Tyler Cowen's Blog, page 588

The polity that is America

Now, with the collapse of the Florida [Orlando to Tampa] route, it looks as if the nation's first segment of true high-speed rail will be in an even unlikelier place — linking Fresno and Bakersfield, in California's Central Valley, and scheduled to end construction in 2017.

Here is more.

The transition to WordPress

I am learning how much I rely on the total familiarity of my immediate visual field.  I look at the blogging box for WordPress (which by the way isn't that different from Typepad) and I am baffled.  In the writing process everything feels molasses slow, but I will get used to it.

We are still working out some bugs, but if you are having problems with the site please let us know in the comments.  Thanks!

Why American movies won't die

Here is a well-linked to article about how American movies are dying in terms of quality.   Ross Douthat comments.  Most of the arguments are correct, namely that too many big budget movies require a "tent pole" in terms of a connection to a comic book, a famous book (Harry Potter), a TV show, and so on.  But the article is still too pessimistic.  Here are three reasons why movie quality should survive, albeit with some cyclical fluctuations:

1. The more centrist and mainstream the big budget movies get, the more opportunities are created in the niches.

2. Due mainly to digital editing, the costs of movie production and editing are falling.  That favors innovation.  Marketing costs are rising, due to an increasing scarcity of attention, and that favors blockbusters  Still, this latter factor has self-correcting elements, as mentioned above, and many forms of marketing (e.g., the internet) are cheaper than buying network TV ads.  The cost story is complicated, but it should not over the longer run penalize quality.

3. The U.S. population is aging and this will push movies away from some of their more juvenile shortcomings.

Starve the beast means feed the machine

Joseph Daniel Ura and Erica Socker report (pdf):

The notion of starving the beast has been an important justification for major elements of the fiscal program advocated by many Republicans and conservatives over the last three decades. While the idea of restraining government spending by limiting government revenues has an intuitive appeal, there is convincing evidence the reducing federal tax rates without coordinated reductions in federal spending actually produces long-term growth in spending. This seemingly perverse result is explained by Buchanan's theory of "fiscal illusion." By deferring the costs of government services and benefits through deficit financing, starve the beast policies have the effect of lowering the perceived price of government in the minds of many citizens. We assess the principal behavioral prediction of the fiscal illusion strategy. Incorporating estimates of the effects of federal deficits into a standard substantive model of Stimson's mood index, we find strong support for a subjective price-driven theory of demand for government. In particular, we find that the size of the federal budget deficit is significantly associated greater demand for government services and benefits.

Assorted links

1. Mexican report on TGS (in Spanish).

2. David Leonhardt on economists' blind spots.

3. Do the opposite!

4. What would Feynman do?

5. One-third of wages.

6. "renewed philosophic interest…"

7. How did humans move away from apes?, hail the Scottish Enlightenment.

We're moving to WordPress!

Yes, starting this afternoon the transition will begin.  It may mean no blogging this weekend, the first break we have taken from MR since the very beginning.  It depends how long the transition takes, but possibly there will be no new posts this weekend.  If there are any glitches, we apologize in advance, please bear with us.  We wish to be back blogging as soon as possible.

You won't need to change your bookmarks, RSS feeds, nada.  Just be yourselves.

There will be cool new features and we will explain these in due time, yet the blog still will be easy to load.

For the push to WordPress, I thank Chris F. Masse, Chug, Joanna, and Cord, among others.

File under "Pareto improvements."

Economic lessons of the Kobe earthquake

You will find a George Horwich paper here, gated to some of you.  Here is a good paper on the political economy of earthquakes.  Here is the famous paper on how Japanese cities recovered after Allied bombing.  Here are Becker and Posner on the economics of tsunamis.

Markets in everything, earthquake and tsunami bonds

In 1984, Svensk Exportkredit launched a private placement of earthquake bonds that are immediately redeemable if a major earthquake hits Japan.  Insurers in Japan bought the bonds agreeing to accept lower than normal coupons in exchange for the right to put the bonds back to the issuer at face value if an earthquake hits Japan.  This is the earliest catastrophe risk bond deal we know about.

The paper is here (pdf) and other writings on Japanese earthquake bonds are here.  There are also tsunami bonds.

What I learn from chess and computers

I take these points to be a jumping off place for thinking about computers and future economic growth, and wages, more generally.  The AI revolution basically came first to chess!  Of course chess is sustained by a mix of donations, corporate and political sponsorship, wage labor (e.g., lessons), and volunteer labor, so it is hardly a metaphor for the economy as a whole; still we can see how computer labor and human labor might fit together:

1. Databases equalize preparation opportunities for the top players.  Those who rise to the very top have very strong creative skills.  In relative terms, being a chess "grind" is worth less than in times past.

2. If the computer is set at 2200 strength, "me plus the computer" (I override it every now and then) almost always beats "the computer alone."  Often we beat "the computer alone" very badly.  If the computer is set at full strength, my counsel is worth much less, although it is not valueless.

3. With a computer set at full strength, the useful "team" requires a much stronger human team member than I.  The required education level -- for the team's "wage premium" -- is ratcheted up.

4. Chess is an area where educational reform has been extremely rapid and extremely successful.  Chess education today revolves around learning how to learn from the computer, and this change has come within the last ten to fifteen years.  No intermediaries were able to prevent it or slow it down.  Humans now teach themselves how to team with computers, and the leading human players have to be very good at this.  The computers which most successfully team with humans are those which replicate most rapidly.

5. There are many more chess prodigies than ever before, and they mature at a more rapid pace.

6. We used to think that computers would play chess like we did, only "without the mistakes."  We now know that playing without the mistakes involves a very different style from what we had imagined.  A lot of human positional intuitions are garbage, and the computer can make sense out of ugly-looking moves.  A lot of the human progress since then has involved unlearning previous positional rules and realizing how contingent they are.  Younger players, who grew up playing chess with computers, are especially good at this.  For older players, it is a good way to learn how unreliable your intuitions can be.

7. Highly exact and concrete analysis, and calculation of variations, is now the centerpiece of grandmaster chess at top levels.  We have learned how to become more like the computers.  The computers have taught us well. 

8. Chess-playing computers still are not meta-rational.  They do not understand what they do not understand very well, for instance blocked positions and long sequences of repetition.  That is one reason why human-computer teams are so important and so productive.

Here is Kasparov on Watson.  Here is Kasparov on AI and chess.  Here is a good treatment of human-computer teams.

*The Way it Worked*

The author is Gordon C. Bjork and the subtitle is Structural Change and the Slowdown of U.S. Economic Growth.  I recommend this not-so-well known book, first published in 1999, very highly.  Among its other merits, it traces how much of the productivity slowdown results from the switch of the U.S. economy into lower-growing sectors.  Excerpt:

Thus, if the 1950s structure of relative output levels and employment were combined with the intra-sector growth rates of the decade ending in 1990, the aggregate intra-sector growth rate would have been 19 percent as opposed to the 13.2 percent it actually was in the decade ending 1990.  If the slow-growth decade of the 1980s had had the same output structure as the high-growth 1950s, it would have had higher growth rates than the high-growth 1950s.  Conversely, if the 1990 structure had been in effect in the 1950s, the intra-sectoral growth rate for the decade would have been only 11 percent, rather than its actual 17 percent.  These two examples of the effect of output structure on average growth rates illustrate the importance of structural change in determining aggregate rates of growth in per worker output by changing the relative size of sectors.