Category Archives: Tyler Cowen is my Favorite Blogger

Thoughts on Jordan Peterson to ponder

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from Bernard Schiff

What was off-putting was his tendency to be categorical about his positions, reminiscent of his lectures where he presented personal theories as absolute truths. I rarely challenged him. He overwhelmed challenges with volumes of information that were hard to process and evaluate. He was more forceful than I, and had a much quicker mind. Also, again evocative of what I saw in the classroom, he sometimes appeared to be in the thrall of his ideas and would not, or could not, constrain himself and self-monitor what he was saying.

Pointer from Tyler Cowen.

I should note that my wife has a strong, automatic distrust of any charismatic person. She senses danger in that.

But otherwise the piece does not deliver such a heavy blow to Peterson, at least as I read it.

Truly experimental firms

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by John List, on corporate social responsibility.

My initial inclination is: firm does a good thing; worker reciprocates to firm by working harder; and the world is a better place. Everyone’s better off. But what this suggests is that there’s something deeper on the psychological side, that it’s not just triggering this reciprocity from workers. C.S.R. is also triggering something deeper, which the researchers in this area call moral licensing.

Pointer from Tyler Cowen. Read the whole transcript, to see the research method. He actually starts firms and hires workers in order to do controlled experiments.

Reading Jonathan Rauch

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The book is called The Happiness Curve. It fits Tyler Cowen’s old definition of self-recommending, in that it is an interesting topic (the influence of stage of life on happiness) by an interesting author (Rauch). Note that Tyler himself recommends the book.

Rauch looks at the paradox that in your forties you may doing well objectively but feel unhappy. And after age 50 you tend to feel happier, even if you are not doing so well. My hypothesis is that one’s comparative references change. At age 40, it is easy to look at people of a similar age or younger who seem to be achieving more than you are. As you get older, you start to notice people your age who are physically deteriorating or whose lives are troubled in some way, and so it is easier to feel good about what you have. Rauch does not suggest a single cause, but this change in comparative references does seem to play a role.

As long-time readers know, I think that one should take a very skeptical view of happiness research. I think that some subjective measures are necessary, but I prefer measures that are more specific: how is your health? your job? etc. I think that happiness surveys are much harder to do well and can easily produce deceptive results.

I would rather read a book like this from someone who is as skeptical as I am. For example, Rauch looks at studies that instead of showing a sharp mid-life crisis show a gradual decline in life satisfaction followed by a gradual rise. But I found myself thinking: Suppose that everyone had a sharp mid-life crisis that took place at somewhat different ages, with the average age of crisis at, say, 45. If you looked at aggregate data, the crises would be smoothed away, and you would see a curve.

My personal perspective is that stage of life may have affected me a bit in the way Rauch describes. I remember in my mid-forties putting a list on the wall of my office of things I thought I should have been happy about. I called it my “serenity list.” In hindsight, had I been really serene, I would not have needed such a list. I have no need for one now. The Happiness Curve would have predicted this.

But overall, I believe that my outlook tends to fluctuate at higher frequencies. I think of myself as having a personal Minsky cycle. In the “hedge” phase, my energy level is low. I don’t have much emotion, and what little I have I distrust. I waste a lot of time. I don’t start any risky projects or come up with creative ideas. In the “speculative” phase, my energy level is high. I romanticize the world, and I listen to my emotions. I use my time fully, I am creative, and I am willing to take risks. In the “Ponzi” phase, my creativity takes a more dangerous turn. My connection to reality weakens, and some of my thoughts become very dark. On a couple of occasions I had difficulty recognizing and pulling out of this phase, and some bad experiences resulted.

It is plausible that I am bipolar, but even if that were the case I do not seek treatment. Sort of like people who don’t want to move to San Diego because they would miss the seasons.

Friends have told me that it was hard for them to know the difference between my “speculative” phase and my “Ponzi” phase. In fact, hardly anybody knows which of the three phases I am in at any one time. If you guess, you are likely to be wrong.

Patrick Collison on corporate culture

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Asked about what sorts of feedback mechanisms he tries to put in place, He says,

I really think it’s too early to answer that, in the sense that I can tell you what I think today and the changes we’ve made over the last year and things like that. Stripe has been a thousand-person organization … or has been a more-than-500-person organization for just over a year. We’re beginners at this! Three years ago, Stripe was under 100 people

Again, pointer from Tyler Cowen.

It sounds as though Stripe has only recently gone from being sub-Dunbar (fewer than 150 people) to super-Dunbar (more than 150). That is a really challenging transition. In a sub-Dunbar organization, informal communication channels work best. In a super-Dunbar organization, much more structure is required. As a result, it feels as though the organization is becoming stale and bureaucratic.

I joined Freddie Mac late in 1986, not long after the company moved definitively into the super-Dunbar range. Some people who operated effectively in the sub-Dunbar phase became dysfunctional in the super-Dunbar phase, and even those who were still effective often were less happy. I think even the CEO felt less comfortable with the larger organization.

Patrick Collison on life influences

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Patrick Collison says,

There’s a quote about how you end up the average of your five closest friends. I think there’s a very deep truth to that. But if you accept that, then of course who your five closest friends are, choosing that, and we do, though we may not think of it this way, we do choose those people. Like, you are choosing who you are. And of course that’s a bidirectional process where who you want to be is determined by who you’re around, which determines who you want to be around, and so on.

Pointer from Tyler Cowen. There is a lot of interesting material, and I may have another post on it.

As I read this portion of the interview, Collison is saying that your personality is correlated with that of your peers, but we have to be agnostic about causality. Maybe we could improve our personality by choosing better peers, or maybe we just select peers that fit with an innate personality.

My reaction was to try to relate it to my own life.

1. Right now, I don’t have five close friends. (Note: reading Jonathan Rauch’s new book, this is not so unusual for old people, who tend to trim their relationships.) But at my age, if you want to look for influences on my personality, presumably you would want to look back at my friends when I was younger.

2. I see my life as very compartmentalized. One reason I don’t have close friends now is that my worlds don’t overlap. The people who read my books don’t know that I go Israeli dancing three nights a week, and the people who I dance with have not read any of my books. My social friends and my intellectual friends would not get along with one another.

3. Also, the time periods of my life have been very different. Typically, someone matters to me very intensely for a few years, but hardly at all apart from that. In the late 1990s, I talked with my main business partner several times a day. Now we communicate about once a year. If you don’t count family members, it is hard to think of anyone I have been in close touch with for as long as ten years. My “best” long-term friend is someone I speak with for an average of about an hour a month.

4. If I were to say that my intellectual life is an average of other people, I would list my father (a political science professor), Bernie Saffran (who was an economics professor at Swarthmore), and Russ Roberts. All three rank much higher in wisdom than their place in the academic hierarchy would indicate. All I would describe as much more open-minded, capable of lifelong learning, and able to change their mind more than typical academics. In general, I have found that people in business (such as Collison) are much more oriented toward learning than are academics. Many professors by age 30 have narrowed their intellectual world to a few peers that operate within their narrow sub-field. In business, you fail if you do that.

But in other aspects of my life I wish I were closer to an average of: my wife (and dance partner), who is constantly asking herself how she ought to act and trying to follow that; Dave, a former Freddie Mac colleague who has the same traits; and dancers with whom I have no personal connection but who on the dance floor can be inspiring, natural, balletic, athletic, regal.

At all points in my life, the key people in my life have been very high in conscientiousness. Compared with others around them, they have been far more averse to recreational drugs or sexual adventures. You might accuse them of being inhibited. They are very conservative with personal finances and could live on much less than what they have. They would never allow career ambition to jeopardize family cohesion. They have a strong sense of agency–they would never celebrate victimhood. (In new-age jargon, they are “at cause” as opposed to “at effect.”)

Defensive polarization

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Eric Groenendyk writes,

Those who like their own party least, often loath the opposition most. I will refer to this as the defensiveness hypothesis.

Tyler Cowen’s post put me on the trail that ended with this paper.

Suppose you identify with one party, but you find that increasingly you do not like what the party is doing. You might think that your response would be to tone down your partisanship. But instead, you dial up your opposition to the other party. This approach avoids the cognitive dissonance that otherwise would result from supporting a party that is not doing what you like.

Intellectuals worthy of respect

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Tyler Cowen writes,

Paul Krugman recently made a splash in a New York Times column by suggesting there are no “serious, honest, conservative intellectuals with real influence,” referring to the “unicorns of the intellectual right.” I largely agree with his criticisms, but I would like to offer a very different perspective. This column is my corresponding warning to the left

I think that for an intellectual to be worthy of respect, he or she must be able to recognize, understand, and confront the best arguments of the other side. This aligns closely with what Bryan Caplan calls the “ideological Turing test.” By that standard, Krugman himself is a dismal failure. The vast majority of his columns are comprised of nothing but asymmetric insight, the self-deceptive belief that you understand your opponents better than they understand themselves.

Cowen says,

the right is extremely familiar with the doctrines of the left and center-left, but the converse is somewhat less true.

That’s putting it mildly. Krugman’s credentials are imposing, and Kevin Williamson’s are not. But in a one-on-one debate between them, I would bet on Williamson.

City income differentials widen

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Thomas B. Edsall writes,

According to Romem, between 2005 and 2016, those moving into the San Francisco area had median household incomes averaging $12,639 a year more than the households of the families moving out, $70,015 to $57,376.

Conversely, in the struggling Syracuse metropolitan area (Clinton 53.9 percent, Trump 40.1 percent), families moving in between 2005 and 2016 had median household incomes of $35,219 — $7,229 less than the median income of the families moving out of the region, $42,448.

It’s a long essay, worth reading in its entirety. Edsall’s focus is on the evolution of the political coalition that makes up the Democratic Party. But I find the economic phenomenon interesting. The data support the Handle Hypothesis that urbanization has become a winners-take-most game. The article by Issi Romem that Edsall refers to is also worth reading. Romem writes,

Why do the expensive coastal metros exhibit positive income sorting? These metros are expensive because they have restricted their supply of new housing even as they continue to generate strong demand for it.

Kevin Erdmann and many others have been saying this for quite some time.

Related: Pew reports,

In 2001, 13 percentage points separated the shares of white and African-American renter households that were burdened: 26 and 39 percent, respectively. . .By 2015, the share of African-American-led renter households that were burdened had risen to 46 percent

Rent-burdened is defined as spending more than 30 percent of a household’s income on rent. Pointer from Tyler Cowen.

I think that the political threat to the Democratic Party is minimal. Group identity seems to overcome anything. The Democrats can be anti-Israel and still get most of the Jewish vote. Their policies make housing less affordable and drive African-Americans out of Washington, D.C. or San Francisco, but they still get most of the black vote.

Estimating consumers’ surplus from information goods

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Erik Brynjolfsson, Avi Gannamaneni, and Felix Eggers have a paper on the topic. From the abstract:

We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods. We test the robustness of the approach and benchmark it against established methods, including incentive compatible choice experiments that require participants to give up Facebook for a certain period in exchange for compensation. The proposed choice experiments show convergent validity and are massively scalable. Our results indicate that digital goods have created large gains in well-being that are missed by conventional measures of GDP and productivity.

Pointer from Tyler Cowen.

Based on their powerpoint, I gather that the method is something like this.

1. Ask a user of, say, Facebook how much they would need to be paid to give it up for a month.

2. If they say they would give it up for $25, tell them to do it.

3. If after a month they have not used it, give them $25.

The methods that they use are really interesting, but I have doubts about the approach. I think dollars are too abstract. I would like to see a lot of “give up X or give up Y” choices offered. The authors do some of this and apparently it confirms their findings.

The values that the authors get are really high. If the median Facebook user gets over $40 a month in value from it, then Facebook is leaving a fortune on the table by not having a subscription service. Yes, they have to be careful that charging a subscription price could drive some customers away, lowering the value of the service to other customers, but the “freemium” model could be used to address that. That is, let anyone join for free, but give more privileges to subscribers.

Finally, note that if I pay less for Google Maps and other digital services than I would be willing to pay, I also pay more for my smart phone, home Internet connection, and wireless service provider than I would if all I were getting were just plain phone service. In other words, some of the “consumer’s surplus” from digital goods goes to Verizon and Apple as revenue, not to consumers.

Try competing with Facebook

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Tyler Cowen writes,

I would instead start with the sentence “Most Americans don’t value their privacy or the security of their personal data very much,” and then discuss all the ways that limits regulation, or lowers the value of regulation, or will lead many well-intended regulations to be circumvented. Next I would consider whether there are reasonable restrictions on social media that won’t just cement in the power of the big incumbents. Then I would ask an economist to estimate the costs of regulatory compliance from the numerous lesser-known web sites around the world. Without those issues front and center, I don’t think you’ve got much to say.

He is commenting on a scheme for regulating Facebook.

I would instead start like this:

You didn’t come up with the idea. You didn’t build the business. Now that it’s here, who the heck do you think you are telling them how to run it?

That is from a brand new essay, in which I offer up my idea for a Facebook competitor. I’m sure that folks at Facebook have thought of my ideas and discarded them, probably for very good reasons. But I would much rather see people thinking like competitors rather than like fantasy-despot regulators.