Category Archives: Growth Causes and Consequences

Eric Weinstein and Tyler Cowen, partially annotated

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The podcast is here.

For the first hour, it reminds me of conversations I occasionally had at home as a teenager, in which I would climb onto an intellectual ledge and my father would try to gently talk me down. Here, Tyler plays the role of my father.

At one hour and six minutes, Tyler himself climbs onto a ledge. In talking about the stagnation that began in 1973, he speaks of the “feminization” of our society.

One possibility is that he was thinking, “Our society reduced its rate of risk-taking and novelty-seeking. Women tend to like risk-taking and novelty-seeking less than men. Therefore, it is fair to speak of feminization.”

The first two statements are controversial, but suppose that they are true. The conclusion still does not follow. We need some link that connects the premises to the conclusion at the level of society. Did women, starting around 1973, acquire significant power to direct corporate investment and/or the regulatory apparatus? Or did men in these positions lose their, er, manhood around this time? I don’t think that’s a ledge you want to stand on.

Another interpretation of “feminization” works much better but is somewhat less interesting. That is, we can say that because of the decline of manufacturing and the rise of the New Commanding Heights industries of education and health care, employment opportunities for women improved while those for men worsened. At the same time, widening the door for women to enroll in universities was like opening up professional sports to African-Americans in that the formerly-excluded were able to compete effectively and some of the formerly-protected were left worse off.

This latter interpretation allows “feminization” to explain why earnings of the median working-age male have shown at best disappointing growth over the past 35 years. But it does not work as a broad sociological explanation for other phenomena, such as a slowdown in scientific discovery or an apparent decline in the productivity of civil engineering.

About 15 minutes later in the podcast, Eric tries to interest Tyler in a comparison of mainstream and heterodox thinkers. Tyler will have none of it. He says that we are the last generation that will understand the distinction. His view appears to be that institutional brand names, such as “New York Times” or “Harvard Economics Department” will not impress the Internet generation.

So where does that lead? What becomes of what Eric would call society’s “sense-making apparatus”? One scary scenario is that it doesn’t get any better than it is today, so that the loss of the information Leviathans with which we grew up will lead to a sort of Hobbesian “war of all against all.” A more optimistic scenario would be a “cream rises” outcome in which to attain broad credibility you have to rise to a very high level of intellectual rigor. Think of Scott Alexander as an example.

Scientific progress and institutions

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1. Institutions solve the problem of “phase change” as groups get larger than the Dunbar Number, of about 150 people. Below that number, you don’t need market prices, organization charts, written reports, written rules, and other formal apparatus. Somewhere around or above that number, you do.

2. Historical examples of scientific institutions that made a difference: Royal Society, Encyclopedie, German universities, Manhattan Project, Bell Labs, Institute for Advanced Studies, Xerox PARC, DARPA, Internet Engineering Task Forces, Human Genome Project.

3. But institutions can be a problem as well as a solution. In his forthcoming book, Yuval Levin notes that institutional leaders can abuse their power. We don’t hear much about the scientific labs and projects that are dysfunctional, but I would guess that abuse of power by leaders plays a role in such cases. The other problem is that individuals focus on exploiting institutions for personal gain rather than contributing to the mission of the institution. I would argue that the NSF and the Federal grant-making process have been looted like this in recent decades.

4. There may be a “narrow corridor” in which scientific progress in an area requires some institutional structure but progress is inhibited by too much structure or the wrong structure.

5. How do you reform institutions or build better ones? My guess is that reform requires replacing a cadre of leaders with Young Turks. That probably is hard to do with something like NSF. It might be easier to do–but still quite difficult–at a tech firm or a pharmaceutical company.

6. My guess is that building new and better scientific institutions requires a fortunate combination of compelling mission and visionary leadership among the founding team. The leaders are sometimes strong scientists (e.g., Oppenheimer) but often strong scientists are not skilled at bringing out the best in others.

7. What would be a compelling vision today? Improving human longevity? Improving human cognition? Augmented reality sufficient to substitute for in-person meetings?

8. And how do you develop skill at choosing the founder or founders for scientific institutions? What qualities do great institutional founders have?

Creating a new index

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Tyler Cowen proposes several.

Indexes are informative, easy to digest, and remarkably well-suited for social-media sharing. At their best, they can actually be fun. Creating more of them is one way social scientists can satisfy the growing public hunger for knowledge and accountability.

In a blog post, he asks,

Which indices do you wish for?

I already have an answer.

I propose that, instead of using GDP or overall subjective happiness, we should use occupational satisfaction as the broad indicator of economic performance. Occupational satisfaction is the core economic component of happiness. Unlike GDP, which is rooted in a materialistic understanding of value, occupational satisfaction reflects the understanding that value is subjective.

That is from two years ago.

Cultures of conventional failure

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In this essay, I will offer a theory of slow progress based on the maxim, “It is often easier to fail conventionally than to succeed unconventionally.” My claim will be that in health care, education, and construction/infrastructure, the consuming public is more receptive to conventional failure than unconventional success. This is less the case in other realms, so progress is faster in those realms. We are willing to try ride-sharing apps or airbnb, but no middle-class parent wants to tell their peers that their kids are not going to an established college.

In the Zuckerberg-Cowen-Collison conversation, Zuckerberg repeatedly asks why costs are high in health care, education, and rent.

So you were talking a minute ago about the explosion in costs in healthcare. And right now, I think one of the defining aspects of the moment that we’re in is a lot of the basic costs of living for a lot of people have just increased a lot. . .things that matter so much like healthcare, education, rent–those things have generally just increased, right? And the normal dynamics that you’d be hoping would play out aren’t. And to some degree, for the quality of life for a lot of people, the increases in those costs may even be dwarfing all the other advances in everything else

1. As I was listening, I was frustrated, because I wanted to point to my essay What Gets Expensive, and Why?. There I include the Baumol effect, but note my critical comments on the attempt by Alex Tabarrok to put it all on the Baumol effect.

2. Patrick notes that our ability to do large construction projects has declined over the past 70 years or so.

it’s very clear that our productivity has fallen off a cliff and for reasons that we can be pretty sure are not that it’s getting intrinsically harder. And so, for example, when New York decided to build the subway in 1900…4.7 years later, they opened 23 subway stations, and in 2019 dollars, they spent just over a billion dollars doing so. … When New York decided to build the Second Avenue subway in the year 2000, 17 years later they opened three stations and they spent $4 1/2 billion doing so. And so our productivity in subway construction has, at least in New York, decreased by a factor of 40. … California, you have high speed rail where… when France decided to build the TGV, its high speed rail, it opened the first line after five years. California started pursuing high speed rail 11 years ago. They forecast–we forecast–being finished in 2033. So we project a 25-year project, but of course, that’s a projection. It’ll probably end up being much longer

3. I already gave away my instinct on this when I wrote,

my inclination is to focus on broader cultural values. The enemies of progress are fear of novelty and envy of success. My thinking is that when those enemies hold sway, progress will be slow. When those enemies are weak, progress will be rapid.

I agree with Tyler that there is a lack of will. In the case of infrastructure projects or housing development, we now have a culture of conventional failure. Look at how hard it has been for Google to try to find a city that will allow it to experiment with a city of the future. Cities are only willing to approve politically correct development–bicycle lanes, as opposed to dedicated lanes for self-driving cars.

4. Patrick says,

empirically the entry costs of forming a new university are really high, but that’s not because there’s a kind of formal toll you have to pay. It’s not like zoning where there are deliberate, specific legal restrictions that prohibit you from doing so. But just as a practical matter sociologically, institutionally, accreditation dynamics, who knows, it’s apparently almost impossibly difficult to create a successful new university today.

Again, that is because we prefer conventional failure to unconventional success. I recently was hosted by a family in Texas. The oldest daughter was in the midst of applying to college. I wanted to scream “No! Don’t do it!” I do not believe that she is ready to go to college. I think she would be much better off just working at a low-paying job for a year or two and living on her own. I believe that is true for the vast majority of high school seniors these days.

Patrick is in the business of making it easier to start a company. Suppose he were in the business of making it easier to start a university. From the standpoint of technology, that seems like a very plausible business. Tools exist to deliver education in different ways. Look at Tyler’s and Alex’s MRU. The barriers are mostly cultural. Nobody wants to be the parent whose child succeeds unconventionally by taking a nontraditional approach to higher education.

I also want to scream “No!” when I see wealthy donors giving money to universities. The top schools have these enormous endowments already, which act like moats protecting them from competition. Don’t help them fill their moats! Instead, put that money into higher education start-ups. But if you give to your alma mater or to create a research institute at an established university, you can enjoy conventional failure. That seems to be more appealing to philanthropists than unconventional success.

Tyler and Patrick offer some provocative views about the way that success in research tends to come from less conventional institutional processes. But people stick with the conventional. For example, Tyler says

So I think in general, big questions are under-studied– the tenure system, I think, increasingly is broken. A lot of academics do work pretty hard, but that so much of your audience is a narrowly defined set of peers who write you reference and tenure letters–I think we need to change. And the incentive for academics to integrate with practitioners and learn from them and actually try doing things–we need more of that. I’ve often suggested for graduate school, instead of taking a class, everyone should be sent to a not-so-highincome village for two weeks. They can do whatever they want. Just go for two weeks, think about things. No one wants to do this. No one wants to experiment with it.

And I would add, require internships for economists. You can learn a lot while working in business.

Turning to health care, I think that Zuckerberg over-states the amount of money wasted in futile care in the last six months of life. But I think that the point is correct that we undergo many procedures with high costs and low benefits. I strongly believe that if we took away dollars at the margin from medical procedures and put those dollars into public health measures, the net effect would be positive. But wasting money on medical procedures with high costs and low benefits is a way to fail conventionally.

In short, when it comes to urban construction/civil engineering, education, and health care, we have evolved cultures of conventional failure. Innovation and entrepreneurship are discouraged. The heavy influence of government in these sectors probably serves to reinforce this. But ultimately the political process gives us something like what most people want. As Pogo would put it, we have met the enemy of progress, and he is us.

Science: increasing and decreasing returns

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Tyler Cowen and Ben Southwood write,

To sum up the basic conclusions of this paper, there is good and also wide-ranging evidence that the rate of scientific progress has indeed slowed down, In the disparate and partially independent areas of productivity growth, total factor productivity, GDP growth, patent measures, researcher productivity, crop yields, life expectancy, and Moore’s Law we have found support for this claim.

I think of this in terms of what factors might cause science to exhibit increasing returns or diminishing returns

The most obvious source of diminishing returns would be the “low-hanging fruit” story. The problems that remain to be solved are really hard: human biology; human psychology; climate science; etc.

Another possibility is that scientific genius is limited. If you throw more money at mediocre scientists, you don’t get any results.

The most obvious source of increasing returns would be lower cost of new scientific tools. The cost of genome sequencing, for example.

Another source of increasing returns would be better communication technology.

If you want to speed up scientific progress, the tools that are available are probably institutional. What changes in institutions can we make that would either mitigate diminishing returns or promote increasing returns?

As the authors point out, science has become bureaucratized, with much of the funding coming from government grants that impose a lot of costs in terms of process and perhaps impede creativity. Having more science funded by patronage, with wealthy donors providing funding with fewer strings attached, might be an improvement–unless you think that the bureaucratic requirements add value and rigor to the process of choosing scientific projects.

Two articles on assortative mating

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Both from Quillette, which is what you should read instead of Twitter or Facebook.

1. Branko Milanovic summarizes a variety of findings, including

high-earning young American men who in the 1970s were just as likely to marry high-earning as low-earning young women now display an almost three-to- one preference in favor of high-earning women. An even more dramatic change happened for women: the percentage of young high-earning women marrying young high-earning men increased from just under 13 percent to 26.4 percent, while the percentage of rich young women marrying poor young men halved. From having no preference between rich and poor men in the 1970s, women currently prefer rich men by a ratio of almost five to one.

Read the whole essay.

2. Daniel Friedman writes,

A spot-check of a few dozen elite and selective schools suggests that there is near gender parity at the most elite private universities, and perhaps a slight tilt toward women among selective private schools and public flagships, but not one nearly as dramatic as the nationwide numbers would lead you to believe.

…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.

He argues that the least selective schools do not confer such high status. He claims that a woman who graduates with a nursing degree or a teaching degree is not higher status than a man who becomes an electrician without a college degree. In terms of income, this may be true. But will the teacher be willing to marry the electrician?

In any case, I don’t think Friedman’s analysis is inconsistent with Milanovic’s data.

More with Less

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Andrew McAfee writes,

Our wants and desires keep growing, evidently without end, and therefore so do our economies. But our use of the earth’s resources does not. With the help of innovation and new technologies, economic growth in America and other rich countries — growth in all of the wants and needs that we spend money on — has become decoupled from resource consumption. This is a recent development and a profound one.

I have not yet read the book from which this essay is excerpted. Of course, those of you who have read Specialization and Trade already are clued in. Both McAfee and I were influenced by Jesse Ausubel.

By the way, could this decoupling be responsible for low interest rates? Think of a Hotelling model of resource storage but with the interest rate as endogenous and the path of resource prices exogenous. As long as economic growth required more use of resources, you expect a positive return from storing resources. You get a positive interest rate out of that. But when growth is decoupled, you do not expect a positive return from storing resources. If you want to create a store of value with a positive rate of return, you need to find some productive investment.

For more on McAfee and his latest book, see Alex Tabarrok on McAfee’s long-term bets.

A new revolution in food production?

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Peter Diamandis writes,

Today’s breakthroughs will soon allow our planet to boost its food production by nearly 70 percent, using a fraction of the real estate and resources, to feed 9 billion by mid-century.

It seems that these are his predictions for 2030. He cites vertical farming, 3D printing of food, and other technological advances.

Capitalism = market-tested innovation (McCloskey) = more with less (McAfee).

Decentralizing science grants

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Eli Lehrer and M. Anthony Mills write,

federal support for basic research should be decentralized and diversified. The current model is almost the inverse of Bush’s model: He envisioned a single independent agency, staffed by scientists, that would disperse funds widely across a range of nongovernmental institutions, and he assumed these institutions would retain autonomy and control over their research agendas and personnel. What Bush recognized is that science is best conducted in a vibrant marketplace of ideas with minimal bureaucratic oversight.

Elites and the economy

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Donald Schneider writes,

The economy has undergone massive shifts over the last several decades. The opening of new markets exposed domestic workers to fierce competition and increased the returns to scale and management. The evolution of the product cycle contributed to the hollowing out of established industries. A decades-long shift from goods production to service provision changed the allocation and intensity of capital investment. New technologies increased the returns to education and disrupted established occupations. The shifting nature and intensification of competition begat the rise of a “winner take most” model and “superstar” firms. And a rising dispersion of productivity across firms and the slowing diffusion of innovation altered the competitive landscape for businesses.

The thrust of the article is that populist economic resentment is not justified.

1. He argues that average wages have kept pace with productivity. I view all aggregate productivity estimates with suspicion, so I am not a participant in this particular debate.

2. He argues that low-skilled workers have gained in real income. This depends a lot on long-term measurement of changes in the cost of living, which is quite difficult. I lean on the side of those who think that official statistics overstate the increase in living costs and by the same token understate the gains in real income.

3. He argues that although high-skilled workers have gained ground relative to low-skilled workers in recent years, this is not because elites are rigging the game.

I agree that there is no conspiracy to exploit low-skilled workers taking place. And for years I have cited four forces that converge to weaken the relative standing of low-wage workers: the New Commanding Heights (shift of demand toward health care and education; globalization; computerization; and assortative mating.

But I would count credentialism as rigging the game. It artificially inflates the incomes of professors and adminsitrators by raising the demand for higher education. It artificially inflates the incomes of health care professionals. In government, it artificially raises incomes for people who obtain degrees that have no bearing on their ability to perform.