Links to Consider, 4/10

Sam Hammond on economic diversification; Erik Torenberg on equality vs. meritocracy; Niccolo Soldo on how the Ukraine War is going; Michael Shermer and David Brin on AI and other topics

Sam Hammond writes,

Both the Dutch disease and the middle-income trap stem from the failure of an economy to properly diversify, and in many ways the contemporary U.S. economy exhibits symptoms of each. Following the collapse of the Soviet Union, the U.S. adopted an explicit strong-dollar policy, only rather than export oil, we exported the safety and stability of dollar-denominated assets like Treasury securities. The U.S. dollar now denominates two-thirds of international foreign currency reserves, 90 percent of foreign-exchange trades, and trillions of dollars in private assets held abroad.^[42] This makes the U.S. the most attractive economy in the world to park one’s excess savings, which we absorb in the form of our ever greater public and household debt.^[43] Where a petro state might invest in pipelines and refineries, the U.S. invested in Wall Street — the de facto pipes of global finance. In the mid-1990s, the U.S. corporate sector thus transitioned from being a net borrower to being a net lender, while aggregate investment in tangible assets like structures and equipment withered on the vine.

He is actually quoting himself from this paper.

Basic economic theory says that a country should exploit its comparative advantage. Instead, to “diversify” the economy is inefficient.

The U.S. has a comparative advantage as a safe financial haven. We have the world’s strongest military and a stable government. Thus, we have a comparative advantage in producing debt, primarily government debt. That is not necessarily a good comparative advantage to have.

Erik Torenberg writes,

Egalitarianism and meritocracy have both been amazing for the world, and in turn made the world more egalitarian and meritocratic. There are benefits to both — but each up to a point. Where's that point? Where's the middle ground? Who gets to decide? We’ll explore these questions in future posts.

A lot of people try to finesse this issue by saying that they are for equality of opportunity while allowing inequality of outcomes. Other people try to finesse the issue by saying that inequality of outcomes proves that there was inequality of opportunity.

In fact, the definition of “equality of opportunity” is elusive. It makes sense if you are talking about a running race. Equality of opportunity puts everyone at the same starting line. But there are no starting lines in life. There is not such a well-defined race.

Niccolo Soldo writes,

Common wisdom had it that Russia would go into Ukraine with overwhelming force. It didn’t. Common wisdom also insisted that the Russian economy would be quickly crippled after the slew of sanctions that followed its invasion of Ukraine. That hasn’t happened. Common wisdom (at least in the West) held that much of Africa, Asia, and Latin America would stand with Ukraine and the West, and side against Russia.

The inability of the US-led West to secure the support of the developing world in its quest to neutralize Russia is its greatest failure since the war began a little over a year ago. The fact of the matter is that not only has western diplomacy failed in large parts of Asia, Africa, and Latin America, China and Russia are making significant inroads in these places to the West’s detriment.

But the virtue signaling is still very satisfying.

Michael Shermer interviews David Brin. I am a huge David Brin fan, and he does not disappoint here. Although the topic is nominally AI, Brin offers his theory of what I call human interdependence. His big thing is reciprocal accountability, which echoes Jonathan Rauch’s Constitution of Knowledge. If you listen to the podcast, you are bound to grasp the influence that Brin has had on me.

The bumper-sticker version of what he says about banning AI is “If AI is outlawed, only outlaws will have AI.” He wants the opposite of banning. He wants lots of AI’s competing with one another and tattling on one another. I find him persuasive.

Substacks referenced above:

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Saturday Commentary and Review #119

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Different Scopes for Different Folks

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JD Vance is right