Economics & Marginalia: February 23, 2024

Hi all,

Today, my son walked into one of my meetings to demand I dismantle one of his toy trucks (it’s touching how much faith he has in my non-existent facility with tools), and on being told I would do it after the meeting, declared that he would wait for me. He sat down by my chair and started howling at the top of his voice to render the meeting impossible to continue (fortunately, we were already wrapping up) and then happily toddled downstairs when I exited the Zoom call. It’s incredible how far a complete disregard for normal social norms will go towards getting you what you want; and depressing to see how this lesson has been taken on by political grifters the world around. Listening to Liz Truss shameless dissembling, speaking nonsense and rewriting history on her tour of America is a great example of it: virtually nothing she says would hold up to five minutes of googling and a tiny bit of intelligent scepticism, but her willingness to talk nonsense wall-to-wall makes it almost impossible to sustain the effort. How do you deal with a world full of toddlers willing to throw all dignity out of the window in exchange for a little bit of power?

1. Speaking nonsense wall-to-wall is not that far removed in spirit from outright lying and fakery. Tim Harford’s recent FT long-read on the topic has now been relieved of its paywall on his website and is, typically, excellent. He uses the story of the artist Eric Hebborn, who made a long career of forgery, to illustrate the corrosive effect of pervasive lies. One of Hebborn’s strategies was to cast doubt on the authenticity of paintings far and wide; finding any individual fake becomes correspondingly harder, but at the cost of tainting almost everything with the faint smell of inauthenticity. Harford suggests the rise of deepfake video and audio might lead us to a similar place. Two things popped into my mind as I read this: first, is Eric Hebborn real? I googled him and it seems that Harford’s story is true, but it occurred to me as I read I was taking a lot of the story on pure trust. This rather illustrates Harford’s core point. Secondly, what kind of institutional system will respond to this kind of threat best? Is it possible that repressive regimes, already used to ‘certifying’ legitimate truths, may actually wind up responding to deepfake political action better than those in which the default is to not monitor speech and reportage?

2. I love this from VoxDev: a new paper shows making local government units smaller in Uttar Pradesh led to more public goods being provided. At a talk I moderated recently, Rohini Somanathan told me that in India, local governments can implement complex policies, and this result seems in that spirit.

3. It will be no surprise to any reader of the links that I tend to see the world through the prism of economics, and in particular, the economics underlying the things I find interesting in the world. Around 18 months ago, two of my colleagues—Anthony McDonnell and Katherine Klemperer—gave a presentation on Antibiotic Resistance; and as I listened to them explain why ABR is on the rise and so deadly, I kept thinking “that’s a standard market failure; that one is a regulatory failure; and that’s an information problem”. I talked to them afterwards, and we (together with two further experts on the topic) wrote a paper setting out all of the economic problems that underpin antibiotic resistance. The economics of antibiotic development, supply and demand are so messed up; I don’t think I’ve ever seen a market beset by so many interlinked failures. We have a paper, a blog and a thread, depending on how much time you have. Even if you’re not a health expert (I’m not) the economics alone here is fascinating.

4. Speaking of very messed up markets, there are a few that are in competition for the World Heavyweight Championship of Human Welfare Destroyed. One of the contenders is the housing market, but there’s more than meets the eye here. The market for housing itself has a few market failures, but nothing so dramatic that it takes much ingenuity to resolve. Why, then, are house prices rising beyond belief and homelessness such a problem? John Burn-Murdoch suggests the answer is government failure: a number of governments around the world have made the regulation of house building so poisonous, so miserable, that it has effectively made their cities unliveable for all but a tiny elite. What is truly remarkable is that the worst offenders are often the ones who claim most loudly to care about social justice and equality, while the places that have actually done really well at making housing affordable and beautiful haven’t made any such noises. But as economists are usually taught: talk is cheap, and action tells you where the values really lie. The thread is also excellent. JBM uses the example of Croydon to explain how better regulation can make housing even in London affordable. I have a friend who benefited from this policy, and it was the basis for the most radical (and laughed out) policy I proposed to the UK Government: make all residential housing applications approved by default and put an extremely short and strict time limit for objections to be made.

5. Ken Opalo on the outlier in every graph of GDP per capita and human development: Equatorial Guinea (and no, it’s not a good outlier).

6. David McKenzie gets very philosophical and asks ‘what makes a firm a firm?’, but he does it in a very David McKenzie way, with empirical studies and discussion of what the evidence tells us about how firms and workers interact with themselves and each other.

7. Lastly, one of the best things I read this week was Branko Milanovic reminiscing on book buying as a young man in Yugoslavia, and in particular his description of his first trip to Foyles in London, on Charing Cross Road. It really struck a chord with me. I remember my first trip to Foyles and my eyes popping almost out of my head: we had some wonderful bookshops in Hong Kong (I truly mourned when the pandemic claimed Swindon Book Co) but nothing like Foyles, which felt like Wonka’s Chocolate Factory, but for words. In fact, when I first spent serious time in London as a 17 year old, all of Charing Cross road seemed like something out science fiction to me: I couldn’t believe so many great bookstores would be next to each other, and all so cheap. I used to spend hours wandering between them. I had a conversation with a friend recently about the impact of the Kindle on books. For them, it has crowded out physical print. For me, I bought one, read two books on it and put it away, and I’ve never used it since. Which of us is the norm? And is there any data to test whether Kindles have crowded in more book purchases or if it’s been zero sum contest?

Have a great weekend, everyone! Just a warning, due to childcare arrangements next week, I might not be able to do the links, so they may go AWOL.

R