Monday Growth Links

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

Time to clear the decks on the reading list:

  • Jerry Hough and Robin Grier have a new book on “The Long Process of Development“. They stress that institutional change, and the economic development that may or may not follow, takes a looooooooong time. It is in the reading pile for the summer.
  • Edited volume by Grief, Kiesling, and Nye on “Institutions, Innovation, and Industrialization“. Also on the summer reading list. If you’re going to study the importance of institutions for economic growth, this is what you want to be reading rather than papers using cross-country regressions based on arbitrary indices of institutional quality. Not that I have a thing about that.
  • Interesting bit on how Nairobi is “in the wrong place”. Given my recent work on urbanization and growth, I found this fascinating. Cities, in some sense, solve coordination problems. If we all agree to show up *here*, then we can all work together. So once a city is in place, it is almost impossible to change that location. History matters.
  • An excellent post by Jesse Ausubel on how nature is “coming back” in America as the economy grows. We are actively returning land to wilderness from agriculture/industrial use. Really simple to understand, in some sense. If we all have preferences over “stuff” and “nature”, then as the economy gets really good at producing “stuff” the marginal utility of that “stuff” becomes very low, and so we start buying more “nature” (by buying less stuff).
  • A long post on the Hajnal Line, by the HBD Chick. Essentially, run a line from St. Petersburg to Trieste (near Venice). Hajnal differentiated family patterns west of that line from those east. But as the HBD Chick capably documents, there are lots of cultural and social factors that differ along this same line. One theory has been that this is the extent of the cultural influence of the Paris Basin. A different theory is that this captures some geographic difference between these regions that led to the cultural differences. Whatever it is, it’s a neat summary of how much breaks along that line.
  • Short post by Marc Bellemare on the (mis)use of instrumental variables. This is particularly relevant to growth research, which often strays into assuming anything geographic is a suitable IV for almost anything else (it’s exogneous!). As Bellemare points out, while geography is subject to reverse causality, that doesn’t mean your regression doesn’t have omitted variable bias or measurement error.
  • Manufacturing with Factories. Tim Taylor talks about a short paper by Bernard and Fort on “factoryless goods producing firms”. Think Apple, who designs everything in the US, but produces almost nothing in the US (although I think they are opening a plant in Texas?). In one sense, the US manufacturing sector is much larger than reported in BEA statistics, because Apple’s output is not recorded as manufacturing, but as wholesale trade. The actual snapping together of iPhones is small potatoes relative to the overall value-added of Apple.
  • A great post by Rachel Laudan on “culinary Luddism” (which is such a great phrase). Let me just lay out one quote: “That food should be fresh and natural has become an article of faith. It comes as something of a shock to realize that this is a latter-day creed. For our ancestors, natural was something quite nasty. Natural often tasted bad.” Her point is that we should demand higher standards from our processed foods, yes, but not abandon them.
  • Example number 8,573,234,948 of why you should never, ever, claim that we have reached the end of innovation. Nature has solutions many of problems with energy and pollution. And we’re getting close to being able to mimic those solutions.
  • I appreciate the effort here in providing a guide to identifying bad science. But the points are so generic that you probably have to be a trained scientist to actually apply them. I think I prefer my advice to undergrads on identifying bogus science: if the website you are reading has an ad to lose weight, meet women, or refinance a mortgage, then do not trust anything it says.

Last Links of 2014

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

So now that I’ve yanked myself out of the nanaimo bar-induced coma of last week to return to the living, I’ve got a stack of links that have been piling up. So here is a last post of 2014 for you to scan through on your phone while you watch Pit Bull’s NYE countdown. (What, you’re *not* watching Pit Bull? And is it Pit Bull or Pitbull?)

Two books I read recently that were quite good:

  1. The First European Revolution by R.I. Moore. This was a fun read. Moore traces the origin of a unique “European” culture to the time around 900-1000 AD. This was after the Carolingian Empire had broken up, and the remaining areas were scrambling in some sense to re-order themselves. Key events are the clear separation of clergy from nobles (enforced through celibacy of clergy) and strict primogeniture (which eliminates contested lordship of warrior clans). Need to process this alongside Mitterauer’s Why Europe? which is also about creation of unique European family structure in place of clans.
  2. Adam Tooze’s The Deluge, about America’s plunge into world leadership during and after WWI. What stood out for me was the ridiculous self-righteousness of Woodrow Wilson. I had this sense that he had been too idealistic to solve the real-world problems at Versailles. But this book makes it even more clear that what we call “idealism” was really a entitled feeling of superiority of Protestant white dudes over the unwashed masses.

I also read a lot of garbage, but these two books make me sound smart, so there you go.

Assorted links of interest:

  1. Stephen Gordon piles on a willfully stupid article regarding Canada and the “resource curse”. Key quote, and this is one to pin up on your wall: “If God provides you with an abundance of something that the rest of the world values highly and is willing to pay through the nose to obtain, then this is a blessing, not a curse. If the ‘resource curse’ has any meaning, it has to do with politics, not economics.” There is never a time when you *don’t* want to have more of a valuable stock of a natural resource.
  2. More on the “resource curse”. Countries with resources are richer, but grow more slowly. So to the extent that you think being rich but growing slowly is a curse, there you have it. Recent paper by Alexander James says that the slow growth we see in resource exporters is due to slow growth in their resource earnings. Drops in commodity prices make overall growth look bad (think of Russia today). What James shows is that over the last few decades, the growth rate of the non-resource sectors of these resource-exporters grow just as fast as everyone else. So “resource curse” or no?
  3. Speaking of willfully stupid. Scientific American, of all places, published this econo-crank piece on the digital economy and secular stagnation. The lede is that Twitch sold for 970 million, but employs only 170 people. Presumably this means that economic growth might end. Uh, what? The market value per employee of tech companies has little to do with the rate of economic growth. If anything, the higher this is, the *greater* will be growth, as the incentives to start tech companies are so huge. We can have reasonable discussions about the relative value of different types of labor and how they might fare as innovation occurs, but that is an entirely different discussion from the “end of growth”.
  4. Send LateX code in Gmail. You heard me. Go check it out.
  5. A very nice comment by Scott Sumner on Noah Smith‘s comment regarding taxes and labor effort. Scott’s good point is that people often try to have it both ways in arguing for European-style social safety nets. When you say that GDP per person is only 70% of the US level, they say that this is because they work fewer hours, but have just as high utility. But if you talk about high taxes in Europe, they claim that Europeans work just as much as US workers. Which is it?

A Few Growth Links

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

  1. Kelly and O’Grada on sustained economic growth in England berfore 1700. That growth was slow relative to modern rates, but they argue it was appreciable and associated with increasing human capital and high wages. They give several examples of significant division of labor within industry in this pre-IR era.
  2. Via Chris Blattman. Experimental evidence that participating in trade leads to higher productivity. The modern firm-level trade models generally take productivity of firms as given, and only those who are already productive find trade worth it. The most enthusiastic reading of this is that simply providing firms with information about markets boosts productivity. The least enthusiastic is that experimenters simply paid fixed export cost for firms.
  3. The UN Least Developed Countries Report 2014 is about Growth with Structural Transformation. One of the key messages is “Economic growth is not enough: it must be accompanied by structural transformation..”. Um, name one example of economic growth that did *not* involve structural transformation. Probably more to come from me on this report, but you can all study it at home over the break.
  4. Correlation of pathogen exposure and degree of innovation across primate species. Essentially, being social animals has benefits (cooperation, imitation, and innovation) and costs (infectious diseases). Big question obviously is whether one drove the other.
  5. Gehringer and Prettner on longevity and innovation. A basic scale story. The longer people live, the more incentives they have to invest in capital (physical and human). This expands the scale of the economy, which expands incentives to innovate and earn profits. A relatively optimistic response to population aging through lower mortality rates as opposed to pessimistic worries about stagnation.
  6. Noah Smith (from a long time ago) writes a review of a paper by Acemoglu, Robinson, and Verdier regarding different types of capitalism (think Sweden and the US) and innovation. Upshot is that Sweden’s “soft” capitalism is worse for innovation than US type. More interesting than the particulars of the ARV paper is Noah’s broader comments on writing down models designed to fit existing data. The fact that the data matches your model doesn’t imply your model is right. It means you were smart enough to get the math to work out.
  7. Alex Tabarrok links to CBO report on patenting and TFP growth. Not much of a correlation. Several ways to think about this. First, patents are a very imperfect measure of innovation. Second, TFP is a very imperfect measure of innovation – remember, TFP includes utilization changes, markups, and input changes. It does *not* equal technology, so it is probably not surprising that TFP and patents are not correlated.

Growth Links for Halloween

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

I don’t know if these are scary or not. Anyway, they’ve been sitting as open tabs in Chrome for too long, and I haven’t thought of anything clever to say about them, so here they are straight.

  1. Our World in Data. This site has some really top-notch graphics on a number of topics: population, war and peace, poverty, health. I ended up there because of a specific graph regarding the decline in war deaths since 1945, but the whole site is excellent.
  2. Gavyn Davies post on whether growth is permanently lower. The post is good example of how you have to be clear about whether you are talking about “growth in aggregate GDP” or “growth in GDP per capita”. Growth in aggregate GDP is falling, and has been falling for decades in most rich countries, but that is due in large part to declining population growth rates.
  3. Morgan Spurlock has a set of web videos explaining the economy in simple terms. You can quibble about lots of little points here, but they are funny.
  4. Lant Pritchett on why we shouldn’t get hung up on thresholds for poverty. It’s a response to a SNL sketch spoofing those “39 cents a day” commercials asking you to give money, where all the people in the village keep telling the guy in the commercial to ask for more money. h/t to Chris Blattman for the link.

Random Growth Links

NOTE: The Growth Economics Blog has moved sites. Click here to find this post at the new site.

Just a few interesting things to think about:

  1. I feel like the Einstellung effect is something that could be worked into some sort of model of technology adoption. “…the Einstellung effect operates by biasing attention towards problem features that are associated with the familiar solution rather than the optimal solution.”
  2. An example of why I’m still a techno-optimist in general. “Dubbed the compact fusion reactor (CFR), the device is conceptually safer, cleaner and more powerful than much larger, current nuclear systems that rely on fission, the process of splitting atoms to release energy……The superhot plasma is controlled by strong magnetic fields that prevent it from touching the sides of the vessel and, if the confinement is sufficiently constrained, the ions overcome their mutual repulsion, collide and fuse.”
  3. Don’t confuse welfare (or utility) with happiness. People trying to maximize welfare take happiness into account, but not just happiness.
  4. Related to this, never underestimate the endowment effect. People hate losing *way* more than they love winning.
  5. Malnutrition and the necessity of pollinators (e.g. bees) are highly correlated. “Crops vary in the degree to which they benefit from pollinators, and many of the most pollinator-dependent crops are also among the richest in micronutrients essential to human health. This study examines regional differences in the pollinator dependence of crop micronutrient content and reveals overlaps between this dependency and the severity of micronutrient deficiency in people around the world.”
  6. Do we dare question economic growth? Yes, yes we do. There are all sorts of reasons that progress and technological advancement do not necessarily imply GDP growth – and we could certainly see future growth involving declining input usage rather than expanding output production.