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.
Like the peace movement, the environmental movement in the West was probably not Soviet-originated but they did latch onto it as an opportunity to hold us back, and largely succeeded. In both cases this produced very heterogeneous movements.
In California the most visible enviros by far are the Sierra Club, a group which has the demographics of Marin County (upper-middle-class incomes and above, call it $200K and above today). For these folks, environmentalism brings them direct benefits. It created the urban-planning industry, which amounts to a real estate cartel that legally declares most of other people's unbuilt land off-limits to development, thus raising the price of their own nice homes astronomically at the expense of anyone who comes after them and needs a home. "They can live somewhere else." The club also gets governments to create big new parks and "greenbelt preserves" to buy up that unbuilt land, where its rich members can see it from their front yards. The most outrageous thing about the club, and the broader environmental movement, is that it successfully portrays these selfish grabs to the public as if the members had done them for the benefit of you and me, who as a result will never be able to afford to live anywhere near.
According to Basic Books, publisher of DeLong's book:
"Before 1870, humanity lived in dire poverty, with a slow crawl of invention offset by a growing population. Then came a great shift: invention sprinted forward, doubling our technological capabilities each generation and utterly transforming the economy again and again. Our ancestors would have presumed we would have used such powers to build utopia. But it was not so. When 1870–2010 ended, the world instead saw global warming; economic depression, uncertainty, and inequality; and broad rejection of the status quo.
Economist Brad DeLong's Slouching Towards Utopia tells the story of how this unprecedented explosion of material wealth occurred, how it transformed the globe, and why it failed to deliver us to utopia. Of remarkable breadth and ambition, it reveals the last century to have been less a march of progress than a slouch in the right direction. "
I'm still laughing at that idiocy. Then, in Amazon, I read Piketty's editorial review
“Brad DeLong learnedly and grippingly tells the story of how all the economic growth since 1870 has created a global economy that today satisfies no one’s ideas of fairness. The long journey toward economic justice and more equal rights and opportunities for all shall and will continue.”
And I'm sure I will laugh at it all day long. Today one of my grandsons is finishing the study of world history for his 8th grade exam later this week and I promised him to review it together.
I stopped reading DeLong's blog a long time ago. It looks like that in the meantime he has been thinking again and again the same simple idea: richer but yet unhappy. Although the book may be a masterful interpretation of econ history as asserted by Christina Romer in Amazon, I bet it provides no serious analysis of people's unhappiness.