Category Archives: Growth Causes and Consequences

Russ Roberts and Patrick Collison

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Patrick Collison says,

What is the aggregate rate of progress in science going to be, between now and then? Right? Maybe some tail, really bad things are going to happen. But don’t happen, I think that the single biggest determinant will be the aggregate rate of progress in science.

The discussion is focused on Collison’s claim that on a per-scientist basis, scientific productivity is declining rapidly. I liked best the last 15 minutes or so.

Collison has an ability, which I am pretty sure I don’t have, of finishing a thought out loud when it’s clear that his mind has moved on to a new thread.

Economics over sociology?

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Consider Marriage Markets, by June Carbone and Naomi Cahn. They write,

At the top, there are more successful men seeking to pair with a smaller pool of similarly successful women. In the middle and the bottom, there are are more competent and stable women seeing to pair with a shrinking pool of reliable men.

. . .the conclusion is short and simple: it’s the economy, stupid. And any analysis or proposed solution that does not take growing inequality into account is based on a lie.

Thanks to a commenter for mentioning the book.

I will read it with some skepticism. I certainly see a strong arrow going in the other direction, from assortative mating to inequality. If there is a reverse causal arrow, then that implies a sort of positive feedback loop.

I am not sure what they mean by the first sentence quoted above. If you define success as “college-educated,” then it is the sucessful women who have to compete for a relatively small pool of men.

Consider the following alternate universes:

1. Boys grow up in households with their fathers in households with decent finances.

2. Boys grow up in households with their fathers in households with fragile finances.

3. Boys grow up in households without their fathers in households with decent finances.

Pretty much everyone assumes that in alternate universe (1) we would have fewer problems than we have today. If the authors really believe that “it’s the economy, stupid,” then it seems to me that they either believe that (3) would work about as well as (1) or that income redistribution would be sufficient to create (1).

I read conservatives as saying that scenario (2) leads to boys who can function well as adults, and that scenario (3) does not. And conservatives see income redistribution as leading to (3) rather than (1).

Tyler, Marc, and Ben

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That is, Cowen, Andreessen, and Horowitz, in a 40-minute podcast. I chose to annotate it. Annotating is, like writing a book review, a way for me to absorb the material. Some excerpts from my essay:

1. As far as I can tell, blockchain can only help to prevent one type of cheating: digital forgery. If blockchain is going to have a killer app, then it has to enable a transaction to take place where the only impediment to undertaking such a transaction currently is the threat of digital forgery.

I would add that digital money faces the threat of digital forgery. But digital money also faces other impediments. ICYMI, my whole point is that other impediments to trust are, in the grand scheme of things, much more important.

2. New listening technology strikes me as incremental, not revolutionary. Portable radios are a very old technology. I listened to the Beatles sing “When I’m 64” on a transistor radio when I was 13. Now I’m 64.

3. Could AR and VR become a big part of everyone’s life? In my opinion, yes. Have the breakthroughs necessary for that to happen occurred or are they on the verge of occurring? In my opinion, no.

I would add that I do not know what the key breakthroughs will be. In fact, we will only have a better idea in hindsight. Who knew ahead of time that the breakthroughs needed to make mobile Internet access a winning technology had taken place by 2007 but not earlier?

4. I assume that in Israel and China, security issues provide an arena for cultural mixing between government and technology. Presumably, there is also some cultural mixing between Silicon Valley and part of the American military and homeland security apparatus.

Klassic: a meditation on innovation

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This essay is from 2001. More recently, a lot of people have complained about a slowdown in economic progress. Back then, I wrote,

I think that the adoption and filtering bottlenecks will start to have a visible effect on the rate of technological progress within ten years. Perhaps we will look back in ten years and say that the deceleration of change had already begun at the time that I wrote my essays.

What I mean by the adoption and filtering bottlenecks is that human limitations are an important factor. If we are confused and confounded by new technology, then innovation will have to slow down to allow us to catch up.

Assortative Mating

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Alparslan Tuncay writes,

I look at assortative mating based on the permanent wage, which is constructed by removing age and year components from wage, and using couple rank correlation in the permanent wage as the measure of assortative mating. I then document that assortative mating increased from 0.3 for families formed in the late 1960s (initial cohort) to 0.52 in the late 1980s (final cohort).

Pointer from Tyler Cowen. This is something that many of us have speculated about, but here is some actual documentation. Tuncay also looks into the causes of assortative mating (he points out that marrying later makes it possible to know lifetime wage more reliably) and the consequences (he says that it accounts for 1/3 of the increase in family inequality).

This paper is an example of the road to sociology, but in a good way. First, it relates an economic outcome (inequality) to a sociological phenomenon. Second, it goes counter to the oppressor-oppressed ideology.

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.

Should taxation be regressive?

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Tyler Cowen said,

The best kinds of redistributions are those that, say, educate poor children or fix up their health or end malnutrition. And those also boost wealth. So if you follow the lode star of boosting wealth, you’ll be led toward the better rather than the worst redistributions.

. . .I’m way less enthusiastic about just taking money from rich people and giving it to poor. If the incentive on both sides is to work less and create less then I generally don’t wanna do it. I would just say stick with wealth enhancing redistribution. There’s plenty of that we can do, it’s very powerful.

If I were to try to summarize his latest book, Stubborn Attachments, standing on one foot, it would be this:

1. The future will include many people not yet born, and we should care about their welfare. To a first approximation, we should care about future people as much as we care about people who are alive today.

2. The way that economic growth compounds, the welfare of people in the future depends mostly on the growth rate.

3. Therefore, economic growth is really important.

Let’s push on that a bit. Suppose that there is a regressive tax scheme that enhances economic growth. It’s not hard to imagine. Tax consumption, but don’t tax income or savings.

You could use some of those tax proceeds to redistribute income to the poor. But let’s push a little harder. Suppose that a poor person will spend marginal dollars on wasteful purchases, while a rich person will put marginal dollars into investment. In that case, lower taxes and less redistribution could promote growth.

So it is possible that regressive policies today could improve welfare tomorrow.

International estimates of human capital

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There is a 2017 report by the World Economic Forum.

The top three nations are scoring a cut above the remainder of other leading countries in this year’s Index, with Norway (1) and Finland (2) almost drawing level and slightly ahead of Switzerland (3). All three countries are unique in the Index in having passed the threshold of developing more than 75% of their human capital against the theoretical ideal.

Suggested by a commenter, who notes

43% of Finnish high school graduates go to vocational training programs rather than university and Finland spends 30 percent less per student than the US.

Also, most American universities are not highly rated.

Tyler Cowen loses his cool

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He writes,

Here is a new Lancet paper by Stephen S. Lim, et.al., via the excellent Charles Klingman. Finland is first, the United States is #27, and China and Russia are #44 and #49 respectively. There is plenty of “rigor” in the paper, but I say this is a good example of what is wrong with the social sciences and more specifically the publication process. The correct answer is a weighted average of the median, the average, the high peaks, and a country’s ability to innovate, part of which depends upon the market size a person has in his or her sights. So in reality the United States is number one, and China and Russia should both rank much higher (Cuba and Brunei beat them out, for instance, Cuba at #41, Brunei at #29). And does it really make sense to put North Korea (#113) between Ecuador and Egypt? I’m fine with Finland being in the top fifteen, but I am not even sure it beats Sweden. Overall the paper would do better by simply measuring non-natural resource-based per capita gdp, though of course that could be improved upon too.

I think the paper is fine. It seeks to measure human capital, using indicators of health and educational attainment, whereas Tyler seems to be looking for a measure of all intangible assets. Other intangible assets include skills acquired on the job, social norms, and institutions. One certainly can make a case that human capital includes job skills, but social norms and institutions fall in a different category.

If we look at human capital per person, then it strikes me as plausible that Finland is far ahead of the U.S. We make up for it with social norms that encourage successful risk-taking and with institutions like venture capital and deep capital markets in general. Suppose Cuba and China had governments that were equally inclined to tolerate markets. Would you bet against Cuba having higher per capita GDP than China? I wouldn’t. That bottom third of China’s population has got to be a real drag.

Norms and institutions matter. That is why average human capital is not a sufficient statistic to describe a nation’s intangible wealth. But average human capital is nonetheless worth trying to measure.