India forecast of the day
India is likely to be the fastest-growing Asian economy in the Asian region in 2022-23, according to analysts at Morgan Stanley, who expect the expect India’s gross domestic product (GDP) growth to average 7 per cent during this period – the strongest among the largest economies – and contributing 28 per cent and 22 per cent to Asian and global growth, respectively. The Indian economy, they said, is set for its best run in over a decade, as pent-up demand is being unleashed.
Here is further detail. How many other countries can expect to average even five percent growth over the next decade? Bangladesh? A few of the smaller nations in West Africa? Who else? Possibly Indonesia? It is hard not to be (relatively) optimistic about India, economically speaking at least.
The wisdom of Garett Jones
Of course this Bloomberg column was inspired by Garett’s work, not to mention Paleo-Caplanianism! Here is one excerpt, with the focus being on the annoying tendency to label various policies “anti-democratic”:
The danger is that “stuff I agree with” will increasingly be labeled as “democratic,” while anything someone opposes will be called “anti-democratic.” Democracy thus comes to be seen as a way to enact a series of personal preferences rather than a (mostly) beneficial impersonal mechanism for making collective decisions…
It is also harmful to call the Dobbs decision anti-democratic when what you’re really arguing for is greater involvement by the federal government in abortion policy — a defensible view. No one says the Swiss government is “anti-democratic” because it puts so many decisions (for better or worse) into the hands of the cantons. And pointing out that many US state governments are not as democratic as you might prefer does not overturn this logic.
It would be more honest, and more accurate, simply to note that court put the decision into the hands of (imperfectly) democratic state governments, and that you disagree with the decisions of those governments.
By conflating “what’s right” with “what’s democratic,” you may end up fooling yourself about the popularity of your own views. If you attribute the failure of your views to prevail to “non-democratic” or “anti-democratic” forces, you might conclude the world simply needs more majoritarianism, more referenda, more voting.
Those may or may not be correct conclusions. But they should be judged empirically, rather than following from people’s idiosyncratic terminology about what they mean by “democracy” — and, by extension, “anti-democratic.”
I am worried about some of the increasing polarization on this issue. If you are on “the Left,” and you think various social and policy trends are so immoral, how is it exactly that you avoid becoming yourself “anti-democratic”? Even though at the same time you are cursing everything you don’t like as “anti-democratic” too?
The Distributional Effects of Student Loan Forgiveness
Even worse than you thought:
We study the distributional consequences of student debt forgiveness in present value terms, accounting for differences in repayment behavior across the earnings distribution. Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values. Consequently, forgiveness would benefit the top decile as much as the bottom three deciles combined. Blacks and Hispanics would also benefit substantially less than balances suggest. Enrolling households who would benefit from income-driven repayment is the least expensive and most progressive policy we consider.
That is from a working paper by Sylvaine Catherine and Constantine Yanellis. It is sad that such material even needs to be posted. I hope you are not taken in by Dube-ous ideas to the contrary!
Monday assorted links
A college degree ain’t what it used to be
Labor market outcomes for young college graduates have deteriorated substantially in the last twenty five years, and more of them are residing with their parents. The unemployment rate at 23-27 year old for the 1996 college graduation cohort was 9%, whereas it rose to 12% for the 2013 graduation cohort. While only 25% of the 1996 cohort lived with their parents, 31% for the 2013 cohort chose this option. Our hypothesis is that the declining availability of ‘matched jobs’ that require a college degree is a key factor behind these developments. Using a structurally estimated model of child-parent decisions, in which coresidence improves college graduates’ quality of job matches, we find that lower matched job arrival rates explain two thirds of the rise in unemployment and coresidence between the 2013 and 1996 graduation cohorts. Rising wage dispersion is also important for the increase in unemployment, while declining parental income, rising student loan balances and higher rental costs only play a marginal role.
That is from a new NBER paper by Stefania Albanesi, Rania Gihleb, and Ning Zhang.
What are higher university endowments good for?
Estimates reveal that growing endowments generate large and persistent increases in spending overall and for instruction, student services, and administration in particular. However, wealthier colleges and universities do not increase the number of students they serve or the fraction of students receiving aid, and only modestly increase the generosity of aid packages. Instead, these institutions offset higher freshman yield rates by becoming more selective and enrolling fewer low-income students and students of color. Overall, colleges and universities appear to use greater endowment wealth to increase spending and to become more selective, resulting in higher institutional rankings, but do not increase the size or diversity of their student bodies.
Here is the full paper by George Bulman. Ahem! Amazing what a con they are pulling off…
Indonesia is doing OK
The rupiah, down only 3.8%, is the third best-performing Asian currency this year. It’s all the more remarkable considering Bank Indonesia has resisted following the Fed and only began raising interest rates this week, by a modest 25 basis points.
Its stock market is another winner. The iShares MSCI Indonesia ETF is up 5.6% this year, beating the S&P 500 Index’s 13.1% drop. As a result, even though foreigners have been selling holdings of government bonds, robust equity demand has helped stabilize Indonesia’s portfolio flows…
The conflict in Ukraine has pushed up prices of palm oil and coal, which Indonesia exports. These two commodities alone improved the country’s current account by 2.4% of its gross domestic product since 2019, with one-third coming from palm oil and the rest from elevated coal prices, according to HSBC Holdings Plc. Indonesia now has a solid current-account surplus for the first time since 2011.
Here is more from Shuli Ren of Bloomberg.
Sunday assorted links
1. Lex interviews Magnus. Who claims he has impostor syndrome.
3. Christian Zeal and Activity (John Adams).
4. The ongoing fight for octopus rights (NYT).
5. Why are there no awesome Silicon Valley types in their 20s right now? (FT) Has the well run dry? Or something else?
6. Public sector R&D and growth.
7. New inhaled Covid-19 therapeutic blocks viral replication in the lungs.
What should I ask Mary Gaitskill?
I will be doing a Conversation with her. Here is Wikipedia:
Mary Gaitskill (born November 11, 1954) is an American novelist, essayist, and short story writer. Her work has appeared in The New Yorker, Harper’s Magazine, Esquire, The Best American Short Stories (1993, 2006, 2012, 2020), and The O. Henry Prize Stories (1998, 2008). Her books include the short story collection Bad Behavior (1988).
I consider The Mare, Veronica, and Lost Cat (among others) to be some of the best and most insightful American fiction of recent times. She is um…frank, and has held a series of actual jobs in her lifetime, including stripper and sex worker. She was also a teenage runaway.
Here is the The New Yorker covering her new Substack. Here is a Guardian profile:
Mary Gaitskill’s fiction is often called cold, or even brutal, but I have always loved it for nearly opposite reasons: its tender attention to the complexities of human emotion, and the compassion it coaxes from clear-eyed perception.
So what should I ask her?
Will open science matter?
Yesterday I posted this link, about how federally funded science will have to be made open access right away. I’m all for this, as it has some upside and no downside that I can see. Still, at the margin I am not sure it will make a huge difference.
Who says when the research is “ready” to be posted? No matter what you put in the fine print, de facto that is a decision made by the scientists. If scientists wish to delay open access publication, I doubt if this will stop them. “The paper simply isn’t finished yet.” The law cannot in practice dictate otherwise. Of course scientists already put plenty of works on-line and open to the public, and this private calculation will continue, but with only modest changes.
The actual main effect will be to enable scientists to resist commercial attempts to monopolize publication rights in closed access form. Presumably such contracts now will be illegal. But think about the new equilibrium: there will be a final, published, canonical version of the article published in The Journal of Botchagaloup. There will be an open access, not yet published, non-canonical (no proper pp. at the very least) version on the scientist’s home page. And very often there will be an illegal copy of the canonical version on SciHub, the pirate site for scientific papers. Plus the data copies that circulated before the commercial publisher made the authors take them down.
How is that so different from the status quo? Some scientists who didn’t get a crack at the data the first time around won’t have to wait as long to access it. And maybe scientists will make more of an effort for the open access version of their papers to be closer to the canonical versions published in commercial journals. This could prove a modest benefit, though you, as an outside scientist, wishing to cite “p.43” just won’t know how canonical the open access version will be. And presumably for-profit commercial journals will add extra stages to the final production process, if only to keep interest in the product they are selling, relative to the open access versions on-line. So I don’t think it will “do under” for-profit scientific publishing, not to mention that many articles are not federally funded by the U.S. government.
A more radical policy change would have been to require the journals to make their final versions of the papers open to the public, and in the final, canonical versions. That would create greater benefits, but also run the risk of putting those journals out of business. As I understand the new dictate, it does not do this.
The new law also will give scientists leverage against private companies that wish to buy up the research rights and not publicize the results. Probably this is a benefit, though that doesn’t hold a priori, as it does raise the cost of private sector involvement by forcing them to share the information more. And some unscrupulous scientists might try to get a better deal from the companies by releasing a different and inferior version of “the public research results” to the open access community. Still, on net I expect these are benefits.
Addendum: You may recall that Fast Grants had its own version of an open access requirement. I think this worked quite well! But it is interesting why it might have proven effective. I think we credibly signaled that people with open and early good results would be plausible candidates for additional funding, and soon, and indeed some of them were. To the extent that the federal government can signal the same, good incentives will be all the stronger. But this new OSTP order does not coordinate future funding decisions per se, and I don’t see any clauses that the NIH, NSF, and others are bound to revise their funding policies accordingly, to favor researchers who come out with speedy, open results. So the benefits here could be much greater if the entire federal science apparatus could signal its prioritization of speed and openness. We are still quite far from this. Nonetheless, this policy is a marginal improvement and a step in the right direction and its creates some preconditions for matters getting better yet.
Saturday assorted links
The long-awaited upgrade to Ethereum
Which are the best sources to read on what is happening, and its likely benefits and problems? If you are starting from scratch, here is some NYT coverage. The Ethereum Foundation reports:
- Soon, the current Ethereum Mainnet will merge with the Beacon Chain proof-of-stake system.
- This will mark the end of proof-of-work for Ethereum, and the full transition to proof-of-stake.
- This sets the stage for future scaling upgrades including sharding.
- The Merge will reduce Ethereum’s energy consumption by ~99.95%.
What else should I be reading on this? Here are various Reddit threads. Here is coverage from Timothy B. Lee. And what are you all expecting? (Please don’t just rehash the standard crypto debates.)
The Student Loan Giveaway is Much Bigger Than You Think
Wiping out 10k in student debt is not the most expensive part of the Biden student loan program. Most Federal student loans are now eligible for an income based repayment plan, under these plans students pay a small percentage of their “discretionary” income, say 10%, and then after a fixed number of years the debt is wiped off the student’s books. At first glance these plans don’t seem crazy, but as Matt Bruenig points out they create perverse incentives.
Under the Public Service Loan Forgiveness (PSLF) program, law graduates that go on to work in the public sector, which is a lot of them as the public sector employs many lawyers, only have to pay 10 percent of their discretionary income for 10 years in order to have their debt forgiven.
Law schools figured out many years ago that, for a student who is planning to enroll in PSLF upon graduation, prices and debt loads don’t matter. Ten percent of your discretionary income is ten percent of your discretionary income regardless of what the law school charges you and how much debt you nominally have to take on.
Law schools also realized that they could make the deal even sweeter by setting up LRAPs [repayment programs, AT] that give graduates money to cover the the modest repayments required by the PSLF.
The LRAP schemes work as follows:
- The school increases their tuition.
- The student takes out federal loans to cover the tuition increase.
- The school squirrels away the debt-financed tuition increase into an LRAP fund.
- The school disburses money from the LRAP fund to cover PSLF repayments.
Did you get that? Here’s a stylized example. Suppose a student will make 150k per year for 10 years working in the public sector. If they have 200k in debt they pay 15k every year to the government for 10 years and then 50k is “forgiven.” But now the law school comes to the student and says ‘heh, I have a deal which will make both of us better off. We are going to raise the price of law school to 400k but don’t worry not only won’t that cost you a penny more than the 15k a year you are already obligated to pay it will actually cost you much less because we will pay your payments of 15k per year!’ This indeed is a great deal for the student who pays nothing and it’s a great deal for the law school which gets 200k more revenue immediately in return for 150k of payments paid out over the following 10 years. Win-win! Except for the taxpayer of course.
But wait there’s more. Student loans can be used not only to pay tuition and fees but also to pay “living expenses.” Thus, under these plans, students have an incentive to take out as big a loan as allowed in excess of tuition and fees because no matter how large the loan the student’s costs are zero! Lyman Stone has a good tweet thread giving many examples of how to game the system such as “Every student should borrow their maximum loan eligibility and then find some way to invest it illegally. My strategy would be: rent a wildly oversized apartment and sublet.” And here is a tweet thread from Michael Feinberg showing how even wealthy parents may be able to game the system.
Furthermore, the new Biden plan makes the income driven repayment schemes even more generous!
The IDR changes are four-fold:
- Increase the amount of income not subject to IDR from 150 percent of the federal poverty line to 225 percent of the federal poverty line.
- Reduce the interest rate on IDR-enrolled loans to 0 percent.
- For undergraduate debt, reduce the IDR rate from 10 percent of income beyond the threshold in (1) to 5 percent of income beyond the threshold in (1).
- For IDR-enrolled debts with original loan balances below $12,000, reduce the repayment period from 20 years to 10 years.
Essentially what this means is that every school will now have the possibility of using a law school like program to shift costs onto taxpayers. Thus Bruenig concludes:
…going forward, these new rules could quite radically alter the incentives of colleges and students when it comes to college prices, institutional financial aid, how much debt to take on, and how to approach repayment.
Indeed, these programs are likely to be very expensive and the resulting increase in the price of tuition will lead to calls either to end the program or for price controls on education.
What I’ve been reading
Frances Spalding, The Real and the Romantic: English Art Between the Two Wars. Wonderful text, quality images, and the whole subject area remains underrated, so this book was a big plus for me. The history of modernism is not just cubist and abstract art on the continent.
Chris Miller, Chip War: The Fight for the World’s Most Critical Technology. I liked this book and found it useful, though I wished for more on Taiwan and more recent times, and for less on the earlier years. Just my subjective preference.
Alice Bentinck and Matt Clifford, How to be a Founder: How entrepreneurs can identify, fund and launch their best ideas. Do you have it in you to be a founder? If you are asking that question, this book is maybe the best place to start looking for some answers.
Thomas H. Davenport and Steven M. Miller, Working with AI: Real Stories of Human-Machine Collaboration. Actual examples!
There is also Ajay Agrawal, Joshua Gans, and Avi Goldfarb, Power and Prediction: The Disruptive Economics of Artificial Intelligence, which I have not yet read.
Samuel Gregg, The Next American Economy: Nation, State, and Markets in an Uncertain World is a useful corrective to some recent attempts to overrate the import of industrial policy, especially in an American context.
Celia Paul, Letters to Gwen John I found a moving set of (imaginary) letters from one living female painter to another first-rate deceased female painter, both having lived through some similar situations. Excellent color plates too.
Christopher Marquis and Kunyuan Qiao, Mao and Markets: The Communist Roots of Chinese Enterprise. A good look at the essential continuity in Chinese history between the Maoist period and the “capitalist” period. Of course the main thesis no longer seems so crazy as it might have ten years ago.
How does such a “power grab” stay secret?
Prime Minister Anthony Albanese announced on Friday that former High Court Justice Virginia Bell will report on Nov. 25 on the findings of her inquiry into [Scott] Morrison’s secret power grab.
Morrison secretly appointed himself to five ministerial roles between March 2020 and May 2021, usually without the knowledge of the original minister.
Albanese, who replaced Morrison in May elections, cited Solicitor-General Stephen Donaghue’s legal opinion that while the appointments were legal they undermined the principle of responsible government….
Morrison, who is now an opposition lawmaker, maintains that he gave himself the portfolios of health, finance, treasury, resources and home affairs as an emergency measure made necessary by the coronavirus crisis.
But his only known use of the secret powers had nothing to do with the pandemic. He overturned a decision by former Resources Minister Keith Pitt to approve a contentious gas drilling project near the north Sydney coast that would have harmed his conservative coalition’s reelection chances.
Here is the full story. But really people — how is this secrecy possible? No one was tempted to mention this on Twitter? Did it involve no paperwork? Isn’t such a “secret” minister just a windowless monad? Or why not install loyal “lackey type” subordinates instead? Or is this like Trump’s “document declassification,” existing mainly in the mind of the executive and nowhere else? Model this for me please!!