Tyler Cowen's Blog, page 4

No Font of Wisdom

You will not understand this post better just because it is hard to read. Small n study magnified by Gladwell, Kahneman et al. doesn’t replicate. ∑Àgain.

More here.

Hat tip: Nathaniel Bechhofer

Will the Black Panthers make a comeback?

In my spare time I was reading some Huey Newton, and it struck me how contemporary his ideas were in some regards, in particular the risk of arbitrary violence at the hands of the police.  Here is an excerpt from Revolutionary Suicide:

As our forces built up, we doubled the patrols, then tripled them; we began to patrol everywhere — Oakland, Richmond, Berkeley, and San Francisco.  Most patrols were a part of our  normal movement around the community.  We kept them random, however, so that the police could not set a network to anticipate us.  They never knew when or where we were going to show up…The chief purpose of the patrols was to teach the community security against the police, and we did not need a regular schedule for that.  We knew that no particular area could be totally defended; only the community could effectively defend and eventually liberate itself.  Our aim simply was to teach them how to go about it.  We passed out our literature and ten-point program to the citizens who gathered, discussed community defense, and educated them about their rights concerning weapons.

By the way, Hillary Clinton worked as a young intern for the Huey Newton legal defense team (he was accused of shooting a policeman).

Tony Atkinson and François Bourguignon on inequality

His new book Inequality: What Can Be Done?, is out mid-May but already available in some bookstores.  Here is an interview with Atkinson.  I thought this book did not take sufficient care with some very basic distinctions, such as the difference between a problem of poverty and a problem of inequality.   Nor does it put enough emphasis on wealth creation, or explain why Korean-Americans have done pretty well over the last thirty years, among other possible examples.

The book is dedicated to the NHS workers of Britain.  That’s fine, many of them are very good, but Atkinson doesn’t mention a few key points, namely that a) the British system ranks relatively poorly by European standards, b) the British system probably has too much governmental ownership and provision, and c) bureaucracies usually underpay their best workers and thus do not generate enough initial income inequality.

François Bourguignon has a very good and readable new book on the international dimension of inequality, The Globalization of Inequality.

Martin Wolf has an FT review of both books.

For the pointer to the Atkinson interview I thank Enrico Schaar.

Assorted links

1. The economics of product compression.  And what was Venus de Milo doing with her arms?

2. Lars Christensen will pursue his dream.

3. An untested hypothesis.

4. More evidence for a great stagnation, and the Fed on where we were too optimistic or too pessimistic.

5. Interfluidity on the Baltimore riots; not my view, but of course it is worth entertaining a variety of perspectives.

6. An update on the CRISPR human enbryo experiment, how much did they really fail?  That is hard for me to assess but fyi.

7. The era of drone vandalism has begun, #dronewars.

Square Dancing Bees and Quadratic Voting

It’s well known that bees dance to convey where useful resources are located but how do bees convey the quality of the resource and what makes this information credible? Rory Sutherland and Glen Weyl argue that the bees have hit upon a key idea, quadratic dancing or as I like to put it, square dancing.

Seeley’s research shows that the time they spend on dances grows not linearly but quadratically in proportion to the attractiveness of the site they encountered. Twice as good a site leads to four times as much wiggling, three times as good a site leads to nine times as lengthy a dance, and so forth.

Quadratic dancing has some useful properties which can be duplicated in humans with quadratic voting.

Under Quadratic Voting (QV), by contrast, individuals have a vote budget that they can spread around different issues that matter to them in proportion to the value those issues hold for them. And just as with Seeley’s bees, it becomes increasingly costly proportionately to acquire the next unit of influence on one issue. This approach highlights not only frequency of preferences but also intensity of preferences, by forcing individuals to decide how they will divide their influence across issues, while penalising the single-issue fanatic’s fussiness of putting all one’s weight on a single issue. It encourages individuals to distribute their points in precise proportion to how much each issue matters to them.

They offer a useful application

Consider a firm that wants to learn whether customers care about particular product attributes: colour, quality, price, and so on. Rather than simply ask people what they care about — which leads to notoriously inaccurate results, often where people affect strong views just to maximise their individual influence — a business, or a public service, could supply customers with budgets of credits which they then used to vote, in quadratic fashion, for the attributes they want. This forces the group of respondents, like the swarm of bees, to allocate more resources to the options they care most about.

Weyl’s paper with Eric Posner is a good introduction to quadratic voting and here are previous MR posts on quadratic voting.

Fast Tracking the FDA

Bart Madden and James Pinkerton suggest a new “free to choose” track for pharmaceuticals. Pharmaceuticals which showed initial effectiveness would be available for early sale but all treatment information under the early-sale program would have to be reported to an open-access database.

After a drug successfully passes safety trials and shows initial effectiveness in clinical trials—that is, the early steps—a drug developer could request that their drug be available for sale on a “free to choose” track (the developer could elect also to continue on the FDA clinical trial track). As a result, patients such as Matt Bellina would be able to access innovative new drugs up to seven years earlier than waiting for a final FDA decision. For patients given only a few years—or months—to live, seven years sooner could spell life, not death.

Under our proposal, a patient’s doctor would be required to submit treatment results and medical information such as a patient’s genetic data to the open-access database. Doctors and patients would get real-time updates about the benefits and side effects of any “free to choose” drug and be able to make informed decisions about an early use of these new drugs versus approved drugs.

We might bear in mind that clinical trials involve patients who are mostly similar. On the other hand, because the “free to choose” option would be available to everyone, new insights would be obtained about how a drug performs for a far broader range of patients. These insights would better inform the biopharmaceutical industry, leading, in turn, to better allocation of research funds and faster innovation.

Bart’s excellent book Free to Choose Medicine has more on the proposal, which I think would speed drugs to patients and increase pharmaceutical research and development. Do note that I hold the Bartley J. Madden chair in economics at Mercatus at GMU and I have my biases.

How will Canada be a part of the knowledge economy?

Me:

Some economic sectors are distributed everywhere, like every city has its dentist[s], and other sectors are quite clustered. Banking is pretty clustered — New York, London, Hong Kong. Tech has been evolving in a pretty clustered way; I don’t mean simple software support, which is more like dentistry, but big, grand projects — the next Google, the next Facebook, Uber. We see those come out of quite a small number of places, so Skype coming from Estonia is quite the exception. Even then, it was improved by people in the clusters.

I think any location, not just Canada, has to ask itself, ‘are we going to be one of those clusters or not’? And the correct answer may be ‘no’. It may also be the sector evolves so it’s less clustered and more like dentistry, and then everywhere including Canada would partake. But maybe the future is Canada will have a knowledge sector doing small-scale things like software design for local projects but not anything like its own Silicon Valley. I guess at this point that seems likely — that Canada will not be a huge innovative part of the knowledge economy.

That is from my interview with the excellent Eva Salinas, mostly about other topics, such as what a great egalitarian age we live in and also where the World Bank and IMF stand, among other issues.  A few of the comments make more sense if you know that the interviewer is Chilean and we were discussing Chile before the formal interview started.

How bad are the investor arbitration clauses in TPP?

Mood affiliation aside, these clauses do not constitute a significant reason to oppose the treaty, in my view.  Gary Hufbauer has a good discussion:

ISDS provisions enable a foreign investor to seek compensation in an amount determined by an impartial panel of arbitrators, if a host government expropriates its property, or regulates its business in an arbitrary or discriminatory manner. Such protections have been deemed necessary in agreements going back at least to a Germany-Pakistan accord in 1959, and they have successfully protected US investments overseas in many countries.

Often these ISDS provisions are part of bilateral investment treaties (BITs), of which more than 2,200 are now in force worldwide. The United States has 41 BITs with countries near and far, and is actively negotiating a BIT with China, aimed at strengthening the rights of investors in a country that has not always been fair. Starting with the North American Free Trade Agreement (NAFTA) in 1994, the United States has also included ISDS in the investment chapters in nearly all its free trade agreements (FTAs), now numbering 20. Given this rich history, Senator Warren should be able to cite actual examples of the multiple abuses that she claims have occurred. She has not done so, because she cannot. Senator Warren makes a big deal about the hypothetical outcome of the old Methanex case against California’s regulations on gasoline additives, but the case was decided against the Canadian corporation.

The record shows that, far from a record of multinational corporations trampling sovereign states, investors have won fewer than a third of the cases resolved by the ISDS process. Arbitration procedures were formalized in 1996, when the World Bank created the International Center for the Settlement of Investment Disputes (ICSID) as a neutral forum to handle ISDS claims. Similar fora are based in London, Paris, and Stockholm, but ICSID oversees the vast majority of claims. To date, ICSID has handled almost 500 cases. Of these, 36 percent were settled between the parties before going to arbitration. The arbitrators declined to hear 16 percent of claims for want of jurisdiction. They dismissed 19 percent of claims for lack of merit. Only in 29 percent of cases did the arbitrators uphold some or all of the business claims.

The full post is here.

Not everyone in this country is nice

People search frequently for it, roughly as often as searches for “migraine(s),” “economist,” “sweater,” “Daily Show,” and “Lakers.”

That is from an interesting Wonkblog article, using Google searches, trying to estimate the most racist regions of America.  The rural Northeast and Midwest don’t do so well.

The pointers are from SV and AM.

Assorted links

1. Stephen F. Cohen on Russia and Putin, not exactly my view but interesting nonetheless.

2. Packing isn’t that hard, but still an interesting idea.

3. Jeremy Grantham on bond rates.

4. Hahaha vs. Hehehe.

5. The police rough ride.

6. The economics of the Tesla battery.