Results for “underappreciated economist”
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New issue of Econ Journal Watch

In this issue:

Are a Few Huge Outcomes Distorting Financial Misconduct Research? Emre Kuvvet confronts the extreme-values problem in firm penalties and other SEC enforcement outcomes against financial misconduct, and how outliers might affect research in finance, as well as policy judgment, focusing on an article in Journal of Accounting ResearchAndrew Call, Nathan Sharp, and Jaron Wilde respond.

Both terrorist and public mass shooter? In 2016 Adam Lankford published a news-busting article purporting to show that during a 47-year period the United States represented 31% of worldwide public mass shooters, and claiming that the outsized U.S. percentage is a result of gun prevalence. John Lott and Carlisle Moody criticize Lankford’s terminology and methods. Lankford replies to Lott and Moody. Once the terminological disputes are clarified, the issue that emerges is: Why does the United States have an outsized number of lone-wolf mass shooters? Lott and Moody offer explanations different than Lankford’s.

Another round on right-to-carry and violent crimeCarlisle Moody and Thomas Marvell have another go at John Donohue, treating the weighting of fixed effects by population and synthetic controls. Donohue, Abhay Aneja, and Kyle Weber respond.

Tennis and loss aversionMichał Krawczyk challenges a set of authors who read loss aversion in tennis data. Nejat Anbarci, Peren Arin, and Christina Zenker return serve.

Why Did Milton Friedman Win the Nobel Prize? James Forder and Hugo Monnery appreciate Friedman’s underappreciated early work on the complexity of stabilization policy.

Edmund Burke, liberal:

EJW Audio:

James Forder on Milton Friedman’s Early Work on Stabilization Policy

Leo Krasnozhon on Liberalism in Ukraine

John Cairns on the 1758 Pamphlet about Hair-Cutting in Edinburgh

What I’ve been reading

1. Mark Zupan, Inside Job: How Government Insiders Subvert the Public Interest.  This is now the very best book on how special interest groups subvert the quality of public policy.

2. Historically Inevitable: Turning Points of the Russian Revolution, edited by Tony Brenton, contributors include Dominic Lieven, Orlando Figes, and Richard Pipes.  I, for one, often find it easier to learn history through counterfactual reasoning.  “What if they hadn’t put Lenin into that train?, and so on, and so this is my favorite from the recent spate of books on 1917 in Russia.

More generally, there are people who very much like counterfactual reasoning (say Derek Parfit), and people who don’t care for it much (say Jim Buchanan).  The two types often don’t communicate well.  The counterfactual deployer seems like a kind of smart aleck, caught up in irrelevancies and neglecting “the real issues.”  In turn, the non-poser of counterfactuals seems stodgy and unable to understand the limitations of principles, how one might handle the tough cases, and what might cause one to change one’s mind.  Being able to bridge this gap, and learn from both kinds of thinkers, is both difficult and yields high returns.

3. Mary Gaitskill, Somebody with a Little Hammer, Essays.  Short pieces, never too long, strong throughout, mostly on literature (Nicholson Baker, Peter Pan, Norman Mailer, Bleak House) with some essays on movies too.  This will make my best of the year list, and she remains an underrated author more generally.

4. Jace Clayton, Uproot: Travels in 21st-Century Music and Digital Culture.  An original and consistently interesting extended essay on how “World Music” is evolving in digital times.  A must-read for me, at least.

5. Johan Chistensen, The Power of Economists Within the State.  I haven’t read this one, but it appears to be a very interesting look at the role of economists within government, for the case studies of New Zealand, Ireland, Norway, Denmark, and other cases (in less detail).  “Economists in government” remains an underappreciated topic, so I expect this book is a real contribution.

6. Julie Schumacher, Doodling for Academics: A Coloring and Activity Book.  It’s funny, for instance one panel has the heading “Find and color the many readers who will enjoy your dissertation.”  The images include a rat and a snake in the grass, but there aren’t even so many of those.

My Bloomberg debate with Noah Smith on free trade

Here are a few sentences from me:

I take the contrarian view that the benefits of trade deals are more typically underappreciated.

And:

But Noah, you are my Exhibit A for my claim that many economists are still undervaluing the benefits of trade. You’ve written on losers from globalization, but not sufficiently stressed the point that tariffs are an especially regressive tax. They tend to be applied to food and clothing, which the poor spend a disproportionate share of their income on. A lot of the poor also have service jobs that aren’t hurt so much by trade with lower-wage nations. In other words, free trade is (usually) a good antipoverty remedy.

Noah had some sentences too.

My conversation with Kareem Abdul-Jabbar

Here is the video, the podcast, and the transcript.  Kareem really opened up.  Here is the summary:

Kareem Abdul-Jabbar joins Tyler Cowen for a conversation on segregation, Islam, Harlem vs. LA, Earl Manigault, jazz, fighting Bruce Lee, Kareem’s conservatism, dancing with Thelonious Monk, and why no one today can shoot a skyhook.

Maybe you think of Kareem as a basketball player, but here is my introduction:

Kareem Abdul-Jabbar is one of America’s leading public intellectuals. I would describe him as an offshoot of the Harlem Renaissance, and what he and I share in common is a fascination with the character of Mycroft Holmes, the subject of Kareem’s latest book — and that of course, is Sherlock Holmes’s brother.

Here is Kareem:

I did know Amiri [Baraka]. I think the difference is I believe in what happened in Europe during what they call the Enlightenment. That needs to happen to black Americans, absolutely a type of enlightenment where they get a grasp of what is afflicting them and what the cures are.

I think that the American model is the best in the world but in order to get everybody involved in it we have to have it open to everyone. That hasn’t always been the case.

The most under-appreciated Miles Davis album?

For me [Kareem], the most under-appreciated one is Seven Steps to Heaven. And that shows, I think, Miles’ best group. There’s a big argument, what was Miles’ best group, the one that had Cannonball Adderley, Coltrane, Bill Evans, and Philly Joe Jones and Red Garland or Herbie Hancock, Ron Carter, Tony Williams, and Wayne Shorter?…number two is Porgy and Bess.

He cites Chester Himes as the underappreciated figure of the Harlem Renaissance.  And Kareem thinks like an economist:

It [my instruction] was going well with Andrew Bynum, but Andrew finally got to sign his contract for $50 million, and then at that point Andrew thought that I didn’t know anything and that he didn’t have to listen to me, and we don’t know where Andrew is right now.

Read or hear also his very interesting remarks on Islam, and where its next Enlightenment is likely to come from, not to mention Kareem on the resource curse and of course his new book (and my Straussian read of it).  And Kareem on his favorite movies, starting with The Maltese Falcon.  Self-recommending!

Kareem

Assorted links

1. Peter Boettke’s new paper on Henry Hazlitt.

2. Where do people go when they drop out of the labor force?

3. The sovereignty of American Indian tribes, interesting throughout.

4. Deregulation has lowered the prices of coffins.

5. Susan Sontag, an appreciation, and Doris Lessing, an appreciation.  They are both still underappreciated, especially on “the Right.”  It is easy to dismiss them for their worst utterances, but they both have been brilliant writers, albeit in very different ways.

6. Which entrepreneurs are benefiting from the violence in Syria?

FDA: Moving to a Safety-Only System

It now costs about a billion dollars to develop a new drug which means that many potentially beneficial drugs are lost. Economist Michele Boldrin and physician S. Joushua Swamidass explain the problem and suggest a new approach:

Every drug approval requires a massive bet—so massive that only very large companies can afford it. Too many drugs become profitable only when the expected payoff is in the billions….in this high-stakes environment it is difficult to justify developing drugs for rare diseases. They simply do not make enough money to pay for their development….How many potentially good drugs are dropped in silence every year?

Finding treatments for rare disease should concern us all. And as we look closely at genetic signatures of important diseases, we find that each common disease is composed of several rare diseases that only appear the same on the outside.

Nowhere is this truer than with cancer. Every patient’s tumor is genetically unique. That means most cancer patients have in effect a rare disease that may benefit from a drug that works for only a small number of other patients.

…We can reduce the cost of the drug companies’ bet by returning the FDA to its earlier mission of ensuring safety and leaving proof of efficacy for post-approval studies and surveillance.

Harvard Neurologist Peter Lansbury made a similar argument several years ago:

There are also scientific reasons to replace Phase 3. The reasoning behind the Phase 3 requirement — that the average efficacy of a drug is relevant to an individual patient — flies in the face of what we now know about drug responsiveness. Very few drugs are effective in all individuals. In fact, most are not effective in large portions of the population, for reasons that we are just beginning to understand.

It’s much easier to get approval for drugs that are marginally effective in, say, half the population than drugs that are very effective in a small fraction of patients. This statistical barrier discourages the pharmaceutical industry from even beginning to attack diseases, such as Parkinson’s, that are likely to have several subtypes, each of which may respond to a different drug. These drugs are the underappreciated casualties of the Phase 3 requirement; they will never be developed because the risk of failure at Phase 3 is simply too great.

Boldrin and Swamidass offer another suggestion:

In exchange for this simplification, companies would sell medications at a regulated price equal to total economic cost until proven effective, after which the FDA would allow the medications to be sold at market prices. In this way, companies would face strong incentives to conduct or fund appropriate efficacy studies. A “progressive” approval system like this would give cures for rare diseases a fighting chance and substantially reduce the risks and cost of developing safe new drugs.

Instead of price regulations I have argued for more publicly paid for efficacy studies, to be produced by the NIH and other similar institutions. Third party efficacy studies would have the added benefit of being less subject to bias.

Importantly, we already have good information on what a safety-only system would look like: the off-label market. Drugs prescribed off-label have been through FDA required safety trials but not through FDA-approved efficacy trials for the prescribed use. The off-label market has its problems but it is vital to modern medicine because the cutting edge of treatment advances at a far faster rate than does the FDA (hence, a majority of cancer and AIDS prescriptions are often off-label, see my original study and this summary with Dan Klein). In the off-label market, firms are not allowed to advertise the off-label use which also gives them an incentive, above and beyond the sales and reputation incentives, to conduct further efficacy studies. A similar approach might be adopted in a safety-only system.

Addendum: Kevin Outterson at The Incidental Economist and Bill Gardner at Something Not Unlike Research offer useful comments.

The future of Ontario (Canada?)

Daniel Drache reports on some trends which I had not quite been following:

Ontario has the densest concentration of car production probably in the world…

From a North American perspective, Ontario, Canada’s industrial heartland, ranks 16 out of 18 on his competitiveness ranking index, just ahead of Michigan.

…the job boom in resources including minerals and agricultural exports offset less than one-fifth of the jobs lost in Canadian manufacturing facilities.  The big winners in terms of job growth are private services and government…

…the incredible growth in services challenges one of the standard assumptions of globalization — that Canada is becoming more integrated into the global economy.  Most service production is consumed domestically and virtually all public services are not traded…the most remarkable structural change in the Canadian economy is that Canada was less integrated in world markets at the end of 2006 than it was a decade earlier measured by intense export openness…Canadian exports reached their peak at over 45 percent of the share of Canada’s total GDP in 2000; by 2007 this had declined by 10 points to 35 percent.

Here is yesterday’s related post on America.  Here is my earlier post on Harold Innis.

*The Other Barack*

The author is Sally H. Jacobs and the subtitle is The Bold and Reckless Life of President Obama’s Father.  But forget about “our Obama” and read this as a biography of colonialism, the 1960s, interracial relations, and most of all the East African intelligentsia.  In addition to being a life story, it’s an excellent treatment of those topics.  Here is one of the soggier excerpts:

As suddenly as it began, however, his ascent was over.  Six years after he returned from the United States, Obama had been let go from one promising job and was fired from another, his career abruptly dead-ended.  All three of his marriages had failed, and he was barely on speaking terms with any of his children.  Penniless and increasingly dependent on his beloved Johnnie Walker Black, he collapsed at night on the floor at a series of friends’ homes and lived for periods alone in a solitary hotel room.  It was a monumental fall.

…”He didn’t commit a crime.  He didn’t do anything wrong particularly.  He just didn’t finish the race.  As schoolboys, we were always taught that you must finish the race no matter what.  But he didn’t.  He just collapsed.”

Barack Obama Sr. spent two years in the Harvard economics Ph.d. program and had a very good knowledge of econometrics.  Edward Chamberlain, Robert Dorfman, Roger Noll, Sam Bowles, Lester Thurow, and John Dunlop make cameos in this part of the book.  Barack wanted to write his Ph.d. thesis on an econometric investigation on the staple theory of development, but after two years he lost his departmental funding and had to leave, eventually having to leave the U.S. as well.  Harvard was upset that he seemed to be married to two women at once and they looked to ease him out of the program; it’s an ugly story.

There are interesting bits on his time working at Shell, at the tourism bureau, his four months in traction following a major auto accident, his connection to domestic Kenyan political disputes, his role as a Kenyan urban planner, and how he would chat up women.  This book was very extensively researched.

Definitely recommended to anyone interested in East Africa.  Here is David Garrow’s review of the book.

Profile of Morgan Kelly

He is the Irish economist and sage who predicted the decline in property prices and also predicts future political chaos in Ireland.  The profile, unnecessarily snarky at points, is here.  We again see that economists who have studied economic history are proving especially wise during difficult times:

He was described by the Herald Tribune as "a specialist in medieval demographics"… "whose eyes burn with the passionate intensity of his prophesy".

Here is Kelly on TV.  His current prediction?:

Now he is forecasting mass mortgage defaults and an ugly popular uprising. The first stirrings are already visible, he says, with "anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America", giving rise to a new "hard-right, anti-Europe, anti-traveller party".

I've already linked to this first-rate Kelly piece on the coming collapse in the Irish housing market.  He does not follow every current academic fashion, but here are his (consistently interesting) academic papers.  I find this one, about the Industrial Revolution, to be of special import.  Here is his potentially important but hard for me to assess paper on the economic impact of the Little Ice Age in European history (or ungated here).

File under "Underappreciated and indeed Hated Economist!"

My NYT column on Austro-Chinese business cycle theory

The column is here and one excerpt is this:

China uses American spending power to enlarge its private sector, while America uses Chinese lending power to expand its public sector.

A longer excerpt is this:

China has been building factories and production capacity in virtually every sector of its economy, but it’s not clear that the latest round of investments will be profitable anytime soon. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues.

Chinese planners now talk of the need to restrict investment in sectors that are overflowing with unsold products. The global market is no longer strong, and domestic demand was never enough in the first place.

Regional officials have an incentive to prop up local enterprises and production statistics, even if that means supporting projects or accounting practices that are not sustainable. For an individual business, the standard way to get more capital resources is to put forward a plan for growth. Because few sectors are mature, and growth has been so widespread, everyone can promise to be profitable in the future.

Over all, there is a lack of transparency. China’s statistics on its gross domestic product are based more on recorded production activity than on what is actually sold. Chinese fiscal and credit policies are geared toward jobs and political stability, and thus the authorities shy away from revealing which projects are most troubled or should be canceled.

Put all of this together and there is a very real possibility of trouble.

I then outline how the negative scenario might run and that involves deflation on the goods side, for both China and the U.S., and higher U.S. borrowing costs on the capital side.  A few related points:

1. The word "malinvestment" does not appear in The New York Times style guide but it survived to the final published draft of the piece.

2. Scott Sumner offers a skeptical take on my claims.

3. The piece cites Malthus in the same breath as Hayek.  Malthus is a much-underappreciated economist and in macroeconomics he was much better than the naive overproduction theorists.  His cyclical story is ultimately about proportionality and it is based on a "tragedy of the commons" effect — for the production of capital goods — which is not so different than his population mechanism.  Malthus, by the way, had quite a modern understanding of supply and demand, well before the marginalist revolution.

4. I still am not convinced that we have avoided a new version of "the vertigo years," based on a fundamental discombobulation of economic expectations.  This is probably just historical coincidence, but the Great Depression did come last to China.

*A Happy Marriage*

That is the title of the new novel by Rafael Yglesias.  Here is a tiny excerpt:

Although a credulous consumer, Enrique was a skeptical lover, and he demanded to know what was wrong.

I devoured this book eagerly on a plane flight and I recommend it highly to those who are married, have been married, will be married, should be married, and should not be married. 

The blogger son Matt, in the form of a fictional persona, makes numerous cameo appearances.  The economist Paul Joskow, in the form of a fictional persona, makes a cameo appearance.  In real life he is Matt's uncle.

How many other novels explain to you — tongue in cheek — the exact difference between microeconomics and macroeconomics?

In my view Rafael Yglesias is one of the best American novelists of the last twenty years and probably the most underappreciated.  Here is my earlier post on his earlier novel Dr. Neruda's Cure for Evil.

The social changes brought by recessions

Here is my column on the social changes occasioned by recessions.  Of course recessions are mostly bad and this one is no exception.  Still, one underappreciated fact is that health outcomes appear to improve in recessions, not get worse (even though health care access and coverage decline):

Sure, it's stressful to miss a paycheck, but eliminating the stresses of a job may have some beneficial effects. Perhaps more
important, people may take fewer car trips, thus lowering the risk of
accidents, and spend less on alcohol and tobacco. They also have more
time for exercise and sleep, and tend to choose home cooking over fast
food.  In a 2003 paper, “Healthy Living in Hard Times,” Christopher J. Ruhm, an economist at the University of North Carolina
at Greensboro, found that the death rate falls as unemployment rises.
In the United States, he found, a 1 percent increase in the
unemployment rate, on average, decreases the death rate by 0.5 percent.

In this recession the consumption of the wealthy is taking a bigger hit than is usually the case in a downturn:

In any recession, the poor suffer the most pain. But in cultural
influence, it may well be the rich who lose the most in the current
crisis. This downturn is bringing a larger-than-usual decline in
consumption by the wealthy.

The shift has been documented by Jonathan A. Parker and Annette Vissing-Jorgenson, finance professors at Northwestern University, in their recent paper,
“Who Bears Aggregate Fluctuations and How? Estimates and Implications
for Consumption Inequality.” Of course, people who held much wealth in
real estate or stocks
have taken heavy losses. But most important, the paper says, the labor
incomes of high earners have declined more than in past recessions, as
seen in the financial sector.

Popular culture’s catering to the
wealthy may also decline in this downturn. We can expect a shift away
from the lionizing of fancy restaurants, for example, and toward more
use of public libraries. Such changes tend to occur in downturns, but
this time they may be especially pronounced.

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