My Conversation with the excellent Kyla Scanlon
Here is the audio, video, and transcript. Here is the episode summary:
Kyla Scanlon has made it her personal mission to bring economics education to a larger audience through social media. She publishes daily content across TikTok, YouTube, Substack, LinkedIn and more, explaining what is happening in the economy and why it is happening. Tyler calls her first book In This Economy? How Money & Markets Really Work a “good and bracing shock to those who have trained their memories on some weighted average of the more distant past.”
Tyler and Kyla dive into the modern state of economics education and a whole range of topics like if fantasy world building can help you understand economics, what she learned trading options at 16, why she opted for a state school over the Ivy League, lessons from selling 38 cars over summer break, introversion as an ingredient for social media success, if she believes in any conspiracy theories, Instagram scrolling vs TikTok scrolling, the decline of print culture, why people are seeking out cults, modern nihilism, how perspective can help with optimism, the death of celebrity and the rise of influencers, why econ education has gone backward, improving mainstream media, YIMBYism and real estate, nuclear pragmatism versus utopian geothermalists, investing advice for young people, why she thinks about the Great Depression more than Rome, creating the next Free to Choose, and more.
Excerpt:
COWEN: Putting aside your own work, what kind of economics do you think young people are learning from TikTok?
SCANLON: [laughs] Concerning.
COWEN: Is it conspiratorial? Is it leaning in some particular direction?
SCANLON: I would say it’s definitely conspiratorial. There’s a lot of desire to pin inflation onto companies, which I don’t know if that’s the best thing to do. There’s a lot of desire to have a scapegoat. I think a lot of people are frustrated with their economic situation, and so they look at TikTok videos, and somebody is telling them that, yes, Blackrock is conspiring against them, and that’s very soothing. I think that’s where we have ended up with TikTok and econ.
And this:
COWEN: Yes, in a way, they’re making a deal with you. They promise to listen and give you numbers, and you promise to let them abuse you. That’s the exchange. That’s what they want.
SCANLON: Yes, exactly.
COWEN: It’s the right to selectively abuse.
Definitely recommended. And here is the earlier David Beckworth podcast with Kyla.
Incentives matter, the demand curve slopes downward, mental health edition
Since 2000, pharmaceuticals for common psychiatric conditions aged out of patent protection. After generic entry, supply increases as more sellers enter the market, leading to lower prices – about 80-85% less! Cheaper prescriptions and more treatment are the stated goal of policies to improve affordability.
…Drug prices definitely fell during this period. For the SSRI sertraline, consumer cost per month dropped from ~35 dollars in the mid-2000s to ~6 dollars by the mid 2010s. Total Medicaid spending on antidepressants peaked in 2004 ($2 billion) then declined through 2018 ($750 million). Authors of that paper note that “generic drug prices steadily decreased over time” while utilization increased. From 2013 to 2018, both out-of-pocket costs and total expenditures per prescription fill went down for antidepressants and antipsychotics. For antipsychotics, generic drug claims grew 35% from 2016 to 2021.
According to the DEA, total dispensing of stimulants jumped 58% from 2012 to 2022; note how this follows the generic entry of long-acting Ritalin (methylphenidate) and Adderall (amphetamine) products. More recently, stimulant prices shot up amid shortages.
And:
By the mid 2010s, people with psychiatric conditions were better able to afford mental health care. Young adults, now on their parents insurance, saw declining out of pocket costs for behavioral health in particular. For people aged 18-25, “mental health treatment increased by 5.3 percentage points relative to a comparison group of similar people ages 26–35.” Even for employer plans, in-network prices and cost-sharing decreased from 2007 to 2017…
Here is the full essay by AffectiveMedicine. It has numerous other points of interest.
Model this
Doctors were given cases to diagnose, with half getting GPT-4 access to help. The control group got 73% right & the GPT-4 group 77%. No big difference.
But GPT-4 alone got 92%. The doctors didn’t want to listen to the AI.
Here is more from Ethan Mollick. And now the tweet is reposted with (minor) clarifications:
A preview of the coming problem of working with AI when it starts to match or exceed human capability: Doctors were given cases to diagnose, with half getting GPT-4 access to help. The control group got 73% score in diagnostic accuracy (a measure of diagnostic reasoning) & the GPT-4 group 77%. No big difference. But GPT-4 alone got 88%. The doctors didn’t change their opinions when working with AI.
Wednesday assorted links
1. Listen to it order 400 strawberries.
2. Does studying philosophy make you a more rigorous thinker?
3. What the populists do not know about tariffs. From two experts who understand trade theory.
4. Claims.
New MRU Video! Negative Externalities
Here’s the latest video from Marginal Revolution University. It covers negative externalities–drawing, of course, from the most innovative and interesting principles of economics textbook, Modern Principles of Economics.
MRU videos are free for anyone’s use anytime, anywhere and don’t forget there are also two new econ-practice games on negative externalities and positive externalities and a fun choose your own adventure story on Unintended Consequences (most textbooks just teach when regulation works. We are more balanced.)
Podcast on science policy
It is titled ARPAS, FROs, and Fast Grants, Oh My! The host is the excellent Tammy Winter, and the other guests are Patrick Hsu and Adam Marblestone, plus yours truly.
Here is the link, with transcript. Excerpt:
Tyler Cowen: In virtually all institutions, we should be taking more chances on quite young people, giving them more authority, in general. My background is quite different from the rest of you at this meeting. I spent a big chunk of my career studying the financing of the creative arts, economics of the arts. That’s always my mental touchstone. When I hear about Focused Research Organizations that expire when the project is over, I think of Hollywood movies. We’ve been doing that for a long time.
You can almost always find parallels in the arts, which makes you much more optimistic about what you can do. Rapid patronage was a big thing during the Renaissance, and it worked really well. I knew when we started Fast Grants, “Oh, we can do this” because of historical examples.
And when you think of young people running things — well, who ran the Beatles? There was George Martin and Brian Epstein, but the Beatles ran the Beatles. Paul McCartney had to figure out the recording studio. We don’t call that science, but that was an extremely difficult scientific project that had never been done before. And this guy, who hadn’t gone to college, at age 23 starts figuring it out and becomes a master. When you see those things happen in the arts — frequently, they happen — you become way more optimistic. “How many people can do this? How can we scale it? Can super young people contribute? Can this all work?”
You are not saying it’s easy — most projects in the arts fail, too — but you think, “Yes, yes, yes, we can do this.” And you do it, or you try to do it.
Recommended, interesting throughout. We had great fun taping this at Stripe headquarters.
Econ Journal Watch, new issue
Volume 21, Number 2, September 2024
In this issue:
Academic Productivity after the CEA: Gordon Tullock wrote that government economists found capable of “firefighting” are assigned to do more of it, “with the result that the higher ranks of government economists aren’t able to read.” Here, Richard Burkhauser, Kevin Corinth, and Casey Mulligan offer themselves as confounding data points.
Intelligent? DEI in the U.S. intelligence community: John Gentry examines and criticizes claims by Carmen Medina and others that DEI improves operational performance in the CIA and the U.S. intelligence community more broadly. (Medina is hereby invited to reply in a future issue of this journal.)
Temperature~economic growth: David Barker analyzes the Economic Inquiry article by Michael Kiley, who declined to respond to Barker’s critique of the Fed working paper version. Barker addresses what’s new and what he thinks is wrong. (Kiley is hereby invited to reply in a future issue of this journal.)
The Tuskegee Syphilis Experiment, which was sanctioned by the federal government, plausibly created mistrust of the medical profession among Blacks. In a Quarterly Journal of Economics article Marcella Alsan and Marianne Wanamaker purport to show a causal link between the despicable experiment and Black male mortality. Here, Robert Kaestner reassesses and concludes that their analysis was based on unsupported theoretical assumptions and faulty empirical methods. He concludes that the article does not provide proper evidence for the claim that the experiment caused an increase in Black male mortality. (Alsan and Wanamaker are hereby invited to reply in a future issue of this journal.)
Can we detect the effects of racial violence on Black patenting? Lisa Cook published a Journal of Economic Growth article on the effect of racial violence on innovation by Black Americans over the period 1870–1940. Here, Michael Wiebe contends that Cook’s results are not reliable and her conclusions are uninformative. (Cook is hereby invited to reply in a future issue of this journal.)
If in 1917 the Bolsheviks had failed, would Marx not have become such a big deal? In a Journal of Political Economy article, Phillip Magness and Michael Makovi argue that Karl Marx was not destined to become such a big deal, but rather that his enormous place as symbol and influence depended adventitiously on 1917 and its aftermath in the Soviet Union. Here, Joseph Francis challenges their hypothesis, and, in a reply, Magness and Makovi stick to their original claim.
Classical Liberalism in Argentina, from 1816 to 1884: Alejandro Gómez and Nicolás Cachanosky treat the classical liberal influence in Argentine history from independence in 1816 to the 1853 constitution and its aftermath. The foremost protagonist is Juan Bautista Alberdi (1810–1884). The piece extends the Classical Liberalism in Econ, by Country series.
Mission: Preposterous! The ‘mission economy,’ associated with economist Mariana Mazzucato, repackages the aim to governmentalize economic affairs. The ‘mission economy’ mission is assessed by the 2024 book Moonshots and the New Industrial Policy: Questioning the Mission Economy edited by Magnus Henrekson, Christian Sandström, and Mikael Stenkula. A review essay is here provided by Michael Munger.
Are Economic Freedom and Political Unfreedom Compatible? Mark Koyama reviews Evan Osborne’s 2024 book on economic liberalism in modern China.
Cure for Russia Hate: The Anglo tradition of hating Russia started in earnest in the 1830s. In 1836, Richard Cobden wrote a pamphlet challenging the development. A portion is presented here.
EJW Audio:
Tuesday assorted links
2. Dikembe Mutombo, RIP (NYT).
3. Rick Rubin asked me to make for him a Spotify playlist of some of my favorite classical performances. Quite subjective and arbitrary.
4. How are “Top Five” publications distributed across economics departments? And the spreadsheet.
7. Apologies, there was an error in the “France fact of the day” post, explained here.
8. Claims: “basically one thing that’s happening globally right now is that american ideological strains escaped from america. they’re incredibly potent and while americans have been selected for resistance the rest of the world is naive. basically brain smallpox but for the old world”
9. Switzerland and Italy redraw border due to melting glaciers.
10. NotebookLM. Beats the Turing test, to say the least.
There are not 13,099 Illegal Immigrant Murderers Roaming Free on American Streets
Migrants incarcerated for homicide are considered “non-detained” by ICE when they are in state or federal prisons. When ICE uses the term “non-detained,” they mean not currently detained by ICE. In other words, the migrant murderers included in the letter are overwhelmingly in prison serving their sentences. After they serve their sentences, the government transfers them onto ICE’s docket for removal from the United States.
And that is only part of the mistake in the numbers you may have heard. Here is more from Alex Nowrasteh:
The third untrue claim is that these 13,099 migrants convicted of homicide committed their crimes recently. Those migrant criminal convictions go back over 40 years or more. Confusion over the period covered by a dataset afflicts the interpretation of other criminal datasets too. If there really were 13,099 migrants convicted for domestic homicides in 2023, then they would have accounted for about 99 percent of all homicide convictions in the U.S. last year despite being about 4 percent of the population. That is obviously not the case because no group of people is criminally overrepresented by a factor of 25 above their share of the population. Even when the 13,099 homicide convictions of migrants are spread out over the entire Biden administration, migrants would have accounted for about one-third of all homicide convictions from 2021 through 2023. That’s obviously not true. The problem comes from erroneously increasing the numerator (the number of homicide convictions) for a single year and decreasing the denominator (the total number of homicide convictions in just one year) rather than spreading out the convictions and the total number of all murders over a 40-plus year period.
As a side observation:
Here is the whole essay. Tweetstorm here. Via Naveen.
Predicting future promotions from police cadets’ facial traits
From the results:
Facial traits are the primary driver of subject perceptions of leadership ability, and those perceptions successfully predict promotional success later in the cadets’ careers. When selecting for leadership potential based on police cadet photographs, respondents predict correct promotional choices at levels well above chance as measured by an AUC score of .70. Further, respondents’ evaluations successfully discriminate both between no promotion and lieutenant promotion, and sergeant versus lieutenant promotions.
That is from a new paper by Ian T. Adams, Scott M. Mourtgos, Christopher A. Simon, and Nicholas P. Lovrich. Via the excellent Kevin Lewis.
The dominance of large factor models in finance
This is less news to the private sector traders on the frontier, but the idea now has reached academia and the NBER working paper series:
We introduce artificial intelligence pricing theory (AIPT). In contrast with the APT’s foundational assumption of a low dimensional factor structure in returns, the AIPT conjectures that returns are driven by a large number of factors. We first verify this conjecture empirically and show that nonlinear models with an exorbitant number of factors (many more than the number of training observations or base assets) are far more successful in describing the out-of-sample behavior of asset returns than simpler standard models. We then theoretically characterize the behavior of large factor pricing models, from which we show that the AIPT’s “many factors” conjecture faithfully explains our empirical findings, while the APT’s “few factors” conjecture is contradicted by the data.
That is from a new paper by
The culture that is Washington, D.C.
Campaign-finance reports reveal that Republicans overwhelmingly outspend Democrats at every major steakhouse in the city… At the Capital Grille, Republicans have outspent Democrats nearly 13 to 1 so far this election cycle.
That is from Jessica Sidman. Here is the full and interesting article., and an excerpt:
Longtime Capital Grille regular David Safavian remembers the same. But things changed, says the American Conservative Union’s general counsel, as the District became more of a dining destination—and politics became more divisive. “Conservatives tend not to really care about the ‘foodie’ culture as much as Democrats do—we would rather just go have a good steak and a glass of wine,” Safavian says. “Back when the city was more bipartisan, Capital Grille reflected that. As the city has become more polarized, I think Republicans go to more traditional establishments.”
Perhaps in the 1980s and 1990s there was somewhat of a Republican connection to Chinese food, but now that seems to be gone…?
My podcast with Brian Chau
I appear on his show, he describes it as follows:
Tyler Cowen: No Such Thing As Talent Decline
Here is the link.
Monday assorted links
Reducing Pollution in India with a Cap and Trade Market
India has some of the worst air pollution in the world. India regulates pollution but it uses a command and control approach with criminal penalties, a system in tension with enforcement given low-state capacity. The result has been widespread corruption, inefficiency, and poor enforcement of pollution controls. In a very important paper, Greenstone, Pande, Ryan and Sudarshan report on an experiment with a market for particulate matter in Surat, India. In fact, this is the first particulate-matter market anywhere in the world.
The experiment created two sets of firms, the treatment set were required to install continuous emission monitoring systems (CEMS) which measured the output of particulate matter. The control set of firms remained under the command and control system which required the installation of various pollution control devices and spot checks. Firms were randomly assigned to treatment or control. Pollution at treatment firms was capped and permits were issued for 80% of the cap so firms could pollute at 80% of the cap for free. Permits for the remaining 20% of the cap were sold at auction and trading was allowed. Treatment plants which polluted more than their permits allowed paid substantial fines, about double the cost they would have paid to buy the necessary permits.
The one and half year experiment revealed a great deal of importance. First, the CEMS systems and the switch to financial penalties reduced the cost of enforcement so that essentially all firms quickly came into compliance. Second, trading was vigorous, which indicated that firms have heterogeneous and changing costs. Moreover, by allowing for a more information rich market the costs of achieving a given level of pollution fell. Pollution costs were 11% lower in treatment firms compared to control firms at the same level of pollution. The value of trade in lowering abatement costs illustrates Hayek’s idea that one of the virtues of markets is that they make use of information of particular circumstances of time and place. In fact, since the costs of achieving a given level of pollution were low, the authorities decreased the cap so that the treatment firms reduced their pollution levels significantly relative to the control firms.
The CEMS systems were a fixed cost but because abatement costs decreased, the overall expense was reasonable. The need for monitoring systems and procedures highlights Coase’s insight that property rights in externalities must be designed and enforced, the visible and invisible hand work best together.
Using estimates on a statistical life-year in India of $9,500 (about 1/10th to 1/30 the level typically used in the US) the authors find that the benefits of substantial pollution reduction exceed the costs by a factor of 25:1 or higher.
I have emphasized (and video here) that there are significant productivity gains to reducing air pollution which would make these benefit to cost ratios even higher. Less pollution can mean more health and more wealth.
The authors are especially to be congratulated because this paper began in 2010 with discussions with the Gujurat Pollution Control Board. It took over a decade to implement the experiment with the authors helping to design not just the market but also the technical standards for CEMS monitoring. Amazing. The success of the system is already leading to expansion across India. Bravo!
Hat tip: Paul Novosad.