Keeping up with the FITs, 6/19
Noah Smith on Brad DeLong; Patrick Collison interviews Sam Bankman-Fried; Matt Yglesias on energy policy; Timothy Taylor on the stock market
Noah Smith has a preview copy of Slouching Toward Utopia, by Brad DeLong. DeLong has seemingly been working on the book forever. Smith writes,
Most of the book is actually focused on those political upheavals. DeLong’s “long 20th century” saw the development of various ideologies, including liberal democracy, free-market libertarianism, communism and fascism. This was completely natural; thanks to rapidly accelerating growth, humanity was rapidly confronted with newfound wealth beyond their previous imaginings, new possibilities for social organization, new problems, new opportunities, and new distributions of economic power. Of course there were going to be lots of big ideas for how to handle all this, and of course some of those ideas were going to be crazy and bad.
Interviewed by Patrick Collison, Sam Bankman-Fried around minute 40 says that it is easy for the marginal employee to be net-negative. I wonder if he is too young to have read The Mythical Man-Month. One of a number of interesting comments. Pay attention to the questions that Patrick asks, because they offer insight into how his mind works. Pointer from Tyler Cowen.
Matt Yglesias takes climate activists to school. Just one example:
cheap natural gas is a great complement to renewable electricity. Natural gas plants that cycle on only when the sun isn’t shining obviously aren’t going to get you to a zero-emissions electricity grid. But they are great for getting you to a lower emission grid without the need for massive overbuilding.
The green movement in the West mostly helps Russia and other non-U.S. oil producers. Some people suspect that Russia is behind much of the green movement.
There are reasons that a higher-than-normal CAPE might be appropriate in 2022. First, interest rates are lower than inflation, so the real interest rate (the nominal rate minus the inflation rate) is negative. This should increase the amount an investor should be willing to pay for $1 of current earnings since earnings (and the dividends they fund) should grow with inflation while the alternative of holding a bond rather than a stock is less attractive because of still low nominal interest rates. Second, high price-earnings ratios in the United States partly reflect a sectoral sorting between the United States and Europe in which the United States has more high-growth technology companies and Europe more slower-growing consumer goods corporations.
CAPE is a price-earnings ratio based on a ten-year average for earnings. The point about “sectoral sorting” is one that had not occurred to me.