Results for “age of em”
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What Export-Oriented America Means

by  Tyler Cowen in

That is the title of my new 4000 or so word essay for The American Interest.  Excerpt:

At least three forces are likely to combine to make the United States an [increasing] export powerhouse.

First, artificial intelligence and computing power are the future, or even the present, for much of manufacturing. It’s not just the robots; look at the hundreds of computers and software-driven devices embedded in a new car. Factory floors these days are nearly empty of people because software-driven machines are doing most of the work. The factory has been reinvented as a quiet place. There is now a joke that “a modern textile mill employs only a man and a dog—the man to feed the dog, and the dog to keep the man away from the machines.”

The next steps in the artificial intelligence revolution, as manifested most publicly through systems like Deep Blue, Watson and Siri, will revolutionize production in one sector after another. Computing power solves more problems each year, including manufacturing problems.

It’s not just that Silicon Valley and the Pentagon and our universities give the United States a big edge with smart machines. The subtler point is this: The more the world relies on smart machines, the more domestic wage rates become irrelevant for export prowess.

…The second force behind export growth will be the recent discoveries of very large shale oil and natural gas deposits in the United States…

That brings us to the third reason why America is likely to return as a dominant export power: demand from the rapidly developing countries, and not just or even mainly demand for fossil fuel. As the developing world becomes wealthier, demand for American exports will grow. (Mexico, which is already geared to a U.S.-dominated global economy, is likely to be another big winner, but that is a story for another day.)

In the early stages of growth in developing nations, importers buy timber, copper, nickel and resources linked to construction and infrastructure development. Those have not been U.S. export specialties, and so a lot of the gains from these countries’ growth so far have gone to Canada, Australia and Chile. Usually American outputs are geared toward wealthier consumers and higher-quality outputs, which is what you would expect from the world’s wealthiest and most technologically advanced home market. To put it simply, the closer other nations come to our economic level, the more they will want to buy our stuff.

That’s just the introduction.  The rest of the essay considers: “how will this shape American foreign policy, jobs, education, politics and poverty?”  For instance:

Some of the new technological and export-related breakthroughs will consist of making education and health care more affordable, often through software and smart machines that bypass the current credentialized control of those fields. Imagine getting an online medical diagnosis from a smart machine like IBM’s Watson, or learning mathematics from an online MITx program or one of its successors. The American poor and lower middle class will have considerably greater opportunities, at least if they are savvy with information technology and disciplined enough to take advantage of these new free or cheaper goods. Of course, this will not come close to helping everybody. These internet tools reward the self-motivated, who will be disproportionately well educated, even if their parents lack higher education, wealth and connections. Many of the rest will still fall by the wayside.

Do read the whole thing.  You can think of it as some current thoughts on what it would look like to climb out of The Great Stagnation.

Addendum: Reihan adds excellent comments.

The IKEA-ization of life?

by  Tyler Cowen in

The people who run the Swedish home-furnishings behemoth are launching a bold push into the business of designing, building and operating entire urban neighbourhoods. Where once they placed a couch in a living room, the Swedes now want to place you and 6,000 neighbours into a neglected corner of your city, design an entire urban world around you, and Ikea-ize your lives. Their bold, high-concept notion of an urban ’hood could be an important solution to the housing-supply shortages that plague many large cities – but it could take some getting used to.

…In a model that is the norm in Sweden and other parts of continental Europe, but alien to English-speaking countries, this will be an all-rental private neighbourhood, run and overseen by a private company.

Here is more, that is for England, and for the pointer I thank Michelle Dawson.

The cost of development

by  Tyler Cowen in

From Angus:

The indefatigable Michael Clemens reports that a new Millennium Village project in Ghana plans to spend a minimum of $12,000 per household in the project. This is something north of 30 times higher than average annual household income in the region where the project is going.

I have no doubt that many of these households will be “lifted out of poverty” during the years when these expenditures are made.

But, I don’t think it can be called development.

Clemens proposes an interesting cost -benefit hurdle for the MVP by noting that if the money was placed in a trust that earned 5%, each household would receive $600 / year FOREVER (which would be triple the average annual household income in the region). He asks if the MVP method of spending the money will permanently triple the average incomes of these households.

The new casinos and how they induce you to spend money

by  Tyler Cowen in

From Jonah Lehrer.

Using the Panoscope method, Finlay compared the mental effects of classic casinos, with low ceilings and a mazelike layout, to those of casinos designed by Thomas. Subjects surrounded by footage of Thomas’s interiors exhibited far higher levels of what Finlay terms mental “restoration”—that is, they were much more likely to say that the space felt like a “refuge” and reduced their stress level. They also manifested a much stronger desire to gamble. In every Panoscopic matchup, gamblers in Thomas’s rooms were more likely to spend money than those in Friedmanesque designs. Although subjects weren’t forced to focus on the slot machines, the pleasant atmosphere encouraged them to give the machines a try.

Finlay refers to Thomas’s environments as “adult playgrounds,” since they provide an atmosphere in which people are primed to seek pleasure. “These casinos have lots of light and excellent way-finding,” she told me. “They make you feel comfortable, of course, but they also constantly remind you to have fun.”

…Thomas’s designs have a particularly marked effect on those guests who normally don’t gamble. The seduction of his décor, perhaps, is that it doesn’t feel like a gambling environment. The beauty is a kind of anesthesia, distracting people from the pain of their inevitable losses.

I just noticed exactly this from my trip yesterday to the newer complexes.  While I felt no temptation to gamble, I found them far more pleasant than the traditional casinos, and if I were going to gamble, I would do it there.  My refuge I found in Jose Andres’s restaurant China Poblano (in the Cosmopolitan), which I recommend if you are also here for the APEE meetings.

A future without ACA?

by  Tyler Cowen in

As predicted by Ezra Klein:

I think that path would look something like this: With health-care reform either repealed or overturned, both Democrats and Republicans shy away from proposing any big changes to the health-care system for the next decade or so. But with continued increases in the cost of health insurance and a steady erosion in employer-based coverage, Democrats begin dipping their toes in the water with a strategy based around incremental expansions of Medicare, Medicaid, and the Children’s Health Insurance Program. They move these policies through budget reconciliation, where they can be passed with 51 votes in the Senate, and, over time, this leads to more and more Americans being covered through public insurance. Eventually, we end up with something close to a single-payer system, as a majority of Americans — and particularly a majority of Americans who have significant health risks — are covered by the government.

One question is whether having both Medicaid and Medicare (and other programs) function as a “single payer” system, but that is arguably semantics.  In any case the American system is likely to remain fragmented.  I am also not sure if this process would take a decade, as sometimes a single election cycle can feel like an eternity.  In any case, I see that as likely a superior outcome to the current ACA track.  I have never thought that a mandate is workable in a fragmented system with employer-based care and high health care costs and high income inequality.

I also would not be surprised to see Romney, if elected, and if ACA is struck down, resurrect some version of the McCain health care plan with tax credits, maybe some more federalism, and less of a Medicaid extension than was in ACA.  I don’t know if that would pass but I suppose I think not.  I also don’t see much hope for a much-needed “supply-side” competitiveness plan.

Good overview of the legal battle over eBooks

by  Tyler Cowen in

You will find it here, by Tim Carmody, and there are more issues involved than I had thought:

Knebel says there are three major points of law at stake in both the class-action suit and the Justice Department investigation against Apple and the five publishers:

  1. Whether and how the agency model applies to virtual goods;
  2. Whether Apple and publishers engaged in a “hub-and-spoke” conspiracy or simply “conscious parallelism”;
  3. The status of the “most-favored nation” clause, common to many legal contracts today, which Apple used to ensure that books could not be sold elsewhere at a lower price than in the iBooks store.

On the latter point there is this:

The last point at issue is Apple’s agreement with publishers that their books be sold at the same price to all other competitors. In contract law, this is called “the most-favored nation” clause.

“The most-favored nation clause has been suspicious under antitrust laws for years,” says Knebel. But at the same time, it’s extraordinarily common. “Most law firms, including mine, will agree to charge one client the lowest possible price for the same services,” he says.

So even though Apple’s insistence that HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc. and Simon & Schuster Inc all charge the same prices for their books at all e-book stores is what seems on its face the fishiest about the whole affair, it’s actually the part that, in the absence of a conspiracy, is most hallowed by practice. A change in its status under federal antitrust law would require the largest revision to current legal agreements, in industries widely separated from publishing and software.

My view is simple, namely that in the face of massive disruptive innovation, antitrust law rarely does a good job.  The law should stay out of this.  In any case the prices of books have been falling for some time.

What is the causal link between parental income and education?

by  Tyler Cowen in

…the connection between income and student performance “is no less true in the Age of Obama than it was in the Age of Pericles.” But, he points out, most of the connection is not causal, but due to other factors.  He cites a study by Julia Isaacs and Katherine Magnuson (Brookings Institution, 2011), that examines an array of family characteristics – such as race, mother’s and father’s education, single parent or two-parent family, smoking during pregnancy – on school readiness and achievement.  The Brookings study finds that the distinctive impact of family income is just 6.4 percent of a standard deviation, generally regarded as a small effect.  In addition, Peterson calls attention to earlier research by Susan Mayer, former dean of the Harris School at the University of Chicago, which also found that the direct relationship between family income and education success for children varied between negligible and small.

Responding to Ladd’s claim that the gap in reading achievement between students from families in the lowest and highest income deciles is larger for those born in 2001 than for those born in earlier decades, Peterson points out that the achievement gap between income groups was growing at exactly the same time the federal government was rapidly expanding services to the poor – Medicaid, food stamps, Head Start, housing subsidies, and many other programs.

“A better case can be made that any increase in the achievement gap between high- and low-income groups is more the result of changing family structure than of inadequate medical services or preschool education,” Peterson says.  In 1969, 85 percent of children under the age of 18 were living with two married parents; by 2010, that percentage had declined to 65 percent.  The median income level of a single-parent family is just over $27,000 (using 1992 dollars), compared to more than $61,000 for a two-parent family; and the risk of dropping out of high school increases from 11 percent to 28 percent if a white student comes from a single-parent family instead of a two-parent family.  For blacks, the increment is from 17 percent to 30 percent, and for Hispanics, the risk rises from 25 percent to 49 percent.

That is from Harvard’s Kennedy School, from Paul Peterson.  Here is more, and for the pointer I thank Ilya Novak.

Puerto Rico hypergamy fact of the day

by  Tyler Cowen in

In Puerto Rico, women already outearn men — in 2009, women’s wages were 103 percent of men’s.  In other regions, women are close to catching up: in the District of Columbia, with a high number of federal workers and a high proportion of minorities, women earn 88 percent of what men do…Among 25- to 34-year-olds working full-time, women’s earnings were 91 percent of men’s in 2010, up from 68 percent in 1979.

That is from Liza Mundy’s The Richer Sex: How the New Majority of Female Breadwinners is Transforming Sex, Love, and Family.  It is an interesting book, though it does not always focus on the questions that I would.  The core thesis is that women will learn to marry down and men will learn to marry up.

The text has subtitles like “Women Will Have to Learn to Appreciate New Qualities in Men.”

Here is a paper on “the end of hypergamy,” it has fragments like “we estimate a female hypergamy parameter, following Mare’s example (1991),” plus it introduces me to the word “hypogamy.”  The key sentence I suppose is this:

This means that the gender gap in education accounts for almost 80% of the cross-country and within country variance in observed hypergamy.

And it is stated:

According to our results, if current trends in education are to continue the end of hypergamy is near.

That would be for recorded marriages, but at what rate of marriage might such an equalization take place?  This paper on hypergamy suggests that marriage rates are falling predominantly for the less educated women; Betsey Stevenson has work on related topics.  It is a puzzle for the extreme hypergamy theorists why the rate of marriage for educated women has not fallen lower than it has.

Random thoughts on hysteresis

by  Tyler Cowen in

Let’s say you believe labor market unemployment hysteresis is strong, and you also believe that for political reasons (for better or worse) further monetary or fiscal stimulus is unlikely.  Which policies should you be more likely to support?  Should one be more inclined to limit unemployment insurance, ax the minimum wage, expand EITC, and in general decrease labor market regulation and mandates?  Should one be more likely to favor direct government hiring of the unemployed, if only at “make work” tasks at low wages, and less likely to favor projects run through third-party intermediaries, which may or may not focus on hiring the unemployed?  Let’s abolish Davis-Bacon, yes?  Let’s move away from European models, yes?

I thank J. for a useful comment on this matter.

The Golden Rule of Organ Donation

by  Alex Tabarrok in

Here is Joseph Roth, president and CEO of New Jersey Organ and Tissue Sharing Network:

Caseworkers from our organization recently went to the hospital to visit the family of a woman who suffered a stroke. The woman was dead, but machines continued to keep her organs functioning. She was an ideal candidate to be an organ donor. Her husband, it turns out, was on the waiting list to receive a heart.

Our caseworkers asked the husband if he would allow his wife’s organs to be donated. The husband, to the shock of our caseworkers, said no. He simply refused. Here was a man willing to accept an organ to save his own life, but who refused to allow a family member to give the gift of life to another person.

…Cases like this are rare, thankfully, but are nonetheless troublesome.

Roth continues:

Our proposal — we call it the Golden Rule proposal — would permit health insurers in New Jersey to limit transplant coverage for people who decline to register as organ donors. It would be the first such law in the nation. No one would be denied an organ. But under the proposal, insurers could limit reimbursement for the hospital and medical costs associated with transplants of the kidney, pancreas, liver, heart, intestines and lungs.

I am not in favor of messing with the insurance system for this purpose but have argued for a more direct approach. Under what I call a “no-give, no-take” rule if you are not willing to sign your organ donor card you go to the bottom of the list should you one day need an organ. Israel recently introduced a version of no-give, no take which gives those who previously signed their organ donor cards points pushing them up the list should they need an organ transplant–as a result, tens of thousands of people rushed to sign their organ donor cards.

Hat tip to David Undis whose excellent group Lifesharers (I am an adviser) is implementing a private version of no-give, no take in the United States.

Here is my piece on Life Saving Incentives and here are previous MR posts on organ donation.