I am still not very far into Nicholas Wade’s Troubled Inheritance, but I found out something I did not know but which fits well with my world view. It turns out that oxytocin is not some generic “trust hormone” that makes one feel at ease with all sorts of strangers. Instead, describing the implications of recent research by Carsten de Dreu, Wade writes,
Oxytocin engenders trust toward members of the in-group, together with feelings of defensiveness toward outsiders.
The promise is a highly targeted method of drug delivery, precision guided missiles that leave healthy cells alone — as opposed to the kill-everything-cluster-bombs of chemotherapy.
And here’s the interesting part: Douglas and his peers have actually produced the nanorobots and they appear to work. At least in cell culture flasks.
How they did it says a lot about where we are and where we’re going in synthetic biology, an emerging field that allows scientists to custom design DNA, proteins and organisms to carry out specific tasks.
Pointer from Tyler Cowen. Successful anotechnology requires the ability to control the end product and self-assembly. Dry nanotechnology, which uses materials science rather than DNA, makes the control problem relatively easy and the self-assembly problem relatively difficult. Wet nanotechnology does the reverse. My uninformed inclination is to assume that wet nanotechnology will arrive sooner, because I think it will be easier to start with a working solution to self-assembly and achieve control than the other way around.
Ian Hathaway and Robert E. Litan write,
the firm entry rate—or firms less than one year old as a share of all firms—fell by nearly half in the thirty-plus years between 1978 and 2011. The precipitous drop since 2006 is both noteworthy and disturbing. For context, the rate of firm failures held relatively steady—aside from the uptick during the Great Recession. In other words, the level of business deaths kept growing along with the overall level of businesses in the economy, but the level of business births did not—it held relatively steady before dropping significantly in the recent downturn. In fact, business deaths now exceed business births for the first time in the thirty-plus-year history of our data.
…—whatever the reason, older and larger businesses are doing better relative to younger and smaller ones. Firms and individuals appear to be more risk averse too—businesses are hanging on to cash, fewer people are launching firms, and workers are less likely to switch jobs or move.
Some possibilities:
1. Galbraith was right. Large, established firms have the advantage, due to advertising and technocratic management. Consider what Wal-mart has done to the small-town pharmacy or grocer. There is dynamism in the market, but it is not coming from the mom-and-pops.
2. Population aging. Older workers are less mobile, and older consumers are less willing to change.
3. Consider the sectors in the economy that have expanded: health care, where there is consolidation (fewer small practices, lots of mergers); finance, where our system has become much more concentrated; education, where new entry faces regulatory barriers. As the share in the economy of more-dynamic sectors (manufacturing, retail) shrinks, and the share of less-dynamic sectors rises, the average dynamism falls.
4. Perhaps incumbent firms have become better at using regulation to deter entry. I think of automobiles, where I am guessing it takes more lawyers than engineers to bring a new car into the market.
It seems that Piketty offers one stylized fact about inequality, which is that it rose during the long 19th century, fell during the period of the World Wars and their aftermath, and has risen since. What might explain this?
I would offer a theory in the spirit of Adam Smith: the division of labor is limited by the extent of the market.
My theory is that the more division of labor, the greater the inequality within a nation. Of course, from a world perspective, inequality may go up or down, and in recent decades it has gone way down.
The long 19th century was an era of globalization. World War I interrupted that, and there was little recovery of international trade between the wars. After World War II, trade also was limited. We had the cold war, which isolated the East from the West. We had economic policies in many countries that were anti-trade (remember import substitution?). Finally, in the 1980s, we began to see liberalization in the West, and then greater liberalization in China, India, and some of the former Soviet bloc. Then we had the Internet, which opened up new opportunities for specialization and trade.
This unleashed a new round of globalization, and the “extent of the market” became greater. The business opportunities this created helped to increase inequality within nations. At the same time, incomes increased in India, China, and several other poor countries, so that world inequality fell.
This theory won’t give me a best-selling book. But I think it has merit.
The deeper point is that things are getting cheaper and cheaper, and people — services provided with their expertise — are getting more and more expensive.
He points to an NYT chart showing plummeting prices for goods and soaring prices for education, health care, and child care.
My view is that a lot of spending on these services is discretionary (not all of it, of course). I think this makes any broad statement about “the” real wage incorrect. See my essay on that topic.
A few days ago, I proposed an idea to replace means-tested programs with flexible benefits. Part of the idea was to get rid of the various income thresholds and instead start with a fixed sum of flexdollars that “fades out” at a rate of 20 percent for each dollar that a household earns.
It occurs to me that this can be thought of as two separate proposals.
1. Replace all earnings thresholds in means-tested programs with a fade-out.
2. Consolidate means-tested programs into flexdollars.
Since my main concern is to lower implicit marginal tax rates on low-income households, maybe the simplest thing to do is to focus on doing (1) first, and leave (2) for later. Thus, for each means-tested program, replace all earnings tests with a fade-out rate of 20 percent, meaning that you lose 20 cents in food stamps for every dollar of income. So if a family of four with zero income gets $8000 per year in food stamps, a family with $20,000 in income would get $4000, and a family with $40,000 in income would get no food stamps.
In fact, food stamps work sort of like this. See A Quick Guide to SNAP. But the rules are more complex. And then you have Medicaid, welfare, housing subsidies, and Obamacare subsidies, all with different approaches to means testing. I think it would be pretty straightforward to introduce a “flat tax” of 20 percent for all of these means-tested programs. With Medicaid, perhaps the fade-out could be applied to the Federal subsidy given to states, and then it would be up to states to pass this through to individuals.
Comments welcome.
It’s the book that you’re not supposed to read. A Troublesome Inheritance: Genes, Race and Human History, by Nicholas Wade. Robert VerBruggen reviews it.
An overarching theme is that while institutions matter greatly — just look at the difference between North and South Korea — it is possible that some institutions are better able to take root if certain genetic adaptations have already taken place. If human populations in some parts of the world, but not others, evolved slightly higher levels of trust, a slightly greater tendency toward nonviolence, and so on — perhaps because population density forced them to live in close proximity to each other, abandon tribalism, and develop states — that might help to explain why some populations have become unusually peaceful, democratic, and economically productive.
It seems that many people disagree with parts of the book, although they disagree with different parts. If I were Brad DeLong, I might say that this proves that the book is basically right. But I’m not and I won’t.
undermining rights works both ways. This is going to happen: sooner or later, some CEO or sports team owner or similar is going to get ousted because he or she supports a woman’s right to an abortion, or the cause of Palestinian statehood, or opposes the death penalty. It’s inevitable. I can easily see someone suggesting that, say, Israel is an apartheid state, and watching as the media whips itself into a frenzy. And when that happens, the notion that there is no such thing as a violation of free speech that isn’t the government literally sending men with guns to arrest you will be just as powerful, and powerfully destructive, as it is now. So what will these people say? I don’t have the slightest idea how they will be able to defend the right of people to hold controversial, left-wing political ideas when they have come up with a thousand arguments for why the right to free expression doesn’t apply in any actual existing case. How will Isquith write a piece defending a CEO’s right to oppose Israeli apartheid? A sports owner’s right to do the same? I can’t see how he could– unless it really is just all about teams, and not about principle at all.
Read the whole thing. The piece came up in comments on this post.
Perhaps it is the case that generically certain forms of speech are being declared “unacceptable” by mobs, either on the right or the left. That is what concerns DeBoer.
Another possibility, raised in the comments on my earlier post, is that the progressive “elect” is confident of its moral superiority and its dominance of the media. Hence, it does not have any worries about becoming a victim of speech suppression by the mob.
Going back to Joseph Bottum’s thesis, I think it is a fair worry that politics has become infused with religious meaning. His thesis is that progressives, as the heirs to mainline Protestantism, hold the upper hand in this religious contest. So even if I am correct, and there is an element of religiosity in all political outlooks, the religion that most threatens to become the established church in this country is progressivism.
I hope that America’s historical resistance to an established church asserts itself in this case. That is, I hope that the backlash against the religious conformity of the progressive movement will prove ultimately to be more powerful than the movement itself.
If a firm hires a specific capital good for a unit of time, the payment is the rental price of the capital good. For example, suppose that a warehouse pays $100,000 per year to an independent company that maintains fleets of forklifts. These annual payments are clearly due to the “marginal product” of the forklifts; the warehouse can sell more of its own services to its customers when it has use of the forklifts.
However, these technological facts tell us nothing about the rate of interest enjoyed by the owners of the forklifts. In order to determine that, we would have to know the market price of the forklifts. For example, if the forklifts that the independent company rents out to the warehouse could be sold on the open market for $1 million, then their owners would enjoy a 10-percent return each year on their invested capital. But if the forklifts could be sold for $2 million, then the $100,000 payments—due to the “marginal product” of the forklifts—would correspond to only a 5-percent interest rate. As this simple example illustrates, knowledge of the marginal product of capital, per se, does not allow us to pin down the rate of interest.
I am not sure what to take as exogenous and what to take as endogenous. My inclination would be to treat the interest rate and the marginal product of forklifts as exogenous and the market price of forklifts as endogenous. That is because I was brought up by the folks who lost the Cambridge controversy but went ahead writing down neoclassical production functions, anyway. While Murphy comes from yet another tradition, I doubt that he has the same agenda as, say, Jamie Galbraith.
Let’s back up, though, and try to think of a general equilibrium model. (Nick Rowe does something similar, with diagrams.) Continue reading
his findings argue against the need to create strong incentives to succeed. If some people are genetically oriented toward success, then they do not need lower tax rates to spur them on. Such people would be expected to succeed regardless. The ideal society implicit in Clark’s view is one in which the role of government is to ameliorate, rather than attempt to fix, the unequal distribution of incomes.
The book I am reviewing is The Son also Rises, in which Clark argues that social status is highly heritable everywhere in spite of many differences in institutional rules. I spend a lot of the review talking about the statistical basis for Clark’s work.