Anton Howes: Is Innovation in Human Nature?: “Most theories… assume that innovation is in human nature…

…I disagree. The more I study the lives of British innovators, the more convinced I am that innovation is not in human nature, but is instead received. People innovate because they are inspired to do so — it is an idea that is transmitted. And when people do not innovate, it is often simply because it never occurs to them to do so. Incentives matter too, of course. But a person needs to at least have the idea of innovation — an improving mentality — before they can choose to innovate, before they can even take the costs and benefits of innovation into account….

My favourite example is John Kay’s flying shuttle. It was an improvement to the loom, which radically increased the productivity of weaving, and which finds a place in every textbook…. Kay’s innovation was to use two wooden boxes on either side to catch the shuttle. And he attached a string, with a little handle called a picker, so that the shuttle could be jerked across the loom, at great speed…. Kay’s innovation was extraordinary in its simplicity. As the inventor Bennet Woodcroft put it, weaving with an ordinary shuttle had been “performed for upwards of five thousand years, by millions of skilled workmen, without any improvement being made to expedite the operation, until the year 1733”. All Kay added was some wood and some string. And he applied it to weaving wool, which had been England’s main industry since the middle ages….

It is illustrative of many more innovations that were low-hanging fruit, ripe for the plucking for centuries. So the usual, natural state is the state of those millions of weavers who preceded Kay, who never knew another innovator and so never even received the idea of innovating. As the agricultural innovator Arthur Young put it, the natural state is not innovation, but “that dronish, sleepy, and stupid indifference, that lazy negligence, which enchains men in the exact paths of their forefathers, without enquiry, without thought”.

Must-Read: Paul Krugman (2011): The Ricardian Equivalence Argument Against Stimulus: “There have been a lot of shockingly bad performances among macroeconomists in this crisis…

…most startling… is the way freshwater economists… demonstrated… they don’t understand… their own… Ricardian equivalence… that what determines consumption is the lifetime present value of after-tax income, and hence that, say, a temporary tax cut won’t stimulate spending…. It is… dubious… even done right…. But… it does NOT imply that government spending on… infrastructure will be met by offsetting declines in private spending….

Robert Lucas was betraying a complete misunderstanding… when he said this:

If the government builds a bridge, and then the Fed prints up some money to pay the bridge builders, that’s just a monetary policy. We don’t need the bridge to do that. We can print up the same amount of money and buy anything with it. So, the only part of the stimulus package that’s stimulating is the monetary part.…

But, if we do build the bridge by taking tax money away from somebody else, and using that to pay the bridge builder — the guys who work on the bridge — then it’s just a wash. It has no first-starter effect. There’s no reason to expect any stimulation. And, in some sense, there’s nothing to apply a multiplier to. (Laughs.) You apply a multiplier to the bridge builders, then you’ve got to apply the same multiplier with a minus sign to the people you taxed to build the bridge. And then taxing them later isn’t going to help, we know that.

This remark was followed, by the way, by a smear against Christy Romer:

Christina Romer — here’s what I think happened. It’s her first day on the job and somebody says, you’ve got to come up with a solution to this — in defense of this fiscal stimulus, which no one told her what it was going to be, and have it by Monday morning.

So she scrambled and came up with these multipliers and now they’re kind of — I don’t know. So I don’t think anyone really believes. These models have never been discussed or debated in a way that that say — Ellen McGrattan was talking about the way economists use models this morning. These are kind of schlock economics.

Maybe there is some multiplier out there that we could measure well but that’s not what that paper does. I think it’s a very naked rationalization for policies that were already, you know, decided on for other reasons.

I’ve tried to explain why Lucas and those with similar views are all wrong…. There may be an even more intuitive way…. Think about… a family buys a house with a 30-year mortgage… takes out a $100,000 home loan…. If the house is newly built, that’s $100,000 of spending…. But the family has also taken on debt, and will presumably spend less because it knows that it has to pay off that debt. But… there’s no reason to expect the family to cut its spending right now by $100,000. Its annual mortgage payment will be something like $6,000, so maybe you would expect a fall in spending by $6000; that offsets only a small fraction of the debt-financed purchase….

How could anyone who thought about this for even a minute — let alone someone with an economics training — get this wrong?… Yet… almost everyone on the freshwater side of this divide did get it wrong, and has yet to acknowledge the error.

Robert Waldmann: [Benchmark II][]: “Benchmark[s] which I think are dangerous…

…Macroeconomists have agreed to treat technology as exogenous. I think this particular choice helps explain Paul Romer’s extreme irritation…. Macroeconomists have agreed that long run forecasts are best made using a neoclassical model without frictions. This means that the macroeconomic discussion is about the optimal model of convergence to a given long run which is given by assumption and not analysis or evidence. This provoked Roger Farmer to be almost as harsh as Paul Romer (by the way reading that Farmer post is a much better use of your time than reading this post)…

Benchmark II]: http://rjwaldmann.blogspot.com/2016/10/benchmark-ii.html

Must-Read:** My view: this map has the Middle East having much less of the 50 million and the Ganges and China coast much more than they likely had in reality:

Doug Jones: The world at 1000 BCE: “The world population is about 50 million…

…The Bantu expansion is just beginning, from a homeland on the present Nigeria/Cameroon border. It will eventually cover most of Africa south of the equator. The expansion is sometimes told as a story of first farmers replacing hunter-gatherers. But, as with the Indo-European expansion, this now looks to be too simple…. The Bantu had something extra – social organization? malaria resistance? – going for them.

Seafarers with roots in the Lapita culture have already reached Western Polynesian – Samoa and Tonga, previously uninhabited. The Olmec are flourishing in Meso-America. A controversial find (the Cascajal block) suggests they are just taking up writing. In China, the Mandate of Heaven has passed from the Shang Dynasty to the Zhou.

In the Near East and Eastern Mediterranean, the Late Bronze Age collapse has opened up space for smaller states. Tyre and other Phoenician city-states are sailing the Mediterranean. Phoenicians using an alphabet that Greeks will eventually adapt. Further south, Philistines and Israelites have been duking it out, with Israelites gaining the upper hand under David (king from 1010 to 970 BCE). The Iron Age conventionally begins now, with the widespread use of iron – more abundant and cheaper than bronze.

On the steppe, horses have long been domesticated, but people are now learning to make effective use of cavalry – fighting in formation and firing volleys from horseback. This is the beginning of 2500 years in which the division between Steppe and Sown will be central to Eurasian history…