J. Bradford DeLong's Blog, page 388

Should-Read: Paul Krugman: Trump and Trade and Zombies: "...

Should-Read: Paul Krugman: Trump and Trade and Zombies: "Until now, the most visible neo-goldbug in the administration has been David Malpass... the former chief economist of Bear Stearns...

...a man with a Kudlow-like record of being wrong about everything. In particular, however, back in 2011 Malpass published an op-ed article declaring that what America needed to fix its economic ills was a stronger dollar (and higher interest rates). It was a bizarre claim. After all, at the time the unemployment rate was still 9 percent���and a stronger dollar would have made things even worse. Why? Because it would have made U.S. products less competitive, increasing the trade deficit���and a situation of persistently high unemployment is the one situation in which trade deficits really are an unambiguously bad thing, reducing the demand for domestic goods and services. But here���s the thing: Kudlow appears to share Malpass���s worldview. In fact, his first newsworthy statement after Trump announced his selection was a call for a higher dollar���something that would worsen the very trade deficit Trump sees as a sign of American weakness.

Why has Trump hired people with such conflicting notions about international economic policy? The answer, presumably, is that he doesn���t understand the issues well enough to realize that the conflict exists. And what both sides in this dispute share is a general propensity for invincible ignorance, which makes them Trump���s kind of people. Anyway, on international economics the Trump administration is now on track for a battle of the zombies���a fight between two sets of bad ideas that refuse to die. Pass the popcorn...

Should-Read: Noah Smith: How Universities Make Cities Gre...

Should-Read: Noah Smith: How Universities Make Cities Great: "Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region���over four times as strong as the effect of degree production...

...Skilled workers come to do research at the university itself. But most of the effect comes from private-sector activity in the surrounding economy. When a university spends a lot on research, ideas and technology leak out to surrounding businesses in myriad ways. Universities cross-license technologies to the private sector. Academics consult for local businesses. Grad students, researchers, and professors start local businesses of their own. Companies establish research centers and hire smart people away from their Ph.D. programs or campus jobs. Some universities provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment.

High-productivity technology businesses therefore tend to cluster around universities, in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals.

The policy implication is clear. In order to boost local economies, universities should stop seeing themselves only as educators, and start seeing themselves as platforms for local economic activity. Cleveland State University researchers Richey Piiparinen, Jim Russell, and Charlie Post call the former a ���consumer university��� model, and the latter a ���producer university��� model. They apply the distinction to explain the diverging performances of Cleveland and Pittsburgh. Cleveland���s colleges, they say, are still too focused on educating locals, while Pittsburgh���s���especially Carnegie Mellon���have taken an active role in boosting the city���s technology industry...

Should-Read: Those beats won't sweeten themselves!: Zack ...

Should-Read: Those beats won't sweeten themselves!: Zack Kanter: "Absolutely bizarre, fawning NYT piece [by Zach MacFarquhar]. I���m not sure I���ve read anything quite like it in recent memory..."

Should-Read: A very nice paper indeed: J. Vernon Henderso...

Should-Read: A very nice paper indeed: J. Vernon Henderson, Adam Storeygard, Tim L. Squires, and David N. Weil: The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade: "We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers...

...Nearly half of the variation can be explained by a parsimonious set of physical geography attributes.... Geographic characteristics... two groups... agriculture... trade.... Agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late.... Two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs.... Agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high.... When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation... [so] manufacturing agglomerated in relatively few, often coastal, locations....

The base covariates are... malaria and ruggedness.... Our agricultural covariates... temperature, precipitation, length of growing period, land suitability for agriculture, elevation, and latitude... 14 biome indicators.... Five trade variables... distances... to the nearest coast, navigable river, major lake, and natural harbor...

Should-Read: This makes no sense at all. There is nothing...

Should-Read: This makes no sense at all. There is nothing in the formal or informal record suggesting that any of the potential deciders and influencers inside the Trump Administration support the steel and aluminum tariffs as some kind of Xanatos Gambit to persuade China to adopt intellectual property rules more to the liking of U.S. firms doing business in China. Absolutely nothing: Martin Feldstein: The Real Reason for Trump���s Steel and Aluminum Tariffs: "The US tariffs will... increase the likelihood that China will accelerate the reduction in subsidized excess capacity...

...It will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China.... The administration has not yet said that it will focus the tariffs in this way....

For the US, the most important trade issue with China concerns technology transfers, not Chinese exports... The Chinese government was using the Peoples Liberation Army���s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology.... President Barack Obama and President Xi Jinping met in California in June 2013.... Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology.... It appears that such cyber theft has been reduced dramatically....

Current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms ���voluntarily��� transfer production knowhow because they want access to a market.... The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China���s behavior.... US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China���s government to abandon the policy of ���voluntary��� technology transfers.... [Then] the threat of tariffs will have been a very successful tool of trade policy.

Should-Read: Dan Shaviro: Another new publication!: "'Eva...

Should-Read: Dan Shaviro: Another new publication!: "'Evaluating the New U.S. Pass-Through Rules'...

...The pass-through rules that the U.S. Congress enacted in 2017-permitting the owners of unincorporated businesses in favored industries to escape tax on 20 per cent of their income-achieved a rare and unenviable trifecta, by making the tax system less efficient, less fair, and more complicated. It lacked any coherent (or even clearly articulated) underlying principle, was shoddily executed, and ought to be promptly repealed. Given the broader surrounding circumstances, the mere fact of its enactment sends out a disturbing message about disregard among high-ranking US policymakers for basic principles of competence, transparency, and fair governance....

This article is a bit on the candid and unvarnished side-even though it's been toned down significantly from earlier drafts. But I think the tone is justified given the passthrough rules' egregiousness-at least leaving aside the old maxim that, if you can't say something nice, you shouldn't say anything at all. (That maxim would tend to hold down the quantity of writing about the passthrough rules.) It also addresses the 2017 act's negligence or worse (it appears to have been deliberate) in cutting the corporate rate without addressing the use of C corporations as tax shelters that can be used to lower the rate on labor income. Read the article and you'll find a few well-chosen (I'd like to think) words about that...

Should-Read: A rather odd piece in its rhetorical pose. I...

Should-Read: A rather odd piece in its rhetorical pose. It really is not a critique of Allen's hypothesis about the especially strong incentives in Industrial Revolution England to invent and innovate in coal energy and machine intensive ways: it is a reinforcement of it: an argument that British patriarchy reinforced and augmented the imperial, coal-resource, cultural, scientific, and technological forces converging to make the British Industrial Revolution: Jane Humphries (2013): The lure of aggregates and the pitfalls of the patriarchal perspective: a critique of the high wage economy interpretation of the British industrial revolution: "The lure of aggregates and the pitfalls of the patriarchal perspective...

...a critique of the high wage economy interpretation of the British industrial revolution...

...The account of the high wage economy is misleading because it focuses on men and male wages, underestimates the relative caloric needs of women and children, and bases its view of living standards on an ahistorical and false household economy. A more accurate picture of the structure and functioning of working-class households provides an alternative explanation of inventive and innovative activity in terms of the availability of cheap and amenable female and child labour and thereby offers a broader interpretation of the industrial revolution...

Wakanda and the Resource Curse

Wakanda and the Resource Curse: Wakanda���s prosperity is based on its possession of vibranium, a stable transuranic elements with unique And extraordinary chemical properties. Yet those of us who have studied the history of emerging markets with powerful natural resource advantages would fear for the present and future of an emerging market country that based its prosperity on such a road so very vulnerable to the ���resource curse���.

The closest analog which seem to be the oil states. But Wakanda is very different from Qatar, or Venezuela, or any of the other countries that have received the ambiguous possession of extremely valuable industrial resources���with the possible exceptions of Botswana and Norway.

Standard histories attribute Wakanda���s success to the wisdom of the ruling dynasty, aided by the vibranium-boosted biotechnology of the heart-shaped herb, which produces what propagandists for the ruling dynasty claim to be the extraordinary powers and wisdom of the ���Black Panther���.

Viewing the destinies of nations as determined by their rulers as if they were superheroes is a historical fashion that we have long outgrown. Serious students of history, international relations, and political economy must look for the sources of the divergent Wakandan path elsewhere, in opportunities open door for closed by social structure. Such investigations...

OK: help me out. Somebody else take this over...

Should-Read: Kevin Kelly: The Myth of a Superhuman AI: "'...

Should-Read: Kevin Kelly: The Myth of a Superhuman AI: "'I���ve heard that in the future computerized AIs will become so much smarter than us that they will take all our jobs and resources, and humans will go extinct. Is this true?' That���s the most common question I get whenever I give a talk about AI...

...Buried in this scenario of a takeover of superhuman artificial intelligence are five assumptions which, when examined closely, are not based on any evidence. These claims might be true in the future, but there is no evidence to date to support them. The assumptions behind a superhuman intelligence arising soon are:

Artificial intelligence is already getting smarter than us, at an exponential rate.
We���ll make AIs into a general purpose intelligence, like our own.
We can make human intelligence in silicon.
Intelligence can be expanded without limit.
Once we have exploding superintelligence it can solve most of our problems.

In contradistinction to this orthodoxy, I find the following five heresies to have more evidence to support them.

Intelligence is not a single dimension, so ���smarter than humans��� is a meaningless concept.
Humans do not have general purpose minds, and neither will AIs.
Emulation of human thinking in other media will be constrained by cost.
Dimensions of intelligence are not infinite.
Intelligences are only one factor in progress.

If the expectation of a superhuman AI takeover is built on five key assumptions that have no basis in evidence, then this idea is more akin to a religious belief���a myth. In the following paragraphs I expand my evidence for each of these five counter-assumptions, and make the case that, indeed, a superhuman AI is a kind of myth....

We run on ecosystems of thinking. We contain multiple species of cognition that do many types of thinking: deduction, induction, symbolic reasoning, emotional intelligence, spacial logic, short-term memory, and long-term memory. The entire nervous system in our gut is also a type of brain with its own mode of cognition. We don���t really think with just our brain; rather, we think with our whole bodies. These suites of cognition vary between individuals and between species. A squirrel can remember the exact location of several thousand acorns for years.... That superpower is bundled with some other modes that are dim compared to ours in order to produce a squirrel mind....

Likewise in AI. Artificial minds already exceed humans in certain dimensions. Your calculator is a genius in math; Google���s memory is already beyond our own in a certain dimension. We are engineering AIs to excel in specific modes. Some of these modes are things we can do, but they can do better, such as probability or math. Others are type of thinking we can���t do at all���memorize every single word on six billion web pages, a feat any search engine can do. In the future, we will invent whole new modes of cognition that don���t exist in us and don���t exist anywhere in biology.... In many cases they will be new, narrow, ���small,��� specific modes for specific jobs���perhaps a type of reasoning only useful in statistics and probability. In other cases the new mind will be complex types of cognition that we can use to solve problems our intelligence alone cannot.... At the same time we will integrate these various modes of cognition into more complicated, complex societies of mind....

Thinking differently from humans is AI���s chief asset. This is yet another reason why calling it ���smarter than humans��� is misleading and misguided....

I understand the beautiful attraction of a superhuman AI god. It���s like a new Superman. But like Superman, it is a mythical figure. Somewhere in the universe a Superman might exist, but he is very unlikely. However myths can be useful, and once invented they won���t go away. The idea of a Superman will never die. The idea of a superhuman AI Singularity, now that it has been birthed, will never go away either. But we should recognize that it is a religious idea at this moment and not a scientific one. If we inspect the evidence we have so far about intelligence, artificial and natural, we can only conclude that our speculations about a mythical superhuman AI god are just that: myths....

Yet non-superhuman artificial intelligence is already here, for real.... In the wider sense of... a continuous spectrum of various smartness, intelligences, cognition, reasonings, learning... AI is already pervasive on this planet and will continue to spread, deepen, diversify, and amplify. No invention before will match its power to change our world, and by century���s end AI will touch and remake everything in our lives. Still the myth of a superhuman AI, poised to either gift us super-abundance or smite us into super-slavery (or both), will probably remain alive���a possibility too mythical to dismiss...

Should-Read: Matt Townsend et al.: America���s ���Retail ...

Should-Read: Matt Townsend et al.: America���s ���Retail Apocalypse��� Is Really Just Beginning: "The reason isn���t as simple as Amazon.com Inc. taking market share...

...or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt���often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder���even for healthy chains. The debt coming due, along with America���s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what���s coming next could truly be scary. Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys ���R��� Us Inc. served as an early sign of what might lie ahead...