Category Archives: Tyler Cowen is my Favorite Blogger

Evaluating organizational effectiveness

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Tyler Cowen writes,

The US funds more science research than any other country — about $35 billion per year on the NIH and $8 billion per year on the NSF. How exactly do these institutions work? How have they changed over time and have these changes been for good or bad? Based on what we now know, how might we better structure the NIH and NSF? What experiments should we run or what kind of studies should we perform?

This is the first in a long and varied list of areas he thinks are worthy of further study. One more example:

Indonesia is a large, populous middle-income country. It faces no major near-term security threats. It has a small manufacturing base and no major non-commodity export sectors. What is the best non-bureaucratic 10 page economic development briefing document and set of prescriptions that one could write for Indonesia’s president? For Indonesia, substitute Philippines, Chile, or Morocco.

Many of the topics in Tyler’s list involve attempts to improve or evaluate organizational effectiveness. I would say that in evaluating an organization, look for common flaws, listed below. Give high marks to organizations that are able to avoid these pitfalls.

1. A good mission statement will serve to narrow the purpose of an organization. It will remind everyone what the organization will not attempt to do. In badly-run organizations, the scope of the organization is unclear.

2. The organization should have a formal planning process. About once a year, or once every other year, the organization should evaluate past performance and set future goals. Middle management as well as top management should be involved in this planning process, in order to try to achieve alignment between strategic goals and departmental activities. In badly-run organizations, departments run on auto-pilot without any strategic direction.

3. Borrowing terminology from Morrisey, et al, The planning process should include Key Results Areas and Indicators of Performance. For example, a city could have a Key Result Area that is reducing traffic congestion, and an Indicator of Performance that is the number of workers who are able to commute during rush hour in less than 30 minutes. Middle managers strongly resist KRAs and IOPs. Instead, they prefer to be measured on the basis of activities–how many traffic lights they installed, or how many potholes they filled. A grant-making organization that measures how many grants get approved rather than anything related to the results from making those grants is operating on auto-pilot. In badly-run organizations, departments do not articulate meaningful KRAs and IOPs.

4. Organizations need to periodically adjust their incentive systems. Top management wants maximum effort with minimum outlays. Employees and other recipients of funds want the opposite. Over time, the compensation system degrades, due to changes in organizational goals and due to recipients learning how to game the system. Badly-run organizations leave ineffective compensation systems in place.

5. Some departments or projects falter. Can the floundering projects or departments be put back on track at a reasonable cost? If not, then they probably should be shut down. Badly-run organizations are unwilling or unable to identify and deal with low-achieving activities.

6. Organizations need periodic adaptation, including restructuring. The environment changes–think of the effect of new computer and communications technologies on many areas. Badly-run organizations fail to adapt to changes.

My guess is that you could use this framework to evaluate many of the institutions mentioned in Tyler’s list. But in the case of government agencies or non-profits, will such evaluation make a difference?

Non-fiction books of the year

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No overlap with Tyler’s list. I don’t know how he got through Jewish Emancipation. I will have to give Whiteshift another try.

My list:

Robby Soave, Panic Attack

David Epstein, Range

Tyler Cowen, Big Business

Kevin Mitchell, Innate

Gregory Zuckerman, The Man Who Solved the Market

Yuval Levin, A Time to Build

I have spent considerable time pondering the last three, and I have essays on them forthcoming.

Levin’s book does not come out until next year. But to repeat it on next year’s list would be forgivable.

Eric Weinstein and Tyler Cowen, partially annotated

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The podcast is here.

For the first hour, it reminds me of conversations I occasionally had at home as a teenager, in which I would climb onto an intellectual ledge and my father would try to gently talk me down. Here, Tyler plays the role of my father.

At one hour and six minutes, Tyler himself climbs onto a ledge. In talking about the stagnation that began in 1973, he speaks of the “feminization” of our society.

One possibility is that he was thinking, “Our society reduced its rate of risk-taking and novelty-seeking. Women tend to like risk-taking and novelty-seeking less than men. Therefore, it is fair to speak of feminization.”

The first two statements are controversial, but suppose that they are true. The conclusion still does not follow. We need some link that connects the premises to the conclusion at the level of society. Did women, starting around 1973, acquire significant power to direct corporate investment and/or the regulatory apparatus? Or did men in these positions lose their, er, manhood around this time? I don’t think that’s a ledge you want to stand on.

Another interpretation of “feminization” works much better but is somewhat less interesting. That is, we can say that because of the decline of manufacturing and the rise of the New Commanding Heights industries of education and health care, employment opportunities for women improved while those for men worsened. At the same time, widening the door for women to enroll in universities was like opening up professional sports to African-Americans in that the formerly-excluded were able to compete effectively and some of the formerly-protected were left worse off.

This latter interpretation allows “feminization” to explain why earnings of the median working-age male have shown at best disappointing growth over the past 35 years. But it does not work as a broad sociological explanation for other phenomena, such as a slowdown in scientific discovery or an apparent decline in the productivity of civil engineering.

About 15 minutes later in the podcast, Eric tries to interest Tyler in a comparison of mainstream and heterodox thinkers. Tyler will have none of it. He says that we are the last generation that will understand the distinction. His view appears to be that institutional brand names, such as “New York Times” or “Harvard Economics Department” will not impress the Internet generation.

So where does that lead? What becomes of what Eric would call society’s “sense-making apparatus”? One scary scenario is that it doesn’t get any better than it is today, so that the loss of the information Leviathans with which we grew up will lead to a sort of Hobbesian “war of all against all.” A more optimistic scenario would be a “cream rises” outcome in which to attain broad credibility you have to rise to a very high level of intellectual rigor. Think of Scott Alexander as an example.

Creating a new index

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Tyler Cowen proposes several.

Indexes are informative, easy to digest, and remarkably well-suited for social-media sharing. At their best, they can actually be fun. Creating more of them is one way social scientists can satisfy the growing public hunger for knowledge and accountability.

In a blog post, he asks,

Which indices do you wish for?

I already have an answer.

I propose that, instead of using GDP or overall subjective happiness, we should use occupational satisfaction as the broad indicator of economic performance. Occupational satisfaction is the core economic component of happiness. Unlike GDP, which is rooted in a materialistic understanding of value, occupational satisfaction reflects the understanding that value is subjective.

That is from two years ago.

Male labor force participation

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Ariel J. Binder writes,

positive co-movement between employment and wages is closer to the exception than the norm in modern U.S. history. Second, most estimates of the wage elasticity of male labor supply are small, suggesting that male employment responds little to persistent wage changes. And third, prominent labor demand forces were found in a recent review to account for less than half of observed decline in U.S. employment since 1999 (Abraham and Kearney, 2018). These facts suggest that factors beyond labor demand are necessary to explain the secular decline in noncollege men’s involvement in the labor market.

Pointer from Tyler Cowen.

This decline in male labor force participation among those without a college degree is a significant issue. Note that even though the unemployment rate has come down for those workers, their rate of labor force participation is still way down.

Economists on the left tend to assume that this is due to a drop in demand for workers at the low end of the skill distribution. Binder’s claim is that instead one factor in declining participation is an increase in the ability of women to participate in the labor market, which in turn lowers the advantage of marrying a man. The reduced interest in marriage on the part of women attenuates the incentive for men to work.

Like all economic research of this kind, I would take this with a grain of salt. But if it is true, then I would say that if we could substitute a universal basic income for our current in-kind transfer programs, then the marginal tax rate for the working class would go down, and this might restore some of the incentive for marriage.

Employee tenure

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The BLS reports,

The median number of years that wage and salary workers had been with their current employer
was 4.2 years in January 2018

(in the future, the link may take you to a then-current survey)

Pointer from Alex Tabarrok, indirectly from Tyler Cowen.

The overall figure includes workers under age 25, and that may skew the number downard. If you dig into the BLS release, you find that for workers aged 35-44, the median tenure is around 5 years. That is still not terribly long. This is not the textbook picture of the labor market, in which everybody works in the GDP factory in “the” job at “the” wage rate. I see it as another reason to prefer the framework that I call patterns of sustainable specialization and trade.

Cultures of conventional failure

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In this essay, I will offer a theory of slow progress based on the maxim, “It is often easier to fail conventionally than to succeed unconventionally.” My claim will be that in health care, education, and construction/infrastructure, the consuming public is more receptive to conventional failure than unconventional success. This is less the case in other realms, so progress is faster in those realms. We are willing to try ride-sharing apps or airbnb, but no middle-class parent wants to tell their peers that their kids are not going to an established college.

In the Zuckerberg-Cowen-Collison conversation, Zuckerberg repeatedly asks why costs are high in health care, education, and rent.

So you were talking a minute ago about the explosion in costs in healthcare. And right now, I think one of the defining aspects of the moment that we’re in is a lot of the basic costs of living for a lot of people have just increased a lot. . .things that matter so much like healthcare, education, rent–those things have generally just increased, right? And the normal dynamics that you’d be hoping would play out aren’t. And to some degree, for the quality of life for a lot of people, the increases in those costs may even be dwarfing all the other advances in everything else

1. As I was listening, I was frustrated, because I wanted to point to my essay What Gets Expensive, and Why?. There I include the Baumol effect, but note my critical comments on the attempt by Alex Tabarrok to put it all on the Baumol effect.

2. Patrick notes that our ability to do large construction projects has declined over the past 70 years or so.

it’s very clear that our productivity has fallen off a cliff and for reasons that we can be pretty sure are not that it’s getting intrinsically harder. And so, for example, when New York decided to build the subway in 1900…4.7 years later, they opened 23 subway stations, and in 2019 dollars, they spent just over a billion dollars doing so. … When New York decided to build the Second Avenue subway in the year 2000, 17 years later they opened three stations and they spent $4 1/2 billion doing so. And so our productivity in subway construction has, at least in New York, decreased by a factor of 40. … California, you have high speed rail where… when France decided to build the TGV, its high speed rail, it opened the first line after five years. California started pursuing high speed rail 11 years ago. They forecast–we forecast–being finished in 2033. So we project a 25-year project, but of course, that’s a projection. It’ll probably end up being much longer

3. I already gave away my instinct on this when I wrote,

my inclination is to focus on broader cultural values. The enemies of progress are fear of novelty and envy of success. My thinking is that when those enemies hold sway, progress will be slow. When those enemies are weak, progress will be rapid.

I agree with Tyler that there is a lack of will. In the case of infrastructure projects or housing development, we now have a culture of conventional failure. Look at how hard it has been for Google to try to find a city that will allow it to experiment with a city of the future. Cities are only willing to approve politically correct development–bicycle lanes, as opposed to dedicated lanes for self-driving cars.

4. Patrick says,

empirically the entry costs of forming a new university are really high, but that’s not because there’s a kind of formal toll you have to pay. It’s not like zoning where there are deliberate, specific legal restrictions that prohibit you from doing so. But just as a practical matter sociologically, institutionally, accreditation dynamics, who knows, it’s apparently almost impossibly difficult to create a successful new university today.

Again, that is because we prefer conventional failure to unconventional success. I recently was hosted by a family in Texas. The oldest daughter was in the midst of applying to college. I wanted to scream “No! Don’t do it!” I do not believe that she is ready to go to college. I think she would be much better off just working at a low-paying job for a year or two and living on her own. I believe that is true for the vast majority of high school seniors these days.

Patrick is in the business of making it easier to start a company. Suppose he were in the business of making it easier to start a university. From the standpoint of technology, that seems like a very plausible business. Tools exist to deliver education in different ways. Look at Tyler’s and Alex’s MRU. The barriers are mostly cultural. Nobody wants to be the parent whose child succeeds unconventionally by taking a nontraditional approach to higher education.

I also want to scream “No!” when I see wealthy donors giving money to universities. The top schools have these enormous endowments already, which act like moats protecting them from competition. Don’t help them fill their moats! Instead, put that money into higher education start-ups. But if you give to your alma mater or to create a research institute at an established university, you can enjoy conventional failure. That seems to be more appealing to philanthropists than unconventional success.

Tyler and Patrick offer some provocative views about the way that success in research tends to come from less conventional institutional processes. But people stick with the conventional. For example, Tyler says

So I think in general, big questions are under-studied– the tenure system, I think, increasingly is broken. A lot of academics do work pretty hard, but that so much of your audience is a narrowly defined set of peers who write you reference and tenure letters–I think we need to change. And the incentive for academics to integrate with practitioners and learn from them and actually try doing things–we need more of that. I’ve often suggested for graduate school, instead of taking a class, everyone should be sent to a not-so-highincome village for two weeks. They can do whatever they want. Just go for two weeks, think about things. No one wants to do this. No one wants to experiment with it.

And I would add, require internships for economists. You can learn a lot while working in business.

Turning to health care, I think that Zuckerberg over-states the amount of money wasted in futile care in the last six months of life. But I think that the point is correct that we undergo many procedures with high costs and low benefits. I strongly believe that if we took away dollars at the margin from medical procedures and put those dollars into public health measures, the net effect would be positive. But wasting money on medical procedures with high costs and low benefits is a way to fail conventionally.

In short, when it comes to urban construction/civil engineering, education, and health care, we have evolved cultures of conventional failure. Innovation and entrepreneurship are discouraged. The heavy influence of government in these sectors probably serves to reinforce this. But ultimately the political process gives us something like what most people want. As Pogo would put it, we have met the enemy of progress, and he is us.

Telepresence

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[Note: I originally scheduled this post to be published next week, but I moved it up after listening to the conversation between Mark Zuckerberg, Tyler Cowen, and Patrick Collison. In the transcript, Zuckerberg says

So rather than people moving–inventing a new hyperloop or cars, I tend to think the set of technologies around–whether it’s augmented reality or virtual reality or video presence that just lets people be where they wanna be physically and feel present with other people wherever they need to be to do their job, to connect with the people they care about–that feels to me the better long-term solution.

Those are the thoughts I express and elaborate on below.]

I remember hearing Robert Metcalfe (link goes to Wikipedia) speak about twenty years ago, and when he was asked what he thought was the killer application for the Internet, he said “telepresence.”

I thought of this when I saw the paper on mobility in the United States by Kyle Mangum and Patrick Coate, pointer from Tyler Cowen.

repeat mobility is common. That is, people living in their “home” locations are far less likely to migrate than those away from home.

My train of thought went as follows.

1. I view the paper as showing that many people come to like where they live. The repeat movers are either innately restless or experimenting.

2. When people my age talk about their children’s work lives, a sentence that comes up frequently is, “They let him (her) work remotely.” Of my three daughters, one works in Boston for an organization based in Maryland, one works from home three days a week, and the third probably could continue to work remotely if her husband moves.

3. In fact, a lot of married couples have job opportunities in different cities.

4. Recall that Patrick Collison said that his firm set up a department that he calls “Remote.”

5. As Patrick pointed out in that same conversation with Reid Hoffman, Zoom Meeting is quite a step forward in the videoconferencing arena. I can’t really articulate what makes it better than Skype or Google Hangouts, but it just feels more conference-y.

6. If I were in the venture capital business, I would make a bet that remote work will grow exponentially, and I would assemble a portfolio of companies based on that bet. Will more people wear body cameras? Do small companies need better support for interstate human resource functions? What are the needs of the home-office worker? What sorts of meeting-scheduling systems address the challenges posed by remote work forces?

7. I think that blue-collar work may be an overlooked opportunity for telepresence. Techies talk about telemedicine, but it seems to me that it is much harder to remotely work on someone’s body than it is to do other tasks remotely. So blue-collar telepresence may come first. Professor Daniel Markovitz, author of the Meritocracy Trap (in another conversation I plan to annotate) says that Amazon warehouse workers already are subject to remote monitoring.

–How about tele-sanitation? Bathrooms at places like airports and hospitals have to be cleaned and re-stocked very often, and robots could do that. But the robots might not be able to operate completely independently. A remote operator could help the robot be more adaptable to situations.

–How about tele-chauffer? Even if self-driving cars are not ready for the road, who says that the driver has to be in the car? In the case of truck driving, the number one source of job dissatisfaction is being away from home all the time Telepresence could solve that problem. Perhaps a co-pilot does not have to be on the plane (assuming you want the pilot to be there).

–The highway construction workers who operate machines. Do they need to be there?

–The workers building skyscrapers. Could they operate by managing robots remotely?

8. Think of what Zoom Meeting and other telepresence apps will be able to do when 5G is ubiquitous.

Science: increasing and decreasing returns

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Tyler Cowen and Ben Southwood write,

To sum up the basic conclusions of this paper, there is good and also wide-ranging evidence that the rate of scientific progress has indeed slowed down, In the disparate and partially independent areas of productivity growth, total factor productivity, GDP growth, patent measures, researcher productivity, crop yields, life expectancy, and Moore’s Law we have found support for this claim.

I think of this in terms of what factors might cause science to exhibit increasing returns or diminishing returns

The most obvious source of diminishing returns would be the “low-hanging fruit” story. The problems that remain to be solved are really hard: human biology; human psychology; climate science; etc.

Another possibility is that scientific genius is limited. If you throw more money at mediocre scientists, you don’t get any results.

The most obvious source of increasing returns would be lower cost of new scientific tools. The cost of genome sequencing, for example.

Another source of increasing returns would be better communication technology.

If you want to speed up scientific progress, the tools that are available are probably institutional. What changes in institutions can we make that would either mitigate diminishing returns or promote increasing returns?

As the authors point out, science has become bureaucratized, with much of the funding coming from government grants that impose a lot of costs in terms of process and perhaps impede creativity. Having more science funded by patronage, with wealthy donors providing funding with fewer strings attached, might be an improvement–unless you think that the bureaucratic requirements add value and rigor to the process of choosing scientific projects.

The new “it” paper from Joseph Henrich

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and others, two of whom are colleagues of Tyler at GMU. Caitlin McDermott-Murphy provides coverage.

Comparing exposure to the Western Church with their “kinship intensity index,” which includes data on cousin marriage rates, polygyny (where a man takes multiple wives), co-residence of extended families, and other historical anthropological measures, the team identified a direct connection between the religious ban and the growth of independent, monogamous marriages among nonrelatives. According to the study, each additional 500 years under the Western Church is associated with a 91 percent further reduction in marriage rates between cousins.

“Meanwhile in Iran, in Persia, Zoroastrianism was not only promoting cousin marriage but promoting marriage between siblings,” Henrich said. Although Islam outlawed polygyny extending beyond four wives, and the Eastern Orthodox Church adopted policies against incest, no institution came close to the strict, widespread policies of the Western Church.

The authors adopt a “not that there is anything wrong with that” attitude toward cousin marriage. Whether that protects them from being sent to the Correctional Institution for Dangerous White Supremacists (where Charles Murray is held, among others) is an open question.