South American economic growth

by  Tyler Cowen in

While there are varying sources, I did check a few of the numbers and they were confirmed. At first they seemed a little high to me.

Addendum: Note there is some kind of data problem with the 1980 numbers, but the latter-day numbers seem fine.

World War II R&D and the Takeoff of the US Innovation System

by  Tyler Cowen in

That is the article subtitle, the title is “America, Jump-Started:,” and the authors of this new AER piece are Daniel P. Gross and Bhaven N. Sampat.  Here is the abstract:

During World War II, the US government’s Office of Scientific Research and Development (OSRD) supported one of the largest public investments in applied R&D in US history. Using data on all OSRD-funded invention, we show this shock had a formative impact on the US innovation system, catalyzing technology clusters across the country, with accompanying increases in high-tech entrepreneurship and employment. These effects persist until at least the 1970s and appear to be driven by agglomerative forces and endogenous growth. In addition to creating technology clusters, wartime R&D permanently changed the trajectory of overall US innovation in the direction of OSRD-funded technologies.

This is very important work, and among other things it may help explain the productivity slowdown starting in the early 1970s (that is my speculation, not from the authors).  Recommended, for all those who follow these topics.

Here are earlier, less gated copies.

Nathaniel Hendren emails me

by  Tyler Cowen in

Saw your recent post on Intergenerational Mobility being constant over time. Just wanted to flag the importance of defining the relevant notion of Intergenerational Mobility. Much of the “mobility is falling” discussion has been about absolute mobility (kids earning more than their parents) not relative mobility. I think the evidence is now reasonably well-aligned in suggesting that various measures of relative mobility are reasonably stable over time (as we found in our work). But, absolute mobility has fallen in the last 50 years.

Thursday assorted links

by  Tyler Cowen

1. Alexandria, Virginia ends single family only residential zoning.

2. Predictions about Seoul yikes.

3. Profile of Tamara Winter.

4. Background on the pending Guyana conflict.

5. Camera obscura, AI, and art.

6. Is AI easy to control? Speculative, but a good example of how the discourse runs, this time from the optimist side. And claims about Chinese open source AI, speculative too but important if true.  And more.

Markets in everything those new service sector jobs

by  Tyler Cowen in

The video, posted by the 39-year-old Tampa resident under her stage name Roxie Rae, is one of dozens on Clips4Sale, an adult-video-sharing website where content creators cater to all types of sexual fetishes, including one that is rarely discussed outside of niche kink circles: political humiliation. There are people who get turned on by the idea of having their political views mocked, usually (but not always) by members of the opposing political group. Liberals desire being dominated by conservatives and called pejoratives that imply they are weak and unintelligent, while conservatives want to be mocked for supporting former president Donald Trump, among other perceived transgressions, according to those who participate in this subculture.

Here is the full Washington Post article by Hallie Lieberman.

My excellent Conversation with John Gray

by  Tyler Cowen in

I had been wanting to do this one for a while, and now it exists.  Here is the audio and transcript, here is the episode summary:

Tyler and John sat down to discuss his latest book, including who he thinks will carry on his work, what young people should learn if liberalism is dead, whether modern physics allows for true atheism, what in Eastern Orthodoxy attracts him, the benefits of pessimism, what philanthropic cause he’d invest a billion dollars in, under what circumstances he’d sacrifice his life, what he makes of UFOs, the current renaissance in film and books, whether Monty Python is still funny, how Herman Melville influenced him, who first spotted his talent, his most unusual work habit, what he’ll do next, and more.

Excerpt:

COWEN: Do you think that being pessimistic gives you pleasure? Or what’s the return in it from a purely pragmatic point of view?

GRAY: You are well prepared for events. You don’t expect —

COWEN: It’s a preemption, right? You become addicted to preempting bad news with pessimism.

GRAY: No, no. When something comes along which contradicts my expectations, I’m pleasantly surprised. I get pleasant surprises. Whereas, if you are an adamant optimist, you must be in torment every time you turn the news on because the same old follies, the same old crimes, the same old atrocities, the same old hatreds just repeat themselves over and over again. I’m not surprised by that at all. That’s like the weather. It’s like living in a science fiction environment in which it rains nearly all of the time, but from time to time it stops and there’s beautiful sunlight.

If you think that basically there is beautiful sunlight all the time, but you’re just living in a small patch of it, most of your life will be spent in frustration. If you think the other way around, as I do, your life will be peppered, speckled with moments in which what you expect doesn’t happen, but something better happens.

COWEN: Why can’t one just build things and be resiliently optimistic in a pragmatic, cautionary sense, and take comfort in the fact that you would rather have the problems of the world today than, say, the problems of the world in the year 1000? It’s not absolute optimism where you attach to the mood qua mood, but you simply want to do things and draw a positive energy from that, and it’s self-reinforcing. Why isn’t that a better view than what you’re calling pessimism?

And:

COWEN: Under what circumstances would you be willing to sacrifice your life? Or for what?

GRAY: Not for humanity, that’s for sure.

Recommended, interesting throughout.  John is one of the smartest and best read thinkers and writers.  He even has an answer ready for why he isn’t short the market.  And don’t forget John’s new book — I read all of them — New Leviathans: Thoughts After Liberalism.

*Everyday Freedom*, by Philip K. Howard

by  Tyler Cowen in

This is very much a book that needed to be written.  Here is one short excerpt:

Powerlessness has become a defining feature of modern society. Americans at all levels of responsibility feel powerless to do what they think is needed. The culture wars, sociologist James Davison Hunter explains, stem from institutional impotence: A “growing majority of Americans believe that their government cannot be trusted, that its leaders . . . are incompetent and self-interested, and that as citizens, they personally have little power to influence the . . .institutions or circumstances that shape their lives.”

Feeling fragile, and buffeted by forces beyond our control, many Americans retreat to online groups defined by identity and by distrust of the other side as “a threat to [our] existence.” It’s hard to identify what’s wrong amid the clamor and conflict in modern society. But a clue can be found in remembering what makes us proud. America is where people roll up our sleeves and get it done.

The ability to do things in our own ways activates the values for which America is well-known: self-reliance, pragmatism, and loyalty to the greater good—what Alexis de Tocqueville called “self-interest, rightly understood.” For most of American history, the power and imperative to own your actions and solutions—the concept of individual responsibility—was implicit in the idea of freedom.

Americans didn’t abandon our belief in individual responsibility. It was taken away from us by post 1960s legal framework that, with the best of intentions, made people squirm through the eye of a legal needle before taking responsibility. Individual responsibility to a broader group, for example, was dislodged by a new concept of individual rights focused on what’s best for one person or constituency. The can-do culture became the can’t do culture.

At every level of responsibility, Americans have lost the authority to do what they think is sensible. The teacher in the classroom, the principal in a school, the nurse in the hospital, the official in Washington, the parent on the field trip, the head of the local charity or church . . . all have their hands tied by real or feared legal constraints.

And yes he does propose concrete solutions, most of all at the level of the law.  The whole thing is only 84 pp., and this is one of the books that comes closest to diagnosing what is wrong with our country.  The subtitle is Designing the Framework for a Flourishing Society.

Perhaps intergenerational mobility has not declined in the United States after all

by  Tyler Cowen in

From the latest American Economic Review:

A large body of evidence finds that relative mobility in the US has declined over the past 150 years. However, long-run mobility estimates are usually based on White samples and therefore do not account for the limited opportunities available for nonwhite families. Moreover, historical data measure the father’s status with error, which biases estimates toward greater mobility. Using linked census data from 1850 to 1940, I show that accounting for race and measurement error can double estimates of intergenerational persistence. Updated estimates imply that there is greater equality of opportunity today than in the past, mostly because opportunity was never that equal. (JEL J15, J62, N31, N32)

That is from Zachary Ward of Baylor University.  If that is true, and it may be, how many popular economics books from the last twenty years need to be tossed out?  How many “intergenerational mobility is declining” newspaper columns and magazine articles?  Ouch.  No single article settles a question, but for now this seems to be the best, most up to date word on the matter.

Here are earlier, less gated copies of the research.

Wednesday assorted links

by  Tyler Cowen

1. Anti-Piketty on r > g, once you put entrepreneurs into the model.

2. From Loyal, potential gains in canine life extension.  And more from the NYT.

3. The economics of globalized fashion.  And Emily Oster moonlights as fashion model.

4. Please donate to Conversations with Tyler.

5. Joe Walker podcasts with Shruti Rajagopalan on India and also talent.  With transcript, there is also quite a bit of discussion of me in there.

6. Scott Alexander on Effective Altruism.

7. Niskanen symposium on Milton Friedman and the negative income tax.

8. Naming and necessity, Young Thug edition.

Why Housing is Unaffordable: The Elasticity of Supply

by  Alex Tabarrok in

We have a great new MRU video on housing and why it’s so expensive in many dynamic cities. The video is a good introduction to the economics and also to the politics of housing supply. A highlight is a wonderful animation illustrating how increasing demand coupled with inelastic supply leads to competitive bidding among buyers, driving up prices. Anyone teaching economics should take a look.

Of course, the video pairs perfectly with our textbook, Modern Principles. Indeed, this is the initial video in a two-part series exploring the elasticity of supply, transforming a traditionally mundane topic into a relevant and fun discussion. Check it out!

Why Argentina’s dollarization is likely to come in sudden, messy ways

by  Tyler Cowen in

Yes, I do still favor it, but here is part of the problem, as I explain in my latest Bloomberg column:

The simplest way for Argentina to dollarize would be to inflate the peso even more. For purposes of argument, imagine a peso inflation rate of one billion percent a year. Pesos would be worthless, and transactions would be consummated with US dollars (or in some cases in crypto, which also is popular in Argentina). The problem is that current peso holders would be left with nothing. That would be unfair, and it also might torpedo support for other parts of Milei’s agenda.

To put it in more general terms: The question is not how to adopt a new currency, it is how to adopt a new currency and retain a reasonable value for the old one. Argentina, according to some estimates, would need about $30 billion to back the retired pesos.

And now here is the key practical issue:

Another question is how to choose a rate of conversion for pesos to dollars. The government might look to current black market rates as a rough guide — but the correct rate, post-policy shift, would not be the same as the market rate right now. If the government were to peg the peso too high, in the short run prices in Argentina would have to adjust downward, if only because the demand for pesos would be rising (let’s generously assume the peg is credible). That would lead to deflationary pressures, which would likely harm the economy.

Alternatively, if the government pegged the peso too low to the dollar, there would be even more inflation in the short run, as people would be all the more inclined to unload their pesos.

The government is more likely to overshoot, pegging the peso too low in order to avoid a deflationary recession and because it would require raising fewer dollars. In this case, the peso would lose even more value right now, and the rate of inflation would accelerate. In fact, this is the most likely scenario for the early months of the Milei administration.

It would be a version of the first plan mentioned above — namely, dollarization through the outright destruction of the peso, whether intentional or not. Either the value of the peso would collapse, or the higher inflation rate would induce Milei to advance dollarization as quickly as possible, even if it is done at quite unfair rates.

Worth a ponder, roller coaster ahead.  One way to put it is that an unexpected dollarization and an expected dollarization have somewhat different properties, with the latter in some ways being more difficult.  Here is the Spanish language version of the column.

Reassessing China’s Rural Reforms: The View from Outer Space

by  Tyler Cowen in

We study one of the central reforms in China’s economic miracle, the Household Responsibility System (HRS), which decollectivized agriculture starting in 1978. The HRS is commonly seen as having significantly boosted agricultural productivity—but this conclusion rests on unreliable official data. We use historical satellite imagery to generate new measurements of grain yield, independent of official Chinese statistics. Using two separate empirical designs that exploit the staggered rollout of the HRS across provinces and counties, we find no causal evidence that areas that adopted the HRS sooner experienced faster grain yield growth. These results challenge our conventional understanding of decollectivization, land reform, and the origins of the Chinese miracle.

That is a new paper by Joel Ferguson and Oliver Kim, with Kim being on the job market from Berkeley this year.  Here is Kim’s thread on Twitter.  Intriguing results, which have won praise from Pseudoerasmus…