Category Archives: Tyler Cowen is my Favorite Blogger

The Age of Creative Ambiguity

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Tyler Cowen writes,

File under “The End of Creative Ambiguity.” That file is growing larger all the time.

What is Creative Ambiguity? I would define it as the attempt by policy makers to ignore trade-offs and to deny the need to make hard choices. Consider the Fed’s balance sheet. One hard choice might be to sell its gigantic portfolio of bonds and mortgage-backed securities. That would depress the prices of those assets and make it harder for the government to borrow and to provide mortgage loans. The other hard choice might be to provide whatever support is necessary to enable the government to borrow and to provide mortgage loans, even if it means printing enough money to risk hyperinflation. Creative ambiguity means convincing investors that neither hard choice will be necessary. Perhaps that is even true.

However, if the Fed’s hard choices are to be avoided, then at some point the government must get its fiscal house in order. That is where the real creative ambiguity comes in. See Lenders and Spenders.

David Brooks on Redistribution vs. Education

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He writes,

No redistributionist measure will have the same long-term effect as good early-childhood education and better community colleges, or increasing the share of men capable of joining the labor force.

Pointer from Tyler Cowen.

A cynical believer in the Null Hypothesis would argue that putting money into education is an exercise in redistribution. It will redistribute income toward teachers’ unions members, college professors, and administrators.

Also, what is the probability that Brooks is simply trolling Bryan Caplan?

Sentences I Might Have Written

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from Megan McArdle:

1950s health care isn’t expensive; this same regimen would be a bargain at today’s prices. What’s expensive is things that didn’t exist in 1950. You can say that “health care” has gotten more expensive—or you can say that the declining cost of other things has allowed us to pour a lot more resources into exciting new health products that give us both longer and healthier lives.

In Crisis of Abundance, I wrote,

The American middle class can still afford the wonderful health care that was available in 1975–easily. . .as a thought experiment, a return to 1975 health care standards would completely resolve what is commonly described as America’s health care crisis.

You know, that book was written 10 years ago (it came out in 2006), and at the time I said it would have a shelf life of ten years, meaning that I thought that it would still accurately describe the issues for another decade. In fact, it is looking like it will be valid for another ten years. I would say that the majority of popular books on politics and economics expire much more quickly.

Four forces watch: In addition to the New Commanding Heights, McArdle’s essay also touches on the Demographic Divide.

while the college educated class seems to have found a new equilibrium of stable and happy later marriages, marriage is collapsing among the majority who do not have a college degree, leaving millions of children in unstable family situations where fathers are often absent from the home, and their attention and financial resources are divided between multiple children with multiple women.

Other sentences are reminiscent of The Reality of the Real Wage. There, I recycled a bit from my book.

My guess is that if you could find a health insurance policy today that only covered diagnostic procedures and treatments that were available in 1958, the cost of that policy would not be much higher than it was then. Much of the additional spending goes for MRIs and other advanced medical equipment, as well as for health care professionals with more extensive specialization and training than what was available 50 years ago.

I recommend McArdle’s entire essay. Brink Lindsey adds more statistics, such as

In 2011, 87 percent of kids who had at least one parent with a college degree were living with both their parents. For the children of high school dropouts and high school grads, the corresponding figures were 53 and 47 percent, respectively.

Finally, on this same topic, a reviewer (Francis Fukuyama) of an about-to-be-released Robert Putnam book writes,

One of the most sobering graphs in Our Kids shows that while the proportion of young children from college-educated backgrounds living in single-parent families has declined to well under 10 per cent, the number has risen steadily for the working class and now stands at close to 70 per cent.

Pointer from Tyler Cowen.

Labor Policy and Implicit Bias

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Commenting on a book about behavioral considerations in public policy, Jason Collins writes,

The opening substantive chapter by Curtis Hardin and Mahzarin Banaji is on bias – and particularly implicit bias. Implicit biases are unconscious negative (or positive) attitudes towards a person or group. Most people who claim (and believe) they are not biased because they don’t show explicit bias will nevertheless have implicit bias that affects their actions.

I think that thinking in terms of the oppressor-oppressed axis is an example of implicit bias. For example, labor policies, such as the minimum wage, are based on an implicit bias that workers are oppressed. I was reminded of this by a recent Tyler Cowen post.

I am often struck by the conflict between one supposition and one fact. First, employers are supposed to be reaping some big surplus from hiring unskilled labor. Second, when a downturn comes, it is unskilled labor who are laid off.

The three-axes model would explain the supposition as a form of implicit bias.

The New Demographics

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Nicholas Eberstadt writes,

Europe’s most rapidly growing family type is the one-person household: the home not only child-free, but partner- and relative-free as well. In Western Europe, nearly one home in three (32%) is already a one-person unit, while in autonomy-prizing Denmark the number exceeds 45%. The rise of the one-person home coincides with population aging. But it is not primarily driven by the graying of European society, at least thus far: Over twice as many Danes under 65 are living alone as those over 65.

Pointer from Tyler Cowen. The entire essay is recommended.

My impression of the United States is that we have two marital cultures. One culture, more prevalent among the affluent, is traditional marriage, delayed and with fewer children, with reasonably low divorce rates. The other culture, more prevalent among the less-than-affluent, is child-bearing outside of marriage, with a low proportion of long-lasting marriages.

Eberstadt’s global tour makes it difficult to claim that a single factor, such as affluence or local culture or the welfare state, is causing the decline in traditional marriage.

One thought I have is that the traditional family is highly congruent with an agricultural society. Perhaps we are seeing a sort of delayed response to industrialization and urbanization.

Reluctant Heroes Austan Goolsbee and Alan Krueger

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They write,

It is fair to say that no one involved in the decision to rescue and restructure GM and Chrysler ever wanted to be in the position of bailing out failed companies or having the government own a majority stake in a major private company. We are both thrilled and relieved with the result: the automakers got back on their feet, which helped the recovery of the U.S. economy. Indeed, the auto industry’s outsized contribution to the economic recovery has been one of the unexpected consequences of the government intervention.

Pointer from Tyler Cowen.

I guess there is no such thing as the seen and the unseen. For those of you who do not know, Goolsbee and Krueger were officials in the Obama Administration as the bailout was being executed. Here, if their arms do not break from patting themselves on the back, it won’t be for lack of trying.

Timothy Taylor, I question the editorial decision to publish this piece, even if you also include an article that challenges the auto bailouts. Could you not find a neutral party to tell the pro-bailout side? If not, then what does that tell us?

New Commanding Heights Watch

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From the NYT.

Ms. Waugh, like many other hard-working and often overlooked Americans, has secured a spot in a profoundly transformed middle class. While the group continues to include large numbers of people sitting at desks, far fewer middle-income workers of the 21st century are donning overalls. Instead, reflecting the biggest change in recent years, millions more are in scrubs.

Pointer from Tyler Cowen. The New Commanding Heights are health care and education. As they increase employment at the margin while manufacturing production work decreases at the margin, male participation in the labor force continues to decline. Note, however, that female labor force participation has been trending down in this century, also.

The Harm of Government Debt

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Tyler Cowen writes,

I worry that the general decline of discretionary government spending may make politics less stable (but also more interesting, not necessarily in a good way). When there is plenty of spending to bicker about, politics revolves around that question, which is relatively harmless. When all the spending is tied up, we move closer to the battlefield of symbolic goods, bringing us back to “less stable and more interesting.” If that is a cause, this trend is likely to spread.

For a longer essay on the way that government borrowing creates political friction, see my essay Lenders and Spenders.

Who Do You Least Admire?

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Tyler Cowen discusses the people he most admires.

the very top of my personal list would be shaped more by how much individuals had sacrificed

I think that the question of who you admire can be interpreted two ways. One way is aspirational. “I wish that I could dance like Inbar.” Another is gratitude. “I admire people who serve in our armed forces, even though I do not aspire to be like them.” I am not sure that Tyler has sufficiently articulated how he would weigh these two interpretations.

I find it easier to think about who I least admire. The answer that comes to mind is “toadies.” People who ingratiate themselves with politicians or business executives. Or academics. To me, the meetings of the American Economics Association are just mass exercises in toadyism.

Based on that, I would say that the people I admire are people who are not toadies.

A Question about Inequality Within States

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Salil Mehta writes,

Let’s start by looking at this chart below. It shows the differences in state-level ratios, contrasting the typical incomes at the top 1% versus the typical incomes at the bottom 1%… the Economic Policy Institute (EPI) chart above has a clear concordance between income dispersion and the population size itself.

Pointer from Tyler Cowen.

My question is this. Suppose that we ignored the actual geography of states, and instead we produced artificial pseudo-states by taking random samples of all U.S. data. We took one sample the size of Texas, and called it pseudo-Texas. Another the size of Vermont, and called it pseudo-Vermont. etc. My guess is that the pattern of inequality across pseudo-states would look a lot like the pattern across actual states. If that is true, then there is not really much information in the pattern of inequality across states.