Scott Aaronson: Why Philosophers Should Care About Computational Complexity
One might think that, once we know something is computable, how efficiently it can be computed is a practical question with little further philosophical importance. In this essay, I offer a detailed case that one would be wrong. In particular, I argue that computational complexity theory—the field that studies the resources (such as time, space, and randomness) needed to solve computational problems—leads to new perspectives on the nature of mathematical knowledge, the strong AI debate, computationalism, the problem of logical omniscience, Hume’s problem of induction, Goodman’s grue riddle, the foundations of quantum mechanics, economic rationality, closed timelike curves, and several other topics of philosophical interest. I end by discussing aspects of complexity theory itself that could benefit from philosophical analysis.
Robert Allen: Why was the Industrial Revolution British?
It is still not clear among economic historians why the Industrial Revolution actually took place in 18th century Britain. This column explains that it is the British Empire’s success in international trade that created Britain’s high wage, cheap energy economy, and it was the spring board for the Industrial Revolution.
Dean Baker: The Upward Redistribution of Income: Are Rents the Story?
In the years since 1980, there has been a well-documented upward redistribution of income. While there are some differences by methodology and the precise years chosen, the top one percent of households have seen their income share roughly double from 10 percent in 1980 to 20 percent in the second decade of the 21st century.1 As a result of this upward redistribution, most workers have seen little improvement in living standards from the productivity gains over this period.
This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.
This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.
Abhijit Banerjee, Rema Hanna, Gabriel Kreindler, Benjamin A. Olken: Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs Worldwide
Targeted transfer programs for poor citizens have become increasingly common in the developing world. Yet, a common concern among policy makers – both in developing as well as developed countries – is that such programs tend to discourage work. We re-analyze the data from 7 randomized controlled trials of government-run cash transfer programs in six developing countries throughout the world, and find no systematic evidence that cash transfer programs discourage work.
Nicolas Baumard, Coralie Chevallier: The nature and dynamics of world religions: a life-history approach
In contrast with tribal and archaic religions, world religions are characterized by a unique emphasis on extended prosociality, restricted sociosexuality, delayed gratification and the belief that these specific behaviours are sanctioned by some kind of supernatural justice. Here, we draw on recent advances in life history theory to explain this pattern of seemingly unrelated features. Life history theory examines how organisms adaptively allocate resources in the face of trade-offs between different life-goals (e.g. growth versus reproduction, exploitation versus exploration). In particular, recent studies have shown that individuals, including humans, adjust their life strategy to the environment through phenotypic plasticity: in a harsh environment, organisms tend to adopt a ‘fast' strategy, pursuing smaller but more certain benefits, while in more affluent environments, organisms tend to develop a ‘slow' strategy, aiming for larger but less certain benefits. Reviewing a range of recent research, we show that world religions are associated with a form of ‘slow' strategy. This framework explains both the promotion of ‘slow' behaviours such as altruism, self-regulation and monogamy in modern world religions, and the condemnation of ‘fast' behaviours such as selfishness, conspicuous sexuality and materialism. This ecological approach also explains the diffusion pattern of world religions: why they emerged late in human history (500–300 BCE), why they are currently in decline in the most affluent societies and why they persist in some places despite this overall decline.
Marianne Bitler, Sean Corcoran, Thurston Domina, Emily Penner: Teacher Effects on Student Achievement and Height: A Cautionary Tale
Estimates of teacher “value-added” suggest teachers vary substantially in their ability to promote student learning. Prompted by this finding, many states and school districts have adopted value-added measures as indicators of teacher job performance. In this paper, we conduct a new test of the validity of value-added models. Using administrative student data from New York City, we apply commonly estimated value-added models to an outcome teachers cannot plausibly affect: student height. We find the standard deviation of teacher effects on height is nearly as large as that for math and reading achievement, raising obvious questions about validity. Subsequent analysis finds these “effects” are largely spurious variation (noise), rather than bias resulting from sorting on unobserved factors related to achievement. Given the difficulty of differentiating signal from noise in real-world teacher effect estimates, this paper serves as a cautionary tale for their use in practice.
Peter Bofinger et al.: Discovering the ‘true’ Schumpeter: New insights on the finance and growth nexus
Joseph Schumpeter made pioneering contributions to economic theory on the relationship between the financial system and economic growth. However, the economic literature has often misinterpreted his work, particularly on the importance of banks and liquidity creation for development. This column argues that a correct interpretation of Schumpeter helps resolve many empirical puzzles which have emerged in the last decades. Using a panel of 43 countries, it finds strong positive effects of credit growth on GDP growth and little effect of saving on GDP and credit growth [emphasis added].
Ahmad A. Borazan: On the Way to the Great Depression The Demand Regime of the US Economy (1900-1929)
It has become commonplace to raise the analogy between the recent experience of the dynamics of income distribution and growth, and that of the era before the Great Depression. However, no study of the demand regime has been done for the early twentieth century period; this study attempts to fill that gap in the literature. Based on a Kaldroian model, I estimate whether the demand regime of the pre-Great Depression era for private domestic output was wage-led or debt-led. The results of the study show the demand regime was wage-led with a considerable role of private debt in driving aggregate demand. Furthermore, I discuss the Roaring Twenties period and argue that increased income inequality led to the rise of destabilizing channels that propped up demand which contributed to increasing economic fragility on the way to the Great Depression.
John Bronsteen, Christopher Buccafusco, and Jonathan S. Masur: Well-being analysis vs. cost-benefit analysis
Cost-benefit analysis (CBA) is the primary tool used by policymakers to inform administrative decision making. Yet its methodology of converting preferences (often hypothetical ones) into dollar figures, then using those dollar figures as proxies for quality of life, creates significant systemic errors. These problems have been lamented by many scholars, and recent calls have gone out from world leaders and prominent economists to find an alternative analytical device that would measure quality of life more directly. This Article proposes well-being analysis (WBA) as that alternative. Relying on data from studies in the field of hedonic psychology that track people’s actual experience of life—data that have consistently been found reliable and valid—WBA is able to provide the same policy guidance as CBA without CBA’s distortionary reliance upon predictions and dollar figures. We show how WBA can be implemented, and we catalog its advantages over CBA. In light of this comparison, we conclude that WBA should assume CBA’s role as the decisionmaking tool of choice for administrative regulation.
Ricardo Caballero, Emmanuel Farhi, Pierre-Olivier Gourinchas: On the global ZLB economy
Interest rates are near zero – or moving towards it – in major economies worldwide. This column introduces a new theoretical framework that helps to organise thinking on how liquidity traps and slow growth spread across the world. It stresses the role of capital flows, exchange rates, and the shortage of safe assets. Once rates are at the ZLB, the imbalance between the supply and demand of safe assets is redressed by lower global output. Liquidity traps emerge naturally and countries drag each other into them.
Charles W. Calomiris and Stephen H. Haber: If Stable and Efficient Banks Are Such a Good Idea, Why Are They So Rare? From Fragile by Design: The Political Origins of Banking Crises and Scarce Credit
This book takes exception with [the technocratic] view [of banking] and suggests instead that the politics that we see operating everywhere else around us also determines whether societies suffer repeated banking crises (as in Argentina and the United States), or never suffer banking crises (as in Canada). By politics we do not mean temporary, idiosyncratic alliances among individuals of the type that get the dumbest guy in the company promoted to vice president for corporate strategy. We mean, instead, the way that the fundamental political institutions of a society structure the incentives of politicians, bankers, bank shareholders, depositors, debtors, and taxpayers to form coalitions in order to shape laws, policies, and regulations in their favor—often at the expense of everyone else. In this view, a country does not “choose” its banking system: rather it gets a banking system that is consistent with the institutions that govern its distribution of political power.
Costas J. Efthimiou and Sohang Gandh: Cinema Fiction vs Physics Reality: Ghosts, Vampires and Zombies
We examine certain features of popular myths regarding ghosts, vampires and zombies as they appear in film and folklore. We use physics. to illuminate inconsistencies associated with these myths and to give practical explanation to certain aspects.
Andreas Glöckner. The irrational hungry judge effect revisited: Simulations reveal that the magnitude of the effect is overestimated
Danziger, Levav and Avnaim-Pesso (2011) analyzed legal rulings of Israeli parole boards concerning the effect of serial order in which cases are presented within ruling sessions. They found that the probability of a favorable decision drops from about 65% to almost 0% from the first ruling to the last ruling within each session and that the rate of favorable rulings returns to 65% in a session following a food break. The authors argue that these findings provide support for extraneous factors influencing judicial decisions and cautiously speculate that the effect might be driven by mental depletion. A simulation shows that the observed influence of order can be alternatively explained by a statistical artifact resulting from favorable rulings taking longer than unfavorable ones. An effect of similar magnitude would be produced by a (hypothetical) rational judge who plans ahead minimally and ends a session instead of starting cases that he or she assumes will take longer directly before the break. One methodological detail further increased the magnitude of the artifact and generates it even without assuming any foresight concerning the upcoming case. Implications for this article are discussed and the increased application of simulations to identify nonobvious rational explanations is recommended.
Larry Hamelin: And To No More Settle For Less Than Purity: Reflections on the Kerista Commune. Praxis 1.1
In 1987-1988, the author spent about 18 months as a member of Kerista, a utopian commune in San Francisco. From its beginnings in the 1960s as a free love anarchistic hippie commune in New York, the Kerista commune had become a more structured, dynamic, and successful community. As time passed, however, the author discovered that the core psychological process in Kerista was anxiety-producing and ultimately destructive because it centered around the toxic value of purity, which made the commune a bad place to live. The failures of Kerista were not failures of process or procedure; they were failures of values. We must apply not only traditional political science, but also anthropology, sociology and psychology to understand the interactions of values and institutions on the quality of intentional communities.
Larry Hamelin: The Fall and Rise of the American Bourgeoisie. Unpublished paper.
As a result of the economic chaos of the Great Depression, the ruling capitalist class lost state power to the professional-managerial class beginning in 1929. After decades of class struggle, the capitalist class regained state power in 1980, with the election of Ronald Reagan. I investigate and document this unique class struggle, and draw conclusions about the larger struggle between the proletariat and the bourgeoisie.
Kieran Healy: Fuck Nuance. Sociological Theory
Nuance is not a virtue of good sociological theory. Although often demanded and superficially attractive, nuance inhibits the abstraction on which good theory depends. I describe three “nuance traps” common in sociology and show why they should be avoided on grounds of principle, aesthetics, and strategy. The argument is made without prejudice to the substantive heterogeneity of the discipline.
Jakob Kapeller and Stephan Pühringer: The internal consistency of perfect competition
This article surveys some arguments brought forward in defense of the theory of perfect competition. While some critics propose that the theory of perfect competition, and thus also the theory of the firm, are logically flawed, (mainstream) economists defend their most popular textbook model by a series of apparently different arguments. Here it is examined whether these arguments are comparable, consistent and convincing from the point of view of philosophy of science.
Paul Krugman: The Rich, the Right, and the Facts: Deconstructing the Income Distribution Debate in The American Prospect
During the mid-1980s, economists became aware that something unexpected was happening to the distribution of income in the United States. After three decades during which the income distribution had remained relatively stable, wages and incomes rapidly became more unequal. Academic researchers soon began arguing vigorously about the causes of the growth in inequality: was it global competition, government policy, changing technology, or some other factor? What nobody, whatever his or her political stripe, questioned was the fact that there had been a dramatic change in income distribution.
Philip Mirowski: The Political Movement that Dared not Speak its own Name: The Neoliberal Thought Collective Under Erasure
Why do so many people who should know better argue that Neoliberalism 'does not exist'? In this paper I examine the disinclination to treat the Neoliberal political project as a serious intellectual project motivating a series of successes in the public sphere. Economists seem especially remiss in this regard.
Michele Piccione and Ariel Rubinstein: Equilibrium in the Jungle
In the jungle, power and coercion govern the exchange of resources. We study a simple, stylized model of the jungle that mirrors an exchange economy. We deÖne the notion of jungle equilibrium and demonstrate that a number of standard results of competitive markets hold in the jungle.
Thomas I. Palley: Why Negative Interest Rate Policy (NIRP) is Ineffective and Dangerous
NIRP is quickly becoming a consensus policy within the economics establishment. This paper argues that consensus is dangerously wrong, resting on flawed theory and flawed policy assessment. Regarding theory, NIRP draws on fallacious pre-Keynesian economic logic that asserts interest rate adjustment can ensure full employment. That fallacious logic has been augmented by ZLB economics which claims times of severe demand shortage may require negative interest rates, which policy must deliver since the market cannot. Regarding policy assessment, NIRP turns a blind eye to the possibility that negative interest rates may reduce AD, cause financial fragility, create a macroeconomics of whiplash owing to contradictions between policy today and tomorrow, promote currency wars that undermine the international economy, and foster a political economy that spawns toxic politics. Worst of all, NIRP maintains and encourages the flawed model of growth, based on debt and asset price inflation, which has already done such harm.
Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva: Optimal taxation of top labor incomes: A tale of three elasticities
This paper analyzes the problem of optimal taxation of top labour incomes. We develop a model where top incomes respond to marginal tax rates through three channels: (1) the standard supply-side channel through reduced economic activity, (2) the tax avoidance channel, (3) the compensation bargaining channel through efforts in influencing own pay setting. We derive the optimal top tax rate formula as a function of the three elasticities corresponding to those three channels of responses. The first elasticity (supply side) is the sole real factor limiting optimal top tax rates. The optimal tax system should be designed to minimize the second elasticity (avoidance) through tax enforcement and tax neutrality across income forms, in which case the second elasticity becomes irrelevant. The optimal top tax rate increases with the third elasticity (bargaining) as bargaining efforts are zero-sum in aggregate. We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implying that the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.
A. Pluchino. A. E. Biondo, A. Rapisarda: Talent vs Luck: the role of randomness in success and failure
The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success. But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories. It is very well known that intelligence or talent exhibit a Gaussian distribution among the population, whereas the distribution of wealth - considered a proxy of success - follows typically a power law (Pareto law). Such a discrepancy between a Normal distribution of inputs, with a typical scale, and the scale invariant distribution of outputs, suggests that some hidden ingredient is at work behind the scenes. In this paper, with the help of a very simple agent-based model, we suggest that such an ingredient is just randomness. In particular, we show that, if it is true that some degree of talent is necessary to be successful in life, almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals. As to our knowledge, this counterintuitive result - although implicitly suggested between the lines in a vast literature - is quantified here for the first time. It sheds new light on the effectiveness of assessing merit on the basis of the reached level of success and underlines the risks of distributing excessive honors or resources to people who, at the end of the day, could have been simply luckier than others. With the help of this model, several policy hypotheses are also addressed and compared to show the most efficient strategies for public funding of research in order to improve meritocracy, diversity and innovation.
Eric Rauchway: The New Deal Was on the Ballot in 1932
During the 1932 campaign, Franklin Roosevelt explicitly committed himself to nearly all of what would become the important programs of the New Deal. In the months before his March 4, 1933, inauguration, he made his proposed policies even clearer. Yet many Americans have forgotten this clarity of purpose, led in large measure by histories of the New Deal and biographies of Roosevelt that echo old misconceptions of this critical election. Such texts are far more likely to describe Roosevelt’s campaign as so devoid of substance and full only of“sunny generalities” that at the time he took the oath of office his “plans remained largely unknown to the public.” He had “no larger philosophy or grand design.” He stood only for “action, any action, with little or no thought given to the long-term consequences.” One historian recently declared, “The notion that when Franklin Roosevelt became president he had a plan in his head called the New Deal is a myth that no serious scholar has ever believed.”
Joan Sweeney and Richard James Sweeney: Monetary Theory and the Great Capitol Hill Baby Sitting Co-op Crisis: Comment
Martin L. Weitzman: Prices vs. Quantities
For one particular isolated economic variable that needs to be regulated, what is the best way to implement control for the benefit of the organization as a whole? Is it better to directly administer the activity under scrutiny or to fix transfer prices and rely on self-interested profit or utility maximization to achieve the same ends in decentralized fashion? . . .
In studying such a controversial subject, the only fair way to begin must be with the tenet that there is no basic or universal rationale for having a general predisposition toward one control mode or the other. If this principle is accepted, it becomes an issue of some interest to abstract away all "other" considerations in order to develop strictly "economic" criteria by which the comparative performance of price and quantity planning instruments might be objectively evaluated. Even on an abstract level, it would be useful to know how to identify a situation where employing one mode is relatively advantageous, other things being equal.
In studying such a controversial subject, the only fair way to begin must be with the tenet that there is no basic or universal rationale for having a general predisposition toward one control mode or the other. If this principle is accepted, it becomes an issue of some interest to abstract away all "other" considerations in order to develop strictly "economic" criteria by which the comparative performance of price and quantity planning instruments might be objectively evaluated. Even on an abstract level, it would be useful to know how to identify a situation where employing one mode is relatively advantageous, other things being equal.
Simon Wren-Lewis: The Knowledge Transmission Mechanism and Austerity
How do economic policy mistakes happen? One view is that policy makers
are benevolent, and errors arise because economic theories are inadequate. Another is that policy makers pursue sectional interests that may have no relation to any academic consensus on good policy. This paper examines a third alternative: policy makers want to do the right thing (although they have political preferences), and the academic consensus is correct, but policy makers do not follow it because they rely on imperfect intermediaries. I use this framework to examine the global switch to fiscal austerity in 2010.
are benevolent, and errors arise because economic theories are inadequate. Another is that policy makers pursue sectional interests that may have no relation to any academic consensus on good policy. This paper examines a third alternative: policy makers want to do the right thing (although they have political preferences), and the academic consensus is correct, but policy makers do not follow it because they rely on imperfect intermediaries. I use this framework to examine the global switch to fiscal austerity in 2010.
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