Category Archives: Tyler Cowen is my Favorite Blogger

Who Says These Are Public Goods?

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By paying for public goods like education and health care, governments can improve efficiency as well as welfare.

That is from John Micklethwait and Adrian Wooldridge, writing in The Fourth Revolution. I have just started to read it, based on Tyler Cowen’s recommendation.

If one of my high school students wrote the quoted sentence, it would receive a bad grade. The standard economic definition of public goods is that they are neither excludable nor rivalrous. That means that once the good is produced, it is hard to stop anyone from enjoying it, and one person’s enjoyment does not interfere with someone else’s enjoyment. National defense and pubic public safety are classic examples. Sanitary conditions in a city would qualify.

However, education and health care do not qualify as public goods under the standard definition. If it chooses to, a school or hospital can exclude non-paying customers from obtaining its services. And your use of a teacher’s or a doctor’s time can reduce my ability to use that person’s time.

Another characteristic of public goods is that the social benefits exceed the private benefits. One can make a case that vaccinations have that property. In theory, driver education would have that property also. However, for the most part, the benefit I receive from your education and health care is extremely low, particularly relative to the benefit that you receive from those goods.

In my opinion, casually making the case that government should pay for health care and education by asserting that these are public goods sounds to me like what Tyler would call “mood affiliation,” not sound reasoning. I hope that his endorsement of the book does not turn out to be mood affiliation.

Computers and Go

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Alan Levinovitz writes,

The rate at which possible positions increase is directly related to a game’s “branching factor,” or the average number of moves available on any given turn. Chess’s branching factor is 35. Go’s is 250. Games with high branching factors make classic search algorithms like minimax extremely costly. Minimax creates a search tree that evaluates possible moves by simulating all possible games that might follow, and then it chooses the move that minimizes the opponent’s best-case scenario. Improvements on the algorithm — such as alpha-beta search and null-move — can prune the chess game tree, identifying which moves deserve more attention and facilitating faster and deeper searches. But what works for chess — and checkers and Othello — does not work for Go.

Pointer from Tyler Cowen.

My theory of skill at these sorts of games is that it involves making the correct move a high percentage of the time. With games that last many moves, eventually the weaker player will make a mistake. For example, I can get into a favorable position against Zebra Othello any time it plays a suboptimal opening, but I can almost never maintain my lead.

Another theory that I and others have is that top players use pattern recognition, based on experience. For computers, databases of games can be used to build experience and the ability to recognize patterns. The real dominance of computers in Othello took place when somebody accumulated a large database of games, so that the programs could start looking for statistical patterns in evaluating positions. My guess is that the same is true in chess.

My advice to “Go” programmers is to

1. Amass a large databases of games played by top players, with positions annotated in terms of quality at each step in the game.

2. Then, using your knowledge of Go, construct an algorithm that will rate a position by measuring its similarity to positions in the database and their ratings. (This is the hard part, and it is where the program will have to be constantly revised.)

3. Choose a move that produces a position that appears to least resemble a weak position in the database. That is, go for a mistake-avoidance approach.

Once a Go program gets good enough to come close to being able to beat a top player, the ability to use computer vs. computer games to enlarge the database will come into play. At that point, progress in computer Go will be very fast.

A Scientist Shunned

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Patrick Brennan reproduces a letter from a scientist pressured to resign from a climate skeptic group.

I had not expect[ed] such an enormous world-wide pressure put at me from a community that I have been close to all my active life. Colleagues are withdrawing their support, other colleagues are withdrawing from joint authorship etc.

I see no limit and end to what will happen. It is a situation that reminds me about the time of McCarthy. I would never have expecting anything similar in such an original peaceful community as meteorology. Apparently it has been transformed in recent years.

I do not know the full background. Perhaps there is a charitable interpretation. However, unless there are particulars that justify this instance, I am inclined to think that shunning of a former colleague for joining a climate skeptic group is a sign of intellectual weakness, not strength.

The list of speakers dis-invited or withdrawn from commencement addresses because of a purge mentality is also a source of concern. I wish that there were stronger voices on the left denouncing this phenomenon.

Good Sentences

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From Ashok Rao.

Is the mind-blowing wealth of 30,000 Americans absurd? Sure. But it would be difficult to say, as the video suggests, these elite are beneficiaries of any inequality other than owning the right capital at the right time. (Indeed it is capital gains in the stock market that drive the income of this group).

Pointer from Tyler Cowen.

I strongly recommend Rao’s entire post. Later, he writes.

Sure the bottom 95% are doing a little worse and the top 5% a little better today, but the changes are nothing near the drastic increase in income inequality in the same time period. This suggests policy has changed favoring high income over low income in a much clearer fashion than high wealth over low wealth. This isn’t surprising given that much of the richest 0.01% are executives and bankers, not heirs to mounds of wealth. After all, it is the group of affluent-but-not-rich people for whom we subsidize housing (indeed more than we do food for the poor!) It is for the doctors we protect the medical market. It is for the middling executives and partners at law firms nobody has heard of we decrease taxes on those earning more than $200k. It is for the top 15(- top 2)% of Americans who couldn’t afford frequent flights to Florida without Spirit or Southwest we refuse to tax carbon emissions from airplanes the way they should be!

Wet Nanotechnology

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An interesting article.

The promise is a highly targeted method of drug delivery, precision guided missiles that leave healthy cells alone — as opposed to the kill-everything-cluster-bombs of chemotherapy.

And here’s the interesting part: Douglas and his peers have actually produced the nanorobots and they appear to work. At least in cell culture flasks.

How they did it says a lot about where we are and where we’re going in synthetic biology, an emerging field that allows scientists to custom design DNA, proteins and organisms to carry out specific tasks.

Pointer from Tyler Cowen. Successful anotechnology requires the ability to control the end product and self-assembly. Dry nanotechnology, which uses materials science rather than DNA, makes the control problem relatively easy and the self-assembly problem relatively difficult. Wet nanotechnology does the reverse. My uninformed inclination is to assume that wet nanotechnology will arrive sooner, because I think it will be easier to start with a working solution to self-assembly and achieve control than the other way around.

The World is Complicated

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Tyler Cowen quotes Aaron Hedlund:

The flaw with both of these models, of course, is that they are representative household models where there is no inequality.

Fair point, but I do not see this as a fatal flaw in trying to adapt the Solow growth model to a theory of inequality. Suppose you have two types of representative households–workers and capitalists. The capitalists do all the saving.

The real trick, which is just as tricky in a model with one type of representative household, is to get the capital/worker ratio to rise without the return on capital falling. At most, that can happen for a while–not indefinitely.

Rothbard and Krugman

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Jason Brennan trolls,

Yes, libertarians, Paul Krugman is a better economist than Murray Rothbard.

My comments.

1. I agree with Brennan that Krugman’s scholarly work is more important than Rothbard’s.

2. On matters of economic analysis, I have serious disagreements with both. Krugman on the liquidity trap. Rothbard on banking.

3. I think that a point of similarity is that both Rothbard and Krugman attract devoted fanatical followers who are unable to appraise their hero objectively and instead are sentimentally loyal. I am not sure, but I think that may be what Tyler Cowen means when he uses the phrase “mood affiliation.”

4. I think that at his worst (and he is often at his worst), Krugman reaches intellectual lows in terms of straw-man arguments and asymmetric insight (the claim that you understand your adversary’s motives better than the adversary understands himself) that I suspect are lower than Rothbard’s intellectual lows. Perhaps I am being charitable to Rothbard, because I have almost no first-hand acquaintance with his work.

Krugman explains his approach here.

Politics and policy are overwhelmingly dominated by what I call the Very Serious People — people who insist that deficits are our most pressing problem, that high unemployment must be a matter of inadequate skills, that low marginal tax rates on the rich are essential for growth. Behind the conventional wisdom of the VSPs lies a vast mass of power and prejudice.

Pointer from Tyler Cowen. Read the whole thing. I see this as pretty much standard Krugman. He takes the least charitable view of those who disagree with him, and he makes that the core of his argument. I think that this approach mostly inflicts damage, not so much on his enemies as on his friends. I think it brings down both their cognitive ability and their emotional intelligence.

Tyler Cowen’s Best Business Aphorism

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From an interview with Nick Beckstead on the topic of existential risk, meaning fundamental threats to the human race.

In his view, uploads are just an idea that some people came up with, most ideas don’t work, and most institutions are dysfunctional. Those truths seem more important for thinking about the distant future than any complicated arguments for the feasibility and importance of uploads.

Emphasis added to highlight the phrase that grabbed me.

Another aphoristic excerpt from the interview:

People in rural areas care most about things like fights with local villages over watermelon patches. And that’s how we are, but we’re living in a fog about it.

Tyler Cowen’s Best Sentence

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From his own review of Piketty.

In this sense, Piketty is like a modern-day Ricardo, betting too much on the significance of one asset in the long run: namely, the kind of sophisticated equity capital that the wealthy happen to hold today.

Cowen notes that Ricardo’s prediction that wealth would ultimately accrue to owners of land proved inaccurate. Read his entire review, as well as his related blog post. In the latter, I like these sentences:

Piketty converts the entrepreneur into the rentier. To the extent capital reaps high returns, it is by assuming risk (over the broad sweep of history real rates on T-Bills are hardly impressive). Yet the concept of risk hardly plays a role in the major arguments of this book. Once you introduce risk, the long-run fate of capital returns again becomes far from certain. In fact the entire book ought to be about risk but instead we get the rentier.

Regular readers will note that I have expressed concerns about this issue.

Clive Crook’s Best Sentence

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It is not in the excerpt of Crook’s review of Piketty that Tyler Cowen blogged. Instead, my favorite sentence is this:

It could also explain why the book has been greeted with such erotic intensity: It meets the need for a work of deep research and scholarly respectability which affirms that inequality, as Cassidy remarked, is “a defining issue of our era.”

I’ll get in trouble for saying this, but I will say it anyway:

Marx’s economics never stood on its merits. He got major things clearly wrong.

Keynes’ economics was never proven right or wrong, but by the same token no one has ever been able to pin down the answer to the question, “What did Keynes really mean?” Who else has spawned such a voluminous and inconclusive literature dedicated to seeking the “correct” interpretation? You don’t see economists floundering over the issue of “What did Coase really mean?” or “What did Samuelson really mean?” But with Keynes, that remains the overriding reason to read The General Theory–to try to figure out what the heck the guy really meant. I would say that after more than 75 years of attempts to clarify Keynes, one must either conclude that he was a clear thinker whose ideas are so brilliant that they have eluded the understanding of all subsequent economists–or that perhaps he was not such a clear thinker.

Galbraith’s The New Industrial State was the best-seller that was greeted with erotic intensity in the late 1960s, but on its merits it fell short as well. One of its central themes was that entrepreneurialism was dead, replaced by Soviet-style planning at American industrial giants. As Deirdre McCloskey tartly observed, “Eight years after the first publication of The New Industrial State, Bill Gates founded Microsoft.”

So before we pronounce Piketty’s book a masterpiece, I suggest waiting to see how the economic arguments shake out.