The Great Stagnation (Part 1)

Seth Roberts16 Comments

Tyler Cowen has written a short Kindle book called The Great Stagnation. I have a lot to say about it. This post is about the context, how it fits into a bigger picture. In a later post I’ll discuss its ideas.

At the end of The Economy of Cities (her favorite among her books), Jane Jacobs said if a flying saucer came to Earth she’d want to know how they avoided stagnation. The main battle in any society, said Jacobs, is not between rich and poor or owners and labor but between those who benefit from the status quo and those who benefit from new ways of doing things. The status quo usually wins, no surprise. And the status quo tends to become more powerful over time, which is why Jacobs didn’t know if profound stagnation could be avoided as a kind of terminal state. When she wrote The Economy of Cities (published 1969), she saw stagnation mounting in the American economy — in transportation, for example. By stagnation she didn’t mean lack of growth; she meant lack of useful innovation, causing problems to stack up unsolved. If you keep doing the same things, but more intensely, you will grow in conventional economic terms (e.g., GDP) but you aren’t solving your problems. Doing more of the wrong thing (e.g., treating all diseases with pills) counts as growth but such growth makes things worse, not better, because bad ways of doing things become more entrenched.

Most people see Jacobs as someone who wrote about cities. She saw herself as someone with new ideas about economic development — especially innovation. Cities are important above all because city people are more innovative than rural people. Tractors, for example, grew out of city inventions (the internal combustion engine, etc.). The same person (same IQ, same wealth) will be more innovative in a city than outside of one.

Stagnation is a major problem at all levels of the economy. A few years ago, a friend of mine who worked at the Chicago Tribune said it was clear newspapers were in trouble long before craigslist. As early as the 1980s, he said, there were bad signs. They were ignored. The people in charge kept doing the same things. Had they started trying new things at the first signs of trouble, they might have found a way out. But they were complacent. By the time they stopped being complacent, it was (apparently) too late. Gone (1999) by Renata Adler, a great book, is about the disastrous consequences of stagnation at The New Yorker. The Innovator’s Dilemma by Clayton Christensen is about stagnation at industry-leading companies, such as DEC, GM, and Microsoft. Failure to innovate enough was what Christensen found when he tried to understand why industry-leading companies frequently lost their lead. Not only do these companies lose their lead, they often go out of business.

How to avoid or recover from stagnation, Jacobs was saying, is the central question of economic life, with no clear answer. Yet it is roundly ignored. In the Berkeley Public Library a few years ago, I picked up an introductory economics textbook for junior colleges, 700 pages long. It had one page — fact-free, poorly-written — about where new goods and services come from. This is typical of the introductory economics textbooks I’ve seen. It reflects the profession as a whole: I estimate about 1% of mainstream economic research is about innovation. It should be half the field.

To study innovation is to study what controls it, what makes the rate of innovation go up or down. Thorstein Veblen (not a mainstream economist) wrote one essay and two books about it. Adam Smith wrote nothing interesting about it, as far as I know, nor did Keynes. I remember nothing interesting about it in The Worldly Philosophers by Heilbroner, including the chapters on Schumpeter and Veblen. There have been no Nobel Prizes about it. (Among the Economics prize-winners, Robert Fogle has done the best work about it, whereas Samuelson’s textbook is a monument to lack of understanding of innovation and its importance.) Ed Glaeser’s new book The Triumph of the City emphasizes that cities boost innovation but Jacobs said this 40 years ago. Because cities tend to grow (increasing innovation as they grow), why do whole societies stagnate? Apparently a countervailing force overcomes the innovative power of cities. I have never heard an economist make this point nor say what the countervailing force might be.

In Collapse, Jared Diamond showed how whole societies collapsed (ran out of food and disappeared) when they failed to innovate enough. Instead of blaming lack of innovation, Diamond blames overfishing, overhunting, soil problems, and so on. His list of “different” causes of collapse is like a list of “different” kinds of paranoia: persecution by the FBI, persecution by the CIA, persecution by the police, and so on. If a society does the same thing over and over, at increasing intensity, eventually it will collapse. The collapse may have many proximate causes.

Tyler does not assume that all growth is good. Perhaps influenced by Robin Hanson, he points out that vast health care spending has done little for American health. Much poorer countries get the same results. When you spend four times as much but get the same results, it implies stagnation. Presumably the 20% we share with poor counties is spent on the oldest stuff. If so, the most recent 80% of growth was worthless and a great deal of it has been a kind of churning, useless research passed off as useful. It entered the health care system, people paid for it, but it didn’t help them. It is entirely possible that some of the expensive health care found in America but not poor countries is beneficial and some of it is harmful.

Tyler sees the forest — a society-wide failure to solve important problems. The tremendous accomplishment of his book is to bring the puzzle of stagnation to mainstream economic attention (“the most talked-about economics book of the year so far” according to this review). I am too far from economics to guess what influence it will have on research, but if mainstream economics becomes even 2% about innovation and stagnation (= lack of useful innovation), that will be great intellectual progress.

Climate Model Predictions and What Happened

Seth Roberts28 Comments

In a comment on a previous post about lack of convincing evidence for climate models — the ones that predict catastrophe — I wrote:

At any time — right now, 5 years ago, 10 years, 15 years ago –” the people who work with those models and claim we should pay attention to their predictions could make/have made a set of predictions: next year, the year after that, and so on. Then, as time passed, we would have found out if the models predict correctly. The modelers haven’t done that.

From this talk by Richard Muller, a Berkeley physicist, I learned of two instances where the modelers did what I said they haven’t done.

1. In 2009, James Hansen predicted, based on his model, that 2010 would be the hottest year on record. Since temperatures had been roughly constant — not rising — for the previous 12 years, this was an interesting prediction. When 2010 ended, Hansen’s own data (analyzed in an unusual way, according to Muller) found this to be true, but two other datasets found it to be false.

2. In 2001, several scientists, based on nine climate models, predicted that Antarctic ice would increase over the next ten years. In fact, it decreased (“exactly the opposite of the prediction”). In response, John Holdren, President Obama’s science advisor, said, according to Muller (at 26:22):

Well, those models were really wrong. But now we’ve changed those models. And now if we run them again they show that the ice will decrease. And therefore this is evidence in favor of global warming.

The audience tittered.

If you think Climategate was not important, and that the scientists whose email was revealed did nothing seriously wrong — as several official investigations, Bill McKibben (“if you managed to hack 3,000 emails from some scientist’s account, you might well find a few that showed them behaving badly”) and New Yorker staff writer Elizabeth Kolbert have concluded — you should see what Muller says about it (starting about 30:00).

I liked the talk. Muller makes several points with which I agree and presents helpful data. However, there were several things I didn’t like. There is one big gap. Muller thinks current climate models are probably right, but doesn’t explain why. I would have liked to know. And he says two things with which I deeply disagree. First, he says scientists shouldn’t say what the data will show — that is, make predictions. I believe that making and testing predictions is by far the best way to learn how much we know. Second, Muller says that buying a Prius does nothing. The improvement is too small, the cost of a Prius too great. People in China can’t afford a Prius, says Muller. This misses a really important point. When you buy a Prius you are supporting innovation. To solve the big problems that arise in any society, innovators need support. My theory of human evolution goes on and on about this. Long ago, connoisseurs supported innovation. Festivals such as Christmas supported innovation. Art lovers supported innovation. Fashion supported innovation. The great achievement of Tyler Cowen’s new book The Great Stagnation, which I will discuss tomorrow, is its focus on rate of innovation. What controls rate of innovation is a supremely important question usually ignored by economists — as Muller ignores it.

In any case, here are two actual predictions and how they fared.

Root Planing Cancelled

Seth Roberts15 Comments

My friend Carl Willat writes:

Last June I went to the dentist for a checkup and cleaning, fully expecting my gums to be in great shape since I had been diligently using my Braun Oral B electric toothbrush. Â To my surprise and disappointment the hygienist told me the pockets had actually become deeper and that she was seeing bleeding in many places, to the point where she was recommending I have my roots planed, a painful and expensive procedure I had undergone once before many years ago. So of course I went home and started taking the flax seed oil and ground flax seed [“a couple of tablespoons a day of oil, plus random amounts of ground flax seed”] as you had recommended. Â I also started using a Sonicare toothbrush at that point so it’s hard to figure out the degree to which either variable might be responsible, but today she said my gums were much better, and had hardly bled at all during the measurement of the pockets. All talk of root planing was forgotten.

According to this, root planing costs $400-$1600. After Tyler Cowen started drinking flaxseed oil (2 T/day), he no longer needed gum surgery.

It is hard to get well-preserved flaxseed oil in Beijing (it goes bad at room temperature) so I now take 66 g/day ground flaxseed instead of 2 T/day flaxseed oil. I add it to yogurt twice/day. I don’t know if ground flaxseed is healthier or less healthy than flaxseed oil but it is much less trouble. Preservation is no problem (flaxseeds can be stored at room temperature) and ground flaxseed requires zero willpower to eat with yogurt. I had to push myself a little to drink the oil.

Inside Job Wins Oscar

Seth Roberts6 Comments

I remember the first time I encountered Spy magazine. It was at Cody’s Bookstore in Berkeley. One of the articles attacked Bill Cosby. Wow! I thought. You don’t see that every day.

Which is why Inside Job, which just won the Oscar for long documentary of the year, is so important: It attacks prestigious professors at Harvard and Columbia and to some extent the institutions themselves. You don’t see that every day. Larry Summers, former Harvard president, is one of the main villains of the piece. Few intellectuals have combined poor understanding and power as much as Summers has. (With bonus points for nauseating treatment of staff.) Perhaps none has done so much harm. Had Summers not blocked Brooksley Born from regulating derivatives, the world would be a different place. And it isn’t just Summers. The movie shows that John Campbell, chairman of the Harvard economics department, has trouble understanding the concept of conflict of interest. What this says about Harvard, the most prestigious academic institution in the world, is not something Harvard professors are going to want to think about. Harvard, of course, is the home of Joseph Biederman, the most ethically-challenged professor I know of.

Michael Moore’s Sicko did a great job of provoking outrage. At the same time, however, it was empty of interesting thought. It was not a new idea that American health care might benefit from imitating other countries. So the outrage boils away unused. In contrast, Inside Job contains the beginning of a thoughtful critique: It says that economics professors were corrupted by all the money they could make praising and doing the bidding of Wall Street (e.g., resisting regulation). Summers made out especially well. You won’t find this critique in The Big Short, All The Devils Are Here, Too Big to Fail, or How Markets Fail. A viewer of Inside Job might stop giving money to Harvard until Harvard enacts conflict of interest rules for economics professors.

I don’t think conflict of interest is the whole problem with Summers et al. Poor understanding is a big part of it. A friend of mine at Berkeley took introductory economics. What about data? I asked her. Where’s the data for all these assertions? She went to her professor. Where’s the data? she asked. Don’t worry about data, he said. Economics professors have started paying more attention to data (Steve Levitt, John List), but they have a long way to go.

How to Be Less Efficient

Seth Roberts4 Comments

Andrew Gelman links to this post about intellectual working conditions. It reminds me of something I do every day that still amuses me. I keep track of whether I am working or not — and I count making tea as working. This helps me get started: I start by making tea. The opportunity to mislead myself (appear more efficient than I am, get something for nothing) makes me want to start working.

The Best Argument Against Man-Made Global Warming

Seth Roberts46 Comments

The best argument I have ever seen against the idea that humans are dangerously warming the earth — that is, against the view of Al Gore, Elizabeth Kolbert, and thousands of other people who claim to understand what they are talking about — comes, strangely enough, from a supporter of this view.

Steve Connor is the Science Editor of The Independent, a highbrow London newspaper. He interviewed Freeman Dyson — who, like me, thinks the conventional certainty on this issue is far too strong — on the subject. The headline of the interview labels Dyson a “heretic”. Connor wants to know how Dyson reacts to what seems to Connor to be overwhelming evidence.

The interview is by email. Dyson says he has no faith in the models. Connor writes:

I was only trying to find out where your problem lies with respect to the scientific consensus on global warming. As you know these models [that Dyson doesn’t believe] are used by large, prestigious science organizations such as NASA, NOAA and the Met Office, which use them to make pretty accurate predictions about the weather every day. The scientists who handle these models point out that they can accurately match up the computer predictions to real climatic trends in the past, and that it is only when they add CO2 influences to the models that they can explain recent global warming.

There it is. The scientists who use the weather models every day, who know them better than anyone else say that we should believe them because 1. They can fit “real climatic trends in the past”. This is meaningless. The models have lots of adjustable parameters. Perhaps they could have fit any plausible past trends. 2. They “make pretty accurate predictions about the weather every day” — that is, predictions of the weather of the next week or so.

This is admission of defeat. It’s as if you say you can throw a ball a mile and, when someone asks how you know this, you say, “I’ve thrown a ball 10 yards quite often.” If you had thrown a ball more than 10 yards you would have said so. If the models had predicted accurately more than a week in advance their boosters would have said so.

It isn’t just Steve Connor who unintentionally makes a really good case for the opposite of what he believes. Sir Paul Nurse, a Nobel Prize winner in Biology and President of the Royal Society, hosted a recent BBC show called Science Under Attack in which we were supposed to believe predictions of global catastrophe because weather models can predict the weather for the next few days. A NASA weather expert said that! Nurse took him seriously.

My goodness. If the President of the Royal Society is this credulous, what are the ordinary members like?

The Baltimore Shipyard Study

Seth Roberts12 Comments

In a comment on my last post, Sean Estey described a study of Baltimore shipyard workers, some of whom handled radioactive materials. The ones exposed to more radiation were healthier than those exposed to less. The difference in death rate was huge: 25%. This is so large and consistent with other data I doubt it is due to a confounding.

You can read more about this study here and here. If one quarter of all deaths are due to suboptimal stimulation of repair systems, that’s extraordinary news. The study was finished around 1990. The plausibility of such a large benefit should have led to experiments. The observation that people in mountain states (such as Colorado) have less cancer than those in gulf states (such as Alabama) as well as greater radiation exposure suggested to John Cameron, a professor of toxicology, an experiment in which some gulf state residents are exposed to enough radiation to bring their total exposure up to what mountain state residents receive. This has yet to be done.

In a paper about the effects of low-dose radiation, the authors say we should ignore the Baltimore study because of “the healthy worker” effect — the possibility that persons in one exposure group were healthier than those in another exposure group because workers are healthier than non-workers (and fitness for work may have differed between the exposure groups in the Baltimore study). They give three examples to illustrate the healthy worker effect. In these examples, a group in which everyone has a particular job were healthier than the general public, which includes many people without a job. In their examples, the median effect of being in the full-employment group (in which everyone has a job) is a 10% decrease in mortality compared to the general-public group (in which some people don’t have a job because of disability). That should give a good idea of the maximum size of the healthy worker effect — when something is explicitly varied, that’s what happens. The Baltimore study compares person with job to person with job, not person with job to person without job. This suggests that in the Baltimore study, the healthy worker effect was smaller than the effect in the examples, meaning smaller than a 10% reduction. Such an effect cannot explain a 25% reduction.

A comment by Alrenous on my earlier post linked to a 2007 study of people in Taiwan whose apartment building was accidentally contaminated with radioactive materials. By the time of data collection, they had gotten far less cancer (3% of what would have been expected) than the general Taiwan population. A healthy worker effect cannot explain this. Again, the reduction is so great it is unlikely to be due to confounding.

If I could buy something to put under my bed that would expose me to the level of radiation received by people in Colorado, I would.