Author Archives: Arnold Kling

A simple solution for the virus?

Posted on by

UPI reports,

A commercially available nasal antiseptic solution “inactivates” COVID-19 just 15 seconds after the coronavirus is exposed to it, effectively preventing the infection from developing, according to a study published Thursday by JAMA Otolaryngology-Head & Neck Surgery.

It works in test tubes, but needs to be proven to work on humans. In theory, it could make my outlandish prediction that we will give up on a vaccine come true. But have we already invested too much financial, political, and cultural capital into “wait for a vaccine” to adopt an alternative?

Some are teachable

Posted on by

Bo Winegard writes,

From listening to podcasts such as Econtalk with Russ Roberts, I began to understand the dangers of top-down solutions and intellectual arrogance, and about the importance of diffuse social knowledge, knowledge that is contained in social institutions but that we can’t necessarily articulate. The idea that if we just worked hard and elected the right people, we could solve long intractable problems became silly. The left appears to believe that almost every bad outcome is the result of a moral failure of society. . . .

But this ignores stubborn facts about human nature, individual differences, and incentive systems.

Thanks to a reader for the pointer.

Google certificates instead of college

Posted on by

Inc Magazine writes,

The three new programs Google is offering, together with the median annual wage for each position (as quoted by Google), are:

Project manager ($93,000)
Data analyst ($66,000)
UX designer ($75,000)
Google claims the programs “equip participants with the essential skills they need to get a job,” with “no degree or prior experience required to take the courses.” Each course is designed and taught by Google employees who are working in the respective fields.

The courses take only 6 months and cost way, way, less than going to college. They are not a status symbol for parents (nobody is bragging that their kid got into Google), but still. . .

Is financial repression an option for the U.S.?

Posted on by

Timothy Taylor writes,

the US political system has been unwilling to restructure big spending programs like Medicare and Social Security; a large-scale restructuring or default on US debt seems like a highly unlikely last resort; and US inflation has been stuck at low levels for 25 years now, for reasons not fully understood. Thus, I suspect the US economy may be headed, by fits and starts, to a period of what Reinhart and Sbrancia call “financial repression.” By this term, they mean a set of policies that invole much greater government management of the financial sector, including policies that focus on keeping interest rates very low and also limit other options available to investors–so that the government will find it easier to keep borrowing at low interest rates.

Financial repression means that government dictates how people save, essentially forcing them to finance government debt at artificially low rates. I can see doing this in a backward country that lacks financial markets that would allow people to get better interest rates than they can from the government. I cannot see how this would work in the United States. I think that we will get inflation instead.

Right now, people are bidding up the prices of assets, especially in the stock market. I think of an asset boom as deferred inflation. Eventually, people will sell assets and buy goods and services, and that is when we will see the inflation.

A Grumpy outlook on the debt

Posted on by

John Cochrane writes,

The danger the US faces the danger we should repeat and keep in mind, is a debt crisis. We print our own money, so the result may be a sharp inflation that wipes away the value of debt rather than an even more disruptive default, but the consequences will be almost as dire.

Read the whole essay. The counter-argument, which the market clearly accepts, is that the inflation-worriers have been with us for decades, and inflation has only trended down. Please do not repeat that argument in the comments. To me, it is the classic case of jumping out of a 10-story window, and as you pass the 2nd floor saying, “See, it’s all fine so far.”

In a subsequent post, Cochrane writes,

The main worry I have about US debt is the possibility of a debt crisis. I outlined that in my last post, and (thanks again to correspondents) I’ll try to draw out the scenario later. The event combines difficulty in rolling over debt, the lack of fiscal space to borrow massively in the next crisis. The bedrock and firehouse of the financial system evaporates when it’s needed most.

Basically agreeing with John, I recently wrote,

for the next several years the Fed will be focused on the task of enabling the government to continue to borrow. The conduct of what economists call monetary policy will be subordinated to that objective. The Fed will be expected to finance as much government borrowing as is necessary to keep interest costs under control. But regardless of how active the Fed is in purchasing government bonds, I believe that the United States will slide into a regime of high inflation.

My previous essays on the topic include How a Sovereign Debt Crisis Might Play Out and Guessing the Trigger Point for a U.S. Debt Crisis. As the latter paper points out, a debt crisis has to come as a surprise to the typical investor. That is why your confidence that there won’t be a debt crisis is not going to persuade me that it will never happen.

The other point of view

Posted on by

Molly Martin writes,

Black Americans have no evidence that they can trust the people who benefit from historically and predominantly white institutions. Banks. Schools. Courts. Bureaucracies. Housing providers. Nonprofits and charities. All were built within a racist system and, intentionally or unintentionally, have in their DNA measures and barriers—from redlining to school segregation—meant to keep Black and Brown people out.

This is from the New America Foundation. This is the point of view that I do not share.

Violence and revolutionary outcomes

Posted on by

Tyler Cowen links to a paper that says

regimes founded in violent social revolution are especially durable

This reminded me of a paper published in 1963, which said that

possible links between varieties of violence and revolutionary outcomes are left unexplored

The latter paper examined Latin America, and its author had considerable influence on my intellectual outlook. Its thesis is that limited, narrow violence, as in a coup, produces less dramatic overall change than broader violence, as in the Cuban revolution.

My objection to critical race theory

Posted on by

Here is a concise explanation of why object to Critical Race Theory, intersectionality, and so on. Following Lindsay and Pluckrose, I will use the shorthand “Theory” to describe these ideas or mindsets.

1. Humans have two bases for hierarchies: prestige and dominance. In a prestige hierarchy, such as the international rankings of chess players or tennis players, people lower down appreciate and admire people higher up. In a dominance hierarchy, such as a violent gang, people lower down fear and resent people higher up.

2. Prestige is positive and dominance is negative. Participating in a prestige hierarchy tends to involve skill development, greater prosperity, and peaceful cooperation. Participating in a dominance hierarchy tends to involve violence, coercion, and repression.

3. When we examine a cultural institution, we may see elements of both prestige and dominance. For example, we may wear a mask during the current pandemic because we appreciate and admire those who recommend doing so. Or we may wear a mask mainly because we fear law enforcement or social pressure. Another ambiguous example is a corporate hierarchy. You may think of the CEO as a leader who enjoys the trust and respect of employees, investors, and consumers. Or you may think of the CEO as an autocrat exercising power over those constituents. In truth, there is some of both.

Government is an interesting example of an ambiguous case. If the way to become head of state is to use force, and the head of state rules by decree, then intuitively this is a dominance hierarchy. If the way to become head of state is to inspire followers, and the way to inspire followers is to have good ideas for policy, then intuitively this is a prestige hierarchy.

4. The idea of Theory is to expose the dominance that lies behind existing institutions that supposedly operate as prestige hierarchies. For example, STEM fields appear to be a prestige hierarchy, but Theory looks at the disparities in STEM positions by race and gender and sees a dominance hierarchy.

5. Today, Theory has taken this idea to extremes. It does not see our existing institutions as having any basis in prestige. Instead, it interprets all cultural institutions as serving a dominance hierarchy. In this view, the sole purpose of the SAT score is to perpetuate the oppression of blacks, so SAT scores should be eliminated. The sole purpose of police is to oppress blacks, so the police should be de-funded. The sole purpose of the use of the scientific method is to oppress indigenous people, so that the status of the scientific method should be lowered and instead other ways of knowing should be accorded more respect.

[UPDATE: This comment documents these examples.]

6. In going to these extremes, Theory is wrong. Many cultural institutions really do promote prestige and minimize dominance. They are good institutions. Where they fail to live up to our highest ideals, they can and should be reformed, not eliminated. We can improve the policies to recruit and train police, but not if we de-fund the police.

7. Even worse, Theory is dangerous. Because it thinks only in terms of dominance, its adherents seek to dominate. When the “Woke” encounter people who do not share their outlook, they use coercion, including mob intimidation, “canceling,” and brainwashing “training.” The movement has none of the tolerance for dissent that is the essence of a liberal society.

Naive realism and the pandemic

Posted on by

Ross Douthat writes,

it probably makes more sense to compare the U.S. death toll to similarly positioned and sized countries — meaning the biggest countries in Western Europe and our major neighbors in the Americas — than to compare us to a global average. And when you compare deaths as a share of population within that group of peer countries, the U.S. starts to look more mediocre and less uniquely catastrophic.

He is responding to the views of his newspaper’s writers and readers that the United States suffered many more COVID deaths because Donald Trump was President. I think that this view is very widespread and very wrong.

A lot of research suggests that non-pharmaceutical interventions made little or no difference in cross-regional and cross-country comparisons. Statistical comparisons aside, tell me what policies the President could have put in place that would have made a large difference. Show your work, keeping in mind how many deaths seemed to stem from New York subways and nursing homes.

Jeffrey Friedman introduced me to the term naive realism, which is an important concept with a misleading name. I would explain naive realism as follows.

A first-order naive realist believes that he knows enough to solve a problem if he were in charge.
A second-order naive realist admits that he does not know the solution, but he is sure that someone could solve the problem if that person were put in charge.

It seems to me that there are a lot of naive realists about the pandemic. To them, I would say the following:

1. Even now, there are huge gaps in our knowledge. It is not clear that after more than 6 months we know what the optimal policy should be or should have been.

2. Among experts, the most touted solution is massive testing along with “track and trace.” But in February or March, when this might have made a large difference, it was logistically and politically impossible. It was logistically impossible for many reasons, including the fact that the FDA was in the process of disapproving any test not issued by the CDC, and the CDC was in the process of issuing faulty tests. It was politically impossible because in early March, politicians on the left were positioning themselves against taking the virus seriously, arguing that to do so was anti-Asian and racist.

3. Health experts were against masks.

I am not saying that President Trump said the right things or gave good advice. But to me, the view that we would have had a different outcome under a different President seems difficult to support.

Corporate R&D labs

Posted on by

Ben Southwood writes,

From 1949 authorities pursued a case against AT&T’s Bell Labs, which ultimately resulted in the forced divestiture of their non-telecoms arms, separation from their vertically integrated manufacturing, and compulsory no-fee licensing of all 7,820 of its non-telecoms patents (1.3% of the total stock of patents in force in the USA at the time). There is evidence that this move rippled across the US economy, providing a foundation for many of the great innovations of the next fifty years. But this would be true of almost any mass patent invalidation: the monopoly restrictions of patents once they are granted are the cost we pay for the investment in innovation that came before.

He raises the possibility that whatever short-run gains there were from going after AT&T, the long-run impact was to reduce R&D and growth.

In a business environment with no barriers to entry, it is impossible for a firm to capture the benefits of innovation. Hence, there is little incentive to innovate.

Patents provide one barrier to entry. But that approach has a number of flaws. I am not a fan of patents in general.

The main alternative is barriers to entry that are created by business strategy and execution. Microsoft in the 1990s was the master of using business strategy to erect barriers to entry.

These strategic barriers to entry can work both ways. To the extent that an innovation expands profit opportunities for the incumbent firm, it is encouraged. To the extent that it cannibalizes opportunities for the incumbent firm, it is stifled.

This may explain why Xerox “fumbled the future.” The personal computer and the network appeared to create the possibility of a “paperless office,” which is not a welcome development for the copy machine business.