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
I don't buy most of Hammond's description. From 1990 to 2007 total value of US manufacturing rose by 80% and there was plenty of growth in other areas beyond just finance. It is functionally only after 2008 when US debt exploded after saving the finance system that we went from a decently expanding economy to a straight jacketed, fully debt financed economy. 1990-2007 had its issues, but the clear break between when the US was an expanding economy with growth in multiple sectors to the US being well below trend with growth in highly levered sectors or explicit government subsidies (healthcare, college) is frankly wildly easy to see on just about any graph you pull up. '07/'08 was a hard break and that had little to do with a strong dollar policy and everything to do with socialization of risk.
"we have a comparative advantage in producing debt, primarily government debt. That is not necessarily a good comparative advantage to have"
Amazing statement--captures so much of what underlies US government policy. Worth a longer and careful analysis. It seems like the US government has decided to weaponize this CA? Can a weaponized CA endure and growth when other parties recognize the risks posed by weaponization?
Soldo: Most of the places that remain uncommitted in the West v Russia-China in Ukraine were also uncommitted in WWII (except parts of empires and that hardly counts).
Nothing wrong with "virtue signaling" when it's a real virtue being signaled. :)
Hammond, I have a different diagnosis. A combination of increased demand for safe dollar assets and structural deficits meaning higher than otherwise dollar interest rates made the dollar "strong" and shifted the relative prices of traded and non-traded goods. The deficits also meant a pull of resources from investment toward consumption. When policy direct the additional income from higher exports toward investment (e.g. Norway) "Dutch Diseases don't strike.
Brin sounds similar to a more extended version of something Tyler Cowen has said more than once that the correct model/analogy for AI/Human relations is the relationship between humans and dogs. I took this to mean the entire relationship over tens of thousands of years between humans and dogs and Brin's comments fit into this when he talks about giving good AIs treats and rewards for tattling on bad AIs so they can be neutered. Brin also takes the logic of this analogy to its conclusion when the benevolent good AIs get powerful enough there is a flip to who is on top in the relationship and now the humans become the dogs living under a world government utopia with all their needs being met.
"But there are no starting lines in life. There is not such a well-defined race."
True but from another angle, life is like a series of races. Maybe a race run in stages, sort of the like Tour de France. Your effort in one stage may affect your starting position in another but each stage is still an individual race, to a certain degree.
Saying life is like a race also assumes that everyone is going to wind up at the same finish line, which is of course true in a certain sense. But people are all running largely different races. Nobody is going to wind up at exactly the same place so attempting to ensure 'equality of outcome' is only good for the people whose outcomes are made equal (to be a bit politically incorrect, AA appears a great benefit for black lawyers and brain surgeons but how much does it benefit black garbage men?). An 'equality of opportunity' standard can provide support to a much broad class of people.
Diversification is only inefficient if you can be certain you've picked a no risk high yield investment. If that isn't enough, there are many other reasons for diversification. How'd it work out for Germany being dependent on Russian fuel for heating?
meritocracy and egalitarianism - We not only all have a different idea of what the right mix is, we all have a different idea of what the current mix is.
Russia is making inroads by selling cheap. Will this effect long term changes? That seems way less certain. China is far more complicated. This reminds me of what I saw on 60 Minutes last night. Saudi Arabia is buying athletes and entertainers. It would seem their hope is to buy goodwill. Will it work? IDK. Are the athletes selling their soul or banking big paychecks with little or no consequence? I lean towards the later. It would seem a Bruno Mars concert would change Saudi Arabia more than it changes their image. I'm curious what other people think.
Remember the Daryl Morey controversy? When you're the piper, you play what the guy paying you wants to hear, or you don't eat any more. They aren't buying 'goodwill'. They know exactly what they are buying.
CW is in that situation but I don't think the athletes are, especially the top ones. To pick a name, I'm certain Mickelson could walk away at the drop of a hat. And there is also what he could do to them. On both notes, remember Kaepernick?
Normally I don't like the framing of 'a country exploits it's comparative advantage' because it is individual foreign consumers who want to buy a good where it is relatively cheap, and individual businesses who respond to the profit incentive to produce that good, 'the country' decides nothing.
But in this version it is a little different, though again it is specific actors in the government making relevant decisions not 'the country'.
What would it look like to try and move away from this comparative advantage'? Weaken the military, destabilise the government, specific capital controls or financial regulation?
"We lack the industrial base to produce the weapons that Ukraine needs .. ." In the name of "efficiency," we have outsourced much of our manufacturing sector to China, but our comparative advantage in producing government debt depends in part on having "the world's strongest military." So China will happily sell us the inputs required to produce the weapons we need to defend Taiwan against China. Makes sense to me.
I don't buy most of Hammond's description. From 1990 to 2007 total value of US manufacturing rose by 80% and there was plenty of growth in other areas beyond just finance. It is functionally only after 2008 when US debt exploded after saving the finance system that we went from a decently expanding economy to a straight jacketed, fully debt financed economy. 1990-2007 had its issues, but the clear break between when the US was an expanding economy with growth in multiple sectors to the US being well below trend with growth in highly levered sectors or explicit government subsidies (healthcare, college) is frankly wildly easy to see on just about any graph you pull up. '07/'08 was a hard break and that had little to do with a strong dollar policy and everything to do with socialization of risk.
"we have a comparative advantage in producing debt, primarily government debt. That is not necessarily a good comparative advantage to have"
Amazing statement--captures so much of what underlies US government policy. Worth a longer and careful analysis. It seems like the US government has decided to weaponize this CA? Can a weaponized CA endure and growth when other parties recognize the risks posed by weaponization?
"Basic economic theory says that a country should exploit its comparative advantage. Instead, to 'diversify' the economy is inefficient."
But this is risky if conditions change. Like the risk of losing all your crops to a disease if you don't diversify them.
Soldo: Most of the places that remain uncommitted in the West v Russia-China in Ukraine were also uncommitted in WWII (except parts of empires and that hardly counts).
Nothing wrong with "virtue signaling" when it's a real virtue being signaled. :)
Hammond, I have a different diagnosis. A combination of increased demand for safe dollar assets and structural deficits meaning higher than otherwise dollar interest rates made the dollar "strong" and shifted the relative prices of traded and non-traded goods. The deficits also meant a pull of resources from investment toward consumption. When policy direct the additional income from higher exports toward investment (e.g. Norway) "Dutch Diseases don't strike.
I was unimpressed, to put it mildly (https://punsalad.com/cgi-bin/ps?spec=2012/08/09/1344549600) with Brin's comments on Hayek in a 2012 WIRED interview (https://www.wired.com/2012/08/geeks-guide-david-brin/). Also see Don Boudreaux (http://cafehayek.com/2012/08/david-brin-misinterprets-hayek.html) and David Friedman (http://daviddfriedman.blogspot.com/2011/11/david-brin-and-adam-smith.html).
Brin sounds similar to a more extended version of something Tyler Cowen has said more than once that the correct model/analogy for AI/Human relations is the relationship between humans and dogs. I took this to mean the entire relationship over tens of thousands of years between humans and dogs and Brin's comments fit into this when he talks about giving good AIs treats and rewards for tattling on bad AIs so they can be neutered. Brin also takes the logic of this analogy to its conclusion when the benevolent good AIs get powerful enough there is a flip to who is on top in the relationship and now the humans become the dogs living under a world government utopia with all their needs being met.
"But there are no starting lines in life. There is not such a well-defined race."
True but from another angle, life is like a series of races. Maybe a race run in stages, sort of the like Tour de France. Your effort in one stage may affect your starting position in another but each stage is still an individual race, to a certain degree.
Saying life is like a race also assumes that everyone is going to wind up at the same finish line, which is of course true in a certain sense. But people are all running largely different races. Nobody is going to wind up at exactly the same place so attempting to ensure 'equality of outcome' is only good for the people whose outcomes are made equal (to be a bit politically incorrect, AA appears a great benefit for black lawyers and brain surgeons but how much does it benefit black garbage men?). An 'equality of opportunity' standard can provide support to a much broad class of people.
Diversification is only inefficient if you can be certain you've picked a no risk high yield investment. If that isn't enough, there are many other reasons for diversification. How'd it work out for Germany being dependent on Russian fuel for heating?
meritocracy and egalitarianism - We not only all have a different idea of what the right mix is, we all have a different idea of what the current mix is.
Russia is making inroads by selling cheap. Will this effect long term changes? That seems way less certain. China is far more complicated. This reminds me of what I saw on 60 Minutes last night. Saudi Arabia is buying athletes and entertainers. It would seem their hope is to buy goodwill. Will it work? IDK. Are the athletes selling their soul or banking big paychecks with little or no consequence? I lean towards the later. It would seem a Bruno Mars concert would change Saudi Arabia more than it changes their image. I'm curious what other people think.
Remember the Daryl Morey controversy? When you're the piper, you play what the guy paying you wants to hear, or you don't eat any more. They aren't buying 'goodwill'. They know exactly what they are buying.
CW is in that situation but I don't think the athletes are, especially the top ones. To pick a name, I'm certain Mickelson could walk away at the drop of a hat. And there is also what he could do to them. On both notes, remember Kaepernick?
Normally I don't like the framing of 'a country exploits it's comparative advantage' because it is individual foreign consumers who want to buy a good where it is relatively cheap, and individual businesses who respond to the profit incentive to produce that good, 'the country' decides nothing.
But in this version it is a little different, though again it is specific actors in the government making relevant decisions not 'the country'.
What would it look like to try and move away from this comparative advantage'? Weaken the military, destabilise the government, specific capital controls or financial regulation?
The Sam Hammond Link is FUBAR
"We lack the industrial base to produce the weapons that Ukraine needs .. ." In the name of "efficiency," we have outsourced much of our manufacturing sector to China, but our comparative advantage in producing government debt depends in part on having "the world's strongest military." So China will happily sell us the inputs required to produce the weapons we need to defend Taiwan against China. Makes sense to me.