As we will learn in today’s post, the principles that we will learn from this marvelous essay are applicable in so many other contexts.
First, the title of his essay:
A Quickly Made Long Tragedy
Here’s one way to understand what this means in practice: the advantage of a top-down decision making system is that decisions can be made quickly. The opportunity cost of such a system is that buy-in from every person involved with the system is not only difficult to get – it is difficult to ascertain in the first place. As Akshay Alladi puts it over here:
What does Lant Pritchett mean when he says a “quickly” made “long” tragedy? The decision making was quick, sure – implementing said decisions on the ground proved to be rather more tricky. And it took twenty years to understand that in this case, more tricky was, in fact, a euphemism for “was never gonna happen”.
Second, talk about connecting the dots as a writer!
If you’re a student, this is an important lesson. Figure out what type of learner you are, and that as quickly as possible. Do you prefer to understand a concept by drawing a diagram? Or by writing down an equation? Or by writing down your understanding in words? You’d be doing yourself a favor by trying to get better at all three, but any subject becomes easier when you try to figure out how you learn best. Double down on that method and get excellent at it. Try to get better at the other methods sure, but be unapologetic about the method that works best for you.
The entire essay is worth reading, and multiple times. But when you consume anything (a video, a movie, a podcast, a textbook – anything) always ask what else you can learn from it, apart from the intended lesson itself.
There’s a lot to learn from that talk (duh), but there was one particular thing he mentioned in that talk that I want to focus on today:
When it comes to teaching principles of economics, less is more.
I’m paraphrasing here, and what you’re about to read is my interpretation of his point – but when it comes to a subject like Principles of Economics, width isn’t the point, depth is.
Unfortunately, however, most students seem to emerge from introductory economics courses without having learned even the most important basic principles. According to one recent study, their ability to answer simple economic questions several months after leaving the course is not measurably different from that of people who never took a principles course. What explains such abysmal performance? One problem is the encyclopedic range typical of introductory courses. As the Nobel laureate George J. Stigler wrote more than 40 years ago, “The brief exposure to each of a vast array of techniques and problems leaves the student no basic economic logic with which to analyze the economic questions he will face as a citizen.”
Honestly, if you understand the principles of economics well enough, that alone suffices to get a grasp on how economists view most things about society. Each economist has his/her own list of what they might consider to be the principles of economics, but I’d argue that there are some that will certainly be on everybody’s list:
As I said, some folks might include other principles, some folks might include a whole lot more, and some might provide our field with some much needed levity. It’s not so much about what makes each economists’ list and what doesn’t (although that is a topic that us economists can keep going for days on end) – but it is about two very different, and very important things:
How well do you teach these principles?
How much do you stress upon the application of these principles?
Learning about the principles doesn’t take all that much time, and neither does understanding them.
Applying them? Trust me, that takes a lifetime, and even us economists can trip up every now and then:
Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists to answer this question: “You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50.” The opportunity cost of seeing Clapton is the total value of everything you must sacrifice to attend his concert — namely, the value to you of attending the Dylan concert. That value is $10 — the difference between the $50 that seeing his concert would be worth to you and the $40 you would have to pay for a ticket. So the unambiguously correct answer to the question is $10. Yet only 21.6 percent of the professional economists surveyed chose that answer, a smaller percentage than if they had chosen randomly. (Emphasis added)
And so one thing that I’ve tried to change in how I teach Principles of Economics is to take things really, really slowly. Answer as many questions as possible for every nuance related to every principle, and not worry about the schedule and the teaching plan. Soak ourselves as thoroughly and as extensively as possible in each principle, ruminate about potential applications, wonder about exceptions, and then move on.
We might end up covering less, but that which we will cover, we will cover as thoroughly as possible. It is, I think, a better way to go about things. We’ll find out, at any rate 🙂
P.S.: One principle that I would want to talk about (and think about myself, to begin with!) is the principle that time matters. What is the best decision is as much a function of the choices, the trade-offs and the incentives, but each of these are subject to the time horizon that you have in mind. The decision about whether or not to have a second helping of desserts after lunch today (yumm!) is about choices, trade-offs and incentives, but it also is a function of what time horizon one has in mind:
And that principle is applicable in so many different ways! So yeah, about the list of principles of economics, my addition to the list would be “Time Matters”.
Apologies about not writing yesterday, but life has been pretty busy in myriad ways.
Today’s post is a bit of a cop-out, in the sense that I’m simply putting up a list of questions that I got to ask Tyler Cowen today. The call lasted for an hour, and it was every bit as fantastic as I’d hoped it would be.
I haven’t edited the list of questions at all, and the reason I’m putting them up here is because:
Most (but not all) of the questions were related to blogposts he has written, and you may want to read them
Help me learn how the questions could have been better, and what else I could have asked
Hopefully, some of you get inspired to ask better questions!
On Philosophy and Economics and Opportunity Costs (16 minutes)
What has been the opportunity cost to the field of philosophy for you having chosen to study and teach, but especially specialize in, economics?
If one agrees with the central thesis of Stubborn Attachments, should more people be asking themselves this question? And if yes, is it better to ask this question early on in life, or later?
If economics is the study of how to get the most out of life, how should individuals think about what most means to them? Is that a useful way to start thinking about philosophy if you’re an undergrad econ student?
In your ideal university, “Teachers would be compensated on the basis of how many students they could attract, in a manner suggested long ago by Adam Smith, who himself lived under such a system in 18th-century Scotland.” My question is related to another recent blog post of yours: how did Adam Smith and his students think about the elasticity of demand? If we were to implement a system like this today (and god knows I would love to), how should we be thinking about the elasticity of demand?
What has Songdo taught you about urbanization, and what has George Mason’s presence in Songdo taught you about the internationalization of American education?
Which is the model that excites you the most in American education today: Minerva, Harvard or Arizona State University?
What should other countries be learning from whichever model you picked?
Tim Ferriss famously rejected an MBA and used that money to learn by investing in start-ups after moving to San Franscisco. David Perell is notably against the kind of education that we deliver in universities, and schools today. David and Seth Godin have working models of what alternative methods of delivering learning might look like. Will the future be more a case of universities looking more like these models, to some extent, or these models looking more like universities?
What would you want to add to David’s liberal arts essay?
Some cross-subsidization of the non-liberal-arts education by the liberal arts students, intra or inter-personal?
You’d mentioned in a blogpost in 2006 that “there is something about having the person right in front of your face that triggers your biological “pay attention” alert mechanisms”, and that you weren’t in favor of online learning. What, specifically, were the social and technological changes that led you to change your mind?
What technological changes are next when it comes to improving education, and what are the thresholds, in your mind, that need to be reached before you’ll change your mind again?
Deirdre McCloskey has a famous essay on how it is all but impossible to get an undergrad student to do economics. Would you agree with that claim?
On Tyler Cowen and His Work/Worldview (16 minutes)
Our field remains unsure of what principles of differentiation rule how “culture” and “economics” will be related in a particular problem. How should this influence how principles of economics ought to be taught to undergraduates – or indeed, anybody learning economics for the first time?
I cannot remember where I read this, but I think the story goes something like this: Alex Tabarrok suggested starting a blog, and you responded by saying let’s write a textbook first. What are the strongest arguments that make Twitter, on balance, a positive force for the world? (I had this backward! Turns out Alex Tabbarok suggested writing a textbook, and Tyler Cowen said they should start a blog first)
You had a post in 2007 about how to study economics in one’s spare time. How would you update your answer today? MRU (or its substitutes), but how should a noob think about what to learn more of, less of – and why?
Are vouchers a bad idea for American education, or more generally speaking? How should we in India be thinking about developing a voucher system, or should we abandon the idea altogether?
Calculus, statistics, programming, Shakespeare and the Bible were your picks when it came to the question of what, at the minimum, one should take away from schooling. The audience we’re speaking in front of today is about the same age as Yana was back when you wrote this post, only a little older. We’ll generalize/localize the Bible, but has your choice changed 17 years down the line?
You had a post on teaching with blogs in 2005. It contained this line: “we are programmed to remember interpersonal exchanges better than written or spoken drones.” One, your own Bowie moment, so congratulations, but also a question: at the undergrad level, what is the ideal mix of drones versus interpersonal exchanges, and how should we be thinking about it?
On Travel, Arts and Culture (16 minutes)
Is a culture that values honorifics less likely to be a culture of excellence?
How should one square this with the fact that at least some street food in practically every Indian city is excellent (as opposed to the Philippines).
Choices choices: I give you two options, you must choose one, and I must guess which one you’ll choose. You must also explain the reasoning behind your choice. As with your game, so also with this one: feel free to pass on any or all.
Pakistan or Bangladesh, the more exciting growth story from South Asia
Re: pretty much any situation, Alex Tabarrok’s intuition or a really good model, and you cannot give the Samuelsonian response!
A food trip to a part of India you’ve not been to yet (Orissa, perhaps?), or a food trip to a part of China you’ve not been to yet.
On a related note, who in your opinion is India’s answer to Fuschia Dunlop?
For any major city in the world, you get to visit it, but must give up one of the following: the food from that city, or museum visits while in that city. (Paris, if I must pick the city.
Overrated vs. underrated or choices/choices, which game is more fun to play?
If you had to recommend places to travel to within India for an Indian undergrad students, which places would you recommend? What mental model would you recommend they adopt to choose the destination, and what to do at the destination?
Your next book is about recruiting better. What advice do you have for students about getting recruited better?
Questions from students/etc (12 minutes)
Would you prefer a version of The Book of Disquiet in which the thoughts were lexically ordered? It would obviously render the Disquiet part almost wrongly placed, but wouldn’t then would he be able to communicate more thoroughly?
How would you define/what would constitute Social Mobility in a stratified society, especially like India?
Can what we know of economics be taught to aliens? Is there a role for human values in economic thinking?
This week is Back to College at the Gokhale Institute. A podcast that I started a couple of years ago has become a tradition of sorts at the start of each semester at the BSc programme.
For about a week, we have people come and speak to us. All of them answer a simple question in a variety of ways. And that question is this: what would you do differently if you got the chance to go back to college? It’s a simple question, and can be answered in myriad ways. Here are some of the past talks, if you’re interested.
There’s one theme that has come up in all of the talks so far, and often enough for me to want to emphasize on it further. All of the speakers have spoken about the importance of doing the analysis, but also having the ability to build a story around it. Most folks are perhaps good at one, but not the other, and rarely both.
As an economist, almost all of the speakers have said, we have nowadays the ability to build models and run regressions. Building out a more sophisticated model, tweaking it, refining it, is either already possible, or can be learnt relatively easily. But where we lose out on, as young economists entering the workforce, is in our ability to explain what we’ve done.
I often say in my classes on statistics that the most underrated skill that a statistician possesses is the English language. I usually get confused laughter by way of response, but I am, of course, getting at much the same point. Unless you have the ability to explain what your model implies for the business problem at hand, you haven’t really done your work. And when I say explain, I mean using the English language.
Each of our speakers for the week so far have made the same point in their own way. Technical ability is table stakes. The differentiator is the ability to expand on what you’ve done, in a way that resonates with the listener. And resonance means the ability to tell a story about how what you’ve done is A Good Thing For The Business.
There are many other lessons to have come out of this week’s talks, and more, I’m sure, to come. But this is worth internalizing and working upon for all of us (myself included): it’s about the analysis and the narrative.
Instead, whenever belts need to be tightened it is invariably the players – the actual wealth creators – who are asked to shoulder the burden. The real lesson of Messi’s departure is of the ultimate powerlessness of the elite footballer in the jaws of unregulated capitalism, a reminder that even the very greatest are not immune to the game’s more malign and rapacious forces.
It’s not planned, two consecutive posts on the economics of sports, but it was hard to read this excerpt and not think about the parallels between what I wrote about yesterday and this sorry saga.
Jonathan Liew’s piece carries the headline “Messi’s sad exit shows players are at the bottom of football’s power structure”. It also carries this thought-provoking line: “How is it possible the greatest player of his generation – a man who has created more wealth, more content, more pure joy than any footballer who has ever lived – is denied basic agency over his career?”
So, two questions to think about:
What does football’s power structure look like, and who is at the top, and who is at the bottom?
What might be done to change it for the better?
First, about football’s power structure: are players at the bottom? Maybe so, although I would be inclined to disagree. I am a Manchester United supporter, and good luck trying to tell a fan of a club that has Paul Pogba within its ranks that players have no power. So while I am as sad as you are at the way Messi had to leave Barca, surely there is a spectrum at play over here?
Clubs aren’t particularly high on the pecking order of football’s power structure either. The European Super League was (is?) an idea born out of desperation, not strength.
Or are they all just too overleveraged for their own good? Consider this, from 2018:
In the event of any general economic peril, such as a hard Brexit, future economic woes (this is a certainty, never-mind Janet Yellen), a liquidity crisis from lower attendance (due to wider economic problems) or reduction in revenue from cash-strapped owners, TV sponsors, or corporations, many of the Premier League clubs will find themselves in a fiscal crisis.
I don’t understand why in the United States the only thing that is really noncompetitive is sports. In Europe, the only thing that is really competitive is sports. In Italy, soccer you are the first division, second division, you are promoted or demoted, according to performance. You don’t buy your way into the NFL or the Major League, et cetera. Here, you buy the franchise, and once you’re in, no matter how incompetent you are, you stay there, which is completely un‑American.
… and ask yourself if the Schumpeterian process of creative destruction is really so desirable when it comes to sports clubs. That is, having to compete for your very existence in a league that has relegation ends up being a zero-sum game in which overleveraging is all but inevitable.
Maybe the reason sports is noncompetitive in the United States is because one falls in love with the entities (the clubs) that are competing, rather than the process of competition? I’m happy to buy a PS5 rather than an Atari, but I would much rather watch Manchester United than any other club.
And hey, if that’s what you’re optimizing for (building a narrative around the clubs you support), maybe a franchise model is actually a good thing?
So, the answer to my two questions:
It is a cut-throat, extremely competitive structure, European football, and maybe that’s not such a good thing. Nobody is at the top, and the weak (across all levels) are ruthlessly eliminated. Those that survive are likely to be overleveraged in one way or the other.
I have no clue! Because I think lesser competition than now might be a good thing, but surely the ESL is a horrible thing? Turn the clock back to February, 1992?
There’s something inexplicably uplifting about sporting success. Not only does it inspire — even if fleetingly — at an individual level, it fosters national pride, a feeling rarely experienced in our networked world of partisan sniping. India’s best-ever performance at the Tokyo Olympics gave me, you, and millions of other Indians a reason to chin up in these challenging times.
So begins Pranay’s essay today from his (and RSJ’s) excellent newsletter, Anticipating the Unanticipated. The essay is a rumination on the role of government in sports, and as Pranay rightly points out, the implicit assumption that most of us make is that government should play a bigger role in fostering an environment more conducive to sporting excellence.
“Fostering an environment more conducive to sporting excellence” ought to at least get me an interview with a consulting firm, so I’ll translate that into plainspeak. The government should spend more, and work more on building out better sporting facilities, hiring better coaches, paying our sportspeople more, and more besides – all so that we win more medals.
Pranays disagrees with this view (and I agree with Pranay). This job, he says, is best left to markets and society.
Consider the role of markets first. Not too long ago, cricket would be criticised by players of other sports for hogging all the popularity, attention, and resources. And then a commercial, entertainment-focused enterprise such as the IPL turned this argument on its head. The city-based league format pioneered in India though IPL proved to be a positive-sum game for other sports. It spawned similar leagues in several sports, even managing to bring back Kabbadi to primetime TV screens. This commercial model energised many sports in ways that no government medals could have done. At the amateur level, reforms in India’s FDI policy finally brought world-class sporting retailers such as Decathlon to India. Earlier, the sports retailing scene was stagnant, with few old-style shops only catering to demands of select, mass-market sports. By getting out of the way, the government helped change the sports equipment landscape for millions of budding sportspersons in the country. In short, markets are critical to lasting sporting success.
I agree, for the most part, but with government support, about which I’ll write more in a bit. Pranay also makes the case for the third pillar to do its bit:
Take the role that the MRF Pace Foundation has played in producing fast bowlers in India. Or the contribution of the Tata Group in improving hockey facilities in Odisha. We need many more philanthropic initiatives of this nature. Besides the well-established corporates, there are smaller non-profit organisations such as the GoSports Foundation and Olympic Gold Quest. These organisations sponsor and support talented Indian sportspersons so that they can become world-class. Perhaps, we need hundreds of such societal initiatives outside the government to achieve sporting excellence.
By the way, here’s a good (and fairly straightforward) paper to read on this issue:
Every four years it begins anew, the hand-wringing and finger-pointing over a poor showing at the Olympics. The only real uncertainty is which countries will feel the sharpest disappointment over their poor performances. After the Barcelona Olympics, a headline in the New York Times read “Despite its 108 medals, U.S. rates mixed success.” In 1996, headlines in London trumpeted “Olympic shame over Britain’s medal tally” and “Britain in danger of being left at the starting line,” while in Mexico, Japan, Singapore, Colombia and Egypt, medal totals below expectations led to national self-examinations. After Sydney, in Canada the Globe and Mail bemoaned “Canada’s Olympic fears come true: Despite a few bright spots, athletes not only won fewer medals, they performed below their own and nation’s expectations.” In this paper, we ask the straightforward question of how many medals countries should be expected to win by considering what factors influence national Olympic success
Read the whole paper, of course, but here’s a key bit:
Over time, a country’s real GDP remains the single best predictor of Olympic performance. Population and per capita GDP contribute equally at the margin implying that two countries with identical levels of GDP but different populations and per capita GDP levels will win the same number of medals. While GDP is most of the story, it is not the whole story. Host countries typically win an additional 1.8 percent of the medals beyond what would be predicted by their GDP alone. The forced mobilization of resources by governments clearly can also play a role in medal totals. On average, the Soviet Union and Eastern Bloc countries won a share of medals higher by 3+ percentage points than predicted by their GDP
“I won xyz award in school/college. Can I put that in my CV?”
In my personal opinion, no, you shouldn’t. Awards show that you won, and that you defeated others. Which, don’t get me wrong, is great. But what I would want to look for in a fresher’s CV is evidence of three things:
Have you shown the drive and initiative to start something (anything!), and have you shown the gumption required to see it through?
Have you shown an interest in helping others, whether on your team or otherwise? Leadership is about winning by helping others win. Awards are about about winning by making sure others lose.
Have you shown an ability to pick up a skill in order to be able to finish a project? Certified by xyz in abc isn’t what I’m looking for. “I realized I had to acquire xyz skill in order to do abc on project pqr. I did the course, and was therefore able to contribute to the project” is a better conversation to have. That is, learning how to code isn’t as useful as being able to finish a project because you learnt to code.
So can you put that award in your CV? I’d rather you didn’t. But if you must, speak about how what you did helped your team win. Speak about how you learnt, and how you helped others learn.
Market yourself as a leader, not as a winner, in other words. And the best way to market yourself as a leader is by being one.