BRIEFLY NOTED: For 2024-02-25 Su
Branko Milanovich on visions of inequality; shifting expectations of Federal Reserve rate cuts, are maniacal bubbles a good thing? sorta…; whimpering about how policy is not near-neutral even though the economy is near to macroeconomic balance; against getting trapped in a mediasphere perceptual mirror of wildernesses; Jeffrey Frankel is on Team “It’s Mostly the Lags!”; very briefly noted; & a woman called “toad” once again; can I still believe in Web3?; American nationalism Teddy Roosevelt style; the “Slouching” Sean Illing interview; & BRIEFLY NOTED: for 2024-02-20 Tu…
ONE VIDEO: Branko Milanovic: Visions of Inequality:
<https://faculti.net/visions-of-inequality/>
ONE IMAGE: Shifting Rate-Cut Expectations for 2024:
SubStack NOTES:
Economics: It is a commonplace truism of economics that market economies do not do enough technological and business-model research and development. The externalities from exploration of these spaces are immense. But those who undertake such explorations are never fully compensated—never receive anything close to the societal value that their explorations create. It is thus a good thing that invention, development, and innovation are supported by greed-maddened rich people of poor judgment, isn’t it? Eric Schmidt opines:
Chris Anstey: Chaotic Capital Markets Give US an AI Edge Over China: ‘One thing that’s emerging is a major difference between the world’s two largest economies with regard to how AI research and applications will be funded. And that in turn may affect the extent to which experimentation and diffusion of generative AI, or that which creates new content, evolves in the US versus China…. American capital markets are… a forum that allows anything to happen, including hype and mania, as witnessed this week with Nvidia Corp.’s record surge. While that makes US markets vulnerable to crashes and volatility, it also means they’re a venue for funding big dreams…. Eric Schmidt… described the American advantage in colorful fashion…. “The reason the hype is so insane” about AI is that the US has a “capital market that allows for crazy people to raise billions of money with no product, no team, no revenue, and no idea what they’re doing…. And by the way, they’re going to go for another round, and get twice as high, and twice as high. I mean, the American capital market is allowing this. It’s going to be invented in America. Which is wonderful”… <https://www.bloomberg.com/news/newsletters/2024-02-24/bloomberg-new-economy-chaotic-capital-markets-give-us-an-ai-edge-over-china?cmpid=BBD022424_NEF>
Well, kinda-sorta. That an externality market failure is partly counterbalanced and offset by a behavioral-irrationality-herd-mania cognitive failure is a fact about the world. But it does not mean that we should not be thinking and working very hard to build a better system—or that those who profit mightily from herd mania on the part of others should feel good about themselves.
Economics: I understand that the Federal Reserve would be embarrassed if it lowered interest rates this spring and then found out this fall that it needed to raise them again. But the costs of such embarrassment are small. And since inflation is near-target, policy rates should be near-neutral. Shouldn’t they? As one Wall Streeter told me this AM, if the policy rate were now 3.25%, every FOMC participant would look at you as if you were crazy if you raised your hand and said that the rate needed to be raised to 5%. The belief on the FOMC that it needs to see “signs of weakness” in the economy before it begins to cut interest rates leaves it incredibly hostage to Tykhe because of the context of long and variable lags:
Garfield Reynolds: The Weekly Fix: Fighting the Fed Leaves Bonds Bruised Once More: ‘The relentless pushback from policymakers against bets on rapid interest-rate cuts continued apace this week, pushing bonds down and sending yields to fresh 2024 peaks. Plenty are willing to wager yields could push higher still. As the Federal Reserve and the European Central Bank continued to preach patience, the markets were forced to further rein in their bets on easing. US traders have just about stopped fighting the Fed. Swaps are essentially pricing for the central bank to meet its guidance for three cuts this year…. Traders also started to become more diverse in their projections, rather than expecting most major central banks to move in lockstep… <bloomberg.com/news/newsletters/2024-02-…>
Public Reason: Noah Berlatsky says, I think wisely:
Noah Berlatsky: No one is replacing Joe Biden, ffs: The bed-wetting needs to stop…. New York Times columnist Ezra Klein argued last week that President Joe Biden should step aside and not run for another term <nytimes.com/2024/02/16/opinion/ezra-kle…>…. Klein says he thinks Biden is fit and competent to be president for another term. He lauds Biden’s accomplishments, including low unemployment <commerce.gov/news/blog/2023/02/news-une… and groundbreaking climate legislation <commerce.gov/news/blog/2023/02/news-une…>… <publicnotice.co/p/joe-biden-ezra-klein-…>
I am inclined to take this as yet more evidence that Noah Smith is very wise in his opinion that people should say true things about the world outside the mediasphere, rather than greatly increase their error rate and erode their credibility by getting lost in the wilderness of mirrors of polls, perceptions, and possibilities. Why doesn’t Ezra Klein write more columns about how Joe Biden has, so far, been a very good president—and is perfectly capable of figuring out the point at which he has lost too many steps. And if he is going to write about politicians who have lost it, why wouldn’t concern-trolling Republicans about Mitch McConnell or Donald Trump be a better use of his time?
Economics: Jeffrey Frankel joins Noah Smith and me on Team “It’s Mostly Lags”, and joins us in expecting people to become much more sanguine about the economy as information works its way through the system:
Jeffrey Frankel: Explaining Americans’ Pessimism About a Strong Economy: ‘At least six reasons have been advanced…. Positive economic indicators are wrong…. Negative data.sca.isr.umich.edu/fetchdoc.php reflect Republican partisanship…. News media’s tendency to focus on the frbsf.org/research-and-insights/data-an……. Perceptions lag behind reality…. The problem is not the rate of price rises, but the price level…. Inflation is hurting lower-income households…. While there need not be one single explanation for negative perceptions of the economy, the lag hypothesis seems most persuasive… <project-syndicate.org/commentary/explai…>
Very Briefly Noted:
Economics: Tim O’Reilly: PS Say More: ‘It’s not easy to be a fan of either Musk or Jeff Bezos…. Let me tell you what I once admired about them…. True entrepreneurial success is… creat[ing] more value than you capture…. Both…once created enormous amounts of value, not only for themselves, but also for many others. Recognizing the enormity of the climate threat, Musk placed very bold bets, which catalyzed the development of both the electric-car market and the commercial space market. In its heyday, Amazon created new opportunities for millions of people, as it connected buyers and sellers using brilliant new algorithmic matching tools…. Today, however, Bezos is turning into a value extractor, and Musk into an outright value destroyer…. With its ad business, Amazon has turned to the dark side…. It is now a pay-to-play platform that abuses decades of learned trust from users to offer them worse products at higher prices…. You might start off idealistic, but once the rising tide of innovation starts to ebb, the market will demand that you use less virtuous means to keep growing—and you will bend the knee… <https://www.project-syndicate.org/onpoint/an-interview-with-tim-oreilly-about-advanced-technology-ai-development-regulation-2024-02>
Thomas Hutcheson: ‘There are one and a half fundamental issues with this essay: <https://www.project-syndicate.org/commentary/biggest-risks-facing-world-economy-in-2024-by-kenneth-rogoff-2024-02>. One. Is ANYONE celebrating that the global economy has achieved target inflation and low unemployment? One half. How many are celebrating that the US has achieved target inflation and low unemployment? Not the Fed. Not the punditsphere. Let’s forgive Rogoff his hook given his pointing to some real problems that an improved macroeconomic outlook (AKA “celebrating”) should not obscure. Item… “the IRA is… essentially a protectionist trade policy…”. “Both Democrats and Republicans in the US seem uninterested in cutting government spending, let alone reducing the deficit.” Or, more importantly, reforming taxes to reduce dead-weight loss…
Marian L Tupy: ‘The amount of time an unskilled worker (e.g., janitor) in the U.S. had to work to buy an egg fell by 96.2 percent between 1919 and 2019. The same amount of time that bought him/her 1 egg in 1919 bought him/her 26.19 eggs in 2019… <https://twitter.com/Marian_L_Tupy/status/1759269918413885855>
Public Reason: Bill Emmott: What We Know, & Don’t Know, About the New Geopolitical & Geoeconomic Order… <https://civita.no/notat/what-we-know-and-dont-know-about-the-new-geopolitical-and-geoeconomic-order/>
Cosma Shalizi (1997): Review of “A Future for Socialism” by John E. Roemer: ‘Initiates into the mysteries of the goddess Logical Rigor use a strange speech among themselves, and find it all but impossible to communicate their visions to the mass of ordinary, unilluminated mankind. This accounts in part for the fact that, of the three disciplines most devoted to that goddess, analytical philosophy and neo-classical economics have done next to nothing to shape thought and the culture at large, or even within the academy, while mathematics gave up all such pretensions long ago… <http://bactra.org/reviews/future-for-socialism/>
Noah Smith: Book Review: “Power & Progress: ‘In which Daron Acemoglu and Simon Johnson fail to convince me that innovation needs to be steered away from automation…. Footnotes and endnotes are a technology that has unambiguously benefitted the world, and even though they can be a bit of a pain the butt, authors should include them…
Central Country: Economist: China’s well-to-do are under assault from every side: ‘Their agonies at the hands of markets and the state will reshape the Chinese economy…. By far the most common investment in China is property, and property values have been falling for almost three years. The stockmarket, too, is sliding: the Shanghai Composite, one of the most prominent indices, has dropped by over 20% since its peak in 2021. And whereas the government has in the past stepped in to help investors hit by plunging asset prices, this time it shows little inclination for a bail-out…. By far the most common investment in China is property, and property values have been falling for almost three years. The stockmarket, too, is sliding: the Shanghai Composite, one of the most prominent indices, has dropped by over 20% since its peak in 2021. And whereas the government has in the past stepped in to help investors hit by plunging asset prices, this time it shows little inclination for a bail-out…. Even if most got-rich-first keep quiet, however, the current turmoil is unwinding decades of goodwill between the government and its most productive citizens…. Previously China’s thriving strivers and the authorities appeared to be on the same side…. The state now appears indifferent if not hostile to the problems of the well-to-do. The got-rich-first, says an investment manager, “are just starting to realise that they have become the enemy”. That is a shift that will have grim consequences not just for them, but for all of China… <https://www.economist.com/briefing/2024/02/08/chinas-well-to-do-are-under-assault-from-every-side>
History: Dio Cassius: Roman History: ‘Before Severus died, he is reported to have spoken thus to his sons (I give his exact words without embellishment): “Be harmonious, enrich the soldiers, and scorn all other men”… <https://penelope.uchicago.edu/Thayer/E/Roman/Texts/Cassius_Dio/77*.html>
“Spatial Computing”: Jason Snell: sixcolors.com/post/2024… ‘The Vision Pro is… a great movie player, offering 3-D and immersive experiences that go beyond anything else that’s out there… an iPad-level computing device that can optionally integrate with the Mac to take a small laptop screen and make it part of a larger world…. Compared to… early personal computers, the Vision Pro is… a better value, thanks to the existing software ecosystem…. But still, this is a product you buy either because you have a very specific use case that makes it worth the cost or because you just want to have a taste of the future…. Even with immersive video in its infancy, it’s a great solo entertainment device…. If you travel a lot and find yourself in cramped airline seats and tiny hotel rooms, or if your home or office is too small to fit a full desk setup with a big monitor, you’ll find that the Vision Pro is a bit of a TARDIS: everything’s bigger on the inside. It’s fine if none of those use cases fit you—this is a pricey first-generation product that’s finding its way. But it might still be worth musing a little bit about where the product might go… <https://sixcolors.com/post/2024/02/apple-vision-pro-review-eyes-on-the-future/>
GPT-LLM-AML: Ethan Mollick: Strategies for an Accelerating Future: ‘Four questions to ask your organization…. How can leaders start to think about the rapidly advancing nature of AI? The first thing they should do is use it. No amount of reading and research can substitute for spending 10 hours or so with a frontier model, learning what it can do. After getting familiar, companies should think about the following four questions: 1. What useful thing you do is no longer valuable? AI doesn’t do everything well, but it does some things very well…. What impossible thing can you do now?… What can you move to a wider market or democratize?… What can you move upmarket or personalize?… Don’t just build for what is possible today, but what is possible in six months, if this pace of change continues. At this point, I think things are unlikely to slow down in the near future, and focusing on where things are heading, rather than where they are, prepares you for a world of continuing change…
