Simple truths about power

These are all people who are connected to the power of government.

Either physically, i.e. economically, or emotionally—power. The dream of sharing power. The gender studies professor not only gets her money eventually from government, but she dreams of being part of a world-transforming enterprise.

Here, I agree with you. There is a dream that unites progressives and bureaucrats and wealthy technologists. And where does that dream come from?

It’s a dream peculiar to this class. Other classes have been united by different dreams.

Is it a substitute for religion?

Yes.

Is that its primary emotional charge?

Well, I don’t know about primary. Look, the primary element is, as we Christians were taught, pride. That is the sin of sins. There is nothing that moves human beings quite so much as the desire to be on top of other human beings.

That is from an interview with Angelo Codevilla.

Friday assorted links

1. The French may be moving back toward nuclear power.

2. “In fact, it is the least selective schools that are driving the national gender gap in bachelor’s degrees. For example, at for-profit colleges, most of which have very low admissions standards, 63 percent of students are female.”  Link here.

3. “…students at Oxford University are to replace clapping at student union events with “silent jazz hands” amid fears that applause could trigger anxiety.”  Link here.

4. David Brooks calls for 20-30 percent tipping (30 percent for smaller bills, say below $25, NYT).

5. Predict science to improve science, by Stefano DellaVigna, Devin Pope, and Eva Vivalt.  And here is a beta version of the associated “predict social science” website.

6. Who deserves the Nobel for China’s economic development?

7. Charles Barkley opines.

Who’s a Russian Asset?

Mark Zuckerberg was once again pilloried in Congress. How many companies in the Libra association are headed by LGBTQ people? Isn’t it true that Libra is a project of white men? What are you doing for African Americans whose lives you have ruined? Do you discuss white supremacy at your far right dinner parties? And, of course, overlaying all of this was the idea of Russian interference.

Ironically, one of the goals of the Russians was to enhance US grievances and elevate identity politics. Most notably, some of the most successful Black Lives Matter memes and tweets were created by the Russians. As the NYTimes wrote:

“The most prolific I.R.A. efforts on Facebook and Instagram specifically targeted black American communities and appear to have been focused on developing black audiences and recruiting black Americans as assets,” the report says.…The report says that while “other distinct ethnic and religious groups were the focus of one or two Facebook Pages or Instagram accounts, the black community was targeted extensively with dozens.” In some cases, Facebook ads were targeted at users who had shown interest in particular topics, including black history, the Black Panther Party and Malcolm X. The most popular of the Russian Instagram accounts was @blackstagram, with 303,663 followers.

The Internet Research Agency also created a dozen websites disguised as African-American in origin, with names like blackmattersus.com, blacktivist.info, blacktolive.org and blacksoul.us. On YouTube, the largest share of Russian material covered the Black Lives Matter movement and police brutality, with channels called “Don’t Shoot” and “BlackToLive.”

…Of 81 Facebook pages created by the Internet Research Agency in the Senate’s data, 30 targeted African-American audiences, amassing 1.2 million followers.

The fact that Black Lives Matter was promoted by the Russians doesn’t detract from their legitimate goals. Nevertheless, one can imagine the Russians chortling at how successful their attacks have been. Mark Zuckerberg is one of America’s most successful entrepreneurs, the creator of Facebook, a world-dominant firm, a firm that the Russians and Chinese fear and instead of rejoicing in America’s success, America’s political class are seeking to take Facebook and its CEO down through the petty politics of identity.

Who’s a Russian asset?

Nathan Nunn’s recent talk on economic development

Here is one excerpt of many substantive points:

Numerous studies have formally tested for relationships between foreign aid and conflict,using a range of identification strategies to obtain credible causal estimates. Many studies find that foreign aid can increase conflict. Nunn and Qian (2014) find this to be the case for U.S. food aid. Their analysis uses an IV strategy where U.S. wheat production shocks, combined with a country’s tendency to receive wheat aid from the U.S. to obtain exogenous variation in U.S. food aid supply. Crost, Felter and Johnson (2014) use an RD strategy that exploits an eligibility cut-off for a World-Bank-funded development program in the Philippines to estimate the effects of the program on conflict. They find that eligibility to participate in the program is associated with more conflict, which appears to be due to an increase in insurgent attacks against government forces in an attempt to disrupt the program. Dube and Naidu (2015) estimate the effects of military aid in Colombia using a differences-in-differences identification strategy. They find that U.S. military aid leads to an increase in conflict and violence arising due to an increase in attacks by paramilitaries…

While there is evidence that foreign aid can increase conflict, it is not the case that it always leads to conflict. For example, Nunn and Qian (2014) show that among the countries in their sample without a recent history of past conflict, food aid does not increase conflict. In a follow-up study that studies a conditional cash transfer program also in the Philippines, Crost, Felter and Johnson(2016) find that this aid package actually decreased conflict. Trisko Darden (2020) finds that the effect of U.S. aid on state killings and repression of its citizens is weaker following the end of the Cold War.

Given the evidence that foreign aid can sometimes cause conflicts, but at other times have no effects or even reduce conflict, the natural next question is how we implement foreign aid projects in a manner that minimizes its harm, thus maximizing overall benefit.

That is from a recent and really quite excellent talk on development by Nathan Nunn.  He also has an especially interesting discussion of the geographic centralization of RCTs in economics among numerous other points of note.  Recommended.

Can you impose pecuniary externalities upon Korean squirrels?

Look out, squirrels of the world. It turns out acorns are good for humans, too.

Here in South Korea, the popularity of acorn noodles, jelly and powder has exploded in recent years, after researchers declared the nuts a healthy “superfood” that can help fight obesity and diabetes.

In the U.S., where some Native Americans once made acorns a staple of their diet, restaurants and health-conscious blogs are starting to explore recipes for acorn crackersacorn bread and acorn coffee.

That is bad news for squirrels and other animals that rely on oak trees for sustenance. In South Korea, where human foraging has multiplied, there are now fewer acorns on the ground, and the squirrel population has dwindled.

Is this a reductio ad absurdum of the idea that pecuniary externalities are irrelevant?  Ask your friendly neighborhood squirrel!  If you can find him, that is.  Then there is this:

Safeguarding acorns for squirrels is proving to be a tough nut to crack. That’s where the Acorn Rangers come in.

Formed at Seoul’s Yonsei University, the nascent Acorn Rangers group polices the bucolic campus, scaring off other humans from swiping squirrel food. Taking up the cause are students like Park Ji-eun, who skipped lunch on a recent day so a squirrel could eat this winter.

Strolling across campus, Ms. Park, a junior, sprung into action after spotting an acorn assailant: a woman in her early 60s, clutching a plastic bag stuffed with the tree nuts.

“The squirrels will starve!” barked Ms. Park, her voice booming so loudly that other acorn hunters—human ones—scurried away. The two argued for nearly an hour until Ms. Park emerged with the plastic bag in hand.

Here is the full WSJ story, by Dasl Yoon and Na-Young Kim, via the excellent Samir Varma.

Thursday assorted links

1. Photomicography competition.

2. Even in Atlas Shrugged, this would not be a believable scene.

3. “It took Tesla just 168 working days to go from permits to a finished [Shanghai] plant.” (Bloomberg)

4. “Pakistan has been acknowledged by the World Bank among the top 20 global reformers this year. Pakistan is expected to improve its [Doing Business] ranking by 25 places in the report to be launched on Oct 24…”  Link here.

5. Roots of Indian economic reforms.

6. The title should be “Pedestrians are getting worse.”

Middlemen, China story of the day

Five hitmen have been jailed for attempted murder, after each one avoided carrying out the contract themselves so they could make a profit.

Chinese businessman Tan Youhui was looking for a hitman to take out a competitor, Wei Mou, and was willing to pay 2 million yuan (£218,000) to get the job done.

The hitman that Mr Youhui hired, decided to offer the job to another hitman, for half the original price.

The second hitman then subcontracted to another hitman, who then subcontracted to a fourth, who gave the job to a fifth.

However, hitman number five was so incensed at how much the value of the contract had fallen, that he told the target to fake his own death, which eventually led to the police finding out about the plot, Beijing News reported.

Here is the full story, via Yana.

Rat transit markets in everything

Learning to drive small cars helps rats feel less stressed, scientists found.

Researchers at the University of Richmond in the US taught a group of 17 rats how to drive little plastic cars, in exchange for bits of cereal.

Study lead Dr Kelly Lambert said the rats felt more relaxed during the task, a finding that could help with the development of non-pharmaceutical treatments for mental illness.

Here is the story, via the excellent Fergus McCullough.

How has Paris changed

Following my OECD visit, I have been thinking about how Paris has changed in the almost thirty years I have been going there.  I came up with the following mental list:

1. It is much less of a working class city in the center.

2. Many more immigrants, most of all outside the center.  The center and the periphery are now more different than in times past.

3. People smoke much, much less.

4. The residents are less Marxist, but now more “woke.”

5. English is far more widely spoken, and good French is not so much expected in casual interactions.

6. The average quality of bread is declining.

7. Michelin restaurants, in relative terms, have grown much more expensive.  I recall having a meal at the Hotel Bristol, maybe six years ago, for 150 euros.  A similar meal now goes for 380 euros, more than I am willing to pay.

8. The city has been remarkably economically resilient, in part because of the longstanding emphasis on services.

9. The city now has a burgeoning start-up scene.

10. I believe central Paris is now much more different from the rest of France than it used to be.

What else?

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.