I like Travis Bradberry's 10 ways to appear smarter than you are better after I arrange them into two lists: laudable and gimmicky. Here is my arrangement:
Laudable, in order from least to most laudable:
- Skip that drink.
- Speak expressively.
- Believe in yourself.
- Make graphs.
- Write simply.
Gimmicky, in order from least to most gimmicky:
- Look 'em in the eye.
- Keep pace with the crowd. ("If you want to look smarter, you need to stop dawdling, but you also need to stop scurrying around like some crazed robot.")
- Dress for success.
- Use a middle initial.
- Wear nerd glasses.
On the third laudable way to look smarter, "believe in yourself," I say this in "Calculus is Hard. Women Are More Likely to Think That Means They’re Not Smart Enough for Science, Technology, Engineering and Math":
In addition to discouragement, low confidence in oneself also causes other people to underestimate one’s skills. It is quite difficulty to know how skilled someone is, but typically quite easy to tell how skilled they think themselves to be. So people use a job candidate’s opinion of herself or himself as a shortcut for judging her or his skills.
For those who need to come across as more confident I highly recommend the weekend personal growth workshops conducted by Landmark Education Corporation, beginning with the Landmark Forum. In my view, almost everyone entering the dissertation writing and then job-hunting phases of getting a PhD in economics should do the Landmark Forum because of how much it will help the psychology of being able to focus on dissertation research and then the psychology of self-presentation for getting a job. I am sure that the same advice would apply to students in many other fields, at many stages of education.
My biggest disagreement with Travis is not my discomfort with gimmicky ways to appear smarter. It is with his conclusion
Intelligence (IQ) is fixed at an early age. You might not be able to change your IQ, but you can definitely alter the way people perceive you.
Au contraire: your intelligence is not fixed at all. It is possible to become much smarter by serious, well-focused effort. If you don't believe that, read these three columns on education:
- There’s One Key Difference Between Kids Who Excel at Math and Those Who Don’t
- How to Turn Every Child into a “Math Person”
- The Coming Transformation of Education: Degrees Won’t Matter Anymore, Skills Will
What is said there about math also applies to many other mental skills.
I have had it verified by those in a position to know that among many economists in the city of Minneapolis, there is an view that can be summarized as
General equilibrium good, partial equilibrium bad.
I would like to contest the second half of this view, and qualify the first half. Here, when I speak of general equilibrium, I am thinking of a typical dynamic, stochastic general equilibrium model. When I speak of partial equilibrium, I am including models of a single agent's decision problem, such as the model of household decision-making that leads to the empirical consumption Euler equation. In both cases, I am thinking of models being taken to the data as opposed to models that are pure theory.
Why Partial Equilibrium Has an Advantage over General Equilibrium Models for Empirical Analysis
The basic problem with a general equilibrium model is that if any part of the model is misspecified, then inference (formal or informal) about the relationship between any other part of the model and the data is likely to be messed up. If that is not true, then the general equilibrium model is equivalent, or nearly equivalent to a partial equilibrium model, putting that partial equilibrium model and the general equilibrium model on an equal footing. (If a general equilibrium model is equivalent to a partial equilibrium model, then the general equilibrium aspect of the general equilibrium model is just window dressing.)
By contrast, a partial equilibrium model—say one that makes predictions conditional on observed prices—can be robust to ignorance about big chunks of the economy. For example, given key assumptions about the household (rational expectations, maximization of a utility function of a given functional form, absence of preference shocks, no liquidity constraints, etc.) the consumption Euler equation should hold regardless of how the production side of the economy is organized.
That statement about the robustness of the consumption Euler equation to ignorance about big chunks of the economy holds true for a variety of different functional form assumptions. For example, if labor hours (or equivalently, leisure hours) are nonseparable from consumption, there is still a well-specified consumption Euler equation in which one only needs to know labor hours to condition on them. Here, for the purposes of understanding the determination of consumption, one need not know the structure of the labor market for the equation to hold, only the actual magnitudes of labor hours ground out by the labor market. (Susanto Basu and I talk about this in our still-in-the-works paper "Long-Run Labor Supply and the Elasticity of Intertemporal Substitution for Consumption.")
As another example, I have begun supervising a potential dissertation chapter looking at a model that combines many sides of the economy, but derives results that are robust to ignorance about the stochastic processes of the shocks to the economy.
One way to think about partial equilibrium is that a partial equilibrium model represents a class of general equilibrium models. Showing that something is true for an entire class of general equilibrium models can be quite useful. Therefore, partial equilibrium can be quite useful.
Where General Equilibrium Models Come In
Because of their robustness to ignorance in other parts of the economy, partial equilibrium models have a real advantage over general equilibrium models for breaking the task of figuring out how the world works into manageable pieces. This is empirical analysis, in the literal sense of analysis as breaking things down.
Once one understands (to some reasonable extent) how the world works, general equilibrium models are the way to understand what the effects of different policies would be. The motto that "Everything affects everything else" is a useful reminder that studying the effects of policies often requires a general equilibrium approach. But that comes after one understands what the right model is. Partial equilibrium is often a better way to figure out, piece by piece, what the right model and the right parameter values are.
Even in policy analysis, sometimes a more partial equilibrium approach can be helpful. In policy analysis, a partial equilibrium approach can be called "price theory," in line with Glen Weyl's definition in his Marginal Revolution guest post "What Is 'Price Theory'?":
... my own definition of price theory as analysis that reduces rich (e.g. high-dimensional heterogeneity, many individuals) and often incompletely specified models into ‘prices’ sufficient to characterize approximate solutions to simple (e.g. one-dimensional policy) allocative problems.
Glen gives some examples:
To illustrate my definition I highlight four distinctive characteristics of price theory that follow from this basic philosophy. First, diagrams in price theory are usually used to illustrate simple solutions to rich models, such as the supply and demand diagram, rather than primitives such as indifference curves or statistical relationships. Second, problem sets in price theory tend to ask students to address some allocative or policy question in a loosely-defined model (does the minimum wage always raise employment under monopsony?), rather than solving out completely a simple model or investigating data. Third, measurement in price theory focuses on simple statistics sufficient to answer allocative questions of interest rather than estimating a complete structural model or building inductively from data. Raj Chetty has described these metrics, often prices or elasticities of some sort, as “sufficient statistics”. Finally, price theory tends to have close connections to thermodynamics and sociology, fields that seek simple summaries of complex systems, rather than more deductive (mathematics), individual-focused (psychology) or inductive (clinical epidemiology and history) fields.
I view most of the economics I do on this blog as price theory in Glen Weyl's sense: "analysis that reduces rich and often incompletely specified models into 'prices' sufficient to characterize approximate solutions to simple allocative problems." My analysis of negative interest rate policies—and in particular what I wrote in "Even Central Bankers Need Lessons on the Transmission Mechanism for Negative Interest Rates" and "Negative Rates and the Fiscal Theory of the Price Level"—is a good example.
The moral is don't put unnecessary constraints on the tools you use. Use the tool that best fits the purpose. Sometimes that will be general equilibrium; sometimes it will be partial equilibrium.
I have watched enough cop and detective shows to know the standard line against vigilantism: some version of "You can't take the law into your own hands." But John Locke begs to differ. In section 19 of his 2d Treatise on Government: “On Civil Government,” he says quite explicitly that in situations where the police and courts won't do their jobs or are unable to do their jobs in time, that it is appropriate to take the law into one's own hands:
And here we have the plain difference between the state of nature and the state of war, which however some men have confounded, are as far distant, as a state of peace, good will, mutual assistance and preservation, and a state of enmity, malice, violence, and mutual destruction, are one from another. Men living together according to reason, without a common superior on earth, without authority to judge between them, is properly the state of nature. But force, or a declared design of force, upon the person of another, where there is no common superior on earth to appeal to for relief, is the state of war: and it is the want of such an appeal gives a man the right of war even against an aggressor, though he be in society and a fellow subject. Thus a thief, whom I cannot harm, but by appeal to the law for having stolen all that I am worth, I may kill, when he sets on me to rob me but of my horse or coat; because the law, which was made for my preservation, where it cannot interpose to secure my life from present force, which, if lost, is capable of no reparation, permits me my own defence, and the right of war, a liberty to kill the aggressor, because the aggressor allows not time to appeal to our common judge, nor the decision of the law, for remedy in a case where the mischief may be irreparable. Want of a common judge with authority, puts all men in a state of nature: force without right, upon a man’s person, makes a state of war, both where there is, and is not, a common judge.
There are three reasons to let the state take care of justice rather than taking the law into one's own hands that do not involve any mystical respect for the state. The first is the principle that "People Must Not Be Judges in Their Own Cases." And by the same token, my family, friends, close allies or someone in my pay should not judge my case either. There is too much chance of bias. But other than one's family, friends and close allies, whom can I convince to take an interest in justice for me? One can hope the state will.
Second, even if an impartial vigilante is available to take an interest in justice for me, there is a good chance that the vigilante's procedures for determining the facts and appropriate disposition of my case will be less accurate, and therefore less just than the state.
Third, even when a wise, impartial vigilante with excellent investigative skills is available to take an interest in justice for me, the state may object, simply as a power play. If the state isn't too much worse than the vigilante at securing justice, it might make sense to allow a modest degradation of justice in order to avoid getting in practical trouble with a state jealous of its own prerogatives.
All of these reasons to let the state take care of justice are a matter of degree. I consider the first the most compelling; people often do misjudge their own cases and the cases of those close to them, and even the cases of those in their own ethnic group, when the opposing side in the case is someone from another ethnic group. But once an impartial vigilante is in play, it is easy to get sympathy for that vigilante and the person who needs justice simply by portraying a situation in which the state is doing a bad job.
Moreover, when they are otherwise in the right, vigilantes who take the law into their own hands often get away with only light punishments. To me, this reflects the respect prosecutors and juries have for the principles John Locke writes of, whether those prosecutors and juries realize it or not.
Update: After reading this post, Dwight Allman makes a very interesting comment on Facebook about John Locke's shifting views of the state of nature. Here is a link.
Nick Timiraos and Andrew Tangel's Wall Street Journal article on productivity and number of workers in the US explores many of the same themes as my talk "Restoring American Growth." One of the most basic truisms in the article is the one I made into the title of this post:
In the long term, an economy can’t expand faster than the combined growth rates of its working population and their output per hour.
Let me talk about each of these in turn, as they do.
The Drift of Policy is Against Growth in Number of Workers Because It Focuses on Prohibiting People from Working for the US Economy
Nick and Andrew write:
The president is pushing some policies that work against economic growth. Relatively low birthrates and an aging population mean immigration is the source of nearly all of the work force’s net increase, so its growth rate would be even lower if legal immigration were curbed.
For the most part, economic growth is judged in terms of income per person. But there is one exception: potential military power depends in important measure on total GDP, not just GDP per person. In "Benjamin Franklin's Strategy to Make the US a Superpower Worked Once, Why Not Try It Again?" and "Why Thinking about China is the Key to a Free World," I wrote of how allowing more immigration could add greatly to the military and therefore geopolitical strength of the US. Thus, allowing more immigration is the obvious way to "Make America Great Again" in the geopolitical sense. Conversely, treating being American as a closely guarded privilege that only those born to that privilege are allowed is a path to greatly reduced American power and influence. Of course, allowing more immigration is also extremely valuable to the immigrants themselves, as I talk about in "Us and Them" and "'The Hunger Games' Is Hardly Our Future--It's Already Here." But many people have a "Keep the Riffraff Out!" attitude that trumps concern with the America's power and the well-being of people who want to join us in our fair land.
Aggregate Demand Is No Longer Scarce
Other than immigration, is there room for expanding the number of workers in the US economy? NIck and Andrew argue this is difficult:
With the unemployment rate now at 4.4% and operating at a level economists consider to be “full employment,” meaning the economy produces as many jobs as it can without spurring inflation, the labor market provides little room for the kind of economic surge that marked the 1980s.
But there is a contrary argument:
White House Budget Director Mick Mulvaney ... pointed to millions of prime-age workers who aren’t in the labor force. “If you created economic opportunity and jobs that they want, they would come back,” Mr. Mulvaney said. “So I’m not worried about the tightness of the labor supply.”
This argument should not be dismissed too quickly. It is quite similar to arguments made by Narayana Kocherlakota in our storified Twitter debate "Narayana Kocherlakota and Miles Kimball Debate the Size of the US Output Gap in January, 2016."
When Monetary Policy Keeps the Economy at the Natural Level, the Supply Side Determines What Happens
Some people think that monetary policy alone can create growth miracles. It can't; not for long. Good monetary policy can readily cut short potential disasters such as the Great Depression or Great Recession, which is in itself quite valuable, but when monetary policy has done its job, then it takes other policies to raise the growth rate of the economy in a sustainable way.
And indeed, if monetary policy is done well, the remaining story will about the supply side. In my view, one of the best ways to get people to focus on the supply side—or what is sometimes called "structural reform"—is to do monetary policy so well that the economy stays at the natural level, or very close. What would this look like? Something like this description from Nick and Andrew, only more so:
If growth advances and productivity does too, policy makers may be able to keep interest rates lower for longer because productivity growth holds down inflation. Companies can boost profit margins and hold down costs, and thus inflation, when they can produce more goods and services with fewer workers.
If, on the other hand, the administration’s policies boost demand without drawing in new workers or raising their productivity, the growth that results could be harder to sustain because it would produce inflation. The Fed would feel additional pressure to raise interest rates to prevent the economy from overheating.
The Overall Trends in Productivity Growth Are Disappointing
Nick and Andrew include a graph showing how the growth rate of output per work hour has declined in recent years:
I made a similar graph in the slides for my talk "Restoring American Growth." But where Nick and Andrew's graph gives credit for growth in the next 5 years and the last 5 years, my graph gives credit only for growth in the next 5 years after a given date, and so shows the decline in productivity growth after 2003 much more clearly:
A capsule history of productivity growth since World War II goes like this:
- Fast from the end of World War II in 1945 to 1973
- Slow from 1973 to 1995
- Fast from 1995 to 2003
- Slow from 2003 to the present and maybe beyond (2017+)
But to provide some perspective, however wrenching they have been politically, the "slow" growth rates from 1973 to 1995 and from 2003 to the present still represent the productivity growth rate that existed during the Industrial Revolution. The fast periods from the end of World War II in 1945 to 1973 and 1995-2003 made many people expect those productivity growth miracles to continue.
Productivity Growth Is Miserable in Construction
One of the big puzzles for productivity—one that deserves to have many more economists studying it—is why productivity growth in construction has been so miserable. Productivity growth has been quite high in manufacturing. Construction is also a seemingly straightforward physical activity involving the assembly of tangible materials. Why is its productivity growth trend so different from that of manufacturing?
Look at the difference in the productivity trends between construction ("Structures") and manufacturing (the other two):
Nick and Andrew also note the low productivity growth in construction. Here is their discussion:
Camden uses efficiencies such as prefabricated concrete building panels and roof trusses, “but there hasn’t been a huge breakthrough yet where we can lower costs dramatically,” said Mr. Campo. “You have a nail gun instead of a hammer, OK? But you still have to line it up and pull the trigger.”
Productivity in construction has contracted at a 1% annual rate since 1995, according to a study by McKinsey Global Institute, the research arm of McKinsey & Co., due in part to reliance on unskilled workers and in part to government red tape.
Joel Shine, chief executive of builder Woodside Homes Inc., visited Kyoto, Japan, to see how firms there use automation in home construction. He thinks it would take at least a decade for the innovations to become mainstream in the U.S., in part because they would require building-code changes.
State and local rules often play as big a role for his business as the federal government. Higher permitting fees, for instance, have raised construction costs in California towns. “There are a lot of places if you gave me a raw lot for free—for free!—I could not even come close to building an entry-level house,” Mr. Shine said.
I think this passage is part of the story. But I think there is more to the story of why construction productivity has gotten worse instead of better. I hope someone does more digging to find out.
Prospects for Productivity Growth Elsewhere are Unclear
There is hope that productivity growth—that is, growth in output per work hour—will pick up. But the prospects are unclear. Nick and Andrew counterpose these two views:
Some productivity optimists say gains from new technology will build in the years ahead. They see businesses incorporating a backlog of innovations in artificial intelligence, from self-driving vehicles to the processing of routine clerical work.
A paper from four growth specialists published by the Brookings Institution in March takes a dimmer view. It maintains that almost the entire shortfall in output during the recent expansion reflects long-term forces unrelated to the financial crisis and recession, including a drop in a measure of economic dynamism called “total factor productivity.” That measure reflects how efficiently labor and capital are used.
Of course, the future of technology is unavoidably difficult to know; to know enough to predict it well, we would have to know the future technology itself. I talk about that difficulty in "The Unavoidability of Faith."
What Can Be Done?
The question of what can be done is a difficult one. I know I don't have all of the answers, but I tried in my talk "Restoring American Growth" to make progress on this issue. I would be honored to have anyone reading this post listen to the video of that talk.
A clear refutation of this theory would be very interesting.
Here is a link to my 68th Quartz column, "Economics is unemotional—and that's why it could help bridge America's partisan divide." Note: You can see all of my previous Quartz columns listed in order of popularity here.
In order to keep things tight, my editor for this column, Sarah Todd, suggested cutting two passages that might interest you: my original introduction, which defines the concept of "politicism," and a passage about the politics of financial stability. I reproduce them below from my early draft of this column:
Original Intro Defining 'Politicism':
Among friends considering where to live, I hear a concern these days I don’t remember hearing when I was younger: “I could never live there because people are too conservative there politically.” A series of social psychology studies by Jarret Crawford, Mark Brandt, Yoel Inbar, John Chambers and Matt Motyl back up the idea that this kind of distaste for those with different political beliefs is common. They have two main findings, based on detailed surveys of 4912 people. First, liberals look down on conservatives just as much as conservatives look down on liberals. Second people look down on others more for discordant beliefs on social issues than they do for discordant beliefs on economic issues.
It is handy having a word for “looking down on a group of people because of their politics.” The word “politicism” seems available. The online Oxford Dictionary defines it as “A concern with or emphasis on the political,” which is close enough for me. The online Urban Dictionary defines it as “voting in a politic election simply based on religion, sex, or ethnicity.” In my definition I am turning that around: politics itself has become a quasi-ethnicity that many people have intense prejudices about. Using my definition of “politicism,” one can say liberals as well as conservatives show a great deal of politicism, and politicism is stronger for social issues than for economic issues.
Original Passage on the Politics of Financial Stability
For a political strategy in which rhetoric focuses on social issues and easy-to-understand economic issues, there is a role for hard-to-understand aspects of economic policy. Hard-to-understand aspects of economic policy are perfect for pleasing sophisticated special interests who understand—while others don’t—that some opaque bit of economic policy will enrich them at the expense of everyone else. A prime example is the hope of banks and other financial firms to get themselves in line for more bailouts in the future by gutting requirements that stockholders put up enough money for banks that stockholders take the hit in a crisis rather than taxpayers. Regular voters know they don’t like bailouts, but their eyes glaze over at discussions of the capital requirements needed to avoid bailouts. Even Elizabeth Warren, who is better at making this kind of thing interesting to the average voter than anyone else, often has to quickly shift the subject to the easier-to-understand issue of people being ripped off by deceptive consumer finance in order to keep her listeners awake.
My Dad, Edward Lawrence Kimball, died on November 21, 2016, a little less than six months ago. I have posted my tribute to my Dad and the tributes of my brothers and sisters, as well as by my Dad's colleague Jack Welch:
- My Dad
- Christian Edward Kimball on Edward Lawrence Kimball
- Joseph Ellsworth Kimball on Edward Lawrence Kimball
- Paula Kimball Gardner, Mary Kimball Dollahite and Sarah Camilla Kimball Whisenant on Edward Lawrence Kimball
- Jordan Andrew Kimball on Edward Lawrence Kimball
- One for All: John Woodland "Jack" Welch on Edward Lawrence Kimball
Today, and four weeks from today, I am posting videos of John Dehlin's two interviews of my Dad about my Dad's views on Mormonism. (If you can't wait, here is a link to Part 2.) These interviews are excellent at showing how my Dad thought about religion—something he cared deeply about. If you want to see the best face of Mormonism I know of, take a look at these videos.
Sam Wang begins his December 5, 2015 New York Times op-ed "Let Math Save Our Democracy" (flagged by a current article about the upcoming 2020 census) with the words
Partisan gerrymandering is an offense to democracy. It creates districts that are skewed and uncompetitive, denying voters the ability to elect representatives who fairly reflect their views.
I expressed a similar view in my early post Persuasion:
Many people may not realize the extent to which political polarization in the House of Representatives arises from partisan and pro-incumbent redistricting. When electoral districts are designed to be either safe Republican or safe Democratic districts, then the main fear for a politician seeking reelection is losing in the primary. That typically pulls members of the House of Representatives toward the extremes. Nonpartisan redistricting is a way to have more districts be competitive in the general election and so make those running for Congress worry more about the general election relative to how much they worry about the primary. I believe this would pull politicians toward to center and toward a greater willingness to work with those in the other party. Getting change to happen in this area will be hard, but there are groups already working on this. I believe the long-run value to our Republic of nonpartisan redistricting would be substantial.
In my more recent post "Nonpartisan Redistricting," I added:
In other words since most (all but about 40 of 435) Congressional districts are designed to be safe for one party or the other, those in Congress often take actions to please their bases rather than the center. That in turn tends to push Congress toward being more of an arena of posturing rather and less of an arena for deliberating about helpful legislation.
So I am pleased that the Supreme Court upheld the constitutionality of redistricting commissions. (I am not sure the text of the Constitution fully supports this decision, so ideally it would be good to have a constitutional amendment declaring them legal–and going beyond that, requiring them for all states.)
I hope with the issue of constitutionality settled that more and more states adopt redistricting commissions. Though this may involve short-run sacrifices of reelection probabilities, I think this is actually even in the long-run interest of a party in control of a given state, since parties that get used to appealing to the center to a greater degree are likely to grow in influence.
Sam Wang gives another ray of hope that things can improve even in states that continue to have legislative redistricting:
Simple criteria for identifying gerrymanders would be of great use. The Supreme Court has never rejected a voting district for giving a political party an advantage. ...
A majority of the court, however, supports the idea of finding a test that measures partisan asymmetry. Justice Anthony M. Kennedy, who in the past has provided the deciding vote on this question, has stated his desire to find a workable means of identifying partisan gerrymanders. Either the average-median difference or the lopsided-margin test could serve such a function. Justice Kennedy can have them both.
The trouble with Sam Wang's tests is that they focus on the effect of gerrymandering on overall partisan balance, rather than the number of competitive districts. To me, the number of competitive districts is every bit as important as the overall partisan balance. So a third statistical test is needed: one the counts the number of districts with with close to a 50% vote share for each party. This would force candidates in those districts to try to appeal to independent voters and even voters of the other party, not just voters of their own party.
The link at the top is to Neil Irwin's summary, which includes the two graphs above from Alan Krueger's speech. Below is the link to Alan Kruegers full speech: