Tyler Cowen's Blog, page 101
October 19, 2014
Some of the most important sentences in economics
This is from Larry Summers and Lant Pritchett:
…knowing the current growth rate only modestly improves the prediction of future growth rates over just guessing it will be the (future realized) world average. The R-squared of decade-ahead predictions of decade growth varies from 0.056 (for the most recent decade) to 0.13. Past growth is just not that informative about future growth and its predictive ability is generally lower over longer horizons.
The main point of this paper is to argue that Chinese growth rates will become much lower, perhaps in the near future, here is a summary of that point from Quartz:
Summer and Pritchett’s calculations, using global historical trends, suggest China will grow an average of only 3.9% a year for the next two decades. And though it’s certainly possible China will defy historical trends, they argue that looming changes to its authoritarian system increase the likelihood of an even sharper slowdown.
The piece, “Asiaphoria Meets Regression Toward the Mean,” is one of the best and most important economics papers I have seen all year. There is an ungated version here (pdf). I liked this sentence from the piece:
Table 5 shows that whether or not China and India will maintain their current growth or be subject to regression to the global mean growth rate is a $42 trillion dollar question.
And don’t forget this:
…nearly every country that experienced a large democratic transition after a period of above-average growth…experienced a sharp deceleration in growth in the 10 years following the democratizing transition.
As Arnold Kling would say, have a nice day.
Germany fact of the day
A shocking example is the decrepit state of German military hardware. Of the Luftwaffe’s 254 fighter planes, 150 cannot fly.
That is from Wolfgang Münchau at the FT.
Sunday assorted links
1. Good essay on risk communication during pandemics (though it focuses on flu, not Ebola).
2. Charles A. Beard and the Columbia School of Political Economy.
3. What Saddam Hussein said in public vs. what he said in private (hat tip www.bookforum.com for the last two links).
4. What are academic conferences good for?
5. Have we lost confidence in public health?
Charles Murray on Ayn Rand
Charles Murray has a good piece on Ayn Rand, critical in parts but especially insightful about why Rand’s books continue to be so inspirational and influential:
Rand expressed the glory of human achievement. She tapped into the delight a human being ought to feel at watching another member of our species doing things superbly well. The scenes in “The Fountainhead” in which the hero, Howard Roark, realizes his visions of architectural truth are brilliant evocations of human creativity at work. But I also loved scenes like the one in “Atlas Shrugged” when protagonist Dagny Taggart is in the cab of the locomotive on the first run on the John Galt line, going at record speed, and glances at the engineer:
He sat slumped forward a little, relaxed, one hand resting lightly on the throttle as if by chance; but his eyes were fixed on the track ahead. He had the ease of an expert, so confident that it seemed casual, but it was the ease of a tremendous concentration, the concentration on one’s task that has the ruthlessness of an absolute.
That’s a heroic vision of a blue-collar worker doing his job. There are many others. Critics often accuse Rand of portraying a few geniuses as the only people worth valuing. That’s not what I took away from her. I saw her celebrating people who did their work well and condemning people who settled for less, in great endeavors or small; celebrating those who took responsibility for their lives, and condemning those who did not. That sounded right to me in 1960 and still sounds right in 2010.
Second, Ayn Rand portrayed a world I wanted to live in, not because I would be rich or powerful in it, but because it consisted of people I wanted to be around. As conditions deteriorate in “Atlas Shrugged,” the first person to quit in disgust at Hank Rearden’s steel mill is Tom Colby, head of the company union:
For ten years, he had heard himself denounced throughout the country, because his was a ‘company union’ and because he had never engaged in a violent conflict with the management. This was true; no conflict had ever been necessary; Rearden paid a higher wage scale than any union scale in the country, for which he demanded—and got—the best labor force to be found anywhere.
That’s not a world of selfishness or greed. It’s a world of cooperation and mutual benefit through the pursuit of self-interest, enabling satisfying lives not only for the Hank Reardens of the world but for factory workers. I still want to live there.
…In scene after scene, Rand shows what such a community would be like, and it does not consist of isolated individualists holding one another at arm’s length. Individualists, yes, but ones who have fun in one another’s company, care about one another, and care for one another—not out of obligation, but out of mutual respect and spontaneous affection.
Ayn Rand never dwelt on her Russian childhood, preferring to think of herself as wholly American. Rightly so. The huge truths she apprehended and expressed were as American as apple pie. I suppose hardcore Objectivists will consider what I’m about to say heresy, but hardcore Objectivists are not competent to judge. The novels are what make Ayn Rand important. Better than any other American novelist, she captured the magic of what life in America is supposed to be. The utopia of her novels is not a utopia of greed. It is not a utopia of Nietzschean supermen. It is a utopia of human beings living together in Jeffersonian freedom.
Also worth reading is this superb piece by Robert Tracinsiki, All an Ayn Rand Hero Really Wants is Love.
October 18, 2014
The Ebola risk premium
Underpaid or overpaid?:
They’re looking for the few, the proud — and the really desperate.
For a measly $19 an hour, a government contractor is offering applicants the opportunity to get up close and personal with potential Ebola patients at JFK Airport — including taking their temperatures.
Angel Staffing Inc. is hiring brave souls with basic EMT or paramedic training to assist Customs and Border Protection officers and the Centers for Disease Control and Prevention in identifying possible victims at Terminal 4, where amped-up Ebola screening started on Saturday.
EMTs will earn just $19 an hour, while paramedics will pocket $29. Everyone must be registered with the National Registry of Emergency Medical Technicians.
The medical staffing agency is also selecting screeners to work at Washington Dulles, Newark Liberty, Chicago O’Hare and Hartsfield-Jackson Atlanta international airports.
There is more here, via Matthew E. Kahn. How much does the regular (non-Ebola) staff earn?
Germany fact of the day
From 1973 to 1985 German inflation was most of the time over two percent a year, sometimes much over two percent. In 1973 it hit eight percent and in the early eighties it exceeded six percent a year. Source here (pdf), see p.6.
From 1951-1973, the Germans seemed happy with roughly the same inflation rate as what Americans had. Source here (pdf), see p.9, and also p.13, passim. In the early 1970s, the rate averaged almost seven percent a year for a few years (p.15). It is fine to note the role of oil shocks here, and in the earlier period Bretton Woods, but still Germans tolerated the higher inflation rates. They expected the alternatives would be worse and probably they were right.
The claim that the current German dislike of inflation dates back to unique memories of Weimar hyperinflation is dubious. Rightly or wrongly, today’s Germans associate high rates of inflation with wealth transfers away from Germany and toward other nations. More broadly, Germany is a more flexible country than outsiders often think, not always to the better of course.
October 17, 2014
From the comments, on a fusion reactor
So for once I can intelligently comment on a Marginal Revolution article. (I have a Ph.D. in applied plasma physics and fusion energy; I worked on the “conventional” fusion reactor design, the tokamak). Lockheed hasn’t released many details of their concept (at least, not enough details that it can actually be evaluated in technical detail), but it looks like it’s a combination of a magnetic mirror and a levitated dipole. The magnetic mirror was studied in detail in the 1960s and 1970s and didn’t work out (due to [detailed plasma physics reasons]) and the levitated dipole has a fundamental flaw as a power-producing reactor in that the superconducting magnets are inside the neutron shielding – neutrons destroy the magnets.
It’s tough as a scientist to be able to comment on things like this, because it’s “science by press release”, i.e. there’s a big media hype but the actual researchers don’t release enough technical details to actually evaluate it. One wants to remain cautiously optimistic, but with fusion in particular, we’ve been down this road many, many times. Thus I predict that the most likely outcome is that as they scale their device up, they’ll find that the confinement (a measure of how well the device holds a fusion plasma) unexpectedly drops off due to some different types of turbulence turning on at higher temperatures / higher pressures… and it will quietly go away.
I hope that I am proven wrong.
There are other interesting comments at the link and Kottke offers more.
Immigration Granger-causes neither unemployment nor growth
So argues a new paper (pdf) by Ekrame Boubtane, Dramane Coulibaly, and Christophe Rault, the abstract is here:
This paper examines the causality relationship between immigration, unemployment and economic growth of the host country. We employ the panel Granger causality testing approach of Konya (2006) that is based on SUR systems and Wald tests with country specific bootstrap critical values. This approach allows to test for Granger-causality on each individual panel member separately by taking into account the contemporaneous correlation across countries. Using annual data over the 1980-2005 period for 22 OECD countries, we find that, only in Portugal, unemployment negatively causes immigration, while in any country, immigration does not cause unemployment. On the other hand, our results show that, in four countries (France, Iceland, Norway and the United Kingdom), growth positively causes immigration, whereas in any country, immigration does not cause growth.
This result reflects two broader lessons. First, at the margin the major benefits from migration are to the migrants. Second, again at the margin, most policy changes matter less than you think they will.
Hat tip goes to Ben Southwood.
Assorted links
1. The drone brawl between Serbia and Albania.
2. E. Glen Weyl on the openness-equality tradeoff in global redistribution, or is there a case for the Gulf monarchies?
3. Shenzhen black swans feed pellets to carp.
4. When is martial law a tourist attraction? (the culture that is Thailand)
6. Arnold Kling on Alan MacFarlane.
7. Monetary policy with interest on reserves (speculative)
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