perhaps economist Gary Becker, who was awarded the Nobel Prize in 1992 and died in 2014, had the answer. As the relative importance of firm-specific human capital declines, workers are less invested in their organizations. This weakens the organization’s commitment to its mission and values.
Another FITs update
On Wednesday, Tyler Cowen’s Assorted Links post was one of his best ever. Each was worth following, but I take particular note of J. Stone on The Great Feminization. This includes, for example
Less affinity for traditional, constitutionally protected forms of confrontation in the legal and political spheres, i.e., less support for open debate, free-speech rights, and “due process of law.”
There is some overlap between Stone’s post and my own on Warriors/Worriers. I think that these speculations align with the “mean girls” observation in the Bari Weiss podcast with Jaron Lanier.
Links omitted, click on the link above to see them.
Balaji wants a $600 toilet seat
Someone, not Balaji, forwarded this to me.
the world needs a global, decentralized, censorship-resistant inflation dashboard. For the next 90 days, we’re accepting submissions for this project. We’ll invest $100k in the best entrant
…what we want to build is a maximally government-independent, on-chain, open-source, crypto oracle version of MIT’s Billion Prices Project, which uses raw data from many different online merchants to provide a public, transparent, reproducible, and internationally useful calculation of how much inflation is happening.
In addition,
The ultimate version of the smart contract would allow you to pick some weighted basket of goods to get a personal inflation calculator
Thirty-five years ago, there was a mini-scandal when it was discovered that the Pentagon was paying $600 for a toilet seat. When consultants looked into it, they discovered that the military procurement process kept adding requirements to proposals until they became ridiculously expensive to fulfill. I was reminded of that when I saw Balaji’s requirements document. In my email back to the individual who had forwarded it to me, I wrote:
I would say that by the time you could execute this, $100,000 would have been eroded by inflation to almost nothing. 😉
Seriously, it’s way too hard as described. Anyone who submits a proposal shows me that they are too delusional to be trusted with an investment.
If the problem is governments hiding inflation, then I would aim for a simpler solution. Come up with a list of about 20 broad categories, such as durable consumer goods, medical services, housing, transportation, etc. Then for each category come up with a list of about 10 items that are typical within the category, which together track broader price indexes in that category, and for which price data are obtainable in many locations. Think about items that would be hard for the government to manipulate–for example it is unwise to choose a type of bread that a government subsidizes. So now you have 200 items for which you need to collect data.
I think that a lot of the requirements go way beyond trying to get a decent measure of inflation, e.g. enabling the calculation of an individualized inflation estimate. If it were me calling for proposals, I would focus the requirements on obtaining a hard-to-game inflation measure and get rid of all the other crazy requirements. This looks like something a team of government bureaucrats would dream up, and no genuine entrepreneur should go near it.
Can we count on the Fed to hold down inflation?
Jason De Sena Trennert writes,
The Fed’s policy of quantitative easing injures middle-class savers. People without financial assets get kneecapped by the policy known as “financial repression”—purposefully attempting to pay for government spending by keeping interest rates below the rate of inflation. This policy has been a boon for the wealthy but a disaster for average people, who earn no return at all on their savings.
…Total financial assets in the U.S. now represent 565% of gross domestic product.
…A remarkable 50.9% of U.S. sovereign debt matures in the next three years. The weighted average cost of America’s outstanding debt is only 1.38%. With more than $22 trillion of that debt owed to the public, relatively small changes in short-term interest rates could greatly increase the federal deficit.
His point is that the Fed will be under tremendous pressure not to raise interest rates, because of the devastation it would bring to financial assets and the cost it would impose on the government deficit. My thoughts:
Interest rates are low either because (a) the Fed has the power to control them and is keeping them artificially low; or (b) the natural forces of supply and demand favor low interest rates (global supply of savings is high, global demand for investment is low, and/or preferences for low-risk assets are high).
I think that (b) is more likely to be the case.
If (a) is true, then it seems pretty certain to me that we will get lots of inflation over the next few years.
I also think we are headed for inflation if (b) is true, but it might take longer to get rolling and be much, much harder to stop.
I agree with the thrust of the story, that the Fed will be under intense pressure to keep nominal interest costs low. If it had the means to stop inflation, it might not have the will. But I don’t think it even has the means–it’s up to Congress to stop running up the debt.
Use your economics!
If you use your economics, then no matter how complex the supply-chain problems might appear, they can be solved using the price system. The price system may or may not be able to call forth more supply, but it certainly can ration demand, and it can do so more efficiently than is being done at present. Everywhere the supply chain is “broken,” higher prices can ensure that scarce goods are allocated to the highest-priority uses.
The latest Nobel Prize in economics
The award announcements says that one-half of the award is given to David Card “for his empirical contributions to labour economics,” while the other half is given jointly to Joshua D. Angrist and Guido W. Imbens “for their methodological contributions to the analysis of causal relationships.”
All three are involved in what Angrist and Jörn-Steffen Pischke dubbed the “credibility revolution” in empirical economics. As Alex Tabarrok puts it,
Almost all of the empirical work in economics that you read in the popular press (and plenty that doesn’t make the popular press) is due to analyzing natural experiments using techniques such as difference in differences, instrumental variables and regression discontinuity.
The Leamer critique caused economists to largely abandon ordinary multiple regression and to instead employ more credible research designs, such as natural experiments.
Leamer in 2010 pointed out that the newer methods also come with limitations. But, alas, he was bypassed by the Nobel committee.
Noah Smith goes way overboard in praise of the new laureates. He makes it sound as though the results that David Card and Alan Krueger claimed about the minimum wage were only controversial because they were surprising. But they were also controversial because they were wrong.
The opposite of FITs
Ordinarily, I like to focus on good writing and ignore the bad. But this WaPo op-ed is such a classic illustration of how to reinforce closed minds on your own side that I am willing to violate my own rule. Adam Laats writes,
At moments when American culture has taken some progressive turn, conservatives have consistently blamed a single culprit for indoctrinating vulnerable youth with radical ideas: public schools. Local school board meetings offer an attractively close-to-hand target — a place to vent frustrations and feel some measure of control, instead of admitting defeat.
The theme is that conservatives are trying to “turn back the clock.” This is classic asymmetric insight–claiming to understand the other side’s motives better than they do, and not taking their concerns at face value. At no point in his piece does Laats try to articulate what conservatives are saying about critical race theory in schools, much less steel-man their argument.
I should note that it would take only a few minutes to find an equally bad column written by a conservative. In fact, here is Victor Davis Hanson on why he left National Review. Hanson is another master of asymmetric insight. In this case, he claims that the true motives of those on the right who oppose Donald Trump are:
that’s kind of a virtue signal to the left. .. a lot of them felt it was their duty as Republican establishmentarians to tell the world they didn’t approve of Donald Trump’s tweets or his crudity.
I think that a lot of never-Trumpers genuinely believe that U.S. foreign interventions are necessary and that cutting entitlement spending is necessary. And they dislike Mr. Trump’s style because they think it damages the conservative cause.
That is the way to charitable to never-Trumpers, and those are the positions you should argue against. Just to be clear, I was not a never-Trumper, although his post-election complaints are making me one.
VDH is doing the opposite of being charitable. And he does it with the left even more. So you can like him for being on your team, but I don’t think he earns many FIT points.
I wrote The Three Languages of Politics to try to get people to reject this sort of writing and to demand better. To no avail.
The permanent government
You don’t control the government unless you can shut down parts of the ‘permanent’ bureaucracy and you can’t legally do this in the current regime without grabbing control of a party. It’s hard to imagine sane politics over the next 50 years without somehow closing (or at very least ‘changing beyond recognition’) the GOP, Democrats, Tories, Labour.
The post is endorsed by Tyler Cowen, and I think it says some things that Tyler would not say out loud.
Speaking for myself, I strongly agree with Cummings on this:
Whether Trump wins or loses [in 2024] his candidacy will be terrible for everybody. He demonstrated no interest in actually controlling the government. He didn’t drain even a corner of the swamp, he just annoyed it.
Seminar for Paid Substack Subscribers
More information here. We will meet using Zoom. Eight weeks, forty bucks.
The seminar will meet on Monday evenings, from 8-9 PM New York time, starting November 1 and finishing December 20.
The topic is Institutional Irrationality. I think that many of our current problems cannot be solved by institutions that have gone off the rails.
National Conservatism Confers Again
In just three weeks, and I just found about it a couple of days ago. It will cost 315 bucks, plus transportation and lodging. I doubt that I will attend.
It looks to me as though almost every public intellectual who has ever had a kind word to say about Donald Trump will be there. One of the more interesting people on the list of speakers is Batya Ungar-Sargon, who has said
I, too, have been shocked at the refusal to acknowledge Trump’s wins, many of which were actually really progressive. Thanks to his economy, the base pay of the lower 25% of wage earners rose by 4.5%, which is unprecedented in recent history (certainly, nothing like this happened under Clinton or Obama). He brought truly unprecedented unemployment to marginalized communities and gave millions and millions of dollars to HBCUs. He freed over 4,000 Black men from prison; men sent to prison because of Joe Biden’s crime bill, the irony of ironies. Had the Democrats not been so totally committed to their loathing of Trump, they could have gotten much more out of him.
I recommend the whole interview. The title of her scheduled talk at the conference is “America’s Hidden Class Divide and Our Terrible Media.”
The political party I want would be:
(a) anti-Woke culturally
(b) respectful of working- and middle-class voters without pandering
(c) determined to cut Federal government spending, including on entitlements
(d) determined to shake up bureaucracies (like the FDA and CDC) so that they solve problems instead of operating as self-licking ice cream cones
The National Conservatives are anti-Woke, but they want to pose as working- and middle-class champions. Pandering includes ignoring the out-of-control growth in entitlements. And I don’t see anyone stepping up to the plate on shaking up Washington. In the case of Mr. Trump, the swamp drained him rather than the other way around.