*Conversations with Goethe*

by  Tyler Cowen

By Johann Peter Eckermann, imagine transcripts of podcasts from the 1820s, albeit edited.  This book is described on the back jacket as “In 1823 he [Goethe] became friend and mentor to the young writer Johann Eckermann, who, for the last nine years of Goethe’s life, recorded their wide-ranging conversations on art, literature, science and philosophy.”

I find this book gripping throughout, though many parts are tough going if you are not up on the details of not only Friedrich Schiller, but also say Ludwig Tieck and Christoph Martin Wieland.  If nothing else, it helps you realize how funny virtually all of today’s podcasts will sound (and read) someday.

You can order it here.  Upon my reread, one striking feature of the dialogues is how much Goethe was obsessed with discussing and evaluating talent:

“Byron’s lofty status as an English peer was very damaging to him.  Every talent struggles with the outside world — and it is harder still for someone of high birth and great wealth.  A middling sort of condition is far more congenial to talent — which is why our great artists and poets come from the middle classes.  Byron’s fondness for excess would have been far less dangerous to him if he had been o lower birth and humbler means.  As it was, he had it in his power to fulfill his every whim, and that landed him in endless trouble.  And besides, how could he, coming from the upper class himself, be impressed or inhibited by social rank of any kind?  He said whatever was on his mind, and that brought him into ceaseless conflict with the world.

You will find talent discussions every few pages or more frequently yet.

The new translation is by Allan Blunden and is A+, noting that Goethe usually is impossible to meaningfully translate into English.  This is amazingly the first new English translation in 150 years and it is the best sense we have of Goethe as a human being.

The text also has been an influence on my own Conversations with Tyler.  The book is now quite oddly contemporary once again.

Effective Altruism and the Repugnant Conclusion

by  Tyler Cowen in

Here is an excellent essay by Peter McLaughlin, here is one excerpt:

So, the problem is this. Effective Altruism wants to be able to say that things other than utility matter—not just in the sense that they have some moral weight, but in the sense that they can actually be relevant to deciding what to do, not just swamped by utility calculations. Cowen makes the condition more precise, identifying it as the denial of the following claim: given two options, no matter how other morally-relevant factors are distributed between the options, you can always find a distribution of utility such that the option with the larger amount of utility is better. The hope that you can have ‘utilitarianism minus the controversial bits’ relies on denying precisely this claim.

This condition doesn’t aim to make utility irrelevant, such that utilitarian considerations should never change your mind or shift your perspective: it just requires that they can be restrained, with utility co-existing with other valuable ends. It guarantees that utility won’t automatically swamp other factors, like partiality towards family and friends, or personal values, or self-interest, or respect for rights, or even suffering (as in the Very Repugnant Conclusion). This would allow us to respect our intuitions when they conflict with utility, which is just what it means to be able to get off the train to crazy town.

Now, at the same time, Effective Altruists also want to emphasise the relevance of scale to moral decision-making. The central insight of early Effective Altruists was to resist scope insensitivity and to begin systematically examining the numbers involved in various issues. ‘Longtermist’ Effective Altruists are deeply motivated by the idea that ‘the future is vast’: the huge numbers of future people that could potentially exist gives us a lot of reason to try to make the future better. The fact that some interventions produce so much more utility—do so much more good—than others is one of the main grounds for prioritising them. So while it would technically be a solution to our problem to declare (e.g.) that considerations of utility become effectively irrelevant once the numbers get too big, that would be unacceptable to Effective Altruists. Scale matters in Effective Altruism (rightly so, I would say!), and it doesn’t just stop mattering after some point.

There is much more to the argument, recommended.

Will Europe choose an energy crisis or a fiscal crisis?

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is one excerpt:

Estimates of the size of the energy price shock vary, but one plausible assessment runs in the range of 6% to 8% of GDP for Europe. One response to this shock would be to let energy prices rise and allow the private sector to adjust. This would mean higher costs for manufacturing, higher home heating bills, and lower disposable income to spend on other goods and services. In broad terms, it would be like the energy price shock of 1979 and the following recession…

That sounds grim, but it is important to realize that there is a different yet equally grim path: Governments could take this energy price shock and turn it into a fiscal shock instead…

If a government picked up the entire extra energy cost, it would cost something in the range of 6% to 8% of GDP — and that cost would need to be incurred every year that energy prices stayed high. That would require more government borrowing, higher taxes, more money printing, or some mix of those options.

The good news is that turning an energy crisis into a fiscal crisis doesn’t spread high energy costs through the entire economy. The bad news is twofold: First, keeping energy prices low does nothing to encourage conservation. Second, and more important, a fiscal crisis is still a crisis. Even if a government eschews extra borrowing, how much room is there to raise taxes, given economic and political constraints?

Recommended, and with a nod to Arnold Kling.

Markets in everything — sleep tourism

by  Tyler Cowen

Going on a vacation might seem like a rather unconventional way to try to improve your sleep habits. But sleep tourism has been growing in popularity for a number of years, with an increasing amount of sleep-focused stays popping up in hotels and resorts across the world.

Interest has skyrocketed since the pandemic, with a number of high profile establishments focusing their attention on those suffering from sleep-deprivation.

Over the Over the past 12 months, Park Hyatt New York has opened the Bryte Restorative Sleep Suite, a 900-square-foot suite filled with sleep-enhancing amenities, while Rosewood Hotels & Resorts recently launched a collection of retreats called the Alchemy of Sleep, which are designed to “promote rest.”

Zedwell, London’s first sleep-centric hotel, which features rooms equipped with innovative soundproofing, opened in early 2020, and Swedish bed manufacturer Hastens established the world’s first Hästens Sleep Spa Hotel, a 15-room boutique hotel, in the Portuguese city of Coimbra a year later.

Here is the full story, via Mike Doherty.

The wisdom of Daniel Gross

by  Tyler Cowen

Now in 2017, a bunch of people, each of which now has their own company, the new PayPal Mafia is the Transformer Mafia, wrote this paper called Attention is All You Need, which at the time was mostly ignored by the rest of the world, and they came up with a way to effectively parallelize this training, and enable us to create models that are much larger, and as a byproduct are able to store more context tokens over and over, but effectively more words and effectively be able to predict more words to you.

The paper was mostly ignored when it came out — I thought it was neat, I don’t know that I made much of it. Google at the time had developed this pretty large model based on the paper that it didn’t release for various reasons we can touch on. Then OpenAI really productized that paper with GPT-2 and 3, general purpose transformer, that transformer is from that paper from Attention is All You Need. They were able to build these successively larger and larger models because they were able to parallelize training. These models now, GPT-3, is considered state-of-the-art, although I think our grandchildren will look at that the same way as we look at tube television.

That is from the new Ben Thompson interview with Daniel and Nat Friedman, and yes I do subscribe to Ben and pay for it.

Is there a neglect of low-probability gains?

by  Tyler Cowen

Seven preregistered studies (N = 2,890, adult participants) conducted in the field, in the lab, and online documented opportunity neglect: a tendency to reject opportunities with low probability of success even when they come with little or no objective cost (e.g., time, money, reputation). Participants rejected a low-probability opportunity in an everyday context (Study 1). Participants also rejected incentive-compatible gambles with positive expected value—for both goods (Study 2) and money (Studies 3–7)—even with no possibility of monetary loss and nontrivial rewards (e.g., a 1% chance at $99). Participants rejected low-probability opportunities more frequently than high-probability opportunities with equal expected value (Study 3). Although taking some real-life opportunities comes with costs, we show that people are even willing to incur costs to opt out of low-probability opportunities (Study 4). Opportunity neglect can be mitigated by highlighting that rejecting an opportunity is equivalent to choosing a zero probability of success (Studies 6–7).

That is from new research by Emily Prinsloo, Kate Barasz, and Michael I. Norton, via the excellent Kevin Lewis.

My Conversation with the excellent Walter Russell Mead

by  Tyler Cowen in

Here is the audio and transcript, here is the summary:

He joined Tyler to discuss how the decline of American religiosity has influenced US foreign policy, which American presidents best and least understood the Middle East, the shrewd reasons Stalin supported Israel, the Saudi secret to political stability, the fate of Pakistan, the most likely scenario for China moving on Taiwan, the gun pointed at the head of German business, the US’s “murderous fetishization of ideology over reality” in Sub-Saharan Africa, the inherent weakness in having a foreign policy establishment dominated by academics, what he learned from attending the Groton School, and much more.

Here is one excerpt:

COWEN: How would you change or improve the training that goes into America’s foreign policy elite?

MEAD: Well, I would start by trying to draw people’s attention to that, over the last 40 years, there’s been an enormous increase in the number of PhD grads engaged in the formation of American foreign policy. There’s also been an extraordinary decline in the effectiveness of American foreign policy. We really ought to take that to heart.

COWEN: Do you think of it as an advantage that you don’t have a PhD?

MEAD: Huge advantage.

COWEN: How would you describe that advantage?

MEAD: I don’t really believe in disciplines. I see connections between things. I start from reality. I’m not trying to be anti-intellectual here. You need ideas to help you organize your perceptions of reality. But I think there’s a tendency in a lot of social science disciplines — you start from a bunch of really smart, engaged people who have been thinking about a set of questions and say, “We’ll do a lot better if we stop randomly thinking about everything that pops up and try, in some systematic way, to organize our thinking of this.”

I think you do get some gains from that, but you see, over time, the focus of the discipline has this tendency to shift. The discipline tends to become more inward navel-gazing. “What’s the history of our efforts to systematize our thinking about this?” The discipline becomes more and more, in a sense, ideological and internally focused and less pragmatic.

I think that some of the problem, though, is not so much in the intellectual weaknesses of a lot of conventional postgrad education, but simply almost the crime against humanity of having whole generations of smart people spend the first 30, 35 years of their lives in a total bubble, where they’re in this academic setting, and the rule . . . They become socialized into the academy, just as much as prisoners get socialized into the routines of a prison.

The American academy is actually a terrible place for coming to understand how world politics works. Recently, I had a conversation with an American official who was very proud of the way that the US had broken the mold by revealing intelligence about Russia’s plans to invade Ukraine, and pointed out how that had really helped build the NATO coalition against Russian aggression, and so on.

So far as he goes, it’s true. But I said, however, if you really look at the total message the US was projecting to Russia in those critical months, there were two messages. One is, “We’ve got great intelligence on you. We actually understand you much better than you think.” It was shocking. I think it shocked the Russians. But on the other hand, we’re saying, “We think you’re going to win quickly in Ukraine. We’re offering Zelenskyy a plane ride out of Kyiv. We’re pulling out all our diplomats and urging other countries to pull out their diplomats.”

The message, actually the totality of the message that we sent to Putin is, “You are going to win if you do this.”

And this, on what makes for talent in the foreign policy arena:

…you can’t know too much history. A hunger for travel. I think too many foreign policy types don’t actually get out into the field nearly as much as they should. Curiosity about other cultures. A strong grounding in a faith of your own, which can be a secular ideology, perhaps, in some cases, but more often is likely to be a great religious tradition of some kind.

A very good conversation.  And I am happy to recommend Walter’s new book The Arc of a Covenant: The United States, Israel, and the Fate of the Jewish People.

India: The Revolution in Private Schooling

by  Alex Tabarrok in

A whopping 50%+ of secondary school students in India are educated in private schools. Do private schools increase human capital or merely skim the best students? My paper, Private Education in India: A Novel Test of Cream Skimming made a simple but telling point:

…As the private share of school enrollment increases simple cream skimming becomes less plausible as the explanation for a higher rate of achievement in private schools. If the private schools cream skim when they are at 10% of public school enrollment how much cream can be left in the public school pool when the private schools account for 60% of total enrollment? Thus, if this simple form of cream skimming is the explanation for the higher achievement rate in private schools, we would expect the “private effect,” the difference between private and public scores, to be smaller in regions with a high
share of private schooling.

In fact, what I find is the private advantage, although larger in districts with smaller shares of private schooling (suggesting some skimming), stabilizes and doesn’t disappear even as the share of private schooling heads towards 100%. I also show that mean scores across all students, public and private, increase with the share of private schooling which is inconsistent with cream skimming (which predicts a constant mean). At right a picture showing that private scores continue to outpace public scores even in districts where private schools educate a majority or larger share of students.

In a new paper, Bagde, Epple and Taylor study 4 million students in thousands of villages in India during 2004-2014. In the early years of the study, none of the villages have private schools but entry starts to occur in 2007-2009 and the authors look at who switches to private schools. They find significant selection from higher income, higher caste, higher ability, and males towards private schools but no evidence that public school students are harmed.

The authors give a nod to the possibility that stratification could generate problems down the line if it increases inequality but they don’t mention the key point that, as with arguments for cream skimming, stratification concerns diminish the more students are in private schools and disappear altogether if 100% of students are in private schools.

More generally, India is pioneering private education on a grand scale and the entire world should pay attention to these innovations.

Addendum: See also my previous post on a key paper by Muralidharan and Sundararaman, Private Schooling In India: Results from a Randomized Trial.

“But are you long volatility?”

by  Tyler Cowen in

As many of you know, when I confront mega-pessimists I like to ask them “But are you short the market?”  Not once in my life have I heard a satisfactory rejoinder to this query.  (The last answer I heard was “I will be!”.)

I now have a new question for those who see a reasonably high likelihood of AGI.  Of course AGI could wreck the world, make the world a whole lot better, or simply overturn multiple sectors of the economy, in both good and bad ways.  If you believe in AGI, typically you believe it will matter a lot, though there is considerable disagreement on the cost-benefit ratio.

So basically you should go long volatility, both of the aggregate market and sector-by-sector.

Can I call them AGIers?  (“Aggies” is already taken.)  AGIers ought to be long volatility.

Are they?  I have started asking this question, and I plan to continue the practice.

The market for property insurance vs. climate change

by  Tyler Cowen in

That is the topic of my latest Bloomberg column, here is one bit:

One of the classic rejoinders to worries about climate change is the claim that people can move out of highly vulnerable areas into safer areas. Maybe the world will not be willing to accept hundreds of millions of climate-change refugees, but within the US, perhaps people can move from storm-prone Florida to the northern Midwest, or to wherever might prove appropriate, including safer parts of Florida. The US, after all, has a longstanding tradition of individual mobility. And many parts of the country have the space and infrastructure for additional residents.

For such migration to have any effect on the costs of climate change, however, price signals have to be active and relatively undistorted. That is, some set of market prices has to be giving people impetus to leave one place for another. And policymakers have not been letting insurance markets perform their proper work in this regard.

And on the details:

Currently the market for Florida property insurance is in a pretty bad way. This year six relevant insurance companies went insolvent, and for Florida underwriting losses have run more than $1 billion for each of the last two years. Not surprisingly, insurers have been cutting back their coverage in the state or leaving altogether. The end result is that homeowners are finding it much harder to get coverage and finding it much more expensive when they do. None of this should come as a surprise, given the immense damage wrought by Hurricane Ian and previous storms.

Yet politics is stifling market adjustments. Florida has a state-run insurer of last resort, called Citizens Property Insurance Corp. Not surprisingly, that insurer has financial problems of its own, and in May Governor Ron DeSantis oversaw an additional $2 billion in reinsurance support for the company’s efforts. In other words, the state government is stifling the market signals that might induce some of the state’s homeowners to leave for drier pastures.

But don’t put your hopes in the Florida gubernatorial election. DeSantis’s Democratic rival, Charlie Crist, has criticized the governor for not doing more on the property insurance front and has proposed 90-day emergency insurance coverage for residents. That would stifle market incentives all the more.

I should note that water subsidies for the Southwest are another example of the same general phenomenon.