Category: Uncategorized

Something is wrong with construction

by  Tyler Cowen in

Changing sectoral trends in the last 6 decades, translated through the economy’s production network, have on net lowered trend GDP growth by around 2.3 percentage points.  The Construction sector, more than any other sector, stands out for its contribution to the trend decline in GDP growth over the post-war period, accounting for 30 percent of this decline.

That is from a new working paper by Andrew Foerster, Andreas Hornstein, Pierre-Daniel Sarte, and Mark W. Watson, “Aggregate Implications of Changing Sectoral Trends.”

Kevin Erdmann, telephone!

Has the division of labor hindered knowledge integration and productivity growth?

by  Tyler Cowen in

…we suggest that this division of innovative labor has not, perhaps, lived up to its promise.  The translation of scientific knowledge generated in universities to productivity enhancing technical progress has proved to be more difficult to accomplish in practice than expected.  Spinoffs, startups, and university licensing offices have not fully filled the gap left by the decline of the corporate lab.  Corporate research has a number of characteristics that make it very valuable for science-based innovation and growth.  Large corporations have access to significant resources, can more easily integrate multiple knowledge streams, and direct their research toward solving specific practical problems, which makes it more likely for them to produce commercial applications.  University research has tended to be curiosity-driven rather than mission-focused.  It has favored insight rather than solutions to specific problems, and partly as a consequence, university research has required additional integration and transformation to become economically useful.  This is not to deny the important contributions that universities and small firms make to American innovation.  Rather, our point is that large corporate labs may have distinct capabilities which have proved to be difficult to replace.

That is from Ashish Arora, Sharon Belenzon, Andrea Patacconi, and Jungkyu Suh, “The Changing Structure of American Innovation: Some Cautionary Remarks for Economic Growth,” recommended, an excellent paper spanning several disciplines.  I would myself note this is further reason not to split up the major tech companies.

*Dignity: Seeing Respect in Back Row America*

by  Tyler Cowen in

That is the new book by Chris Arnade, insightful throughout and with excellent photos.  Excerpt:

McDonald’s wasn’t just central to my friends, it was important to everyone in the neighborhood.  It was always packed with families and older couples, especially on weekend mornings.  In the evenings, it was filled with teenagers or young couples going out.

There weren’t really many other options.  McDonald’s was one of the few spaces in Hunts Point open to the public that worked.  While wonderful and well-intentioned nonprofits serve Hunts Point, whenever I asked anyone where they wanted to meet or grab a meal, it was almost always McDonald’s.

Arnade indicts “the elitists,” whereas I would lay heavier blame on alcohol and drug abuse.  Many much poorer people never touch the stuff, and furthermore I would have added a comparison with America’s dark-skinned, not entirely popular Muslim immigrants, the non-drinking ones most of all.  There is indeed something wrong with much of American culture, and we need to think harder about what that might be.  Neither sympathy nor empathy changes that fact, and I am happy to be one of the elitists under indictment.  I would rather write what I think than try to make other people feel better, or to support my favored politics, and perhaps that attempt is doomed in any case?  Is it more or less condescending to hold the poor to high standards?

*Godzilla: King of the Monsters* (spoilers in this post)

by  Tyler Cowen in

Carp all you want, I thought it was pretty damn good.  The innovations: monsters have economic value, there are property rights in monsters (for a while), communication really matters, the environmentalists are the bad guys, and nuclear power saves the world.  The stagnation: Asian people, and only Asian people, have TFP about monsters.

You can’t judge these movies by normal standards, like those silly critics do, instead you have to ask:

1. How good are the monsters and the monster fight scenes?

2. Does it give the monsters a decent backstory and mythological lore?

3. Does it pay suitable homage to the original movies?

4. Does it have the right number of obscure monsters, arbitrarily added to the canon, as if we know all along who and what they are supposed to be?

5. Do you learn something about how the film-producing country views its own science and bureaucracy?

6. Perhaps YIMBY will come to Boston after all.

Mothra steals the show, A- I say, don’t @ me on this one.  The Japanese movie Shin Godzilla, which appeared about two years ago, is pretty good too, especially on #5.

Friday assorted links

by  Tyler Cowen

1. Arnold Kling on the decline in labor’s share.

2. New results on RNA-based memory and even Lamarckianism of a sort.

3. Plastic bags designed to embarrass their users (the culture that is Vancouver).

4. What is it like to have a six-fingered hand?

5. Laurence B. Siegel reviews *Big Business: A Love Letter to an American Anti-Hero*.

6. Are markets becoming less competitive?

7. Amy Finkelstein on AER: Insights.

Israel is a triumph of neoliberalism

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is one excerpt:

From about 1973 to 1985, Israel had very high rates of inflation at one point reaching over 400%. That was the result of excessively loose monetary policy. Over time, printing money at such a clip took in successively less government revenue, as Israelis adjusted to the inflation and worked around it by holding less cash and denominating their contracts in foreign currencies. The inflation stopped giving macroeconomic benefits, even for government revenue, and Israel moved toward a regime of lower inflation and fiscal strength, to the benefit of the country’s longer-term growth.

This is a classic episode of MMT — “Modern Monetary Theory” — getting it wrong, as argued by Assaf Razin in his recent study of Israeli macroeconomic history. Under MMT, monetary policy can cover government spending, and fiscal policy can regulate price levels. Israel wisely followed more mainstream approaches.

And:

Even many of the microeconomic developments in Israel fit standard models. As you might expect, given the aridity of the region, Israel has had longstanding issues with water supply. Yet today water is not a huge practical problem in Israel, though it requires constant attention. Under the Israeli water regime, which has strong governmental support, high prices and well-defined property rights encourage conservation and careful use. Remarkably, the Israeli population basically quadrupled from 1964 to 2013, but water consumption barely went up. Israel has become a world leader in dealing with water problems, and in turn the country has become an exporter of sophisticated systems for water management.

There is much more at the link, and note Israel is neo-liberal only in some ways, see this earlier link I put up (which I link to in the piece).

Wednesday assorted links

by  Tyler Cowen

1. “We find an association between local practice of untouchability and open defecation that is robust; is not explained by economic, educational, or other observable differences; and is specific to open defecation rather than other health behavior or human capital investments more generally.”  Link here.

2. Huawei selling its undersea cable business (but to whom exactly?).

3. Deepfake propaganda is maybe not such a big problem after all.

4. How marital sorting works for Brits (pdf).

5. Michael Strain tells us that the emergency expense story is wrong.

Why do right-wing authoritarian regimes allow so much citizen exit?

by  Tyler Cowen in

Derek Bonett emails me:

I’ve been considering the differences between left-wing authoritarian regimes and right-wing authoritarian regimes throughout history. One particular difference springs to mind that I do not believe has been explored:

Left-wing authoritarian regimes very frequently restrict emigration. Legal emigration from the U.S.S.R. and the Eastern Bloc was very difficult, same with Mao’s China, Castro’s Cuba, the DPRK, “Democratic Kampuchea”, Ethiopia under Mengistu, the list goes on.

But, strikingly, it seems to me that with the partial exception of the Third Reich, fascist/ultranationalist/right-wing authoritarian regimes generally do not restrict emigration. In the Third Reich, it seems that even Jews were allowed to emigrate until 1941. Mussolini’s Italy didn’t impose extensive emigration controls either. And, accordingly to my admittedly casual familiarity with these regimes, neither did Franco’s Spain, Salazar’s Portugal, Pinochet’s Chile, nor the more generic authoritarian regimes of Chiang Kai Shek’s Taiwan or Park Chung He’s South Korea.

Does your much more comprehensive reading of history confirm this difference? Has someone already written about this?

Perhaps the more “right-wing” regimes tolerate different sorts of income inequality.  Cuba and the USSR had plenty of inequality, but the main earners, in terms of living standards, are restricted to people within the state apparatus.  That means a lot of the talent will want to leave.  Many fascist regimes, however, are quite willing to cultivate multi-millionaires and then try to co-opt them into supporting the state.  Since you can still earn a lot in the private sector, exit restrictions are less needed.

What would be other hypotheses?

I don’t find all global cities increasingly the same

by  Tyler Cowen in

Here is my Bloomberg column on that question, recently raised by Megan McArdle, here is one excerpt from my take:

Maybe it is only the “major” cities that are becoming more alike. If so, what is “major” supposed to mean? Among the more populous cities I have visited are Lagos, Tokyo, Mexico City, Delhi, Sao Paulo, Shanghai and Cairo. I can find very real similarities among their gyms, coffee shops, hotels and smart phones used by the locals. Still, it is hard to argue they are converging on some common set of experiences or cultural memes. Those cities show different movies (for the most part), play different kinds of music in public spaces, serve different dominant cuisines, exhibit different modes of personal dress, and of course speak different languages.

And:

Even central London and central Manhattan have fundamental differences, and that is without bringing Harlem or East Harlem into it. I almost always feel pleasant and relaxed walking around London. In central Manhattan, I often feel a bit stressed. I go to Manhattan to hear jazz, to visit contemporary art galleries, to soak up the energy of the streets. When I am in London (less frequently), I visit well-stocked bookshops, eat Indian food, and absorb a very different vision of government and politics.

To be blunt, if the two cities are so similar, why do I much prefer spending time in London?

…More than ever before, London and New York offer more good ways of having different experiences.

There is much more at the link, hearkening back to my earlier book Creative Destruction: How Globalization is Changing the World’s Cultures.

Tuesday assorted links

by  Tyler Cowen

1. Has the Chinese audience induced Hollywood to make whiter casting decisions?

2. Redux of my 2016 Brexit post.

3. New learning on the Greek great depression — floating rates may not have helped much for very long.

4. Further evidence for the view that air pollution is really, really bad.

5. This is labeled “the most middle class argument ever.”  I call it “the most British argument ever.”  It is about flowers and property rights.

6. Against E-Verify.

No sweet spot for Singapore in US-China tensions

by  Tyler Cowen in

That is the title of the new and remarkable Bilahari Kausikan Op-Ed in The Straits Times.  I will serve up some bits, and please note this is now the world we live in:

Evoking the Long March [by Xi] is intended to prepare the Chinese people for a prolonged struggle with the US. It was, in effect, a tacit admission of the CCP’s mistakes with the consequent need for a retreat, while holding out the promise of ultimate victory…

The Chinese have long memories. Despite our constant denials, they still consider Singapore a “Chinese country” and may feel entitled to our support and will not quickly forget if we are regarded as insufficiently helpful in their time of need.

Some in the Trump administration also seem inclined to view the issue in racial terms. As the only ethnic Chinese-origin majority sovereign state outside greater China, we may be subject to special scrutiny.

What Singaporeans need to understand better is that, under present circumstances, there may be no sweet spot we can occupy that will keep both the Chinese and the Americans simultaneously happy. There is no silver bullet, and it is a fool’s errand to look for one.

Neither can we just lie low and hope for the best. You may not look for trouble but trouble may come looking for you. And trouble is all the more likely to seek you out if either side thinks you are, or can be, intimidated.

We must have the courage to pursue our own national interests. Sometimes our national interests may lead us to tilt one way, sometimes the other. But it must always be our national interest that guides us and nothing else.

Both the Chinese and Americans may not be too happy with us for pursuing our own interests. But Singapore does not exist to give joy to American or Chinese hearts. So long as neither side is so unhappy that it dismisses us as unredeemable, we can live with their unhappiness and manage it…

Our more complex domestic politics is a complication. I see still faint but distinct signs that some section of our population – how large, I do not know – either for transactional economic reasons, or unthinking ethnic sympathies, or sheer chauvinism, is beginning to look at the current US-China tensions through a racial lens.

As US-China competition heats up, this tendency may be accentuated. This is the greatest danger to Singapore in this new phase of US-China competition. It is still at a nascent stage and must be checked, if necessary by the prophylactic exercise of the coercive powers that are the legitimate monopoly of the state, before external and internal forces act and react with each other in a vicious spiral downwards.

If we hold together, we can manage the external complications. If we do not, and the social compact which is the foundation on which modern Singapore was built is strained or broken, these internal stresses may make the external complications unmanageable.

Since this period of US-China tensions will be prolonged, this is not a challenge that lends itself to definitive solutions. Managing it requires continual vigilance and periodic decisive action. It is our own Long March.

Do read the whole thing, as I said above this is now the world we live in.