My excellent Conversation with Gregory Clark

by  Tyler Cowen in

Here is the audio, video, and transcript.  Here is the episode summary:

How much of your life’s trajectory was set in motion centuries ago? Gregory Clark has spent decades studying social mobility, and his findings suggest that where you land in society is far more predictable than we like to think. Using historical data, surname analysis, and migration patterns, Clark argues that social mobility rates have remained largely unchanged for 300 years—even across radically different political and economic systems.

He and Tyler discuss why we should care about relative mobility vs growing the size of the pie, how physical mobility does and doesn’t matter, why England was a meritocracy by 1700, how assortative mating affects economic and social progress, why India industrialized so late, a new potential explanation why Britain’s economic performance has been lukewarm since WWI, Malthusian societies then and now, whether a “hereditarian” stance favors large-scale redistribution or a free-market approach, the dynamics of assimilation within Europe and the role of negative selection in certain migrations, the challenge of accurately measuring living standards, the neighborhood-versus-family debate over what drives mobility, whether we need datasets larger than humanity itself to decode the genetics of social outcomes, and much more.

Here is one of many interesting excerpts:

COWEN: How do you think about the social returns to more or less assortative mating? Say in the United States — do we have too much of it, too little of it? If we had more of it, you’d have, say, very smart or determined people marrying those like them, and you might end up with more innovation from their children and grandchildren. But you might also be messing with what you would call the epistemic quality of the median voter. There’s this trade-off. How do you think about that? What side of the margin are we at?

CLARK: Assortative mating turns out to be a fascinating phenomenon, and in this new book, we actually have records of 1.7 million marriages in England from 1837 until now. What is astonishing in England is the degree to which people end up assorting in marriage so that basically, they’re matching with people that are as close to them, essentially genetically, as their siblings in marriage. It’s really interesting because people could mate in any way.

You could think I want the tallest person, the handsomest person, the youngest person, but for some reason, consistently, people seem to want to match to people who are close in social status. Now that doesn’t affect anything about the average level of ability in a society, but if it’s consistently followed over generations, it will widen the distribution of ability.

COWEN: Yes, and are we doing too much of that or too little of it in the United States?

CLARK: It depends what your view is. If you think that the engine of high-tech society now, like the United States, is the top 1 percent or 5 percent of the ability distribution, then you would say the more assortative is mating, the more people will be in that extreme and the greater will be economic growth.

In the new book, I actually speculate about, was assortative mating in Northern Europe a discovery of the late Middle Ages that actually then helped propel things like the Scientific Revolution, the Enlightenment, the Industrial Revolution, because as I say, it’s a remarkably constant feature of British society.

We can only trace it back to about 1750, the actual degree of assortativeness. So, in that sense, you can’t have too much if that’s your view about how society operates.

COWEN: At least we could have more of it. There might be some margin where you’d have too much.

CLARK: But it does produce more inequality, so if you’re worried about inequality in society, you don’t want assortative mating. The one way to correct a lot of inequality would just be to have much more random matching.

One of the remarkable things about Denmark is, education is essentially free until you’re age 24. They give you subsidies for your living expenses, for childcare provision — it’s all available. They’ve compressed the income distribution quite sharply.

There is this periodic survey of how well students do, the PISA measures. Nordic countries have not reduced the inequality of PISA measures compared to much more unequal societies like the United States. Again, it’s just interesting that a high degree of inequality is still found within these societies. It turns out that in Nordic societies, people are mating again very strongly assortatively even now. That is the thing that you would worry more about, that there is going to be this trade-off between assortative mating and the degree of inequality in a society.

Stimulating throughout, with lots of debate.

Wednesday assorted links

by  Tyler Cowen

1. Plane crashes are still on a downward trend.

2. 2015 Matt Yglesias on whether American democracy is doomed.

3. 3.1%.

4. Does technology do more to help submarine tracking or submarine autonomy?

5. Good piece on Macca.

6. The actual budget news: House Republicans reluctant to cut Medicaid.  And does the bond market believe in DOGE?

7. It seems China has passed peak fuel consumption!? (Bloomberg)

8. Germany’s trains are less punctual than Britain’s (FT).

9. Are the independent agencies still independent? I agree with Matt: “My guess is that in the long run, bringing independent agencies more closely under presidential control is going to make policy outcomes more left-wing.”

10. FTC following the Lina Khan merger guidelines.

50 Takes from Kevin Bryan

by  Alex Tabarrok in

A very good list from Kevin Bryan. 49 out of 50 correct, excellent ratio.

1) Ukrainians are heroes who suffered a ton.
2) Putin obviously covets Georgia and the Baltics also.
3) EU not in talks because they basically have no hard power; France even lost the Sahel.
4) The far right European parties are bad.
5) Pretending parties that win state and EU elections, and are in govt in NL and AT and IT, aren’t legitimate will not end well.
6) And in fact EU & UK speech laws not on side of liberty.
7) (but EU food and kid culture is better!)
8) Europe’s demographic crisis is really severe; not sure what the solution is.
9) Engineer training esp in France, Italy, Switz is excellent.
10) That talent should produce better econ outcomes, so econ policy must be dreadful.
11) Trump clearly doesn’t value democracy.
12) Most of his actual actions are much milder than his words.
12) Would be a disaster if that changed.
13) Censorious right wing culture will cause backlash just like woke culture did (put another way, 90s civic culture was better!)
14) Decline in trust in universities, media, and public health was our own fault.
15) Broader ideological diversity would be a huge improvement.
16) “Smart people in private sector” are much more ideologically diverse.
16) Canada has resources and good demographics so future is strong.
17) But culture based on “we aren’t US” is a dead end.
18) CA attitude to US like Calif attitude towards Texas: many stereotypes, little knowledge, and getting crushed on growth.
19) Most Middle East problems easy to solve but populace even crazier than leaders.
20) With exception of Iran, who would be great ally of West based only on median “voter”.
21) Dubai isn’t somewhere I’d live, but economically it is most fascinating success of recent decades.
22) Future of India very bright – English, young, educated, democratic, globally focused, successful expats.
23) Bangladesh as well.
24) Pakistan has problems that are very hard to fix, though Hunza is prettiest place in the world.
25) China underrated: the growth is actually staggering and tech leapfrogging in many areas is clear.
26) Chinese universities getting very strong, many foreign students from dev world.
27) But society way more closed than when I worked there 20 yrs ago, HK stolen, Taiwan?
28) Korea and Japan are delightful, but what will happen to countries who lose 20% of population in a generation?
29) Vietnam and Indonesia are very interesting going forward, esp former, as important powers.
30) Australia as well: resources and culture.
31) The future is African: tautology based on demographics.
32) The Sahel can easily get much much worse.
33) As can Central Africa, largely because of Kagame.
34) Ethiopia, Kenya, Nigeria, Ghana, Bénin as growth miracles seems possible, though.
35) Latin America is joyous and way underappreciated for cultural interest.
36) But highly polarized Presidential systems make it so hard to improve.
37) And the educational underperformance is a real barrier to growth.
38) US is clearly economic engine of world, and more so now than 10 years ago, and you are deluded to think otherwise.
39) Why? Energy costs and tech sector, esp AI, plus growing pop of high grit immigrants. Have to get these right.
40) Avg US govt quality is not good but generally it doesn’t try to do very much, which makes it less of a problem.
41) But it isn’t filled with fraud – it is almost all old age transfers and military and interest.
42) More federalism, weaker courts would be better (this is Canada’s secret – federal courts don’t matter).
43) More transfers to young would be better: preK, service opps, parental leave, guaranteed vacation.
44) That said, US policy directionally right, and Germany has more to learn economically from Texas than vice versa (let people build, keep energy cheap).
45) Still, institutions matter, and hard to rebuild once destroyed.
46) EU = no war in W Eur for 80 years = it is good.
47) NATO, UN, World Bank have flaws, but they are so cheap and global stability so rare historically that they are good.
48) Greenland in CoFA, free labor movement with Canada and US: both good, made harder by DT rhetoric.
49) Shame is useful to keep public servants and regular Joes on straight and narrow path.
50) But at the end of day, success more important than words. Strong countries and societies and global orders are not build on words & soft power, but on growing liberty & prosperity.

Baudrillard on AI

by  Tyler Cowen in

If men create intelligent machines, or fantasize about them, it is either because they secretly despair of their own intelligence or because they are in danger of succumbing to the weight of a monstrous and useless intelligence which they seek to exorcize by transferring it to machines, where they can play with it and make fun of it. By entrusting this burdensome intelligence to machines we are released from any responsibility to knowledge, much as entrusting power to politicians allows us to disdain any aspiration of our own to power.

If men dream of machines that are unique, that are endowed with genius, it is because they despair of their own uniqueness, or because they prefer to do without it – to enjoy it by proxy, so to speak, thanks to machines. What such machines offer is the spectacle of thought, and in manipulating them people devote themselves more to the spectacle of thought than to thought itself.

Jean Baudrillard – The Transparency of Evil_ Essays on Extreme Phenomena (Radical Thinkers)-Verso.

For the pointer I thank Petr.

*Steven Weinberg: A Life in Physics*

by  Tyler Cowen in

A fun book, I enjoyed the read.  Here is one bit:

There is another contribution to my productivity.  While sitting at my desk at home doing physics or preparing classes, or doing some science writing, I picked up the habit of watching classic movies or the History Channel on television.  My TV is always turned on in its corner of my desk.  Doing the two things at once doubles the value of my time.  And the movie keeps ne gnawing at a problem in physics when I might otherwise have knocked back my chair and decamped in frustration.

And:

At this time, Louise [his wife] literally saved my life.  Through my friendship with Bernie Feld, I found myself welcome at, and attending, international meetings of various experts on the problems of the international order.  Louise understood the situation better than I did.  She advised me to have nothing further to do with Bernie’s world, if I wanted to get anything done in physics.  She made me see that this was a world of disheartened older men giving themselves something important-looking to do, but that I was an optimistic young man with real work to do.  I do not exaggerate when I confess that she saved my life.

You can order it here.

Germany facts of the day

by  Tyler Cowen in

Germany has lost almost a quarter of a million manufacturing jobs since the start of the Covid pandemic as companies and politicians sound the alarm that Europe’s industrial heartland is suffering an irreversible decline…

The contraction of Germany’s industry is evident in the fall of market value in the sector. Together, Dax constituents Volkswagen, Thyssenkrupp and BASF have lost €50bn, or 34 per cent, in market capitalisation over the past five years. From 2010 to 2014, carmakers on the Dax index were more valuable on average than their peers in any other sector, but valuations have slipped as demand has started to falter. VW’s deliveries to customers last year slumped by nearly a fifth compared with the pre-pandemic year of 2019.

In other industrials, steelmaker Thyssenkrupp has announced plans to reduce its production capacity by up to a quarter and cut 40 per cent of jobs. BASF is looking to cut costs at its Ludwigshafen headquarters, the world’s largest chemical site, by €2bn a year.

Here is more from the FT.

Does Peer Review Penalize Scientific Risk Taking?

by  Tyler Cowen in

Scientific projects that carry a high degree of risk may be more likely to lead to breakthroughs yet also face challenges in winning the support necessary to be carried out. We analyze the determinants of renewal for more than 100,000 R01 grants from the National Institutes of Health between 1980 and 2015. We use four distinct proxies to measure risk taking: extreme tail outcomes, disruptiveness, pivoting from an investigator’s prior work, and standing out from the crowd in one’s field. After carefully controlling for investigator, grant, and institution characteristics, we measure the association between risk taking and grant renewal. Across each of these measures, we find that risky grants are renewed at markedly lower rates than less risky ones. We also provide evidence that the magnitude of the risk penalty is magnified for more novel areas of research and novice investigators, consistent with the academic community’s perception that current scientific institutions do not motivate exploratory research adequately.

That is from a new NBER working paper by Pierre Azoulay & Wesley H. Greenblatt.

An Economic Approach to Homer’s Odyssey: Part II

by  Tyler Cowen in

My three-part essay for Liberty Fund continues, here is the opener:

In the previous article, I outlined what an economic approach to reading Homer’s epic, The Odyssey,1 might look like. I also noted that what most strikes me about The Odyssey is Homer’s treatment of comparative political regimes. Looking at the wide variety of regimes Odysseus encounters is the focus of this article.

Given that human behavior, at least in The Odyssey, can be understood in terms of the non-standard assumptions described in my previous essay, what are then the possible states of affairs? Which polities might we look to for arranging human interactions and maintaining political order? Utopia is not readily achieved, not only because of material constraints, but also because human behavior is too restless and too desirous of alternative states of affairs. A straightforward order based on political virtue is also beyond human grasp, again because it clashes with the nature of human beings as we understand them. What then might fit with a vision of humans as restless, intoxicating, deceiving, and self-deceiving creatures? The travel explorations of The Odyssey can be understood as, in part, an attempt to address this question.

I will now consider the major and some of the minor polities described by The Odyssey, roughly in the order they appear in the story.

The discussion starts with Pylos and Sparta…

It’s happening at The New York Times

by  Tyler Cowen in

The New York Times is greenlighting the use of AI for its product and editorial staff, saying that internal tools could eventually write social copy, SEO headlines, and some code.

In an email to newsroom staff, the company announced that it’s opening up AI training to the newsroom, and debuting a new internal AI tool called Echo to staff, Semafor has learned. The Times also shared documents and videos laying out editorial do’s and don’t for using AI, and shared a suite of AI products that staff could now use to develop web products and editorial ideas.

“Generative AI can assist our journalists in uncovering the truth and helping more people understand the world. Machine learning already helps us report stories we couldn’t otherwise, and generative AI has the potential to bolster our journalistic capabilities even more,” the company’s editorial guidelines said.

Here is the full story, via the excellent Samir Varma.

Italy’s Superbonus: The Dumbest Fiscal Policy in Recent Memory

by  Alex Tabarrok in

Luis Garicano has an amazing post on “one of the dumbest fiscal policies in recent memory.” Launched in Italy during COVID by Prime Minister Conte, the “Superbonus” scheme subsidized 110% of housing renovation costs. Now if one were to use outdated, simplistic, Econ 101 type reasoning one would predict that such a scheme would be massively costly not only because people would rush to renovate their homes for free but because the more expensive the renovation on paper the bigger the bonus.

The proponents of the Superbonus, most notably Riccardo Fraccaro, were however, advocates of Monetary Monetary Theory so deficits were considered only an illusory barrier to government spending and resource constraints were far distant concerns. Italy still had to meet EU rules, however, so the deficit spending was concealed with creative accounting:

rather than direct cash grants, the government issued tax credits that could be transferred. A homeowner could claim these credits directly against their taxes, have contractors claim them against invoices, or sell them to banks. These credits became a kind of fiscal currency – a parallel financial instrument that functioned as off-the-books debt (Capone and Stagnaro, 2024). The setup purposefully created the illusion of a free lunch: it hid the cost to the government, as for European accounting purposes the credits would show up only as lost tax revenue rather than new spending.

In MMT terms, Fraccaro and his team effectively created money as a tax credit, putting into practice MMT’s notion that a sovereign issuer’s currency is ultimately a tax IOU​.

So what were the results? The “free renovation” scheme quickly spiraled out of control. Initially projected to cost €35 billion, the program ballooned to around €220 billion—about 12% of Italy’s GDP! Did it drive a surge in energy-efficient renovations? Hardly. Massive fraud ensued as builders and homeowners inflated renovation costs to siphon off government funds. Beyond that, surging demand ran headlong into resource constraints. Econ 101 again: in the short run, marginal cost curves slope upward.

Construction costs sharply increased – the Construction Cost Index grew by roughly 20% after the pandemic and surged another 13% after September 2021, with the Superbonus directly responsible for about 7 percentage points of that rise, according to Corsello and Ercolani (2024). The price of setting up scaffolding, an essential first step for renovation, increased by 400% by the end of 2021.

…Even the program’s environmental benefits came at an astronomical cost – any calculation will yield far north of €1,000 per ton of carbon saved (versus an ETS Carbon price of around €80 per ton).

Moreover, as Garicano trenchantly notes once started the program’s structure made it fiendishly difficult to stop:

The benefits were concentrated among vocal constituencies: homeowners getting renovations, the environmental movement, and contractors seeing booming business. The costs, while enormous, were spread across all taxpayers and pushed into the future through the tax credit mechanism. No government—leftist, technocratic, or right-wing—was able to resist its logic. Parliament consistently pushed back against efforts to limit its scope, even after fraud estimates hit €16 billion. As prime minister, Mario Draghi, despite publicly criticizing the program for tripling construction costs, could not halt it — in fact, his initial action was to simplify access to it. When his government attempted to curb abuse, the Five Star Movement reacted with anger, and even modest controls on credit transfers were fought. By 2023, Giorgia Meloni’s right-wing government faced the same constraints—industry groups protested, coalition partners balked.

In normal times, the EU might have intervened to curb the reckless deficit spending—everyone knew what was going on, even if the numbers were temporarily kept off the books. But during COVID, the EU turned a blind eye, and the ECB kept interest rates low.

In fact, Garicano argues that the Superbonus story is merely the most blatant example of deeper systemic issues which now trouble the entire EU:

This erosion of discipline isn’t limited to Italy. France’s deficit has drifted to 6.1% of GDP. Spain reversed its post crisis pension reform right around the time Italy was passing the Superbonus, with much larger negative consequences for fiscal sustainability. In a world where the ECB will always intervene to prevent bond market pressure and Brussels cannot credibly enforce fiscal rules on large states, sustainable fiscal policy becomes politically almost impossible.

The very mechanisms designed to protect the euro may now be undermining it.

Naming AI models correctly

by  Tyler Cowen in

Are you confused by all the model names and terminology running around?  Here is a simple guide to what I call them:

o1 pro — The Boss

4o — Little Boss

o3 mini — The Mini Boss

GPT 4o with scheduled tasks — Boss come back later

o1 — Cheapskates’ boss

Deep Research — My research assistant

GPT-4 — Former Boss

DeepSeek — China Boss

Claude — Claude

Llama 3.3, or whichever — Meta.  I never quite got used to calling Facebook “Meta,” so I call the AI model Meta too.  Hope that’s OK!

Grok 3 — Elon

Gemini 2.0 Flash — China Boss suggests “Laggy Larry,” but I don’t actually call it that.

Perplexity.ai — Google

Got that?  Easy as pie!

Kevin Kelly’s fifty travel tips

by  Tyler Cowen in

Here is one of them, in part:

Here in brief is the method I’ve honed to optimize a two-week vacation: When you arrive in a new country, immediately proceed to the farthest, most remote, most distant place you intend to reach during the trip. If there is a small village, remote spa, a friend’s farm, or a wild place you plan on seeing on the trip, go there immediately. Do not stop near the airport. Do not rest overnight in the arrival city. Do not pause to acclimate. If at all possible proceed by plane, bus, jeep, car directly to the furthest point without interruption. Make it an overnight journey if you have to. Then once you reach your furthest point, unpack, explore, and work your way slowly back to the big city, wherever your international departure airport is.

In other words you make a laser-straight rush for the end, and then meander back. Laser out, meander back. This method is somewhat contrary to many people’s first instincts, which are to immediately get acclimated to the culture in the landing city before proceeding to the hinterlands. The thinking is: get a sense of what’s going on, stock up, size up the joint. Then slowly work up to the more challenging, more remote areas. That’s reasonable, but not optimal because most big cities around the world are more similar than different. All big cities these days feel same-same on first arrival. In Laser-Back travel what happens is that you are immediately thrown into Very Different Otherness, the maximum difference that you will get on this trip.

Here are the rest, mostly I agree.