Must-Read: Larry Summers: When the best umps blow a call

Must-Read: I think Larry Summers gets this wrong. Under Rivlin, Reischauer, Orszag, and Elmendorf the CBO was a national treasure. Otherwise… Not so much. Hit and miss.

Remember June O’Neill talking about how many people would lose their jobs from health care reform, and never once telling the reporters she briefed that in her models people hadn’t “lost” their jobs, they quit jobs they did not want to have and were made happier thereby?

And now we have an assumed-but-hidden 2%/year real rate of return on government infrastructure investment driving an analysis:

Larry Summers: When the best umps blow a call: “The Congressional Budget Office is an American national treasure…

…Without the impartial objectivity it brings to the budget process, our country would make much worse policy. Baseball without an umpire would be a very different game, and similarly the making of budget policy without CBO would be a very different and inferior activity. However, even the best umps occasionally blow a call, and I am afraid that is what CBO has done in its recent infrastructure report…

Must-Read: Mark Yzaguirre: Texas Has Prospered In Spite of Social Conservatism, Not Because of It

Must-Read: Mark Yzaguirre: Texas Has Prospered In Spite of Social Conservatism, Not Because of It: “My normal response when I hear people… criticizing Texas is… to try and find a way to defend or at least explain it…

…Governor Greg Abbott… Twitter… ‘NY led way in taxes, regulations, union abuses, high living costs & how New Yorkers are fleeing to TX’. This is a nonresponsive and utterly unsatisfactory answer from Governor Abbott. The New York ad talks about human rights, not regulatory policy and taxes. I would agree that those items are of great importance when it comes to fostering a business-friendly environment and I probably have views closer to Governor Abbott’s on such points than many of my fellow Democrats. They aren’t the only issues that matter, however. Culture, legal protections for individuals and quality of life are also big drivers for development and it’s no accident that the parts of Texas where most of the wealth is generated and prosperity is centered are its more socially progressive cities….

Business leaders in Texas, even those who might otherwise lean Republican, seem to understand that revanchist social conservatism doesn’t work well if you want to encourage educated and tolerant people to move to and stay in your city and state…. One wonders if Texas’s reputation as a bastion of a certain sort of intolerant social conservatism hurts it economically in the long run and it’s hard to find evidence that it has ever been helpful…. The Texas of the future is not the Texas that supports anti-LGBT policies and other retrograde ideas that are indefensible on general principle and do nothing to make anyone’s life better. In this one case, it was appropriate for New York to mess with Texas.

Must-Read: Noel D. Johnsony and Mark Koyamaz: States and Economic Growth: Capacity and Constraints

Must-Read: Noel D. Johnsony and Mark Koyamaz: States and Economic Growth: Capacity and Constraints: “In this survey we review the contributions of economic history to the study of state capacity…

…Economic history makes an important contribution to understanding how state capacity developed by ‘decompressing’ the historical coevolution of fiscal capacity, legal capacity, and rule of law. We emphasize the heterogeneity in the experiences of the countries which have eventually achieved rule of law states. We present two lessons drawn from historical research. The first is that institutions which respect the rule of law are unlikely to be robust unless a state has first adopted intermediate fiscal and political institutions which create incentives for,first elites, and eventually the rest of the population, to support them. Second, we emphasize the difficulties associated with disentangling the role of public-order and private-order institutions in generating support for growth-enhancing institutions. We argue that, in fact, both have played vital roles in the creation of institutions which support the rule of law in modern states.

Must-Read: Jason Furman: Is This Time Different? The Opportunities and Challenges of Artificial Intelligence

Must-Read: Super-smart–naturally intelligent, one might say…

Jason Furman: Is This Time Different? The Opportunities and Challenges of Artificial Intelligence: “I see little reason to believe that the economic impact of AI will be very different from previous technological advances…

…But unlike many of the optimists, I do not find that similarity fully comforting, as technological advances in recent decades have brought tremendous benefits but have also contributed to increasing inequality and falling labor force participation. However, as I will emphasize this morning, the effects of technological change on the workforce are mediated by a wide set of institutions, and as such, policy choices will have a major impact on actual outcomes. AI does not call for a completely new paradigm for economic policy—for example, as advocated by proponents of replacing the existing social safety net with a universal basic income (UBI) —but instead reinforces many of the steps we should already be taking to make sure that growth is shared more broadly. But before turning to concerns about some of the possible side effects from AI, I want to start with the biggest worry I have about it: that we do not have enough of AI. Our first, second and third reactions to just about any innovation should be to cheer it—and ask how we get more of it, the issue I will discuss first in my remarks. But I will then discuss the potential labor market downsides of AI. Finally, I will conclude with the role of public policy in addressing these issues…

Must-Read: Kieran Healy: The Moral Economy of Technology

Must-Read: When I think of the standard uses of “moral economy”, I think not of “fairness” and “justice” but rather of tradition and hierarchy. I think of the Odyssey, in which the fact that Laertes looks like a badly-treated garden slave rather than like a prince is a violation of the moral-economic order:

Indeed your face and figure have nothing of the slave about them, and proclaim you of noble birth. I should have said that you were one of those who should wash well, eat well, and lie soft at night…

The market can and very often does produce pressure for outcomes that violate “moral economy” understood as tradition and hierarchy, but they may or may not violate “moral economy” understood as reasonable and humane notions of justice and fairness. Indeed, Prometheus the fire-bringer’s and the disruptions he causes have an alternative and stronger claim to “moral economy”:

Kieran Healy: The Moral Economy of Technology: “‘moral economy’ refers to some kind of informal but forceful collective control over the market…

…justice over efficiency, fairness over freedom, and community expectations over individual opportunity…. Technologies are counting and classifying your actions constantly in an effort to make you a better person. Their promoters and investors constantly moralize about their products, too…. This kind of moral economy is not about justice or fairness. Instead it evangelizes social progress through technological disruption. This vision has deep historical roots that are uncomfortably entwined with the origins of the social sciences…. The Saint-Simonian vision became what Hayek called ‘the religion of the engineers’, full of faith in the power of rational expertise. That religion is very much still with us….

Consider two basic experiences of our new world of smart devices and internet-enabled things. The first is the nice one… the lives of people who live in Apple advertisements… a computer or device knows what you want it to do, or has anticipated a need that you have and acted on it in a pleasing way. It is a feeling of magic and delight, or at least a sense of ease and convenience…. The second basic experience is the bad one. I associate it with a parade of malfunctioning, misconceived or badly-designed software and smart devices…. Most recently I’ve experienced it with allegedly smart devices that pretend they can talk with and understand you, but which are really just verbal command lines operating on the narrowest of gauges. If you stray from the expected path at all, the illusion of both interactivity and smartness is destroyed….

Social theorists consistently underestimate the value of technology’s delightful aspects… want to say your Fitbit or Apple Watch is exercising a subtle form of control over you by encouraging you not just to meet your step count for the day but also encouraging you to value the act of meeting your step count for the day, and most perniciously by arranging things so that you experience your valuation of the act of meeting your step count for the day as a satisfying personal choice, rather than an instrument of neoliberal governmentality. Conversely, though, the same theorists also consistently overestimate how often software and hardware actually works properly…. They reverse left and right, so that cheerful hype becomes a harsh critique of the all-consuming power of technology. But… they do not reverse up and down. The technology is still assumed to work, even though it probably doesn’t, most of the time. It matters which technologies are going to work, and which ones are just going to be billion dollar cargo-cults…

Must-Read: James Pethokoukis: The Magical Thinking of America’s Pro-Brexit Conservatives

Must-Read: James Pethokoukis: The Magical Thinking of America’s Pro-Brexit Conservatives: “Lawrence Kudlow called Brexit a ‘Thatcher moment’ that could put Britain ‘on the pro-growth path of free-market supply-side policies’…

…The Wall Street Journal … explained… ‘now more than ever Britain will need supply-side economic policies that reassure investors and make Britain a growth model for Europe.’… By detaching from the EU regulatory superstate, an unchained Britain would return to its risk-taking, free-trading roots. London would become a sort of Hong Kong on the Thames, England a Texas on the North Sea. With the Voldemort of Brussels vanquished, free-market magic could be unleashed. Economicus growthus leviosa! Or not.

This is the sort of magical, fantastical thinking all too common in the Republican Party and among American conservatives… why Donald Trump can offer a $10 trillion tax cut plan that would need to quintuple GDP growth to break even–all with scant criticism from many leading voices on the right…. Even if you doubt the potential for long-term damage–permanently slower economic growth, the disintegration of the EU–the short-term post-Brexit picture is pretty ugly…. A 2017 recession as likely. Not to mention that disentangling from the EU might consume British politics and policy for years. And all for what, exactly? The U.K…. ranks ninth for global competitiveness, says the World Economic Forum. And it ranks 10th… on the Index of Economic Freedom…. Britain is already a relatively well-run, free-trading nation…. Never has so much been risked for potentially so little.

Must-Read: Dietrich Vollrath: The Persistence of “Technology”

Must-Read: If you have not been reading Dietrich Vollrath’s weblog on economic growth, you should. He has been teaching the world a masterclass in understanding the patterns and determinants of economies’ long-run growth trajectories:

The Persistence of Technology Dietrich Vollrath

Dietrich Vollrath: The Persistence of “Technology”: “Diego Comin, Bill Easterly, and Erick Gong… ‘Was the Wealth of Nations Determined in 1000BC?…

…there is a surprising amount of explanatory power in technology measures from 1500AD….

CEG document… that technology levels are incredibly persistent…. CEG… pull out binary measures of technological use for different ethnic/cultural groups. Did your group use wheeled wagons in 1500? Yes? You get a 1. Did you use paper? No? You get a zero. Did you produce steel? No? You get a zero. Average these 0/1 measures across the different measures of technology, and you get an overall score…. Their Figure 2 gives you essentially the whole thrust of the paper. They use the ethnic group technology measures, assign each country a technology level based on the highest scoring ethnic group in their country, and then adjust the country level scores based on the fact that country populations are different in 2002 from in 1500…. They regress 2002 current income per capita on technology levels in past years, they find significant effects. This holds for technology in 1000BC, 0AD, and 1500AD…. Take the 1500AD result in column (3)…. If the technology index goes from 0[.5] ([half] technologies) to 1 ([three fifths of] the original technologies), log income per capita goes up by 2 log points, or by 3…. Also notice the R-squared, which is 50% for the 1500AD results….

CEG… establish that old technology levels have predictive power for current income per capita. They are not looking for explanatory power…. Ultimately, you might want to argue that we want strict causal explanations for why some countries are rich in 2002. But an explanatory paper like this is valuable…. Knowing that anything in 1500AD has strong predictive power for incomes today is informative. It tells us that we have to look back to 1500AD for at least some of those causal forces…. It isn’t the technology in 1500AD per se that matters…. This is an indicator of some kind of variation in culture or institutions (or something else?) that matters… [and] is telling us to something about how powerful those cultural/institutional factors are.

Which Thinkers Will Define Our Future?: Live at Project Syndicate

Over at Project Syndicate: Which Thinkers Will Define Our Future?: BERKELEY – Several years ago, it occurred to me that social scientists today are all standing on the shoulders of giants like Niccolo Machiavelli, John Locke, Adam Smith, Alexis de Tocqueville, Max Weber, and Émile Durkheim.

One thing they all have in common is that their primary focus was on the social, political, and economic makeup of the Western European world between 1450 and 1900. Which is to say, they provide an intellectual toolkit for looking at, say, the Western world of 1840, but not necessarily the Western world of 2016. What will be taught in the social theory courses of, say, 2070? What canon – written today or still forthcoming – will those who end their careers in the 2070s wish that they had used when they started them in the late 2010s? Read MOAR at Project Syndicate

Must-Read: Jared Diamond: Agriculture: The Worst Mistake in the History of the Human Race

Must-Read: How poor were the bulk of our post-Neolithic pre-Commercial Revolution Agrarian-Age ancestors, anyway?

Jared Diamond: Agriculture: The Worst Mistake in the History of the Human Race: “One straight forward example of what paleopathologists have learned from skeletons…

…concerns historical changes in height. Skeletons from Greece and Turkey show that the average height of hunger-gatherers toward the end of the ice ages was a generous 5’9″ for men, 5’5″ for women. With the adoption of agriculture, height crashed, and by 3000 B. C. had reached a low of only 5’3″ for men, 5’ for women. By classical times heights were very slowly on the rise again, but modern Greeks and Turks have still not regained the average height of their distant ancestors.


Diamond appears to be referring to the work of J. Lawrence Angel here…

The extremely scanty guesses collected by Clark (2007) tell us that 5’4″ is not a bad guess for post-Neolithic pre-Commercial Revolution average adult-male heights in temperate Eurasia…

Cf: Greg Clark (2007): A Farewell to Alms: A Brief Economic History of the World (Princeton: Princeton University Press: 0691141282) http://amzn.to/1Tc5pCq:

James s Kindle for Mac 4 A Farewell to Alms A Brief Economic History of the World Princeton Economic History of the Western World

Must-Read: Marco Arment: Avoiding Blackberry’s Fate

Must-Read: Marco Arment: Avoiding BlackBerry’s Fate: “Before the iPhone, RIM’s BlackBerry was the king of smartphones…

…When the iPhone came out, the BlackBerry continued to do well for a little while. But the iPhone had completely changed the game…. The BlackBerry’s success came to an end not because RIM started releasing worse smartphones, but because the new job of the smartphone shifted almost entirely outside of their capabilities, and it was too late to catch up…. No new initiative, management change, or acquisition in 2007 could’ve saved the BlackBerry. It was too late, and the gulf was too wide.

Today, Amazon, Facebook, and Google are placing large bets on advanced AI, ubiquitous assistants, and voice interfaces…. If they’re right — and that’s a big ‘if’ — I’m worried for Apple…. [in] big-data services and AI…. Apple can do rudimentary versions of all of those, but their competitors — again, especially Google — are far ahead of them, and the gap is only widening. And Apple is showing worryingly few signs of meaningful improvement or investment in these areas….

If Google is wrong, and computing continues to be defined by a tightly controlled grid of siloed apps that you poke a thousand times a day on a smooth rectangle of manufacturing excellence, Apple is fine…. But if Google is right, that’s a big problem for Apple.