Economics & Marginalia: June 9, 2023

Hi all,

I’m going to try and alienate all my readers in this intro: the Americans with some incomprehensibility about the cricket, and the English with more gasping at the genius of the pudgy Serbian basketball savant Nikola Jokic. My prediction of last week proved rather bad (no sooner did I announce the Heat have no chance than they won a game) so I’m going to keep my prognostications to myself, but I do feel obliged to point out that Jokic is absurd: even his bad games involve historically-great production. I just don’t see how anyone can contain him. There was a time when Steve Smith was much the same; you might as well have started carving his name on the honours board as soon as he put his pads on. But no longer: he’s just been out swiping ridiculously at Ravindra Jadeja. Australia will still win the World Test Championship, mind (this time I’ll be fine if my prediction turns out to be hopeless), but I hope its about as draining as it gets, with the Ashes starting this time next week. I’ve just realised I’ll be in the US for most of the Lord’s test, so between the jetlag and the cricket, I may not sleep at all.

1. Apparently, New York had the worst air quality in the world yesterday, which made me think of my childhood in Hong Kong, when there were days you had to chew before inhaling. As Alex Tabarrok points out, air pollution is really bad—for health, productivity and cognitive development, but it’s also tractable to policy change. Blue skies were unknown in Hong Kong for most of my younger years; things are getting better, albeit slowly. Part of the issue (as the New York situation also clearly shows) is that the problem is cross-border. Much of the policy change that is required to improve air quality in Site A must be taken in Site B. That’s easy if they’re in the same state or country; much harder when different decision-makers are involved.

2. I found this piece in Project Syndicate (paywalled, but if you register you can read it for free) rather puzzling. Antara Haldar talks about the slow pace at which behavioural economics has been absorbed into mainstream economics, by which she mainly means macroeconomics. She seems to chalk this up mainly to resistance to the underlying ideas; but I’m not sure there isn’t something simpler and more important at work. You shouldn’t update a model simply to make it more realistic; you update models to make them more useful.Sometimes realism makes a model more useful because it improves its predictions and the changes can be implemented (for example, we have adequate data). But other times, the juice is not worth the squeeze: models can become more complex and reflective of the real world without generating more effective policy or better predictions. I suspect that for many models, this is where the reality is, though I’m keen to hear if there are examples of implementable improvements that simply haven’t been adopted. And that’s before we start thinking about how well behavioural findings are holding up over time, a real mixed bag.

3. I’ve been thinking more and more about how thing scale: what’s different about doing things big? How different does the management and monitoring need to be? What happens to the costs and the benefits? This piece by Gaurav Khanna looks (mainly)at the second of these questions very carefully with respect to an education policy in India and shows that when implemented at scale the effects of increased education are fundamentally different, because (in part) there’s a big difference between a few people getting a new skill and loads of people getting that new skill. The effect is different for society (largely positive!) and for the people getting the skills (not so much). I haven’t read the full paper yet, but am very much looking forward to doing so.

4. NPR cover India’s demonetization again (transcript), this time to try and draw lessons for what a cashless society might look like, and who might lose out. The key point is that the poor and excluded are systematically more likely to rely on cash and would thus lose out is true, but I think they overplay how much India’s sudden experiment can really be generalized. There is a world of difference between announcing on Monday that on Wednesday most of our cash will be worthless to a gradual shift of preferences towards cashless transactions on average. We should care very much about how the marginalised will be disadvantaged, but the effect will be very different to essentially wiping out a chunk of their assets.

5. I missed this when it came out, but Andrew Gelman’s tips for designing experiments are great. I think the first one, making sure that the thing your measuring is really informative about the thing you care about is actually glossed over quite a lot. I’m writing something up now where we are trying to pin down exactly how the measure and the real world relate and it’s surprisingly difficult.

6. Oh good, another reason to doubt published research.

7. I haven’t been able to see the new Spider-Man movie, though the reviews have been rapturous, but if you need something that makes you happy before the weekend, this is as good a story as you’re likely to get: after the last Spider-Man animation (Into the Spider-Verse), a 14-year-old did an animated Lego-inspired version of the trailer. It turns out that the producers of the new movie were so impressed by it that they hired him to do a scene for it. Let kids noodle around on the computer!

Have a great weekend, everyone!

R