Category Archives: links to my essays

Mike Munger’s latest book

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I have written a review. The book, Tomorrow 3.0, speculates that we could become a society where individuals own few goods and instead rent. I conclude

Up until now, it seems to me that we have managed to become increasingly interdependent without a loss of liberty. That is, we have developed norms and institutions that facilitate interdependence while maintaining our ability to make individual choices freely. Many of the important institutions that provide this governance are in the private sector, and the norms that they develop evolve over time (think of the evolution of payment from cash to checks to credit cards to smart phone apps). Going forward, I would be optimistic that although a society of renters may require more governance and more rules, these will evolve primarily from competition and cooperation among private entities, and we need not see an increase in centralized coercion.

The time-to-learn effect and the science slowdown

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Scott Alexander writes,

There are eighteen times more people involved in transistor-related research today than in 1971. So if in 1971 it took 1000 scientists to increase transistor density 35% per year, today it takes 18,000 scientists to do the same task. So apparently the average transistor scientist is eighteen times less productive today than fifty years ago. That should be surprising and scary.

He is citing Bloom, Jones, Reenen & Webb (2018). This paper was discussed at a conference Alexander attended. He writes,

constant growth rates in response to exponentially increasing inputs is the null hypothesis. If it wasn’t, we should be expecting 50% year-on-year GDP growth, easily-discovered-immortality, and the like. Nobody expected that before reading BJRW, so we shouldn’t be surprised when BJRW provide a data-driven model showing it isn’t happening. I realize this in itself isn’t an explanation; it doesn’t tell us why researchers can’t maintain a constant level of output as measured in discoveries. It sounds a little like “God wouldn’t design the universe that way”

My favorite economics professor, Bernie Saffran, was wont to observe that learning takes calendar time as well as studying time. A student cannot master a concept merely by putting in a certain amount of hours studying it. It takes some amount of days or weeks or months for a concept to sink in. You could write L = f(T,t) where L is learning, T is the amount of time you spend studying, and t is the passage of calendar time. Throwing more T at a subject brings diminishing returns, unless you also increase t. We can speculate that some of the brain rewiring that takes place is unconscious, and you cannot artificially speed up this process.

Suppose that there is an analogous factor at work at the level of society. That is, scientific discovery depends on calendar time as well as the time that scientists spend working on a problem. It takes a while for X to sink in, and only after X has sunk in can we go on and discover Y.

Alexander sees no reason to expect that we can speed up scientific progress with simple policy changes or institutional tweaks. I am inclined to agree.

But having said that, I can think of institutional habits that may be holding progress back. I probably will write an essay on those. UPDATE: The essay offers two modest reforms.

Why some things get expensive

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My latest essay deals with a question posed by Patrick Collison. He asks why things like education and health care keep getting more expensive. My answer is part Baumol, part Hanson, part Caplan, and part Kling. An excerpt:

It may seem puzzling that the demand for health care and education keeps rising while measurable outcomes, such as longevity or skill attainment, show little response to higher spending. One reason is that the perceived benefits of health care and education may be high relative to their effects on outcomes. You may not be cured of your ailment, but the effort is what matters to you, so you seek treatment. Sending your child to an expensive college may not improve her skills, but your own sense of status depends on it, so you fork over the tuition.

Read the whole thing.

Robert Plomin talks his book

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In the WSJ, Robert Plomin writes,

DNA is the major systematic influence making us who we are as individuals. Environmental influences are important too, but what look like systematic effects of the environment are often genetic effects in disguise: Parents respond to their children’s genetically driven traits, and children seek, modify and even create experiences correlated with their genetic propensities.

His book is Blueprint, which I just finished. His thesis:

DNA is the only thing that makes a substantial systematic difference, accounting for 50 percent of the variance in psychological traits. The rest comes down to chance environmental experiences that do not have long-term effects.

What he calls “chance environmental experiences” could be measurement error. Measurement error always holds down correlation. This raises the possibility that some traits that are measured with error are more heritable than they appear. For example, Gregory Clark found that social status is much more heritable across many generations than would be expected based on parent-child heritability estimates. I explained that this is likely due to error in measurement in social status, which lowers immediate-generation correlation more than multi-generation correlation.

Educational interventions are apparent environmental influences that wear off over time. You raise a test score but do not fundamentally alter ability. That is an element of what I call the Null Hypothesis, which Plomin strongly endorses, although of course he does not use that term. Related: Scott Alexander on pre-school.

This is one of the most important books of the year. Coincidentally, the NYT has an article on economists’ use of polygenic scores. Tyler and Alex both linked to it.

But you should know that I came away from Plomin’s book less than impressed with polygenic scoring. So much data mining. So little predictive value. Also, there is serious criticism of his view that environmental factors exhibit no systematic influence, but he does not confront it. I did a search inside the Kindle edition for “Flynn” and found no results.

Maintaining political sanity

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Channeling anthropologist Clifford Geertz, Timothy Taylor offers this advice.

  • What effort do you make to see yourself as those from the other sides of the partisan divides see you?
  • Do you have the “merest decency” to see those with other political beliefs as sharing a nature with you?
  • Do you see yourself and your political beliefs “as a local example of the forms human life has locally taken, a case among cases”?
  • To what extent is your objectivity a matter of self-congratulation?
  • To what extent is your tolerance a sham?

In a similar spirit, I wrote,

I wish that people could treat their political beliefs the way that they treat their religious beliefs: as ideas and values that they find appealing, but which are by no means the one true way.

The masses and the internet

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Robin Hanson writes,

But in fact ordinary people don’t care as much about privacy and corporate concentration, they don’t as much mind self-promotion and status tracking, they are more interested in gossip and tabloid news than high status news, they care more about loyalty than neutrality, and they care more about gaining status via personal connections than via grand-topic debate sparring. They like wrestling-like bravado and conflict, are less interested in accurate vetting of news sources, like to see frequent personal affirmations of their value and connection to specific others, and fear being seen as lower status if such things do not continue at a sufficient rate.

Read the whole post. I had some similar thoughts in this essay.

The masses came to the Internet. Many of the new arrivals were less technically savvy, were more interested in passively consuming entertainment than in contributing creatively, and were less able to handle uncensored content in a mature way. They have been willing to give up autonomy in exchange for convenience.

Buchanan’s theory of consent

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Two essays on the econlib web site.

1. Pierre Lemieux re-examines James Buchanan’s The Limits of Liberty.

“My approach,” he writes at the beginning of the book, “is profoundly individualistic, in an ontological-methodological sense” (emphasis in original); “[e]ach man counts for one, and that is that.” It follows that individual liberty is a value and that the social system should be based on unanimous consent. Any limit to liberty must thus be consented to by each and every individual.

2. I review Robert Sugden’s The Community of Advantage.

Sugden proposes what he calls contractarianism, which he credits to James M. Buchanan. Instead of thinking in terms of social decisions made by benevolent autocrats, Sugden’s contractarian treats decisions as made by individuals acting voluntarily and in concert. The job of the welfare economist is to act as a mediator, making individuals aware of opportunities for mutually agreeable bargains as suggested by the economist’s research.

The Diss Card Pile

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The Economist (warning: their site has lots of scripts* and is likely to crash your browser) writes,

Harvard’s lawyers hired David Card, a prominent labour economist at the University of California, Berkeley. His model includes factors like the quality of a candidate’s high school, parents’ occupations and the disputed personal rating. Under these controls, Mr Card claims that Asian-American applicants are not disadvantaged compared with whites. But given that these factors are themselves correlated with race, Mr Card’s argument is statistically rather like saying that once you correct for racial bias, Harvard is not racially biased.

Pointer from Tyler Cowen. The previous day, Tyler simply said Card is wrong.

I know of three works by Card. One is his paper, with Krueger, claiming that a higher minimum wage raised employment in an area. The criticisms of that paper are persuasive. The second is a paper claiming that college attendance helps people from poor families, controlling for ability. As I wrote in this paper (see the appendix), what he claimed was an instrumental variable (meaning it should have no independent correlation with the dependent variable) was anything but. The third is this latest piece of arrogantly-expressed unpersuasive analysis.

Card was awarded the Clark Medal, which is on par with a Nobel Prize. His body of work is enormous, and perhaps I have encountered the only three times he has been wrong. Perhaps he is only untrustworthy when he wades into a politically sensitive topic. But if you are looking for an economist’s work to examine to see how well it replicates, I have a name for you.

*All media sites do this, but The Economist really goes over the top. Just once I would like to see a major media site that does not invite you to “get notifications” and such. They are all apparently listening to the same Internet consultant, who is an idiot. If they want to listen to someone, they should listen to me. I proposed a better model almost twenty years ago. I knew they would resist it for a while, but I never thought it would be for this long.

Oren Cass’ Working Hypothesis

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Oren Cass writes,

a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy.

In other words, instead of counting GDP, we should be counting workers with enough income to support families. He goes on to say

if the Working Hypothesis is correct, a basic income would be entirely unresponsive to the nation’s challenges; indeed, the idea represents an explosive charge planted directly at the weakest points in society’s foundation. It would make work optional and render self-reliance moot; consumption would become an entitlement officially disconnected from production. A community in which people capable of making positive contributions are not expected to do so is unlikely to be one that thrives on any dimension in which productive contributions are needed.

Yuval Levin cites this paragraph and praises the book.

But Cass is wrong on the economics. If you object to policies that make earning a living unrewarding, then you should object to the policies we have now and appreciate that a universal basic income would be a huge improvement.

Cass uses rhetoric to make the universal basic income sound anti-work. But it is not. It would be much more pro-work than our patchwork of means-tested programs whose phase-outs create implicit tax rates that average 80 percent on earned income for the bottom fifth of earners.

Apparently, more people need to get up to speed on the basic economics of the UBI.

Cognitive failure and the financial crisis

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My review of A Crisis of Beliefs, by Nicola Gennaioli and Andrei Shleifer.

GS directly attack the hypothesis of “rational expectations,” which has dominated the economics profession for forty years. The rational-expectations doctrine holds that when economic actors make decisions that require forecasts, they make optimal use of the available information. They are not guilty of predictable irrationality.

. . .Think of a forecast as employing two types of information about a variable being forecast. One is a “base rate,” which is a very generic property of the variable. The other is “recent information” about that variable or about factors that could affect that variable. Recency-biased forecasting over-weights the recent information and under-weights the base rate.