Tuesday assorted links
1. Nick Whitaker of Brown interviews me. Rapid-fire, with transcript.
2. Waiting for the visitors to match the art works.
3. Machine learning Beatles lyrics I am not impressed and still I do not fear The Singularity.
4. John Cochrane on elasticities and cognitive dissonance.
My Conversation with Henry Farrell
An excellent episode, here is the audio and transcript. We ranged far and wide, starting with Huawei and weaponized interdependence, moving later to the Facebook supreme court, Karl Polanyi, Ireland, and Gene Wolfe and Philip K. Dick. Here is one excerpt:
COWEN: Arguably, dominant firms are easier to regulate. And since you seem to favor some kinds of additional regulation on the major tech companies, does this mean we’re too worried about monopoly, that we actually want to keep around a few dominant firms, and that if we split them up into many small parts, there would be more chaos or more fake news or more privacy violations?
If some parts of what they do are bad, and you get more competition in the bad, don’t we just want to put in GDPR barriers to entry, not quite public utilities, but keep them big and fat and happy and somewhat not so dynamic, yes or no?
FARRELL: It depends on what you value.
COWEN: But what you value.
FARRELL: Yeah. Let me put the tradeoff to you this way. If you value security, if the highlight is on security, then the answer is, you probably want to keep big companies around because you’re going to want to impose broad standards. You’re going to want to create collective security goods, and the only actors that can really do that in a substantial way are big businesses of one sort or another.
If, alternatively, you value things like privacy and other kinds of rights, then you probably want to move towards an equilibrium in which there are far, far fewer big firms. So that’s where I see the fight being played out. I see the fight being played out between people who value security and people who value privacy. I think they point in somewhat different directions.
COWEN: And where are you on that spectrum?
FARRELL: Well, it depends on the time of the day, and I find myself —
COWEN: It is 2:22 p.m.
And:
FARRELL: Well, I guess the question for me is — and again, this is a wide open question because we simply don’t have enough good empirical research — but what is the relationship and the broader ecology between companies like 8chan and companies like Facebook? I suspect that companies like 8chan will be far, far less successful if there weren’t much bigger platforms like Facebook that they could effectively grow upon.
So here are the arguments, something as follows. If you think about 8chan, and if you think about 4chan before it, they were basically meme factories. They were basically these places where these bored individuals hung out. You also created these memes in a kind of process of frenzied Darwinian evolution, where you desperately want to make sure that whatever you had said was on the front page because otherwise it would disappear forever. So you’ve got this survival-of-the-fittest thing, where incredibly valuable or incredibly effective memes go out and begin to populate the entire space.
But you need two things for that to work. First of all, you need a process of generation, and secondly, you need some kind of process of dissemination. You need other platforms which have far greater reach, which can then allow for these memes to propagate through the atmosphere.
I suspect that if we were in a world in which everything was at the scale of 8chan, rather than having a mixture of companies at the scale of 8chan and companies at the scale of Facebook, that the likelihood of this stuff spreading and becoming epidemic across the entire community of internet users would be far, far less. Obviously, we would have other problems then. But I think that the problems that we would face would be a very, very different set of problems from the problems that we face in the current environment.
Finally:
FARRELL: Yes. [Gene] Wolfe misleads us systematically, and clearly Severian is not a reliable narrator, but then neither is Proust’s narrator either. I think that if you really want to understand where Wolfe comes from, it really is Proust. His writing style is Proustian. His concern with time, with how it is that time works, is quintessentially Proustian.
And you don’t look to Wolfe any more than you look to other science fiction for characterization. I don’t think that’s the particular strength. What you do look for is a kind of a sense of the world. And in Wolfe, in particular, he provides this real understanding of how it is that the workings of society, and interestingly, conservative understanding of the workings of society.
I think of him almost as being Proust in reverse. Proust is describing a world in which the modern world is overtaking aristocracy. And that clearly is one of the great problems of Proust, what is happening on the social level. You have all of these aristocratic understandings: the Merovingian, all of these histories, all of these castles, all of this wonderful art, and they are being replaced by the modern world with its telephones, with its electric lighting, and so on.
And how do you think about this? How would you try to preserve what was happening in the past? What Wolfe does, which I think is an extraordinarily interesting thing, which would be impossible for anybody who is not a science fiction writer, is to take that and to reverse this and to imagine a world in which modernity has disappeared.
Recommended!
Beware the Mediocre Robots!
It’s often thought that what we have to fear from automation and AI is super-robots. Acemoglu and Restrepo make the useful point that what we actually should fear is mediocre robots, robots only slightly better than humans. Think about robots replacing labor in various tasks. A super-robot replaces labor but has an immense productivity advantage which generates wealth and increases the demand for labor elsewhere. A mediocre-robot replaces the same labor but doesn’t have a huge productivity advantage. As a result, the mediocre robot is the true jobs killer because it replaces labor without greatly increasing wealth. Think about automated phone systems or chat bots.
In an empirical breakdown, Acemoglu and Restrepo suggest that what has happened in the 1990s and especially since 2000 is mediocre-robots. As a result, there has been a net decline in labor demand with no big wealth increase. Thus, Acemoglu is more negative than many economists on automation, at least as it has occurred recently.
More generally, Acemoglu and Restrepo create a new type of production function and use that to reformulate how we think about production and how we measure what is happening in the economy with automation and AI. This is one of the most important new pieces on automation and the economy.
Who tips on Uber?
Men tip 12 percent more if their driver is a woman, but that’s entirely because they give more money to the youngest female drivers. The premium men pay to women behind the wheel shrinks as the women get older. By the time the drivers are age 65, it has virtually vanished. Women also tip other women more, but they don’t significantly change their tips based on the driver’s age.
Tips are highest between 3 a.m. and 5 a.m., and not surprisingly:
Tips are highest in small cities and the middle of the country. Riders in California and the Northeast weren’t great tippers.
Here is much more from Andrew van Dam at The Washington Post.
Are intuitions about occupational licensing and minimum wages consistent?
The other day I asked whether our intuitions about minimum wages and also occupational licensing might be consistent. In particular, if we think occupational licensing is very bad for employment and prices and welfare, is that consistent with monopsony/low elasticity of demand for labor models?
That is a tough problem, here is one approach:
If you think minimum wage hikes are fine, typically you believe something like:
“A 20 percent hike in the required wage will not much damage employment, if at all.”
What then would you say to this?:
“A 20 percent training surcharge on all worker hires will not much damage employment, if at all.”
It seems you should believe the second proposition as well.
Now, consider occupational licensing. Typically it is not absolute (“only 300 goldsmiths in Florence!”), but rather it imposes a surcharge on entrants. They have to pass a test, or undergo training, or receive a degree of some kind. They must incur training costs to get the license, and you can think of those training costs as a tax on the employment relationship. But if those costs are incurred, a worker passes through the permeable membrane of the licensing restriction into the active labor force pool of that sector.
Of course we all know that a tax can be borne by either side of the market, depending on elasticities.
Now, if you believe minimum wage hikes don’t much harm employment, you believe the demand for labor is relatively inelastic. And if you believe the demand for labor is inelastic, the burden of the training costs for licensing fall on the employer, not the worker. Taxes fall on the inelastic side of the market.
Now, you’ve already assented to: “A 20 percent training surcharge on all worker hires will not much damage employment, if at all.”
So the occupational licensing should not much damage employment either. The employer simply picks up the tab, albeit grudgingly.
(The effect on consumer prices will depend on market structure, for instance you can have a local monopsonist shipping into in a largely competitive broader market — tricky stuff!).
The occupational licensing will not help workers as the minimum wage hike would, because there is (probably) greater rent exhaustion in the licensing case. The workers get higher wages, but they are paid the higher wages precisely to compensate them for and pull them through those arduous training programs.
So the licensing and the minimum wage hike are not equivalent, for that reason alone. But still, the licensing will not really harm the interests of the workers, again the burden being born by the employer, or possibly the consumers in the retail market to some extent.
So if you are finding occupational licensing results that damage overall worker welfare, you must not accept the premises of the low price elasticity demand for labor model!
Another way to put the point is that the occupational licensing papers are testing some of the common presumptions of minimum wage models, and flunking them.
First addendum: It is not an adequate reply to this post to reiterate, with multiple citations, that minimum wage hikes do not lower employment. Even assuming that is true, other simple models will generate that result, without clashing with the occupational licensing studies. For instance, the employer might respond to the minimum wage hike by lowering the quality of some features of the job. In essence you are then suggesting the demand for labor may be elastic, but the real wage hasn’t changed much in the first place, and then it is easy enough in the occupational licensing setting for the burden of licensing to fall on the class of workers as a whole.
Second addendum: There is a longer history of minimum wage assumptions not really being consistent with other economic views.
Have you ever heard someone argue for wage subsidies and minimum wage hikes? No go! The demand for labor is either elastic or it is not.
Have you ever heard someone argue for minimum wage hikes and inelastic labor demand, yet claim that immigrants do not lower wages? Well, the latter claim about immigration implies elastic labor demand.
Have you ever heard someone argue that “sticky wages” reduce employment in hard times but government-imposed sticky minimum wages do not? Uh-oh.
It would seem we can now add to that list. Maybe we will see a new view come along:
“Labor demand is elastic when licensing restrictions are imposed, but labor demand is inelastic when minimum wages are imposed.”
Third addendum: Of course there are numerous other ways this analysis could run. What is striking to me is that people don’t seem to undertake it at all.
What should I ask Shaka Senghor?
I will be having a Conversation with Shaka, no associated public event. So what should I ask him? Here is the main part of his Wikipedia page:
Shaka Senghor is director’s fellow of the MIT Media Lab, college lecturer, author, and was convicted of murder in American courts. As of October 2015, he also teaches a class as part of the Atonement Project, a partnership between him, the University of Michigan, and the MIT Media Lab. His memoir, Writing my Wrongs, was published in March 2016. Senghor was named to Oprah’s SuperSoul 100 list of visionaries and influential leaders in 2016.
And here is Shaka’s home page. I thank you all in advance for your suggestions.
Tuesday assorted links
1. The new left-wing critique of Facebook (and I predict it will stick, even if not always articulated as such).
2. How the internet is changing Russia’s most isolated major city (NYT).
3. Claims about Fortnite. And transcript of my Elucidations philosophy podcast with Matt Teichman.
4. A rising expectations theory of the Chilean protests: ““Piñera’s government has always been preoccupied with reducing poverty, and has also designed policies that help the rich, so the middle class feels abandoned,” he said. “The middle class has been growing in Chile, but with a slowing economy, they feel like they were offered a path to the promised land and were never really let in.””
5. Ross Douthat on Watership Down (NYT). And you can pre-order the new forthcoming Ross Douthat book The Decadent Society: How We Became the Victims of Our Own Success.
6. Republican control of state governments has not stopped the growth of government at the state level (median voter theorem still underrated).
What is behind the spread of so many mass protests?
One frequent theme is people objecting to a price increase. In Ecuador, a focal point of the protests has been a demand for restoration of fuel subsidies. Petroleum price subsidies also have been central to the Haitian protests. In Lebanon, citizens have been upset at a new tax levied on the use of WhatsApp, with a social media tax also having been an issue in Uganda. In Sudan cuts to food and fuel subsidies have been a major complaint. In Chile they are protesting subway fare hikes.
The trend is that price increases may continue to become less popular. And, crucially, the internet will help people organize against such changes.
Consider that an old-style labor-oriented protest can be organized through the workplace or plant itself, through on-the-ground techniques that long predate the internet. There is a common locale and set of social networks in place, including perhaps a union. Those who suffer from a price increase, in contrast, typically do not know each other or have common social ties. Just about everyone buys gasoline, either directly or indirectly. The internet, however, makes it possible to mobilize these people into protests with prices as the common theme.
In other words: Protests of workers seem to be becoming less important, and protests of consumers are becoming more important.
You may recall that one of the original demands of the “gilets jaunes” protests in France was for free parking in Disneyland Paris. If you think that sounds a little crazy, you haven’t yet internalized the nature of the new millennium.
In the future, efficiency-enhancing or austerity-induced changes in prices may be much harder to accomplish politically. The new trend is neither central planning nor market liberal reforms, but rather frozen prices, especially when those prices are set in the political realm.
Here is the rest of my latest Bloomberg column on that topic. Two further points: my global warming point I pulled from Noah Smith, though I could no longer find his tweet to cite. Furthermore, many of the recent protests, such as in Spain, fit a more political and ethnic model, I am not saying price increases are always the major factor.
Marriage is underrated for its social and political benefits
The more freedom we have, the more there will be very feminine and masculine subcultures too, and this might explain a great deal of recent political developments — in particular the campus identity politics movement and the alt-right. The former is heavily female, while the latter is overwhelmingly male — in fact, not just male, but populated by men who seem to have difficulties with women…
Single women tend to be politically very liberal, voting for the Democrats in huge numbers, while in Britain Labour Party leader Jeremy Corbyn has overwhelming support among young women, the vast majority of whom are unmarried. Generally speaking, the culture wars are far more intense between women because women have to make more sacrifices — whether children or career — and this inevitably influences their worldview. Political liberalism, with its strong relationship between the state and the individual, favors single women, while conservatism, with its emphasis on monogamy and support for the nuclear family, speaks to their married equivalents. And while married men with children are also more conservative than single ones, the difference is not as pronounced.
So what happens when fewer people get married and, indeed, spend time with the opposite sex? Gender-segregated politics it seems.
That is from Ed West, via Ilya Novak.
Academic vita fraud?
A recent study of 180 academic curricula vitae found that 56 percent that claimed to have at least one publication contained at least one unverifiable or inaccurate publication, and it suggests that CV falsification could be much more common than scholars committed to professional integrity might hope. The study is small — the 56 percent reflects only 79 CVs, of 141 that claimed to have at least one publication. The researchers behind the study make no presumption as to whether the errors were intentional.
Monday assorted links
1. Drone deliveries start in Virginia town.
2. “All the US politicians and pundits and social media virtue signalers who are quick to windbag opine on Hong Kong protests are quiet on Chile and Barcelona this week where brutal rioters are destroying their cities and police are aggressively cracking down.” That is from Sameer Chisty. Not exactly how I would frame it, but a perspective worth hearing.
3. Sweet beverage taxes had no impact in three of the four major American cities studied.
4. Particulate matter has been rising in the U.S. since 2016 and that is bad.
5. New Kleiner and Soltas results on occupational licensing. As a side note, if you think quantity restrictions on labor entry are so bad, are you also committed to thinking the dual of price restrictions — minimum wages — must fail too? If not, what is the exact difference between those two cases?
Summers on the Wealth Tax
Larry Summers is my favorite liberal economist because even while maintaining his liberal values he never stops thinking like an economist. That makes him suspect among the left but it means that he is always worth listening to. The video below with Saez, Summers and Mankiw (with Rampell moderating) is excellent throughout. I cribbed a number of points from Summers:
“I have studied last week’s twitter war very carefully and I have to say that I am 98.5% convinced by the critics that the Zucman-Saez data are substantially inaccurate and misleading.”
The arguments around political power are not persuasive. Most of what is wrong with politics is because that is what the people want (I’m filling in a bit here from comments throughout). A wealth tax does nothing about corporate lobbying and would increase the incentive to give to political organizations. If you cut wealth at the top by 30% that wouldn’t change relative political power in the slightest.
Wealth is up in large part because interest rates are down which means that permanent income hasn’t increased.
Forced savings programs like social security and unemployment insurance mean that people at the bottom need to save less and thus their wealth falls even as their welfare increases.
A wealth tax increases the incentive to consume instead of save and invest.
On employee stock ownership plans: “When you put workers in control of firms and you give them substantial control–see Israeli kibbutz’s, see Yugoslav cooperatives, see universities where faculties have a powerful voice–the one thing you do not get is expansion. You get more for the people who are already there. That does not seem to be an attractive position for progressives.”
In the Q&A Summers just goes to town on Saez when Saez claims 90% tax rates are a great American invention. “The people who were around in the Kennedy administration who were at least as progressive as you are were united in the belief that 90% tax rates were a bad idea….The number of people who paid those 90% tax rates was trivial and it wasn’t because there weren’t a lot of rich people.” Greg Mankiw, who gives a nice parable in his remarks, has to stifle a laugh as Summers lets rip.
The body language in the Q&A is very interesting.
Ranking states by their degree of regulation
Now Mercatus has completed an analysis of state-level regulation. State RegData 1.0 analyzes the administrative codes of 46 states plus the District of Columbia, and the results are informative. The average state has 131,000 restrictive terms and about 9 million words in its code, which would require roughly twelve work weeks to read at a normal reading pace.
But there is huge variation. The least regulated state is South Dakota, with about 44,000 regulatory restrictions, while the most regulated state is California, with 395,000. All told, the least regulated states are South Dakota, Alaska, Montana, Idaho, and North Dakota, while the most regulated states are California, New York, Illinois, Ohio, and Texas.
Unfortunately, we weren’t able to include Vermont, New Jersey, Arkansas, and Hawaii. Arkansas is the easiest to explain: It has no administrative code, at least not yet. Its state agencies produce regulations, but until this year no one had ever bothered to compile them in one place. Fortunately — perhaps partly in response to RegData — legislation was passed this year to create an official Code of Arkansas Rules by January 2023, so Arkansas’s regulatory landscape will eventually come to light.
That is from James Broughel and Patrick A. McLaughlin, there is more at the link.
Trust, Airbnb, and Himalayan villages
An excellent short essay, with many points of note, here is one:
In Himalayan villages like mine, there is deep social uncertainty because of Airbnb and other online marketplaces. The opportunity cost of doing business with one’s nephews and cousins is now high. There is the real problem of nephews who run away on the flimsiest of pretexts. The stakes are higher, and there is much to gain by trading with outsiders. You can’t even run Airbnbs well without breaking free from closed relationships with your family and tribe, and forming spontaneous relationships with strangers. It’s hard for me to do justice to my Airbnb listings without being free to run them in a fairly entrepreneurial fashion.
And there is this:
Millions of people stay in Airbnb homes every night. It’s not trust which makes this possible. My pup is fearless when he sleeps with the door wide open, in a cottage in the woods. There are leopards around. Dogs here don’t live very long. He doesn’t trust leopards, but he knows they are afraid of humans. My pup sleeps on my bed, and so is well-protected from the vicissitudes of life. But I’m not the living proof that dogs can trust leopards. Dogs wouldn’t need humans to guard them if they could trust leopards. Similarly, Airbnb puts hosts and guests in a position where behaving badly would ruin their reputation. In one of my bad moods, I held my pup quite firmly. At midnight, he ran out of the cottage and barked for hours. I couldn’t bring him back to my bed. I did something he thought I wouldn’t consider. He felt I betrayed his trust in me. I’m, here, talking about a more meaningful form of trust. Intellectuals miss this obvious distinction, because they’re not the wonderful people they think they are. The distinction between trust and assurance is all too obvious. But if doing wrong doesn’t fill you with moral horror, you won’t get it. You can’t trust anybody who doesn’t feel that way, and there are not many such people. Unconditional trustworthiness is one of the rarest things in the world. Institutions can’t produce this kind of trust, because people aren’t conditionable beyond a point. In any case, how do you produce something you don’t even understand?
By Veridici, and I believe Shanu Athiparambath.
China facts of the day
Sports Business Journal recently estimated that the NBA’s presence in China is worth $5 billion to the league.
And:
Nike, with [Lebron] James as a primary spokesman in China, received 17% of its $37.2 billion in brand revenue from Greater China in fiscal 2019…James also has served Tencent as a spokesperson, consultant and endorser of the NBA 2K League in China.
From a marketing expert who knows China:
“The NBA is nothing but good; it provides entertainment, keeps people busy, gives them something to talk and be passionate about, and if they’re doing all that, they’re not on the streets complaining about the government.”
And to close the joke:
Said [Bill] Bishop, referencing the pingpong diplomacy that initiated a warming of relations between the countries back in the early 1970s: “One of the jokes going around is U.S.-China engagement started with pingpong and ended with basketball.”
Link here.