Literacy or Loyalty?
Why does schooling in much of the developing world not result in much in the way of increased skills? Maybe because education bureaucrats in these counties want obedient citizens more than literate, numerate, informed citizens.
In a discrete choice experiment in which bureaucrats in education were asked to make trade-offs between foundational literacy, completion of secondary school, and formation of dutiful citizens, respondents valued dutiful citizens 50% more than literate ones. For many policy makers, the goal is not the production of knowledge, but the fostering of nationalism.
This may sound like an odd set of priorities, but both European and Latin American countries had similar priorities when they expanded their education systems to serve more than a small elite around the turn of the 20th century. The goal was not to produce scientists or entrepreneurs but to inculcate a reliable workforce that would support the state.
…Developing-country schools are trying to achieve much the same ends. Students learn to memorize, to obey, and to not question — but they do not particularly learn to read or write. But then again, that was never the goal — developing countries are following the path trod on by developed countries. Just like developed countries, they will try to “teach ordinary people obedience, respect for the law, [and] love of order.”
I am reminded that if you want to predict which countries invest a lot in education, look at which countries invest a lot in government owned television stations.
My notes/outline on the rise of Scottish economic thought
1650s, wars with England, invasions, Cromwell repels the Scots
1690s – Darien Scheme in Panama, Scots more generally grow interested in empire
1707 – Union with England
Scotland keeps its Presbyterian church and laws
Scotland never settled by Rome, for a long time closer to France
Post Glorious Revolution, many Scots still loyal to the Stuart monarchy, recurring theme
Jacobites – loyal to James, who was expelled by the Glorious Revolution
Glasgow – tobacco and sugar trade
Edinburgh – Intellectual, educational, and administrative center
Overall good educational system at multiple levels
Frances Hutcheson – born in Ireland to Scots family, key works in the 1720s, beauty, approbation, ethics, 1729 starts professorship in Glasgow
1739-40 – David Hume, Treatise on Human Nature
1745 – Major Jacobite uprising
Post-1745: The Highlanders and the clan system starts its true decline
Linen, cotton, wool, jute industries
Good schools, good universities, competitive, English-language, no class system
1748 – David Hume, Enquiry Concerning Human Understanding
1750s – David Hume’s essays on economics
1755 – 1.3 million people in Scotland
1759 – Adam Smith, Theory of Moral Sentiments
1762 – Ossian [James Macpherson], beginnings of Scottish romanticism
1767 — Adam Ferguson – Essay on Civil Society, progress, commercial society, militarism
1776 – David Hume dies
1776 – Wealth of Nations
The sciences: the physician and chemist William Cullen, the agriculturalist James Anderson, chemist and physician Joseph Black, natural historian John Walker, and James Hutton, the first modern geologist.
Late 18th century – onset of Scot inventors/tinkerers, most of all James Watt and the steam engine
Thursday assorted links
2. How to model the Putin interview.
3. What really happened with the Hugo Awards?
4. In this one study, wage subsidies have a pass-through rate of about 28%.
5. When it comes to Ontario, the world is waking up.
6. Bard is now Gemini. And a quick overview here. And here is Zvi on Gemini. And Ethan Mollick.
Grandmaster-Level Chess Without Search
Scaling seems to be working here:
The recent breakthrough successes in machine learning are mainly attributed to scale: namely large-scale attention-based architectures and datasets of unprecedented scale. This paper investigates the impact of training at scale for chess. Unlike traditional chess engines that rely on complex heuristics, explicit search, or a combination of both, we train a 270M parameter transformer model with supervised learning on a dataset of 10 million chess games. We annotate each board in the dataset with action-values provided by the powerful Stockfish 16 engine, leading to roughly 15 billion data points. Our largest model reaches a Lichess blitz Elo of 2895 against humans, and successfully solves a series of challenging chess puzzles, without any domain-specific tweaks or explicit search algorithms. We also show that our model outperforms AlphaZero’s policy and value networks (without MCTS) and GPT-3.5-turbo-instruct. A systematic investigation of model and dataset size shows that strong chess performance only arises at sufficient scale. To validate our results, we perform an extensive series of ablations of design choices and hyperparameters.
Here is the full paper by Anian Ruoss, et.al. I guess AI is likely to get better at other things too — I’ve become numb to the miracles, frankly.
Should AM radios be mandated in cars?
No. Here is my Bloomberg column to that effect, excerpt:
Personally, I prefer to listen to XM satellite radio, a paid subscription service. It features channels that appeal to my specific tastes (in this case, if you’re asking, the Beatles, classical music and various Spanish-language programs). AM radio, which is usually advertiser-supported, tends to have more of a “least common denominator” flavor, as it must attract many listeners to pull in the ad revenue. I do not think the federal government should be using the force of law to favor cultural options that are already trying to appeal to the least common denominator.
When I bought my current car, it was capable of receiving a satellite radio signal, and I simply had to request that it be turned on. (This ease of use is one reason why I purchased the model, so the commercial considerations here are real.) There was no law requiring the satellite radio option — just as there should be none requiring an AM radio option. This symmetry of treatment meets standards of both fairness and economic efficiency.
So I’ll say it again, no AM radio should not be mandated in cars, even though Congress is thinking of doing this on a bipartisan basis.
My Conversation with the excellent Ami Vitale
Here is the audio, visual, and transcript. Here is the episode summary:
Ami Vitale is a renowned National Geographic photographer and documentarian with a deep commitment to wildlife conservation and environmental education. Her work, spanning over a hundred countries, includes spending a decade as a conflict photographer in places like Kosovo, Gaza, and Kashmir.
She joined Tyler to discuss why we should stay scary to pandas, whether we should bring back extinct species, the success of Kenyan wildlife management, the mental cost of a decade photographing war, what she thinks of the transition from film to digital, the ethical issues raised by Afghan Girl, the future of National Geographic, the heuristic guiding of where she’ll travel next, what she looks for in a young photographer, her next project, and more.
Here is one excerpt:
COWEN: As you probably know, there’s a long-standing and recurring set of debates between animal welfare advocates and environmentalists. The animal welfare advocates typically have less sympathy for the predators because they, in turn, kill other animals. The environmentalists are more likely to think we should, in some way, leave nature alone as much as possible. Where do you stand on that debate?
VITALE: It depends. It’s hard to make a general sweeping statement on this because in some cases, I think that we do have to get involved. Also, the fact is, it’s humans in most cases who have really impacted the environment, and we do need to get engaged and work to restore that balance. I really fall on both sides of this. I will say, I do think that is, in some cases, what differentiates us because, as human beings, we have to kill to survive. Maybe that is where this — I feel like every story I work on has a different answer. Really, I don’t know. It depends what the situation is. Should we bring animals back to landscapes where they have not existed for millions of years? I fall in the line of no. Maybe I’m taking this in a totally different direction, but it’s really complicated, and there’s not one easy answer.
And:
COWEN: As you know, there are now social networks everywhere, for quite a while. Images everywhere, even before Midjourney. There are so many images that people are looking at. How does that change how you compose or think about photos?
VITALE: Well, it doesn’t at all. My job is to tell stories with images, and not just with images. My job as a storyteller — that has not changed. Nothing has changed in the sense of, we need more great storytellers, visual storytellers. With all of those social media, I think people are bored with just beautiful images. Or sometimes it feels like advertising, and it doesn’t captivate me.
I look for a story and image, and I am just going to continue doing what I do because I think people are hungry for it. They want to know who is really going deep on stories and who they can trust. I think that that has never gone away, and it will never go away.
I am very happy to have guests who do things that not everyone else’s guests do.
Might a Georgist land tax help revive Detroit?
That is the topic of my Bloomberg column. Maybe they should try it for federalism/discovery purposes, but overall I am skeptical. Here is one excerpt:
The history of “enterprise zones,” which are specially designated areas (usually urban) with lower taxes and fewer regulations, offers a cautionary tale. Enterprise zones have at best mixed results in revitalizing declining areas. Could fiddling with the marginal incentives embedded in the property tax code really make that much more of a difference? Most economic decisions are made on the basis of broad criteria such as labor force quality, nearby markets and the ease of doing business.
By itself, the uneven record of enterprise zones is no reason not to experiment with land value taxation. But it does limit the upside from any change.
A possible downside from land value taxation is that it discourages land speculation. Land speculators do not, I concede, have the best reputation — but speculation can be either a positive or negative, depending on whether entrepreneurs have good foresight. On the plus side, speculation can keep land from being developed prematurely, or from being locked into uses that later turn out to be too low in value.
If dormant land in Detroit is taxed at a higher rate, that might encourage property owners to develop low-quality housing or retail to lower their tax burden. A landowner might build a small house, for example, rather than holding out for a large, higher-quality apartment complex. The city might get modest growth, but lose out on the chance for a bigger economic redevelopment. Detroit has in recent times shown signs of a revival, so perhaps waiting for the right opportunity is sometimes best.
Of course, speculators can also make mistakes, for example by failing to develop their property more quickly. Still, whether the tax authorities have the foresight and flexibility to do better than property speculators is an open question. In the meantime, some speculators may abandon their holdings to avoid the tax, putting more property in the hands of the municipal government — hardly an ideal outcome.
Note also that the proposal is revenue neutral by design (taxes on developments are supposed to go down), but over time it might simply evolve into a flat-out tax increase.
Wednesday assorted links
1. “That work suggested it was not how many times a word was repeated that predicted whether Roy’s son learned it early, but whether it was uttered in an unusual spot in the house, a surprising time or in a distinctive linguistic context.” Link here.
2. Neruda update (New Yorker). The poor Tamil maid.
3. Positive rather than adverse selection into life insurance.
4. Deutsche Bahn is still using Windows 3.11 (auf deutsch).
5. The Norwegian Century is indeed upon us (in Norwegian).
Is Science a Public Good?
Science seems like a public good; in theory, ideas are non-rivalrous and non-excludable. But the closer we look at how ideas actually spread and are used in the world, the less they seem like public goods. As I am fond of pointing out, Thomas Keller wrote a literal recipe book for the dishes he served at his world famous French Laundry restaurant and yet, the French Laundry did not go out of business. Ideas are in heads and if you don’t move the heads, often the ideas don’t move either.
In a new NBER working paper, The Effect of Public Science on Corporate R&D by Arora, Belenzon, Cioaca, Sheer & Zhang, (Tyler mentioned it briefly earlier) the authors make a similar point:
…the history of technical progress teaches us that abstract ideas are also difficult to use. Ideas have to be tailored for specific uses, and frequently, have to be embodied in people and artifacts before they can be absorbed by firms. However, such embodiment also makes ideas less potent sources of increasing returns, turning non-rival ideas into rival inputs, whose use by rivals is easier to restrict. Our findings confirm that firms, especially those not on the technological frontier, appear to lack the absorptive capacity to use externally supplied ideas unless they are embodied in human capital or inventions. The limit on growth is not the creation of useful ideas but rather the rate at which those ideas can be embodied in human capital and inventions, and then allocated to firms to convert them into innovations.
The question of whether science is a public good is not merely technical but has significant implications. If science is a public good, markets will likely underproduce it, making government subsidies to universities crucial for stimulating R&D and economic growth. Conversely, if ideas are embodied and thus closely tied to their application, government funding for university research might not only fail to enhance economic growth but could also hinder it. This occurs as subsidies draw scientists away from firms, where their knowledge directly contributes to product development, towards universities, where their insights risk becoming lost in the ivory tower. (Teaching scientists who then go on to careers in the private sector is much more likely to be complementary to productivity growth than funding research which pulls scientists away from the private sector.)
In a commentary on Arora et al., the Economist notes that growth in universities and government science has coincided with a slowdown in productivity.
Universities have boomed in recent decades. Higher-education institutions across the world now employ on the order of 15m researchers, up from 4m in 1980. These workers produce five times the number of papers each year. Governments have ramped up spending on the sector. The justification for this rapid expansion has, in part, followed sound economic principles. Universities are supposed to produce intellectual and scientific breakthroughs that can be employed by businesses, the government and regular folk. Such ideas are placed in the public domain, available to all. In theory, therefore, universities should be an excellent source of productivity growth.
In practice, however, the great expansion of higher education has coincided with a productivity slowdown.
Arora et al. present detailed empirical evidence causally linking the productivity slowdown to the expansion of government science. Government science has yielded smaller-than-expected productivity improvements due to significant trade-offs. Subsidies have moved heads out of firms and into universities and for many firms this shift of talent has not only reduced the firms’ capacity to generate ideas (crowding out) but has also impaired their ability to adopt academic innovations. As the authors write:
…productivity growth may have slowed down because the potential users—private corporations—lack the absorptive capacity to understand and use those ideas.
The great Terence Kealey made many of these points much earlier in his important book, The Economic Laws of Scientific Research (here is an online precis). Kealey, however, was challenging a beautiful theory, supported by the great and good of the economics profession, by pointing to an ugly practice. Arora et al. show that the beauty of the theory may have misguided us and that “the vast fiscal resources devoted to public science…probably make businesses across the rich world less innovative” (quoting the Economist).
One reason why the disinflation proved so manageable
From a new and important paper by Xiwen Bai, Jesús Fernández-Villaverde, Yiliang Li, and Francesco Zanetti:
Our analysis shows that supply chain disruptions generate stagflation, accompanied by an increase in spare capacity for producers. This higher spare capacity curtails the supply of goods to retailers and results in a surge in prices, leading to a tighter retail market. We show that, in this situation, prices become highly sensitive to changes in demand, while output remains relatively inelastic. In other words, disruptions to the supply chain enhance the effectiveness of contractionary monetary policy in taming inflation while reducing the sensitivity of output to the policy. Our results reinforce the general findings on the state-dependence of the efficacy of monetary policy.
Progress! And arguably this is a Keynesian result:
In fact, our result resembles the celebrated analysis by Keynes (1940). Keynes argued that when output is constrained (in our case, because of supply chain disruptions, in Britain’s case in 1940, because of resources employed in World War II), policymakers can lower aggregate demand aggressively to prevent inflation without much fear of lowering production.
As I mention in GOAT, How to Pay for the War remains a neglected and underrated work by Keynes. Note this as well:
We document how supply chain shocks drove inflation during 2021 but that, in 2022, traditional demand and supply shocks also played an important role in explaining inflation.
The pure supply-side story, as you have been hearing from Krugman just isn’t going to work, it is time to give it up.
By the way, yet another advance in this lengthy paper is this (from JFV): “…we have satellite information about every single container ship of the world in real time (ID, geolocation, speed, draft, heading,…), which allows us to do tons of things in terms of machine learning and time series econometrics that people have not been able to do before.”
Comparing Large Language Models Against Lawyers
This paper presents a groundbreaking comparison between Large Language Models and traditional legal contract reviewers, Junior Lawyers and Legal Process Outsourcers. We dissect whether LLMs can outperform humans in accuracy, speed, and cost efficiency during contract review. Our empirical analysis benchmarks LLMs against a ground truth set by Senior Lawyers, uncovering that advanced models match or exceed human accuracy in determining legal issues. In speed, LLMs complete reviews in mere seconds, eclipsing the hours required by their human counterparts. Cost wise, LLMs operate at a fraction of the price, offering a staggering 99.97 percent reduction in cost over traditional methods. These results are not just statistics, they signal a seismic shift in legal practice. LLMs stand poised to disrupt the legal industry, enhancing accessibility and efficiency of legal services. Our research asserts that the era of LLM dominance in legal contract review is upon us, challenging the status quo and calling for a reimagined future of legal workflows.
That is from a new paper by Lauren Martin, Nick Whitehouse, Stephanie Yiu, Lizzie Catterson, and Rivindu Perera. Via Malinga.
The Global Distribution of College Graduate Quality
We measure college graduate quality—the average human capital of a college’s graduates—for graduates from 2,800 colleges in 48 countries. Graduates of colleges in the richest countries have 50% more human capital than graduates of colleges in the poorest countries. Migration reinforces these differences: emigrants from poorer countries are highly positively selected on human capital. Finally, we show that these stocks and flows matter for growth and development by showing that college graduate quality predicts the share of a college’s students who become inventors, engage in entrepreneurship, and become top executives both within and across countries.
That is a new JPE piece by Paolo Martellini, Todd Schoellman, and Jason Sockin.
Tuesday assorted links
2. How is AI helping ornithology?
3. Vesuvius Challenge Prize awarded, we can read the first scroll. And a background Bloomberg piece.
4. Seafood as a resilient food solution after a nuclear war.
5. Nabeel Qureshi on whether there is a Moore’s Law for intelligence: “The shocking implication of what we have seen in this piece so far is that there may be no great, transformative breakthroughs needed to get to the critical inflection point. We already have the ingredients. As Ilya Sutskever likes to say, “the machine just wants to learn” – data, compute, and the right algorithms result in intelligence of a particular kind, and more of those inputs results in more intelligence as an output!”
My Upstream podcast with Erik Torenberg
Tyler, here are links to your appearance on Upstream, titled “Tyler Cowen on Harvard, the GOAT Economist, and Ending Stagnation.”
Spotify: https://open.spotify.com/episode/2AtAP42KpRdCxhioJSR9KY?si=bf643df853da4ec1Apple: https://podcasts.apple.com/us/podcast/tyler-cowen-on-harvard-the-goat-economist-and/id1678893467?i=1000643908309YouTube: https://www.youtube.com/watch?v=zS6B9LHRHKw
The Gershwins on free trade (that was then, this is now)
In 1927, George and Ira Gershwin put on a musical satire about trade and war entitled Strike Up the Band. The plot centres around a middle-aged US cheesemaker, Horace J. Fletcher of Connecticut, who wants to corner the domestic dairy market. When Fletcher hears that the US government has just slapped a fifty per cent tariff on foreign-made cheese, he sees dollar signs. High tariffs mean his fellow citizens will have little choice but to ‘buy American’. What’s more, the tariff’s impact soon reaches beyond the national market to sour the country’s trade relationships.. Swiss cheesemakers are particularly sharp in their demands for retaliation. Fletcher surmises that a prolonged Swiss-American military conflict would provide the necessary fiscal and nationalistic incentives to maintain the costly tariff on foreign cheese in perpetuity.
To make his monopolistic dream of market control a reality, Fletcher sees to it that the tariff spat between the two countries leads to an all-out war. He first creates the Very Patriotic League to drum up support for the Alpine military adventure, as well as to weed out any ‘un-American’ agitation at home. The Very Patriotic League’s members, donning white hoods reminiscent of the Ku Klux Klan, go about excising all things Swiss from the nativist nation. Not even the classic adventure The Swiss Family Robinson escapes notice: it gets rebranded The American Family Robinson. With domestic anti-war dissent quelled, Fletcher next orchestrates a military invasion of Switzerland. The farcical imperial intervention ends with a US victory. But just as the war with Switzerland winds down and a peaceful League of Cheese established, an ultimatum arrives from Russia objecting to a US tariff on caviar. And, it’s implied, the militant cycle repeats.
That is from the new and interesting Pax Economica: Left-Wing Visions of a Free Trade World, by Marc-William Palen.