posts, including travel tips.
5. Odisha [Orissa], India. Sometimes called India’s most underrated cuisine, that is enough reason to go and so now it is on my list for myself.
6. Sumatra, Indonesia. Surely a good place to understand the evolution of Islam, and supposedly to be Indonesia’s best food. I hope to get there soon. First-rate textiles and lake views, I hear.
7. Warsaw, Poland. No, not a fascist country (though objectionable in some regards), and rapidly becoming the center of opportunity for eastern Europe and a major player in the European Union. First-rate food and dishes you won’t get elsewhere, at least nothing close to comparable quality. Nice for walking, don’t expect too many intact old buildings, but isn’t it thrilling to see a major part of Europe growing at four percent?
8. Baku, Azerbaijan. The world’s best seaside promenade, and wonderful textiles and food, in the Iranian direction, here are my travel notes. Feels exotic, yet safe and orderly as well.
9. Macedonia, or anywhere off the beaten track in the former Yugoslavia. Then think about the history and politics of where you are at, and then think about it some more.
10. Quito, Ecuador. One of the world’s loveliest cities, including the church, wonderful potatoes and corn for vegetarians too. There are some iPhone snatchers, but overall safe to visit. Very good day trips as well, including to the “Indian market” at Otavalo and volcano Cotopaxi.
Saturday assorted links
1. The Tippie Hedren Vietnamese manicurists story.
2. A world without pain (New Yorker).
4. Slow progress and high costs on German cultural infrastructure (NYT).
5. Demand for ginseng is creating a ‘wild west’ in Appalachia.
6. Poor taste markets in everything, not recommended.