Tyler Cowen's Blog, page 572
January 3, 2012
*The Coming Prosperity*
The author is the highly intelligent Philip Auerswald and the subtitle is How Entrepreneurs are Transforming the Global Economy. I am less optimistic about the next ten years, but this is a very well-argued book. I am hoping to have a chance to work more with Phil, my colleague at George Mason, in the near-term future.
Eurozone sentences to ponder
Put another way, there are not enough creditworthy counterparties in the system to encourage any sort of money multiplication effect at all.
That is Izabella Kaminska, there is much more at the link.
Trade between belligerents
I have been enjoying Adam Hochschild's To End All Wars: A Story of Loyalty and Rebellion, 1914-1918, which covers the British role in World War I. My favorite section details how the British responded when it turned out they had a drastic shortage of binoculars, which at that time were very important for fighting the war. They turned to the world's leading manufacturer of "precision optics," namely Germany. The German War Office immediately supplied 8,000 to 10,000 binoculars to Britain, directly intended and designed for military use. Further orders consisted of many thousands more and the Germans told the British to examine the equipment they had been capturing, to figure out which orders they wished to place.
The Germans in turn demanded rubber from the British, which was needed for their war effort. It was delivered to Germany at the Swiss border.
What are the possible theories?
1. It was a two-front war, and thus the British could offer the Germans a deal, knowing part of the costs of the rubber supply would fall on the combatants at the Eastern front, or perhaps even other combatants at the Western front.
2. The deal may have appealed to commercial interests in each country.
3. Politicians may have expected to survive the war, and to have their country survive the war, and in the meantime they wanted the war for their side to go better rather than worse, for reasons of public relations or to appeal to their military lobbies.
4. The traders may have disagreed about the relative merits of what they were exchanging, as is the case on Wall Street every day.
What else?
January 2, 2012
Scott Winship on mobility in America
On net, it seems it is not going down and may be rising:
…consider what we know from previous studies of trends in intergenerational income mobility. The bulk of the existing research shows either that mobility has increased over the long run or that it has changed little in either direction. That includes both studies that I know of examining changes in upward mobility from the bottom. It also includes six studies using measures of mobility not confined to movement up from the bottom; these find either no change or rising mobility. In contrast, only two papers find a fall in mobility, each using non-directional measures. Notably, one of them shows an uptick in the mobility of the most recent two birth cohorts it examined, leaving in doubt the question of whether the longer-term decline it found would have persisted had the authors had more recent data. The other study finds somewhat mixed evidence, depending on the data source and whether children of single parents are included.
Of course this doesn't mean mobility is "high enough." Scott also will be publishing a more detailed explication of these results with Brookings.
Not anomalous enough
This is from an article about the transmissibility of bird flu:
But there have also been some anomalous cases, including a group of diners in Vietnam who apparently were infected by raw duck blood pudding, and the handlers of fighting cocks who were stricken after sucking blood and mucus out of their birds' beaks.
Might schooling raise IQ?
Children who have more schooling may see their IQ improve, Norwegian researchers have found.
Although time spent in school has been linked with IQ, earlier studies did not rule out the possibility that people with higher IQs might simply be likelier to get more education than others, the researchers noted.
Now, however, "there is good evidence to support the notion that schooling does make you 'smarter' in some general relevant way as measured by IQ tests," said study author Taryn Galloway, a researcher at Statistics Norway in Oslo.
Findings from the large-scale study appear in this week's online edition of the Proceedings of the National Academy of Sciences.
…In 1955, Norway began extending compulsory middle school education by two years. Galloway and her colleague Christian Brinch, from the department of economics at the University of Oslo, analyzed how this additional schooling might affect IQ.
Using data on men born between 1950 and 1958, the researchers looked at the level of schooling by age 30. They also looked at IQ scores of the men when they were 19.
"The size of the effect was quite large," she said. Comparing IQ scores before and after the education reform, the average increased by 0.6 points, which correlated with an increase in IQ of 3.7 points for an addition year of schooling, Galloway said.
The summary is here, the paper is here, and for the pointer I thank Michelle Dawson.
Krugman v. Krugman
Paul Krugman (Jan 1, 2012):
People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!
…while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem's size.
…nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today's conventional wisdom would lead you to believe.
Paul Krugman (March 11, 2003):
…last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.
…we're looking at a fiscal crisis that will drive interest rates sky-high….But what's really scary — what makes a fixed-rate mortgage seem like such a good idea — is the looming threat to the federal government's solvency.
…How will the train wreck play itself out? ….my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar.
Now to be fair, Krugman covered himself in 2003 in a credible way he said "unless we slide into Japanese-style deflation, there are much higher interest rates in our future." Thus, I do not fault Krugman's forecasting ability. What I do fault is that despite a 180 degree about-face, one thing remains constant in all of Krugman's writings, anyone who disagrees with him is portrayed as a mendacious idiot. In truth, Heritage today and Krugman 2003 both have legitimate concerns about the long-term debt situation of the United States and it would have been to the credit of Krugman 2012 had he acknowledged that point more fairly.
Addendum: Krugman responds pointing out that he has acknowledged this mistake. Fair enough, although I remain puzzled as to whether we did or did not owe the debt to ourselves in 2003.
The life and times of Gordon Tullock
Here is a new paper by Daniel Houser and Charles K. Rowley (pdf):
Gordon Tullock is a founding father of public choice. In an academic career that has spanned 50 years, he forged much of the research agenda of the public choice program and he founded and edited Public Choice, the key journal of public choice scholarship. Tullock, however did much more than this. This Special Issue of Public Choice honors Gordon Tullock in precisely the manner that he most values: the creation of new ideas across the vast range of his own scholarly interests.
The paper gives a better sense of Tullock the individual than the abstract alone indicates. Hat tip goes to Andres Marroquin, who all development economists should be following on Twitter.
Assorted links
1. Particle physics developments from 2011, a busy year.
2. Are we reaching "peak text"?
3. chill.com.
4. Why are there no economists who have turned down British honours?
5. What cities do top musical tracks come from? And is there now an Uighur [Uyghur] restaurant in Anacostia? Please let me know if you know more about this, in the comments would be fine.
6. Timothy Snyder critique of Pinker.
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