Please do read The Wizard and the Prophet by Charles C Mann, but in the meantime, watch this video:
Month: July 2022
Jakob Schneebacher’s Twitter Thread on Baumol’s Cost Disease
Spreadsheets Are Hot (Apparently)
Not my headline, I’ve simply borrowed it from Wired magazine.
As with almost everybody else back in the day, I kinda sorta knew that Microsoft Excel existed when I was in college, but its true awesomeness was only revealed to me when I joined the workforce. While I was excited to learn about SAS and Knowledge Seeker and the other cool software tools that my organization used to do analytics, I very quickly realized that most of the work actually went on in Excel.
And this, I discovered over the years, was true no matter what you did in which organization. Microsoft Excel to the corporate world is like the front foot defense for a batsman – you must know it. When I tell students in a class on MS Excel these days that 90% of their work will involve MS Excel in one way or the other, I get the odd chuckle or two. But it is quite true: Excel is still where it’s at.
Well, spreadsheets are where it’s at. I’m old enough to have known (and very briefly used) Lotus 1-2-3, and Google Sheets is now a product that is almost as good as Microsoft Excel – but number crunching for a variety of tasks is still best done in a simple spreadsheet.
But now, Wired magazine tells us, spreadsheets are (couldn’t resist, sorry) spreading their wings:
Suddenly, the field has begun to bloom. A small cluster of startups have in the past year released spreadsheet products–such as Rows, Spreadsheet.com, and Grist–with newfangled robot superpowers, like automatically hoovering up data from other sites or sending emails when the logic in a formula triggers. In a strange way, they’ve taken spreadsheets and turned them into all-purpose, helpful bots–crafted from rows and columns.
https://www.wired.com/story/spreadsheets-are-hot-and-cranking-out-complex-code/
These new services all spring from a core observation of their inventors, which is that spreadsheets are now used for far more than crunching numbers. These days, people use them as a fungible organizational tool: They make to-do lists inside spreadsheets, plan weddings, divine the best possible Magic decks, and run fantasy football groups.
There’s AirTable, there’s Rows and there’s Spreadsheet.com, and you could argue that if you’re really looking to use a spreadsheet as a relational database, there’s Notion too. Besides, of course, the (by now) veteran, Google Sheets, and the OG: Microsoft Excel.
But if you’re a student looking to join the corporate world today, a certain minimum level of expertise with Excel/Google Sheets, and a degree of familiarity with at least one (and preferably all) of these new variants is heavily recommended.
If you’re looking for recommendations, there’s literally no dearth of excellent sources, but Chandoo.org remains a very good place to start.
Timothy Taylor on Forest Fires
Sometimes, some of my students will ask me how I manage to read as much as I do, and I tell them that I barely manage to get any reading done at all. They think I’m being unnecessarily modest, but then again, I should be fair to them. They probably haven’t yet subscribed to blogs such as The Conversable Economist. Who, I ask you, reads The PERC Reports magazine?
Professor Timothy Taylor does, that’s who:
The western United States has experienced some extraordinarily large forest fires in recent years. Part of the reason is drought conditions that have left the landscape tinder-dry. But another part of the reason is a century-long legacy of shutting down forest fires–even controlled burns. The PERC Reports magazine considers the history and consequences in a symposium on “How to Confront the Wildfire Crisis” in the Summer 2022 issue.
https://conversableeconomist.com/2022/07/27/the-no-burn-forest-policy-origins-and-consequences/
The phrase “controlled burns” may confuse you if you aren’t familiar with forestry and ecology. But I assure you, the practice is very real, and very necessary. First, what is controlled burning?
Controlled burning, also known as prescribed burning, involves setting planned fires to maintain the health of a forest. These burns are scheduled for a time when the fire will not pose a threat to the public or to fire managers. In addition, forest conditions should call for a controlled burn and weather conditions should be right to allow burning but not enable a fire to spread out of control. Materials burned in a planned fire include dead grass, fallen tree branches, dead trees, and thick undergrowth.
https://education.nationalgeographic.org/resource/controlled-burning
And second, why is it necessary?
Controlled burns are lit for a number of reasons. By ridding a forest of dead leaves, tree limbs, and other debris, a prescribed burn can help prevent a destructive wildfire. Controlled burns can also reduce insect populations and destroy invasive plants. In addition, fire can be rejuvenating. It returns nutrients to the soil in the ashes of vegetation that could otherwise take years to decompose. And after a fire, the additional sunlight and open space in a forest can help young trees and other plants start to grow.
https://education.nationalgeographic.org/resource/controlled-burning
As always, do read the whole thing. But the blogpost reminded me of a book I’d read a while ago, called Foolproof, by Greg Ip. As an aside, Greg Ip will always stay in my memory as the guy whose pocket money was adjusted for inflation. His economist mum had told him that how much money he got each month would be a function of what inflation was like in that month – which, if you ask me, is the best possible way to teach what inflation is to young folks!
But anyways, back to forest fires. The very first chapter of Foolproof is titled Progressives, Engineers and Ecologists, and Greg Ip makes the same point in it and Professor Taylor’s blogpost does – that if you don’t carry out controlled burns every now and then, you’ll only end up getting a whopper of a forest fire eventually.
But he also points out in this chapter that you can use the same analogy in the case of financial crises:
Does this mean central bankers and forest managers were failures? From the point of view of their mandates, they’ve been hugely successful at putting out fires, both in the forest and in the economy. Yet it was that very success that planted the seeds for future disaster and that illustrates the fundamental
Ch 1, FoolProof, by Greg Ip
contradiction in humanity’s quest for safety and stability: oftentimes our efforts to make our surroundings safer trigger offsetting behavior that frustrates those efforts.
There are many nuanced points that follow, and that’s why the book exists – to speak about all of them. But his basic point, at least in the first chapter, is that long stretches of perceived stability only guarantee a eventual moment of reckoning – and that those long stretches of perceived stability only serve to make us ever more complacent.
I hope I’ve managed to incentivize you to read the book – and the key point bears repeating: that our efforts to make our surroundings safer trigger offsetting behavior that frustrates those efforts.
Indians who have relocated abroad experiencing stomach upsets when they come back to India, kids not really learning how to ride a bike if they have safety equipment on while riding even the smallest of cycles are other examples of the same concept. The book has many more.
And as a eminently suitable coda for a whimsical blogpost that talks about forest fires and financial crises, let me round things off by telling you a short story about death:
There was a merchant in Bagdad who sent his servant to market to buy provisions and in a little while the servant came back, white and trembling, and said, Master, just now when I was in the marketplace I was jostled by a woman in the crowd and when I turned I saw it was Death that jostled me. She looked at me and made a threatening gesture, now, lend me your horse, and I will ride away from this city and avoid my fate. I will go to Samarra and there Death will not find me. The merchant lent him his horse, and the servant mounted it, and he dug his spurs in its flanks and as fast as the horse could gallop he went. Then the merchant went down to the marketplace and he saw me standing in the crowd and he came to me and said, Why did you make a threating getsture to my servant when you saw him this morning? That was not a threatening gesture, I said, it was only a start of surprise. I was astonished to see him in Bagdad, for I had an appointment with him tonight in Samarra.
https://www.k-state.edu/english/baker/english320/Maugham-AS.htm
Lant Pritchett Advises Us To Zoom Out
I would much rather that you only read his post, because it is a wonderful, wonderful piece.
But if you insist on a key extract, this would be it for me:
…we development economists should keep in mind that sustained economic growth is empirically necessary and empirically sufficient for reducing poverty (at any poverty line) whereas targeted anti-poverty programs, while desirable, are neither necessary nor sufficient
https://lantpritchett.org/development-work-versus-charity-work/
Again, please, read the whole thing.
Lant’s point in his blogpost is asking what will give the biggest bang for the buck in terms of developmental work. He reviews a paper which “shows that adding a “psycho-social” component to an anti-poverty program in Niger is enormously cost-effective, as it had similar impacts as adding a cash grant but was much less expensive”.
You may get the impression, while reading the blogpost, that Lant Pricthett is being a tad sarcastic. But I don’t think he is – he is truly appreciative of the quality of the work done in the paper, and thinks that the conclusions are truly solid. But, he says, the paper rigorously and correctly answers a question that is, in itself, a completely wrong one.
The development question is: “How can the people living in Niger come to have broad based prosperity and high levels of wellbeing?” The charity question is: “If some agency (perhaps of a government) is going to devote a modest amount of resources to targeted programs that attempt to mitigate the worst consequences of a country’s low level of development, what is the most cost-effective design of such programs?”
https://lantpritchett.org/development-work-versus-charity-work/
Not enough people working in development, Lant seems to say, focus on the truly big picture question in development economics – how can we have broad based prosperity and high levels of well-being? Instead, we focus on improving the cost-efficiency of a program that “attempts to mitigate” the ill-effects of poverty.
To use an analogy, Lant is saying that medical researchers who focus on improving the quality of aspirin by, say, 5% might do better by trying to understand what is causing the headache in the first place. Get rid of the cause, rather than trying to incrementally improve the cure.
But the larger point from his blogpost is applicable to much more than development economics. Don’t try to make your existing solution to anything incrementally better, ask if eradicating the underlying problem itself is possible.
And if it is, work on that.
Peter Thiel and Elle Hunt on the World We Live in Today
Here’s Peter Thiel, in a long interview published in UnHerd:
If, he suggests, it were more obvious to people that we now live in a stagnant world, more might be said and done to address it. But the key reason this isn’t happening is “that we’ve been distracted from the lack of progress” by “the shift from exteriority, from measurable things” such as “faster speeds, supersonic airplanes or longer life expectancies” and re-oriented on “the interior world of yoga, meditation, psychology, parapsychology, psychopharmacology, psychedelic drugs, video games, the internet et cetera”.
https://unherd.com/2022/07/peter-thiel-on-the-dangers-of-progress/
And here’s Elle Hunt in The Guardian:
She quit last August, and has since pursued work that feels meaningful: she has written a children’s book about being mixed race, advised on inclusive recruiting strategy, coached corporate types in empathic leadership, and taught meditation – “to slow everyone else down too”.
https://www.theguardian.com/money/2022/jul/19/a-bigger-paycheck-id-rather-watch-the-sunset-is-this-the-end-of-ambition
It has not been easy to turn down opportunities or to adjust to the step-down in status and income. “But I feel so much more me.” She doesn’t start work before 10am or carry on past 5pm, does yoga daily and spends quality time with family. “Ambition used to mean a bigger paycheck, a bigger brand, a more senior position … Now I’d actually rather go and watch the sunset.”
I’ve started to read columns, essays and blogposts on TFP and measuring productivity,1 because I’ve been thinking about writing out a series on this topic, and that’s one of the reasons I chanced upon the Thiel interview:
Thiel characterises this stagnation as a long, slow victory of the Club of Rome, a nonprofit founded in 1968 to drive political change premised on the belief that infinite growth is impossible. As Thiel sees it, this tacit postwar abandonment of the growth aspiration has resulted in “something like a societal and cultural lockdown; not just the last two years but in many ways the last 40 or 50”. There’s “a cultural version, a demographic version, and a technological version of this stagnant or decadent society,” he suggests. And the upshot of this paralysis has been “a world of technological stagnation and demographic collapse”, along with “sclerosis in government and banal repetition in culture”.
https://unherd.com/2022/07/peter-thiel-on-the-dangers-of-progress/
Are we as a society (and I mean the entire world) in cultural lockdown? I’m currently rewatching Seinfeld, and my favorite genre of music to listen to is classic rock. Quick aside: Dave Barry’s definition of the genre is funny because it is true. So from a sample size of one (me), I can empathize with the idea of a cultural stagnation. But hey, Netflix paid five hundred million dollars to get the streaming rights to Seinfeld until 2026, so maybe there’s more to it?
I’m not sure how to interpret the demographic version from a global perspective. There’s Italy (most of Europe, actually), Japan, China and the United States, but hey, we’re still growing (albeit ever more slowly), and Africa is going to chug right along this century.
And this is Peter Thiel, so I’m sure I don’t need to re-emphasize his point about technological lockdown.
And then on the supply side we have the exhaustion that seems to have settled like a fog on on most of us over the last two years, and certainly among folks somewhat younger than I:
My burnout was especially distressing for being self-inflicted; I felt bewildered and betrayed, as if my trusty north star had led me astray. Gingerly, I started interrogating my ambition: what was I seeking from work, and where might this feeling be better sourced?
https://www.theguardian.com/money/2022/jul/19/a-bigger-paycheck-id-rather-watch-the-sunset-is-this-the-end-of-ambition
By my 30th birthday, in March 2021, the version of myself who had organised her entire life around her career felt like a stranger. I was still productive, but no longer at the expense of my health, happiness or relationships. It was as if the fire that had been fuelling me for half my life was down to a smoulder – and for the first time, I was content to let it go out.
It turns out I was not alone. This has been called the age of anti-ambition: over the past two and a half years, many people have taken stock – of how they spend their time, where they find meaning, their hopes for the future – and found work wanting.
How to increase productivity begs the question: how does one measure it? And the more you read about both of these questions, the more you wonder if we know as much as we should about the latter, and whether we are worried (at all) about the former.
Food for thought, but for the moment, these are disquieting thoughts.
- and please, if you have recommendations, send ’em along! This is a very short list, and I hope to add much more reading as I go[↩]
Can Micro be Weird?
Donald Bodreaux has an excellent, truly thought-provoking write-up on the imposition of price floors.
…governments also sometimes attempt to push prices upward. When the intervention is designed to increase prices by outlawing the charging of monetary prices below some minimum, the intervention is called a price floor.
https://www.aier.org/article/on-the-negative-consequences-of-price-floors/
I usually explain price floors to my students by speaking about attendance requirements in colleges and universities. Think of it, I urge them (only somewhat in jest), as a price that you guys have to pay me. Even if you happen to not like my classes, and think me to be the most boring guy ever – and therefore don’t wish to pay me by spending your time – no can do. You must pay me with your time.
That’s a price floor.
So what might be the unseen consequences of a price floor?
Here’s where Donald Bodreaux’s 1 column gets truly interesting (apologies for the lengthy extract):
Suppose that the government imposes a true price floor in the market for pickles. The government declares illegal all purchases and sales of pickles at prices below, say, $10 per pound (which price, let’s assume, is above the market price that would prevail absent the price floor).
https://www.aier.org/article/on-the-negative-consequences-of-price-floors/ (Emphasis added)
The first and most obvious effect of this price floor is that the quantity of pickles that consumers are willing to buy will fall; the quantity that consumers demand will be driven lower than it would be without the price floor. If pickle producers are economically naĂŻve, this price floor will create a physical surplus of pickles as producers, attracted by the higher price, increase their production of pickles. But even the most naĂŻve pickle producers will soon learn that consumers are willing to buy at the high price-floor not only fewer pickles than producers are willing to produce and sell at that high floored price, but even fewer than consumers were willing to buy at prices lower than the floored price.
Discovering themselves unable to sell all of the output they are willing to sell at the price floor, pickle producers reduce their production. They produce no greater amount of pickles than consumers are willing to buy at the high price floor. So while price ceilings always create shortages, price floors don’t always create physical surpluses.
Nevertheless, because price floors do always reduce the quantities that buyers wish to buy while increasing sellers’ willingness to produce and sell, price floors create a second negative consequence – namely, the need for some means to determine which sellers will be among the lucky ones to sell at the higher price and which sellers will not be able to take advantage of the higher price by actually selling units of output at that price.
This determination might be done by luck or random chance. Perhaps only those sellers who encounter consumers early will be able to sell, while sellers who get to market too late find no more buyers.
But luck or random chance is unlikely to operate for long. Eager to sell at the high price floor, sellers will compete for buyers in ways other than cutting prices. A third negative consequence of a price floor is, thus, that the quality of the price-floored good rises. Pickle producers might attach to each jar they sell “free” coupons for discounts on crackers or deli meats or beer. These producers might work harder to make their pickles even tastier. Such non-price competition for consumer patronage is an inevitable result of price floors.
Unlike with the quality reductions caused by price ceilings, the impetus to quality improvements caused by price floors perhaps seems to be a positive consequence rather than, as I’ve described it, a negative one. But negative it is when compared to what the situation would be absent the price floor.
It’s true that, given that consumers aren’t allowed to buy pickles at any price below $10 per pound, they like their pickles being even tastier or sold with discount coupons. But what consumers would like even more is to pay a lower price for a lower-quality product. Were there no price floor in place, consumers would reveal through their spending that the higher quality isn’t worth the higher price. Yet because lower prices are unlawful – that is, because consumers must pay the higher price if they want pickles – consumers settle for the second-best outcome of paying this higher price for a higher-quality product.
Price floors, in short, compel consumers to buy too few units but too much quality.
And that’s why the title of this blogpost is what it is: can micro be weird?
Demand will go down with a higher price, sure, and suppliers will eventually reduce their supply given low demand. So far, so standard.
But remember that suppliers compete with each other, not with folks on the demand side – and so if you and I and five of our friends are pickle manufacturers facing high prices and low demand, we have to “do battle” with each other to sell our produce.
Facing low sales, will a producer’s natural response be an upping of quality? Discounts, freebies, and maybe the attempt to convince buyers that my product is of higher quality (marketing, branding) – but an actual increase in quality? But hey, that’s why studying micro can be fun – because it is weird!
This is covered in Paul Krugman’s textbook on micro too, where he cites the example of airlines upping the quality of service when faced with price floors set by international treaties. And, the textbook goes on to say, when prices were allowed to come down, so did quality.
So, long story short, yes, micro can be weird – but that’s what makes studying economics fun!
- quick question for grammar Nazi’s – should it be Bodreaux’s or Bodreaux’[↩]
The Big Misconception about Clean Energy
Related to this past Monday’s post (plus, a great application of incentives matter – the carrot and the stick approach):
Atif Mian on Pakistan
We live in a troubled neighborhood and in scary times.
PSA: XLOOKUP for the win
Any student who has been subjected to an Excel class by me knows the syntax for VLOOKUP, because it just is that awesome (and mundane) a formula. When you type in “=VLOOKUP(” in a cell in Excel, Excel asks you four questions:
- What should I look for?
- Where should I look for it?
- Once I find it, which column’s entry matters to you in this row?
- Do you want an exact match, or will an approximate match do?
If you haven’t used VLOOKUP before, I strongly urge you to both (pun half intended) look it up, and try it for yourself. Here’s a simple explainer from Microsoft.
But gawd, XLOOKUP is so much better!
Use the XLOOKUP function to find things in a table or range by row. For example, look up the price of an automotive part by the part number, or find an employee name based on their employee ID. With XLOOKUP, you can look in one column for a search term and return a result from the same row in another column, regardless of which side the return column is on.
https://support.microsoft.com/en-us/office/xlookup-function-b7fd680e-6d10-43e6-84f9-88eae8bf5929
If you’ve used VLOOKUP in the past, that last bit, after the comma, is likely to bring a tear to your eye. It is available only in Office 365 (which, in my opinion, is entirely worth the price of entry) or MS Office 2021, please note.
Here’s the legendary Chandoo explaining how to go about using it: