the same argument that disproves the importance of photolithography disproves the importance of anything else.
His post gives a number of examples where progress follows a straight line. This is sometimes used as an argument that no individual policy (or invention, as in the case of photolithography) matters. Alexander wonders whether we are deceiving ourselves into believing the null hypothesis for policy.
I think that in the case of inventions it can be difficult to discern an effect at the point in time when the invention occurs. The process of developing complementary inventions, adapting to the new technology, and achieving widespread adoption takes time. See the work of economic historian Paul David. As a result, even in a world of discrete innovations, the overall path of progress is smooth.
In the case of policy, I think that one must also allow for time lags. For example, changes in labor market incentives may not have large effects in the short run, but over time the culture can be affected.
But in general, I think that if one fails to see any historical break point in an outcome following the adoption of a policy, that justifies a presumption that the policy did not better. I would suggest more careful analysis if that is possible. A clever researcher may be able to find a “natural experiment” that has more power against the null hypothesis. For example, Tyler Cowen posted about a study that found that a carbon tax had little effect on carbon dioxide emissions by comparing across regions. In principle, that study provides more persuasive evidence that the null hypothesis holds for the carbon tax.
Another confounding factor is the fact that many policies are intentionally crafted to have a gradual effect in their implementation and impact, which moderates what would otherwise be a more blunt and drastic departure from the status quo likely to provoke opposition from established stakeholders, who usually get “grandfathered” into the new regime.
So, for example, consider some EPA action that is intended to do something like reduce lead in the environment from vehicle emissions. In that case, there wasn’t any overnight, instant prohibition of any lead in any motor fuels, the reduction was gradually phased in to allow industry and the auto sector to adjust. Even then, the EPA can’t surpass King Canute and order the tide to stop. It chooses a target that it has reason to believe will be economically feasible given reasonable expectations about foreseeable technological developments. Also, it doesn’t immediately require every old car to be scrapped; the requirements could apply only to new cars, or perhaps only to any vehicle transaction, but if you don’t sell the car, you can keep driving it. And again, the effect is gradual, with the expectation that non-compliant vehicles will slowly age out of the system and through natural turnover the fleet will come to be 100% compliant with the new standard.
If you imagine how this looks on a chart, with a vertical line at the passage of the law, it once again seems an smooth trend without discontinuity. But that doesn’t mean the policy didn’t “work”. What we’re really interested in is how reality would have evolved in the counterfactual scenario in the absence of the requirements. What we might expect is that at the passage of the law, there would have been an intersection of two alternative histories with a point of departure and growing gap starting at the passage of the law.
The trouble, of course, is that we can’t observe counterfactuals, and we’re really terrible at guessing what they will look like, or would have looked like.
Not sure why anyone would have faith in elite technocratic policy making.
Arnold: I have a question on the carbon tax issue.
Assume for the moment that the tax imposed accurately reflected the social cost. By the standard theory of Pigouvian taxes, do we actually care whether emissions go down? As long as everyone incorporates the social costs in to their decisions, we’ve internalized the externality, yes?
If demand isn’t very elastic in the range of the tax, then no reduction in emissions (or too low to measure) is the “correct” result, right?
Well, you could break the transistor line into two component lines: microprocessors with photolithography; and microprocessors without photolithography. I think the graph of the component lines would make it really obvious that photolithography had an effect.