The disinflation as American triumph
That is the theme of my latest Bloomberg column, score one for the Quantity Theory as well, here is one excerpt:
Enter the notion of “credibility.” A long-standing tradition in macroeconomics, sometimes called rational expectations, suggests that a truly credible central bank can lower inflation rates without a recession. If the central bank announces a lower inflation target, and most people believe the central bank, wages and prices adjust in rough sync with demand. All nominal variables move upward at a slower pace, markets continue to clear, and the economy keeps chugging along. Because individuals in markets believe the disinflation process is for real, they are willing to act in accordance with it in their pricing and wage-demand decisions.
Although rational expectations theory has undergirded several Nobel Prizes (see Robert E. Lucas and Thomas Sargent, for example), most mainstream economists these days do not believe in it as a general approach. The critics might be behavioral economists who scorn the notion that individuals are rational in their market decisions, or they might believe that full credibility is rarely if ever present. After all, do we not live in an age of low trust and mixed quality governance? Over the last year, for instance, I have been party to numerous conversations suggesting the Fed will be afraid to pursue disinflation out of fear of inducing a recession and indirectly electing Donald Trump as president.
And yet it seems the credibility has been there, and so we can give plaudits to various parts of the federal government, including President Biden, for supporting Powell and the Fed. At no point did the president intervene to bash the central bank or send a mixed message, and so the disinflation had implicit stamps of approval from majorities in both parties. It is often the job of Congress to complain, but there were no serious moves made against the independence of the Fed, even if Elizabeth Warren and a few others squawked.
As for the commentariat, a diverse array of economists ranging from the Keynesian Paul Krugman to many conservative economists recognized that rate increases and disinflation were necessary and had to be done with promptness and fortitude. And so credibility reigned.
Granted, the rational expectations view is not always correct — and a recession somewhere down the road isn’t out of the question — but at least in this instance America pulled together and did the job. This sequence of events, which is continuing, should serve as a lesson to those predicting either the decline of America or the creeping polarization and paralysis of our politics. The disinflation can serve as Exhibit A for American optimism and a demonstration that we are still capable of making our own future.
Can the UK and EU pull off the same?
Austin Vernon on electric vehicles > hybrids
From my email, I will not indent but please note this is all from Austin:
“I don’t agree with electric vehicle mandates or subsidies, but the recent push against pure battery electric vehicles from free market commentators is bizarre. The arguments against them because of mineral shortages, battery shortages, or manufacturing emissions completely abandon free market principles. These arguments will lead to failure because they are obviously wrong after minimal investigation.A more effective argument would be that electric cars are so popular and production is growing so fast that there is no need for mandates. The market will provide the goods through better technology, increased output, and substitution. A company like GM will have no chance of paying its debt if it doesn’t make compelling electric cars. Then hammer home use cases that make no sense for batteries, like a farmer that needs a semi-truck for harvest. It will run nearly 24/7 for a week or two and then sit idle for the rest of the year. An electric truck would impose a significant economic penalty while barely saving emissions.Some of the errors:1. The majority of electric vehicles in the world use lead-acid batteries, not lithium-ion batteries. Low-speed electric vehicles are popular in China even though the government does not love them. They start at $1000 and might have 100 km of range. They are the Model T of electric cars, except with much better performance at a fraction of the cost of the Model T. They are modern marvels of economic growth. We don’t have these vehicles in rich countries because they would be illegal, and we can afford higher-performance vehicles. There are some exceptions, like golf carts in Peachtree City, GA.2. Electric cars are a great value. Low-speed electric vehicles obviously provide value to have so many sales. Something like a Tesla Model 3 has the performance of a BMW 3 series with a total cost of ownership more like a Camry. The next generation of electric cars that Chinese automakers and Tesla are designing will have highway-capable performance with an ownership cost below any gasoline car available and entry level purchase prices.3. The market is screaming for batteries that don’t use nickel or cobalt, and companies are delivering. Even Tesla thinks 2/3 to 3/4 of their cars will use lithium iron phosphate batteries. Only luxury vehicles and some semi trucks will use nickel batteries (and cheaper manganese might substitute for some of the nickel). The performance of lithium iron phosphate battery vehicles has improved because companies are figuring out how to make their cars more efficient and remove unnecessary packaging and structure from the packs to reduce weight. Sodium-ion batteries lack the performance of lithium batteries but are much better than lead-acid batteries that power most electric cars. Consumers will happily trade up as they get richer.4. We can build more factories and mines. Look at all the factory announcements! There is lots of lithium in the Earth’s crust! Let the market cook!5. The leading companies are now profitable without subsidies. Protectionists, unions, and car makers that still aren’t good at making battery cars drive lobbying for subsidies.6. The price of an item signals information about its availability! The need for scale is driving new manufacturing technology. Tesla hopes to produce 20 million cars yearly (car sales are ~80 million globally). They recently highlighted improvements like motors that use iron magnets instead of rare earth ones, higher voltage systems to reduce copper wiring, and a novel assembly technique to reach this scale. These are in addition to previously announced simplifications in battery manufacturing and a focus on lithium iron phosphate batteries. Electric cars need to be inexpensive to sell in the tens of millions. And that means using cheap, available materials that use less energy and labor to produce.7. Hybrid cars are an engineering travesty. They are more expensive and complex than either an internal combustion car or a pure electric car. There will be adequate fast chargers with a seamless experience now that almost every major North American carmaker is adopting Tesla’s chargers. A hybrid owner pays thousands of dollars more for a car, has to go to gas stations, needs oil changes, etc. A battery car owner might fast charge a few times a year while they eat lunch or shop when their vehicle range isn’t enough for the day’s driving. The battery car is way more convenient. Even many cases like semi trucks can get by with pure batteries because there is plenty of time to charge during government-mandated breaks. Someone with work or leisure that requires frequent highway driving for hours straight but doesn’t have mandated breaks should buy a regular gasoline car.8. Two-wheel and three-wheel vehicles are popular globally. But they are not big enough to support complicated hybrid powertrains. Highway-speed motorcycles are challenging to electrify. Mopeds, rickshaws, and e-bikes are easy.9. A new battery cathode technology might increase energy density and dramatically reduce battery costs. But this technology isn’t necessary to electrify ground vehicles on economics and consumer preference alone.10. Few people care about emissions in their revealed preferences. It’s all about selling stuff people want to buy. Governments will remove mandates if electric cars aren’t ready for the median voter. The worst case for freedom is that electric cars are incredibly successful, and we hurt the outliers that still need gasoline or diesel vehicles. Broadly attacking electric cars doesn’t help!”
Mental health and European economics departments
We study the mental health of graduate students and faculty at 14 Economics departments in Europe. Using clinically validated surveys sent out in the fall of 2021, we find that 34.7% of graduate students experience moderate to severe symptoms of depression or anxiety and 17.3% report suicidal or self-harm ideation in a two-week period. Only 19.2% of students with significant symptoms are in treatment. 15.8% of faculty members experience moderate to severe depression or anxiety symptoms, with prevalence higher among nontenure track (42.9%) and tenure track (31.4%) faculty than tenured (9.6%) faculty. We estimate that the COVID-19 pandemic accounts for about 74% of the higher prevalence of depression symptoms and 30% of the higher prevalence of anxiety symptoms in our European sample relative to a 2017 U.S. sample of economics graduate students. We also document issues in the work environment, including a high incidence of sexual harassment, and make recommendations for improvement.
That is from a new paper by Elisa Macchi, Clara Sievert, Valentin Bolotnyy, and Paul Barreira.
Wednesday assorted links
Progress
Mass incarceration fundamentally altered the life course for a generation of American men, but sustained declines in imprisonment in recent years raise questions about how incarceration is shaping current generations. This study makes three primary contributions to a fuller understanding of the contemporary landscape of incarceration in the United States. First, we assess the scope of decarceration. Between 1999 and 2019, the Black male incarceration rate dropped by 44%, and notable declines in Black male imprisonment were evident in all 50 states. Second, our life table analysis demonstrates marked declines in the lifetime risks of incarceration. For Black men, the lifetime risk of incarceration declined by nearly half from 1999 to 2019. We estimate that less than 1 in 5 Black men born in 2001 will be imprisoned, compared with 1 in 3 for the 1981 birth cohort. Third, decarceration has shifted the institutional experiences of young adulthood. In 2009, young Black men were much more likely to experience imprisonment than college graduation. Ten years later, this trend had reversed, with Black men more likely to graduate college than go to prison. Our results suggest that prison has played a smaller role in the institutional landscape for the most recent generation compared with the generation exposed to the peak of mass incarceration.
Here is the full article, via a loyal MR reader. The causes of this advance should be a greater topic of discussion.
The new LLaMa 2 from Meta
Here is one way to access it, so what do you all think?
The politics of neuroticism and unhappiness
2/ …the increasing ideological differences on these measures are far larger and more numerous pic.twitter.com/UTl87O1wtS
— Zach Goldberg (@ZachG932) July 14, 2023
I’ve said this before, but the evidence for the proposition continues to mount: current political debate in America cannot be understood without the concept of neuroticism — as a formal concept from personality psychology — front and center.
And also as I’ve said before — neurotic isn’t the same thing as wrong!
Perhaps more importantly yet, even if a political ideology has a dominant vibe, the variance of temperaments within that ideology remains high, and high relative to the differences across ideologies. I wonder whether, as the “vibes” of particular ideologies become more public and more salient through social media, whether this does not lead to partial secessions? (Is Nate Silver one example of this?)
Imagine a future — or how about a present — where “people with a positive attitude” is actually an organizing intellectual and ideological principle? Yes, that world can be ours, we need only to will it so.
Matt Yglesias on European politics
The deeper reason, though, is that Europe has kind of killed off politics. So much power now rests at the EU level, but the EU doesn’t conduct a recognizable form of democratic politics. Voting for the European Parliament has what David Schleicher terms a “second-order” pattern, where Spanish voters will cast their votes in the European Parliament elections as a way of voicing approval or disapproval for the performance of the prime minister in Madrid. The same is true in Italy, Poland, and so forth.
Regardless of the actual election results, the Parliament is always controlled by a grand coalition with a senior center-right bloc and a junior social democratic bloc. The European Commission — the EU’s version of a cabinet — guarantees each country one Commission slot, so the actual composition of the Commission is a mess based on who controls which country at any given time. And the prime ministers of even small and mid-sized EU countries don’t see moving up to Brussels as a promotion the way American governors become senators or cabinet secretaries run for president.
It’s not exactly an “undemocratic” system, but it’s very depoliticized. You don’t have clear partisan coalitions or a real policy debate, you don’t have incumbents worrying about reelection or ambitious opposition figures looking to gain power. And I think this has consistently undermined Europe’s ability to think clearly about tradeoffs and strike win-win bargains.
That is from this longer (gated but worth it) post on why America has leapt out ahead of Europe in the last few decades.
Tuesday assorted links
1. Inside the underbelly of Karachi.
2. “My glimpsed personal highlight of the conference was spotting Tyler Cowen and Ian Leslie discuss the Beatles and have 2 minutes listening in to them.” Benjamin Yeoh on the Civic Future Progress Summit.
3. Maxwell Tabarrok on NSF > NIH during the Covid crisis.
5. Dylan Matthews on AI safety at Anthropic. The piece has interesting details of note.
How the NSF Moved Faster than the NIH During COVID-19
The NSF is a much smaller organization than the NIH but during the pandemic it moved more quickly. Why? Maxwell Tabarrok explains:
The NSF relied on its special congressional authority to skip peer review to bootstrap its pandemic-related granting. Two pre-existing programs which use this authority enabled the NSF’s speedy response. The RAPID (Rapid Response Research) and EAGER (EArly-concept Grants for Exploratory Research) programs focus on “proposals having a severe urgency,” and “exploratory work in its early stages on untested, but potentially transformative, research ideas,” respectively. Both turn applications around quickly: while typical federal science grants take 9-12 months of review, RAPID and EAGER grants usually provide funding to researchers in less than a month.
…The NSF funded valuable research through its RAPID grants program, including the development of the first COVID-19 test to get FDA approval, the Johns Hopkins COVID-19 data dashboard, and both inhaled and micro-needle patch vaccines, the latter of which is currently being scaled up for use in HPV vaccines. These examples don’t conclusively show that the NSF avoided sacrificing quality control for speed, but they suggest that the NSF’s internal team of reviewers funded multiple effective projects that benefited from faster turnarounds. The benefits of speeding up these big successes when they were urgently needed outweighed the hypothetical costs of approving some below-average projects.
In crises generally, the success of a science funder is determined by its biggest wins, not by the average quality of the projects it approves. Science’s impact on the pandemic was dominated by a single technology: the mRNA vaccine. The next most important contributions, likely testing or pharmaceutical treatments, were less important than the vaccine, and the average COVID-19 research project may have had minimal impact. External peer review slows down the funding of all projects to make sure that low-quality research is not funded. This kind of bottom-end quality control is less important in a crisis environment. At crisis-response margins, it’s probably better for science funding agencies to anchor less on quality control and instead take more shots on goal.
The NIH, to be fair, also responded more rapidly than usual and it used some special “shark-tank” like programs to do so which also worked well.
Read the whole thing for more recommendations.
Work from home, and golf
1) Working from Home (WFH) has powered a huge boom in golfing
2) Golfers are playing more golf on weekdays, for example 143% more on Wednesday in 2022 vs 2019
3) Golfers are playing more mid-afternoon, for example 278% more on Wednesday 4pm in 2022 vs 2019
Here is more from Alex Finan and Nick Bloom.
What I’ve been reading
Christopher Clark, Revolutionary Spring: Fighting for a New World 1848-1849. The new go-to book on this topic, magisterial on the lead-up causes and later on the international influences and contagions. Will make the year’s best non-fiction list.
Fearghal Cochrane, Belfast: The Story of a City and its People. A wonderful book on this most underrated city, the best overall general introduction to Belfast.
Rory Naismith, Making Money in the Early Middle Ages is a historically important work about the significant of coined money in dragging the Western world out of the Dark Ages.
Florian Illies, 1913:The Year Before the Storm, considers what the leading German and Austro-Hungarian cultural figures were doing in that year, right before disaster struck.
Matthew Barrett, The Reformation as Renewal: Retrieving the One, Holy, Catholic, and Apostolic Church. A lengthy and highly detailed polemic arguing that Protestantism is the true universal church, rather than a dissent per se. These are not my issues, but some people will like this book a good deal.
I can recommend Maurizio Isabella, Southern Europe in the Age of Revolutions, mostly about the 1820s.
Tara Isabella Burton, Self Made: Creating Our Identities from Da Vinci to the Kardashians is an interesting look at the earlier history of self-made celebrity images.
Anupam B. Jena and Christopher Worsham, Random Acts of Medicine: The Hidden Forces that Sway Doctors, Impact Patients, and Shape Our Health, is a Freakonomics-style look at what we can learn from controlled and also natural experiments in medicine.
Soon to appear is Yasheng Huang’s The Rise and Fall of the East: How Exams, Autocracy, Stability, and Technology Brought China Success, and Why They Might Lead to Its Decline. Here is my earlier CWT with Yasheng Huang.
I will not right now have time to read Wang Hui, The Rise of Modern Chinese Thought, but it appears to be a major work of importance.
Art market fractionalization
From an email sent to me by The Art Newspaper:
Fractionalisation and tokenisation of art are all the rage. While the notion of unlocking the value in an artwork by selling shares in it has been around for over a decade, a slew of new initiatives is taking it to an explosive new level.
Among the splashiest new launches is the Artex Stock exchange out of Liechtenstein, co-founded by financiers Prince Wenceslas von Liechtenstein and Yassir Benjelloun-Touimi, the latter seemingly the driving force. The project buys art (its first acquisition is Bacon’s Three Studies for a Portrait of George Dyer, 1963) bought for $52m in 2017 at Christie’s and now valued at $55m. Investors can buy shares for as little as $100 in the Bacon, which can be traded (or technically, the company that owns it) on the Liechtenstein MTF (an alternative trading platform). Other paintings will follow; trading starts on 21 July.
These ideas seem weird to me. The more wonderful it is to own art, the lower should be its pecuniary rate of return, as recompense. So why buy into fractional shares of an art work? You don’t get to hang it on your work, and at the same time you get the subpar rate of return resulting from the fact that some people do get to hang it on their walls.
Mission Impossible 7 (no real spoilers)
Eh. It has some good scenes, but there was no movie in the movie, as they say. I do understand this is a film and also a visual event, but the evil AI should have been kept abstract, rather than visualized in such a corny, stupid fashion. That reminded me of Hitchcock’s Spellbound, which is also too visually literal. This installation of the MI series uses a bunch of Hitchcock tricks, some expected James Bond, and then a bunch of LOTR moral and “power corrupts” themes, which don’t fit the kinetic emphasis in the on-screen action. Most of all, I am struck by the great lengths they go to in order to portray lone individuals as decisive over the final outcomes. In a Bond movie there is a wire to be cut, a button to be pressed, and a specific villain to be vanquished in a remote island lair, with a stomach punch-invulnerable henchman along the way. OK enough, but here they have to work far harder. They even solve for the strategic game between the AI and the good guys, and it still isn’t clear who is a decisive agent in the action.
And so the movie ends with “part I and uncertainty,” as even 2 hours 40 minutes was not enough to get a single individual to matter. Modelmakers, take note.
Monday assorted links
1. Rasheed Griffith interviews Anton Howes on the Caribbean, Japanese toilets, and much more.
2. Puffin photo.
3. The economic life of cells?
5. Good profile of BAP. In my view, the so-called “New Right” needs to learn to live with feminization, one way or another. I think of BAP as “Cope” for those people who will not or cannot do so.