My Conversation with Noel Johnson and Mark Koyama
Lots of economic history in this one, with the underlying themes of persecution and tolerance, here is the audio and video.
We talk about the evolution of anti-Semitism, how the Black Death influenced Europe, the economics and politics of volcanic eruptions, how much prejudice will come back, amateur astronomy, Jared Diamond, cousin marriage and the origins of the West, why England was a coherent nation-state so early, the origins of the Industrial Revolution, Schindler’s List, and more. I split the time between the two, here is one excerpt:
JOHNSON: Mark and I have done a lot of work on building datasets of Jewish persecution and Jewish expulsions at the city level and the country level in Europe over a very long period of time. And a question that I, for one, don’t fully understand is, you don’t need to actually kill all the Jews or expel them in order to extract resources from them. In fact, in some way, this is off the equilibrium path. You’re no longer in some optimal equilibrium for both the ruler and for the Jewish community.
Oftentimes, these Jewish communities would be expelled from a city, they would be invited to come back, and they would come back — in 5, 10, 15 years, sometimes even shorter. But that’s a little bit easier to understand.
In the case I gave you in England in 1290s, I think I understand a little bit about why it might have happened that way. I think it was signaling credibility in some political compact between the king and the nobles, but I’m not sure. But that’s an example of top down.
Other times, clearly, people are . . . You have, say, guilds moving against these Jewish communities. An example of this would be in 1614, when the most well-known Jewish persecution was in Frankfurt am Main. It was called the Fettmilch Massacre. Fettmilch was a baker. He was in guild, and he was upset about the terms of the political deal between the city rulers — the city council — and what the guilds were getting. One of the things that the guilds wanted were the Jews to be expelled. This was competition in some sense.
There was this bit from me:
COWEN: If the Black Death raised wages, does that mean that immigration today lowers wages?
And:
COWEN: Large volcanic eruptions earlier in history. From an economic point of view, what’s the single most interesting thing we know about them?
JOHNSON: I think what’s very interesting about the volcanic eruptions is that we are discovering more and more that they may have played a large role in political change that occurred. Joe Manning at Yale, and I believe his graduate student (Bruce M.S. Campbell) have been doing work on . . . They looked at a series of volcanic eruptions that led to the end of the pharaonic empire. That ended around 30 or 60 BC, I forget. Right around that time.
That was an empire that lasted for 300 years, but they experienced all these crop failures. And then once you look at it, you see that in Indonesia, all these major volcanic eruptions were happening in perfect timing with these crop failures that were taking place. Actually, they can tell from looking at the Nile and how much it’s flooding and things.
COWEN: Politics becomes nastier when the volcano goes off?
And from Mark Koyama:
COWEN: Why was China, as a nation or territory, so large so early in world history?
KOYAMA: Yeah, that’s a great question. There are several potential explanations, one of which is geographic. Another one would be an argument from the writing system. But I think the geography story is quite important. Jared Diamond, building on people like Eric Jones, argued that China’s geography . . .
Essentially there are two core geographic regions in China around the Yellow and Yangtze river deltas, which produced a huge amount of grain or rice. If you control those core regions, you can raise large armies. You can have a large population and dominate the subsequent regions.
Whereas, the argument is for Europe that these core regions are, perhaps, arguably more separated by geographical boundaries. The limitation of that argument on its own is that geography is static, so it doesn’t really tell you anything about the timing.
The interesting thing about China, in my view, is not just that it was once unified, or unified early. But it’s persistently unified. It reunifies. Interestingly enough, the periods of de-unification get consistently smaller. So there are always periods where it’s fragmented, like the warlord period in the early 20th century, but over time may become smaller.
Europe doesn’t seem to have that centrifugal force, so a lot of Europe is unified by the Romans, but it’s not able to come back together along those lines later.
And the argument that I put forward in an article with Tuan-Hwee Sng and Chiu Yu Ko of National University of Singapore is that it’s not just the core geographical reason. That’s part of it. But actually, the periodic threat from a nomadic steppe is another key factor.
This is geographic because China has a very sharp slope from really productive agricultural land to land which is only fit for horses, for Eurasian steppe. China could be invaded very easily from the north by these steppe nomads, whereas Europe — it was much less vulnerable to this. And that helps to explain why the Chinese state is often a northern state.
So if I can add, if you think about China today, or even China in the past, the really productive land — a lot of it’s in the quite far south, in Shanghai, Yangtze delta. But the political center of China is near Beijing, or it’s in the north. And that’s due to this political economy threat from the steppe. And it’s these periodic steppe invasions which we argue are responsible for the centralization, an almost militarized character of the Chinese state through history.
And:
COWEN: Max Weber. Overrated or underrated?
KOYAMA: Underrated.
COWEN: Why?
KOYAMA: Because most people just know the Protestant theory, and they misreport it. Whereas, actually, his most interesting stuff is on Chinese religion and ancient Judaism. And the role of —
COWEN: The history of music, right?
There is much more at the link. I am very happy to recommend their forthcoming book Persecution and Tolerance: The Long Road to Religious Freedom.
What I’ve been reading
1. Josh Rosenblatt, Why We Fight: One Man’s Search for Meaning Inside the Ring. An actual conceptual phenomenology of fighting, there should be more books like this about more different topics. Think of the model “X is actually like this.” Recommended.
2. Alexander Hertel-Fernandez, State Capture: How Conservative Activists, Big Businesses, and Wealthy Donors Reshaped the American States — and the Nation. A serious and scholarly book, rather than the kind of hysterical falsehoods we’ve come to expect on such topics.
3. Peter Doggett, Are You Ready for the Country? Elvis, Dylan, Parsons and the roots of country rock. Five hundred pages of text, and consistently interesting throughout, at least if you care about the topic. Otherwise not. I have pre-ordered the author’s forthcoming biography of CSNY.
4. Tony Spawforth, The Story of Greece and Rome. Highly readable and useful, not comprehensive on say the economics side but a fresh look and what we know and do not know and how the various pieces fit together.
Does Amazon have an investing advantage?
Thought experiment: How would Amazon enter the venture capital business?
Use data from AWS to inform investment decisions
Amazon can leverage its proprietary data from AWS (Amazon Web Services). Amazon’s edge is that most of the best technology start-ups are built on its services. Amazon has a lot of information about how much these companies are spending, what services they use, what technologies they use, and more.
The AWS data could be extremely predictive and give Amazon early signs that companies are growing fast or reaching an inflection point. And it can use the data as a better diligence check of a company … for instance, the data could help determine which companies that claim they have “AI” are real and which are just marketing.
Using this data to invest in public companies would likely not be legal since it could be deemed as inside information. But using it for private companies is something Amazon could do.
There is much more at the link from Auren Hoffman.
You still underestimate YouTube
Birmingham was brought to a standstill on Saturday, with motorists abandoning cars and the city gridlocked for hours after thousands of teenagers flooded the city centre to see a 19-year-old YouTuber make a 30-second public appearance at a cosmetics store.
Many shoppers were forced to cancel their trips, while parts of the bus network ground to a halt and road traffic was at a standstill, as fans hoped to catch a glimpse of James Charles, who is known for his online makeup guides.
Here is the full story, via Anecdotal.
Claims about transistors
Today, humanity fabricates 1,000 times more transistors annually than the entire world grows grains of wheat and rice combined. Collectively, all those transistors consume more electricity than the state of California.
Here is more from Mark P. Mills. Via Auren Hoffman.
Craig Palsson does economics on YouTube — Market Power
His channel is Market Power, and he promises new economics videos every Tuesday. Here is the associated Twitter account for the channel. Here is his video “How much does vibranium cost in the Marvel movies?”:
Here is another video “How much is an Oscar nomination worth?”
And I am pleased to announce that Craig is a newly minted Emergent Ventures fellow. He also is an economic historian, and has lived for two years in Haiti, both big pluses in my view.
Philanthropic hospital markets in everything
Nonprofit hospitals across the United States are seeking donations from the people who rely on them most: their patients.
Many hospitals conduct nightly wealth screenings — using software that culls public data such as property records, contributions to political campaigns and other charities — to gauge which patients are most likely to be the source of large donations.
Those who seem promising targets for fund-raising may receive a visit from a hospital executive in their rooms, as well as extra amenities like a bathrobe or a nicer waiting area for their families.
Some hospitals train doctors and nurses to identify patients who have expressed gratitude for their care, and then put the patients in touch with staff fund-raisers.
…it could make patients worry that their care might be affected by whether they made a donation.
Despite such concerns, these practices are becoming commonplace, particularly among the largest nonprofit hospitals. A 2016 survey of 108 hospitals found that 68 had grateful patient programs, according to the Advisory Board, a consulting firm.
Here is more from Phil Galewitz at the NYT.
The population explosion in the global South
Vegard Skirbekk shows that many of those who were part of Europe’s population explosion died before reaching childbearing age, which is not true in the developing world. This means the European boom had a smaller impact on global population. Take one of Skirbekk’s comparisons, Denmark and Guatemala. In 1775, prior to the onset of its transition, Denmark had a population of 1 million and a population density of about twenty people per square kilometre. In Guatemala in 1900, these numbers were about the same. Because Denmark’s population boomed earlier, just two to three children per woman survived to adulthood during its transition. By the time Denmark’s total fertility rate fell below 2.1 in the 1950s, its population had expanded to 5 million. By contrast, Guatemala’s transition only began in 1900. By the 1990s, the average Guatemalan woman was giving birth to five children who survived to childbearing age. Today there are 15.5 million Guatemalans. When Guatemala’s transition is complete, it is projected to have a population of about 24 million. Its transition will have produced a population expansion five times that of Denmark. Multiplied across many countries, this explains why the West’s share of world population dropped so rapidly after 1950.
That is all from Eric Kaufmann’s excellent Whiteshift: Populism, Immigration, and the Future of White Majorities.
Monday assorted links
1. Auren Hoffman on VC and private equity.
2. “Cambridge creative-arts students have a-level scores close to those of economics students at Warwick, but earn about half as much. That is tantamount to giving up an annuity worth £500,000.” (The Economist)
3. Who again in NATO is supposed to fight back?
4. Singapore weighs the fate of its brutalist buildings (NYT).
6. Holocaust survivors lived longer.
7. The wisdoms of Eli Dourado how to boost long-term growth.
One shutdown lesson is that Americans need to save more
That is the topic of my latest Bloomberg column, here is one excerpt:
Indeed a higher savings rate is possible, and not just for the wealthy. Most Mormons in the U.S., for example, manage to tithe at least 10 percent of their incomes. This suggests it is possible to curtail one’s consumption without losing the best things in life. Mormons also tend to have especially large families, making tithing all the more difficult. If Mormons can tithe so much, is it so impossible for the rest of us, including government employees, to save more?
There is also a new “gospel of savings” in the U.S., being led by such renowned (but non-mainstream) figures as Dave Ramsey and Mr. Money Mustache. They reach millions of Americans, imploring them to strip down their consumption to essentials and to save a much higher percentage of their incomes, sometimes 20 percent or more. Ramsey wrote a column giving advice to unpaid federal workers, including “sell stuff” and to cancel Netflix.
Do read the whole thing.
The Buying Slow but Selling Fast Bias
In this clip professional money manager Ben Griffiths approvingly quotes fellow-trader Larry Williams, “If you get one thing right in your career it is to learn to be a slow buyer and a fast seller”. “If you can master that”, Griffiths continues “you will be well down the way to being a successful manager of money.” Using a huge database of 783 portfolios averaging $573 million in size and covering 4.4 million trades over 16 years, Akepanidtaworn, Di Mascio, Imas, and Schmidt show that professional money managers follow exactly this advice and it is exactly wrong.
Professional money managers do well on their “slow”, buy decisions–somewhat surprisingly, well enough to beat benchmark portfolios. It’s on their “fast”, sell decisions that money mangers significantly underperform the market. Remarkably, the authors show that on average professional money managers would have done better had the chosen what to sell randomly. Why? On their buy decisions money managers put in effort–you can tell they are putting in effort because their buy decisions cannot be explained by simple heuristics based on past returns (such as buy past winners or buy past losers). On their sell decisions, however, managers do appear to follow a heuristic of selling their big past winners or past losers. See the graph where the blue buy decisions are independent of past returns while the red sell decisions show a clear preference to sell positive or negative return outliers. The authors show that this bias reduces return (just as you would expect). When you sell fast you sell what comes to mind quickest, an availability bias, and that’s often a past winner or a past loser even if greater thought would convince you that these are not the best stocks to sell. The sell fast bias, however, is pretty easy to fix. I expect that institutional investors will induce money managers to take a second look at sell decisions, much as computer systems now ask physicians to check branded prescriptions when generics are available.
Addendum: In related news, Deep Mind’s Alpha Star trounced human players of StarCraft II, a game of imperfect information that is much more complicated than chess. Amazingly, Alpha Star made fewer actions per minute than the human players. As with GO the AI developed new long-range strategies never before seen.
Eric Kaufmann’s *Whiteshift*
The subtitle is Populism, Immigration, and the Future of White Majorities, and might this be the must-read book of the year? It is “to the right” of my views on immigration policy, but still I found it informative, fascinating, and relevant on just about every page. Here is the author’s opening framing:
First, why are right-wing populists doing better than left-wing ones? Second, why did the migration crisis boost populist-right numbers sharply while the economic crisis had no overall effect? If we stick to data, the answer is crystal clear. Demography and culture, not economic and political developments, hold the key to understanding the populist moment.
Kaufmann, by the way, is Professor of Politics at Birkbeck in London, but hails from Canada. As for the basics, there is this in addition:
Much of this book is concerned with the clash between a rising white tribalism and an ideology I term ‘left-modernism.’
If you wish to understand “all the stuff that is going on today,” maybe Whiteshift is the best place to start? Kaufmann, by the way, is not a mega-pessimist and he seems to think that “broadening the category of white” will lead to a “good enough” solution for many of the Western democracies. Still, much of this book is disturbing, especially for readers who might consider themselves to be on the left. Most of all, he sees “whiteness” as a legitimate cultural interest, and one which, if we deny, will lead to more overt racism rather than less.
Here is Kaufmann on Brexit, brutal but I think largely correct:
…many analysts bring a political lens to their analysis which inclines them to want to tell a story about wealth and power. Over half the country voted Leave and we can’t condemn such a large group. So we pretend populist voters are motivated by the same things we are: economic stagnation (for fiscal conservatives) or, for left-liberals, inequality and resentment of the establishment.
Kaufmann also has strong evidence for the “immigration backlash” hypothesis, for instance:
…a higher immigrant share is a consistent predictor of higher opposition to immigration over time…in Western Europe there is a .63 correlation between projected 2030 Muslim share and the highest poll or vote share a populist-right party has achieved.
On top of all of its other virtues, Whiteshift provides the best intellectual history of the immigration debates I have seen. It also has the best discussion of why Canada seems to be different when it comes to immigration, and I may cover that in another blog post.
Kaufmann does very much argue that the left-wing values of diversity and solidarity stand very much in conflict. How is this for an “ouch” sentence?:
Casual observation would suggest that being black in diverse San Francisco is not necessarily better than being black in white-majority Fargo [North Dakota].
By no means am I convinced by everything in this book. I don’t think European politics can handle systematized refugee camps in Europe itself (rather than Turkey and Lebanon), and most of all I am not sure that recognizing whiteness as a legitimate cultural concern will diminish rather than boost racism. I wish he had said much more about gender, and how immigration and gender issues interact.
Nonetheless this book has more points of interest yet, including an original and persuasive take on residential clustering, a good analysis of racial intermarriage, and a sustained argument that avoiding the “no dominant ethnic group” approach of Guyana and Mauritius is imperative.
Strongly recommended, it is out next week, you can pre-order here.
Sunday assorted links
1. Gonzalo Schwarz reviews Stubborn Attachments.
2. Singapore: that was then, this is now, thirty years apart. Perhaps it is politically incorrect for me to suggest this on MR, but many of the earlier images I find more attractive.
3. The airport where robots will park your car.
4. Coming out in world literature (NYT).
5. 3-D printed concrete bridge in Shanghai (does this matter?).
Dalrymple on Aleppo
The history of Aleppo is terrible stuff; a long succession of massacres and sieges disappearing into the mists of Syrian pre-history. First held by the Hittites, it was captured in turn by the Philistines, Assyrians, Babylonians, Persians, Greeks, Romans, Persians (again), Byzantines, Arabs, Mongols and Ottomans, each of whom vied to outdo the carnage of their predecessors. The Assyrians were the most imaginatively sadistic: they impaled the town’s menfolk on their spears and feasted for two days while their victims groaned to a slow death.
In between invasions Aleppo was ruled by a succession of aristocratic thugs who exacted outrageous taxes and perfected ingenious ways of bankrupting their burghers.
In all the town’s history there are only two cheering anecdotes. The first tells of the Arabs who captured Aleppo by dressing up as goats and nibbling their way into the city; the second concerns Abraham, who is supposed to have milked his cow on the citadel’s summit. It is not much in ten thousand years of history, especially when the one story ends in a massacre…and the other is a legend, and untrue. It is the result of a misunderstood derivation of the town’s (Arabic) name Haleb, which comes not from the Arabic for milk (halib) but a much older word, possibly Assyrian, connected with the mechanics of child abuse.
From William Dalrymple’s In Xanadu written in 1989…things have not since improved.
Library of Congress to archive Marginal Revolution
From my email:
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