Quick Notes from Tyler Cowen’s Interview of Garett Jones

We’ll see how this goes, but a very quick introduction before we get started. A friend, Aadisht Khanna, has a blog with a very ambitious aim (and name): Aadisht Logs Everything. Every now and then, I speak to him about some of these posts, and we end up having a lot of fun talking about stuff we get reminded of as a result of he writing these posts and I speaking to him about them. They’re all available here, should you want to check it out.

But why not try and take quick notes on everything I see, read and here? The idea isn’t to write long and detailed posts – that’s happening on the blog, slowly but surely.

But an ongoing repository of my notes on stuff I have read, listened to, viewed, not to mention conversations I’ve been a part of – maybe that’s a good idea too? We’ll see how it goes.

We begin with the thing I read the most recently, which is an episode from what is probably my favorite podcast: Conversations with Tyler.

The episode I read most recently was the one with Garett Jones. Here we go.

  1. The first section was essentially about getting incentives right. The idea is simple, the devil lies in the details is the big takeaway for me, and that applies to practically everything in life.
  2. New Zealand’s contract for its central banker is a form of skin in the game, and that is a gloriously unexplored idea. My own take on this is what if professors were paid a part of their salary on the basis of students who chose to attend their class, and all classes were made optional in terms of enrollment and attendance? Refer to point 1 before you rush to criticize!
  3. The Rajya Sabha elections are staggered in much the same way, of course, and as I understand it, for the same reason as staggered elections in the House of Representatives, and I agree: it is an excellent idea.
  4. About Garett Jones and Tyler Cowen’s discussion re: governance in Europe, does it imply too much centralization, and isn’t that, on balance, a bad thing? Need to read up more about this.
  5. And Scott Sumner’s question about Switzerland is along those lines only, no?
  6. I haven’t read the book in question, but I found it interesting that one of the chapters was titled “The Big Benefits of a Small Increase in Democracy”. Either extreme isn’t desirable, in other words: not too much democracy, but not too little of it either. The Truth Lies Somewhere in the Middle!
  7. This was immensely thought provoking for me, along so many dimensions:

    That’s true, but that’s partly because the rich white elites are acting as the self-appointed representatives of other individuals and groups in society.

  8. Again, thought provoking, and the basis on which the point was made is added to the must-read list:

    Once he pointed out, in sort of the climax of the book, that long-run cooperation focusing on some kind of cultural norm and infusing that throughout the system was crucial to firm success, and that failed firms will be those often that failed to coordinate on a good equilibrium, I decided that was central to seeing not just how firms work, but how societies work as a whole.

  9. If you ask me, Seth Godin and Tyler Cowen should have a conversation, and we should get to listen to it/read it. Here’s one reason, here’s the second, and what follows is my third:

    JONES: Yeah, that’s the thing — figuring out which things within capitalism — what is it about living in a free society with competitive markets where, at least in our youth and middle age, we feel a need to sell ourselves as valuable creators. There’s something about that that probably is what’s most valuable for boosting cognitive skills. It’s a sort of demand-side desire to try to use our minds in socially productive ways. And I think in communism, we can —

    COWEN: So marketing makes us smarter?

    JONES: That’s what I would say, yeah.

  10. Chad Jones, Paul Romer and diminishing returns reminded me of this book, and this TED talk.
  11. Isn’t this one more reason to admire Tyler Cowen more as well?

    Oh, that’s so hard. I’d say Buchanan because he . . . Tullock had more weird ideas. Buchanan took the time to do something that I personally am not that skilled at and not that interested in, which is building an intellectual empire, building an organization and a culture that shares those ideas. And that’s really how you get important ideas into an ecosystem, by taking the time to build an organization, to build a culture, to work with people, and Buchanan did that. That gave him a power that Tullock couldn’t quite have.

  12. And isn’t this a a macro-description of point 11, applied to a nation?

    There is this case that America, at its top 20 percentile of experience — it’s been a nation that’s been built on a hope and vision, not American exceptionalism in that it’s something you’re endowed with, but it’s an American exceptionalism in the sense that it’s something that people create. And a sense of adventure that is central to the American experience. You could think of it as a pioneer. It’s a mixture of a pioneering spirit with an element of strong social capital.So to me, of course, the Mormons then are the embodiment of this. They’ve got this strong social capital, strong enough to stand up to other people, but at the same time, willing to take huge risks and endure great persecution in order to build a new world.And that’s an extreme version of what Americans have done for quite some time. It’s this rare blend of social capital and adventurousness at its best times. And that’s not just a 0.1 percent experience; it’s more like 20 to 30 percent of the US experience. And that’s something that a lot of countries just never get.

Links for 5th June, 2019

  1. “But I think Guo is here engaging in a strategy that is common for those who want to nudge the Chinese system in a more market-oriented direction: they tend to describe things are being more competitive and market-driven than they actually are, so that marginal change in that direction seems unremarkable and logical. If you pound the table and call China’s state-owned enterprises a core interest of the nation, it becomes quite difficult to change them. If you say, China is mostly a market economy already, then gradually reducing the role of SOEs over time seems pretty unthreatening.”
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    Andrew Batson’s blog is entirely worth following (and for a variety of reasons!). In fact, the second link today will also be from his blog. But for the moment, let’s focus on how China might respond to America’s push against China’s State Owned Enterprises (SOE’s).
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  2. “Local governments discovered they could borrow basically without limit to fund infrastructure projects, and despite many predictions of doom, those debts have not yet collapsed. The lesson China has learned is that debt is free and that Western criticisms of excessive infrastructure investment are nonsense, so there is never any downside to borrowing to build more infrastructure. China’s infrastructure-building complex, facing diminishing returns domestically, is now applying that lesson to the whole world.”
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    Andrew Batson has a rather more optimistic take on the Belt and Road Initiative. Not as bad, as he mentions, as Brahma Chellaney makes it out to be. On the other hand, I still do think that Batson is far too optimistic about it – as usual, the truth lies somewhere in the middle!
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  3. “The strategy we have in mind would comprise three mutually reinforcing components: an increase in the skill level and productivity of existing jobs, by providing extension services to improve management or cooperative programs to advance technology; an increase in the number of good jobs by supporting the expansion of existing, local firms or attracting investment by outsiders; and active labor-market policies or workforce-development programs to help workers, especially from at-risk groups, master the skills required to obtain good jobs.”
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    Dani Rodrik writes about how to create “good jobs”, and lots of them. I don’t think what he suggests will likely work, especially in a country like India, for a variety of reasons – but the biggest is that the kind of top-down, bureaucratic approach he suggests simply hasn’t worked in the past.
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  4. “The overall trend was an incredible intensification of output. Splitters, one of the most skilled positions, provide a good example. The economist John Commons wrote that in 1884, “five splitters in a certain gang would get out 800 cattle in 10 hours, or 16 per hour for each man, the wages being 45 cents. In 1894 the speed had been increased so that four splitters got out 1,200 in 10 hours, or 30 per hour for each man – an increase of nearly 100% in 10 years.” Even as the pace increased, the process of de-skilling ensured that wages were constantly moving downward, forcing employees to work harder for less money.”
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    An extremely readable extract from a book called The Red Meat Republic, this article in the Guardian speaks to how America’s beef industry came to be what it is. A great read for students of Industrial Organization, labor economics, development, pricing, transport economics – and more besides.
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  5. “China has an industrial policy whose goal is to be competitive in these [branded goods] and other areas. Tariffs will limit profits for these companies and prevent Chinese products from achieving full economies of scale. So this preemptive tariff strike will hurt the Chinese economy in the future, even if it doesn’t yet show up in the numbers.”
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    Tyler Cowen often forces himself to write the viewpoint on the other side – or at least, that’s how I interpret this article. I’m sharing it partly because it is worth reading (that’s a given, right?), but more so because that trait is worth emulating: force yourself to argue from the other side’s viewpoint. Whether in writing, or just as a thought exercise.

Links for 9th April, 2019

  1. “What is not useful is the sense that measuring GDP is the problem, and measuring gross national happiness is the solution. Few societies have ever really focused on either. We should all be happy about that.”
    Tim Harford reminds us that the truth lies somewhere in the middle. In this case, the article is worth reading for understanding how GDP can’t really be measured, and how that may not be a bad thing. In addition, please read the article to understand that Bhutan probably isn’t all that “happy” a country in the first place!
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  2. “Given the pressure on all unions to negotiate higher-than-average wage increases, using monetary policy to reduce inflation would inevitably aggregate spending to fall short of the level needed to secure full employment, but without substantially moderating the rate of increase in wages and prices. As long as the unions were driven to negotiate increasing rates of wage increase for their members, increasing rates of wage inflation could be accommodated only by ever-increasing growth rates in the economy or by progressive declines in the profit share of business. But without accelerating real economic growth or a declining profit share, union demands for accelerating wage increases could be accommodated only by accelerating inflation and corresponding increases in total spending.”
    Monetary nerds only, it should go without saying! David Glasner runs a blog called Uneasy Money, which is well worth reading, but only if you want to find yourself steeped in all things monetary. This post takes a slightly critical view of Arthur Burns tenure as Fed Chairman.
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  3. “Amazon’s economists game out real estate decisions, set the lowest prices that will deliver a profit, precisely determine what customers care about and whether advertisements are working — all using machine-learning algorithms that automate decision making on a massive scale. It’s the kind of asset that smaller companies can’t always pay for, allowing Amazon to pull further and further away from the competition.”
    Amazon has, in case you didn’t know, probably the world’s largest collection of PhD’s in economics. This article helps you understand what it is that they do once they’re in Amazon. A helpful read if you are considering building a career in economics.
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  4. “The White House explains why it’s predicting such big growth: the TCJA will cause a surge in business investment by “substantially raising the target capital stock and attracting increased net capital inflows.” And this rise in the capital stock will cause a surge in productivity. Except that there’s no sign of a surge in business investment: the report cherry-picks a few numbers, but overall orders for capital goods, probably the best real-time indicator, are showing nothing much (that 2015-6 slump, by the way, was about fracking, which fell off for a while when world oil prices plunged)”
    Paul Krugman is less than impressed with the 2019 Economic Report of the President, and provides data to show why he is less than impressed. The chart that follows the excerpt is worth looking at too.
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  5. “There’s one biosignature that Seager, Guyon, and just about everyone else agree would be as near a slam dunk for life as scientific caution allows. We already have a planet to prove it. On Earth, plants and certain bacteria produce oxygen as a by-product of photosynthesis. Oxygen is a flagrantly promiscuous molecule—it’ll react and bond with just about everything on a planet’s surface. So if we can find evidence of it accumulating in an atmosphere, it will raise some eyebrows. Even more telling would be a biosignature composed of oxygen and other compounds related to life on Earth. Most convincing of all would be to find oxygen along with methane, because those two gases from living organisms destroy each other. Finding them both would mean there must be constant replenishment.”
    That’s just one of many, many excerpt-able pieces from a very long, but also very rewarding article about the search for ET. Take your time with this one – about an hour or so, and pay particular attention to the infographics.

ROW: Links for 12th June, 2019

  1. “Readers will by now be familiar with the list of industries impacted by the US China trade war. These include soyabeans, cars, steel, and semiconductors.But one commodity is increasingly important to how the tensions play out: students. The Chinese state media is now saying the government will issue a warning on the risk of studying in the US”
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    The FT reports on how Chinese students will now be discouraged from going to American Universities – in a sense, an expected move, but you would be surprised at just how dependent universities in America today are on foreign students. Interesting times.
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  2. “To summarize, based on the above I doubt that actual Chinese growth is more than 1% below the reported figures, at least up through 2018. Of course it’s possible that things have changed in 2019; if so I expect that to show up in upcoming airline travel data for China.”
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    Scott Sumner patiently reminds us that we should look at the data before making a claim, and having looked at the airline data, he rejects the notion that there is a dramatic slowdown in China. The truth, as usual, lies somewhere in the middle.
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  3. “Vietnam, like China really doesn’t import very many manufactures from the United States. That’s partially a function of the fact that the value added in Vietnam is often low, and thus Vietnam cannot afford a lot of top of the line U.S. capital goods (yet). But it is also a function of the fact that many of the global value chains that generate large (often offshore) profits for U.S. firms don’t give rise to that much U.S. production these days. There just isn’t much sign that the Asian value chains stretch back to include U.S. factories and workers. Fabless semiconductor firms that design chips likely export their designs to a low tax jurisdiction before they license their designs to an Asian contract manufacturer. The rise in Vietnam’s exports hasn’t been associated with a commensurate rise in exports from the United States to Vietnam.”
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    Brad Setser takes a look at whether Vietnam is the new China, and concludes that it kind of is, and kind of isn’t.
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  4. “It is not surprising that the CPC has worked so hard to extirpate the Tiananmen Square massacre from public memory. History – including the horrors of Mao Zedong’s rule – is too volatile a substance for the Chinese dictatorship. China’s leaders hold up their system of government as a model for other countries. But how can a regime be confident in the sustainability of its values and methods if it is afraid of its own past?”
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    Chris Patten (who knows a thing or two about this issue) reviews the Tiananmen square massacre, and ponders on what it means for China and Hong Kong today.
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  5. “Despite a small increase in young and female lawmakers—like Ms Suematsu, who is in her forties—local politics is still dominated by old men. “In these municipalities, candidates are so old they have a hard time putting up election posters,” says Shigeki Uno of the Nippon Institute for Research Advancement, another think-tank. Indeed, three-quarters of town and village assembly members are over 60. The oldest, aged 91, holds a seat on a city assembly in Shizuoka, in central Japan.Young people are loth to stand because local politics is not a financially rewarding profession. The law bans assembly members from holding other jobs concurrently. Their pay averages around ¥300,000 ($2,740) a month, hardly enough to support young families. “It’s basically a job for the retired,” sniffs Mr Uno. And for little pay, the workload is onerous.”
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    The Economist reports on Japan, and it’s ageing population – and what that means for democracy on the ground, at local elections.