Results for “Tests” 772 found
Should we renorm IQ tests?
The year in which IQ is tested can make the difference between life and death for a death row inmate. It also can determine the eligibility of children for special services, adults’ Social Security benefits and recruits’ suitability for certain military careers, according to a new study by Cornell University researchers.
That’s because IQ scores tend to rise 5 to 25 points in a single generation. This so-called “Flynn effect” is corrected by toughening up the test every 15 to 20 years to reset the mean score to 100. A score from a test taken at the end of one cycle can vary widely from a score derived from a test taken at the beginning of the next cycle, when the test is more difficult, says Stephen J. Ceci, professor of human development at Cornell.
In other words, our definitions of intelligence and mental retardation are more relativistic than we would like to think. Yet the law, and various institutional categories, look to IQ scores as if they were fully objective. Here is the full story.
The Flynn effect implies, if you take it literally, that most people were morons as recently as a few generations ago. Just think, “someone who scored among the best 10% a hundred years ago, would nowadays be categorized among the 5% weakest. That means that someone who would be considered bright a century ago, should now be considered a moron!” So much as I believe in the idea of progress, I don’t think we can take the numbers at face value. If you are not convinced, try reading David Hume. Here is another survey of hypotheses, and why they fail to explain the data.
We’re past the point where nutrition can explain the rise in IQ scores, and more generally the Flynn effect numbers are inconsistent with more general data about the limits on environment for improving IQ scores. The less culturally specific the test, the stronger the Flynn effect appears. Bill Dickens and Flynn offer some interesting evidence on how genes and environment interact.
My favorite hypothesis, which has no hard data to support it, cites “the impact of the visual and spatial demands that accompany a television-laden, video-game-rich world. ” In other words, TV helps us do well on IQ tests. This does not explain why the Flynn effect predates 1950, but perhaps the more general increase in world complexity forces our brains to adapt. In earlier times people were “smart enough” for their environments, and still could create brilliant achievements on the frontiers they faced, still they might have been ill-suited to live in modern times.
Is there Hope for Evidence-Based Policy?
Vital City magazine and the Niskanen Center’s Hypertext have a special issue on the prospects for “evidence-based policymaking.” The issue takes as its starting point, Megan Stevenson’s Cause, effect, and the structure of the social world, a survey of RCTs in criminology which concludes that the vast majority of interventions “have little to no lasting effect.” The issue features responses from John Arnold, Jonathan Rauch, Anna Harvey, Aaron Chalfin, Jennifer Doleac, myself, and others. It’s an excellent issue.
My contribution focuses on the difference between changing preferences versus constraints. Here’s one bit:
Some other programs that Stevenson mentions elsewhere are also not predominantly constraint- or incentive-changing. Take, for example, the many papers estimating the effect of imprisonment on the post-release behavior of criminal defendants via the random selection of less and more lenient judges. At first, it may seem absurd to say that imprisonment is not about incentives. Isn’t deterrence the ne plus ultra of incentives? Yes, but the economic theory of deterrence, so-called general deterrence, is rooted in the anticipation of consequences — the odds before the crime. By the sentencing stage, we’re merely observing where the roulette wheel stopped. Criminals factor in the likelihood of capture as just another cost of doing business. Thus, the economic theory of deterrence predicts high rates of recidivism, as the calculus that justified the initial crime remains unchanged after punishment. To be sure, imprisonment might change behavior for all kinds of reasons. Maybe inmates learn that they underestimated the unpleasantness of prison, but perhaps they improve their criminal skills while in prison or join a gang, or perhaps the stain of a criminal record reduces the prospect of legitimate employment. Thus, the study of imprisonment’s effects on criminal defendants is intriguing, but it’s not testing deterrence or incapacitation, on which we have built a body of work with clear predictions.
Indeed, on Stevenson’s list only hot-spot policing is a clear example of changing constraints. It is perhaps not coincidental that hot-spot policing is one of the few interventions that Stevenson acknowledges “leads to a small but statistically significant decrease in reported crime in the areas with increased policing.” While I do not begrudge Stevenson her interpretation, other people shade the total evidence differently. Here, for example, is the Center for Evidence-Based Crime Policy, in my experience a rather tough-minded and empirically rigorous organization not easily swayed by compelling narratives:
As the National Research Council review of police effectiveness noted, “studies that focused police resources on crime hot spots provided the strongest collective evidence of police effectiveness that is now available.” A Campbell systematic review by Braga et al. comes to a similar conclusion; although not every hot spots study has shown statistically significant findings, the vast majority of such studies have (20 of 25 tests from 19 experimental or quasi-experimental evaluations reported noteworthy crime or disorder reductions), suggesting that when police focus in on crime hot spots, they can have a significant beneficial impact on crime in these areas. As Braga concluded, “extant evaluation research seems to provide fairly robust evidence that hot spots policing is an effective crime prevention strategy.”
Indeed, I argue that most of the programs that Stevenson shows failed, tried to change preferences while those that succeeded tend to focus on changing constraints. There are lessons for future policy and funding. Read the whole thing.
*Who’s Afraid of Gender?*
That is the title of the new Judith Butler book, focusing mostly on trans issues. To be clear, on most practical issues concerning trans, I side with the social conservatives. For instance, I don’t think trans women have a right to compete in women’s weightlifting contests. And I have not been happy with how many schools have been teaching about trans issues, due to social contagion effects that are larger than I would have expected. And yet — when it comes to the grounds of theory I think Butler is more right than wrong. This is a very good book, and in some critical ways a very libertarian book (again to be clear I think Butler is wrong about most other things). But on this issue — why so insist on such a rigid male-female set of binary categories? Why be so afraid of alternative, more flexible approaches? Why restrict our conceptual freedoms and ultimately our life practical freedoms in such a manner? Especially when a minority of people — admittedly a small minority but also much larger than the mere category of “trans” — will suffer greatly from such attitudes and such practices?
So I am happy to recommend this book, noting that not everyone will like it, to say the least. My main criticism is that Butler spends too much time with what I consider to be weaker views (e.g., the Pope), and not enough time with the more difficult problems concerning real and potential harms to children. Her neglect of the latter verges on the intellectually criminally negligent. And yet the key is to see that it is still a good and interesting book.
My excellent Conversation with Marc Rowan
Here is the video, audio, and transcript, taped in his Apollo office in NYC. Here is the episode summary:
Marc Rowan, co-founder and CEO of Apollo Global Management, joined Tyler to discuss why rising interest rates won’t hurt Apollo’s profitability, why liabilities have traditionally been the weak spot in insurance, why the concept of liquidity needs a rethink, the meaninglessness of the term “private credit”, what role crypto will play in American finance, why Marc bought a brutalist apartment, which country has beautiful new neighborhoods, what motivated Apollo’s office redesign, what he looks for in young hires, the different kind of decision-making required in debt versus private equity, the biggest obstacle to doing business in India, how university governance can be improved, what he’s learned from running restaurants, the next thing he’ll learn, and more.
And an excerpt:
COWEN: Now, how stable is all this as a political equilibrium? If you think about the four major banks, as you well know, there are very serious stress tests applied to them, capital requirements. The Fed is a major regulator. At least for insurance, it tends to be at the state level. One can reinsure through Bermuda. Capital requirements are very different. Competence of the state regulators arguably is lower than that of the Fed. Whether or not one wants more regulation — and generally, I don’t — but is this a stable situation? How’s it going to evolve?
ROWAN: First, I would have to correct almost everything you’ve said along the way to set the table for what I’m going to talk about. First, the difference between not so much the banking system and insurance, but the banking system and the investment marketplace. Let’s start with this — there are plenty of ways for investors to lose money. Investors can buy speculative stocks. They could buy the S&P. They can speculate in almost anything.
The making or losing of money is not, in and of itself, a systemically risky activity because, for good reason, we allow speculative investing every single day. Things go up, things go down. You can lose money in credit as well as in equity.
Now we come to mutual funds. If a mutual fund, which is daily liquid, owns credit, and investors want to get their money back, you’re right, price just adjusts. Mutual funds are not price guarantors. Are they regulated? Mutual funds are regulated. Are they disclosed and transparent? Yes, they’re disclosed and transparent. The holdings of a mutual fund are completely visible and they’re de-levered. Is that a risky activity because it moved out of the banking system and into a mutual fund? I don’t think so; I actually think it has de-risked. It’s made our economy and our financial system more resilient.
Now I’ll come to your question on political equilibrium. Insurance — if you just focus on insurance — has no federal guarantee, does not borrow short and lend long, has no access to the Fed, and does not do liquidity transformation or maturity mismatch, and they are forced to hold amounts of capital.
If you look — and I’ll give you a comparison just for us, not for the whole industry — who holds more capital, Athene our insurer as a percentage of assets or the typical bank? You would think the typical bank, but you would be wrong. We hold more capital per dollar of assets than anyone else. Who holds more investment-grade assets? Ninety percent of our book is investment-grade, the typical bank is two-thirds investment-grade.
COWEN: Sure, but that’s all time-sliced—
ROWAN: Let’s keep going.
COWEN: Money market funds have been a source of systemic risk, AIG has been —
ROWAN: I can’t tell you there’s not risks in the economy. We have a choice. We can have risk dispersed among lots of institutions, or we can have it concentrated in the government-backed, borrow-short, lend-long, government-guaranteed banking system.
Every time we disperse that risk, we make the system more resilient. If you want to focus on insurance, which is your question on political equilibrium, there’s more capital, there’s no ALM mismatch, there’s more investment-grade, and there is appropriate state-based regulation for institutions that do not have government guarantees or borrow from the Fed or do anything else.
Insurance is very slow-moving. We’re talking about, on average, 10-year assets. This is a very slow-moving process. Again, most of the issues that have happened in the insurance industry have not been asset issues. They’ve been liability issues, exactly the kind of thing that insurance-specialist regulation is designed to detect.
Recommended, and of course we talk about Marc’s higher ed campaign as well.
Genetic Insurance
Genetic testing identifies disease risk, enabling individuals to dodge environmental triggers, optimize treatments, and improve planning. Yet, the fear of increased insurance premiums deters many from undergoing tests. Genetic testing offers societal benefits but also presents significant distributional challenges. To address this, my 1994 paper proposed the idea of genetic insurance.
For a small fee genetic insurance would insure against the possibility of a positive test result. If the test came back positive the customer would be paid a large sum of money, enough to cover the expected costs of his disease or equivalently enough to allow him to purchase health insurance at the new risk premium. If the test turns out negative the customer would lose his genetic insurance fee but would gain the results of the test and also lower health insurance premiums. Those who have positive tests results would be paid enough money to pay their health care costs and would also benefit from being able to plan in accord with the test results. Under this proposal average insurance rates will fall and everyone will be made better off.\
Genetic insurance is insurance against changes in the cost of health insurance due to genetic information. John Cochrane would later generalize this idea to show that it’s possible to insure against changes in the cost of health insurance due to any new information. Cochrane called this time-consistent health insurance or health-status insurance; it’s a way of creating long-term health insurance contracts without binding an individual to a firm.
In an interesting paper, Helene Schernberg extends my 1994 paper. Schernberg shows that even if an individual has full-health insurance that can’t be taken away, there are other reasons to want genetic insurance. She focuses on the planning aspect. Genetic insurance could be used to shift consumption earlier, to better health states and thus improve life-time allocation.
Genetic testing could soon be a routine part of your medical journey. It offers insights into inherited disorders or susceptibility to various conditions. For example, if you are a woman with a BRCA mutation, you have a 55 to 72% lifetime risk of breast cancer.
… This suggests that genetic information is valuable while providing a theoretical argument in favor of genetic insurance. The mechanism is described in Tabarrok (1994): Individuals purchase genetic insurance before taking a genetic test, thus receiving a compensation upon being identified as a high-risk. Tabarrok (1994) relates this genetic insurance payment to the need to cover expensive health insurance premia. I show that it also relates to the fact that a temporally risk-averse individual wishes to insure against the lifetime utility losses she may experience when her health prospects deteriorate after taking a genetic test.
Random Admissions Above the Bar
Jon Klick, Professor of Law at the University of Pennsylvania Carey Law School (and a distinguished GMU econ grad), argues that Penn should “abandon the fiction that holistic evaluation is anything more than a way to hide discretion.”
Instead, Penn should set a standardized test score floor and then randomly choose its admittees from the pool of applicants meeting that requirement. That’s it; that’s the application process. Setting a floor helps make sure the matriculating class has the requisite cognitive ability to succeed but otherwise limits concerns about ideology being privileged over academic merit. Random selection (as opposed to just taking the highest test scores) recognizes that standardized tests may be too blunt to make fine distinctions among students and generates a campus population that approximates the population of smart young adults along many more dimensions than we currently consider.
Faculty have largely abandoned the job of admitting students to a professional class of admissions officers. A standardized test floor would simplify the process for universities and reduce the rent-seeking scramble of high-school students to add yet more extra-curricular eye-candy to their highly-crafted personal statements.
Why I don’t like Fischer Random 960
As you may know, a major tournament is going on right now, based on a variant of Fischer Random rules, sometimes misleadingly called “Freestyle.” Subject to some constraints, the pieces are placed into the starting position randomly, so in Fischer Random chess opening preparation is useless. You have to start thinking from move one. This is a big advantage in a game where often the entire contest is absorbed into 20-30 moves of advance opening preparation, with little or no real sporting element appearing over the board.
Yet I don’t like Fischer Random, for a few hard to fix reasons:
1. Most of the time, at least prior to the endgame, I don’t understand what is going on. Even with computer assistance. I could put in five to ten minutes to study the position, and get a sense of the constraints, but as a spectator I don’t want to do that. As a relatively high opportunity cost person, I am not going to do that.
1b. Classical chess sometimes generates positions where one does not really understand what is going on. Then it is thrilling, precisely because it is occasional. A perpetual “fog of war,” as we receive in Fischer Random, just isn’t that thrilling. In the opening, for instance, I don’t even know if one player is attempting “a risky strategy.” I am not sure the player knows either. And I don’t feel that watching more Fischer Random would change that, as there are hundreds of different possible opening positions, mostly with different properties.
2. The younger players have a notable advantage, because they are better at calculating concrete variations and rely less on intuition. (We already see this in the current results.) Experience is simply worth much less in this very novel format. For any one tournament, that is an interesting intrigue. But over time it is a bore, as if only rookies and sophomores could win NBA titles. In fact what spectators enjoy watching is Steph Curry going up against Lebron James, or the analogs in chess. We want to see Magnus meet Fabiano again, not watch two eighteen-year-olds slug it out. Sorry, Pragga! You’ll have your day in the sun.
3. Fischer Random cuts off chess from the rest of its history. That is otherwise a big advantage of chess over many other games and contests. I like seeing that a player’s move is connected to say an idea from Tal in the early 1960s, or whatever. I like “Oh, the Giuoco Piano is making a comeback at top levels,” or “today’s players are more willing to sacrifice the exchange than in the 1970s,” and so on.
4. I get frustrated seeing all those Kings sitting on F1, not able to castle in the traditional sense. There are rules for castling in Fischer Random, but it feels more like pressing the “hyperspace” button in the old Space Invaders video game than anything else. Who wants to see a Knight on C1 for twenty-five moves? Not I.
5. I agree that current opening prep is insanely out of control. I am fine with the remedy of 25-minutes per player Rapid games, or anything in that range, with increment of course. Those contests are consistently exciting and they are not forced draws (you can play something weird against the Petroff, or to begin with) nor are they dominated by prep.
6. If you don’t want to watch Rapid, I would rather randomize the first few opening moves than the placement of the pieces. If you don’t control the first three (seven? ten?) first moves, once again opening prep becomes much tougher. So what if some games start with 1. b4 b6? The resulting position is still playable for both sides and furthermore it still makes intuitive sense to chess spectators. Of course the computers would restrict this randomization to sequences that still are playable for both sides. The very exact nature of current chess opening prep in fact implies you need only a very small change in the rules to disrupt it, not the kind of huge change represented by Fischer Random.
That all said, I am all for experimentation, it’s just that some of them should be strangled in the crib.
An important new paper on the costs of climate change
Forthcoming in ReStud, I haven’t had the chance to read it yet:
To analyze climate change mitigation strategies, economists rely on simplified climate models — so-called climate emulators — that provide a realistic quantitative link between CO2 emissions and global warming at low computational costs. In this paper, we propose a generic and transparent calibration and evaluation strategy for these climate emulators that is based on freely and easily accessible state-of-the-art benchmark data from climate sciences. We demonstrate that the appropriate choice of the free model parameters can be of key relevance for the predicted social cost of carbon. The key idea we put forward is to calibrate the simplified climate models to benchmark data from comprehensive global climate models that took part in the Coupled Model Intercomparison Project, Phase 5 (CMIP5). In particular, we propose to use four different test cases that are considered pivotal in the climate science literature: two highly idealized tests to separately calibrate and evaluate the carbon cycle and temperature response, an idealized test to quantify the transient climate response, and a final test to evaluate the performance for scenarios close to those arising from economic models, and that include exogenous forcing. As a concrete example, we re-calibrate the climate part of the widely used DICE-2016, fathoming the CMIP5 uncertainty range of model responses: the multi-model mean as well as extreme, but still permissible climate sensitivities and carbon cycle responses. We demonstrate that the functional form of the climate emulator of the DICE-2016 model is fit for purpose, despite its simplicity, but its carbon cycle and temperature equations are miscalibrated, leading to the conclusion that one may want to be skeptical about predictions derived from DICE-2016. We examine the importance of the calibration for the social cost of carbon in the context of a partial equilibrium setting where interest rates are exogenous, as well as the simple general equilibrium setting from DICE-2016. We find that the model uncertainty from different consistent calibrations of the climate system can change the social cost of carbon by a factor of four if one assumes a quadratic damage function. When calibrated to the multi-model mean, our model predicts similar values for the social cost of carbon as the original DICE-2016, but with a strongly reduced sensitivity to the discount rate and about one degree less long-term warming.
The social cost of carbon in DICE-2016 is oversensitive to the discount rate, leading to extreme comparative statics responses to changes in preferences.
That is the abstract from Doris Folini, Aleksandra Friedl, Felix Kübler, and Simon Scheidegger,
Friday assorted links
1. How the president of Columbia University avoided much of the current mess (NYT). She also is an economist. And part of how Harvard screwed up the tactics on the PR side.
2. Profile of Stevenson and Wolfers.
3. A typology of who is easiest and hardest to troll on-line. For instance: “People who are focused on economic issues are harder to troll. People who care primarily about social issues are easier to troll.”
4. Scott Sumner on my macro podcast with David Beckworth.
5. A claim that NYT will lose their copyright case. And Rohit. And Kevin Fischer. So far Open AI is favored in the betting markets.
The Sullivan Signal: Harvard’s Failure to Educate and the Abandonment of Principle
The current Harvard disaster was clearly signaled by earlier events, most notably the 2019 firing of Dean Ronald Sullivan. Sullivan is a noted criminal defense attorney; he was the director of the Public Defender Service for the District of Columbia and he is the Director of the Criminal Justice Institute at Harvard Law School, he advised President Obama on criminal justice issues, he represented the family of Michael Brown. He and his wife were the first black Faculty Deans in the history of the college.
Controversy erupted, however, when Sullivan joined Harvey Weinstein’s legal defense team. Student protests ensued. The students argued that they couldn’t “feel safe” if a legal representative of a person accused of abusing women was also serving in a role of student support and mentorship. This is, of course, ridiculous. Defending an individual accused of murder does not imply that a criminal defense attorney condones the act of murder.
Harvard should have educated their students. Harvard should have emphasized the crucial role of criminal defense in American law and history. They should have noted that a cornerstone of the rule of law is the presumption of innocence and the right to a fair trial, irrespective of public opinion.
Harvard should have pointed proudly to John Adams, a Harvard alum, who defied popular opinion to defend hated British soldiers charged with murdering Americans at the Boston Massacre. (If you wish to take measure of the quality of our times it’s worth noting that Adams won the case and later became president—roughly equivalent to an attorney for accused al-Qaeda terrorists becoming President today.)
Instead of educating its students, Harvard catered to ignorance, bias and hysteria by removing both Sullivan and his wife from their deanships. Harvard in effect endorsed the idea, as Robby Soave put it, that “serving as legal counsel for a person accused of sexual misconduct is itself a form of sexual misconduct, or at the very least contributes to sexual harassment on campus.” Thus Harvard tarred Sullivan and his wife, undermined the rule of law and elevated the rule of the mob. Claudine Gay, then Dean of the Faculty of Arts and Sciences, contributed to the ignorance, bias and hysteria. (It’s also notable, that Sullivan also criticized Harvard’s handling of the investigation of Roland Fryer as being “deeply flawed and deeply unfair.” This may have been Sullivan’s real sin, as the investigation of Fryer was under Dean Claudine Gay.)
Thus, we see in the Sullivan episode disregard for free speech, unprincipled governance in which different rules are applied to different actors in similar situations, and a bending to the will of the mob, all issues which have repeated themselves under the Gay regime. Sad to say, however, that these flaws were not so much ignored at the time as lauded.
Harvard followed the mob and when the mob turned and the season changed it had left itself no defense.
Addendum: See also Tyler, My thoughts on the Harvard mess.
Why France is underrated
That is the topic of my latest Bloomberg column, here is one bit:
Since the West European economic boom ended in the 1970s, the French civil service has been at best a mixed blessing. French administrators have gotten a lot done, reflecting their impeccable education and internal culture. But they have also helped to make the French economy overly static and too reliant on bureaucracy. A lazier, less activist civil service might have been better.
Fast forward to 2023. War and conflict are now more common on the global scene, a trend that shows no signs of abating. Populist governments are on the rise, and China and Russia are active and restless. None of those problems is easy to solve, and they all require greater involvement from the public sector. Nations with high-quality leadership and civil-service traditions will stand a better chance of navigating the turmoil.
So the bureaucracy that was once a hindrance to France may now turn out to be a comparative advantage. And at a time when governance seems to be deteriorating around the world, Macron continues to have a reputation as a relatively responsible leader.
This year has shown how this advantage plays out. Post-pandemic France has been a bit of a mix, with soaring energy prices, inflation, rising interest rates, continuation of the Ukraine war, labor strikes and protests, and a variety of European migration crises. Yet France avoided a credit downgrade and the French economy continued to create more jobs. Performance has hardly been perfect and the risk of recession remains, but France has done better than might have been expected 18 months ago.
I also consider the relatively successful French start-up scene, including in AI.
What is the political orientation of GROK?
The story is complicated, in any case it is not what you might think. It is often not so different from ChatGPT, albeit with many caveats and qualifications, including about the tests themselves. From David Rozado:
I think it is clear that Grok’s answers to questions with political connotations tend to often be left of center.
Model this…
The resurgence of crypto
Crypto and bitcoin, among their other uses, are Rorschach tests for commentators. As these institutions evolve, are you capable of changing your mind and updating in response to new data? Sadly, many people are failing that test and instead staking out inflexible ideological ground.
Bitcoin prices are now in the range of $44,000, and the asset has more than doubled in value this year. Perhaps more surprisingly yet, NFT markets are making a comeback. Many of the older NFT purchases remain nearly worthless, but interest in the asset class as a whole has perked up.
These developments should induce us to reevaluate crypto in a positive direction. If in the past you have argued that crypto is a bubble, can it be the bubble is back yet again? Typically bubbles, once they burst, do not return in a few years’ time. You still will find Beanie Babies on eBay, but they are not surrounded by any degree of excitement. Similarly, the prices of Dutch tulip bulbs appear normal and well-behaved, as that bubble faded out long ago. Bitcoin, in contrast, has attracted investor interest anew time and again.
It is time to realize that crypto is more like a lottery ticket than a bubble or a fraud, and it is a lottery ticket with a good chance of paying off. It is a bet on whether it will prove possible to build out crypto infrastructure as a long-term project, integrated with mainstream finance. If that project can succeed, crypto will be worth a lot, probably considerably more than its current price. If not, crypto assets will remain as a means for escaping capital controls and moving money across borders, or perhaps to skirt the law with illegal purchases.
What might such an infrastructure look like? To make just a few guesses, your crypto wallet might be integrated with your Visa and other credit cards (perhaps using AI?). Fidelity, Vanguard, large banks and other mainstream financial institutions will allow you to hold and trade crypto, just as you might now have a money market fund. Crypto-based lending could help you invest in high-return, high-risk overseas opportunities with some subset of your portfolio. Stablecoins will circulate as a form of “programmable money,” and they will circulate on a regular and normal basis; such a plan was just initiated by the French bank SocGen. On a more exotic plane, AI-based agents, denied standard checking accounts, might use crypto to trade with each other.
I’m not arguing such scenarios are either good or bad, simply that the market sees some chance of them happening. And they are far more than “crypto is a fraud or a bubble.”
Whether that infrastructure will meet market and regulatory tests is difficult to forecast. It has never happened before, and thus no one can claim to be a true expert on the matter. Thus your opinion of crypto should be changing each and every day, as you observe fluctuations in market prices and other changes in the objective conditions.
In this perspective, there are some pretty clear reasons why the price of bitcoin is higher again. First, real interest rates have been falling, and fairly rapidly. Ten-year rates are now closer to four per cent than to five per cent. Since crypto financial infrastructure is a long-term project that won’t be completed in a year or two, lower real interest rates raise the value of that project considerably. The value of bitcoin rises as well, just as many other long-term assets rise in value with lower real interest rates. And if interest rates continue to fall, crypto prices could easily continue to rise.
The resurgence of crypto likely has other causes. The story of SBF is receding from the headlines with the end of his trial. That makes crypto look less scammy. On the regulatory side the United States did not try to shut down Binance, in spite of alleged scandals at the exchange. That is the regulators signaling they are not going to try to destroy crypto. Soon the SEC may approve spot bitcoin ETFs, which would make it easier and safer to invest in that asset. Nor have state laws popped up that might be trying to shut down crypto markets. Finally, the election of Donald Trump as President has not faded as a possibility, and in the past Trump has been supportive of crypto. Overall, the tea leaves are signaling that the U.S. government is making its peace with crypto, or at least with some parts of the market.
So with crypto the most important thing is to keep an open mind. As of late, events have been doing much to signal open and growing possibilities, rather than a world where crypto is shut down.
*Saints, Scholars, and Schizophrenics*
The author of this excellent book is Nancy Scheper-Hughes, and the subtitle is Mental Illness in Rural Ireland. One of the most interesting themes of this book is how life in rural Ireland became so “de-eroticized,” to use her word. Here is one bit:
Marriage in rural Ireland is, I suggest, inhibited by anomie, expressed in a lack of sexual vitality; familistic loyalties that exaggerate latent brother-sister incestuous inclinations; an emotional climate fearful of intimacy and mistrustful of love; and an excessive preoccupation with sexual purity and pollution, fostered by an ascetic Catholic tradition. That these impediments to marriage and to an uninhibited expression of sexuality also contribute to the high rates of mental illness among middle-aged bachelor farmers is implicit in the following interpretations and verified in the life history materials and psychological tests of these men.
And:
In the preceding pages I have drawn a rather grim portrait of Irish country life, one that differs markedly from previous ethnographic studies. Village social life and institutions are, I contend, in a state of disintegration, and villagers are suffering from anomie, of which the most visible sign is the spiraling schizophrenia. Traditional culture has become unadaptive, and the newly emerging cultural forms as yet lack integration. The sexes are locked into isolation and mutual hostility. Deaths and emigrations surpass marriages and births.
Recommended. This seminal book, republished and revised in 2001, but originally from the 1970s, would be much harder to write and publish today.
Wednesday assorted links
1. Jeff Holmes of Mercatus explains in detail “How we built econgoat.” In this case “we” means he!
2. China Foreign Direct Investment fact of the day.
3. The first full-time Taylor Swift reporter what would Adam Smith say?
4. Why protests in Panama right now?
5. Which journals are cited the most by central banks?
6. Iran is now decoupling from Hamas (FT).