Robotic Hiring

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It seems to outperform human hiring, at least according to Mitch Hoffman and others, who write,

We evaluate the staggered introduction of a job test across 130 locations of 15 firms employing service sector workers. We show that testing improves the match-quality of hired workers, as measured by their completed tenure, by about 14%.

Here is an abstract of a more recent version. Some questions:

1. How does this affect diversity?

2. Can testing work for high-skilled jobs, also? Software engineers? Middle managers?

3. What would Tyler Cowen say?

Useful Housing Market Charts

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From the San Francisco Fed. Pointer from Mark Thoma.

II mostly wanted to keep this link for future reference. It charts some key housing market indicators before and after 2008. One bit of text:

The price-to-rent ratio (red line) reached an all-time high in early 2006, marking the apex of the housing bubble. Currently, the price-to-rent ratio is about 25% below the bubble peak.

My reading of the charts is that after the bubble burst, housing construction really fell off. The result has been an increase in rents, which in turn justifies an increase in house prices. You can argue about how much overbuilding there was prior to 2007 and how much underbuilding there has been since. I doubt that one can give a definitive answer. The problem is that I do not think that anyone can say what the “right” amount of average housing space per person is. And we are in the midst of trend increases in urban and outer suburban population, and I do not know how that affects things.

Books of the Year

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The top five of these seem to have come in a burst, over the last six weeks or so.

1. Hive Mind: How Your Nation’s IQ Matters So Much More than Your Own, by Garett Jones. Two factors stand out. One is that Jones is very good at anticipating the views of those who would disagree with him and offering gentle, persuasive arguments. The other is that this is a topic that deserves more discussion, but it is a “third rail” in academia that Jones is one of the few willing to touch.

2. Why Minsky Matters, by L. Randall Wray. Some people may be put off by seeing Minsky held up as the predictor of the financial crisis of 2008, which took place long after his death. But I think Minsky’s views are a a healthy antidote to the view that crises can be prevented through regulation. And I thought that this book gave genuine insight into Minsky’s thinking that was new to me.

3. The Evolution of Everything, by Matt Ridley. The theme is that decentralized evolution beats top-down control. I think that this is the book that I will recommend to a young person who shows an interest or inclination toward libertarianism. I think it is a better introduction to libertarianism than anything that is explicitly labeled as such. However, my guess is that people without libertarian sympathies will find it pugnacious and off-putting. For addressing those with different points of view, Ridley could learn much from Jones.

4. The Secret of Our Success, by Joseph Henrich. Henrich argues for evolution, particularly in the realm of culture, as passionately as Ridley, but he fails to make the connection with markets and hence with libertarian thought. When someone told me that they enjoyed Daniel Kahneman’s Thinking Fast and Slow, I recommended this book to him. Henrich, like Kahneman, popularizes some interesting research, and it has grand overarching theme. In some ways, the research Henrich summarizes is more compelling, because it includes anthropological studies in addition to the psychological experiments that sometimes leave me feeling swindled.

5. Foolproof, by Greg Ip. The theme is the unintended consequences of regulation as people and businesses adapt. Ip’s critique of top-down regulation is too gentle for my taste. However, for someone coming from a mainstream perspective, a gentle nudge probably works better than Ridley’s hard hammer.

Others:

MIT and the Transformation of American Economics, edited by E. Roy Weintraub. I’m cheating, in that this came out late in 2014, and it emerged from an even earlier conference. But this book, more than any other, pushed me to write what I call the Book of Arnold. I was particularly provoked by reading of the role of wartime thinking and defense department funding in getting the MIT program started.

Choice, by Robert Murphy. Makes Mises more accessible than he ever was to me previously. Unless you are capable of digesting Mises yourself (and perhaps even if you are), this is a vital work.

The End of Doom, by Ronald Bailey. A broad, fact-based critique of environmental doom-mongering.

The Essential Hayek, by Donald Boudreaux. Does for Hayek what Murphy does for Mises.

Our Kids, by Robert Putnam. Like Charles Murray in Coming Apart, Putnam explores what he calls “bifurcated family patterns.” From a left-ish ideological perspective, of course.

Matt Ridley’s Latest

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It is called The Evolution of Everything. He contrasts decentralized trial-and-error evolution with top-down control in many arenas, from biology to technology to culture. My first thoughts.

1. He offers full-frontal libertarianism. On money, he cites Selgin. On education, he cites Tooley. etc. Incidentally, on culture he cites Henrich, whose book I interrupted to read Ridley’s and who does not seem to grasp the libertarian implications of his own work.

2. He cites a legal scholar with whom I was not familiar: Oliver Goodenough. Actually, I met Oliver a couple of times through a mutual friend–more than 40 years ago.

3. On the evolution of marriage, he writes that hunter-gatherer societies are mainly monogamous.

But as soon as farming came along, 10,000 years ago, powerful men were able to accumulate the resources to buy off and intimidate other men, and to attract low-status women into harems. . .If only to try to satisfy the low-status men, societies that allowed widespread polygamy tended to be very violent toward their neighbors. This was especially true of pastoral societies reliant on sheep, goats or cattle, whose wealth was mobile and showed scale economies. . .herders from Asia and Arabia not only experienced chronic violence, but kept erupting into Europe, India, China and Africa to kill men and abduct women.

…The transition to monogamy is a big theme of Christianity. . .The winners from the re-emergence of monagamy in late antiquity would have been the high-born women, who got to monopolize their husbands, and the much more numerous low-born men, who got to have sex at all.

4. On the advantage of urbanization for specialization and trade,

In America as a whole, nearly twice as many people work in grocery stores as in restaurants. In Manhattan, nearly five times as many work in restaurants

5. On the inexorable rise of economic well-being,

Stagnationism has its fans in every generation.

6. On technology, he argues strongly for context as a causal factor (“the adjacent possible”) and against individual agency (the heroic inventor). One implication:

having argued for the incremental, inevitable and collective nature of innovation, I am not a fan of patents and copyright laws. They grant too much credit and reward to individuals

7. Speaking of technology’s evolution, when he writes

The internet revolution might have happened ten years earlier if academics had not been dependent on a government network antipathetic to commercial use.

he is blowing smoke. The arrival of the commercial Internet is instead an example of context. Telecommunications pre-internet used circuit-switching networks. The Internet uses packet switching. Until relatively recently, circuit switching was much less expensive (the cross-over point was roughly the year 2000). Packet switching became economical only after sufficient iterations of Moore’s Law had taken place. In 1985, the cost of building out a mass-market Internet would have been astronomical.

Further Thoughts on Current Events

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1. I usually choose not to react to current events, and to do so only with a lag. Also, I do not think people come to this blog, nor should they, for my random political viewpoints. So this is being written with trepidation.

2. Think of three approaches to the issue of Syrians fleeing the war zone.

a. Make them stay where they are, without helping them.
b. Bring them to the west.
c. Try to protect them in Syria.

My guess is that the most politically popular move would be (a). But I think that (a) would be wrong, and it is good for leaders to spend political capital trying for (b) or (c). In my post yesterday, I tried to make the case for (c), although I am not convinced by it myself. The most I will say is that it is possible that (c) is the least worst option.

3. Some points work better as rhetoric than as arguments. For example, “more people are killed by car accidents than by terrorists.” The thing about accidents is that they are accidental. We do not have to worry about car accidents issuing threats to Washington, DC, or developing and using a capability to inflict mass casualties.

Also, saying that it shameful or un-American to treat Christians but not Muslims as refugees is not quite right, either. There are plenty of conflict situations in which we identify specific threatened ethnic or religious groups as eligible for asylum. If somebody wants to argue that Christians are more threatened than Muslims in the Middle East, that is a case that can be made. Having said that, I favor (b) or (c) for both Muslims and Christians.

4. I fear that there is no one close to President Obama who is capable of voicing dissent regarding either his substance or his tone. He needs somebody to to tell him that people who disagree with him are not necessarily evil or stupid. They are just people who disagree with him.

5. President Obama’s situation today reminds me of that of Neville Chamberlain in early May of 1940, when his government was toppling. I think that if we were in a Parliamentary system, Mr. Obama’s government would fall. I think that, as in Britain in 1940, the general public is more bellicose than the elites. I imagine that Chamberlain felt about his opponents the way that President Obama feels about Republicans, but Chamberlain had the self-control to keep such feelings to himself.

6. I predict that the Obama Presidency will end like a bitter divorce. There will be intense mutual hatred between his remaining supporters and the majority of Americans. This mutual hatred will be one of the most significant features of American politics for a long time.

What is the Middle East Endgame?

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Danielle Pletka wrote,

contrary to those waxing nostalgic for Saddam or swooning over Egypt’s Sisi, perhaps next time we can recall that it is these dictators that have spawned the extremist opposition that now threatens Americans and Europeans at home. Isn’t the right answer a more robust form of autonomy and federalism, in which groups that aim for self government have some hope of achieving it? Isn’t the answer a group of federalized, representative governments that allocates shared resources justly, rather than on the basis of ethnic and sectarian cronyism?

She wrote that before the Paris attacks, but those reinforced her views. I see elements of wishful thinking there, but that is hard to avoid when coming up with an endgame for the Middle East that sounds positive.

Suppose that the people in the Middle East are not capable of moving to her preferred endgame at the moment. We might want to think through the pros and cons of a different endgame, or midgame: an American military protectorate in what are now the most disorderly parts of the region. Instead of providing asylum to refugees in the United States, we would provide asylum in place.

There would be no democracy under this protectorate. However, the American military rulers would respect individual rights, including property rights. The protectorate would be run using what I call the Basic Social Rule: reward cooperators, punish defectors. If you show that you want to live in peace and work for a living, you are a cooperator. Otherwise, you are not.

There is a joke that what Israel and the Palestinians need are three states: one for the Jews, one for the Palestinians, and one for the people who want to kill each other. The truth hidden in the joke is that the vast majority of people just want to live their lives. The goal of the protectorate is to protect such people from the militants who want to kill for their ideology. The latter would be killed or deported from the areas under the protectorate.
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A Recession as a Mood Affiliation

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David Tuckett and many others write,

The prototype createsv what is called a relative sentiment shift (RSS) time series. This calculates
changes, in any text database across time, in the number of words related to the category of excitement relative
to the number of words in the category of anxiety, adjusting for the number of words in the articles, etc.
Results suggest that this form of analysis has strong potential for improving our understanding of what is happening in the economy and where policy action might be required.

One digital data source is the Reuters News Archive, which spans 1996 to 2013 and contains over 14 million text documents. Figure 2 shows a relative sentiment shift time series generated from all texts originating in the United States (dashed curve) plotted against US GDP (solid curve). The sharp drop in GDP in the recession of 2008-9 is evident. It is equally evident that relative sentiment series begins to fall well in advance of the decline in GDP.

You might want to read the whole article, which treats a number of methodological issues, not always in ways that I agree. My thoughts on this particular example:

1. For some reason, I am reminded of the way that animals can sense bad weather coming.

2. Perhaps it is not surprising the the participants in the economy sense that things are bad before the economic statistics reflect that. And note that policy makers receive economics statistics with a lag.

3. This sort of analysis does not tell us anything about what is causing anxiety to rise relative to excitement, or what to do about it.

Timothy Taylor on Hansonian Medicine

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He writes,

The good news is 50,000 fewer deaths, along with health improvements and saving money. The bad new is that the rate of hospital-acquired conditions basically fell from one patient in every seven patients to one out of every eight. Sure, hospital-acquired conditions will never fall to zero. But it certainly looks to me as if at least tens thousands of lives were being lost each year because that rate had not been reduced, and that tens of thousands of additional could be saved be reducing the rate further.

Read the whole post.

Robin Hanson has observed that:

1. Some medical interventions clearly prolong life.

2. On average, medical interventions do not prolong life.

He infers from this that the successful interventions must be offset by interventions that make things worse.

Behavioral Non-Science

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Slavisa Tasic and Zeljka Buturovic write,

While it is difficult to gauge the cost of various decision-making errors with any precision, it may be worth contrasting them against the costs of mistakes that clearly have nothing to do with cognitive biases: the cost of choosing a profession one ends up hating, the cost of not finding a suitable mate, the cost of having children too early in life or too late, the cost of moving to a place one ends up disliking, the cost of adopting a pet or sending children to a private school, and so on. These types of decisions–i.e., actual, important decisions in which errors are genuinely costly–are not typically studied in depth. . .Faced with difficulties in assessing the accuracy of the outcome of social judgments in the real world, the field [behavioral economics] has produced various norms of judgment against which to judge human performance, but only in highly artificial settings.

My view:

1. Economics is non-experimental. Instead, we work with interpretive frameworks that cannot be falsified empirically. This means that economic models do not have the epistemic status of models in the physical sciences, which can be falsified through experiments. All of our interpretive frameworks have some degree of plausibility but also are challenged by real-world anomalies. Economists can differ in their willingness to tolerate anomalies in their preferred interpretive frameworks.

2. Behavioral economics is experimental, but the experiments test people making minor decisions in peculiar, isolated settings.

3. Therefore, I go back to (1).

Hard to do Large Clinical Trials

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With this:

Speaking this week at the EmTech conference in Cambridge, Massachusetts, Editas CEO Katrine Bosley said the company hopes to start a clinical trial in 2017 to treat a rare form of blindness using CRISPR, a groundbreaking gene-editing technology.

…The condition Editas is targeting affects only about 600 people in the U.S., says Jean Bennet, director of advanced retinal and ocular therapeutics at the University of Pennsylvania’s medical school.

I don’t think that the FDA is prepared for what is coming.