Tyler Cowen's Blog, page 33

Toward a theory of American academia

Paul E. Smaldino and Joshua M. Epstein have a new paper, note they are not responsible for my blog post heading, they called it “Social conformity despite individual preferences for distinctiveness.”  The abstract is here:

We demonstrate that individual behaviours directed at the attainment of distinctiveness can in fact produce complete social conformity. We thus offer an unexpected generative mechanism for this central social phenomenon. Specifically, we establish that agents who have fixed needs to be distinct and adapt their positions to achieve distinctiveness goals, can nevertheless self-organize to a limiting state of absolute conformity. This seemingly paradoxical result is deduced formally from a small number of natural assumptions and is then explored at length computationally. Interesting departures from this conformity equilibrium are also possible, including divergence in positions. The effect of extremist minorities on these dynamics is discussed. A simple extension is then introduced, which allows the model to generate and maintain social diversity, including multimodal distinctiveness distributions. The paper contributes formal definitions, analytical deductions and counterintuitive findings to the literature on individual distinctiveness and social conformity.

Other sources for paper drafts are here, and for the pointer I thank Michelle Dawson.

Ms. Schneider’s China estimate of the day

Ms Schneider reckons that more than half of the world’s feed crops will soon be eaten by Chinese pigs.

That is from The Economist, via Scott Sumner, whose post is of interest more generally on numerous matters.  Scott also cites The Economist for telling us that in China smaller cities are more densely populated than larger cities.

MRU is nominated for an International Academy of Web Television award

Here is the GMU press release:

Marginal Revolution University’s “Everyday Economics” video series has been nominated for an International Academy of Web Television award in the Best Documentary or Educational Series category.

There is more information here.

Just to repeat myself….

1. The obviously correct legal answer is to toss at least part of ACA back into the hands of Congress for a rewrite.  (There is rarely a well-defined “intent of the legislature” in most matters of detail, yet the wording itself is clear.)  But since many people do not like what Congress would do (or not do) in this situation, this is an option which cannot be discussed very much.  The critics would have to let on that they do not consider the current Congress to be a legitimate governing body.

2. Along the lines of my recent blog post, it is remarkable how many “ugly” pictures of Hillary Clinton I have seen since the email scandal broke.  Aren’t there pretty pictures of Hillary with a Blackberry?

Labor union sentences to ponder

to raise labor share, unions have to decrease markups or the cost of capital; don’t see evidence or mechanism there

That is from A Macroeconomist, on Twitter.  A union which simply grabs for more from the employer will raise marginal cost and induce an offsetting boost in the price, restoring capital’s share (to some degree, depending on assumptions), and of course passing some of the burden along to consumers, most of whom are workers.  The tweeter did also note that unions might decrease income inequality within the category of labor, however.  Nick Bunker comments on that.  Via Kevin Lewis, here is a new and interesting paper on how unions might reduce wage inequality.  David Henderson comments on unions and prices.

I am often struck by the conflict between one supposition and one fact.  First, employers are supposed to be reaping some big surplus from hiring unskilled labor.  Second, when a downturn comes, it is unskilled labor who are laid off.

Sweet Briar will close

I used to think it was a decent enough school, and now:

Sweet Briar College announced today that it is shutting down at the end of this academic year.

Small colleges close or merge from time to time, more frequently since the economic downturn started in 2008. But the move is unusual in that Sweet Briar still has a $94 million endowment, regional accreditation and some well-respected programs. But college officials said that the trend lines were too unfavorable, and that efforts to consider different strategies didn’t yield any viable options. So the college decided to close now, with some sense of order, rather than dragging out the process for several more years, as it could have done.

The story is here, and this is not the last such event of its kind.  Why is it failing financially?  Here is one take:

Sweet Briar officials cited overarching challenges that the college has been unable to handle: the lack of interest from female high school students in attending a women’s college like Sweet Briar, declining interest in liberal arts colleges generally and declining interest in attending colleges in rural areas. Sweet Briar is in the foothills of the Blue Ridge Mountains in Virginia. “We are 30 minutes from a Starbucks,” said James F. Jones Jr., president of the college.

It seems to me that many other small colleges are in a far worse position, but are instead papering over the cracks, for how long I do not know.  Update: This revised version of the story has additional information.

Tuesday assorted links

1. The New Rambler, a new book review journal, edited by Eric Posner, Arian Vermeule, and Blakey Vermeule, looks very good plus I owe them a review.

2. Toulouse School of Economics magazine (pdf).

3. WaPo covers the best places to visit internationally, now that the dollar is stronger.

4. How much did ATMs displace bank tellers?

5. It’s all about the land, not the capital-output ratio.

Ricardo Hausmann on Greece and austerity

So the problem is not that austerity was tried and failed in Greece. It is that, despite unprecedented international generosity, fiscal policy was completely out of control and needed major adjustments. Insufficient spending was never an issue. From 1998 to 2007, Greece’s annual per capita GDP growth averaged 3.8%, the second fastest in Western Europe, behind only Ireland.

…Unsustainable growth paths often end in a sudden stop of capital inflows, forcing countries to bring their spending back in line with production. In Greece, however, official lenders’ unprecedented munificence made the adjustment more gradual than in, say, Latvia or Ireland.

There are many other good points at the link.  Hausmann makes this point:

Greece never had the productive structure to be as rich as it was: its income was inflated by massive amounts of borrowed money that was not used to upgrade its productive capacity.

And then the closer can only be described as an “ouch”!:

Unfortunately, this is not what many Greeks (or Spaniards) believe. A large plurality of them voted for Syriza, which wants to reallocate resources to wage increases and subsidies and does not even mention exports in its growth strategy. They would be wise to remember that having Stiglitz as a cheerleader and Podemos as advisers did not save Venezuela from its current hyper-inflationary catastrophe.

As I’ve said before, that out of control Greek government spending and borrowing has been converted into a (supposed) cautionary tale about the dangers of fiscal conservatism is one of the greatest (and most unfortunate) public relations triumphs of modern times.  That said, I would have preferred it if Hausmann had paid more attention to monetary policy.

Open English Borders

I am in favor of open borders for economic and moral reasons. It’s not crazy, however, to be concerned about some of the potential consequences of immediately opening borders between countries with very different income levels, culture or history. It is crazy, however, to fear opening borders between countries with similar income levels, culture and history. Thus, I fully support the petition of the Commonwealth Freedom of Movement Organisation:

Because of the unique relationship and socio-economic bonds that the U.K, Canada, Australia and New Zealand share, we believe that each country can benefit from a free movement agreement with each other, similar to the policies of the European Union and the Trans-Tasman Travel Arrangement (T.T.T.A) between Australia and New Zealand.

We propose that the governments of the aforementioned countries finalise agreements (and inevitably, legislation) which make it possible for citizens to move freely with no restrictions regarding work permits or visa controls.

Amen to that.

The only problem with agreements like this is that the very big gains come from opening up borders between countries that are different. Still, I am for lowering transportation and transaction costs. I do hope, however, that more people will come to appreciate that the right to move is a human right and not just a right of the British and their colonial cousins.

Addendum: Open Borders Day is coming on March 16. Write about open borders–pro or con–on that day. Let’s peacefully debate.

Soumission — Submission — Unterwerfung

The only version of the new Houllebecq novel I can read now is the one in German, Entwerfung., as the English edition does not come out until September.   I am about halfway through and can report it is excellent and a fun read as well, most of all when it makes fun of the vulnerabilities and vacillations of the West.

Here is an Anthony Daniels review, with lots of plot summary (and spoilers), part of the last paragraph shows he understands the work:

This novel is far from a crude anti-Islamic polemic, however, as many might have supposed it to be from its pre-publication publicity (Houellebecq has expressed himself very unfavorably on Islam elsewhere). It is rather a meditation, admittedly using all the author’s habitual tropes which fortunately, or perhaps unfortunately, are susceptible to an infinite number of bitterly amusing variations, on the state of Western civilization and what makes that civilization vulnerable to attack…In other words, it is an implicit invitation to us to look inwards, to think of what is wrong with us rather than with them. Whether we or they will read it like this, I rather doubt…

This is one of the novels of the year.  Here is a good Adam Gopnik piece on Houllebecq and the book.