Category Archives: Tyler Cowen is my Favorite Blogger

The libertarian non-moment (Kevin Williamson)

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Kevin Williamson writes,

But “libertarian” often means little more than “a person with right-leaning sensibilities who is embarrassed to be associated with the Republican Party.” (Hardly, these days, an indefensible position.) Libertarian sensibilities are popular because they enable the posture of above-it-all nonpartisanship, but libertarian policies, as [Bryan] Caplan and others have noted at length, are not very popular at all. Americans broadly and strongly support a rising minimum wage and oppose entitlement reform with at least equal commitment, and they are far from reliable supporters of free speech and free association or enforcing limits on police powers.

Pointer from Tyler Cowen.

By the end of the essay, Williamson wonders whether the Democrats might make some overtures to libertarians. But I get the sense that he is stopping short of going full Niskanen Center. That is, he doesn’t seem to be bad-mouthing libertarians as a way of trying to curry status with the left.

OK, so I scheduled this post over a week ago, and subsequently Williamson was fired by the Atlantic. Nothing to do with the column I quoted; he apparently is anti-abortion and does not mince words in expressing his opinion on that, and the severity of the way he expressed his views was the reason given for the decision to let him go. I don’t know anything about the background to his hiring or firing, but my instinct is to assign a very low probability to the official explanation being the full story.

The narrative of a gender war

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Tyler Cowen offers it.

I am struck by a recent poll by the Pew Research Center. Millennial women, defined as the group born between 1981 and 1996, favor Democrats by an extraordinarily large 47 percentage points. Millennial men also lean Democratic, but the gap is much smaller, only 8 percentage points. Because the Democratic Party has not had huge national triumphs as of late, the obvious inference is that the Republican Party is doing something to turn off those millennial women.

Another obvious inference is that the Democratic Party must be doing something to turn off older voters, both male and female.

Let me try to flesh out the narrative. Once upon a time, (say, 1930), higher education in America was not for the masses. Harvard was a place for upper-class WASP males, who were not necessarily the cream of the crop intellectually, to firm up their social connections while studying the classics from Western civilization.

By the early 1960s, admission to higher education had become meritocratic, but many of the best colleges did not admit women. This was probably the peak period for “systemizers” to dominate the pool of undergraduates. The classics were still being taught, but many among this brighter cadre of students were gravitating toward the more mathematical and scientific disciplines. To be sure, pre-Med was an especially popular undergraduate choice because guys did not want to end up in Vietnam.

Two developments began in the 1960s that eventually created the state we are in today. One was the attempt to make higher education a mass-market phenomenon. The other was to ensure equal access to higher education for women.

To make a long story short, mass higher education for men was a failure, but for women it was a success. The result was that higher education came to be dominated by empathizers in a number of areas. In the humanities, the classics were displaced by “___ studies” courses, which required less systematic analysis. In these “_____ studies” courses and in psychology and sociology, objectivity gave way to the goal of raising the status of women and minorities.

In terms of voting behavior, we now have young, educated women who have bought into the cause of raising the status of women and minorities, a cause which is packaged with other left-wing causes, including socialism. But we have older Americans and younger less-educated men who have not bought into that cause. Hence, the gap noted by Tyler.

My sense is that, unfortunately, many of these young educated women have a strong streak of soft authoritarianism. If you want to know what it will feel like when they are in charge, read (the movie does not do it justice) One Flew Over the Cuckoo’s Nest. Today’s well-educated young women, and the men who affiliate with them, have a low tolerance for systemizers whose analysis does not lend support to the cause of raising the status of women and minorities.

In the end, I am not convinced that the gender-war narrative is sufficient to describe our current state. The urban-rural divide also matters. Think of a married couple living in a house on the edge of a small town. Then consider two roommates living on the sixth floor of an urban apartment building. These people will have different needs and expectations concerning government, and they are unlikely to vote the same way.

And then you have ethnic divides. And regional divides. I think that if we had an electoral system conducive to multiple parties, then we would have a situation like that in Germany or Italy today, with no coherent central majority.

The game of business strategy

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Greg Lewis says,

Sellers on eBay don’t quite know what gets them to the top of the search results in response to a query, but as they discovered when they made free shipping something that pushed you way up the rankings, suddenly everybody started offering free shipping. People figured it out.

The algorithm itself, the exposure, the possibility of being exposed to a customer might buy a product, very powerful and if you just start up-weighting certain features of the seller, what the seller is offering, then pretty soon, sellers will either figure it out or will die, in the sense that they won’t be on the platform and selling there much longer.

Pointer from Tyler Cowen. Tyler and I both find economists who work in business often to be more fascinating than pure academics.

I found that this wide-ranging interview reinforced many themes of mine. Business is turning into a strategy game. Price discrimination explains everything. Economic models tend to be too simple, and instead we need trial-and-error learning in many situations.

Health care prices and quantities

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Irene Papanicolas, Liana R. Woskie, and Ashish K. Jha write,

The United States spent approximately twice as much as other high-income countries on medical care, yet utilization rates in the United States were largely similar to those in other nations. Prices of labor and goods, including pharmaceuticals, and administrative costs appeared to be the major drivers of the difference in overall cost between the United States and other high-income countries.

Pointer from Tyler Cowen.

The paper is very readable, and the tables are very clear. For example, the ratio of specialist physician pay to the mean wage in the U.S. is 5.3 in the U.S. compared with 3.9 in the next-highest country. For general physicians, the ratio is 3.6 in the U.S. compared with 3.3 in the next-highest country.

The study contradicts most of what I believe about comparative health care spending. It also contradicts the findings of Random Critical Analysis. I think that the probability that the study is mostly accurate is less than fifty percent, but greater than zero.

A challenge is that data are very shaky in many areas. The authors write,

Even when data were collected from the same source, issues of comparability remain because of fundamental differences in how systems are organized and, in turn, how care is categorized. Two areas of particular concern are outpatient spending and the primary care workforce. We attempted to address limitations in the workforce data by utilizing a functionality-based approach to identifying who provides primary care services in each country and by cross-referencing resulting numbers with country experts.

Random Critical Analysis used different data on the health care work force and got very different results.

Me vs. Nassim Taleb

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As Tyler Cowen noted, Taleb takes on some of his reviewers. In a comment, I took on Taleb when he wrote

the variance within forecasters is smaller than that between forecasts and out of sample realizations.

He saw it as a sign of forecasters copying other forecasters. I do not think that this is necessary as an explanation. Unless you are adding noise to your forecast, your forecast should always have less variance than what you are trying to forecast. And it would not surprise me to see a range of forecasts show less variance than the range of subsequent outcomes. I wrote,

That is what you could expect. Suppose that the variable you are trying to forecast, Y, has a set of known determinants, X’s, and a set of random determinants, e’s. People should forecast conditional on the X’s, and the range of forecasts should be narrow. But the range of outcomes relative to forecasts depends on the e’s, and so the out of sample realizations could (and often should) have a wider variance

As usual, in your comments, please avoid making generalizations about either Taleb or me. Speak only to the specific issue that I raised.

Aggregation, not paywall AI, is the answer

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Shan Wang writes,

The [Wall Street] Journal has found that these non-subscribed visitors fall into groups that can be roughly defined as hot, warm, or cold, according to Wells. Those with high scores above a certain threshold — indicating a high likelihood of subscribing — will hit a hard paywall. Those who score lower might get to browse stories for free in one session — and then hit the paywall. Or they may be offered guest passes to the site, in various time increments, in exchange for providing an email address (thus giving the Journal more signals to analyze). The passes are also offered based on a visitor’s score, aimed at people whose scores indicate they could be nudged into subscribing if tantalized with just a little bit more Journal content.

Pointer from Tyler Cowen.

I think that the future of paywalls is aggregation, not artificial intelligence. Spotify is an aggregator. It works better than having individual recording companies set up and manage their own paywalls. Maybe Amazon Prime will become a news aggregator. It already has access to the WaPo (gee, I wonder how it got that?). Facebook is a news aggregator.

The WSJ should get together with the NYT and other major publications to create a news aggregator. I have been saying that for twenty years, but the legacy media won’t do it. Pretty soon they won’t have much choice. Aggregate or be aggregated.

Road to Sociology Watch

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From The Economist

A similar study of American economists by Ms May and others also found men more sceptical of government regulation, more comfortable with drilling in the Arctic National Wildlife Refuge, and more likely to believe that a higher minimum wage would cause unemployment. Women were 14 percentage points less likely to agree that Walmart generates net benefits, and 30 points more likely to agree that American openness to trade should be tied to higher labour standards abroad.

Pointer from Tyler Cowen. One of the factors that will cause economics to move left will be efforts to bring more women into the profession. This development will be praised in most quarters.

I heart John Van Reenen

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That’s going too far, but, hey, it is Valentine’s day. And I appreciate what he has to say.

The large, persistent gaps in basic managerial practices that we document are associated with large, persistent differences in firm performance. Better-managed firms are more productive, grow at a faster pace, and are less likely to die.

. . .many firms in developing countries may not even realise how weak their management practices are. Or, even when they do they realise this, they may not know how to improve things.

Pointer from Tyler Cowen.

One of my tropes these days is that neoclassical economists treat business strategy as nothing more than deciding the level of output and the capital/labor ratio. In fact, the economy is sufficiently complex that management skills and business strategy are really significant.

What do economists know? Tyler Cowen’s Essay Exam

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Tyler Cowen came up with this idea at lunch (I was not there) a few days ago and shared it with me by email.

Imagine giving all professional economists (and other academics) an essay test. Determine their area of expertise, and then ask them to write a twenty-page essay on one of the most basic questions in that field. So it might be “Why did China do so well?” Or “what are the determinants of economic growth?” Or “What causes business cycles?”

In the email, he added

Then we really would see who understands anything at all.

I really, really wish this sort of exercise were carried out. My thoughts:

1. If I were to do this, the topic would be “Why is health care policy a challenge in the United States?” In fact, I plan on doing the exercise. I can take key points from my book (Crisis of Abundance) and add some refinements that have occurred to me in the dozen years since it was published. For another topic on which I feel knowledgeable, the causal mechanisms of the financial crisis, I think that my views are correct with p = .4. Better than just about anyone else, but I think that my analysis of health care is more reliable, closer to p = .8 of being right.

2. To me, the most interesting thing about such essays would be to examine how an economist justifies his or her claim to knowledge. My guess is that you would not see instances in which an economist relies on a particular theoretical model or empirical study. Instead, a variety of observations and basic theoretical insights will be combined to form the economist’s view of the topic. Something like the Hill Criteria, as opposed to this One Chart, or that Clever Model.

3. There are some topics which, no matter how much you know, you cannot pin down with confidence. What caused the Industrial Revolution to take place in England when it did? What caused the Great Depression to take the course that it did? What caused the sharp drop in employment that coincided with or followed the Financial Crisis to take the course that it did? Anyone who in their 20-page essay claims to know the answer to one of these questions with p > .3 is not to be trusted.

4. I am curious about how these essays would differ by age cohort. My guess is that a lot of economists under 40 would write essays on very narrow topics. My guess is that a lot of economists over 60 would write essays that I think are baloney sandwich, particularly if they concern macroeconomics.

Life expectancy slowdown

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Tyler Cowen cites a study that says that the rate at which life expectancy at birth (LEB) is increasing has slowed down. This does not surprise me.

Suppose that there are two outcomes. One outcome is that you live to a ripe old age. The other outcome is that you die within one year of birth. As the percentage of people who die early goes from 10 percent to 1 percent, average LEB goes up dramatically. As it goes from 1 percent to 0.1 percent, average LEB goes up more slowly. But I would not call that stagnation.