Tyler Cowen's Blog, page 433

Assorted links

1. Le blog de Jean Paul Sartre.

2. Good review of the new Camille Paglia.

3. How much of economic stagnation is due to the Midwest?

4. What does the great stagnation look like for journalists?

5. What do animals think of their dead?

Why are growth declines sharp and sudden?

…these econometric studies imply that the decline in growth rates should be gradual, since convergence to high incomes is gradual.  Actual experience, however, rarely displays such a smooth adjustment.  More commonly there is a sharp drop to a new, lower growth rate, as noted above.  In Japan the drop was probably precipitated by the OPEC oil price increases, given Japan’s heavy dependence on imported energy, and by the concurrent worldwide stagflation, particularly in Japan’s major export markets.  In Korea, enormous chaebol-initiated investment projects artificially supported growth for a time but also laid the foundations for the financial crisis that precipitated the sharp decline in growth.

This is one of the most neglected questions in macroeconomics and the theory of economic growth, and these days our understanding of the world, and our fiscal future, may well turn on this matter.  We still don’t have a good sense of why growth fall-offs are so sharp and why they seem so hard to reverse.

In any case that excerpt is from Barry Eichengreen, Dwight H. Perkins, and Khanho Shin, From Miracle to Maturity: The Growth of the Korean Economy.

More generally, I loved reading this book, perhaps all the more because I had just returned from Korea when it arrived.  It is clearly written and full of useful information on virtually every page.  In my opinion every economist should study the Korean growth miracle, as a) it is in some ways mankind’s most impressive and least precedent-backed growth miracle, and b) it overturns or at least challenges many preconceptions about economic growth.  It is perhaps the case where government policy has been most effective in spurring economic growth.  This is now one of the go-to books on that topic.

More on the Kurt Schuler Treasury Bretton Woods find

I am honored to have served as Kurt’s Ph.d advisor.  He recently found the original Bretton Woods archival manuscripts, hidden away in Treasury, here is that story, written up by Annie Lowrey at The New York Times.  Excerpt:

“Everyone thinks they know what happened at Bretton Woods, but what they know has been filtered by generations of historical accounts,” Barry Eichengreen, a professor or economics and political science at the University of California, Berkeley, said in a statement. “International monetary history will never be the same.”

The transcript provides “insight in how it was that they were able to maintain a pace of work which allowed them to reach two really big agreements, on the I.M.F. and the World Bank, within a space of three weeks,” Mr. Schuler said. “Keynes was something of a task master,” he added.

Perhaps the Eurozone — among others — could take a lesson from that.

Assorted links

1. Update on the Medicaid wars: Medicaid spending is slowing, and more here, much of it is from falling reimbursement rates.

2. Upgrading the lowly button.

3. Krugman’s Asimov introduction (pdf).

4. What moderation means, by David Brooks.

5. Thai face-slapping markets in everything.

6. Chris Dillow on the deserving vs. undeserving poor.

Tuition by Major

A task force convened by Florida Governor Rick Scott has recommended changes in tuition subsidies according to job market demand:

Tuition would be lower for students pursuing degrees most needed for Florida’s job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.

The committee is recommending no tuition increases for them in the next three years.

But to pay for that, students in fields such as psychology, political science, anthropology, and performing arts could pay more because they have fewer job prospects in the state.

“The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them,” said Dale Brill, who chairs the task force. “But you better really want to do it, because you may have to pay more.”

The task force has the right idea but the right way to target subsidies is not to the job market per se (let alone Florida’s job market), wages already reflect job market needs. Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large. Overall, this likely means subsidizing the STEM fields more than anthropology which is why the taskforce has the right idea. If the task force wants to explain the idea, however, they should make it clear that the goal is to focus subsidies on those fields where education most benefits the taxpayer.

Defensible conclusions from observing UK fiscal policy

Here are a few which are at least what I call “defensible”:

1. The UK economy was hit with serious problems, and fiscal (and monetary) policy did not respond strongly enough to keep the nation on track.  (NB: If you are citing measures of a cyclically adjusted gap in UK fiscal policy, you probably are citing evidence in support of this proposition.)

2. There has been a shift in the composition of government spending, which has led in turn to sectoral shift problems for former UK government employees.

3. UK government spending is underinvesting in that nation’s future, most of all in education but other public goods too.

You may or may not agree with these views, but again they are defensible.  You can point to both evidence and theory in their favor, noting that the skeptics may have other reasons for dissenting (but still they should accept the first-order evidence and theory).

Here is the view which is not so defensible:

4. A negative shock to UK government spending led to a negative AD shock and that drove the recent poor performance of the UK economy.

People, that one just ain’t true.  I’m receiving a lot of comments and emails, all citing evidence which supports versions of 1-3, but interpreted incorrectly as support for #4.

There is a big difference between #1 and #4 for their concrete implications.  For instance if you believe in #4, it seems that problem would be relatively easily fixed by more AD.  If you believe in #1, you have to think long and hard about what those initial shocks were, and then ascertain how much the resulting fallout from those shocks could be fixed by AD measures.  These become murky waters very quickly.  For instance a mix of collapsing London finance, disappearing North Sea oil, and mysterious British productivity puzzles (one possible set of options in these murky waters) probably can be fixed only a bit by a more expansionary fiscal policy.

I’m on board with the government spending/sectoral shocks to government employment point, though of course it is only one part of the problem.  I would note that everyone criticizes sectoral shocks theories until they wish to use them.  I also would suggest that this point is well explained by the conservative critique of entitlement spending, namely that it swallows up too many parts of the budget and the broader economy.

People are trying to use the UK fiscal policy evidence to argue for the “simple” view when instead they should be pushing the “murky” view.  And the murky view implies the whole mess just isn’t that easy to fix, or for that matter diagnose.

GMOs and pesticide use (an email from Greg Conko)

Here is a further Mark Bittman column on GMOs, arguing against GMOs on the grounds that they lead to greater use of chemicals and pesticides.  I would start with quite a simple point, namely to the extent there is a problem with chemicals and pesticides (as there may be with or without GMOs), let’s regulate that problem directly.  Somehow that option is not put on the table as an alternative to what is widely recognized as a rather dubious referendum.  In any case, I posed the question about GMOs and pesticides to Gregory Conko, who has written a book on GMOs, and he responded to me (Greg’s email goes under the fold)…

GC: Note that “pesticide” is a broad term that includes both insecticides and herbicides, as well as fungicides, nematocides, rodenticides, etc. Use of GE crops has had a measurable impact on insecticide and herbicide use, with insecticide use incontrovertibly down and a mixed record on herbicide use. And because there is much more acreage planted with GE herbicide tolerant varieties than with GE insect resistant varieties, herbicide use trends tend to drown out insecticide use trends.  Critics tend to obfuscate these distinctions by using the term “pesticide”, rather than the more specific sub-types, probably because they know casual readers will think “insecticides”.  But even the herbicide data need some additional context.

When measuring raw quantities of active ingredient, you find herbicide use on herbicide-tolerant GE crops to vary widely with crop species and region. In corn, for example, where atrazine is used extensively on non-GE varieties, a switch to Roundup Ready varieties tends to reduce slightly the quantity of active ingredient used, but mainly results in a switch from one to the other chemical. In soy, on the other hand, where herbicides of any kind are used much less frequently in non-GE varieties, a switch to RR soy almost invariably increases active ingredient use significantly.  And because RR soy is by far the most widely grown GE crop (amounting to well over 60 percent of all the soy grown anywhere in the world), on net across all species, this tends to result in an increase in quantity of active ingredient for GE crops generally.

However, merely saying that GE HT varieties result in higher use of active ingredient says little about the environmental or human impact of that change.  Because glyphosate, the active ingredient in Roundup, has close to zero mammalian, avian, invertebrate, etc. toxicity, and biodegrades rapidly, it has a vastly lower Environmental Impact Quotient (EIQ) than the herbicides it’s replacing.  Thus, a switch to RR soy may result in an increase in “pesticide” use while nevertheless being far better for humans and the environment.  Focusing only active ingredient use without any discussion of EIQ is therefore patently misleading.

It’s also worth noting that there is nothing unique about genetic engineering’s ability to produce herbicide tolerant crop varieties. In fact, there are scores of non-GE herbicide tolerant varieties grown all around the world.  A farmer who wants to plant HT canola or rice but doesn’t want to be beholden to Monsanto, or another farmer who’s tired of waiting for full regulatory approval of Roundup Ready wheat or sunflowers, can buy “Clearfield” branded seed from BASF that’s been bred with induced mutagenesis to tolerate the herbicide imidazolinone. Why are GE opponents not talking about imi-tolerant crops? Because they’re not GE. Plant breeders can expose seeds to mutagenic chemicals or ionizing radiation to scramble the plant’s DNA in entirely unpredictable ways and then put them on the market in the United States without reporting to or asking permission from a single regulatory agency, and not a one environmental activist or consumer group will bother criticizing them for doing so. For some reason, skeptics seem to be fixated on the use of recombinant DNA techniques, even though what they criticize publicly are phenomena that occur with all sorts of plant breeding methods.

See here, for example, for a nice critique of the recent study by Charles Benbrook concluding that GE crops increase pesticide use: http://weedcontrolfreaks.com/2012/10/do-genetically-engineered-crops-really-increase-herbicide-use/. And a related discussion, with references

to the literature, can be found here: http://academicsreview.org/reviewed-content/genetic-roulette/section-6/6

-2-new-herbicide-tolerant-crops/.

For a more general discussion of the impacts of GE crops on pesticide use, see:

National Research Council, Impact of Genetically Engineered Crops on Farm Sustainability in the United States, 2010,

http://www.nap.edu/catalog.php?record_id=12804

” Generally, GE crops have had fewer adverse effects on the environment than non-GE crops produced conventionally. The use of pesticides with toxicity to nontarget organisms or with greater persistence in soil and waterways has typically been lower in GE fields than in non-GE, nonorganic fields. … When adopting GE herbicide-resistant (HR) crops, farmers mainly substituted the herbicide glyphosate for more toxic herbicides.” (p. 3).  And, ” Targeting specific plant insect pests with Bt corn and cotton has been successful, and the ability to target specific plant pests in corn and cotton continues to expand. Insecticide use has decreased with the adoption of insect-resistant (IR) crops” (p.6).

G. Brookes and P. Barfoot, “Global impact of biotech crops: Environmental effects 1996-2009,” GM Crops Vol. 2, No. 1 (2011) pp.

34-49, http://www.landesbioscience.com/journals/gmcrops/BrookesGMC2-1.pdf

Abstract:

This paper updates the assessment of the impact commercialised agricultural biotechnology is having on global agriculture from an environmental perspective. It focuses on the impact of changes in pesticide use and greenhouse gas emissions arising from the use of biotech crops. The technology has reduced pesticide spraying by 393 million kg (-8.7%) and, as a result, decreased the environmental impact associated with herbicide and insecticide use on these crops (as measured by the indicator the environmental Impact Quotient (EIQ)) by 17.1 %. The technology has also significantly reduced the release of greenhouse gas emissions from this cropping area, which, in 2009, was equivalent to removing 7.8 million cars from the roads.

TC again: In other words, the charge about chemicals and pesticides is not such a strong one.  As we can see from the earlier Indian farmer suicide accusation, the critics are still just clutching at straws.

Words of wisdom

Some people I know will hate it when I say this, but as written by E.J. Dionne, this seems to me true, true, true:

The right wing has lost the election of 2012.

The evidence for this is overwhelming, yet it is the year’s best-kept secret. Mitt Romney would not be throwing virtually all of his past positions overboard if he thought the nation were ready to endorse the full-throated conservatism he embraced to win the Republican nomination.

…The right is going along because its partisans know Romney has no other option. This, too, is an acknowledgment of defeat, a recognition that the grand ideological experiment heralded by the rise of the tea party has gained no traction.

There is more at the link.

Assorted links

1. Going back a bit in time, prior approval, a scary doctrine.

2. Profile of Tax Policy Center.

3. Colorblind casting in Cloud Atlas.

4. At least two people are overpaying markets in everything.

5. The commercialization of Mecca, and which airline routes are growing and shrinking most rapidly.

6. Gelman on Cowen and Grier and sports and politics.

Anthem: Ayn Rand’s Dystopian Masterpiece

Rod Long offers a very insightful reading of Ayn Rand’s Anthem:

The book’s most striking feature, both stylistically and in the substance of the story, is the absence of the first-person singular. The idea of a totalitarian state suppressing subversive ideas by banning or distorting the language needed to express or even formulate it has been made generally familiar by George Orwell’s Nineteen Eighty-Four, with its fictional language, “Newspeak”; but Rand’s treatment precedes Orwell’s by more than a decade (and may possibly have influenced it).

In Rand’s dystopia, the first-person singular pronoun — the word “I” — has been abolished in order to prevent people from thinking of themselves as individuals with identities distinct from that of the collective. The struggle of Equality 7-2521 (Rand modeled her characters’ names on telephone exchanges of the “Pennsylvania 6-5000” form) to discover his own individuality is mirrored in his, and the text’s, struggle to move from “we” to “I.”

…If the book’s linguistic center is the first-person pronoun, its imaginal center is light — the guttering candlelight of the collectivist dystopia, contrasted with the electric light that the protagonist reinvents, the latter symbolizing the fire that Prometheus of Greek myth stole to give to the human race, and, consequently, symbolizing as well the creative fire of the unfettered individual mind.

…Rand was a dedicated Aristotelian and a lifelong critic of Plato, and many of the features of Anthem’s dystopia, such as government assignment of professions, state regulation of breeding and reproduction, and abolition of private property and the family, seem drawn from the recommendations in Plato’s Republic. The prohibition of the word “I” in favor of “we” is likewise a natural development of Plato’s dictum in the Republic that all citizens should say “mine” and “not mine” about the same things — a proposal criticized by Aristotle, who warns in his Politics that the attempt to give a community the same degree of unity as a single individual is doomed to disaster.

…Moreover, Equality 7-2521’s journey down into an abandoned subway tunnel to discover an artificial light source turns on its head Plato’s allegory of the cave, in which the wise man ascends from the cave of physical reality, lit by the artificial light of the senses, to discover the “real” world of abstract Forms, lit by a sun of pure ineffable intellect. By reversing Plato’s parable, Rand, in Aristotelian fashion, reorients the pursuit of knowledge away from the supernatural and back to this world, to empirical reality.

Read the whole thing.