Ooh those tricky poverty lines

Noah Smith had a rather exasperated blogpost (or newsletter post) out recently about Jason Hickel.

Hickel, an anthropologist by training, has two major theses about the world:

He believes that global poverty reduction is a myth, and
He believes that degrowth is the best solution to environmental problems.
Both theses are wrong. And not just wrong in the “Ackshually, sir, you don’t have the facts quite right” sense, but wrong in consequential, potentially dangerous ways. In this post I’m only going to push back against the first of these two narratives; I promise I will write more about degrowth later, and in the meantime you can read this and this.


As usual, please do read the whole thing.

In that post, Noah Smith refers to an article by Hickel in The Guardian a couple of years ago. Here’s an excerpt:

What Roser’s numbers actually reveal is that the world went from a situation where most of humanity had no need of money at all to one where today most of humanity struggles to survive on extremely small amounts of money. The graph casts this as a decline in poverty, but in reality what was going on was a process of dispossession that bulldozed people into the capitalist labour system, during the enclosure movements in Europe and the colonisation of the global south.
Prior to colonisation, most people lived in subsistence economies where they enjoyed access to abundant commons – land, water, forests, livestock and robust systems of sharing and reciprocity. They had little if any money, but then they didn’t need it in order to live well – so it makes little sense to claim that they were poor. This way of life was violently destroyed by colonisers who forced people off the land and into European-owned mines, factories and plantations, where they were paid paltry wages for work they never wanted to do in the first place.


I honestly don’t know where to begin in terms of refuting just this excerpt, let alone the rest of the essay, but thankfully, I don’t really need to. Noah Smith takes on part of the burden in his essay already, and Max Roser also pads up in this essay:

You can see this more clearly in the chart below. Clicking on the ‘relative’ button shifts the chart from absolute numbers to percentages. Whilst the proportion of the world’s population living in extreme poverty has been falling consistently since 1820, it is only in recent decades that this has translated into a decline in the number of people living in extreme poverty.

The chart above is absolute numbers, while the one below is in percentage terms. Both charts are from the essay by Roser linked to above. Here is the link again.

Look, much remains to be done in our battle with poverty. Much, much more. The fight is nowhere close to finishing, and we still aren’t sure about how to best reduce poverty – and by we I mean even the best of economists, no matter how you measure “best”. But this fact is incontestable: the world is better off today than it was a century ago, and that by various measures. One of which is the fact that poverty levels are down. By how much, by which yardstick, for which country and why – all are questions worthy of debate. Your answer about the magnitude of reduction in absolute levels of poverty might differ from mine, as might your choice of poverty line. It might also differ in terms of proximate cause.

But not the direction. Your answer about the direction when it comes to reduction of poverty ought to be the same: lower.

What’s Up with the World Outside of Covid-19?

Yash Agarwal, ex-student and good friend recently shared this link on Twitter.

The last line of the article shared by Yash goes like this:

What is starting today is a new age of technological wonder, the Great Acceleration.


The background to this is that Tyler Cowen had written a book some years ago called The Great Stagnation. The basic thesis in that book is that innovation was slowing down, since the low hanging fruit in terms of technical innovation had already been picked. But the book also spoke about how this was not to say that innovation was forever going to be slow – it’s just that it had slowed down around then.

He wasn’t the only one, by the way. There were quite a few folks who were less than impressed with technological progress aobut a decade ago. Everybody has heard of the comparison between Twitter and flying cars, but there’s much more where that came from:

In the 2010s, we largely decided that we were in the middle of a technological stagnation. Tyler Cowen’s The Great Stagnation came out in 2011, Robert Gordon’s The Rise and Fall of American Growth came out in 2016. Peter Thiel declared that “we wanted flying cars, instead we got 140 characters”. David Graeber agreed. Paul Krugman lamented the lack of new kitchen appliances. Some economists asked whether ideas were simply getting harder to find. When the startup Juicero came out with a fancy new kitchen appliance, it was widely mocked as a symbol of what was wrong with the tech industry. “Tech” became largely synonymous with software companies, particularly social media, gig economy companies, and venture capital firms. Many questioned whether those sorts of innovations were making society better at all.
So it’s fair to say that the 2010s were a decade of deep techno-pessimism.


By the way, on a related note (although this deserves its own post, which will be out tomorrow) you may want to read this post by Morgan Housel in this regard.

In any case, Covid-19 has in some ways accelerated innovation, and that’s the point that Bruno Macaes1 is making in the article above.

Take transportation and energy: the demand for driverless cars and delivery vans boomed last year because people were fearful of getting infected. In response companies quickly scaled up their plans. Last October, for example, Waymo announced the launch of a taxi service that is fully driverless. Walmart announced in December its plans to use fully autonomous box trucks to make deliveries in Arkansas later this year. As retail goes online as a result of the pandemic, massive delivery volumes are now placing greater pressure on others to follow suit.


Note that without Covid-19, we would be having debate about automation, jobs and how technology is promoting inequality. That may well be true. But this is precisely why we study opportunity costs in college!

Perhaps the most interesting (to me) advance this past year has been in terms of we humans understanding how protein folding happens. Understanding is perhaps the wrong word to use (and note that I know as much biology as forecasters know about the future), but we have trained machines to understand it.

At CASP14 DeepMind produced an advance so thorough it compelled CASP organizers to declare the protein structure prediction problem for single protein chains to be solved. In my read of most CASP14 attendees (virtual as it was), I sense that this was the conclusion of the majority. It certainly is my conclusion as well.


As I understand it (and please note once again that I am no expert) this has the potential to change by orders of magnitude how we approach the treatment of a variety of diseases in this century.

But if you are anything like me, you are also curious to know about what else has been going on this past year. Again, before we proceed: this post is about the “what” in terms of scientific advancement. Tomorrow is a rumination about the “why”.

First, I’d referred to this interview in an earlier post, an interview of Patrick Collison by Noah Smith. It refers to some of what we have been speaking about, but much more as well:

I think the 2020s are when we’ll finally start to understand what’s going on with RNA and neurons. Basically, the prevailing idea has been that connections between neurons are how cognition works. (And that’s what neural networks and deep learning are modeled after.) But it looks increasingly likely that stuff that happens inside the neurons — and inside the connections — is an important part of the story. One suggestion is that RNA is actually part of how neurons think and not just an incidental intermediate thing between the genome and proteins. Elsewhere, we’re starting to spend more time investigating how the microbiome and the immune system interact with things like cancer and neurodegenerative conditions, and I’m optimistic about how that might yield significantly improved treatments. With Alzheimer’s, say, we were stuck for a long time on variants of plaque hypotheses (“this bad stuff accumulates and we have to stop it accumulating”)… it’s now getting hard to ignore the fact that the immune system clearly plays a major — and maybe dominant — role. Elsewhere, we’re plausibly on the cusp of effective dengue, AIDS, and malaria vaccines. That’s pretty huge.


Second, Caleb Whitney has a lovely blogpost on this topic, and shares with us this chart – and if this chart isn’t beautiful, I do not know what is.

The tiny red vertical line tells you when the cause of the disease was identified, and the tiny green vertical line tells you when the cure was licensed in the United States of America. And now think of what happened with Covid-19!2

There’s much more in that post, and there’s more on Patrick Collison’s website, Matt Clancy’s reading list, Matt Clancy’s Substack, and this blogpost by Eli Dourado. I am sure there is more I have missed – much more! – but isn’t that only reinforcing my point?

It is easy to get caught up in the short term pessimistic narrative, and be overwhelmed by it. It happened to me last year, as I am sure it did to many, many other people on this planet. I gave up on what until then had been my proudest achievement in terms of my work: posting here every single day.

But on a personal level, the past year has also taught me this, and I have Morgan Housel to thank for the central insight: the seeds of calm are planted by crazy.3

So when things are really bad and grim (and again, this is not over yet), look to the bright side. And not just because it’s a good thing to do! But also because the bright side is likely to be brighter precisely because of everything else being so goddamn dark.

Tomorrow, I’ll attempt to answer a question I have, and I am sure you do as well: why?

  1. I don’t know how to type out a c with a cedilla in WordPress, my apologies[]
  2. Please note, covid-19 ain’t over yet, especially here in India. That’s not the point though. The point is to ask if the kind of progress we have made this past year would even have been possible in the past.[]
  3. The reverse is also probably true, more’s the pity[]

The Solow Model in Action

One of the most useful models to know when you are thinking about the long term growth prospect of any nation is the Solow model. Or as Marginal Revolution University refers to it in what I think is the best video available about the topic online: The Super Simple Solow Model.

Anybody can (and everybody should) see all the videos in that series. What I’m going to attempt to do in today’s post is try and explain to you how to think about the Solow model, and also speak a little about why it (the Solow model) matters.

I’d written a series of short posts about the Solow Model about four years ago: if you (like me) prefer reading to viewing, here they are, in order:

  1. The difference between the long run and the short run
  2. How to think about long term growth
  3. What does capital mean in the context of economics?
  4. Small economies, big economies
  5. The importance of institutions
  6. Understanding depreciation

Now, today’s essay is not so much about the model, but about how to use the model to think about the real non-ivory-tower world.

I often say in classes that economic models are like photographs taken by smartphone cameras. They are abstractions of reality. They can’t possibly capture all the nuances, hues, details and features of whatever it is that you are photographing. And looking at the photograph gives you an idea of what it might have been like to actually be there – but you cannot possibly ever experience it yourself.

Similarly, a model is an abstraction of reality. It cannot possibly capture all that you need to know about the real world. And using a model as a crutch to get to grips with reality is like seeing a photograph and imagining yourself there. As a thought experiment, it’s fun. As a way to reach policy decisions, it is fraught with risk. 1

Noah Smith came up with an excellent post recently about the Global South, which triggered this essay. His essay is a must read, and in a loosely chronological sense, it speaks about the history of convergence in the world. More to the point, it helps one understand the point I was trying to make above:

Economists generally agreed that instead of unconditional convergence, countries showed “conditional convergence” — that poor countries could only reach parity with rich ones if they had broadly similar institutions and levels of human capital . The subtext was that poor countries just didn’t have what it took to become rich. On the political left, this was of course taken as evidence that developing countries were being held down by neocolonialism, or at least that the capitalist global economic system didn’t have what it took to lift nations out of poverty.


But the story soon gets better:

Since the mid-1990s, developing countries began to converge toward levels of income of advanced countries. This process accelerated and became strongest in the 2000s…[This] is not driven by advanced nations lowering their growth performance but rather by developing countries raising theirs…Essentially, the entire distribution of growth amongst rich countries has remained stable over time; in contrast, the entire distribution of poor country growth has shifted up.


And today, as Noah points out, the world is a much, much better place than it was about seventy years ago. Nations, particularly those in South East Asia, that would simply not have been thought about as having rapid growth prospects are today all but developed nation status (he mentions Malaysia, Laos, Vietnam and Bangladesh in particular) – and a great way to understand my little series about the Solow model and the MRU video is by reading this essay and reflecting on it.

But the basic point of the Solow model is this: growth matters. It is, in fact, the only thing that matters:

Broad-based growth, defined as the process that raises median income, is far and away the most important source of poverty reduction. There is no instance of a country achieving a headcount poverty rate below 1/3 of its population (at moderate poverty line of $5.50) without achieving the median consumption of that of Mexico. This is not to say that there do not exist anti-poverty programs that are cost-effective and hence should be expanded, or, conversely, that there are anti-poverty programs that are not cost-effective (or even have zero impact on poverty) and should be cut back or eliminated. Analyses of these types of programs would enable a more efficient use of resources devoted to poverty reduction. But large and sustained improvements in global poverty will almost certainly have to focus on how to raise the productivity of the typical person in a poor country, which is a key source of national income growth.


I came across this quote in an essay by Gulzar Natarajan, and the rest of the essay is worth reading in its entirety – but I’ll resist talking about it today – maybe tomorrow!

  1. Let me be clear: I am not criticizing modeling as an endeavor. I am simply stating that it has its limitations.[]

What does the future look like, and how should you think about the answer to that question?

I came across this tweet a while ago, and found it quite funny:

I have asked this question myself while interviewing candidates, and the reason I ask it is not because I want to get a definitive answer from the student. Prediction is a mostly pointless activity. It is because I want to understand what factors the interviewee includes in her analysis.

And the reason I begin with this in today’s post is because two really and truly excellent pieces worth reading were gifted to us earlier this week.

First, Noah Smith interviewed Patrick Collison.

N.S.: So, what are the three things that excite you most about the 2020s?

It’s hard to restrict to three! But here are the first that jump to mind:

First, the explosive expansion in access to opportunity facilitated by the internet. Sounds prosaic but I think still underestimated. Several billion people recently immigrated to the world’s most vibrant city and the system hasn’t yet equilibrated. When you think about how YouTube is accelerating the dissemination of tacit knowledge, or the number of creative outsiders who can now deploy their talents productively, or the number of brilliant 18 year-olds who can now start companies from their bedrooms, or all the instances of improbable scenius that are springing up… in the landscape of the global commons, the internet is nitrogen fertilizer, and we still have a long way to go — economically, culturally, scientifically, technologically, socially, and everything in between. I challenge anyone to watch this video and not feel optimistic.

Second, progress in biology. I think the 2020s are when we’ll finally start to understand what’s going on with RNA and neurons. Basically, the prevailing idea has been that connections between neurons are how cognition works. (And that’s what neural networks and deep learning are modeled after.) But it looks increasingly likely that stuff that happens inside the neurons — and inside the connections — is an important part of the story. One suggestion is that RNA is actually part of how neurons think and not just an incidental intermediate thing between the genome and proteins. Elsewhere, we’re starting to spend more time investigating how the microbiome and the immune system interact with things like cancer and neurodegenerative conditions, and I’m optimistic about how that might yield significantly improved treatments. With Alzheimer’s, say, we were stuck for a long time on variants of plaque hypotheses (“this bad stuff accumulates and we have to stop it accumulating”)… it’s now getting hard to ignore the fact that the immune system clearly plays a major — and maybe dominant — role. Elsewhere, we’re plausibly on the cusp of effective dengue, AIDS, and malaria vaccines. That’s pretty huge.

Last, energy technology. Batteries (88% cost decline in a decade) and renewables are well-told stories and the second-order effects will be important. (As we banish the internal combustion engine, for example, we’ll reap a significant dividend as a result of the reduction in air pollution.) Electric aircraft will probably happen, at least for shorter distances. Solar electricity is asymptoting to near-free, which in turn unlocks other interesting possibilities. (Could we synthesize hydrocarbons via solar powered atmospheric CO2 concentration — that is, make oil out of air — and thereby render remaining fossil fuel use-cases carbon neutral?) There are a lot of good ideas for making nuclear energy safer and cheaper. France today gets three quarters of its electricity from nuclear power… getting other countries to follow suit would be transformatively helpful in averting climate change.

There’s lots more! New semiconductor technology. Improved ML and everything that that enables. Starlink — cheap and fast internet everywhere! Earth-to-earth travel via space plus flying cars. The idea of urbanism that doesn’t suck seems to be gaining traction. There’s a lot of good stuff on the horizon.


I know I say this every other day, but please – pretty please with a cherry on top – do read the whole thing. And subscribe to Noah Smith’s Substack, and follow him on Twitter, and follow Patrick Collison on Twitter, and read the page titled Advice on his website.1

There are many, many, many things to appreciate about Patrick Collison, but the thing that has stayed with me the longest is a tweet of his, that helped me understand how to approach Twitter (and therefore life):

Wonderful advice, and I’ve taken it to heart.

But you need the “No, but” approach in life too. Not so much to disagree with other people, but to constantly ask yourself how you might be wrong, and to think about what needs changing for the better.

And a wonderful essay that speaks about precisely this came out this week as well:

The Decadent Society came out in hardcover about three weeks before Italy’s hospitals were overwhelmed by the coronavirus and lockdowns began to descend across the Western world. So it was probably not the ideal time to bring out a book arguing that our era is defined by drift, stalemate, boredom and repetition, that Francis Fukuyama’s “end of history” is still with us thirty years after he declared its advent, that our society is more likely to glide slowly toward dystopia than to leap forward toward a renaissance or plunge into catastrophe. Surely here was something new, here was history come again, here was the shock, the crisis, the un-simulated Reality, the hinge from one age into the next. Surely the pandemic meant the end of decadence, whatever else it meant.

In the Zoom interviews with which I finished up my book tour, I usually half-conceded the point. Yes, this was a real crisis, death taking off its masque amid the partygoers, stalemate giving way to disaster, Reality Itself suddenly pushing fantasy and simulation aside. But at the same time, nothing about a temporary crisis necessarily alters long-term patterns. Plagues can open new chapters in history, but it all depends on how people respond to them, what kind of responses are possible, and which pre-existing trends they accelerate or blunt. Would our decadent institutions, when tested, crumble, taking us deeper into crisis, closer to collapse? Would the shock of pandemic spark a new era of technological innovation, or midwife a new age of political reform? Or would stagnation reassert itself, or even deepen, in the aftermath?


I haven’t yet read Ross Douthat’s book, but he refers to the four horsemen of the decadent society in his essay: stagnation, sterility, sclerosis, and repetition.2

And this essay is a larger examination of the same question: where do you see the world in the future, but now viewed not through the prism of sunny optimism that imminent technological advances can bring you, but also through the prisms of institutional, cultural and demographic pessimism.

This point, in particular, stood out for me:

Lyman Stone recently calculated that there would be 5.8 million more babies if the U.S. had just maintained its pre-Great Recession birthrates; the pandemic is likely to subtract at least several hundred thousand more, with similar trends in Europe.

Yes, it’s possible to hope that the optimistic economic scenario described above will speed a fertility rebound. It’s possible to look at developments in U.S. family policy and see our political system slowly, slowly coming round to taking those issues seriously. Maybe there’s a big turnaround waiting to happen here: Maybe in a Biden boom there will be a battery-powered minivan in every driveway, piloted by a remote-working parent, and simply stuffed with kids.

But to the extent that the fertility collapse is connected with the struggle to transition to adulthood, the struggle to form stable romantic partnerships, it’s also easy to see how the coronavirus’s negative effects could linger — how a lost period for courtship and marriages, a retreat from physical reality and real-world intimacy in crucial years for both, could reverberate through the next decade and beyond.


I sincerely hope he is wrong about this, and I genuinely think that he is, but is it a point worth thinking about and a factor worth including in your analysis of the future?


Reading both essays will absolutely not help you get the answer to the question of what the future will look like. Nothing will, because the future will remain resolutely unknowable. But both essays will help you get started on which factors you might want to use in your analysis of the question. And will be very informative about why the people who helped make both essays happen think the way they do.

And therefore I’d recommend that you read them. Multiple times over, preferably.

  1. I’ve linked to it before, and I’ll gladly link to it again, it’s that good[]
  2. It is fascinating to me how in the excerpt above, he refers to this quartet as drift, stalemate, boredom and repetition. The first three words have changed, and if you ask me, for the better. The fourth is, well, repeated. I would love to ask Ross Douthat if that was deliberate – and if so, well played, sir![]

Macroeconomics and Arguments

The best way to learn is by arguing with somebody.

Classes are boring, reading is passive, and videos are both of these things. But when you meet somebody who is well informed, thoughtful, respectful of your viewpoint but is willing to argue with you, well: Merry Christmas.

I’m well aware that social media leaves one with the impression that none of these things are true these days, but that is just our tendency to search out the bad, rather than the good.

When I teach courses in behavioral finance, for example, I often show a discussion between Richard Thaler and Eugene Fama:

That is not the point of today’s blogpost, but it is still a video worthy of your time, whether you’re interested in the topic or not. These two gentlemen (Nobel Prize winners both of them) hold diametrically opposite views when it comes to the efficiency of markets. But they spend a little over forty minutes here, engaged in perfectly civil conversation with each other, without once ceding an inch to the other’s viewpoint. The point isn’t the fact that we’re left without a clear understanding of who is right and who is wrong. The takeaway is that it is entirely possible to argue without turning the argument into a shouting match.

It is, as nine pm teaches us every night in India, a vanishing art.

Macroeconomics is a subject that lends itself to vigorous debate for a variety of reasons. One, and let us be clear about this, nobody has the slightest idea about what works and what doesn’t when it comes to macroeconomics. Yes, really.

Two, counterfactuals are impossible to come by, and so you can engage in endless games of but-have-you-considered.

Three, every macroeconomic crisis that I have had the opportunity to study as it has unfolded has led to all of what is listed below:

  1. Some old theories have been vindicated
  2. Some old theories have been falsified
  3. All theories have been updated
  4. We still don’t know quite what is going on

What’s worse is that the first two points depend almost entirely upon one’s point of view. And again, no, I am not making this up.

But I am not saying that this makes macroeconomics “bad”. This is precisely what makes it fascinating!

And the example du jour comes from two economists who love arguing with each other: Noah Smith and Tyler Cowen. The topic? President Biden’s proposed stimulus.

Blanchard’s argument that Biden’s bill is too large rests on the idea that this amount of spending will cause the economy to “overheat” — in other words, that inflation will rise. To prevent this, he suggests shrinking the size of the bill and financing more of it with taxes.


This is a point made by Larry Summers as well, by the way. For a good summary, see this Vox article.

Noah Smith’s point, and it one worth considering, is that this recession isn’t like the others. We say that every time there is a recession, by the way, but Smith’s point this time around is that the spending shouldn’t really be thought of as a stimulus, it should be thought of as social insurance:

If you get a check during a pandemic, you’re not going to go out and spend it at restaurants and bars, because…well, there’s a pandemic. Instead, you’re more likely to stick it in the bank, pay down debt, or pay the back rent that you owe.
In a normal recession, this is exactly what we don’t want people to do. We want them to take their government checks and go out and spend them, to restart the virtuous cycle of economic activity! But in a pandemic, it’s fine.
It’s fine because what we’re trying to do with COVID relief isn’t actually pump-priming — it’s retroactive social insurance. Some people, through no fault of their own, took a big hit from a risk that only a few people were paying attention to. In order to relieve those people’s suffering, we are giving them money that they can use to pay rent and buy necessities, as well as money to pay down debts so they have a bit more financial security.


The rest of the post is worth reading, because it identifies potential flaws in the argument he is making, and provides reasoned counter arguments. So well is this done that you begin to side with him…

…until you read Professor Cowen:

Leave aside the political question of how aggressively to pursue an agenda of a larger, more activist government (and keep in mind that I am more libertarian than many of the participants in this debate). Take a Big Government as a given. History shows that consumption still ought not be the priority.

It’s not as if there aren’t obvious candidates for alternative investment: green energy, broadband and public-health infrastructure for the next pandemic, to name a few. Yes, I am familiar with the argument that spending the extra trillion or so now will make it possible to spend more trillions later, including on such policies. But whatever kind of complicated political story you might tell, the basic laws of economics have not been repealed. Increasing current expenditures does, in fact, involve foregone future opportunities.


And his concluding paragraph is an excellent teacher at work, because he goes back to the Principles of Economics:

I say you can divide the commenters here into two groups.  Those who produce complicated arguments about why opportunity cost reasoning does not apply here, and those who stress the relevance of the opportunity cost of allocating another trillion dollars or two.  I believe that once you recognize that distinction, you know what to do with it next.


To which a pro-stimulus (or pro social insurance) person might say, “But people first!” Does that argument hold true? If this stimulus results in runaway inflation a couple of years down the line (students of the Indian economy might recall the years 2009-2013, so we’re not talking hypotheticals here), then was the stimulus in fact worth it? How do we balance this argument against the very real need to provide a stimulus today?

I am completely unsure about what the correct answer is – and that is my point in today’s post.

How can one not be fascinated by macroeconomics?

EC101: Links for 31st October, 2019

  1. “To make this easier to navigate, I’ve grouped the publications by one measure of influence, academic citations per year since publication. The categories are not indications of the quality of the research, just its academic influence to date. Within categories, I’ve ordered studies chronologically.”
    A useful set of links: 100 of Michael Kremer’s most popular papers.
  2. “Moreover, the key target of economic policy, Gross Domestic Product (GDP), doesn’t provide much help. So with a view to ‘remastering’ macroeconomics, in a new ING report, produced with the help of John Calverley, Carlo Cocuzzo and I investigate how GDP could be remixed. We pay particular attention to the impact of the rapid digitalisation of the economy that has been gathering momentum over the past 25 years. Pursuing the music analogy, our focus is on a digital remix of GDP.”
    I’m not a big fan of the concept of GDP in the first place, but that being said, this article helps us understand how the digital economy might perhaps be underrated in national income.
  3. “Nigeria, like other countries in sub-Saharan Africa, is facing a demographic boom. By 2050, its working-age population will have increased 125 percent. At current GDP growth rates, the local labor market will be unable to absorb all the new entrants. One way for Nigeria to reduce this pressure, and make the most of remittance and skills transfers, is to promote new legal labor migration pathways with countries of destination across the globe.”
    A useful overview of the Nigerian labor market and how it might be made more effective Applies in part to India as well, I’d argue.
  4. “Trouble is, the rescue is entirely fictional. The only reason it’s even being attempted is to delay — as long as possible — the collapse of this large shadow lender. Such an event, as S&P Global said in a rare show of plainspeak by a credit appraiser, could be powerful enough to deliver a “solvency shock” to India’s troubled banks. Neither the lenders, nor the Indian government, wants to contemplate this grim prospect. Hence, the make-believe restructuring.”
    Andy Mukherjee explains the mess that is Dewan Housing. Not only is this not going to end well, I’d argue that there are a lot many more skeletons about to tumble out of the closet.
  5. “The march of technology means oil’s days are numbered. And for the good of the planet, that transition has to happen as fast as possible. But it doesn’t mean the people who gave their lives to getting energy out of the ground should have to suffer.”
    Noah Smith on the second order effects of the slowdown in demand for oil.

Links for 23rd May, 2019

  1. “Ec 1152 is an introduction to that kind of economics. There’s little discussion of supply and demand curves, of producer or consumer surplus, or other elementary concepts introduced in classes like Ec 10. There is no textbook, only a set of empirical papers. The material is relatively cutting-edge. Of the 12 papers students are required to read, 11 were released in 2010 or after. Half of the assigned papers were released in 2017 or 2018. Chetty co-authored a third of them.And while most economics courses at Harvard require Ec 10 as a prerequisite, Ec 1152 does not. Freshmen can take it as their first economics course.

    “I felt increasingly what we’re doing in our offices and our research is just totally detached from what we’re teaching in the intro classes,” Chetty says. “I think for many students, it’s like, ‘Why do I want to learn about this? What’s the point?’”
    Honestly, I am not really sure about this. My own take is that if anything, there is too much of an empirical bias in economics today, not too little. And this class seems to take that trend forward, which is… not great?

  2. “Economists think historians are teaching it. Historians think it is being done by economists. But in truth the study of economic history is almost absent from the university curriculum. Economic history has fallen through the cracks. And economics students across universities are suffering because of its absence.My contention is that our economic past should play a far more central role in the education of economists today. Because I think the study of economic history will make economists into better economists. My mission is to make academic and professional economists aware of the key problems associated with missing out this training from the education of new economists. And then, once the problem is fully acknowledged and understood, to present easy-to-implement pedagogical solutions.”
    This, on the other hand, I am all in favor of. Economic history needs to be taught. Forget needs to be taught, I need to learn more of it!
  3. “It was one of the fastest decimations of an animal population in world history—and it had happened almost entirely in secret. The Soviet Union was a party to the International Convention for the Regulation of Whaling, a 1946 treaty that limited countries to a set quota of whales each year. By the time a ban on commercial whaling went into effect, in 1986, the Soviets had reported killing a total of 2,710 humpback whales in the Southern Hemisphere. In fact, the country’s fleets had killed nearly 18 times that many, along with thousands of unreported whales of other species. It had been an elaborate and audacious deception: Soviet captains had disguised ships, tampered with scientific data, and misled international authorities for decades. In the estimation of the marine biologists Yulia Ivashchenko, Phillip Clapham, and Robert Brownell, it was “arguably one of the greatest environmental crimes of the 20th century.””
    Speaking of economic history, Alex Tabarrok at MR serves us a timely reminder about its importance.
  4. “In democratic countries, we often talk about this concept called audience costs, which is, if you tell your public one thing and then you do another thing, your public is going to punish you for it. But leaders are not elected in China, so there’s a lot less popular-audience cost. And the regime prides itself on total control over the media and censors everything that it doesn’t like. So even if it, in reality, made important concessions to the U.S., it can simply hide that fact from the Chinese public. Of course, the educated public will find out about it, but so what? The vast majority of Chinese people will be almost completely ignorant of that fact, and that’s fine. So when the U.S. is negotiating with China it should not worry about things like that, because China prides itself on its total control over the media—and there’s a lot of documentation showing that they’re pretty successful in what they do.”
    The first time I heard the phrase audience costs, which alone is reason enough for sharing this article. But the rest of the excerpt speaks to how audience costs can be waved away – and that is scary!
  5. “When an American buys a chair from China for $50, it decreases net exports by $50, but it raises consumption by exactly the same amount. The two effects net out exactly. Unfortunately, the way economists decided to define GDP makes imports’ negative contribution to the equation highly visible but hides their positive contribution from view.”
    And in a neat way to circle back to the set of links today, please read this link in its entirety. Econ 101 matters!