Radical claims about recalculation

Via Interfluidity, Noah Smith writes:

In a typical microeconomic model, the market clears, because price adjusts to balance supply and demand. In a PSST world, this does not happen. The pattern of specialization and trade will not always be disturbed by small changes in prices, because the global pattern itself represents a stable equilibrium (i.e., is “sustainable”). How many computers I buy and sell will depend not only on the price of computers, my desire for computers, and my cost of producing computers; it will depend on the prices, desirabilities, and costs of a bunch of other goods throughout the whole economy. The economy will be riddled with network externalities, and the resultant weakening of the price mechanism means that any market may or may not tend toward efficiency on any given time scale. In other words, in a PSST world, there is no invisible hand.
This opens the door for a hugely expanded role for government (or other large, centralized actors) in the macroeconomy. If global patterns matter as much as local prices, then an actor large enough to perceive and affect the overall pattern might be capable of nudging the economy out of a bad equilibrium and into a better one. Dani Rodrik has been saying this for a long time in connection with newly developing economies, but the same may be true in rich countries when faced with disruptive technological change or globalization.
Believe it or not, that’s not exactly my view.  The most serious network externalities problem is most likely underinvestment in new innovation and its supporting infrastructure.  Subsidies to basic research can yield very high returns, as they have done for the computer, the internet, and through NIH.  Otherwise, when it comes to recalculating the resource allocation on top of the basic scheme of knowledge, I am skeptical that the public sector will do a very good job, for both information and public choice reasons.  Private sector rigidities and rules of thumb generally will mean that readjustment is too slow, not that it will fly off the rails into hyperspace, finance being one notable exception.  Education and confidence building can speed readjustment, as can nominal gdp stabilization, but if anything the public sector is especially sluggish itself.  Traders rang the alarm bell on the subprime crisis, and its later and broader offshoots, well before the regulators did.  Has the EU been ahead of the curve on Greece?  I don’t think so.

What is on the horizontal “Q” axis of this female demand curve?

Scott Peterson, who was convicted in California of murdering his wife and unborn child, had dozens of women pleading for his mailing address the first day he arrived in prison. “The more notorious, the stronger the allure,” says Jack Levin, a criminologist at Northeastern University who has studied what he calls “death row groupies.” “These are usually women who would love to date a rock star or rap idol, but if they wrote to a musician, they might get a letter. Here they could get a marriage proposal.” At the same time, he says, “The inmate is seen as evil by society, but only these women see the gentle side of their man. That makes them feel important.” The husband’s legal case adds purpose to her life.

Here is much more, hat tip goes to The Browser.  Oh, don’t forget this part of the story:

Most wives, when they learn something about their husband’s past, don’t have to confront the idea that he burned a toddler’s mouth with a cigarette and broke the child’s arms and legs.

…Crystal, who had recently heard someone describe Randy as “someone who breaks the arms and legs and skull of a baby,” apparently had never heard all the details of the crime.

“What are they talking about?” she asks.

There is fascinating dialogue between the couple, at the link, and then it comes to this:

She goes silent again.

“Babe?”

No response.

“I’m sorry about all this,” he tells her.

“I know you are,” Crystal says as she changes the subject back to the driving trip. “I’m behind a big yellow bus.”

Before he lets it go, Randy tells her that he’s really good with children. “You know how some people are just natural with children? That’s me.”

After just a few minutes of discomfort, they are back to small talk and professions of love. They exchange “I love you”s at the end of nearly every 15-minute call, so often that Crystal starts to joke about their “soap-opera moments.”

“Honey, I just want to look at you. I don’t have to eat,” she says, in a soap-star voice.

Assorted links

1. Has Singapore’s growth been on top of negative TFP?  (This result is not a strong endorsement of their industrial policy.)

2. James Heckman to work on health economics at Dublin, but too late to change the country’s fundamental path.

3. Is the New Zealand boom finally arriving?

4. Why is it so hard to learn Danish?

5. I agree with Krugman on core inflation, but still this is a sobering thought.

6. Rumors of Greek bank runs, original story here (in Greek).  I am afraid that I agree with this broader radical assessment.  Let history prove me wrong, as it probably will.

Do “gifted and talented” sections improve educational outcomes?

Maybe not, according to Sa A. Bui, Steven G. Craig, and Scott A. Imberman (ungated versions here):

In this paper we determine how the receipt of gifted and talented (GT) services affects student outcomes. We identify the causal relationship by exploiting a discontinuity in eligibility requirements and find that for students on the margin there is no discernable impact on achievement even though peers improve substantially. We then use randomized lotteries to examine the impact of attending a GT magnet program relative to GT programs in other schools and find that, despite being exposed to higher quality teachers and peers that are one standard deviation higher achieving, only science achievement improves. We argue that these results are consistent with an invidious comparison model of peer effects offsetting other benefits. Evidence of large reductions in course grades and rank relative to peers in both regression discontinuity and lottery models are consistent with this explanation.

Do the smarter kids choose a peer group to maximize…– what variable?  Maybe it’s a mistake to hang around with people who are too much smarter than you are and maybe a lot of kids know that.  How well do they choose their peer groups?  Can the authorities improve the outcomes of non-troubled kids by manipulating their peer groups?  Here is another new paper on peer effects.

In yet another new paper, early kindergarten seems to hurt not help children’s subsequent educational outcomes.

The licensing of witches

Matt Yglesias probably wishes he were blogging this story, via Salem, Massachusetts:

Just as Ms. Szafranski predicted, the number of psychic licenses has drastically increased, to 75 today, up from a mere handful in 2007. And now Ms. Szafranski, some fellow psychics and city officials worry the city is on psychic overload.

“It’s like little ants running all over the place, trying to get a buck,” grumbled Ms. Szafranski, 75, who quit her job as an accountant in 1991 to open Angelica of the Angels, a store that sells angel figurines and crystals and provides psychic readings. She says she has lost business since the licensing change.

“Many of them are not trained,” she said of her rivals. “They don’t understand that when you do a reading you hold a person’s life in your hands.”

The article is interesting throughout and for the pointer I thank Ryan.

In praise of driverless cars, don’t regulate them into oblivion

My column is here, one excerpt is this:

The benefits of driverless cars are potentially significant. The typical American spends an average of roughly 100 hours a year in traffic; imagine using that time in better ways — by working or just having fun. The irksome burden of commuting might be lessened considerably. Furthermore, computer-driven cars could allow for tighter packing of vehicles on the road, which would speed traffic times and allow a given road or city to handle more cars. Trips to transport goods might dispense with drivers altogether, and rental cars could routinely pick up customers…

The point is not that such cars could be on the road in large numbers tomorrow, but that we ought to give the cars — and other potential innovations — a fair shot so that a prototype can become a commercial product someday. Michael Mandel, an economist with the Progressive Policy Institute, compares government regulation of innovation to the accumulation of pebbles in a stream. At some point too many pebbles block off the water flow, yet no single pebble is to blame for the slowdown. Right now the pebbles are limiting investment in future innovation.

A few points:

1. I couldn’t fit it in the column, but it is an interesting question why there is no popular movement to encourage driverless cars.  Commuting costs are very high and borne by many people.  (Here is Annie Lowery on just how bad commutes can be.)  You can get people to hate plastic bags, or worry about a birth certificate, but they won’t send a “pro-driverless car” postcard to their representatives.  The political movement has many potential beneficiaries but few natural constituencies.  (Why?  Does it fail to connect to an us vs. them struggle?)  This is an underrated source of bias in political outcomes.

2. In the longer run a lot of driverless cars would be very small.  Imagine your little mini-car zipping out and bringing you back some Sichuan braised fish, piping hot.

3. If a traffic situation gets really hairy, the driverless car can be programmed to pull over and stop.  Oddly I think that perfecting the GPS system might be a trickier problem than making them safer than driver-run cars.  Computers don’t drink, but they will drive around the same block forever and ever if they don’t understand the construction situation.  Even the best chess-playing computers don’t very well “understand” blockaded positions and perpetual check.

4. This isn’t a column about driverless cars at all.  It’s about our ambivalent attitudes toward major innovations.  It’s also about how the true costs of regulation are often hidden.  A lot of potentially good innovations never even reach our eyes and ears as concepts, much less realities.  They don’t have tags comparable to that of the driverless car.

5. Via Michelle Dawson, here is a list of driverless trains.  Here are links on robot-guided surgery.

*Midnight in Paris*

I don’t want to over-recommend this movie — it is good not great — but it is certainly enjoyable to watch.  It works because Owen Wilson self-consciously imitating Woody Allen, down to his shuffle and shoulder shrugs, is so absurd that it deflates the rest of the film down to the appropriately non-pretentious level, whether intentionally or not.

More importantly, the movie serves up some conceptual social science.  It focuses on why we so commonly overrate the cultures of previous eras and see them as golden ages.  It also asks the following question: if we somehow managed to meet the cultural titans of previous eras, how many of them would come across as blowhard hacks, if only because their own subsequent work has made their personae obsolete?  Gertrude Stein and Man Ray are the most impressive characters in the movie, even though (perhaps because?) they are the least well known of the figures paraded across the screen.  Hemingway and Picasso sink like stones and the viewer suddenly realizes that Allen sees Hemingway as his foil figure on issues of bravery and death.  He cannot be allowed to look like anything but a blathering fool.  (My view is that artistic creativity is sufficiently g-loaded that none of these people would seem anything less than extraordinarily impressive.)

Once again, this movie is Woody Allen wondering what other people think about him.  Ultimately the point of view of the main character and the director/moviemaker are the same.  You cannot say that about Larry David and that is why these superficially similar figures are very different and ought never to collaborate.

Sentences to ponder

There’s a measles outbreak in Massachusetts, probably thanks to low vaccination rates.

It’s hard to believe, but we’re sliding backwards on two of the three public health achievements of the 20th century: vaccination, antibiotics, and clean water.  Antibiotic resistance is a growing problem, one that we’re partly inflicting on ourselves by rampant overuse.  And now vaccine resistance is spreading among parents who want to free ride on the herd immunity of others.  If these diseases were widespread, they’d be rushing to vaccinate their kids.  But they can delay, or forgo the vaccines entirely, thanks to other parents who are willing to risk their kids in order to do the right thing.  They’re already killing little babies who catch pertussis before they can be vaccinated, and now measles has killed six people in France just since the start of the year.

That is from Megan McArdle.