My first Paraguayan restaurant, and a test of GPT-4

by  Tyler Cowen in

That was the menu from Tal Cual!, in Buenos Aires, the first Paraguayan food I have had.  I showed GPT-4 that menu and asked why there were no posted prices on it.  It responded that the restaurant wanted to economize on the cost of price changes, and afterwards mentioned a fixed price menu as an alternative explanation.  I then added that I was in Argentina, and would that help improve the answer any?  GPT responded that high inflation was likely the reason why the restaurant might want to economize on the cost of frequent price changes.  Not bad.

A fun time was had by all.

John Stuart Mill on empirical economics and causal inference

by  Tyler Cowen in

Written by me, here is a passage from GOAT: Who is the Greatest Economist of All Time, and Why Should We Care?

A System of Logic covers many different topics, but for our purposes the most important discussion is Mill’s treatment “Of the Four Methods of Experimental Inquiry,” sometimes called “Mill’s Methods” and indeed receiving their own Wikipedia page. Mill outlines different manners in which causes and effects might be correlated, or not, and what we can infer from such patterns, and how difficult it can be to sort out actual cause and effect from the data. He refers to the “direct method of agreement,” the “method of difference,” “joint method of agreement difference,” the “method of residue,” and the “method of concomitant variations,” all as ways of trying to make correct or at least better inferences from the data.

I’ll spare you the details on the full argument, but in essence Mill was trying to figure out how to do causal inference econometrics, but with words only. That enterprise was doomed to fail, but it gives us insight into what Mill thought was by far the most important question in social science, namely causal inference when faced with complex underlying chains of cause and effect. For Mill, everything is what we would now call “an identification problem,” and this understanding is clearest in Mill’s chapters “Fallacies of Generalization” and “Fallacies of Ratiocination.” Mill also serves up a remarkably on-target discussion of how the different nature of social science problems, and their possibly greater complexity, can lead to identification problems that are not necessarily present in the natural sciences – see his chapter “Of the Chemical, or Experimental, Method in the Social Science.” That entire approach is remarkably 2020s in orientation, and you won’t find earlier history of thought books giving Mill much if any credit for this.

In a funny way, Mill was ahead of Milton Friedman in his understanding here. Friedman knew much more statistics, but in his economics he often presented causal inference as fairly straightforward. In his Monetary History of the United States, co-authored with Anna Schwartz, the reader does get the impression that the historical correlations, and ordinary least squares techniques, do in fact show that the money supply is a central driver of nominal income, given the relative stability of money demand. Later, the real business cycle theorists were to challenge that inference, and suggest that often it was income that was causing the money supply. That is a kind of complex challenge Mill seemed quite comfortable with in A System of Logic, whereas Friedman and Schwartz assigned higher power to common sense approaches to cause and effect.

Mill remains in my eyes one of the most underrated thinkers.

Top MR Posts of 2023

by  Alex Tabarrok in

This was the year of AI; including the top post from Tyler, Existential risk, AI, and the inevitable turn in human history but also highly ranked were my posts AGI is Coming and AI Worship and Tyler’s GPT and my own career trajectory. Also our paper, How to Learn and Teach Economics with Large Language Models, Including GPT has now been downloaded more than ten thousand times.

2. Second most popular post was The Extreme Shortage of High IQ Workers

3. The University Presidents

4. The Harried Leisure Class.

5. *GOAT: Who is the Greatest Economist of all Time, and Why Does it Matter?*

6. Matt Yglesias on depression and political ideology which pairs well with another highly-ranked Tyler post, So what is the right-wing pathology then? and also Classical liberals are increasingly religious.

7. Can the SVB crisis be solved in the longer run?

8. Substitutes Are Everywhere: The Great German Gas Debate in Retrospect

9. My paean to Costco.

10. Is Bach the greatest achiever of all time?

11. The Real Secret of Blue Zones

12. SpaceX Versus the Department of Justice

13. What does it mean to understand how a scientific literature is put together?

14. In Praise of the Danish Mortgage System

15. Great News for Female Academics!

Finally, don’t forget Tyler’s posts Best non-fiction books of 2023, Favorite fiction books of 2023, and Favorite non-classical music.

What were your favorite posts/articles/books/music/movies of 2023?

Why France is underrated

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is one bit:

Since the West European economic boom ended in the 1970s, the French civil service has been at best a mixed blessing. French administrators have gotten a lot done, reflecting their impeccable education and internal culture. But they have also helped to make the French economy overly static and too reliant on bureaucracy. A lazier, less activist civil service might have been better.

Fast forward to 2023. War and conflict are now more common on the global scene, a trend that shows no signs of abating. Populist governments are on the rise, and China and Russia are active and restless. None of those problems is easy to solve, and they all require greater involvement from the public sector. Nations with high-quality leadership and civil-service traditions will stand a better chance of navigating the turmoil.

So the bureaucracy that was once a hindrance to France may now turn out to be a comparative advantage. And at a time when governance seems to be deteriorating around the world, Macron continues to have a reputation as a relatively responsible leader.

This year has shown how this advantage plays out. Post-pandemic France has been a bit of a mix, with soaring energy prices, inflation, rising interest rates, continuation of the Ukraine war, labor strikes and protests, and a variety of European migration crises. Yet France avoided a credit downgrade and the French economy continued to create more jobs. Performance has hardly been perfect and the risk of recession remains, but France has done better than might have been expected 18 months ago.

I also consider the relatively successful French start-up scene, including in AI.

Censorship of U.S. Movies in China

by  Tyler Cowen in

We introduce a structural econometric model to estimate the extent to which the Chinese government bans U.S. movies. According to our estimates, if a movie has characteristics similar to the median movie in our sample, then the probability is approximately 0.91 that the Chinese government will ban it. During our sample period, 1994-2019, U.S. movies comprised about 28 percent of the Chinese market and sales were about $22.6 billion. However, according to our estimates, if the Chinese government had not banned any U.S. movies, then the latter numbers would have risen to 68 percent and $45.1 billion.

As for what gets banned:

…, two factors that have very high statistical significance are: (i) whether the movie contains occult content, and (ii) whether the movie
receives an R rating from the Motion Picture Association of America (MPAA). The factors also have very high substantive significance. For instance, suppose two movies, A and B, are identical except that movie A contains occult content, while B does not. Suppose movie B’s probability of being banned is 50%. Then, according to our results, the occult content in movie A causes its probability of being banned to rise to 67%. A similar thought experiment implies that, if a movie has an R rating, then this raises its probability of being banned from 50% to 70%.

Three other factors seem to be important but come just short of reaching statistical significance. These are whether the movie contains themes related to (i) anti-communism, (ii) individualism, or (iii) Tibet. A fourth factor is similar. This is whether the actor Richard Gere
appears in the movie.

That is a new paper by XUHAO PAN, Tim Groseclose, and yours truly, forthcoming in the Journal of Cultural Economics.

*The New Deal’s War on the Bill of Rights*

by  Tyler Cowen in

That is the new book by David Beito, and the subtitle is The Untold Story of FDR’s Concentration Camps, Censorship, and Mass Surveillance.  Here is the closing passage:

If Roosevelt’s civil-liberties reputation meant anything to mainstream Americans at the end of the 1950s, it was not for witch hunts against gays in the navy, mass surveillance of private telegrams, crackdowns on free speech, inquisitorial investigations, sedition prosecutions, or the internment of Japanese Americans in concentration camps.  Far more central in the memories of most was his authorship of the four freedoms and the Fair Employment Practices Committee and the appointment of Black and Douglas to the Supreme Court.  But that was not the whole truth, or even the beginning of the whole truth.

There you go.  I don’t think these facts are much contested, though the accompanying mood affiliation hasn’t changed very much.

Salta (and Jujuy) notes

by  Tyler Cowen in

The food is excellent.  Don’t worry about choosing the right restaurant, just try to eat the simple things.  Corn products.  Beans.  Baked goods such as empanadas.  Don’t waste your time on the steak.  The food stalls in the Mercado Municipal are a good place to start, and many items  there cost fifty cents to a dollar.  The “sopa de mani” (peanut soup) is especially good, and almost identical to what you find in Bolivia.

The overall vibe in Salta reminds me of both northern Mexico and the older parts of the American Southwest.  And the adjacent parts of Bolivia.  It is hot, the cities are surrounded by beautiful scenery, and it still all feels rather wild.  Salta is also much safer than Buenos Aires, and you don’t see many beggars here.  In B.A. they are now asking for food rather than money.

There’s not much to do in Salta, as the central sights in town are the two mummified remains of young Incan girls in the archaeological museum.  They are memorable, as it feels like they are staring right back at you.

Spending time here will cure you of utopianism, and also of pessimism.  Whatever issues you might think are really important, most people here really don’t care about them or even know about them.

American brands at the retail level are not to be seen.  Nor will you run across Chinese or Indian merchants.  Perhaps a Syrian or Lebanese is to be found, but not in any great numbers.

Tyrone is accompanying me, and I asked him what he thinks.  As you might expect, he had only stupid rudeness in response.  Tyrone said that northern Argentina is the true essence of the Argentinean nation, and that everyone interested in Argentina should visit here.  In fact, having visited North Macedonia, he wishes to rename the country South Bolivia — were they not once part of the same Viceroyalty?  Is it not enough to share the same soup?  Do they not have broadly the same accent, devoid of all that B.A. slurring?  Was not the country born here in the north?  That is where the decisive battle for national independence was fought and won.  Do we not all agree with theories of deep roots?  It is not just who moves to your nation, but it is about how and where your nation was founded.  And for Argentina that is in the north, and with violence and corruption and economic decline.  Tyrone even wishes to hand over the rest of Patagonia to the Chileans, so that Argentina may better recognize its true self.

In the twisted view of Tyrone, the creation of the modernist city of Brasilia was a big success.  The real failure, hermetically hidden by some charming Parisian and Barcelona-style architecture, was the attempted modernist outpost of Buenos Aires, an immature and underdeveloped excrudescence from the real nation of chocro, horse saddles and the quebrada.  It tricked a few Johnny-come-lately migrants during the early 20th century, and neglected to tell them they still would be ruled by the ideas and the norms of the north.

Imagine thinking that you could govern a nation with high modernism and Freudian psychoanalysis — what folly!  And now, Tyrone tells us, we have the Milei revolution, attempting to replace one Viennese modernism — that of Freud — with the Viennese modernist revolution of Mises.  Good luck with that one, Tyrone says.  What kind of fool would think that the future of South America would be determined by a war across different Viennese modernisms?  Those mummified corpses still will rule the day, whether or not the feds balance the budget in the short term.  Desiccated ever-young girls are in perpetual deficit, no matter how the daily fiscal accounts may read.

I had to stop Tyrone right then and there, as he was explaining why the current hyperinflation probably was a good thing, as the only path to true dollarization and at least one symbolic unification with North America.  Tyrone was shouting that such symbolic unification nonetheless was impossible, and thus the corpses had brought in Milei to restore fiscal sanity and prevent dollarization and thus protect the true Incan and Andean nation.

Such thoughts are not allowed on Marginal Revolution, and so I am now trying to persuade Tyrone to visit Iguassu, in the hope that I can induce him to take a quick swim in those falls…

I hope the rest of you will visit northern Argentina nonetheless, and put all that nonsense aside.  The empanadas await you.

Vincent Geloso says “Ouch!” to PSZ

by  Tyler Cowen in