Results for “paul romer” 134 found
Monday assorted links
1. “Majority of NYC’s coronavirus cases are men between 18 and 49 years old.” After all, it is their city, isn’t it?
2. Rishabh Bhandari advocates “the hammer and the dance” to fight coronavirus.
4. Arnold Kling calibrates his anger. And “solvency later” from Arnold. And Ezra Klein on the economic seriousness of the moment.
5. Worries about the commercial real estate market.
6. “When fighting an outbreak such as #COVID19, we must be guided by solidarity, not stigma. The greatest enemy we face is not the virus itself; it’s the stigma that turns us against each other. We must stop stigma & hate!” That is from the head of the WHO, 2/16/2020.
7. Paul Romer and Alan Garber on how to prevent a depression (NYT). And two Paul Romer blog posts on the benefits of better tests.
8. Scott Gottlieb in today’s WSJ, very good piece.
Why Didn’t Ancient Rome have Dungeons and Dragons?
Why didn’t ancient Rome have Dungeons and Dragons? I am talking, of course, about the game. Anton Howes presents the general problem:
A theme I keep coming back to is that a lot of inventions could have been invented centuries, if not millennia, before they actually were. My favourite example is John Kay’s flying shuttle, one of the most famous inventions of the British Industrial Revolution. It radically increased the productivity of weaving in the 1730s, but involved simply attaching a little extra wood and string. It involved no new materials, was applied to the weaving of wool — England’s age-old industry — and required no special skill or science. Weaving had been “performed for upwards of five thousand years, by millions of skilled workmen, without any improvement being made to expedite the operation, until the year 1733”, was how Bennet Woodcroft — one of the nineteenth century’s most important historians of technology — put it. (Lest you doubt that description of Woodcroft, he was, in addition to being an inventor himself, the man who compiled and categorised England’s entire patent record up to 1852, and who collected the inventions that would later form the basis of London’s Science Museum, particularly some of the earliest steam engines — among the most important machines in human history — that grace its engine hall today. My hero!) Weavers had been around for millennia, as had shuttles: one is even mentioned in the Old Testament (“My days are swifter than a weaver’s shuttle, And are spent without hope”). As a labour-saving invention, Kay’s flying shuttle was even technically illegal.
I keep coming back to this example, because it goes against so many common notions about the causes of innovation. When it comes to skill, materials, science, institutions, or incentives, none of them quite seem to fit. But I keep seeing more and more such cases. There’s the classic example, of course, of suitcases with wheels – why so late? Was the bicycle another candidate?
…The economist Alex Tabarrok calls these cases “ideas behind their time”. I tend to just call them low-hanging fruit. Hanging so low, and for so long, that the fruit are fermenting on the ground. I now see them everywhere, not just in history, but today — probably at least one per week. And I now have a new favourite example, suggested yesterday on Twitter by Jordan Chase-Young: tabletop role-playing games.
Was it lack of the right the bureaucratic mindset? Lack of numeracy? Lower population densitie? Were such games invented but then lost to history? Ultimately Howes rejects these explanations, I think correctly.
Physically, there was nothing that actually stopped the invention of such games centuries or even millennia earlier. It required no special level of science, skill, or materials. So why did it take so long? Rather than there being any constraints, soft or otherwise, I think it’s simply because innovation in general is so extremely rare. It’s a matter of absence, rather than of barriers. The reason we have had so many low-hanging fruit throughout history is just because very few people ever bother to think of how to do things differently. We are, most of us, quite set in our ways. So even today, when there are many more inventors alive than at any previous point in human history, the fermenting fruit still abound.
Innovation doesn’t happen very often. How many people have ever invented a new way of doing anything? If stasis is the norm, then we should expect that many great ideas are routinely overlooked. For an economist this is an uncomfortable thought because we tend to think that profit opportunities are quickly exploited (no $500 bills on the ground). But while that is certainly true for choices within constraints it may not be true for choices that change constraints. This is also consistent with Paul Romer’s views on the combinatorial space of possible innovations—when the combinatorial space is vast and the explorers few, the innovations will be few and far between. What times, places and institutions generate more explorers?
Jason Crawford on twitter has more background and thoughts.
Tuesday assorted links
2. Paul Romer reviews the case against economists.
3. How to eat in coronavirus China.
4. The economics of maps, interesting piece, worthy of its own link but difficult to excerpt from.
The Nobel Prize in Economic Science Goes to Banerjee, Duflo, and Kremer
The Nobel Prize goes to Abhijit Banerjee, Esther Duflo and Michael Kremer (links to home pages) for field experiments in development economics. Esther Duflo was a John Bates Clark Medal winner, a MacArthur “genius” award winner, and is now the second woman to win the economics Nobel and by far the youngest person to ever win the economics Nobel (Arrow was the previous youngest winner!). Duflo and Banerjee are married so these are also the first spouses to win the economics Nobel although not the first spouses to win Nobel prizes–there was even one member of a Nobel prize winning spouse-couple who won the Nobel prize in economics. Can you name the spouses?
Michael Kremer wrote two of my favorite papers ever. The first is Patent Buyouts which you can find in my book Entrepreneurial Economics: Bright Ideas from the Dismal Science. The idea of a patent buyout is for the government to buy a patent and rip it up, opening the idea to the public domain. How much should the government pay? To decide this they can hold an auction. Anyone can bid in the auction but the winner receives the patent only say 10% of the time–the other 90% of the time the patent is bought by the government at the market price. The value of this procedure is that 90% of the time we get all the incentive properties of the patent without any of the monopoly costs. Thus, we eliminate the innovation tradeoff. Indeed, the government can even top the market price up by say 15% in order to increase the incentive to innovate. You might think the patent buyout idea is unrealistic. But in fact, Kremer went on to pioneer an important version of the idea, the Advance Market Commitment for Vaccines which was used to guarantee a market for the pneumococcal vaccine which has now been given to some 143 million children. Bill Gates was involved with governments in supporting the project.
My second Kremer paper is Population Growth and Technological Change: One Million B.C. to 1990. An economist examining one million years of the economy! I like to say that there are two views of humanity, people are stomachs or people are brains. In the people are stomachs view, more people means more eaters, more takers, less for everyone else. In the people are brains view, more people means more brains, more ideas, more for everyone else. The people are brains view is my view and Paul Romer’s view (ideas are nonrivalrous). Kremer tests the two views. He shows that over the long run economic growth increased with population growth. People are brains.
Oh, and can I add a third Kremer paper? The O-Ring Model of Development is a great and deep paper. (MRU video on the O-ring model).
The work for which the Nobel was given is for field experiments in development economics. Kremer began this area of research with randomized trials of educational policies in Kenya. Duflo and Banerjee then deepened and broadened the use of field experiments and in 2003 established the Poverty Action Lab which has been the nexus for field experiments in development economics carried on by hundreds of researchers around the world.
Much has been learned in field experiments about what does and also doesn’t work. In Incentives Work, Dufflo, Hanna and Ryan created a successful program to monitor and reduce teacher absenteeism in India, a problem that Michael Kremer had shown in Missing in Action was very serious with some 30% of teachers not showing up on a typical day. But when they tried to institute a similar program for nurses in Putting a Band-Aid on A Corpse the program was soon undermined by local politicians and “Eighteen months after its inception, the program had become completely ineffective.” Similarly, Banerjee, Duflo, Glennerster and Kinnan find that Microfinance is ok but no miracle (sorry fellow laureate Muhammad Yunus). A frustrating lesson has been the context dependent nature of results and the difficult of finding external validity. (Lant Pritchett in a critique of the “randomistas” argues that real development is based on macro-policy rather than micro-experiment. See also Bill Easterly on the success of the Washington Consensus.)
Duflo, Kremer and Robinson study How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya. This is an especially interest piece of research because they find that rates of return are very high but that farmers don’t use much fertilizer. Why not? The reasons seem to have much more to do with behavioral biases than rationality. Some interventions help:
Our findings suggest that simple interventions that affect neither the cost of, nor the payoff to, fertilizer can substantially increase fertilizer use. In particular, offering farmers the option to buy fertilizer (at the full market price, but with free delivery) immediately after the harvest leads to an increase of at least 33 percent in the proportion of farmers using fertilizer, an effect comparable to that of a 50 percent reduction in the price of fertilizer (in contrast, there is no impact on fertilizer adoption of offering free delivery at the time fertilizer is actually needed for top dressing). This finding seems inconsistent with the idea that low adoption is due to low returns or credit constraints, and suggests there may be a role for non–fully rational behavior in explaining production decisions.
This is reminiscent of people in developed countries who don’t adjust their retirement savings rates to take advantage of employer matches. (A connection to Thaler’s work).
Duflo and Banerjee have conducted many of their field experiments in India and have looked at not just conventional questions of development economics but also at politics. In 1993, India introduced a constitutional rule that said that each state had to reserve a third of all positions as chair of village councils for women. In a series of papers, Duflo studies this natural experiment which involved randomization of villages with women chairs. In Women as Policy Makers (with Chattopadhyay) she finds that female politicians change the allocation of resources towards infrastructure of relevance to women. In Powerful Women (Beaman et al.) she finds that having once had a female village leader increases the prospects of future female leaders, i.e. exposure reduces bias.
Before Banerjee became a randomistas he was a theorist. His A Simple Model of Herd Behavior is also a favorite. The essence of the model can be explained in a simple example (from the paper). Suppose there are two restaurants A and B. The prior probability is that A is slightly more likely to be a better restaurant than B but in fact B is the better restaurant. People arrive at the restaurants in sequence and as they do they get a signal of which restaurant is better and they also see what choice the person in front of them made. Suppose the first person in line gets a signal that the better restaurant is A (contrary to fact). They choose A. The second person then gets a signal that the better restaurant is B. The second person in line also sees that the first person chose A, so they now know one signal is for A and one is for B and the prior is A so the weight of the evidence is for A—the second person also chooses restaurant A. The next person in line also gets the B signal but for the same reasons they also choose A. In fact, everyone chooses A even if 99 out of 100 signals are B. We get a herd. The sequential information structure means that the information is wasted. Thus, how information is distributed can make a huge difference to what happens. A lot of lessons here for tweeting and Facebook!
Banerjee is also the author of some original and key pieces on Indian economic history, most notably History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India (with Iyer).
Duflo’s TED Talk. Previous Duflo posts; Kremer posts; Banerjee posts on MR.
Before last year’s Nobel announcement Tyler wrote:
I’ve never once gotten it right, at least not for exact timing, so my apologies to anyone I pick (sorry Bill Baumol!). Nonetheless this year I am in for Esther Duflo and Abihijit Banerjee, possibly with Michael Kremer, for randomized control trials in development economics.
As Tyler predicted he was wrong and also right. Thus, this years win is well-timed and well-deserved. Congratulations to all.
My Conversation with Alain Bertaud
Excellent throughout, Alain put on an amazing performance for the live audience at the top floor of the Observatory at the old World Trade Center site. Here is the audio and transcript, most of all we talked about cities. Here is one excerpt:
COWEN: Will America create any new cities in the next century? Or are we just done?
BERTAUD: Cities need a good location. This is a debate I had with Paul Romer when he was interested in charter cities. He had decided that he could create 50 charter cities around the world. And my reaction — maybe I’m wrong — but my reaction is that there are not 50 very good locations for cities around the world. There are not many left. Maybe with Belt and Road, maybe the opening of Central Asia. Maybe the opening of the ocean route on the northern, following the pole, will create the potential for new cities.
But cities like Singapore, Malacca, Mumbai are there for a good reason. And I don’t think there’s that many very good locations.
COWEN: Or Greenland, right?
[laughter]
BERTAUD: Yes. Yes, yes.
COWEN: What is your favorite movie about a city? You mentioned a work of fiction. Movie — I’ll nominate Escape from New York.
[laughter]
BERTAUD: Casablanca.
Here is more:
COWEN: Your own background, coming from Marseille rather than from Paris —
BERTAUD: I would not brag about it normally.
[laughter]
COWEN: But no, maybe you should brag about it. How has that changed how you understand cities?
BERTAUD: I’m very tolerant of messy cities.
COWEN: Messy cities.
BERTAUD: Yes.
COWEN: Why might that be, coming from Marseille?
BERTAUD: When we were schoolchildren in Marseille, we were used to a city which has a . . . There’s only one big avenue. The rest are streets which were created locally. You know, the vernacular architecture.
In our geography book, we had this map of Manhattan. Our first reaction was, the people in Manhattan must have a hard time finding their way because all the streets are exactly the same.
[laughter]
BERTAUD: In Marseille we oriented ourselves by the angle that a street made with another. Some were very narrow, some very, very wide. One not so wide. But some were curved, some were . . . And that’s the way we oriented ourselves. We thought Manhattan must be a terrible place. We must be lost all the time.
Finally:
COWEN: And what’s your best Le Corbusier story?
BERTAUD: I met Le Corbusier at a conference in Paris twice. Two conferences. At the time, he was at the top of his fame, and he started the conference by saying, “People ask me all the time, what do you think? How do you feel being the most well-known architect in the world?” He was not a very modest man.
[laughter]
BERTAUD: And he said, “You know what it feels? It feels that my ass has been kicked all my life.” That’s the way he started this. He was a very bitter man in spite of his success, and I think that his bitterness is shown in his planning and some of his architecture.
COWEN: Port-au-Prince, Haiti — overrated or underrated?
Strongly recommended, and note that Bertaud is eighty years old and just coming off a major course of chemotherapy, a remarkable performance.
Again, I am very happy to recommend Alain’s superb book Order Without Design: How Markets Shape Cities.
Thursday assorted links
1. The Danish negative interest rate mortgages are not exactly that. And yes, some Americans are trying to apply for them.
2. What is the best current knowledge on how the pyramids were built?
3. Rob Wiblin interviews Vitalik Buterin. Self-recommending! And some reporting on selected remarks.
5. Paul Romer visits Burning Man (NYT feature article).
Tuesday assorted links
1. Can good charter schools be replicated?
2. Bryan Caplan on why people are suspicious of big business.
3. Why rich convicts hire prison consultants.
4. Texas business and discrimination.
5. My podcast for Technology Policy Institute on *Big Business: A Love Letter to an American Anti-Hero*.
6. Is Queen richer than the Queen?
7. Paul Romer’s proposal for a tax on big tech (NYT). And his associated FAQ. But are digital ads the core problem? Or is it the existence of communications media where virtually everything can be said and published, with or without the ads?
Density is Destiny: Economists Predict the Far Future
In a paper that just won the JPE’s Robert Lucas Prize, Desmet, Krisztian Nagy and Rossi-Hansberg model the evolution of the world economy over the next 400-600 years! Is it laughable or laudatory? I’m not entirely sure. The paper does have an insight that I think is very important, in addition to a number of methodological advances.
If we look around the world today we see that the places with the densest populations, such as China and India, are poor. But in the long-run of history that doesn’t make sense. As Paul Romer, and others, have emphasized, ideas are the ultimate source of wealth and more people means more ideas. As a result, innovation and GDP per capita should be higher in places and times with more people. The fact that China and India are poor today is an out-of-equilibrium anomaly that happened because they were slower than the West to adopt the institutions of free markets and capitalism necessary to leverage ideas into output. China and India weren’t relatively poor in the past, however, and they won’t be relatively poor in the future. With that in mind, a key long-run prediction of Desmet, Krisztian Nagy and Rossi-Hansberg becomes clear. If people are not allowed to migrate then the places that are densest today will not only equal the West, they will overtake the West in innovation and productivity.
One of the key determinants of these patterns is the correlation between GDP per capita and population density. As we mentioned above, the correlation is negative and weak today, and our theory predicts that, consistent with the evidence across regions in the world to-day, this correlation will become positive and grow substantially over the next six centuries, as the world becomes richer. Two forces drive this result. First, people move to more productive areas, and second, more dense locations become more productive over time since investing in local technologies in dense areas is, in general, more profitable. Migration restrictions shift the balance between these two mechanisms. If migration restrictions are strict, people tend to stay where they are, and today’s dense areas, which often coincide with developing countries, become the most developed parts of the world in the future…. In comparison, most of today’s high-productivity, high-density locations in North America, Europe, Japan, and Australia fall behind in terms of both productivity and population.
Thus, if migration restrictions are strict, density is destiny and the dense parts of the world will rule. But what if migration restrictions are loosened?
… if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three.
It’s much better to remove migration restrictions today because we get to a much richer world, faster. In addition, population is better distributed in accordance with natural amenities. All is not perfectly rosy, however, in the free migration scenario. So let’s conclude with a few sentences that would make Hari Seldon proud.
[in the free migration scenario]…growth in utility drops substantially in the short run as many people move to areas with high real GDP; hence these areas be-come more congested and become worse places to live (lower amenities). This initial loss in growth is, however, compensated in the long run by a large surge in productivity growth after year 2200.
Should climate change limit the number of kids you have?
No, or so says I in my latest Bloomberg column., here is the closing bit:
Let’s not give up by ceasing to have children.
Finally, leave aside the implausibility of these arguments and consider their assumptions. What you’ll find is zero-sum thinking, negative value judgments about large families, and an attempt to use guilt and shame to steer social and environmental policy. I suspect that is why these arguments are finding some traction, not because they are the result of any careful cost-benefit calculations.
So if you are both worried about climate change and considering starting a family, I say: Put aside the unhelpful mess of emotions some participants in this debate are trying to stir up. Instead, focus on how your decision might boost future innovation. As a bonus, you might find that one of the better approaches to climate change is actually pretty fun.
Super simple arguments, with credit to Paul Romer and Alex T. and Bryan and Ross Douthat as well.
Tech and economic growth in the Book of Genesis
That is the topic of my latest Bloomberg column, worth reading as an integrated whole. Here is one excerpt:
The stories have so much religious significance that it is easy to miss the embedded tale of technology-led economic growth, similar to what you might find in the work of Adam Smith or even Paul Romer. Adam and Eve eat of “the tree of knowledge, good and evil,” and from that decision an entire series of economic forces are set in motion. Soon thereafter Adam and Eve are tilling the soil, and in their lineage is Tubal-Cain, “who forged every tool of copper and iron.”
Living standards rise throughout the book, and by the end we see the marvels of Egyptian civilization, as experienced and advised by Joseph. The Egyptians have advanced markets in grain, and the logistical and administrative capacities to store grain for up to seven years, helping them to overcome famine risk (for purposes of contrast, the U.S. federal government routinely loses track of assets, weapons, and immigrant children). It is a society of advanced infrastructure, with governance sophisticated enough to support a 20 percent tax rate (Joseph instructs the pharaoh not to raise it higher). Note that in modern America federal spending typically has run just below 20 percent since the mid-1950s.
Arguably you can find a story of quantitative easing in Genesis as well. When silver is hard to come by, perhaps because of deflationary forces, the Egyptian government buys up farmland and compensates the owners with grain.
Most of all, in the Genesis story, the population of the Middle East keeps growing. I’ve known readers who roll their eyes at the lists of names, and the numerous recitations of who begat whom, but that’s the Bible’s way of telling us that progress is underway. Neither land nor food supplies prove to be the binding constraints for population growth, unlike the much later canonical classical economics models of Malthus and Ricardo.
There is much more at the link.
The Top Ten Marginal Revolution Posts of 2018
As measured by page views the most popular MR post this year was my post on how there is one law for the police and another for the rest of us, Get Out of Jail Free Cards.
Second was Tyler Cowen’s 12 Rules for Life. Number seven on Tyler’s list, “Learn how to learn from those who offend you,” caught my eye today but there’s much wisdom throughout.
The third most popular post was by neither Tyler, myself, nor a guest blogger but rather by a MR commentator, One smart guy’s frank take on working in some of the major tech companies.
One of my favorite posts was fourth, Lessons from “The Profit”. The new season of The Profit has started and continues to be of interest. All IO economists should watch.
Number five was another one of my favorites Why Sexism and Racism Never Diminish–Even When Everyone Becomes Less Sexist and Racist.
Tyler’s excellent analysis of the North Korean deal shows why he is an important thinker in foreign policy, able to see beyond the headlines, The North Korean summit and deal.
A second MR commentator had another top post, Will truckers be automated? (from the comments).
Tyler doesn’t like to write the kind of post that came in at number 8 but these posts are always popular which is one reason Tyler doesn’t like to write them. The five most influential public intellectuals?
Number 9 was a useful post, Why are antiques now so cheap?
Coming in at number 10 was my video and Tyler’s post on Paul Romer’s Nobel Prize, Why Paul Romer Won the Nobel Prize in Economics.
Other notable posts from Tyler included:
- Should we Censor Porn?
- The high-return activity of raising others’ aspirations,
- Has there been progress in philosophy?
- Ten favorite Science Fiction Novels
- Underrated Libertarian Thinkers.
Other notable posts from me included:
- Direct Instruction: A Half Century of Research Shows Superior Results
- Do Boys Have a Comparative Advantage in Math and Science?
- The Uber Pay Gap
- Collective Action Kills Innovation
- Blockchains and the Opportunity of the Commons
Overall, I’d say it was a notable year for MR commentators! Congratulations! What were your favorite, or least favorite, MR posts of 2018?
Friday assorted links
1. Scott Sumner on Stubborn Attachments.
2. Excellent and accurate review of Anna Burns’s Milkman, a strong and enduring work of fiction about Northern Ireland.
3. On the constancy of the rate of gdp growth.
4. Smithsonian scholars pick their favorite books of the year.
5. Nick Bostrom has a new paper on the vulnerable world hypothesis (pdf).
6. Paul Romer on how to boost science (WSJ).
*Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism*
That is the new book by David Colander and Craig Freedman, here is one short bit:
The best way of conveying our conception of what is at least suggestive of a Classical Liberal stance is to present a handful of economists who, in our view, reflect this attitude. We have chosen six economists: Edward Leamer, Ariel Rubinstein, Alvin Roth, Paul Romer, Amartya Sen, and Dani Rodrik. Each have, in our view, displayed a Classical Liberal attitude to methodology in important aspects of their work.
I am very much in favor of what the authors propose here, although I might reserve the term classical liberal for the more traditional political distinction.
Assorted Tuesday links
1. Old Paul Romer talk, which even presents the Nordhaus graph on the price of light, see for instance 5:45. Via Kari Kohn.
2. New criticism of charter cities, and Mark Lutter’s response.
3. Lambda School.
4. Larry Summers road trip. Or try this link.
5. How Ray Fair is modeling running, and aging (NYT).
6. Why is the William Nordhaus optimal carbon tax so modest? And A Fine Theorem on Romer and Nordhaus.