Does immigration account for relatively stagnant median income?

Tyler Cowen

It's a common claim that increasing immigration accounts for the slowdown in U.S. median income growth.  No, I don't mean the claim that immigrants lower wages.  Even according to George Borjas, that effect isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree.  Rather I am referring to the mere addition of immigrants to the rolls, which itself shifts the median of the distribution.

I don't see that the immigration effect explains much of the data.

1. Look at Dew-Becker and Gordon, p.62.  They consider panel data for hourly compensation, and they still find a stagnant median.  Also see p.78, where they summarize their results that the stagnation extends upward through the 90th percentile of the income distribution.  The U.S. didn't come close to taking in enough immigrants to produce that result.

2. Look at Lane Kenworthy's figures, p.41.  Median income growth for the category "White, non-Hispanic" is only barely better than for the general population.

3. This paper measures the effect of immigration on the Gini coefficient and finds that a given year's worth of immigration has a peak effect on the Gini at four years' time and the effect disappears altogether within six years' time.

4. Researchers who work in this field are well aware of the phenomenon of immigration and generally they do not use it to dismiss the issue of declining median income growth.

I've heard from one reader that the eBook is now available in France, from another that it is in Australia, but Canada will take a little more time.

February 1, 2011 at 10:38 AM in Economics | Permalink | Comments (0)

Hail Timur Kuran!

Tyler Cowen

King Abdullah II of Jordan fired his government in a surprise move on Tuesday, in the face of a wave of demands of public accountability sweeping the Arab world and bringing throngs of demonstrators in the streets of Egypt.

Here is more.

February 1, 2011 at 09:24 AM in Political Science | Permalink | Comments (4)

What do the betting markets say?

Tyler Cowen

Over at www.intrade.com, the price for Mubarak's departure from the post of President, before the end of Februrary, is currently at 73.5.

For the pointer I thank David Shor.

February 1, 2011 at 07:34 AM in Current Affairs, Political Science | Permalink | Comments (3)

*Euphemania: Our Love Affair with Euphemisms*

Tyler Cowen

The author is Ralph Keyes and you can buy it here.  Here are three excerpts:

Yesterday's polite euphemism is tomorrow's prissy evasion.  "Cherry" was once considered more respectable than "hymen."  Now, just the opposite is true.  The former is thought to be vulgar, the latter decent.

And:

When the unfortunately named rapeseed oil had trouble competing with products that had nicer names, a Canadian strain low in saturated fat was dubbed Canola (i.e., "Canadian oil") in 1978 and has done rather well since.

And:

It used to be said that "Horses sweat, men perspire, and ladies glow."

Most of all, this book was...interesting.

February 1, 2011 at 07:23 AM in Books, Education | Permalink | Comments (11)

The elasticity of trust in the Middle East

Tyler Cowen

From a new experimental paper, by Iris Bohnet, Benedikt Hermann, Mohamad Al-Ississ, Andrea Robbett (she is speaking at GMU today), Khalid Al-Yahi, and Richard Zeckauser, here is one bit from the conclusion:

Mechanisms aimed at mitigating the cost of betrayal, such as damages or insurance provision, seem to work better in the United States, and arrangements focusing on preventing the occurrence of betrayal, such as a punishment threat, have greater impact in the Arab Middle East. In our experiments, trust was promoted by decreasing the cost of betrayal in the United States but not in Jordan. Punishment functioned differently. Giving the first mover the option to take revenge at a price should she be betrayed enhanced trust in Saudi Arabia but not in the United States.

February 1, 2011 at 07:20 AM in Economics, Games, Political Science | Permalink | Comments (4)

Assorted links

Tyler Cowen

1. Google finds it hard to reinvent philanthropy.

2. WSJ coverage of The Great Stagnation; "...in terms of framing the dialogue Tyler Cowen may very well turn out to be this decade’s Thomas Friedman."

3. Can schools teach meta-cognition?

4. Could some British real marginal rates of taxation rise to 70-83 percent?

5. Via Tim Harford, analysis of proposed NHS reforms, and sources for following Egypt.

6. Will high-speed rail worsen traffic in China?

7. Ezra Klein reviews TGS.  And here is Karl Smith.

January 31, 2011 at 12:36 PM in Web/Tech | Permalink | Comments (28)

World Income Inequality

Alex Tabarrok

Here, courtesy of Catherine Rampell of Economix, is a remarkable chart from Branko Milanovic's book The Haves and Have Nots. Along the horizontal axis are within-country income percentiles running from the bottom 5% (1st ventile) to the top 5% (20th ventile). Along the vertical axis are world income percentiles.

Economix-28milanovic-custom1
The graph shows that the bottom 5% of Brazilians are among the poorest people in the world but the top 5% are among the richest. Thus the vertical range of the curve tells us about within-country inequality.

Comparing between countries we see that the poorest 5% of Americans are among the richest people in the world (richer than nearly 70% of other people in the world). The poorest 5% of Americans, for example, are richer than the richest 5% of Indians.

January 31, 2011 at 12:21 PM in Data Source, Economics | Permalink | Comments (58)

The Kitchen Test

Tyler Cowen

Here is Paul Krugman, noting that innovations for the kitchen have slowed down.  He cites this earlier, mid-90s piece of his on kitchens, which I would have cited had I known about it.  His conclusion:

By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

As Krugman did in the mid-1990s, I now cook in a 1950s kitchen and it suits me fine.  I use the microwave reluctantly and when I first met Natasha, eight years ago, she and Yana thought it noteworthy that I did not know how to use the device at all.  I do not see that my cooking stands at a disadvantage.

Alexander J. Field has a long and very good piece on the evolution of kitchen technology.  He concludes:

Aside from the automatic dishwasher in the 1930s (which achieved significant penetration only beginning in the 1960s), the garbage disposer (introduced in the 1950s, but low penetration until the late 1960s) and the microwave oven in the 1970s, there have been no truly revolutionary kitchen appliances in the last eight decades.

Field makes good fun of the electric can opener and the electric carving knife.

Here is a related Krugman post on the 19th century.

January 31, 2011 at 10:04 AM in Economics, Food and Drink, History | Permalink | Comments (88)

Demand Media, a content mill

Tyler Cowen

Via The Browser, this was an excellent article on one of the companies which manufactures superficial web content to draw interest from Google searches.  Three bits:

On Jan. 25, Demand Media sold 8.9 million shares at $17 each in an initial public offering. The following day, the price rose 35 percent to $22.61, which would give the company a market capitalization of $1.9 billion, greater than New York Times Co.'s (NYT) value of $1.5 billion.

And:

Many analysts now say the best way to gauge a Web company's financial hardiness is to look not at page views or monthly unique visitors but at how much money it can generate from each user. Matthew Shanahan, senior vice-president of strategy for Web consulting firm Scout Analytics, says thriving digital ventures typically have a high ARPU (average revenue per user). Amazon.com (AMZN), for instance, makes on average $189 per unique user. Google (GOOG) takes in around $24. Web publishers, Shanahan says, tend to become reliably profitable at about $10 a user. Demand's average revenue per user currently hovers around $1.60.

And:

Last year, Demand Media executives told Wired magazine that the mechanized assignments generate 4.9 times more revenue than ideas generated by humans.

The company employs 13,000 freelancers.

January 31, 2011 at 07:05 AM in Economics, Web/Tech | Permalink | Comments (17)

China "tiger mother" fact of the day?

Tyler Cowen

Under a proposal submitted last Monday by the Civil Affairs Ministry to China’s State Council, adult children would be required by law to regularly visit their elderly parents. If they do not, parents can sue them.

“Before, the courts did not accept this kind of lawsuit,” Wu Ming, a deputy inspector for the ministry, told The Legal Evening News this month. “But from now on, they will have to open up a case.”

It is not obvious that the proposal is going to pass:

“The national delegates are rational enough,” Mr. Jing said.

China, by the way, has the world's third highest elderly suicide rate.  The article is interesting throughout.

January 31, 2011 at 03:18 AM in Current Affairs, Law | Permalink | Comments (8)

*Selfish Reasons to Have More Kids*

Tyler Cowen

The author is Bryan Caplan and the subtitle is Why Being a Great Parent is Less Work and More Fun Than You Think.  Both were true for me and I predict at least one will be true for you.  It is now available for pre-order on Amazon.  And here is Bryan, new to Twitter.

January 30, 2011 at 04:55 PM in Books, Education | Permalink | Comments (18)

Assorted links

Tyler Cowen

1. The most exclusive university in the world?

2. Dating site for sea captains, and the site itself is here (possibly sketchy, one reader tells me).  The captains are here.  Lots of beards, and some strange requests.

3. The bestselling books in France, 2010.

4. Caplan and Wilkinson and the Libertarian challenge.

5. Why grain prices are high for Tunisians.

6. Indie rock and African music.

7. The problem with memoirs.

January 30, 2011 at 12:04 PM in Web/Tech | Permalink | Comments (18)

Median-itis and The Great Stagnation

Tyler Cowen

Here is my NYT column from today, on themes relevant to The Great Stagnation.  I won't rehash this entire discussion, but I would like to focus on this one column excerpt:

From 1947 to 1973 — a period of just 26 years — inflation-adjusted median income in the United States more than doubled. But in the 31 years from 1973 to 2004, it rose only 22 percent. And, over the last decade, it actually declined.

I am noticing that some reviews or commentaries (and here) are citing per capita income growth as a response to my argument.  It is true that per capita income grows at a slower rate post-1973, but my argument is about the slowing down of median income growth and that is a much stronger shift.  The productivity data also tell a glum story.   

CPI bias can change those numbers in absolute terms (see comments from Russ Roberts), but it also changes the pre-1973 median income growth numbers and arguably more so.  The gap remains and TGS refers to the living standard for the average person or household in the United States, not the total amount of innovation, which remains quite high.  They're just not innovations with the same trickle-down or broad-based effects as in an earlier era.

Kindle eBooks are themselves a good example.  It's a real improvement for a lot of us -- especially travelers -- but even the median reader, much less the median American, doesn't have a Kindle or buy eBooks.  As I argued in The Age of the Infovore, the big gains of late have gone to the extreme information-processors.  

I've seen in the MR comments (and elsewhere) a lot of anecdotal comparison of recent gains vs. earlier gains in technology.  Don't we now have this, don't we now have that, and so on.  Of course.  Median incomes have risen somewhat.  But, when it comes to the average household, the published numbers for median income are adding up and trying to measure those gains and it turns out their recent rate of growth really has declined.  Most serious researchers who work in this area use and accept these numbers as the best available (though they do not in general advocate my causal interpretation; see for instance Mark Thoma or Jacob Hacker).  

If the numbers for median income growth are low we ought to take that seriously, as does Scott Sumner.  We are not cheerleaders per se (BC: "I'm baffled why Tyler would focus on slight declines in American growth when the world just had the best decade ever."  Is it then wrong to focus on any other problems at all?  I also was one of the first people to make the "best decade ever" argument, which I still accept.)  Medians also matter for the political climate, even though the median earner is not exactly the median voter.  Adam Smith's welfare economics was basically that of the median, a point which David Levy has made repeatedly.

I'm also being called a "pessimist" a lot.  Yet in my view our current technological plateau won't last forever.  That's probably more optimistic than the Hacker-Pierson approach, which requires a Progressive revolution in economic policy (unlikely), although it is not more optimistic than denying the relevance of the numbers.

I'll soon blog some remarks on changing household size as another attempt to avoid confronting the facts about slow median income growth.

January 30, 2011 at 07:53 AM in Books, Data Source, Economics | Permalink | Comments (62)

Counting and Adding

Alex Tabarrok

Very enjoyable lecture on partition numbers. Deep but accessible, especially first half. Hat tip: The Endeavour.

January 30, 2011 at 07:05 AM in Science | Permalink | Comments (6)

The wisdom of Rocco Landesman

Tyler Cowen

Speaking at a conference about new play development at Arena Stage in Washington on Thursday, Mr. Landesman, the chairman of the National Endowment for the Arts, addressed the problem of struggling theaters. “You can either increase demand or decrease supply,” he said. “Demand is not going to increase, so it is time to think about decreasing supply.”

Here are some of the responses from the sector:

“What does he mean there’s too much supply?!?” wrote Trisha Mead, the public relations and publications manager at Portland Center Stage in Oregon. “What does he mean we can’t increase demand?!? Who determines which theater companies are wheat and which are chaff?!?” In another post, Durango Miller, a playwright and director, said: “Why not just increase funding? Maybe the N.E.A. is outdated and should be replaced by another system for funding the arts in the United States. Or maybe the people who are running the N.E.A. should be replaced.”

January 29, 2011 at 04:01 PM in Economics, The Arts | Permalink | Comments (49)

Assorted links

Tyler Cowen

1. More from Arnold Kling on The Great Stagnation.

2. Kevin Drum on the Kindle version.

3. Predictions about Egypt, from Egyptians, January 2010.

4. How good is Kobe Bryant in the clutch?

5. Markets in everything: Lie back and think of Mother England.

6. Critique of behavioral economics for not being behavioral enough, full paper here.

7. Will Medicaid expand or shrink?

8. TSA halts further "privatizations."

January 29, 2011 at 12:11 PM in Web/Tech | Permalink | Comments (20)

Five-year average productivity

Tyler Cowen

Productivity 
That is from Paul Krugman.  And from Krugman's source, Bart van Ark:

To conclude, there is good reason to adjust the long-term US productivity growth rate downwards.

January 29, 2011 at 07:07 AM in Economics | Permalink | Comments (23)

My favorite things Egypt

Tyler Cowen

1. Novel: I like all of the Mahfouz I have read, but the Cairo Trilogy is the obvious pick.  Here is a very useful list of someone's favorite Egyptian authors and novels.

2. Musical CD: The Music of Islam, vol.1: Al-Qahirah, Classical Music of Cairo, Egypt.  The opening sweep of this is a stunner, and it shows both the Islamic and European influences on Egyptian music.  Musicians of the Nile are a good group, there is Hamza El Din, and there is plenty of rai.  What else?  I can't say I actually enjoy listening to Um Kalthoum, but her voice and phrasing are impressive.

3. Non-fiction book, about: Max Rodenbeck, Cairo: The City Victorious.  Few cities have a book this good.  There is also Dream Palace of the Arabs and Tom Segev's 1967.  Which again is the really good book on the 1973 War?

4. Movie, set in: Cairo Time.  This recent Canadian film avoids cliche, brings modern Cairo to life, and is an alternative to many schlocky (but sometimes good) alternatives, such as The Mummy, Death on the Nile, Exodus, Raiders of the Lost Ark, and so on.  There is Agora.  Egyptian cinema surely has masterpieces but I do not know them.  If you're wondering, for books, I could not finish Norman Mailer's Ancient Evenings.

5. Favorite food: I was impressed by the seafood restaurants on the promenade in Alexandria.  Food in Cairo did not thrill me, though I never had a bad meal there.

6. Philosopher: Must I say Plotinus?  I don't find him especially readable.

7. City: I enjoyed Alexandria, but I can't say I liked Cairo beyond the museum (much better than any Egyptian collection outside of Egypt) and the major mosques.  The Sphinx bored me.  The air pollution prevented me from walking for more than an hour and there was cement, cement. and more cement.  The ride between Cairo and Alexandria was one of the ugliest, most uninspiring journeys of my life.  The Egyptians were nice to me but I never had the sense that anything beautiful was being done with the country.  Let's hope that changes.

8. Opera, about: Philip Glass, Akhnaten.  But wait, there's also Aida, with Callas.  And there's Handel's Israel in Egypt.  Handel set a lot of his operas in Egypt, including Berenice and Giulio Cesare.

Diane Rehm is Egyptian-American but I don't know her show.  The new biography of Cleopatra is smooth but the narratives made me suspicious.  Was Euclid Egyptian?

January 29, 2011 at 07:01 AM in Books, Current Affairs, Film, Music, The Arts | Permalink | Comments (22)

Egypt facts of the day

Tyler Cowen

The Market Vectors Egypt Index (EGPT) ETF is down 20% since Jan. 14 and down 2.9% today on more than six times the daily average volume. Egypt’s credit-insurance costs have also spiked. According to Markit, a data provider, a credit-default swap to insure $10 million of Egyptian sovereign debt over five years has spiked 33% to $405,000. (Update: the CDS cost has jumped to $450,000 since this post was first made.) It may surprise, given what you see on TV, but that’s still cheaper than similar insurance for Portugal, Ireland and Greece.

The article is here.  And:

The Nasdaq Israel Index (ISRQ) is down 1.2% today and 3% in the past 10 days.

January 28, 2011 at 05:43 PM in Current Affairs, Economics | Permalink | Comments (8)

*The Order of Public Reason*

Tyler Cowen

That is the title, the author is Gerald Gaus of U. Arizona, and the subtitle is A Theory of Freedom and Morality in a Diverse and Bounded World.  This is a big and ambitious work, broadly in the liberaltarian tradition, mixing Rawls and Hayek, pondering the implications of disagreement, and experimenting with the idea that morality itself has a coercive element.  It is Gaus's attempt to lay out the proper foundations for a liberal society and he summarizes the hard-to-summarize book a bit here.

Also new on the market is Ronald Dworkin's Justice for Hedgehogs.  I like the title and I like most of his previous books, but I am not finding this one rewarding to read.  Here is one previous debate on related material.

January 28, 2011 at 01:38 PM in Books, Philosophy, Political Science | Permalink | Comments (5)

Cutting off communications in Egypt

Tyler Cowen

Jeff writes:

The government in Egypt is cutting off communications networks, including mobile phones and the Internet.

The decision to get out and protest is a strategic one.  It’s privately costly and it pays off only if there is a critical mass of others who make the same commitment.  It can be very costly if that critical mass doesn’t materialize.

Communications networks affect coordination.  Before committing yourself you can talk to others, check Facebook and Twitter, and try to gauge the momentum of the protest.  These media aggregate private information about the rewards to a protest but its important to remember that this cuts two ways.

If it looks underwhelming you stay home.  And therefore so does everybody who gets similar information as you.  All of you benefit from avoiding protesting when the protest is likely to be unsuccessful.  What’s more, in these cases even the regime benefits enabling from private communication, because the protest loses steam.

Now consider the strategic situation when you lines of communication are cut and you are acting in ignorance of the will of others.  The first observation is that in these cases when the protest would have fizzled, without advance knowledge of this many people will go out and protest.  Many are worse off, including the regime.

The second observation is that even in those cases when protest coordination would have been amplified by private communication, shutting down communication may nevertheless have the same effect, perhaps even a stronger one.  There are two reasons for this. First, the regime’s decision to shut down communications networks is an informed one.  They wouldn’t bother taking such a costly and face-losing move if they didn’t think that a protest was a real threat.  The inference therefore, when you are in your home and you can’t call your friends and the internet is shut down is that the protest has a real chance of being effective.  The signal you get from this act by the regime substitutes for the positive signal you would have gotten had they not acted.

The other reason is that this signal is public.  Everyone knows that everyone knows … that the internet has shut down.  Instead of relying on the noisy private signal that you get from talking to your friends, now you know that everybody is seeing exactly the same thing and are emboldened in exactly the same way.  This removes a lot of the coordination uncertainty and strengthens your resolve to protest.

I would add that today's autocracies hire consultants who advise them on how to best stifle political dissent.  Clumsy errors are less common than in times past.  That increases the likelihood that the Egyptian government sees these protests as very serious indeed.

January 28, 2011 at 10:43 AM in Economics, Political Science | Permalink | Comments (42)

Solving the fiscal crisis at the state level?

Tyler Cowen

Moving to dispel claims that President Barack Obama was not born in Hawaii, his supporters in the state's legislature have introduced a bill that would allow anyone to get a copy of his birth records for a $100 fee.

The idea behind the measure is to end skepticism over Obama's birthplace while raising a little money for a government with a projected budget deficit exceeding $800 million over the next two years.

Here is more.

January 28, 2011 at 10:34 AM in Current Affairs, Economics, History, Political Science | Permalink | Comments (39)

Egypt

Tyler Cowen

There is some chance that 2011 will be the new 1989.  Cutting off the internet should signal to the populace that matters are dire and thus it may prove counterproductive.  Tullock might say it means they will start shooting soon.  It is difficult to put together a "Favorite Things Egyptian," at least for this American, once you get past Mahfouz and music.  Intellectually and culturally, Cairo has been punching below its weight for a long time.  Fortunately, there has been a resurgence in Egyptian cinema since 2007.  When I visited the country in the mid-1990s, I had an overwhelming impression of a cynical populace and a lot of cement.  Timur Kuran's work will rise in status and importance.  "Catch-up" remains the global story of the last ten to fifteen years.

January 28, 2011 at 07:50 AM in Current Affairs, History, Political Science | Permalink | Comments (33)

Assorted links

Tyler Cowen

1. The Economist reviews Timur Kuran's new book.

2. Scott Sumner buys a Kindle and reviews The Great Stagnation.

3. Forbes review of The Great Stagnation.

4. Ryan Avent review of The Great Stagnation.

5. David Brooks coverage of The Great Stagnation.

6. What we don't know about cognitive enhancement.

7. Japan reviews The Great Stagnation.

January 28, 2011 at 07:01 AM in Web/Tech | Permalink | Comments (14)

Are criminals just stupid?

Tyler Cowen

Kevin Beaver and John Paul Wright report:

An impressive body of research has revealed that individual-level IQ scores are negatively associated with criminal and delinquent involvement. Recently, this line of research has been extended to show that state-level IQ scores are associated with state-level crime rates. The current study uses this literature as a springboard to examine the potential association between county-level IQ and county-level crime rates. Analysis of data drawn from the National Longitudinal Study of Adolescent Health revealed statistically significant and negative associations between county-level IQ and the property crime rate, the burglary rate, the larceny rate, the motor vehicle theft rate, the violent crime rate, the robbery rate, and the aggravated assault rate. Additional analyses revealed that these associations were not confounded by a measure of concentrated disadvantage that captures the effects of race, poverty, and other social disadvantages of the county. We discuss the implications of the results and note the limitations of the study.

Hat tip goes to Kevin Lewis.  Elsewhere, again via Kevin, people believe they have more free will than do others.

January 28, 2011 at 04:54 AM in Data Source, Law | Permalink | Comments (40)

Further assorted links

Tyler Cowen

1. Great Stagnation reviews from Brink Lindsey, Mutual Information, and Pegobry, and more Reihan.

2. Whoops!  The flight from specificity.  How far can it go?

January 27, 2011 at 02:05 PM in Books, Web/Tech | Permalink | Comments (15)

Assorted links

Tyler Cowen

1. Markets in everything, government style.

2. I am reading the new Brian Greene book and it is very good.

3. Hansonian result, though it does not apply to Robin himself.

4. Disagreements about proofiness?

January 27, 2011 at 11:37 AM in Web/Tech | Permalink | Comments (12)

The Ethics of Economics

Alex Tabarrok

Ed Glaeser has a good post, The Moral Heart of Economics, on the underlying ethical theories of economics. Tyler and I also discuss this isssue in our chapter on ethics in Modern Principles.

Even though the predictions of economics are independent of any ethical theory, there are ethical ideas behind normative economic reasoning. An economist who rejects the idea of exploitation in kidney purchases, for example, is treating the seller of kidneys with respect—as a person who is capable of choosing for himself or herself even in difficult circumstances.

Similarly, economists don’t second-guess people’s preferences very much. If people like wrestling more than opera, then so be it; the economist, acting as economist, does not regard some preferences as better than others. In normative terms, economists once again tend to respect people’s choices.

Respect for people’s preferences and choices leads naturally toward respect for trade—a key action that people take to make themselves better off. As we saw in Chapter 9 on externalities, economists recognize that trade can sometimes make the people who do not trade worse off. Nonetheless, the basic idea that people can make decisions and know their own preferences leads economists to be very sympathetic to the idea of noncoercive trade.

Economists also tend to treat all market demands equally, no matter which person they come from. Whether you are white or black, male or female, quiet or talkative, American or Belgian, your consumer and producer surplus count for the same in an economic assessment of a policy choice.

None of this it to say that economists are always right in their ethical assumptions. As we warned you in the beginning, this chapter has more questions than answers. But the ethical views of economists—respect for individual choice and preference, support for voluntary trade, and equality of treatment—are all ethical views with considerable grounding and support in a wide variety of ethical and religious traditions.

Perhaps you have heard that Thomas Carlyle, the Victorian-era writer, called economics the “dismal science.” What you may not know is that Carlyle was a defender of slavery and he was attacking the ethical views of economics. Economists like John Stuart Mill thought that all people were able to make rational choices, that trade not coercion was the best route to wealth, and that everyone should be counted equally, regardless of race. As a result, Mill and the laissez-faire economists of the nineteeth century opposed slavery, believing that everyone was entitled to liberty. It was these ethical views that Carlyle found dismal. We beg to differ.

January 27, 2011 at 11:31 AM in Economics, Philosophy | Permalink | Comments (31)

Zeno's paradox

Tyler Cowen

I did get stuck in The Great ???? -- have they given it a name yet? -- last night.  A ten mile commute home took me almost eight hours and from what I have read many people had it worse.  I thought of Keynes and liquidity.  The worst part came at the end when I saw the car crushed by a large, heavy tree, which also fell over the main road and turned four lanes and two directions into one lane and two directions.  For the most part human cooperation held up and people kept their places in line.  Bathroom norms evolved (and were improved), and I now know every station on my radio.  As the trip continued, the number of car corpses rose.

We at GMU are so dedicated they didn't even cancel classes.  And if a nuclear weapon is being launched at DC, I'm simply going down to the basement.

January 27, 2011 at 07:54 AM in Travel, Travels | Permalink | Comments (40)

How much should the safety net grow? (and when?)

Tyler Cowen

Lane Kenworthy thinks there is much more to be done.  For instance:

Early education (preschool, child care), beginning at age one, is a very good idea. Not all states have full-day kindergarten; few have preschool for four-year-olds; none have much in the way of public funding of education for kids age one to three.

Paid parental leave is available in only a few states and covers a relatively short period.

Sickness insurance: ditto.

Unemployment insurance covers too few of us.

Unemployment insurance should be supplemented by or folded into a new wage insurance program.

Social assistance benefits have been decreasing steadily over the past generation.

If markets are now structured in such a way as to severely limit real earnings growth for those in the bottom half of the distribution, we may need to massively expand the EITC.

We ought to do more for children, working-age adults, and elderly persons with assorted physical, cognitive, emotional, and social disabilities.

These questions could and should be debated with thousands of pages.  But, in the meantime, may I offer my little squib/splat of doubt?

At what wealth level are these protections supposed to arrive?  Now?  One also wonders which risks are considered to be insurable at the individual and family level, either through insurance proper or through social norms, savings, and other voluntary institutions.  What will be the implicit marginal rate of taxation on earning additional income in this new arrangement?  Has it been estimated?  What will happen to the savings rate?  What coercions will accompany these protections?  What will the pressures be, legal or otherwise, to send your kid away at one year of age?  Will job creation for women go down if there is mandatory paid parental leave?  Probably so. Will women end up better off?  Quite possibly not.  How many people would count as falling under these disabilities?  Is this all to be financed by higher taxes on the rich?  We probably can't even pay for our current bills in that manner.  If it is all done by VAT, how many people would prefer to have the government spend the money for them, as opposed to spending it themselves?  Just asking.  How about just sending the needy people some cash?  What is the likelihood that such benefits will, in the longer run, discourage our willingness to take in immigrants, the most effective form of aid we know?

Another way to ask the question is to look for the low-hanging fruit, when it comes to social welfare.  Let's take Social Security as more or less given, though it will see marginal adjustments.  Are the big gains to be had from some new social welfare program, or from showing that Medicare and Medicaid and other regulated health care institutions can work better than the public health systems of other wealthy nations, without running the United States into insolvency? 

In my view it is the latter, and I don't think that fruit is hanging especially low.  Can we agree on a truce, and first improve the programs we already have?  Will the new programs have the problems of the old?

If I were to pick some other piece of low-hanging fruit, I would cite the still-neglected problem of pandemic preparation.

On the Kenworthy post, here are comments from Matt.

January 27, 2011 at 04:49 AM in Economics, Political Science | Permalink | Comments (53)

Sentences to ponder

Tyler Cowen

From the comments:

You do not need a Kindle device to read Kindle eBooks. You can download from Amazon and read on your PC, iPhone, Blackberry or iPad.

Another MR reader wrote:

free kindle for PC here: http://www.amazon.com/gp/feature.html?ie=UTF8&docId=1000426311&tag=googhydr-20&hvadid=6737383737&ref=pd_sl_92i9zans8g_b

You also can get an eReader here: http://us.penguingroup.com/nf/Book/BookDisplay/0,,9781101502242,00.html

And I am told that some foreign editions (including Canada!) will be ready soon.  I will keep you posted.

January 27, 2011 at 12:46 AM in Books | Permalink | Comments (20)

Matt Yglesias reviews *The Great Stagnation*

Tyler Cowen

Tyler Cowen’s new ebook How The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better is a bravura performance by one of the most interesting thinkers out there. I also think it’s a great innovation in current affairs publishing—much shorter and cheaper than a conventional book in a way that actually leaves you wanting to read more once you finish it. My guess is that this is the future of books.

Here is much more, and again the book is here.  Here is coverage from Arnold Kling, though I think he (like some MR commentators) is spending too much time on impressions and not considering (at all) the numbers presented in chapter one.

January 26, 2011 at 03:01 PM in Books, Economics, Web/Tech | Permalink | Comments (41)

Assorted Links

Alex Tabarrok

1. Parfitian Problems.

2. The World is Sinking.

3. In Defense of Ligers.  I agree.

4. End the left!

5. Refuting Tyler on stagnation.

January 26, 2011 at 12:32 PM in Economics | Permalink | Comments (21)

Charlie Louvin has passed away at 83

Tyler Cowen

One obiturary is hereTragic Songs of Life, by the Louvin Brothers, is one of my favorite recordings of all time, any genre.  I'm often surprised how many people do not know this music.

January 26, 2011 at 11:42 AM in Current Affairs, Music | Permalink | Comments (2)

Assorted links

Tyler Cowen

1. Mark Bittman update.

2. Tyler Cowen answers questions about eBooks.

3. Irish politics: a pre-election primer.

4. *The Economist*, circa 1843.

5. Nominal gdp in Germany.

6. Daniel Bell passes away.

January 26, 2011 at 10:55 AM in Web/Tech | Permalink | Comments (10)

We are now on Facebook

Tyler Cowen

That is correct, the Cowen-Tabarrok text, Modern Principles.  It is a steady stream of resources for using the text, and learning and teaching economics more generally, updated on a very regular basis, organized using the wonders of Facebook.

Don't forget to click the "Like" button. 

http://www.facebook.com/ModernPrinciples

Thank you Mark Zuckerberg!  I rooted for you in the movie too.

January 26, 2011 at 07:58 AM in Books, Economics, Education, Web/Tech | Permalink | Comments (6)

Why do we care so much about sovereignty?

Tyler Cowen

IVV, a loyal MR reader, asks:

With all the talks about sovereign debt and default, the various EU problems, libertarian rumblings and increasing globalization, I'm mightily curious about one thing:

Why do we care so much about sovereignty?

Why are we trying so hard to declare this patch of land one place or another, and not neither nor both? Why are we trying to identify the people on that land as under one or another jurisdiction? What does being under a jurisdiction mean, and why must that choice be kept out of the hands of individuals? What's the economic value of all this?

We need units which produce public goods and we need people willing to declare their income and pay their taxes and, sometimes, fight and die for those units.  Therefore we need some amount of irrational belief in the idea of sovereignty, nation, and the like.  (Read Benedict Anderson's Imagined Communities.)  Today's distributional pattern of nation-states probably isn't ideal (I would prefer smaller units on the whole), but when it comes to OECD nations it works well enough.  We also don't know of good transition paths to something better, though within an overarching framework such as the EU such paths may be possible. 

Arguably the whole thing is sustained by evolutionary programming.  We cling to small groups, because we once needed to for purposes of survival.  Political entrepreneurs piggyback upon this sentiment to give us a largely illusory attachment to a bigger unit than just a band of hunter-gatherers or however it worked.  The large is made to feel small, through radio, TV, and local organization of political groups, among other methods.

At the margin, policies which "slip out" of sovereignty, without wrecking the entire superstructure of the nation-state, are usually a good idea.  Such as more immigration.  Diverting $1 million from Medicare to a helicopter drop over Haiti is also a good idea, although it cannot be made politically incentive-compatible on a larger scale.  So we have a simple formula for massive gains: subvert sovereignty, at the margin, without subverting belief in sovereignty.

Elsewhere, here is Bryan Caplan on "the stranger":

What fraction of your "fellow citizens" have you actually met?  Virtually zero.  The vast majority of your countrymen are, in fact, utter strangers to you.  When you tell your kid "Don't take rides from strangers," you don't make an exception for anyone who happens to share your citizenship.  Modern government - and most of political philosophy - is just a massive effort to pretend otherwise.

Bryan's right, but he's not facing up to the need for a certain amount of false belief, even though his rhetoric brings him very close to recognizing it.  If we all regard ourselves as nothing more than "strangers," what will happen to "the cement of society"?  The price system does not suffice and in fact the price system itself requires legal and cultural foundations.  Those foundations arise, and are sustained, only when people believe in something, and it can't be just anything they believe in.  Some of those beliefs have to consist of a loyalty to a workable political unit, even to some irrational degree, compared to true cosmopolitanism.

January 26, 2011 at 07:24 AM in Music, Philosophy, Political Science | Permalink | Comments (40)

*The Great Stagnation*: a Straussian reading

Tyler Cowen

It’s clear that in this book Tyler Cowen has reverted to his roots as a radical anarchist theorist and agitator. This is the Tyler from before Cowen (1992) peeking out his head and letting the rest of us know that he’s still here. Waiting for the right time.

From Eli, here is more.

January 25, 2011 at 06:34 PM in Books, Philosophy, Political Science | Permalink | Comments (23)

Reihan Salam reviews *The Great Stagnation*

Tyler Cowen

Excerpt:

I'm wary of summarizing the book -- I really want you to read it for yourself -- but the basic idea is very straightforward: Americans have grown accustomed to painless, automatic increases in prosperity. This is true of Americans on the right, who believe that painless tax cuts will deliver prosperity, and Americans on the left, who believe that above-market wages and more public investment funded by painless tax increases on the rich will deliver prosperity. Tyler convincingly argues that we've run out of this "low-hanging fruit."

In 1920, the marginal college student was fully capable of profiting from a rigorous college education. In 2011, the marginal college student is perhaps less capable, due to a confluence of factors. Some believe that credit constraints are the driver of an increase in dropout rates. Others, myself included, believe that traditional college instruction isn't necessarily right for, say, 80 percent of the population, and that the rigidity that defines an education sector that is tightly regulated and fueled by third-party public dollars doesn't lend itself to the kind of specialization that would yield big productivity increases. This is a subject of particular interest to me.

...Many thanks to Tyler for writing a really terrific provocation.

There is much more, including some very good points on commuting.

January 25, 2011 at 03:37 PM in Books, Economics | Permalink | Comments (17)

Uncelebrated biographies

Tyler Cowen

Nathan Labenz asks:

This got me thinking: what are the most compelling and informative biographies that remain uncelebrated?

"Uncelebrated by whom?" is of course the follow-up question.  Nonetheless I will put forward a few names: Jeremy Bentham, Leo Kanner, Norman Borlaug, Brahms and Stravinsky, Antoine Oleyant, a wide variety of 19th century German chemists, engineers, and scientists (who led a second Industrial Revolution), Montaigne, Thomas Bernhard, various French mathematicians, Simon Newcomb, Ramon Llull, Norbert Wiener, Babbage, and I would even say David Hume.

What are we to make of James K. Polk these days?  I am not sure.

Relative to their importance, their lives and exploits don't seem to receive much attention. In general, there are few good books (or movies) about the lives of famous economists.  Both Hayek and Friedman still lack good biographies, same with Samuelson and Arrow.  Smith, Keynes, and Nash are covered, but how many others? Why aren't there more scintillating biographies of engineers and second-tier scientists? It is harder to find important painters, even of the lower tiers, who have not received adequate biographic attention.

January 25, 2011 at 03:18 PM in History, Science, The Arts | Permalink | Comments (34)

"Age and Great Invention"

Tyler Cowen

This is from Benjamin Jones:

Great achievements in knowledge are produced by older innovators today than they were a century ago. Using data on Nobel Prize winners and great inventors, I find that the mean age at which noted innovations are produced has increased by 6 years over the 20th Century. I estimate shifts in life-cycle productivity and show that innovators have become especially unproductive at younger ages. Meanwhile, the later start to the career is not compensated for by increasing productivity beyond early middle age. I further show that the early life-cycle dynamics are closely related to variation in the age at Ph.D. and discuss a theory where accumulations of knowledge across generations lead innovators to seek more education over time. More generally, the results show that individual innnovators are productive over a narrowing span of their life-cycle, a trend that reduces, other things equal, the aggregate output of innovators. This drop in productivity is particularly acute if innovators’ raw ability is greatest when young.

Hat tip goes to Mike Gibson, read his post.

Here is a Gideon Rachmann column from today, on a similar but not exactly the same question.  I agree with his penultimate remark on the division of labor.

January 25, 2011 at 12:04 PM in History, Science | Permalink | Comments (21)