Tyler Cowen's Blog, page 479

Assorted links

1. It is far from obvious that he is wrong.

2. Big data on campus.

3. One look at our deepest structural problem (no recession for college grads, terrible job market for others).

Those three links are enough to think about for the entire day and more.

Thiel v. Schmidt

Peter Thiel, taking the pessimistic view, and Eric Schmidt of Google, taking the optimistic view, both made good points in their debate over technology but Thiel had the knockout punch:

PETER THIEL: …Google is a great company.  It has 30,000 people, or 20,000, whatever the number is.  They have pretty safe jobs.  On the other hand, Google also has 30, 40, 50 billion in cash.  It has no idea how to invest that money in technology effectively.  So, it prefers getting zero percent interest from Mr. Bernanke, effectively the cash sort of gets burned away over time through inflation, because there are no ideas that Google has how to spend money.

ERIC SCHMIDT: [talks about globalization]

The moderator repeats Thiel’s point:

ADAM LASHINSKY:  You have $50 billion at Google, why don’t you spend it on doing more in tech, or are you out of ideas?  And I think Google does more than most companies.  You’re trying to do things with self-driving cars and supposedly with asteroid mining, although maybe that’s just part of the propaganda ministry.  And you’re doing more than Microsoft, or Apple, or a lot of these other companies.  Amazon is the only one, in my mind, of the big tech companies that’s actually reinvesting all its money, that has enough of a vision of the future that they’re actually able to reinvest all their profits.

ERIC SCHMIDT:  They make less profit than Google does.

PETER THIEL:  But, if we’re living in an accelerating technological world, and you have zero percent interest rates in the background, you should be able to invest all of your money in things that will return it many times over, and the fact that you’re out of ideas, maybe it’s a political problem, the government has outlawed things.  But, it still is a problem.

ADAM LASHINSKY:  I’m going to go to the audience very soon, but I want you to have the opportunity to address your quality of investments, Eric.

ERIC SCHMIDT:  I think I’ll just let his statement stand.

ADAM LASHINSKY:  You don’t want to address the cash horde that your company does not have the creativity to spend, to invest?

ERIC SCHMIDT:  What you discover in running these companies is that there are limits that are not cash.  There are limits of recruiting, limits of real estate, regulatory limits as Peter points out.  There are many, many such limits.  And anything that we can do to reduce those limits is a good idea.

PETER THIEL:  But, then the intellectually honest thing to do would be to say that Google is no longer a technology company, that it’s basically ‑‑ it’s a search engine.  The search technology was developed a decade ago.  It’s a bet that there will be no one else who will come up with a better search technology.  So, you invest in Google, because you’re betting against technological innovation in search.  And it’s like a bank that generates enormous cash flows every year, but you can’t issue a dividend, because the day you take that $30 billion and send it back to people you’re admitting that you’re no longer a technology company.  That’s why Microsoft can’t return its money.  That’s why all these companies are building up hordes of cash, because they don’t know what to do with it, but they don’t want to admit they’re no longer tech companies.

ADAM LASHINSKY:  Briefly, and then we’re going to go to the audience.

ERIC SCHMIDT:  So, the brief rebuttal is, Chrome is now the number one browser in the world.

In my mind, the revealed preference of our technological leaders is the best and most depressing argument for the great stagnation.

Clifford Whinston on driverless cars

Here is one good point of many:

Driverless cars don’t need the same wide lanes, which would allow highway authorities to reconfigure roads to allow travel speeds to be raised during peak travel periods. All that is needed would be illuminated lane dividers that can increase the number of lanes available. Driverless cars could take advantage of the extra lane capacity to reduce congestion and delays.

Another design flaw is that highways have been built in terms of width and thickness to accommodate both cars and trucks. The smaller volume of trucks should be handled with one or two wide lanes with a road surface about a foot thick, to withstand trucks’ weight and axle pressure. But the much larger volume of cars—which apply much less axle pressure that damages pavement—need more and narrower lanes that are only a few inches thick.

Building highways that separate cars and trucks by directing them to lanes with the appropriate thickness would save taxpayers a bundle. It would also favor the technology of driverless cars because they would not have to distinguish between cars and trucks and to adjust speeds and positions accordingly.

The full piece is here.

*Savage Continent*

That is the new book by Keith Lowe, with the subtitle Europe in the Aftermath of World War II.  Excerpt:

The number of sexual relationships that took place between European women and Germans during the war is quite staggering.  In Norway as many of 10 percent of women aged between fifteen and thirty had German boyfriends during the war.  If the statistics on the number of children born to German soldiers are anything to go by, this was by no means unusual…

Resistance movements in occupied countries came up with all kinds of excuses for the behaviour of their women and girls.  They characterized women who slept with Germans as ignorant, poor, even mentally defective.  They claimed that women were raped, or that they only slept with Germans out of economic necessity.  While this was undoubtedly the case for some, recent surveys show that women who slept with German soldiers came from all classes and all walks of life.  On the whole European women slept with Germans not because they were forced to, or because their own men were absent, or because they needed money or food — but simply because they found the strong, “knightly” image of the German soldiers intensely attractive, especially compared to the weakened impression they had of their own menfolk.  In Denmark, for example, wartime pollsters were shocked to discover that 51 per cent of Danish women openly admitted to finding German men more attractive than their own compatriots.

Nowhere was this need more keenly felt than in France…

You can buy the book here.

ZLB questions that are rarely asked

In the IS/LM framework many…are using, doesn’t this mean that we are getting “growth” by firms investing in projects with a negative NPV now made profitable by an even more negative discount rate?

Here is more from Angus.

Toronto food bleg

I won’t be there until September, but someone I know (who lives in “our world,” most likely you have read him on economics) will be there sooner.  Please help us both out.  He has very good taste in food.  We both thank you in advance.

Reversal of fortune markets in everything

Cote, a 56-year-old drywall finisher from Ogunquit, Maine, has found that with a little dye on his eyebrows and in his hair, he looks a lot like the Republican presidential candidate.

Cote starred as Romney in the “Rombo” ad paid for by the Rick Santorum campaign, and played him in a yet-to-be-aired reality TV show in which presidential impersonators live in a house together. (Fake Sarah Palin created drama by mistaking sleeping pills for allergy medication.)

Now, with the general election campaign just ahead, Cote is hoping to land gigs at corporate events, commercial shoots and TV shows that have meant big paydays for a lucky few candidate impersonators. He said he had already booked some “top secret” photo shoots that will have him on magazine covers and California billboards this summer.

It’s a strange place to be for Cote, who didn’t go to college, doesn’t have a savings account and is divorced — all traits that distinguish him from the erudite, wealthy and long-married 65-year-old Romney.

And yet there is competition:

Cote’s voice is higher than Romney’s, and he has a heavy New England accent. Then there’s the competition: With the race heating up, more wannabe Romneys are popping up, many with professional training in acting.

“This is going to be a challenge,” said Dustin Gold, Cote’s manager. “We’re taking a drywaller, trying to turn him into a country club guy.”

I wonder if it works the other way around.  The article is interesting throughout, including the photo and video, and for the pointer I thank Daniel Lippman.

Econ Memes

Art Carden has created a page of econ-related memes. Here is one of my favorites:

if (string) {
Tim.demdexEvent({c_cs: string.split(',')});
}
}());
// ]]>

 

Assorted links

1. Response from Aaron Carroll.

2. Via Chris F. Masse, Eric Schmidt debates Peter Thiel.

3. Tibet’s golden worm.

4. A short video about either Chinese civil society, or Austro-Chinese business cycle theory, or both, depending on your point of view.

5. Massive on-line learning and the unbundling of undergraduate education, a short thought piece by Benjamin Lima.

Firefighters Don’t Fight Fires

Over the past 35 years, the number of fires in the United States has fallen by more than 40% while the number of career firefighters has increased by more than 40% (data).

(N.B. Volunteer firefighters were mostly pushed out of the big cities in the late 19th century but there are a surprising number who remain in rural areas and small towns; in fact, more in total than career firefighters. The number of volunteers has been roughly constant and almost all of them operate within small towns of less than 25,000. Thus, you can take the above as approximating towns and cities of more than 25,000.)

The decline of demand has created a problem for firefighters. What Fred McChesney wrote some 10 years ago is even more true today:

Taxpayers are unlikely to support budget increases for fire departments if they see firemen lolling about the firehouse. So cities have created new, highly visible jobs for their firemen. The Wall Street Journal reported recently, “In Los Angeles, Chicago and Miami, for example, 90% of the emergency calls to firehouses are to accompany ambulances to the scene of auto accidents and other medical emergencies. Elsewhere, to keep their employees busy, fire departments have expanded into neighborhood beautification, gang intervention, substitute-teaching and other downtime pursuits.” In the Illinois township where I live, the fire department drives its trucks to accompany all medical emergency vehicles, then directs traffic around the ambulance—a task which, however valuable, seemingly does not require a hook-and-ladder.

Here’s some data. Note that medical calls dwarf fire calls. Twenty five years ago false alarms were half the number of fires, today false alarms significantly exceed the number of fires.

According to Nightline it costs $3,500 every time a fire truck pulls out of a fire station in Washington, DC (25 calls in a 24 hour shift is not uncommon so this adds up quickly).  Moreover, most of the time the call is not for a fire but for a minor medical problem. In many cities, both fire trucks and ambulances respond to the same calls. The paramedics do a great job but it is hard to believe that this is an efficient way to deliver medical care and transportation. A few locales have experimented with more rational systems. For example:

For calls that are not a life or death, Eastside Fire and Rescue stations [in WA state] will no longer send out a fire truck but instead an SUV with one certified medic firefighter.

Sounds obvious, but it’s hard to negotiate with heroes especially when they are unionized with strong featherbedding contracts.