BRIEFLY NOTED: For 2023-07-23 Su
MUST-READ: The Puzzle—Short Run & Long Run—of Reviving China’s Economy:
Noah Smith has views:
Noah Smith: What should China do to revive its economy?: ‘There are a couple of aces that the government hasn’t yet played…. About the macroeconomic situation… China’s economic slowdown…. China’s youth unemployment has risen from 11% or so before the pandemic to over 20% now, exports and imports are both falling, and the country appears to be heading for deflation if it isn’t there already…. It’s the real estate sector…. What China should do is just have the central government cut a bunch of checks to Chinese households…. Some people argue against using a short-term macroeconomic crisis as a reason to undertake needed long-term structural reforms. I don’t see the point of that argument. If there are reforms you need to make anyway, and if they involve spending more government money, then a recession seems like a perfect time to do them. In China’s case, the reform it needs is a world-class health government-funded health care system…
Both of these are great things to do—and they can be done: a government can mail out checks, and a government can train doctors and nurses and build hospitals. Thus China can get itself back to full employment. At full employment, China has a chance of escaping the middle-income trap in which it is enmeshing itself. Without full employment, it has no chance of doing so: businesses will have little sense of where expansion will ultimately by profitable; hence few businesses will expand; and those businesses that are expanding will do so by hiring cheap labor from the reserve army of the unemployed rather than by pushing deployed technology forward.
But China has now gotten itself into a pickle in which even full employment may not produce productivity-boosting entrepreneurship and enterprise: “entrepreneurship” may well overwhelmingly focus itself on (a) building stronger networks of protection and support between businesses and party bosses, and (b) building escape routes so that you can get out of Dodge with some social power should your particular allies within the party turn out to belong to the next round of purge victims. And the leaders of the CCP have no intellectual tools at all with which to think about how to succeed in the task they have assigned themselves of providing the business class with enough relative autonomy that its entrepreneurship can make China rich without the business class thereby becoming politically powerful.
It is true that I have been saying for forty years that this problem of combining a Leninist government with a von Hayekian economy is almost surely irresolvable, and hence the China growth miracle has at most ten more years to run. And I admit that I have been wrong for forty years.
But now—I would say that the odds that I am finally right are good. Without the Fifth Modernization the other four modernizations have likely attained their Clausewitzian termination point.
ONE IMAGE: Global Warming’s Southwest USA Heat Dome:
Very Briefly Noted:
Paul Krugman: More thoughts about good inflation news: ‘We can tell stories about how rate hikes might reduce inflation without any visible rise in unemployment, but they’re speculative and strained…. We have lots of direct evidence for an alternative story about disinflation, which I think of as recombobulation…
Florian Ederer & al.: Anonymity & Identity Online…
Justin Fox: San Francisco Isn’t Destined to Be the Next Detroit: ‘Detroit really was top of the heap 75 years ago…. In the 1950 US Census, Detroit… [was] the country’s fifth-largest city… median household income… highest of any large US city and… [its] metropolitan area… highest among the nation’s large metro areas…
Terri Adams-Fuller: Extreme Heat Is Deadlier Than Hurricanes, Floods and Tornadoes Combined…
Paul Campos: Tipping points: ‘The world is finally hitting enough tipping points in regard to climate change that various forms of political and cultural denial and indifference are going to become less tenable, perhaps even rather quickly. At least we can hope so…
John Burn-Murdoch: What we get wrong when we talk about global warming: ‘We emphasise the wrong numbers in what is a present reality, not a future threat…. Much worse things [are] coming down the tracks… but a permanent focus on the future can blind us to what is already happening…. For a growing number of people, life does not go on at all…
Scott Lemieux: Time to set the meter on “hack pop-country artist releases shitty pro-lynching song” back to zero days: ‘Try that in a small town/ Full of good ol’ boys, raised up right/ If you’re looking for a fight”…
¶s:
In mid- and late-20th century America, the mathematical turn of economics made it much less friendly to women coming in. And then, I think, the thing snowballed—in large part due to the aggressive seminar culture spreading from Chicago, focused on testing ideas in a blast furnace and also establishing an intellectual pecking-order rather than building a harmonious community. But why it then takes the form of aggressive misogyny I do not know:
Rakesh Bhandari: ‘I don’t understand what is it about economics as it is, neoclassical and mainstream macro, that would attract such aggressive misogynists to it. I can’t imagine such discussions in sociology or anthropology. Perhaps philosophy and political science?…
On the—admittedly few—occasions when I have talked frankly to people who strike me as in the same sociological space as the toxic posters on EJMR, what comes off is absolute rage at affirmative action. The argument that our ticket-punching indicators of “quality” are very noisy, that women face huge headwinds in our profession, and thus that given those headwinds a woman who is at the 95%-ile of “ticket punching” “excellence” is almost surely a better asset to the university than a man who is at the 98%-ile—they are neurologically incapable of allowing that or other arguments that we do not want an intellectual monoculture enter their brains. Hence they are all 100% certain that women as a group are stealing their rightful jobs and keeping them from having the careers they deserve. And every individual woman thus becomes someone to be dissed because she is a participant in this great female conspiracy to do them down.
Or such is my guess.
Relevant to the above. A “meritocratic” system is one that matches people to jobs and situations to actions based on rational Bayesian calculations of likely future performance, rather than trusting 100% to noisy proxy measures:
Dan Davies: goodhart as epistemologist: what did that “law” really say?: ‘Goodhart’s Law is really a statement about the process of trying to make policy based on proxy measures of “internal states of complex systems” which are not themselves directly observable…. Targets… ought to target the thing that you care about, not something which you believe to be related to it…. “Teaching to the test” is a one hundred and eighty degrees inverted description of a phenomenon that ought to be called “not testing for the outcomes you want”…
And I think that this, too, is in the same mental universe. You have your systems. You have your proxy measures. But you need to recognize their and your fallibility, and to listen to the argument which Oliver Cromwell made to the Scots before the Battle of Dunbar: I beseach you, in the Bowels of Christ, consider that you might be mistaken:
William H. Janeway: What to Do About Radical Uncertainty: ‘A longstanding belief in the predictability of market behavior and outcomes has created plenty of fodder for academic theorizing in economics. But firms operating in the real world succeed by recognizing that the future is unknowable—and acting accordingly…. John Kay and Mervyn King showed in their 2020 book, Radical Uncertainty: Decision-Making Beyond the Numbers…. Taking production-network fragility seriously opens the door to a strategic extension of the economics discipline…. In all these contexts, an excessive focus on efficiency in the allocation of resources is the enemy of innovation, and sometimes the enemy of a firm’s survival. The reality of radical uncertainty inverts Cassius’s assertion: The fault, indeed, is in our stars…