The American economy is showing its flexibility
That is the theme of my recent Free Press column on AI. Excerpt:
The more quickly the world changes, the more the quality of our capital markets matters. And the world is indeed changing quickly: AI will soon be present in virtually every job. Many of us already use it informally for legal and medical advice, research, and even companionship.
And to close:
From the point of view of an investor, it matters whether or not we’re in an AI bubble. But if you are seeking to understand long-term social and economic trends, the bubble question is primarily a matter of short-term interest and timing. It will not decide where the economy is headed long-term.
Instead, what we are seeing is that America, at the drop of a hat, can turn on a dime and reallocate capital on an unparalleled scale, to our great and enduring benefit. Unless you were around to witness World War II, none of us have seen anything like this before. Do not expect the ride to be smooth or predictable, but feel free to sit back and enjoy: This is history in the making.
By some estimates, at least three-quarters of the world’s compute is in the United States.
Supply is elastic, in a new and different setting
The longstanding debate over whether human capabilities and skills are shaped more by “nature” or “nurture” has been revitalized by recent advances in genetics, particularly in the use of polygenic scores (PGSs) to proxy for genetic endowments. Yet, we argue that PGSs embed not only direct genetic effects but also indirect environmental influences, raising questions about their validity for causal analysis. We show that these conflated measures can mislead studies of gene–environment interactions, especially when parental behavior responds to children’s genetic risk. To address this issue, we construct a new latent measure of genetic risk that integrates individual genotypes with diagnostic symptoms, using data from the National Longitudinal Study of Adolescent to Adult Health linked to restricted individual SNP-level genotypes from dbGaP. Exploiting multiple sources of variation—including the Mendelian within-family genetic randomization among siblings—we find consistent evidence that parents compensate by investing more in children with higher genetic risk for ADHD. Strikingly, these compensatory responses disappear when genetic risk is proxied by the conventional ADHD PGS, which also yields weaker—and in some cases reversed—predictions for long-run outcomes. Finally, we embed our latent measure of genetic endowments into a standard dynamic structural model of child development. The model shows that both parental investments and latent genetic risk jointly shape children’s cognitive and mental health development, underscoring the importance of modeling the dynamic interplay between genes and environments in the formation of human capital.
That is from a new NBER working paper, by
Monday assorted links
2. Interview with Aghion (in French). And he is now on Twitter.
3. Wigs in court now optional in Britain?
4. Baby Shoggoth is listening. Good piece.
5. Profile of Aria and Ilan Gur (Times of London).
6. Are the San Antonio Spurs the NBA’s first all “AI-native” team? By the way, I saw on Twitter that right now Wemby is favored to win MVP, DPOY, and also Most Improved Player.
How Cultural Diversity Drives Innovation
It is hardly possible to overrate the value…of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar….Such communication has always been, and is peculiarly in the present age, one of the primary sources of progress.
Mill had in mind the civilizing force of commerce but the idea is far more general. My colleague Jonathan Schulz with Max Posch and Joe Henrich have a novel and important test of the idea in a paper forthcoming in the JPE: How Cultural Diversity Drives Innovation (WP; SSRN). They show that the more diverse a county, as measured by surnames, the more ideas and the more novel ideas were patented in that county.
We show that innovation in U.S. counties from 1850 to 1940 was propelled by shifts in the local social structure, as captured using the diversity of surnames. Leveraging quasi-random variation in counties’ surnames—stemming from the interplay between historical fluctuations in immigration and local factors that attract immigrants—we find that more diverse social structures increased both the quantity and quality of patents, likely because they spurred interactions among individuals with different skills and perspectives. The results suggest that the free flow of information between diverse minds drives innovation and contributed to the emergence of the U.S. as a global innovation hub.
Public housing and economic opportunity
This paper studies the long-term neighborhood effects of the American public housing program, one of the largest and most controversial American urban policies of the 20th century. I construct a new national dataset tracking the locations, completion dates, and characteristics of over 1 million public housing units built between 1935 and 1973, which I link to neighborhood-level data from 1930 to2010. Ifirstshowthatpublichousingprojects were systematically targeted towards initially poorer, more populated neighborhoods with higher Black population shares, reflecting the program’s slum clearance goals and racialized site selection politics. Using a stacked matched difference-in-differences approach, I estimate causal effects of public housing construction on neighborhood change by comparing treated neighborhoods to matched control areas within the same county based on pre-treatment characteristics that predict placement. Public housing neighborhoods experienced large, persistent increases in Black population and population shares and substantial declines in median incomes and rents. Geographic spillovers to nearby neighborhoods were limited: median incomes declined modestly, but demographic composition remained relatively stable on average. I find evidence consistent with neighborhood tipping dynamics: neighborhoods with initial Black shares in a plausible tipping range experienced substantial white population outflows in response to public housing construction. Linking to modern mobility data, I show that children from low-income families who grew up in public housing neighborhoods experienced significantly lower rates of upward mobility. These f indings demonstrate that, despite intentions of slum clearance and neighborhood revitalization, public housing reinforced existing patterns of economic and racial segregation and reduced long-run economic opportunity, although effects were largely confined to project neighborhoods themselves.
That is from a new paper by Beau Bressler at UC Davis. Beau is on the job market this year, here is his home page.
The influence of Malthus in India?
Public servants frequently fail to implement government policy as intended by principals. I investigate how exposure to economic ideas can alter implementation by government agents, focusing on the influence of Malthusian ideas on British bureaucrats in colonial India. In the Malthusian view, economic distress reduces population growth, raising incomes and ultimately resolving distress without any need for government intervention. Leveraging the death of Malthus in 1834 as a natural experiment, I find that colonial officials who studied under Malthus at a bureaucratic training college implemented less generous fiscal policies in response to rainfall shortages, a proxy for local distress. Across every common relief measure, Malthus-trained officials provided between 0.10 and 0.25 SD less relief than peers trained by Richard Jones, a critic of Malthus. The results offer new evidence concerning how economic ideas shape government policy through their influence on bureaucrats.
That is an abstract from Eric Robertson, who is on the economics job market from University of Virginia.
Sunday assorted links
1. Being on Twitter boosts legal citations.
2. Sadly, there may be some truth to this: “I have a theory that the core of right-groyper and left-groyper trends is that the Internet is kind of culturally fascist and economically trends towards producing micro doses of race war propaganda.”
3. Interview with Hanno Lustig.
4. Tanzania on the wane, not long ago it was (supposedly) on a very good path.
5. Fra Angelico (NYT).
6. What happens when you try to have more than thirteen kids? (NYT)
7. Derya: “Earlier this year, I also said we should reduce PhD positions by at least half & shorten completion time. Only the most passionate should pursue a PhD. In the age of AI, steering many others toward this path does them a disservice given the significant opportunity costs.”
Go see Alexandre Kantorow (piano) live if you ever have the chance. Of all the pianists I have seen in concert, dating back to Vladimir Horowitz and further, he is the one who best captures what I imagine Franz Liszt might have been like.
The business of the culture war
We show that American cable television news emphasizes race, crime, gender, and other “culture war” issues. These issues are less prominent in broadcast news and appear in only a small fraction of politicians’ campaign advertisements, which overwhelmingly focus on jobs, healthcare, and the economy. We interpret these differences through a parallel tradeoff facing cable outlets, broadcast outlets, and politicians: choosing content best for “poaching” people who would otherwise choose competitors vs. “mobilizing” people who would otherwise not watch news/not vote. Using household-by-second smart TV data, we link cable news’ cultural focus to a distinctive business strategy emphasizing mobilization: we show that cultural coverage mobilizes (many) viewers who would otherwise watch entertainment programming, while economic coverage instead poaches (fewer) viewers who would otherwise watch competing news channels. Cable news outlets, maximizing audience size, therefore prefer cultural coverage. Politicians, instead maximizing vote share , value poaching an opponent’s voter twice as much as mobilizing a nonvoter; giving news outlets the same objective would close 40% of the observed content gap between news and politicians. Cable outlets’ incentives to center cultural conflict influence politics: constituencies exogenously more exposed to cable news assign greater importance to cultural issues, and politicians respond by supplying more cultural ads. Our results suggest that the economic incentives of cable news played a significant role in the growth of cultural conflict.
That is from the job market paper of Aakaash Rao of Harvard, here are Rao’s other papers.
The cosmopolitan conservative
From the excellent Janan Ganesh (FT):
Often, it is fear of causing offence that stops liberal-minded people engaging with vast tracts of the world. And so cultural sensitivity turns into its own kind of parochialism. If Forsyth was a workmanlike writer, he had a grander twin in VS Naipaul, who wrote on a global canvas despite or because of personal attitudes that some call reactionary. (Others have used a different r-word about him.) A modern liberal would not be as cutting about Africa and south-east Asia as Naipaul, it is true. But then don’t assume that a modern liberal would, in either sense of the phrase, “go there” at all.
I even wonder if a small amount of jingoism helps. You have to see the world from somewhere. The branding of this column, Citizen of Nowhere, is tongue-in-cheek: a reference to an old speech by one of our lesser prime ministers here in Britain. The truth is, without a starting point to which one is attached, it is hard to even register cultural differences, let alone comment on them. The result is that weird flattening jargon in which well-meaning people address the world. Rory Stewart remembers some first-class diplomatic baloney during his time in Afghanistan. “Every Afghan is committed to a gender-sensitive, multi-ethnic centralised state . . . ” and so on.
Recommended.
Observations on browsing economics job market candidates
The number of people on the market seems much lower this year, perhaps because of the lag with Covid, as well as more general demographic trends. Even adjusting for the lower number of candidates, I found fewer interesting papers this year than usual, as research interests continue to narrow. There is too much emphasis on showing quality technique by answering a small question well, rather than addressing more important questions more imperfectly. Harvard had by far the most interesting students, as most of them were considering questions I cared about. LSE looked pretty good too. In terms of topics, I saw a lot of papers on educational testing, urban economics and mobility, and AI. Theory seems to be permanently on the wane. The number of co-authors continues to rise.
Overall I came away with a bad feeling from this year’s perusal, noting there are some departments I have not looked at yet. In the aggregate it did not seem vital enough or exciting enough to me?
I still will be putting up some more of the papers I found of interest.
Sentences to ponder
We find that interventions (e.g., busing) that move children to a more favorable neighborhood have large effects but lose impact when they are scaled up because parents’ equilibrium responses push against successful integration with the new peer group.
That is from . Here is the NBER version, here is the JPE version.
Saturday assorted links
1. Who is most worried about AI threats to jobs?
2.. Anna Gát on mentorship and related matters.
4. Frank Dikötter, Red Dawn over China: How Communism Conquered a Quarter of Humanity is due out in February.
5. The effectiveness of mental health treatment guidelines.
David Brooks on the New Right
Excellent David Brooks column on how the right has adopted the theories and tools of the left:
As so many have noted, MAGA is identity politics for white people. It turns out that identity politics is more effective when your group is in the majority.
…Last year, a writer named James Lindsay cribbed language from “The Communist Manifesto,” changed its valences so that they were right wing and submitted it to a conservative publication called The American Reformer. The editors, unaware of the provenance, were happy to print it. When the hoax was revealed, they were still happy! The right is now eager to embrace the ideas that led to tyranny, the gulag and Mao’s Cultural Revolution. Interestingly, the right didn’t take the leftist ideas that were intended to build something; they took just the ideas intended to destroy.
Read the whole thing.
“Gender without Children”
What would the lives of women look like if they knew from an early age that they would not have children? Would they make different choices about human capital or early career investments? Would they behave differently in the marriage market? Would they fare better in the labor market? In this paper, we follow 152 women diagnosed with the Mayer-Rokitanski-Kuster-Hauser (MRKH) type I syndrome. This congenital condition, diagnosed at puberty, is characterised by the absence of the uterus in otherwise phenotypically normal 46, XX females. Using granular health registries matched with administrative data from Sweden, we confirm that MRKH is not associated with worse health, nor with differential pre-diagnosis characteristics, and that it has a large negative impact on the probability to ever live with a child. Relative to women from the general population, women with the condition have better educational outcomes, tend to marry and divorce at the same rate, but mate with older men, and hold significantly more progressive beliefs regarding gender roles. The condition has also very large positive effects on earnings and employment. Dynamics reveal that most of this positive effect emerges around the arrival of children in women in the general population, with little difference before. We also find that women with MRKH perform as well as men in the labor market in the long run. Results confirm that “child penalties” on the labor market trajectories of women are large and persistent and that they explain the bulk of the remaining gender gap.
That is from recent work by Tatiana Pazem, with co-authors Camille Landais, Peter Lundberg, Erik Plug & Johan Vikstrom. Tatiana is on the job market from LSE, with her main job market paper being “Pension Reforms and Consumption in Retirement: Evidence from French Transactions and Bank Data.”
Does economics make you more sexist?
We provide direct evidence on explicit and implicit biases against women among students in economics relative to other fields. We conducted a large scale survey among undergraduates in Chile, among both entering first-year students and students in years 2 and above, combining a wide battery of measures to create an index of gender bias. Economics students are more biased than students in other fields. There is some evidence that economics students are more biased already upon entry, before exposure to economics classes. The gap becomes more pronounced among students in years 2 and above, especially for male students.
That is from a newly published paper by Valentina Paredes, M. Daniele Paserman, and Francisco J. Pino.