Tyler Cowen's next book on food!

I saw Tyler Cowen live in DC tonight - a fun experience for those of you who are familiar with his written word. Most of the discussion focused on The Great Stagnation (a.k.a. TGS), but an exciting tidbit was that his next book will be on food and food economics. Especially given that agriculture recently surpassed climate change as my most-posted-on topic, I for one can't wait.

Finite room for construction in China

China's explosive demand will finally drop from its stratospheric level, either because China's economic development falters or because China is finally totally covered over in cement.

That is Rick Bookstaber, a deeply thoughtful blogger on financial markets, in response to Jeremy Grantham's newsletter on "the mother of all paradigm shifts" (i.e., "Days of Abundant Resources and Falling Prices Are Over Forever"), which excited the likes of Cowen and Krugman.

Like Rick I am in the less apocalyptic camp, although for much prosaic reasons (he believes that eventually our resource consumption will decrease as we increasingly lead virtual lives and turn away from material consumption). As Tyler Cowen says, China cannot continue to invest 50% of its GDP forever. There is a long way to go for the world to catch up to rich-world consumption levels, but it also won't happen all at once (apply an optimistic GDP growth rate to your favorite sub-Saharan African country and you'll be shocked at how long it will take to get where China's income is today, even if everything goes well). Resource demand may not be curbed any time soon, but ultimately I have more faith in the power of prices and markets to change behavior than the doomsayers seem to.

The right attitude

I just started Gregory Clark's A Farewell to Alms, which I was already excited about, largely because Tyler Cowen reviewed and liked it and wrote a series of "Book Forum" posts, which I intend to follow in parallel.

I'm further encouraged by this nicely-worded sentiment from the preface.

Doubtless some of the arguments developed here will prove over-simplified, or merely false. They are certainly controversial, even among my colleagues in economic history. But far better such error than the usual dreary academic sins, which now seem to define so much writing in the humanities, of willful obfuscation and jargon-laden vacuity. As Darwin himself noted, "false views, if supported by some evidence, do little harm, for every one takes a salutary pleasure in proving their falseness, and when this is done, one path towards error is closed and the road to truth is often at the same time opened." Thus my hope is that, even if the book is wrong in parts, it will be clearly and productively wrong, leading us toward the light.

This is a great attitude - for a scholar, for a book, and definitely for a blog.

Regulation vs. torts

Responding to libertarian commenters, Paul Krugman argues that torts are not nearly as effective as environmental regulations in practice.

Commenters say, but isn’t that an equally strong reason to believe that regulation won’t work either?

Well, here’s the thing: regulation demonstrably does work where tort law doesn’t. Consider the environmental issue: in reality, the perpetrators of oil spills never pay most of the cost; but in reality, environmental regulation has led to much cleaner air and water. (Look up the history of Los Angeles smog or the fate of Lake Erie if you don’t believe me.)

Tyler Cowen dissects Krugman's argument in his typical incisive and dispassionate style, scoring points (except I don't think he's keeping score) like:

There is in fact an agency regulating off-shore drilling and in the case under question it totally failed. How can Lake Erie, an orthogonally related success, be cited but this very directly relevant failure not be mentioned?

As usual, Cowen comes across as eminently sensible and I find it hard to disagree with much that he says. Am I just too rushed, and/or not trying hard enough?

Not such a bad decade after all

The Roving Bandit excoriates Paul Krugman for his America-centric pessimism about the last decade:

Via The Monkey Cage, apparently Paul Krugman has been whining about the "naughties" and how nothing good happened in America. This is why I don't read Paul Krugman. He focuses too much on America.

Erm Paul, the continuation of the WORLD'S GREATEST ANTI-POVERTY PROGRAMME EVER? NO? NOT GOOD ENOUGH FOR YOU?!!

This resonates with the interesting recent writing and forthcoming book by Charles Kenny on "The Success of Development", which argues that aside from growing income (a surprisingly intractable problem), development has succeeded admirably in the last fifty years:

This book explores the bad news and the good news about development. It lays out the evidence on growing income disparities between the global rich and the global poor that are at the heart of a narrative of crisis. And it chronicles the failed search for a silver bullet to overcome economic malaise.

But it also discusses the considerable successes of development. Not least, the evidence for any country being stuck in a Malthusian nightmare is threadbare. The book points to global progress in health, education, civil and political rights, access to infrastructure and even access to beer. This progress is historically unprecedented and has been faster in the developing world than in the developed.

Amartya Sen would of course be proud of this broader conception of what development really means.

See also Tyler Cowen on the "Fruitful Decade for Many in the World" (especially "China, India, Indonesia, Brazil, and much of Africa"), and via his MR blogging partner Alex Tabarrok, this post on and list of African successes:

In recent years, a broad swath of African countries has begun to show a remarkable dynamism. From Mozambique’s impressive growth rate (averaging 8% p.a. for more than a decade) to Kenya’s emergence as a major global supplier of cut flowers, from M-pesa’s mobile phone-based cash transfers to KickStart’s low-cost irrigation technology for small-holder farmers, and from Rwanda’s gorilla tourism to Lagos City’s Bus Rapid Transit system, Africa is seeing a dramatic transformation. This favorable trend is spurred by, among other things, stronger leadership, better governance, an improving business climate, innovation, market-based solutions, a more involved citizenry, and an increasing reliance on home-grown solutions. More and more, Africans are driving African development.

Bobby Jindal flip-flops on high-speed rail

At Green Sheet... but this was really just an excuse to link to these outstanding videos (fans of 30 Rock will enjoy).

For those who are interested in the substance of the issue, ahem, highly-respected urban economist Ed Glaeser is skeptical, while former Economist blogger Ryan Avent is outraged at Glaeser's "unserious look." Personally, I can see it being really great in the Northeast Corridor (although who knows if it can make money - I don't think Amtrak can, and the Delta Shuttle is a highly efficient alternative for the Washington-NY-Boston pivot), and am skeptical that it would take off in car-based California, as Avent seems to imply. If you need to rent a car or hail a taxi at your destination, the economics for the traveler deteriorate pretty rapidly, especially because flights are, all things considered, pretty cheap.

Update: Via Environmental Capital, Robert Samuelson writes an op ed against in the WaPo, and Avent and Paul Krugman are all over him in microseconds. I agree with Avent that some of Samuelson's density arguments are facile (subject to The Flaw of Averages, you might say), but for all his vitriole I've yet to see him make a compelling case that the economics of U.S. high-speed rail would be attractive somewhere other than Washington to Boston.

Update 2: Tyler Cowen reviews another argument for high-speed rail and isn't swayed:

More generally, my jaw dropped when I read the denouement:

In this more comprehensive model that takes into account trivialities like regional population growth and a reality-based route, the annual benefits total $840 million compared with construction and maintenance costs of $810 million.

I'm not sure what discount rates he is using but even if we put that problem aside this screams out: don't do it. Given irreversible investment, lock-in effects, and required hurdle rates of return, this still falls into the "no" category. And that's an estimate from an advocate writing a polemic on behalf of the idea. I'm not even considering the likelihood of inflation on the cost side or the public choice problems with getting a good rather than a bad version of the project. How well has the Northeast corridor been run?

So, on high-speed rail, count me as still unconvinced. Nonetheless if you know of a good cost-benefit study, of a single rail link, not in the Northeast corridor, favoring HSR, let me know in the comments.

Update 3: Via Green Sheet, Nate Silver notes that Americans like to drive instead of flying, even when the choice is not "rational" from a financial perspective.

What does this mean for something high-speed trains? It could be either good news or bad news. If a people are driving more than they "should" because they don't like air travel, then trains could pick off quite a bit of that traffic. A "true" high-speed train from St. Louis to New York, traveling at 150 MPH, could make the journey in just under 6 hours, which is quite competitive with air travel once the additional door-to-door costs of air transit are considered (although there are some incumbent to rail travel too). And many of the hang-ups that people associate with air travel, indeed, aren't likely to transfer to rail. Train travel can often be quite comfortable, for instance, and acrophobes won't have to worry about being suspended 30,000 feet above the ground in a flying cigar box. On the other hand, if people are attached to driving for "irrational" reasons -- they find it romantic or improperly evaluate expenses like depreciation -- rail travel might not make much of a dent.

The autistic macroeconomist

Tyler Cowen is a huge fan of Scott Sumner's blog, but despite this golden endorsement I don't read him regularly because his posts are long and technical and macro is not my passion. But here Sumner reviews Cowen's excellent new book (highly recommended, by the way - I thought it was a truly path-breaking work that could materially change society's view of autism over time), and veers off on a fascinating tangent.

For context, Sumner believes that he, like Cowen, displays some strong characteristics of the autistic cognitive style (again, read the book). The operative principle in this particular case is that autistic people are less likely to be swayed by what behavioral economists call "framing effects" (and Naseem Taleb refers to derisively as "narratives").

Cowen pointed out that autistic people often seem to act more like a rational “economic man” than the non-autistic. They are less swayed by framing effects and also less swayed by emotions such as envy and revenge, which can be counterproductive. I always thought it was obvious that it was better to get a 5% real wage increase, when all your colleagues got 10%, then to get a mere 4% real wage increase when all your colleagues got 2%. But as I got older I realized most people don’t look at things that way. The world is not full of characters like “Spock” on Star Trek.

I won't paraphrase Sumner's wonky build-up around coin collecting and monetary economics and NGDP (his post is worth reading in full), but here's the kicker:

I believe that the financial crisis of 2008 was the mother of all frame jobs. The commercial bankers were framed, when it was really the central bankers that created the severe recession.

Over the past few months I have rolled out one quotation after another, trying to show that if one believes the logic of modern macroeconomics, the implications are clear. Fed policy was effectively highly contractionary, and a more expansionary policy could have prevented the sharp fall in NGDP. And there is no evidence that the fall in RGDP is anything more than what one would expect from this sort of monetary policy failure.

So why am I not making any headway? Because the post-Lehman crash was a very powerful framing device. It’s a great story.

That stopped me in my tracks, because it is so true. The fall of Lehman is such a powerfully compelling narrative, and most of us are so drawn to narratives, that it is difficult to dislodge from either our minds or the public discourse once it's taken hold. But what if, 10 or 50 or 100 years from now, dispassionate (autistic?) macroeconomists - or alien archaeologists and economic historians, for that matter - marvel at how the powerful narrative of the credit crisis blinded us to the mundane economic reality of the cause of the recession in which the world now finds itself mired?

I am still shaking my head at how original and powerful this thought is. Wow.

Blogging how-tos

Felix Salmon on monetization and Tyler Cowen on how to give compliments.

P.S. I am embarrassed to say that my first guess of who Tyler was referring to was wrong (Robin Hanson); the correct answer is here.