What should I ask Patrick McKenzie?

I will be doing a Conversation with him.  Patrick is a phenomenon of the modern age.  He writes the excellent Bits About Money, which focuses on money, banking, payments, and more.

His blog is Kalzumeus.  He has lived most of his adult life in Japan, and has many excellent posts about Japan.  Here are his greatest hits on the blog.  He has run national shadow vaccine location information infrastructure.   On Twitter he is @patio11.

So what should I ask him?

Selection, Patience, and the Interest Rate

I take it this is good news?  Or will it arrive too slowly?

The interest rate has been falling for centuries.  a process of natural selection that leads to increasing societal patience is key to explaining this decline.  Three observations support this mechanism: patience varies across individuals, is inter-generationally persistent, and is positively related to fertility.  A calibrated, dynamic, heterogenous-agent model of fertility permits us to isolate the quantitative contribution of this mechanism.  We find that selection alone is the key to explaining the decline of the interest rate.

That is from a new paper by Radoslav Stefanski and Alex Trew.  Via the excellent, patient Kevin Lewis.

From my email (on single-parent families)

I won’t do double indentation, but this is all from Rick from Baltimore:

“In your post today, you cite to an interview you gave in which you describe the negative effects of children growing up with one parent and state that “I don’t have a magic wand to wave to make all those men worthy of having a nice family, but we could do much more than what we’re doing now”.  So my question is what is it that we can or should be doing?  It seems like one of the more important questions of our day.

So what does a Tyler Cowen pro-parent plan look like?  I can think of a number of candidates for interventions, but most of them don’t strike me as things you would advocate for either because of their limited effectiveness or their unintended consequences.  Some possibilities that I can think of:

  1. Parenting interventions in poor communities (i.e. an army of social workers descending on poor communities to teach parenting and advocate for children).
  2. Shorter/fewer prison sentences in order to allow more poor men to be present for their children and improve the sex ratio in poorer communities (thereby encouraging more committed relationships).
  3. Similarly – more drug decriminalization?  Less?
  4. Tax reforms of the kind advocated for by people like Brad Wilcox to encourage rather than penalize marriage.  (Seems like a good idea to me, but I don’t know how many people there really are out there who choose not to wed for tax reasons).
  5. Better/more jobs for working class men and all-out brutes?  (Seems like an obvious idea, but how?  More unions? Fewer?  More tariffs and less free trade?  Get rid of the Jones Act?  More immigration? Less?  A larger standing army?  A return to more vocational education as advocated for by people like Mike Rowe?)
  6. The re-churching of America?  If so, what are your suggestions for how to accomplish this (evangelical minds would like to know)?
  7. Cultural shifts?  Melissa Kearney points out that up and down the educational ladder, Asian kids almost always have a dad.  Should we be more Asian?  More Mormon?
  8. Less cultural feminization?  Less blame cast on structural oppression and more of a return to a culture of personal responsibility as preached by Jordan Peterson et al.?
  9. More recognition of the downsides of the sexual revolution as described by Louise Perry?  Less premarital sex and pornography? The return of the shotgun marriage?
  10. More cultural depictions in Hollywood etc. of successful mixed-collar marriages in order to encourage more college-educated women to marry plumbers and electricians?

What else am I missing?  What do you think would work?”

TC again: I would add this.  We don’t know what would work.  But it can’t hurt to have the intelligentsia unified and vocal in a belief that a) this problem really matters, and b) like most problems it is not a hopeless one and improvement is possible.  I propose that as step number one — are you on board?

Monday assorted links

1. “Decline in Independent Activity as a Cause of Decline in Children’s Mental Well-being.”

2. “We find that annual suicide attempts increased by 16%, or 5 attempts per 100k capita, after the enactment of [Polish] anti-LGBT statutes.”

3. Time preferences and food choice.

4. ChatGPT can now see, speak, and hear.

5. Tries to sound positive, but in fact shows that putting NYC congestion pricing on NJers isn’t going to work very well.  Again, you want to put stiffer congestion pricing on the residents.

6. The avant-garde origins of Gumby.

It is the poor who are lonely (on average)

Lower-income people are more lonely

Jiska Cohen-Mansfield did a literature review with Haim Hazan, Yaffa Lerman, and Vera Shalom of the statistical correlates of loneliness in older adults and found that being low-income is a strong correlate of loneliness. You see the same thing in surveys of middle-aged and elderly Portuguese people, in the Nova Scotia Quality of Life Survey, and in Eastern Europe.

Michelle Lim, Robert Eres, Shradha Vasan have the interesting finding that low income predicts loneliness not only on the individual level but also that “living in poorer neighborhoods” is associated with loneliness.

Sometimes scholarly literatures feature big disputes, or at least nuanced disputes, but in this case there seems to be no dispute at all: loneliness is associated with lower income and thus probably not caused by big houses or lack of huts. I also think it’s notable that at least among rich countries, loneliness seems higher in the poorer (or perhaps “less rich”) ones like Greece and Italy than in the United States and Switzerland.

The low rates of loneliness in egalitarian Sweden and Denmark, in particular, suggest that having more money pretty literally leads to less loneliness. Note as well that while the United States has a somewhat threadbare welfare state, this is data for senior citizens who do enjoy universal health care in the United States and a basic income via Social Security.

It may be, in other words, that being able to afford to do more leisure activities is a significant protector against loneliness. You go do more stuff and you make more friends. Or you have more opportunity to maintain your relationship with friends because you can afford to hang out and do stuff. I don’t think the exact nature of the causal relationship is clear from the studies that I’ve seen, but it bears more examination, especially because a lot of people seem to intuitively spin out to “paradoxical” accounts of loneliness that don’t seem well-supported.

That is from Matt Yglesias ($).

The Productivity of Online Education Increases

Teaching is a labor-intensive service industry for which it is difficult to increase productivity. Thus, the price of education rises over time, the Baumol effect. One of the reasons Tyler and I have put a lot of effort into online education is that it ties education to high productivity growth industries such as software and technology. Thus in the Industrial Organization of Online Education we argued:

…as more of the value of a course comes from software and less from live teaching, productivity will improve, thus removing the cost disease.

Here’s a case in point:

This is just a test but all of the videos for our textbook, Modern Principles, and our free online platform Marginal Revolution University are already subtitled in many languages and soon we will see more translations like the one above. Amazing.

Scoring fifty years of industrial policy

Gary Clyde Hufbauer and Eujin Jung report on what has worked and what has not:

Industrial policy is making a comeback in the United States. It is more urgent than ever to understand how and whether industrial policy has worked to strengthen the US economy. This study analyzes and scores 18 US industrial policy episodes implemented between 1970 and 2020, in an effort to assess what went right and what went wrong—and how the current initiatives might fare. These case studies can guide policymakers as they embark on what appears to be a major initiative in US government involvement in the economy today. The authors divide the 18 case studies into three broad categories: cases where trade measures blocked the US market or opened foreign markets, cases where federal or state subsidies were targeted to specific firms, and cases where public and private R&D was funded to advance technology. The outcome of each episode is scored by grading three criteria: (1) the effect on US competitiveness in global markets (or in some cases the national market), (2) whether the annual cost per job saved or created in the sector was reasonable (i.e., no more than the prevailing average wage), and (3) whether support advanced the technological frontier. Some of the episodes are partly or entirely successful while others are complete failures. Industrial policy can save or create jobs, but often at high cost. A major political selling point for industrial policy is to save or create jobs in a specific industry or location. In most cases, import protection does not create a competitive US industry, and it imposes extreme costs on household and business users per job-year saved. Trade policy concentrated on opening markets abroad is a better bet. Designating a single firm to advance technology yields inconsistent results. The highly successful model of Operation Warp Speed vividly demonstrates that competition is an American strength. R&D industrial policy has the best track record by far. Among the 18 cases, the Defense Advanced Research Projects Agency (DARPA) has the outstanding record.

Are you listening?  From November 2021.

The best sentence I read today (so far)

“Robots can’t replace senior clerics, but they can be a trusted assistant that can help them issue a fatwa in five hours instead of 50 days,” said Mohammad Ghotbi, who heads a state-linked organisation in Qom that encourages the growth of technology businesses.

And this follow-up:

Ghotbi, who leads the Eshragh Creativity and Innovation House, affirmed the approach, arguing that the clergy should not oppose the desire of Iranians to share in global technological advances. “Today’s society favours acceleration and progress,” he said.

Here is the full FT story, via Jesper.

Songs Sold for a Song

In our principles textbook, Modern Principles, Tyler and I discuss securitization and give the interesting example of music securitization with the picture at right (I’m pretty proud of the caption.)

But what has happened to these big purchases of song portfolios? Ted Gioia runs the numbers and finds that the rock stars sold at the top and the financiers are taking a bath!

On Thursday, Hipgnosis announced a plan to sell almost a half billion dollars of its song portfolio. They need to do this to pay down debt. That’s an ominous sign, because the songs Hipgnosis bought were supposed to generate lots of cash. Why can’t they handle their debt load with that cash flow?

But there was even worse news. Hipgnosis admitted that they sold these songs at 17.5% below their estimated “fair market value.” This added to the already widespread suspicion that current claims of song value are inflated.

Hipgnosis’s share price actually dropped after the announcement.

Last year, I predicted the following:

“Don’t be surprised if the folks at [private equity group] Blackstone end up owning all those songs. But if it happens, they will probably acquire the music at a sharp discount to what those songs were worth just a few months ago.”

Can you guess the buyer in the deal announced on Thursday? Yes, it was a Blackstone-backed fund. And they definitely got that discount.

But there’s one part of this story that I love.…It confirms my sense that karma is at work in the universe, and everything tends towards justice and fairness—if you’re willing to wait long enough.

Here’s that element of karma. The old rock stars actually did defeat the system. They screwed the man, and did it big time.

By my measure, Bob Dylan sold out at the top, and gets to laugh at the financiers who overpaid him. The same is true of Paul Simon and Neil Young and all the rest.

When I launch my hedge fund, I’m going to invite them to join me as partners. They are shrewd operators, every one of them.

*Selective Breeding and the Birth of Philosophy*

That is the new book by Costin Alamariu, who also has self-identified as the very famous BAP.  It is a published version of his Yale doctoral dissertation on political theory.  It has been selling very well.

It still comes across as a doctoral thesis, but I feel any reviewer should excuse the unusual modes of presentation.  The doctoral thesis of BAP is going to come out, one way or the other, and better something than nothing.

I am more worried that the main claims are a mix of not true and also too bold.  Take the opening sentence — “The sexual market is the pinnacle of every other market.”

In contrast, I find it odd how little of contemporary society revolves around sex and breeding, relative to what a reading of Darwin might predict.  You might feel, a’la Hanson, that so many of our social proclivities evolved from initially sexual and mating impulses, but how autonomous they have become!  People spend so much time not having sex.  Fertility rates are plummeting, and that is at best a marginal political topic.  Rich CEOs very often utterly fail to create the harems that some might be expecting.  If there is a missing figure in this book it is Adam Smith and his TMS, who can explain so much of our social world with only minimal reference to sex.

Or take this sentence, again from early on: “Who wins in the sexual market as it is formed in a particular society, who gets to breed, is closely related, nearly identical to the question of how the next generation in that society is to be constituted.”

That seems obviously false.  There is simply a massive influence through socialization, and much of that is quite separate from the roles people may or may not have as “breeders.”  For the most talented, breeding in fact might be a highly inefficient way to influence the world’s broader future.  Intermediary institutions are systematically missing from the narrative of this book, so already the stage is set for everything to be darker than it needs to be, and for nature to have a stronger role than it ought to.

In any case it is hard to stay on the track of this argument, as the book is sprawling and repeatedly starts over again with new building blocks.  Perhaps the actual underlying belief here (see p.45) is that the Western intellectual class is boring and decrepit?  (Compared to what?  Has the author spent too much time at Yale?  It never has been easier to learn real stuff.)

We are led down paths of Nietzsche, Strauss, decaying political regimes, Pindar, and the ancient Greek world.  Frazer enters with the Golden Bough.  What I like best in the author is his willingness to throw himself into these worlds with convincing abandon.  What I like least is how little space is carved out for morality, or for the view that there is still plenty of progress in the world, and that there is a broadly common intersubjective judgment that some states of affairs are better than others.  I long for the Masons, and chatter about Hiram the Master Builder — there is a reason why ancient Greek philosophy no longer fits our world.  The simple truths of a suburban real estate developer, and the spouse and kids and dog back home, are swept under the rug.

The truly dark move would be to argue that nature must be violent, that man cannot remove himself from nature, and thus to flirt with the fascist view that violence amongst humans must be acceptable as well.  And, in this take, all of our moralities are phony adjuncts to the desire to breed.  But the exposition is somehow too winding and too replete with fresh turns for those issues to surface in a meaningful way.  Maybe some would argue they emerge from the Straussian muck?  I would have no objection to seeing them addressed directly, as surely the author at current margins is not afraid of additional cancellation.

Would more adherence to the hypothesis testing methods of the economist have done Alamariu some good?

I do agree with his view that Nietzsche was more sympathetic to Christianity than is usually realized.  The expositions and interpretations of Nietzsche probably are the best part of the book.

By the end we are given a new conclusion: “The chief intention of this study has been to offer an explanation for why the ancient city perceived philosophers as dangerous and as associated with tyrants — to argue that there was something to the ancient prejudice that philosophy was associated with tyranny.”  On that I can agree, but a simple libertarianism would have gotten us there more easily.  Alamariu can’t quite bring himself to make this conclusion either an empirical claim (too little actual hard evidence), or a logical claim (too many other variables in the model), and so it continues to hover uncomfortably in between, being put on the table with lots of drama but never receiving actual validation.

There is definitely material of interest in here, but it remains a book of its time.  Unfortunately, too much of our era has an emotionally negative predisposition toward too many things, including our current elites, and for reasons that are mimetic rather than justified, whether rationally or even by our impulses to breed.

BAP once wrote: “I will add only that Nietzsche says somewhere that it is the duty of a philosopher to promote precisely those virtues or tendencies of spirit that are most lacking in one’s own time…”  For all its pretense to the contrary, that is exactly what this book does not achieve.

Does GPT represent a triumph of WEIRD values?

Yes, in short: