Deep Learning for Economists
Deep learning provides powerful methods to impute structured information from large-scale, unstructured text and image datasets. For example, economists might wish to detect the presence of economic activity in satellite images, or to measure the topics or entities mentioned in social media, the congressional record, or firm filings. This review introduces deep neural networks, covering methods such as classifiers, regression models, generative AI, and embedding models. Applications include classification, document digitization, record linkage, and methods for data exploration in massive scale text and image corpora. When suitable methods are used, deep learning models can be cheap to tune and can scale affordably to problems involving millions or billions of data points. The review is accompanied by a regularly updated companion website, EconDL, with user-friendly demo notebooks, software resources, and a knowledge base that provides technical details and additional applications.
By Melissa Dell. And here is my earlier CWT with Melissa Dell.
Facts about Britain
- Between 2004 and 2021, before Russia’s invasion of Ukraine, the industrial price of energy tripled in nominal terms, or doubled relative to consumer prices.
- With almost identical population sizes, the UK has under 30 million homes, while France has around 37 million. 800,000 British families have second homes compared to 3.4 million French families.
- Per capita electricity generation in the UK is just two thirds of what it is in France (4,800 kilowatt-hours per year in Britain versus 7,300 kilowatt-hours per year in France) and barely over a third of what it is in the United States (12,672 kilowatt-hours per year). We are closer to developing countries like Brazil and South Africa in terms of per capita electricity output than we are to Germany, China, Japan, Sweden, or Canada.
- Britain’s last nuclear power plant was built between 1987 and 1995. Its next one, Hinkley Point C, is between four and six times more costly per megawatt of capacity than South Korean nuclear power plants, and four times as expensive as those that South Korea’s KEPCO has agreed to build in Czechia.
- Tram projects in Britain are two and a half times more expensive than French projects on a per mile basis. In the last 25 years, France has built 21 tramways in different cities, including cities with populations of just 150,000, equivalent to Lincoln or Carlisle. The UK has still not managed to build a tramway in Leeds, the largest city in Europe without mass transit, with a population of nearly 800,000.
- At £396 million, each mile of HS2 will cost more than four times more than each mile of the Naples to Bari high speed line. It will be more than eight times more expensive per mile than France’s high speed link between Tours and Bordeaux.
- Britain has not built a new reservoir since 1992. Since then, Britain’s population has grown by 10 million.
- Despite huge and rising demand, Heathrow annual flight numbers have been almost completely flat since 2000. Annual passenger numbers have risen by 10 million because planes have become larger, but this still compares poorly to the 22 million added at Amsterdam’s Schiphol and the 15 million added at Paris’s Charles de Gaulle. The right to take off and land at Heathrow once per week is worth tens of millions of pounds.
- The planning documentation for the Lower Thames Crossing, a proposed tunnel under the Thames connecting Kent and Essex, runs to 360,000 pages, and the application process alone has cost £297 million. That is more than twice as much as it cost in Norway to actually build the longest road tunnel in the world.
That is from the new study of British stagnation by Ben Southwood, Samuel Hughes, and Sam Bowman.
Sweden fact of the day
However, following the start of PhD studies, the use of psychiatric medication among PhD students increases substantially. This upward trend continues throughout the course of PhD studies, with estimates showing a 40 percent increase by the fifth year compared to pre-PhD levels. After the fifth year, which represents the average duration of PhD studies in our sample, we observe a notable decrease in the utilization of psychiatric medication.
Here is the article, via Jesse. Here are some relevant tweets. It doesn’t have to be causal to be interesting!
Friday assorted links
1. A short primer on free market electricity.
2. Joseph Walker podcast with Nassim Taleb.
3. On Sichuan peppers and ma la (NYT).
6. New Zealand government economist job for improving the quality of regulation: Here is the Ministry’s web page for the job. Here is its home page. Here is its first statement of strategic intentions.
7. The truth about Springfield (NYT).
The US Has Low Prices for Most Prescription Drugs
The US has high prices for branded drugs but it has some of the lowest prices for generic drugs in the world and generic drugs are 90% of prescriptions. I’ve been saying this for years but here is the latest study:
U.S. prices for brand-name originator drugs were 422 percent of prices in comparison countries, while U.S. unbranded generics, which we found account for 90 percent of U.S. prescription volume, were on average cheaper at 67 percent of prices in comparison countries, where on average only 41 percent of prescription volume is for unbranded generics. U.S. prices for brand-name drugs remained 308 percent of prices in other countries even after adjustments to account for rebates paid by drug companies to U.S. payers and their pharmacy benefit managers.
Branded drugs are expensive but that is why we have insurance which works reasonably well, albeit far from perfectly. For example, insurance and the low price of generics is one reason that out-of-pocket costs for medical are low in the United States.
If you don’t want to pay high prices for branded drugs just use generics! As I wrote 20 years ago, in what was called a heartless and cruel post:
People talk about the high price of pharmaceuticals as if high prices lasted forever. In fact, within a year of the expiration of a pharmaceutical’s patents, prices will typically fall by more than 50 percent as generic producers enter the market. Patents nominally last for 20 years but the effective patent life is much lower because patents are typically granted years before a product has cleared FDA review. The effective patent life of the average new pharmaceutical in the 1990s averaged just 12 years [new reference for today, 13.5 years, AT]. Competition from competing but non-infringing pharmaceuticals makes the de facto patent life even shorter.
Thus, my response to the seniors and others clamoring for lower pharmaceutical prices is to be more patient. Does this sound harsh? Consider this, the people who are demanding price controls are not simply asking for lower drug prices they are asking for lower prices on the newest drugs. Lower prices for drugs introduced 15 years ago are already here. Remember, those drugs were recently considered the very best modern medicine has to offer, so it’s not like I am expecting those who can’t afford the newer medicines to go back to using leeches.
Price controls or other such plans such as reimportation may bring cheaper pharmaceuticals for a short period but we will then have a much smaller supply of new drugs forever. Only the shortsighted would buy that prescription.
Don’t fail the marshmallow test people!
People get upset when I say just use generics–shouldn’t everyone have access to the very best pharmaceuticals! Yes! But that illustrates another point–these drugs are worth the price!
Hat tip: Steve.
*Ayn Rand: Writing a Gospel of Success*
An excellent book, stressing Rand’s Jewish heritage and its ongoing influence over her work, in spite of her self-professed atheism. The author is Alexandra Popoff, who wrote the wonderful biography of Vassily Grossman as well.
Here is one bit from the preface:
I believe that writers cannot hide themselves in a literary text, even when they later go back to revise it, as Rand had done. She had claimed that being Jewish did not matter to her, but her Jewishness was about the text, crrammed full of ideas, parables, paradoxes, questions, and arguments. Her fictional stories are moral and legal at the same time.
Rand was at one point slated to write the screenplay for a movie about Oppenheimer and the making of the atomic bomb, though the project never realized. Here is an excerpt from the latter part of the book:
In her declining years Rand pursued her passion of stamp collecting. She attended stamp shows and auctions with fellow collectors, one of whom was her surgeon Dr. Cranston Holman. She shopped at Gimbels, her favorite store, played Scrabble with visitors, read Agatha Christie, watched TV cops and robbers, and in her mid-seventies, studied algebra.
The Burns and Heller biographies of Rand are excellent, but this one has plenty of fresh material and insight.
Exciting economics is often misguided economics
In my latest Bloomberg column, I weigh in on the issues surrounding the latest David Deming piece in The Atlantic. Here is one excerpt:
…economics is a relatively mature science, and even surprising results are typically consistent with the laws of supply and demand. Innovations tend to be subtle — they could also be described, less generously, as underwhelming — concerning the relative size of effects. So it is hard for radical new ideas to come out of nowhere, and that does lead to some geographic concentration, centered in the highest-reputation schools…
Can economics come up with truly novel remedies or ideas? Probably not. If there is a recession, or say hyperinflation, there is a standard kit of tools involving monetary policy, fiscal policy, deregulation and some other policy changes. Economists can and do argue about the right mix of those policies in a particular case. But there is no “new drug” waiting to be discovered.
And:
As for microeconomics, if there is too much traffic on a highway, congestion pricing usually works. If there isn’t enough housing, deregulating construction or eliminating rent control are worth a try. No brilliant outsider will come along and say, “The way to get more housing is for everyone to drink two shots of vodka,” or some other novel or wild idea.
The point is not that economists have all the answers. It’s that we have a pretty exhaustive list of possible remedies.
And in sum:
The good news is that economists have already achieved a lot. The bad news is that a lot of the remaining work is doomed to be pretty boring and marginal. So one lesson is simply to appreciate the dullness of economics, because exciting economics is often misguided economics.
There is further content at the link.
Thursday assorted links
1. “At the end of this podcast, @tylercowen jumps in to tell me and @patrickc why we’re both wrong.” Sounds like me, noting that most of the podcast is not me.
2. The new Jordan Peterson educational venture.
4. Korea is running a trade deficit in kimchi.
5. Luca responds to me on urbanism and mobility.
7. New open access book on Spanish economic history. And the older one on Spanish economic growth.
Mercor
Mercor is solving global labor matching with models that understand human ability.
@mercor_ai raised a $30M Series A at a $250M valuation, led by @victoralazarte and @bgurley at @benchmark, with participation from @peterthiel, @jack, @adamdangelo, and @LHSummers.
Here is the tweet from Brendan Foody. My only tie to Mercor is that I was sitting next to someone on a plane from the company, we got to chatting, and I was very impressed. Here is a FAQ about the company and how it will vet talent using AI.
My Conversation with the excellent Tobi Lütke
Here is the audio, video, and transcript. Here is the episode summary:
Tyler and Tobi hop from Germany to Canada to America to discuss a range of topics like how outsiders make good coders, learning in meetings by saying wrong things, having one-on-ones with your kids, the positives of venting, German craftsmanship vs. American agility, why German schooling made him miserable, why there aren’t more German tech giants, untranslatable words, the dividing line of between Northern and Southern Germany, why other countries shouldn’t compare themselves to the US, Canada’s lack of exports and brands, ice skating to work in Ottawa, how VR and AI will change retailing, why he expects to be “terribly embarrassed” when looking back at companies in the 2020s, why The Lean Startup is bad for retailers, how fantasy novels teach business principles, what he’s learning next, and more.
Excerpt:
COWEN: Are Canadians different in meetings than US Americans?
LÜTKE: Yes, as well. Yes, that’s true. It’s more on the side of American, definitely on a minimum quality bar. I think Canadians are often more about long term. I’ve seen Canadians more often think about what’s the next step after this step, but also just low ambition. That’s probably not the most popular thing to say around here, but Canada’s problem, often culturally, is a go-for-bronze mentality, which apparently is not uncommon for smaller countries attached to significantly more cultural or just bigger countries.
Actually, I found it’s very easy to work around. I think a lot of our success has been due to just me and my co-founder basically allowing everyone to go for world class. Everyone’s like, “Oh, well, if we are allowed to do this, then let’s go.” I think that makes a big difference. Ratcheting up ambition for a project is something that one has to do in a company in Canada.
COWEN: Is there something scarce that is needed to inject that into Canada and Canadians? Or is it simply a matter of someone showing up and doing it, and then it just all falls out and happens?
LÜTKE: I don’t know. Inasmuch as Shopify may be seen as something that succeeded, that alone didn’t do it. It would’ve been very, very nice if that would’ve happened. Now there’s another cohort of founders coming through. Some of them have been part of Shopify or come back from — I believe there are some great companies in Calgary, like NEO, that are more ambitious.
I think it’s a bit of a decision. The time it worked perfectly was when Canada was hosting the Winter Olympics, which is now a little bit of ancient history. There was actually a program Canada-wide that’s called Own the Podium. That makes sense. It’s home. We have more winter than most, so therefore let’s do well. And then we did. It’s just by far the best performance of Canada’s Olympic team of all times. I think to systematize it and make it stick — changing a culture is very, very difficult, but instances of just giving everyone permission to go for it have also been super successful.
And this:
COWEN: Say we compare Germany to the Netherlands, which is culturally pretty similar, very close to Koblenz. They have ASML, Adyen. Netherlands is a smaller country. Why have they done relatively better? Or you could cite Sweden, again, culturally not so distant from Germany.
LÜTKE: You’re asking very good questions that I much rather would ask you. [laughs] I don’t know. I wish I knew. I started at a small company in Germany; it didn’t do anything. So, it’s not like people didn’t do this. I came to Canada, again, this time it worked. Then I was head down for a very long time, building my thing because it was all-consuming, so I didn’t pay too much attention to — I wasn’t even very deliberate about where to start a company. I started in Ottawa because that’s where my wife and I were during the time she was studying there. We could find great talent there that was overlooked, it seemed, and gave everyone a project to be ambitious with, and it worked.
I think that if you create in geography a consensus that you’re a company really, really worth working for because it’s interesting work, great work, it might actually lead to something — then you can build it. I don’t quite understand why this is not possible to do in so many places in Germany because, again, Germany does have this wonderful appreciation of craftsmanship, which I think is actually underrepresented in software. I think it’s only recently — usually by Europeans — being brought up. Patrick Collison talks about it more and more, and certainly I do, too.
Making software is a craft. I think, in this way, Germany, Czech Republic, other places, Poland, are extremely enlightened in making this part of an apprenticeship system. I apprenticed as a computer programmer, and I thought it was exactly the right way to learn these things. Now, that means there’s, I believe, a lot of talent that then makes decisions other than putting it together to build ambitious startups. Something needs to be uncorked by the people who have more insight than I have.
COWEN: I think part of a hypothesis is that the Netherlands, and also Sweden, are somewhat happier countries than Germany. People smile more. At least superficially, they’re more optimistic. They’re more outgoing.
LÜTKE: I think it’s optimism.
COWEN: It’s striking to me that Germans, contrary to stereotype — I think they have a quite good sense of humor, but a lot of it is irony or somewhat black. Maybe that’s bad for tech. I wonder: people in the Bay Area — do they have a great sense of humor? I’m not sure they do. Maybe there’s some correlations across those variables.
Definitely recommended. Can you guess which is the one question Tobi refused to answer, for fear of being cancelled?
USA fact of the day
For the first time in decades, public health data shows a sudden and hopeful drop in drug overdose deaths across the U.S.
“This is exciting,” said Dr. Nora Volkow, head of the National Institute On Drug Abuse [NIDA], the federal laboratory charged with studying addiction. “This looks real. This looks very, very real.”
National surveys compiled by the Centers for Disease Control and Prevention already show an unprecedented decline in drug deaths of roughly 10.6 percent. That’s a huge reversal from recent years when fatal overdoses regularly increased by double-digit percentages.
Some researchers believe the data will show an even larger decline in drug deaths when federal surveys are updated to reflect improvements being seen at the state level, especially in the eastern U.S.
“In the states that have the most rapid data collection systems, we’re seeing declines of twenty percent, thirty percent,” said Dr. Nabarun Dasgupta, an expert on street drugs at the University of North Carolina.
According to Dasgupta’s analysis, which has sparked discussion among addiction and drug policy experts, the drop in state-level mortality numbers corresponds with similar steep declines in emergency room visits linked to overdoses.
Here is the link, via Anna Gat of Interintellect.
Why do workers dislike inflation?
How costly is inflation to workers? Answers to this question have focused on the path of real wages during inflationary periods. We argue that workers must take costly actions (“conflict”) to have nominal wages catch up with inflation, meaning there are welfare costs even if real wages do not fall as inflation rises. We study a menu-cost style model, where workers choose whether to engage in conflict with employers to secure a wage increase. We show that, following a rise in inflation, wage catchup resulting from more frequent conflict does not raise welfare. Instead, the impact of inflation on worker welfare is determined by what we term “wage erosion”—how inflation would lower real wages if workers’ conflict decisions did not respond to inflation. As a result, measuring welfare using observed wage growth understates the costs of inflation. We conduct a survey showing that workers are willing to sacrifice 1.75% of their wages to avoid conflict. Calibrating the model to the survey data, the aggregate costs of inflation incorporating conflict more than double the costs of inflation via falling real wages alone.
That new paper is by
Wednesday assorted links
1. Stanford remote work conference will be held in person.
2. What the other people say too.
3. What is bottlenecking progress in chemistry?
4. Prizes for submitting difficult questions for AIs.
5. Can AI improve health care pricing?
6. Some new and important YIMBY vs. NIMBY results, using AI, by Arpit Gupta and co-authors.
7. Announcing the meta-science podcast from Institute for Progress (I will have a forthcoming installment in it, the other participants are excellent).
8. Joshua Rothman on Olivier Roy (New Yorker).
What Fusion Energy Can Learn From Biotechnology
Fusion energy is currently facing many of the same opportunities and challenges as the biotechnology industry of the 1970s: exciting scientific and engineering breakthroughs that could change the course of human history, with sufficient public and private funding, more effective business models, and appropriate regulatory oversight. A number of lessons can be learned from the last 50 years of biotechnology industry history, which lead to five proposed initiatives for accelerating progress in fusion: the creation of a university intellectual-property consortium; the standardization of fusion energy milestones along with fusion rating agencies to certify their achievement; the development of new financing and business models to fund the various stages of fusion progress; a coordinated plan for two-sided outreach, education, and engagement at all levels from K–12 to policymakers and the general public; and managing fusion initiatives as part of a broader ecosystem. Applying these historical lessons today can accelerate the development of fusion towards the same level of commercial success and human impact that biotech has achieved.
That is from a new paper by Andrew W. Lo and Dennis Whyte.
Scholars in support of the Moraes Brazil decision against X
Here is the link, in Portuguese, here is part of a Claude translation:
We, the undersigned, wish to express our deep concern about the ongoing attacks by Big Tech companies and their allies against Brazil’s digital sovereignty. The Brazilian judiciary’s dispute with Elon Musk is just the latest example of a broader effort to restrict the ability of sovereign nations to define a digital development agenda free from the control of mega-corporations based in the United States. At the end of August, the Brazilian Supreme Federal Court banned the X platform from Brazilian cyberspace for failing to comply with court decisions that required the suspension of accounts that instigated right-wing extremists to participate in riots and occupy the Legislative, Judicial, and Governmental palaces on January 8, 2023. Subsequently, President Lula da Silva made clear the Brazilian government’s intention to seek digital independence: to reduce the country’s dependence on foreign entities for data, AI capabilities, and digital infrastructure, as well as to promote the development of local technological ecosystems. In line with these objectives, the Brazilian state also intends to force Big Tech to pay fair taxes, comply with local laws, and be held accountable for the social externalities of their business models, which often promote violence and inequality.
These efforts have been met with attacks from the owner of X and right-wing leaders who complain about democracy and freedom of expression. But precisely because digital space lacks internationally and democratically decided regulatory agreements, large technology companies operate as rulers, deciding what should be moderated and what should be promoted on their platforms. Moreover, the X platform and other companies have begun to organize, along with their allies inside and outside the country, to undermine initiatives aimed at Brazil’s technological autonomy. More than a warning to Brazil, their actions send a worrying message to the world: that democratic countries seeking independence from Big Tech domination risk suffering disruptions to their democracies, with some Big Tech companies supporting far-right movements and parties.
The Brazilian case has become the main front in the evolving global conflict between digital corporations and those seeking to build a democratic and people-centered digital landscape focused on social and economic development. Technology companies not only control the digital world, but also lobby and operate against the public sector’s ability to create and maintain an independent digital agenda based on local values, needs, and aspirations. When their financial interests are at stake, they work happily with authoritarian governments. What we need is sufficient digital space for states to direct technologies by putting people and the planet ahead of private profits or unilateral state control.
All those who defend democratic values must support Brazil in its quest for digital sovereignty. We demand that Big Tech cease their attempts to sabotage Brazil’s initiatives aimed at building independent capabilities in artificial intelligence, public digital infrastructure, data governance, and cloud services. These attacks undermine not only the rights of Brazilian citizens but the broader aspirations of all democratic nations to achieve technological sovereignty. We also call on the Brazilian government to be firm in implementing its digital agenda and to denounce the pressures against it. The UN system and governments around the world should support these efforts.
Signed by Acemoglu, Zucman, Varoufakis, Cory Doctorow, Morozov, Mazzucato, Piketty, and many others. Somehow no one is talking about this petition and its embrace of censorship?
Via Pedro. And you will find some media coverage in Portuguese here.