The Allocative Cost of War

by  Tyler Cowen

Why is war so economically costly? Our answer is that modern war lowers output not only by destroying productive factors, but also by making the surviving economy work less efficiently. Using uniquely comprehensive firm-level data collected during Russia’s full-scale invasion of Ukraine in 2022, we document a dramatic collapse in allocative productivity in Ukraine. To sharpen identification and explore key mechanisms (including the role of war intensity, internal displacement, reallocation, and macroeconomic instability), we exploit spatial heterogeneity across Ukrainian districts and comparisons with Russian aggression in 2014 and the 2008 Global Financial Crisis. Our key policy implication is that restoring allocative efficiency–and preparing institutional arrangements that facilitate rapid reallocation in times of stress–is critical for sustaining economic capacity, defense, and national security.

That is from a new working paper by Yuriy Gorodnichenko, Marvin Amann, and Oleksandr Talavera.

Is there now a better trend in youth mental health?

by  Tyler Cowen in

A key U.S. government report on mental health, substance use and addiction showed continued improvements in several metrics, especially among young people.

There was some uncertainty about the future of the National Survey on Drug Use and Health last year, when the entire 17-member team responsible for it was laid off by the Trump administration. But the Substance Abuse and Mental Health Services Administration released the latest report Monday, with data that lets researchers look at trends from 2021 to 2025.

Fewer adolescents aged 12 to 17 reported using tobacco, alcohol, marijuana and binge drinking in the previous month, the survey found.

And in the past year, fewer in that age group reported:

— illicit drug and marijuana use

— starting drinking alcohol, vaping or marijuana

— substance, alcohol or drug use disorders

Adolescents also saw declining trends for major depressive episodes and fewer reported serious thoughts of suicide, making a suicide plan and attempting suicide.

Here is the link, via Chris Ferguson.

My short interview with Julia Willemyns

by  Tyler Cowen

Here is the link, here is the end bit:

Who is the most important thinker of our time?

It’s not about individual thinkers any more. It’s about the internet as this vast organ of knowledge that you can play like a musical instrument, and combining the internet with AI. You can figure out things to an unprecedented degree, and it’s great in a way how much we’ve removed that process from any individual thinker.

What’s your favourite podcast?

My own! It would be weird if it wasn’t, right?

Fun throughout, from the Centre for British Progress.

Economic Scenarios for Transformative AI

by  Tyler Cowen in

By Anton Korinek, Charles I. Jones, Szymon Sacher, Tess Cotter, and Peter McCrory, a strong line-up from Anthropic.  They are sober, reasoned, scientific, and (for the most part) dynamically consistent.  Here is the paper, here is the abstract:

This paper presents a framework for assessing the economic consequences of AI between 2026 and 2030. In the model, AI automates a growing share of cognitive work, raising productivity and displacing workers who must search for jobs in other occupations. The model maps future paths of AI capabilities into implied paths for GDP, the labor share, wages, labor reallocation, and unemployment. We illustrate the framework by considering three scenarios: modest, substantial, and extreme. Under modest change, AI adds less than half a point to GDP growth by 2030 and raises unemployment by a tenth of a point. In the extreme change scenario, AI has transformative effects, with AI performing almost half of today’s cognitive work by 2030. GDP growth then rises to 15 percent per year, the labor share of income falls from 60 to 45 percent, and nearly one in five cognitive workers is unemployed. We also surveyed US adults about their expectations for AI. Views vary widely, but the median respondent’s answers are consistent with our substantial change scenario in which, by 2030, GDP rises by 8 percent and cognitive employment declines by 4 percent. The model offers a structured way to compare possibilities for our economic future under different expectations about AI.

Here is the associated thread.  I will opt for something a modest bit more than modest.

And here is a good growth discussion from Alex Imas.

Ricardo Reis and the IMF?

by  Tyler Cowen in

The IMF dropped the lead candidate to become its new chief economist at the eleventh hour after he was found to have made critical remarks about the Trump administration’s economic policies, according to people briefed on the process.

The Washington-based fund was preparing an announcement that Ricardo Reis, a professor at the London School of Economics, would take over as head of research and economic counsellor earlier this summer when it suddenly backtracked. The last-minute change was prompted by earlier remarks by Reis that were critical of Donald Trump’s trade tariffs, three people familiar with the matter told the FT.

The IMF in July appointed the former Bank of England policymaker Silvana Tenreyro to the position, another highly regarded LSE economist. Tenreyro started last month.

Here is more from Olaf Storbeck, Claire Jones, and Myles McCormick at the FT.

My very interesting Conversation with Jared Diamond

by  Tyler Cowen in

Here is the audio, video, and transcript.  Here is part of the episode summary:

So which leaders do make a difference?  

Tyler and Jared debate that question, including conditions what a religious founder needs to succeed, whether destructive leaders matter more than constructive ones, why individual leaders have mattered so little in Papua New Guinea, whether we undervalue preventers, how much Rachel Carson and the Resnicks really mattered, whether Botswana’s success will endure, Jared’s own place in intellectual history, and what he’d tell an ambitious 25-year-old about how to become consequential. They go on to cover whether New Guineans are smarter, his reasons for why the Industrial Revolution started in England, what he learned from Jim Robinson about natural experiments, why he’s more optimistic about the environment than when he wrote Collapse, what he’d do about nuclear risk, the 189 bird species on his street in Los Angeles, why the MacArthur “genius grant” left him depressed for a week, why he’s listening to one Bach cantata a week, what he hopes to work on as he enters his nineties, and more. 

Excerpt, we start with this:

COWEN: Who do you think is the least replaceable leader in human history?

DIAMOND: Wow. Wow. The least replaceable leader in human history. Frankly, my answer is none. There has been no unreplaceable leader in human history because over a long time, things wash out. A candidate, of course, would be Jesus Christ, but there were half a dozen other prophets in the Roman Empire at that time discussed in the New Testament. If Christ had died in childbirth, one of those other prophets might have taken over. I would say that in the long run, there is no leader that has made a difference.

COWEN: Well, you say “might have taken over,” but that’s probabilistic, right? Say with a 40 percent chance, someone else would have taken over. It still seems in expected value terms, Christ made an enormous difference.

DIAMOND: Certainly, his religion made an enormous difference. Christ himself was the charismatic founder, but a religion needs three things: It needs a charismatic founder, it needs an organizer, and often it needs a general because new religions often face opposition. The organizer for Christianity was St. Paul. In the case of the Mahdi’s religion of the Sudan in the late 1800s, the Mahdi was the charismatic founder, and he was the organizer, and he was the general. In the case of Islam, Muhammad was the founder and the organizer and the general. Religions may have three roles, some of which are sometimes played by the same person.

COWEN: Without the figure of Muhammad at exactly the time he came along, is it not quite easy to imagine a Middle East not unified under Islam, not unified with the common language of Arabic? In some ways, maybe a bit more like the Caucasus, which remains a crazy quilt of different patterns. Thus, Muhammad is one of the three or four most consequential leaders ever.

DIAMOND: That’s possible. That’s a big question. It’s harder to become clear about Muhammad than it is about Christ, because we don’t know what the weather was like in Arabia at that time. Weather makes a big difference. If it was rainy, that would mean lots of plant growth for lots of babies and for feeding an army. We just don’t have information on the weather in Arabia at that time.

A counter-example is Genghis Khan, who developed the largest land empire in world history, all the way from China to Poland. Recently, why did Genghis Khan do it when there were other steppe leaders like Adolf Hühnlein and Timur the Turk? We’ve learned recently that the wettest time on the steppes in the last 2,000 years was around the time of Genghis’s birth. He was born at exactly the right time at the right place. If he had been born 200 miles further away and 20 years earlier, we wouldn’t know anything about him. In the case of Muhammad, we just don’t know whether the time of his birth was a particularly propitious time to found a religion in that area or not.

COWEN: The very notion that the two first names we’re talking about, they’re both religious leaders, right? They’re not kings. They’re not inventors. Do you think that suggests a vision of the world where it’s ideas that really matter and somewhat at variance with your own geography-based theories?

Interesting throughout, and we debated pomegranate juice as well.  I enjoyed reading Jared’s new book Profits, Prophets, Coaches, and Kings: (When) Do Leaders Matter?

What should I ask Kevin Roose?

by  Tyler Cowen in

Yes I will be doing a podcast with him.  From Wikipedia:

Kevin Roose…is an American author and journalist. He is the author of three books, and is a technology columnist and podcast host for The New York Times. He wrote a book about Liberty University, an evangelical Christian university known for strict rules imposed on students…

Kevin of course has a new book coming out, namely The AGI Chronicles: The Inside Story of the Race to Create an Artificial Superintelligence.  I have yet to read it, but I expect it to be gripping.

So what should I ask him?

Next Wins Appeal

by  Alex Tabarrok in

A spot of good news for Britain. Next has won its appeal and may go on paying warehouse workers more than “equal value” retail workers. I’ve written about this case in Equality Act 2010, The Equal Pay Madness Just Got Madder and The Apples and Oranges Tribunal, and discussed it at length on the CapX podcast.

Note how crazy the headline is:

The landmark ruling allows the retailer to pay warehouse workers more than shop staff on the basis it costs more to recruit and retain them.

Pay more to recruit and retain people? A landmark! Eight years of litigation to establish that wages have something to do with supply and demand.

Some of the crazy has been disciplined. The Leeds tribunal had asked why Next failed to raise the pay of retail workers to the warehouse level. Wrong question, said Mr Justice Bourne on appeal. The right question is why Next needed to pay the warehouse workers more. It did so, he found, for sound business reasons, and those reasons did not apply to retail. Hilariously, he also noted that Next’s warehouses were 47.2% female as opposed to the retail workers who were 77.5% female. In other words, there was more gender equality in the warehouses.

Don’t celebrate too hard. Eight years of litigation isn’t over, Next lost on the basic finding of equal value, and everyone is appealing. Meanwhile the government is moving to replace market wages with committee wages. The consultation closing in October would extend equal-value comparisons to race and disability and it would extend the law up the supply chain so Next’s potential escape route of contracting-out warehouses would be foreclosed. In short, Bourne’s reason is lawful today. Whether it survives the future is another matter.

Hat tip: Stephen S. and Robert W.

Reasons to go to college

by  Tyler Cowen in

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

…college is a great place to make friends, date, and possibly meet a spouse. Those features are ever more important as America suffers a crisis of loneliness. Furthermore, if you think that artificial intelligence may displace a lot of jobs, or just reduce work hours, marrying well will become more important. The title of the new essay by Clara Collier says it all: “After Work, We’ll Have Each Other.” You are also going to live longer, so think hard about who you wish to spend that time with.

The data show that college-educated people are more likely to marry, and to stay married. More generally, college-educated folks have superior social indicators of all kinds, including resistance to alcohol, drug, and gambling addiction. (Charles Murray wrote a whole book on this theme, called Coming Apart: The State of White America, 1960-2010.)

If you have a bachelor’s degree and are over 25 years of age, your chance of being married is 64 percent. If you have only a high school degree, your odds of being married are an even 50 percent.

For divorce, the results are more dramatic yet. The chance of a woman remaining married for at least 20 years is 78 percent if she went to college, but 41 percent if she is only a high school graduate. For men, the gradient is less sharp though still significant—namely, 65 percent versus 47 percent.

People who finished college also have more extensive networks of friends. For instance they are twice as likely to have six or more close friends, and less than half as likely to have no close friends at all.

There are some private sector jobs where you can spend four years alongside the same group of people and then have social networks to stay in touch over the following years. But all too often people come and go in their jobs and lose touch with former colleagues rapidly, or maybe never share much of a common experience in the first place. College seems to do an especially good job of keeping people connected.

We do not know the extent to which these relationships are causal ones. That’s to say, does going to college induce better outcomes, or are the people who will have better outcomes in any case more likely to attend college in the first place? Probably some of both. In any case, it is better to have this force on your side, even if you are not sure how important it is.

So, in sum, while the money premium from college is falling, the friends and marriage premium from college is going up and probably will rise further still.

Of course those are not the only reasons.  That said, I do think going to college makes less sense, at the margin, than it did say seven or eight years ago, as I outline in the piece.