Tyler Cowen's Blog, page 206

What should you talk about?

Robin Hanson reports:

If your main reason for talking is to socialize, you’ll want to talk about whatever everyone else is talking about. Like say the missing Malaysia Airlines plane. But if instead your purpose is to gain and spread useful insight, so that we can all understand more about things that matter, you’ll want to look for relatively neglected topics. You’ll seek topics that are important and yet little discussed, where more discussion seems likely to result in progress, and where you and your fellow discussants have a comparative advantage of expertise.

You can use this clue to help infer the conversation motives of the people you talk with, and of yourself. I expect you’ll find that almost everyone mainly cares more about talking to socialize, relative to gaining insight.

I would be curious to hear what other people think of this…

Assorted links

1. Doug Henwood with a neo-Marxist review of Piketty.  Here is Ryan Decker on Piketty.  Brad DeLong links to eleven different reviews.

2. Russia to recession?  And an FT piece on Crimeanomics and sanctions leverage.  And which news sites refer the most to Hitler?

3. Hire a drone with Bitcoin.  And markets in everything, via Greg Mankiw.

4. Lars Christensen on economic forecasting and AD-AS.

5. Non-compete agreements, non-poaching, and incentives to train (pdf).  And here is Evan Starr’s home page.

6. The world’s highest wind turbine.

7. What is the latest evidence on “too big to fail” banks?

8. Catherine Rampell has a new WaPo blog.  Economics with, we hope, a bit of theater.

Is age-adjusted divorce actually way up?

Kay Hymnowitz reports:

According to new research, far from declining since 1980 as researchers thought, age-adjusted divorce rates have actually risen 40%.

She cites this new paper from Demography, by Sheela Kennedy and Steven Ruggles. The abstract is this:

This article critically evaluates the available data on trends in divorce in the United States. We find that both vital statistics and retrospective survey data on divorce after 1990 underestimate recent marital instability. These flawed data have led some analysts to conclude that divorce has been stable or declining for the past three decades. Using new data from the American Community Survey and controlling for changes in the age composition of the married population, we conclude that there was actually a substantial increase in age-standardized divorce rates between 1990 and 2008. Divorce rates have doubled over the past two decades among persons over age 35. Among the youngest couples, however, divorce rates are stable or declining. If current trends continue, overall age-standardized divorce rates could level off or even decline over the next few decades. We argue that the leveling of divorce among persons born since 1980 probably reflects the increasing selectivity of marriage.

You will find ungated versions here.  I haven’t had a chance to paw through the argument, but it seemed worth passing along.  Hat tip goes to Charles Murray on Twitter.

*Asia’s Cauldron*

That is the new book by Robert D. Kaplan, and the subtitle is The South China Sea and the End of a Stable Pacific.  Since this is possibly the most important topic in the world right now, you should read this book.  Here is one interesting excerpt of many:

According to Yale professor of management and political science Paul Bracken, China isn’t so much building a conventional navy as an “anti-navy” navy, designed to push U.S. sea and air forces away from the East Asian coastline.  Chinese drones putting lasers on U.S. warships, sonar pings from Chinese submarines, the noisy activation of Chinese smart mines, and so on are all designed to signal to American warships that Beijing knows about their movements and the United States risks a crisis if such warships get closer to Chinese waters.  Because “relations with China are too important to jeopardize with a military confrontation,” this anti-access strategy has a significant political effect on Washington.  “The strategic impact of China’s agility is not so much to tilt the military balance in its direction and away from the United States.  Rather,” bracken goes on, “it introduces new risks into the American decision-making calculus.”

Some chapters of this book are deeper and better thought out than others, but still it is definitely worth reading.

How is the biomarker ID aid plan going in India?

One of the most important positive developments of our time – both underpublicized and underappreciated — is our growing ability to send and receive money securely across space.  It’s not just Paypal or Bitcoin in the West, as the truly significant gains from payment systems are coming in the developing world.  In particular, the efforts of the Indian government to set up a biometrically-based payments system are improving the lives of many millions and may go down as one of the most impressive achievements of contemporary times.

In 2009, the government of India set out to create unique, biometric-linked IDs for all 1.2 billion Indian citizens, based on fingerprints and a digital photograph.  Once the identities of these persons are tagged, the government will use the new system to deliver direct cash payments as a form of welfare aid.  To the extent the system works, programs with waste and leakage rates of 40% to 80% will become much more efficient.  Imagine instituting a direct cash transfer in lieu of a low productivity make-work job or sending welfare payments directly to beneficiaries rather than channeling them through corrupt local village officials, who take a cut off the top.

When the biomarker idea was proposed, it was far from obvious it would succeed.  The Indian government has failed at many basic tasks of infrastructure, such as good roads or clean water, and in general the quality of governance is not reliable.  Furthermore conditions in India seemed less than ideal for such an endeavor, as for instance about half of India does not have even a bank account.

There is now a major formal study of how well this new program is going and the results are strongly positive, as shown in “Payments Infrastructure and the Performance of Public Programs: Evidence from Biometric Smartcards in India,” a new NBER Working Paper by Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar (ungated copies here).

The authors look at one Indian state, Andhra Pradesh, and rely on a large-scale experiment which gave some people the new service and others not, on a randomized basis.  The results are impressive.  The average household was able to receive 23% more in aid, and more quickly, while the government’s rate of “leakage” – lost or misdirected aid – declined by over 12%.  Overall the new method cost no more than the old, and there were no additional problems of access.  The authors estimate that the benefits in time savings to beneficiaries, taken alone, are larger than the costs of creating the new payments system.  For poor people, those gains represent major life improvements.

No less importantly, the beneficiaries strongly favored the new method of aid by margins of eighty to ninety percent.  That means a recent Indian Supreme Court decision, ruling against making the new system mandatory for privacy-related reasons, is unlikely to stop its ultimate success.

Despite many obstacles and imperfections, the logistics of the system seem to be coming together.  After two years of roll out, the share of Smartcard-enabled payments in the relevant studied districts is running at about fifty percent.  It now seems plausible to imagine that most eligible Indian citizens are in some way connected to the system within the next ten years.  Liberals may prefer to think of this as a boost in “state capacity,” whereas conservatives can see it as a paring back of government programs which were not working and as replacing corrupt and paternalistic in-kind aid with direct cash transfer, as had been suggested by Milton Friedman.

The nature of this Indian innovation has been the combination of modern (but not cutting edge) information technology with the use of labor on a very large scale for implementation.  The process of registering so many Indians, and recording their biodata, has required the mobilization of an immense army of labor in a manner which is only possible in a low-wage country, albeit one with a fairly active bureaucracy.

One broader lesson here is that developing nations are not merely copying and applying the inventions of the West, but innovating on their own.  But a lot of their innovations take labor-intensive rather than capital-intensive forms, and thus they do not always look like innovations to our sometimes ethnocentric eyes.

China too may be a more innovative nation than it at first appears.  Sometimes the Chinese contribution to a production process is dismissed as merely adding to a single stage of production, such as finishing off an iPhone to be shipped out.  The deeper truth is that China offers not only cheaper wages but also a very large pool of skilled workers, including engineers, which can be mobilized in large numbers with extreme rapidity.  To create such a talented labor pool on such a scale is an unprecedented innovation and it is one which the West has not managed to match.

The bottom line is that today I have good news to report.

Are drunk drivers (instrumentally) rational?

Via Kevin Lewis, here is a new paper on that question:

The Behavioral Economics of Drunk Driving

Frank Sloan, Lindsey Eldred & Yanzhi Xu

Journal of Health Economics, May 2014, Pages 64–81

Abstract:

This study investigates whether drinker-drivers attributes are associated with imperfect rationality or irrationality. Using data from eight U.S. cities, we determine whether drinker-drivers differ from other drinkers in cognitive ability, ignorance of driving while intoxicated (DWI) laws, have higher rates of time preference, are time inconsistent, and lack self-control on other measures. We find that drinker-drivers are relatively knowledgeable about DWI laws and do not differ on two of three study measures of cognitive ability from other drinkers. Drinker-drivers are less prone to plan events involving drinking, e.g., selecting a designated driver in advance of drinking, and are more impulsive. Furthermore, we find evidence in support of hyperbolic discounting. In particular, relative to non-drinker-drivers, the difference between short- and long-term discount rates is much higher for drinker-drivers than for other drinkers. Implications of our findings for public policy, including incapacitation, treatment, and educational interventions, are discussed.

Here is an ungated version of the paper.

The Silicon Valley wage suppression conspiracy

Many readers have asked me what I think of the email chain which shows evidence that Silicon Valley firms conspired to hold wages down, by refusing to engage in competitive bidding for workers’ services.

I would suggest caution in interpreting this event.  For one thing, we don’t know how effective this monopsonistic cartel turned out to be.  We do know that wages for successful employees in this sector are high and rising.  Many a collusive agreement has fallen apart once one or two firms decide to break ranks, as they usually do.  Without legal enforcement, or without an NCAA-like clearinghouse enforcement structure (also backed by the law), it is hard to find examples of persistently successful monopsonistic labor-buying cartels.  One reason is that workers can find means of switching firms which do not directly implicate the new hiring firm as the villain which plucked them away.  The most successful collusive agreements are not usually monopsonistic and furthermore they are often based on self-sustaining and self-interested norms which do not require articulation in the form of incriminating emails.

A second point is this.  Let’s say you knew that when you took a job at Apple or Google that no other Silicon Valley firm would bid you away.  You don’t need to have explicit knowledge of the workings of the cartel, rather you simply observe that other people in your general position seem to stay put rather than receiving fantastic outside offers.  Given that you have outside alternatives, you would demand, and receive, higher wages in the first place for moving to one of those firms.  This actually would increase wage compression and limit inequality, albeit while decreasing efficiency.  Still, workers as a whole would win back some of what they seemed to be losing, albeit not all of it.

Assorted links

1. O England how could ye?: Liverpool City Council trying to ban eating fish and chips from paper.

2. What might BICEP2 mean?

3. A ProteinPower guy obsessed with books (but I would say the crowd underlinings in Kindles are usually the worst passages from books, not the best or the most important).  Here is his daily reading strategy, totally wrong for me it would be.

4. How might you invest in self-driving vehicles?

5. The homing skills of pythons.  And are Marlborough girls unique?

6. Jeremy Stein understands the importance of the risk premium.  And good analysis of The Americans.

7. The roots of Swedish success in pop music.

Metadata Reveals Sensitive, Private Information

The President and other apologists for the NSA have defended the NSA’s illegal mass surveillance of US telephones by arguing that it’s “only” metadata, so “nobody is listening to our telephone calls.” But where, when, how long and to whom customers make phone calls does reveal information that could easily be used to blackmail, stifle and control. A group of computer scientists at Stanford’s Security Laboratory gathered information from volunteers who agreed to have an app on their cell phone mimic what the NSA collects. Here is an initial report.

At the outset of this study, we shared the same hypothesis as our computer science colleagues—we thought phone metadata could be very sensitive. We did not anticipate finding much evidence one way or the other, however, since the MetaPhone participant population is small and participants only provide a few months of phone activity on average.

We were wrong…The degree of sensitivity among contacts took us aback. Participants had calls with Alcoholics Anonymous, gun stores, NARAL Pro-Choice, labor unions, divorce lawyers, sexually transmitted disease clinics, a Canadian import pharmacy, strip clubs, and much more. This was not a hypothetical parade of horribles. These were simple inferences, about real phone users, that could trivially be made on a large scale.

…Though most MetaPhone participants consented to having their identity disclosed, we use pseudonyms in this report to protect participant privacy.

Participant A communicated with multiple local neurology groups, a specialty pharmacy, a rare condition management service, and a hotline for a pharmaceutical used solely to treat relapsing multiple sclerosis.
Participant B spoke at length with cardiologists at a major medical center, talked briefly with a medical laboratory, received calls from a pharmacy, and placed short calls to a home reporting hotline for a medical device used to monitor cardiac arrhythmia.
Participant C made a number of calls to a firearm store that specializes in the AR semiautomatic rifle platform. They also spoke at length with customer service for a firearm manufacturer that produces an AR line.
In a span of three weeks, Participant D contacted a home improvement store, locksmiths, a hydroponics dealer, and a head shop.
Participant E had a long, early morning call with her sister. Two days later, she placed a series of calls to the local Planned Parenthood location. She placed brief additional calls two weeks later, and made a final call a month after.

We were able to corroborate Participant B’s medical condition and Participant C’s firearm ownership using public information sources. Owing to the sensitivity of these matters, we elected to not contact Participants A, D, or E for confirmation.

In other news, a former president believes that his email is being monitored. He is probably correct. Monitoring presidential candidates is all too realistic.

Fortunately, President Obama has announced that the bulk collection of phone calls will end. Dismantling that illegal program is a start. Obviously, this would not have happened without the revelations of Edward Snowden.

The multiverse is looking more likely

Or so I am told:

…those gravitational wave results point to a particularly prolific and potent kind of “inflation” of the early universe, an exponential expansion of the dimensions of space to many times the size of our own cosmos in the first fraction of a second of the Big Bang, some 13.82 billion years ago.

“In most models, if you have inflation, then you have a multiverse,” said Stanford physicist Andrei Linde. Linde, one of cosmological inflation’s inventors, spoke on Monday at the Harvard-Smithsonian Center for Astrophysics event where the BICEP2 astrophysics team unveiled the gravitational wave results.

Essentially, in the models favored by the BICEP2 team’s observations, the process that inflates a universe looks just too potent to happen only once; rather, once a Big Bang starts, the process would happen repeatedly and in multiple ways.

There is more here.  How should this change my behavior?  Should I feel more or less regret?  Take more or fewer risks?

For the pointer I thank Ami Evelyn.