Monday assorted links

How might depopulation reverse itself?

That is the topic of my latest Bloomberg column, drawing upon an earlier discussion by Robin Hanson.  The problem is this: if families find that having three or four kids just isn’t that fun, and women wish to focus more on their careers, which forces might be capable of reversing that trend?:

One possibility is that a shrinking population itself will bring self-reversing mechanisms. For instance, a Japanese population half its current size would make Japan an emptier place, presumably lowering land prices. Some families would find it easier to afford a larger apartment in central Tokyo and perhaps decide to have more children.

But that mechanism seems more likely to reduce population decline than to reverse it. Living space is only one of many factors behind decisions about family size. And as population declines, the stock of houses and apartments will decline too, so in the longer run the amount of space per family may not increase by very much…

Another factor in declining fertility, especially in the U.S., is single parenthood. If a potential mother is facing a fertility decision without another full-time parent on the scene, she is more likely to choose to have fewer children. As population falls, will single-parent families become less common? It is hard to see why. Whether the issue is a lack of marriageable men, unstable family norms or women who simply prefer to go it alone, there is no particular reason to think those factors will disappear in an era of population decline.

And:

What might be some other intervening factors to restore fertility? Perhaps tender and loving robots will make it much easier to raise young children. Or maybe, as populations fall to much lower levels, a sense of moral panic will set in. Families might decide to have more children, feeling that the very survival of their country is at stake. A more elaborate and dystopian scenario would be that corporations take over empty parts of the globe and pay for the raising of children there, in return for a share of their future income.

Here is Ross Douthat’s Sunday column on broadly similar issues, each column was written independently of the other.  As I interpret his discussion, he is more (potentially?) optimistic about ideological and religious forces reversing the decline than I am, in any case an interesting contrast of approach.  By the way, here is Robin Hanson’s proposal for how to escape the problem, more economistic than either Ross or myself.

Adam Ozimek asks about inflation, for his bartender

A question for econtwitter from my bartender. If the US government via deficit spending engages in economic development in other countries, does that increase inflation here?

I would approach this question as follows.  Assume the government is running a foreign aid program that mostly makes purchases and investments abroad with non-U.S. suppliers, furthermore assume floating exchange rates.

The foreign aid, a kind of capital outflow, will induce the dollar to depreciate somewhat, a’ la “the transfer problem” of the 1920s.  That will lead to a modest inflationary impact on imported goods, possibly of a one-off nature if the foreign aid is itself a one-off policy.  American exporters will gain, noting that under some unusual assumptions about the terms of trade the U.S. domestic economy can end up better off.  (Induced profits on the depreciation can in principle outweigh the initial loss from the transfer, though please “do not try this at home.”)

If the deficit is monetized, the exchange rate may depreciate all the more, as individuals shift their future expectations toward a more expansionary monetary policy.  Furthermore, the higher global money supply of dollars would give foreigners a higher option value on making purchases in the United States, another form of (likely modest) inflationary pressure.

If the deficit is financed by borrowing, someday that debt must be repaid.  If it is repaid by higher taxes, that has a deflationary effect on aggregate demand, though the incentive effects of the taxes will lower supply in the future, again creating a (probably modest) upward push on the price level as a further effect.

If you wish, you can toss in added second- and third-order effects on those taxes on exchange rates, terms of trade, and so on.

As an exercise to be performed at home, what if the U.S. sends aid to a dollarized economy, such as Ecuador or El Salvador?

A quiet war, with mutual option values on both escalation and further Clubhouse comments

‘Neither Israel nor Iran want to publicly take responsibility for the attacks because doing so would be an act of war with military consequences,’ Hossein Dalirian, a military analyst affiliated with Iran’s Islamic Revolutionary Guards Corps, told The New York Times in a Clubhouse discussion on Thursday.

Here is the full NYT article.

The influence of hidden researcher decisions in applied microeconomics

Another one from the Department of Uh-Oh:

Researchers make hundreds of decisions about data collection, preparation, and analysis in their research. We use a many‐analysts approach to measure the extent and impact of these decisions. Two published causal empirical results are replicated by seven replicators each. We find large differences in data preparation and analysis decisions, many of which would not likely be reported in a publication. No two replicators reported the same sample size. Statistical significance varied across replications, and for one of the studies the effect’s sign varied as well. The standard deviation of estimates across replications was 3–4 times the mean reported standard error.

Here is the paper by numerous authors, via Scott Cunningham.

Sunday assorted links

Supply chain sentences to ponder

Khanna says these intricacies mean that brash political talk about reshoring operations is naive. “Even the supply chain has a supply chain,” he says.

A dose of the BioNTech/Pfizer vaccine, for example, requires 280 components from multiple countries, according to the company. The idea of moving from what Okonjo-Iweala calls “just in time to just in case to just at home” is harder than it looks.

Here is more from David Pilling and co-authors at the FT.

Maine marijuana markets in everything those new service sector jobs

In Maine it is legal to use and possess marijuana (within limits), but illegal to sell it or give it away.  And so how might a transfer be consummated?:

Cannabis Delivery Services are illegal in Maine.  Gifting Cannabis is illegal in Maine.  Don’t worry though! It is still legal for an Adult age 21/+ to carry 2.5oz of Cannabis Flower and up to 5 grams of concentrates!

So under your scenario you are in Maine vacationing, living, etc… and you lost your weed.  OH NO!  Who do you call? The INCREDIBLES.ME Psychic Service!  We have Psychics roaming all over Portland communicating with their deity, their spirit guides, and having religious moments of clarity. We can guarantee to find your LOST WEED!! (For a small, but very worth while fee!).

Just login to this site, and select the cannabis or cannabis products you lost, and give us your address.  We will find YOUR weed and get it back to you ASAP.  Fees vary based on the time it takes us to find your weed, the quantity of weed we have to locate, and the distance in which we have to travel to get YOUR LOST weed back to you.

Here is more, via Jacob F.

Charter city finally in Honduras?

Próspera is the first project to gain approval from Honduras to start a privately governed charter city, under a national program started in 2013. It has its own constitution of sorts and a 3,500-page legal code with frameworks for political representation and the resolution of legal disputes, as well as minimum wage (higher than Honduras’s) and income taxes (lower in most cases). After nearly half a decade of development, the settlement will announce next week that it will begin considering applications from potential residents this summer.

The first colonists will be e-residents. Próspera doesn’t yet have housing ready to be occupied. But even after the site is built out, most constituents will never set foot on local soil, says Erick Brimen, its main proprietor. Instead, Brimen expects about two-thirds of Prósperans to sign up for residency in order to incorporate businesses there or take jobs with local employers while living elsewhere…

After years of debate, Próspera will be the first real-world test of a divisive libertarian idea, says Beth Geglia, an anthropologist who studies charter cities. “There was a noticeable lull in the startup city movement in general until the Próspera Zede project got off the ground,” she says. “It’s ground zero.”

There is considerably more at the link, if this continues on track I will gladly visit and report back.

Saturday assorted links

Flood the Zone

COVID cases are rising in New York, Michigan and New Jersey with most cases coming from the British and New York variants (B.1.1.7, B.1.526). It would be a good idea to flood these zones with vaccines. J&J production should hit 11 million doses this week. Send the J&J vaccine to pharmacies and clinics in these states that are capable of putting a lot of shots in arms quickly.

Are Americans getting worse?

Maybe so:

Morbidity and mortality have been increasing among middle-aged and young-old Americans since the turn of the century. We investigate whether these unfavorable trends extend to younger cohorts and their underlying physiological, psychological, and behavioral mechanisms. Applying generalized linear mixed effects models to 62,833 adults from the National Health and Nutrition Examination Surveys (1988-2016) and 625,221 adults from the National Health Interview Surveys (1997-2018), we find that for all gender and racial groups, physiological dysregulation has increased continuously from Baby Boomers through late-Gen X and Gen Y. The magnitude of the increase is higher for White men than other groups, while Black men have a steepest increase in low urinary albumin (a marker of chronic inflammation). In addition, Whites undergo distinctive increases in anxiety, depression, and heavy drinking, and have a higher level than Blacks and Hispanics of smoking and drug use in recent cohorts. Smoking is not responsible for the increasing physiological dysregulation across cohorts. The obesity epidemic contributes to the increase in metabolic syndrome, but not in low urinary albumin. The worsening physiological and mental health profiles among younger generations imply a challenging morbidity and mortality prospect for the United States, one that may be particularly inauspicious for Whites.

Here is the full article, via an excellent loyal MR reader.

Focus on the supply side

The biggest question in the U.S. right now is how rapidly vaccinations will proceed. Yet only 8.5% of the new appropriations — under the most generous calculations — are directed toward vaccine supply and anti-Covid-19 efforts.

The biggest question for the world is whether the wealthier nations will put up the estimated $25 billion needed to jump-start a global vaccination campaign in a (relatively) timely manner. So far it appears that they will not — again, a supply-side issue. There did not seem to be much interest in putting such an expenditure into the American Rescue Plan, even though the resulting resumption of trade and migration would undoubtedly have benefited the U.S. by far more than $25 billion.

Major stories about supply-side problems receive only fleeting notice in the U.S. media. Poor infrastructure and distribution are making it difficult for the 270 million inhabitants of Indonesia to get vaccinated, yet very few Americans are paying attention. Indonesia is not usually the focus of attention — and people are not sufficiently obsessed with the supply side.

In the corporate world, there was the big announcement that Intel plans to move full speed ahead to produce more high-quality semiconductor chips and to put more chip factories in the U.S. That switch has come after years of disappointing results from Intel. Can it set things straight? Right now there is a chip shortage in automobile manufacturing, and given the potential fragility of Taiwanese chip supply, U.S. national security hangs in the balance…

Supply-side economics got a bad name because it was associated with too many economists who insisted that tax cuts would be self-financing, or who insisted on tax cuts above all other possible supply-side improvements. Yet all economists ought to proudly announce that they are supply-side economists, first and foremost. That is pretty far from the world we live in, especially as social media have made U.S. monetary and fiscal policies a touchstone for the entire world to debate, often in highly emotional terms.

Here is the rest of my Bloomberg column.