The Idea of Improvement

Sunday, August 28th, 2016

What caused innovation to accelerate in so many different industries during the British Industrial Revolution? Anton Howes suggests the emergence of an idea that was even simpler and more fundamental than systematic experimentation or Newtonian mechanics, though it was implicit to each of them — the idea of improvement itself:

I present new evidence on the sources of inspiration and innovation-sharing habits of 677 people who innovated in Britain between 1651 and 1851. The vast majority of these people — at least 80% — had some kind of contact with innovators before they themselves started to innovate. These connections were not always between members of the same industry, and innovators could improve areas in which they lacked expertise. This suggests the spread, not of particular skills or knowledge, but of an improving mentality. The persistent failure to implement some innovations for centuries before the Industrial Revolution, despite the availability of sufficient materials, knowledge, and demand, further suggests that prior societies may have failed to innovate quite simply because the improving mentality was absent. As to what made Britain special, we cannot know for sure without constructing similarly exhaustive lists of innovators for other societies. But a likely candidate is that the vast majority of innovators — at least 83% — shared innovation in some way, while only 12% tried to stifle it. Just like a religion or a political ideology, the improving mentality spread from person to person, and to be successful required effective preachers and proselytisers too.

Why Do Democracies get Weaker & more Parasitic?

Wednesday, August 24th, 2016

Why do democracies get weaker & more parasitic?

What you have under a representative, egalitarian, winner take all, democracy is a shifting coalition of about 51% of voters aligned to threaten about 49%.

If you’re getting more than 51% of the vote (which is certainly possible) that just means you’re leaving rents on the table. You could take more, and/or give less, and still win the election.

Additionally, maximum rent extraction occurs if your coalition comprises the cheapest 51% of voters, in other words, the most useless and parasitic.

In relative terms, the 51% will tend to expand in number as they gorge on the 49%, who will tend to diminish. That means, the 51% will generally be in the position of being able to kick their most productive members out into the 49% and begin consuming them turn, getting ever more radically leftist, degenerate, and freeloading in the process as the polity becomes progressively weaker and more parasitic, until finally, it collapses.

This is one explanation for the expressions “Cthulu only swims left” or “the ratchet effect.”

Thankfully, there are alternatives to democracy.

Why did the Roman Economy Decline?

Wednesday, August 24th, 2016

Peter Brown of Princeton University is one of Mark Koyama’s favorite historians of late antiquity, but Koyama doesn’t agree with Brown’s explanation for why the Roman economy declined:

In The Rise of Western Christendom, Brown summarizes the new wisdom on the transition from late antiquity to the early middle ages. He accepts that this transition brought about an economic decline — a decline evident in the radical simplification in economic life that took place. Long distance trade contracted. Cities shrank and emptied out. The division of labor became less complex. Many professions common in the Roman world disappeared.

All of this is relatively uncontroversial. At issue is what caused this decline? Traditional accounts emphasized the destruction brought about by barbarian invasions and civil wars as the frontiers of the Western Empire collapsed. These accounts emphasized a collapse in trade and increased economic insecurity. Brown, however, argues that the bulk of modern research rejects this old fashioned view.

[...]

The barbarian invasions, of course, play a role in this story because they put pressure on the Roman state. But their role is peripheral. Rather, Brown contends that the Roman state was the engine of economic growth of late antiquity. Turning on its head the old view associated with Michael Rostovtzeff that attributed the decline of the Roman economy to high taxes imposed by the Emperor Diocletian and his successors, Brown argues that these high taxes were in fact the source of economic dynamism.

[...]

The collapse of the Roman state was catastrophic, not because the Roman state was an engine of economic growth, as Brown contends, but because it provided, albeit imperfectly, the public good of defense. In the absence of this, transactions costs greatly increased, long-distance trade declined, markets contracted, and urbanization declined.

The notion of a Malthusian Trap helps explain how high taxes — especially efficient land taxes — might help, rather than hurt, per capita income.

A trend that has been puzzling economists

Tuesday, August 23rd, 2016

Economist Erik Hurst is looking at how technology affects labor supply:

In my third summer project, I’m trying to understand the labor market and patterns in employment over the last 15 years in the US. Specifically, I’m interested in employment rates of young (in their twenties), non-college educated men. In prior work on changes in demand for low-skilled labor, the theory exists that as technology advances, both employment and wages fall due to decreased demand.

In this strand of my research, I’m almost flipping that theory on its head by asking if it is possible that technology can also affect labor supply. In our culture, where we are constantly connected to technology, activities like playing Xbox, browsing social media, and Snapchatting with friends raise the attractiveness of leisure time. And so it goes that if leisure time is more enjoyable, and as prices for these technologies continue to drop, people may be less willing to work at any given wage. This explanation may help us understand why we see steep declines in employment while wages remain steady — a trend that has been puzzling economists.

Right now, I’m gathering facts about the possible mechanisms at play, beginning with a hard look at time-use by young men with less than a four-year degree. In the 2000s, employment rates for this group dropped sharply — more than in any other group. We have determined that, in general, they are not going back to school or switching careers, so what are they doing with their time? The hours that they are not working have been replaced almost one for one with leisure time. Seventy-five percent of this new leisure time falls into one category: video games. The average low-skilled, unemployed man in this group plays video games an average of 12, and sometimes upwards of 30 hours per week. This change marks a relatively major shift that makes me question its effect on their attachment to the labor market.

To answer that question, I researched what fraction of these unemployed gamers from 2000 were also idle the previous year. A staggering 22% — almost one quarter — of unemployed young men did not work the previous year either. These individuals are living with parents or relatives, and happiness surveys actually indicate that they are quite content compared to their peers, making it hard to argue that some sort of constraint, like they are miserable because they can’t find a job, is causing them to play video games. The obvious problem with this lifestyle occurs as they age and haven’t accumulated any skills or experience. As a 30- or 40-year old man getting married and needing to provide for a family, job options are extremely limited. This older group of lower-educated men seems to be much less happy than their cohorts.

I am currently working to document this phenomenon, but there is a real challenge in determining what the right policy response might be to address the underlying issues.

Danes Live Better in the U.S.

Tuesday, August 16th, 2016

Denmark is wealthy, has strong social and economic indicators, and it offers a comprehensive safety net, Tyler Cowen notes, but Danes live better in the U.S.:

or instance, Danish-Americans have a measured living standard about 55 percent higher than the Danes in Denmark. Swedish-Americans have a living standard 53 percent higher than the Swedes, and Finnish-Americans have a living standard 59 percent higher than those back in Finland. Only for Norway is the gap a small one, because of the extreme oil wealth of Norway, but even there the living standard of American Norwegians measures as 3 percent higher than in Norway. And that comparison is based on numbers from 2013, when the price of oil was higher, so probably that gap has widened.

Of the Nordic groups, Danish-Americans have the highest per capita income, clocking in at $70,925. That compares to an U.S. per capita income of $52,592, again the numbers being from 2013. Sanandaji also notes that Nordic-Americans have lower poverty rates and about half the unemployment rate of their relatives across the Atlantic.

It is difficult, after seeing those figures, to conclude that the U.S. ought to be copying the policies of the Nordic nations wholesale. It is instead more plausible to think that Americans might learn something from the cultural practices of Nordic-Americans. Sanandaji says those norms include hard work, honesty, a strong civil society and an ethic of cooperation and volunteerism.

My own view is that many groups work hard, but that a disciplined, family-based approach to education and human capital investment is the important norm in this context. All the main Nordic groups in the United States have high school graduation rates over 96 percent. That compares to an average of about 82 percent for the U.S. as a whole.

I enjoyed this angle:

Most of all we should consider the option of greater freedom of choice for residence decisions. For all the anti-immigrant sentiment that is circulating at the moment, would it hurt the U.S. to have fully open borders with Denmark? It would boost American gross domestic product and probably also improve American education. History teaches that serious assimilation problems would be unlikely, especially since many Danes already speak English.

Open borders wouldn’t attract Danes who want to live off welfare because the benefits are so generous at home.

How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

Rory Sutherland

Sunday, July 24th, 2016

Rory Sutherland is an ad man and entertaining raconteur:

An expert on fighting poverty makes the case against a universal basic income

Wednesday, July 20th, 2016

Notice how “an expert on fighting poverty” makes the case against a universal basic income:

I began to get particularly concerned when I began to see, in recent years, the emergence of this notion of going to UBI through a left-right coalition — of which a key building block, for the right, is eliminating most or all means-tested programs. It was at that point that I got much more heavily engaged again. I found that a lot of my fellow progressives did not fully appreciate or understand that that could well move us backward on poverty and inequality, rather than forward.

[...]

Among my fears of UBI is that given US political culture, if we ever got to a form of UBI in the first place (which I think is extremely unlikely), I think the odds are high that it would exclude people who have no earnings and have no work record.

How Viennese Culture Shaped Austrian Economics

Tuesday, July 19th, 2016

Erwin Dekker explores how Viennese culture shaped Austrian economics:

What if the coffeehouse culture of the Viennese circles, the decline of the Habsburg Empire, the failure of Austrian liberalism, the rise of socialism and fascism, and the ironic distance at which the Viennese observed the world, are all essential to understanding what the school was about? It would be exciting to discover that the Vienna of Gustav Mahler, Ludwig Wittgenstein, Sigmund Freud, Gustav Klimt, and Adolf Loos, would also be the Vienna of Carl Menger, Ludwig von Mises, and Friedrich Hayek. And if that is so, how would that change how we think about this school and about the importance of cultural contexts for schools of thoughts more generally?

[...]

The hands-off attitude first practiced at the Viennese Medical School, where it was called therapeutic skepticism, spread among intellectuals. They dissected a culture which was coming to an end, without seemingly worrying too much about it. As one commentator wrote about this attitude “nowhere is found more resignation and nowhere less self-pity.”¹ One American proponent of the Viennese medical approach even called it the ‘laissez-faire’ approach to medicine.² The therapeutic skepticism, or nihilism as the critics called it, bears strong resemblance to the Austrian school’s skepticism of the economic cures propounded by the government. Some of the Austrian economists, for instance, have the same ironic distance, in which the coming of socialism is lamented, but at the same time considered inevitable. That sentiment is strongest in Joseph Schumpeter. But one can also find it in Ludwig von Mises, especially in his more pessimistic writings. In 1920, for example, he writes: “It may be that despite everything we cannot escape socialism, yet whoever considers it an evil must not wish it onward for that reason.”³

That same resignation, however, is put to the test in the 1930’s when Red Vienna, the nickname the city was given when it was governed by the Austro-Marxists, becomes Black Vienna, the nickname it was given under fascism. The rise of fascism posed an even greater threat to the values of the liberal bourgeois, and at the same time it demonstrated that socialism might not be inevitable after all. One of my book’s major themes is the transformation from the resigned, and at times fatalistic, study of the transformation of the older generation, to the more activist and combatant attitude of the younger generation. Friedrich Hayek, Karl Popper, Peter Drucker as well as important intellectual currents in Vienna start to oppose, and defend the Habsburg civilization from its enemies. That is one of the messages of Freud’s Civilization and its Discontents, of Hermann Broch’s novel The Death of Virgil, of Malinowski’s Civilization and Freedom, of Hayek’s The Road to Serfdom, Drucker’s The End of Economic Man, and of course Popper’s The Open Society and its Enemies. It is also the message of the most famous book of the period on civilization The Civilizing Process by the German sociologist Norbert Elias. These intellectuals fight the fatalism and the acceptance of decline, and instead start to act as custodians or defenders of civilization.

In the process the relationship between natural instincts, rational thought, and civilization undergoes a major transformation. Civilization? — ?our moral habits, customs, traditions, and ways of living together ?— ?is no longer believed to be a natural process or a product of our modern rational society. Rather, it is a cultural achievement in need of cultivation and at times protection. Civilization is a shared good, a commons, which can only be sustained in a liberal culture, and even there individuals will feel the ‘strain of civilization’ as Popper put it. That is the strain of being challenged, of encountering those of different cultures, and of carrying the responsibility for our own actions. Hayek adds the strain of accepting traditions and customs which we do not fully understand (including the traditions and customs of the market). Similar arguments are made by Freud and Elias.

Our Dumb World

Tuesday, July 12th, 2016

As far as average IQ scores go, Gregory Cochran notes, this is what the world looks like:

national_iq_per_country_-_estimates_by_lynn_and_vanhanen_2006

But there are two relevant tests: the Stanford-Binet, and life itself. If a country scored low on IQ but at the same time led the world in Cavorite production, or cured cancer, or built spindizzies, we would say “screw Stanford-Binet”, and we would be right to do so.

Does that happen? Are there countries with low average scores that tear up the technological track? Mostly not – generally, fairly high average IQ seems to be a prerequisite for creativity in science and mathematics. Necessary, although not sufficient: bad choices (Communism), having the world kick you in the crotch (Mongols), or toxic intellectual fads can all make smart peoples unproductive.

[...]

You could improve the situation, raise the average, by selection for IQ. But that takes a long time, and I know of no case where it was done on purpose. You could decrease inbreeding, for example by banning cousin marriage. That only takes one generation. You could make environmental improvements, iodine supplementation being the best understood. People assume that there are a lot of other important environmental variable, but I sure don’t know what they are. In practice the rank ordering of populations seem to be the same everywhere, which is not what you would expect if there were strong, malleable environmental influences.

Is it easy to notice such differences? Well, for ordinary people, it’s real easy. Herero would ask Henry why Europeans were so smart – he said he didn’t know. But with the right education, it apparently becomes impossible to see. Few anthropologists know that such differences exist and even fewer admit it. I’m sure that most have never even read any psychometrics – more importantly, they ignore their lying eyes. Economists generally reject such explanations, which is one reason that they find most of the Third World impossible to understand. I must give credit to Garret Jones, who is actually aware of this general pattern. Sure, he stepped on the dick of his own argument there at the end of his book, but he was probably lying, because he had to. Sociologists? It is to laugh.

Generally, you could say that the major job of social science is making sure that people do not know this map. Not knowing has its attractions: practically every headline is a surprise. The world must seem ever fresh and new to the dis-illuminati – something like being Henry Molaison, who had his hippocampus removed by a playful neurosurgeon and afterwards could not create new explicit memories.

So when we tried a new intervention aimed at eliminating the GAP, and it failed, Molaison was surprised, even if 47 similar programs had already failed. Neurologically, he was much like a professor of education.

Intergenerational Income Immobility

Sunday, July 10th, 2016

By tracking family names over generations, Gregory Clark revealed that social mobility rates are lower than conventionally estimated, do not vary across societies, and are resistant to social policies.

Guglielmo Barone and Sauro Mocetti found this to be true of Florence, too:

We focus on the Italian city of Florence, for which data on taxpayers in 1427 – including surnames, occupations, earnings, and wealth – have been digitalised and made available online. We matched these data with those taken from the tax records relating to the city of Florence in 2011. Family dynasties are identified by surnames. Table 1 offers a first flavour of our results.

Florence Surnames, Occupations, Earnings, and Wealth

We report for the top five and bottom five earners among current taxpayers (at the surname level) the modal value of the occupation and the percentiles in the earnings and wealth distribution in the 15th century (the surnames are replaced by capital letters for confidentiality). The top earners among the current taxpayers were already at the top of the socioeconomic ladder six centuries ago – they were lawyers or members of the wool, silk, and shoemaker guilds; their earnings and wealth were always above the median. In contrast, the poorest surnames had less prestigious occupations, and their earnings and wealth were below the median in most cases.

(Hat tip to Arnold Kling.)

Four Months as a Private Prison Guard

Wednesday, July 6th, 2016

Shane Bauer went undercover as a prison guard for Mother Jones, with the goal of attacking private prisons.

The system clearly has some incentive problems:

If he were sent to the hospital, CCA would be contractually obligated to pay for his stay. For a for-profit company, this presents a dilemma. Even a short hospital stay is a major expense for an inmate who brings the company about $34 per day. And that’s aside from the cost of having two guards keep watch over him. Medical care within the prison is expensive, too. CCA does not disclose its medical expenses, but in a typical prison, health care costs are the second-biggest expense after staff. On average, a Louisiana prison puts 9 percent of its budget toward health care. In some states it can be much higher; health care is 31 percent of a California prison’s budget. Nearly 40 percent of Winn inmates have a chronic disease such as diabetes, heart disease, or asthma, according to Louisiana’s budget office. About 6 percent have a communicable disease such as HIV or hepatitis C.

Even prisoners want good governance:

“CCA is not qualified to run this place,” an inmate shouts to me a day into the lockdown. “You always got to shut the place down. You can’t function. You can’t run school or nothing because you got everybody on lockdown.”

Another inmate cuts in. “Since I been here, there’s been nothing but stabbings,” he says. “It don’t happen like this at other prisons because they got power. They got control. Ain’t no control here, so it’s gonna always be something happening. You got to start from the top to the bottom, you feel me?”

It’s still shocking that they allow female prison guards in a male prison:

In interviews with staff, the DOC learned that staff members had been “bringing in mountains and mountains of mojo” — synthetic marijuana — and having sex with inmates. “One person actually said that they trusted the inmates more than they trusted me, the warden. One staff member said, ‘The inmate made me feel pretty. Why wouldn’t I love him? Why wouldn’t I bring him things he needs because you all won’t let him have it?’”

Researchers Examine Family Income And Children’s Non-Cognitive Skills

Tuesday, July 5th, 2016

Why do children of the successful do better than children of the unsuccessful?

VEDANTAM: Well, we’ve known for a very long time that family income really matters. This could be because schools in richer neighborhoods are better schools. But it could also be that rich parents are able to give their children more learning opportunities outside of school. I was speaking with the economist Barbara Wulf. She’s at the University of Wisconsin. Along with Jason Fletcher, she recently decided to explore another explanation. She asked if income disparities might also be linked to disparities in what are sometimes called non-cognitive skills. Many researchers think that it’s these skills that undergird not just academic performance in school but a host of other abilities later in life, including in the workplace. Here’s Wulf.

BARBARA WULF: When we think about who is a good employee and who’s likely to succeed in the workplace, you hear a lot of attention paid to these what I’ll call non-cognitive skills. So they pay attention, they are persistent, they are eager. So they have a set of characteristics that make them good employees.

GREENE: OK. So people who have these non-cognitive skills – better employees. But tie this to American education and sort of the income disparity.

VEDANTAM: Wulf and Fletcher analyzed data from a national survey, David, that tracked children from kindergarten through the fifth grade. The survey data allowed the researchers to track the effects of family income on what parents and teachers were reporting about these children as they went through elementary school. The researchers find there’s a very strong correlation between family income and these non-cognitive skills. In other words, when it comes to being cooperative or dealing with conflict productively, children from wealthier families on average seem to have more of these skills than children from poorer families.

GREENE: OK. So this is actually making the connection. We’ve always known that there’s this income disparity. Now we’re sort of understanding that income disparity might be because if you’re less affluent, I mean, you’re just not developing these skills you’re talking about.

“NPR searches valiantly, blindfolded,” in Charles Murray‘s words.

Unsafe Cars Can Save Lives

Sunday, June 26th, 2016

The London-based Global New Car Assessment Program tested seven cars made for the Indian market and handed five of them — the Renault Kwid, Maruti Suzuki Celerio, Maruti Suzuki Eeco, Mahindra Scorpio, and Hyundai Eon — a rating of zero stars out of five for adult safety. This leads Alex Tabarrok to remind us that unsafe cars can save lives:

These cars are very inexpensive. A Renault Kwid, for example, can be had for under $4000. In the Indian market these cars are competing against motorcycles. Only 6 percent of Indian households own a car but 47% own a motorcycle. Overall, there are more than five times as many motorcycles as cars in India.

Motorcycles are also much more dangerous than cars.

The [U.S] federal government estimates that per mile traveled in 2013, the number of deaths on motorcycles was over 26 times the number in cars.

Similar ratios are found in the UK and Australia. I can think of several reasons why the ratio might be lower in India–lower speeds, for example, but also several reasons why the ratio might be higher (see picture).

Indian Family on Motorcycle

The GNCAP worries that some Indian cars don’t have airbags but forgets that no Indian motorcycles have airbags. Even a zero-star car is much safer than a motorcycle. Air bags cost about $200-$400 (somewhat older estimates here a, b, c) and are not terribly effective. (Levitt and Porter, for example, calculated that air bags saved 550 lives in 1997 compared to 15,000 lives saved by seatbelts.) At $250, airbags would increase the cost of a $5,000 car by 5%. A higher price for automobiles would reduce the number of relatively safe automobiles and increase the number of relatively dangerous motorcycles and thus an air bag requirement could result in more traffic fatalities.

Low-Road Narrative

Monday, June 20th, 2016

Los Angeles failed to keep up with its neighbor to the north:

Unlike the Bay Area, which pursued a “high wage specialization strategy,” Los Angeles, in the interest of social justice, deliberately focused on lower- and middle-tier economic sectors. “Los Angeles’s leaders generated a low-road narrative for themselves, while Bay Area leadership coalesced around a high-road vision for their region,” they write. Such decisions have consequences, many of which are demographic. Had Los Angeles followed the same path as San Francisco, Southern California would have attracted far fewer working-class Latinos. The authors don’t directly state this, but it’s a clear implication of their findings. It’s logical to conclude that any region looking to replicate San Francisco’s success should take an exclusively high-end focus — social justice be damned.

(Hat tip to Battery Horse.)

Keeping out swarms of poor immigrants

Sunday, June 19th, 2016

The socially acceptable way to keep out swarms of poor immigrants is the Northern Californian liberal way, Steve Sailer explains: “environmentalism, unionism, historical preservationism, NIMBYism — indeed, the whole panoply of Democratic Party policies at the state and local level.”