Category Archives: Tyler Cowen is my Favorite Blogger

Sentences to Ponder from Mike Konczal

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He writes,

Oil doesn’t experience unemployment as the most traumatic thing that can happen to it. Oil moves magically to new opportunities, unlike people who don’t often move at all. A barrel of oil doesn’t beat their kids, abuse drugs, commit suicide, or experiencing declining life expectancy from being battered around in the global marketplace. But people do, and they have, the consequences persist and last, and now they’ve made their voices heard. It’s the the dark side of Polanyi’s warning against viewing human being as commodities.

Pointer from Tyler Cowen. The entire essay, which looks at Donald Trump’s consistent message, is worth reading.

Tyler Cowen on School Choice

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He writes,

if you’re reading a critique of vouchers and the critic isn’t willing to tell you up front that parents typically like this form of school choice, I suspect the critic isn’t really trying to inform you.

Perhaps the voucher movement ought to be called the “Make schools accountable to parents” movement. I was opposed to the No Child Left Behind law from the very beginning, on the grounds that it defined “accountability” for schools as accountability to Washington.

Parents will not be perfectly informed consumers of public schools. But bureaucrats in Washington will be much less well informed.

I am not claiming that vouchers will lead to better long-term outcomes. As you know, I believe in the Null Hypothesis. But I like the idea of having teachers and school administrators accountable to people who can observe their performance close up.

Why it May be Hard to Change My Mind

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Cass Sunstein offers a list of books from the left or center-left for a conservative to read to possibly change one’s mind. Pointer from Tyler Cowen.

You recall that I appreciated his idea of proposing books for liberals to read that presented a conservative or libertarian perspective.

If you go back and read his first list, written by conservatives and libertarians, the books are quite obscure. I have not done a Google search to check, but I would not be surprised if there are only one or two that have been reviewed in publications that liberals would read. My guess is that if you gave a typical liberal intellectual only the title and author of one of these books and said, “Tell me what you think it says,” you would get an answer that is blank or incorrect.

It turns out that I have not read any of the books on Sunstein’s new list, but long before I saw Sunstein’s post I had read op-eds by the authors and/or reviews of all of them other than Dworkin’s (which falls outside of my area of interest). Based on these, I presume that:

–Nordhaus makes the case that climate models are uncertain, that we need to be worried that they under-estimate the danger, and that a carbon tax is the most efficient way to buy “insurance” against climate risk.

–Frank makes a case that we live in luck village.

–Mullainathan and Shafir say that there is a household-level poverty trap in that the less income you have, the less mental/emotional slack you have, and the worse decisions you make.

–Gordon makes the case that current technological innovation is not boosting living standards as dramatically as innovation a hundred years ago.

My point is that when liberals publish books, conservatives become aware of them. So at the margin, actually reading the book does not introduce us to new ideas–although the book may make the argument more compelling. When conservatives publish books, liberals are not aware of them. So just encountering the ideas would be new. Other things equal, I would expect liberals to find more unfamiliar ideas in conservative books than vice-versa.

Tyler Cowen Sets a Trap

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In an NPR discussion about the deal struck by President-elect Trump with Carrier to keep a plant in Indiana, he says,

There’s plenty of talk that the reason Carrier went along with the deal was because they were afraid their parent company would lose a lot of defense contracts. So this now creates the specter of a president always being willing to punish or reward companies depending on whether or not they give him a good press release.

Why would progressives be inclined to agree with Cowen?

1. They hate Mr. Trump.

2. They do not agree that keeping this plant in Indiana served a compelling and long-standing public purpose. They might even understand that we have an economy in which free trade ultimately is what serves the public purpose.

3. They do not like the idea of businesses being offered carrots and sticks to do things to allow a president to score points with a constituency (“give him a good press release.”)

4. They do not like the idea of policy made in an ad hoc manner between the president and an individual firm, as opposed to policy that is embedded in legislation that affects all firms.

The trap here is that because of (1) progressives might start to reflect on (2) – (4).

Consider, for example, the Obama Administration’s mandate for contraception coverage in health insurance. This forced some businesses, such as Hobby Lobby, to offer contraception coverage when they did not want to do so. How did this differ from what Mr. Trump did to Carrier?

1. Progressives do not hate Obama. However, on reflection they would realize that this cannot be a defense of the contraception mandate.

2. Progressives believe that contraception coverage is important. However, if you took a vote, I bet that more people would prioritize “keeping jobs in America” than having contraception coverage in health insurance. It seems to me that the “compelling and long-standing public purpose” argument would be a stretch.

3. The contraception mandate certainly allowed the Democrats to score points with a constituency that they consider important. It was an important issue for feminists. So I do not think that you can find the difference between the contraception mandate and the Carrier deal here.

That leaves only (4). The contraception mandate was given to all health insurance providers under the Obama Administration’s interpretation of the Affordable Care Act. It represents the rule of law (ish) and not a one-off transaction. Even there, Donald Evans makes the counterpoint (in the same NPR discussion) that

I don’t think it’s a bad thing for the president to send the strong message to the workers of America that he’s going to create the environment for them to do well right here and – and send that same message to the corporations of America.

Mr. Evans seems to me to be saying that Mr. Trump will put generic policies in place that will pursue the goal of keeping plants in America. One can argue that the goal of this deal was not to set a precedent for one-off deals but instead to signal a forthcoming change in policies that will be administered under the rule of law.

As a libertarian, I do not believe that “keeping plants in America” should be a goal for public policy. I believe instead in patterns of sustainable specialization and trade, which includes making efficient use of labor and other resources from other countries. I also believe that contraception coverage is something that should be negotiated between individual households and health insurance providers. Maybe if progressives fall into the trap set by Tyler Cowen, a few of them will start to see where I am coming from in my point of view.

Peter Turchin’s Latest Book

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It is called Ages of Discord: A Structural-Demographic Analysis of American History, and I received a review copy. I am not very far into it. An alternative title might be “Average is over. . .and maybe so is everything else.” From the back cover:

Historical analysis shows that long spells of equitable prosperity and internal peace are succeeded by protracted periods of inequity, increasing misery, and political instability. These crisis periods–“Ages of Discord”–have recurred in societies throughout history. Modern Americans may be disconcerted to learn that the US right now has much in common with the Antebellum 1850s and, more surprisingly, with ancien regime France on the eve of the French revolution.

I will have some problems with his approach to history, if what he says on p.6-7 is any indication.

What we need is theory in the broadest sense, which includes general principles that explain the functioning and dynamics of societies and models that are built on these principles, usually formulated as mathematical equations or computer algorithms. Theory also needs empirical content that deals with discovering general empirical patterns, determining the empirical adequacy of key assumptions made by the models, and testing model predictions with the data from actual historical societies.

This sounds like it borrows some of the more dubious methodological doctrines of economics. I have been arguing that mental processes are important in explaining social outcomes. I fear that the emphasis on mathematical equations and data leads instead to a focus on physical processes, to the neglect of mental processes. I do not think that Turchin will turn out to be such a physical determinist. But we will see.

Somewhat related: Yascha Mounk on indicators of fragility in democracy.

The first factor was public support: How important do citizens think it is for their country to remain democratic? The second was public openness to nondemocratic forms of government, such as military rule. And the third factor was whether “antisystem parties and movements” — political parties and other major players whose core message is that the current system is illegitimate — were gaining support.

Pointer from Tyler Cowen.

Turchin also uses indicators, but his set is different.

Defining Terms in the Social Disciplines

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Chelsea Leu writes,

Chemists don’t squabble about what oxygen is, but if psychologists convene a conference on a fuzzier concept like “trust,” says Colin Camerer, an economist at Caltech, they’ll spend the first two days disagreeing about what the word actually means.

Pointer from Tyler Cowen.

I agree that many important terms in the social definitions are poorly defined. Examples include trust, culture, and happiness. Ethnicity, which is very important in political studies, may not be well defined. I am not sure that such terms as extroversion or openness are well defined. Even IQ may not be that well defined.

Security prices are well defined. As a result, theory and empirical research in finance tends to be more robust than elsewhere in economics. However, even finance has its less well-defined concepts, such as “expectations.”

I should point out that the problem of poorly-defined terms arises not because social scientists are less intelligent or careful than natural scientists. The problem is that social science has to deal with phenomena of the mind. Oxygen is part of the physical world. Trust and extroversion exist in the mental world.

I have noted that in all of the social disciplines there is a bias in favor of explaining outcomes on the basis of physical phenomena, such as natural resources and physical capital, rather than on the basis of mental phenomena, such as culture and institutions. In part this may reflect frustration with the challenge of defining terms when describing mental phenomena.

Although exhortations to social scientists to define terms may be helpful, I think it is important to understand that exhortations alone cannot solve the problem. Mental phenomena are harder to pin down.

Wither Factor-Price Equalization?

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Elisa Giannone writes,

The interaction of SBTC [skill-biased technical change] and agglomeration economies imply that more educated locations have larger skill premium. High and low-skill workers have some degree of complementarity, so, agglomeration effects raise the wages of all the workers. The differential increase in the wages of high-skill workers makes the migration patterns for high and low-skill workers diverge: high-skill workers migrate to educated cities more than do low-skill workers. Migration has a twofold effect. First, the more workers migrate to a location, the marginal productivity of each will decrease, hence, the returns will decrease. Second, when more high-skill workers move to a location, productivity goes up because of agglomeration effects, raising the wages of all the workers, but especially the wages of the high-skill workers.

Pointer from Tyler Cowen.

She points out that within the U.S. since 1980, wages have stopped converging across cities, and this is mostly due to divergence among high-skilled workers. So we are not getting factor-price equalization, and she wants to try to explain why. Her explanation strikes me as quite complex (it includes more than just what is in the quoted paragraph) and a bit just-so-story-ish, but that is what happens when you observe a phenomenon that challenges a core interpretive framework.

If you believe in factor-price equalization, then you predict that workers with similar skills will tend toward the same pay in different locations. The word “similar” often gives me pause. As consumers, we value different amenities. In my prime, I could have earned a higher wage working in Manhattan, but relative to the people who chose to work there, I valued the amenities less. I wonder how much of the apparent divergence can be traced to the interaction of consumer preferences with other factors. I am guessing that assorattive mating fits in somewhere.

Peter Turchin on Surplus Elites

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Bloomberg view decided that this was a good time to recycle this column, first published in 2013.

Past waves of political instability, such as the civil wars of the late Roman Republic, the French Wars of Religion and the American Civil War, had many interlinking causes and circumstances unique to their age. But a common thread in the eras we studied was elite overproduction. The other two important elements were stagnating and declining living standards of the general population and increasing indebtedness of the state.

He argues that the surplus of law school graduates indicates elite overproduction. The other elements seem to be here as well. On the stagnation issue, Tyler Cowen cites research into cohorts that sounds more convincing than the usual analysis of means and medians.

Recall that I wrote about Turchin a couple of months ago.

Jonathan Haidt on the State of Politics

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Self-recommending. Pointer from Tyler Cowen. An excerpt:

I’m a fan of the political scientist Karen Stenner, who divides the groups on the right into three: The laissez-faire conservatives or libertarians who believe in maximum freedom, including economic freedom and small governance; the Burkean conservatives, who fear chaos, disruption, and disorder — these are many of the conservative intellectuals who have largely opposed Trump.

And then there are the authoritarians, who are people who are not necessarily racist but have a strong sense of moral order, and when they perceive that things are coming apart and that there’s a decrease in moral order, they become racist — hostile to alien groups including blacks, gay people, Mexicans, etc. This is the core audience that Trump has spoken to.

That’s not to say that most people who voted for him are authoritarians, but I think this is the core group that provides the passion that got him through the primaries.

But perhaps the key idea is this:

We haven’t talked about social media, but I really believe it’s one of our biggest problems. So long as we are all immersed in a constant stream of unbelievable outrages perpetrated by the other side, I don’t see how we can ever trust each other and work together again.

It’s not just social media. The mainstream media also deal in a “constant stream of unbelievable outrages.” The double standards are glaring. Elizabeth Warren attacks Wall Street, and she is called a brave progressive. Donald Trump attacks Wall Street, and he is called anti-semitic. If the Pope were to say that capitalism needs to be softened by religious beliefs, then the media would report that he “gets it.” Steve Bannon says pretty much the same thing, and supposedly he is a white nationalist.

Related: Scott Alexander writes,

There is no evidence that Donald Trump is more racist than any past Republican candidate (or any other 70 year old white guy, for that matter). All this stuff about how he’s “the candidate of the KKK” and “the vanguard of a new white supremacist movement” is made up. It’s a catastrophic distraction from the dozens of other undeniable problems with Trump that could have convinced voters to abandon him. That it came to dominate the election cycle should be considered a horrifying indictment of our political discourse, in the same way that it would be a horrifying indictment of our political discourse if the entire Republican campaign had been based around the theory that Hillary Clinton was a secret Satanist. Yes, calling Romney a racist was crying wolf. But you are still crying wolf.

Tyler Cowen thinks that Alexander is naive. I think not. The fact that real rape happens does not make false accusations of rape helpful. And the fact that real oppression happens does not make false accusations about it helpful.

If minorities come under attack under President Trump, then I will rally to their defense. But the wave of post-election rallies strikes me as more counterproductive and divisive than healing or inclusive. If what you want is a peaceful, inclusive society, then you should model peaceful, inclusive rhetoric and avoid contrived outrage.

The Best Post-Election Piece So Far

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From Joshua Mitchell.

“Globalization” and “identity politics” are a remarkable configuration of ideas, which have sustained America, and much of the rest of the world, since 1989. With a historical eye—dating back to the formal acceptance of the state-system with the treaty of Westphalia in 1648—we see what is so remarkable about this configuration: It presumes that sovereignty rests not with the state, but with supra-national organizations—NAFTA, WTO, the U.N., the EU, the IMF, etc.—and with subnational sovereign sites that we name with the term “identity.”

…When you start thinking in terms of management by global elites at the trans-state level and homeless selves at the substate level that seek, but never really find, comfort in their “identities,” the consequences are significant: Slow growth rates (propped up by debt-financing) and isolated citizens who lose interest in building a world together. Then of course, there’s the rampant crony-capitalism that arises when, in the name of eliminating “global risk” and providing various forms of “security,” the collusion between ever-growing state bureaucracies and behemoth global corporations creates a permanent class of winners and losers.

Pointer from Tyler Cowen.

Read Mitchell’s whole piece, as well as the earlier essay to which he links. I find his thoughts congenial, because I agree that the election pitted cosmopolitan vs. anti-cosmopolitan.

However, this is far from the last word. In fact, I would say that the longer you take to react to news, the better off you are. In general, I like to schedule my posts several days in advance. (This one is being drafted 3 days before it is scheduled to appear.) That gives me time to revise or delete a post before it appears. You may have noticed that when stock futures plummeted the night of the election, Paul Krugman predicted that the plunge would be permanent. I bet he wishes he had scheduled that post for a few days later, in which case he could have deleted it before it became public. In fact, I rarely have to revise or delete, because scheduling a post in advance forces me to be less reactive and to think ahead.

A lot of social media lacks the “schedule in advance” feature. I don’t think Twitter has it (I only use Twitter automatically, to announce blog posts, so I do not know how Twitter actually works.) Facebook does not have it. Software for posting comments does not have it. (If you like to comment on this blog, feel free to hold back for a few days. Old comments on old posts show up for me to read just as well as fresh comments on fresh posts.)

Thus, for the most part, social media leads people to be reactive and trigger-happy, as opposed to reflective and sober. It is something that one has to be aware of and push back against.