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Is Tyler Cowen right to be stubbornly attached to economic growth?

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Tyler Cowen just published Stubborn Attachments in e-book form.

With the book, you get deep exposure to Tyler’s mental model of the world.

As someone who attempts to collect mental models for subsequent application, I came away smarter for having read it.

Below I’ll try and restate Tyler’s main practical arguments (skipping over some of the philosophy) and then end with some questions and concerns.

Tyler’s Primary Thesis: Sustainable Economic Growth Should Guide Our Policy Making

Tyler argues that sustainable economic growth should guide much of our policy making because, over centuries, the gains from economic growth dwarf the gains of just about all other considerations.

He defines sustainable economic growth as gains in “wealth plus,” which “includes traditional measures of economic value, as would be found in gdp statistics, but also measures of leisure time, household production, and environmental amenities, as summed up in a relevant measure of wealth.”

Over let’s say a 5,000 years, consider two possibilities:

No economic growth: We stay the same. Poverty is all around us. People are starving. Billions of people barely get by. Life is hard for so many people.

Modest economic growth: We grow at 2% a year. In 5,000 years, future humans (assuming no population explosion) are crazy wealthy, have access to amazing technology, and even the poorest humans view the richest people of today as paupers. No one is losing sleep trying to make ends meet. Every person has every material need taken care of, plus the wealth to pursue their passions and interests.

In other words, the difference between poverty as we know it and each of us feeling like Bill Gates was materially poor is determined by one thing: sustainable economic growth.

So when we’re making policy decisions we should keep our eye on the prize: sustainable economic growth is what will allow us to flourish.

Of course, in order for you to accept this argument you have to be ok with two assumptions: future lives matter a lot (so we should focus on pro-growth policies that benefit future people), and, increased wealth leads to increased well-being (Tyler runs through the research).

While both of these assumptions are contentious, I believe both to be correct.

Other Considerations: Individual Rights, the Environment, and Social Stability 

Tyler’s provides guardrails and depth to the concept of sustainable economic growth.

First, Tyler argues that we shouldn’t harm individuals to achieve economic growth; i.e., no mass murder even if it helps us squeak out an additional point of growth.

Second, he argues that we shouldn’t destroy the planet in order to achieve economic growth; i.e., what’s the point of focusing on the future benefits of economic growth if there’s no place to live.

Third, he argues that societal stability is an important part of sustainable growth. So policies that might not seem purely connected to growth (such as welfare state) should be considered as part of an effort to maintain the continuity of our civilization.

All of these seem correct to me, though as I’ll argue at the end, I wonder if this last point (societal continuity) is actually what we should be most focused on.

Major Shifts in How We Think and Feel: Redistribute for Growth Only 

Perhaps the biggest practical implication of Tyler’s thesis is that, according to him, “we should redistribute only up to the point which maximizes the rate of sustainable economic growth.”

In other words, we should only give a starving person food if this can be tied to maximizing the rate of sustainable economic growth, not because we feel that the starving person deserves something to eat.

While this rationale logically follows from his assumptions, this line of thinking departs greatly from current values. Most of us justify the welfare state in terms of our care for living and breathing humans, not for future humans.

Tyler’s argument for redistribution is a monumental shift from our current moral calculus.

That being said, it’s possible the our current lack of opportunity is reducing sustainable economic growth, so for now Tyler’s thesis may actually call for an increase in certain types of charity and transfers.

But I predict that most people will find his logic emotionally unappealing.

Anti-Fragility > Sustainable Economic Growth 

As much as I appreciated Tyler’s argument, I think I disagree, though I’m not sure both because I’m still grappling with the text.

Ultimately I believe that “anti-fragility,” rather than “sustainable economic growth” should be the language we use to guide our policy decisions, and I think, though I’m not sure, that this puts me at odds with Tyler.

Consider this hypothetical: would you rather have rather have a million years of infinitesimal  economic decline (.0000000000000000000000000000000000000000000001% a year) and then human extinction or a thousand years of 5% economic growth and then human extinction.

I think almost everyone (including Tyler?) would choose the former.

While economic growth will likely make our society less fragile, this is not inevitable, and we need to incorporate this understanding in choosing guiding principles.

This thought experiment points to the idea that it’s actually the sustainability of a healthy society, and not the sustainability of economic growth, that we desire.

Most of us would accept small amounts of negative economic growth for hundreds of thousands of years of additional existence.

Similarly, I don’t think most of us would take high economic growth and a population explosion that had most people living at substance levels, even if this led to a sustainable society with high amounts of leisure.

So I would argue:

  • Sustainable economic growth is a sub-goal of anti-fragility; it should not be the primary goal in and of itself.
  • Economic growth should be considered in both societal and per-capita terms.
  • I would maintain Tyler’s support for individual rights.
  • I would make environmental sustainability, like economic growth, a sub-goal of anti-fragility.

In sum: anti-fragility and individual rights do all the work. Everything else follows from these two principles.

Thanks + Do the Work Yourself

All that being said, economic growth is clearly one of the primary ways to make our civilization less fragile, so in this sense I agree with many of the practical implications of Tyler’s worldview.

And Tyler’s mental model will be present in my head next time I’m trying to unpack an efficiency vs. equity argument on a specific policy.

Lastly, I do think that everyone should go through the process Tyler went through; ultimately, each of us should understand the philosophical underpinnings of our policy preferences.

I thank Tyler for his contribution.

What will be the stable charter school and teacher union equilibrium?

It appears Kentucky may pass a charter school law.

News recently broke that Noble charter schools may become unionized.

Where is this all heading?

The Forces at Work: Charter Market Share will Continue to Rise 

Charter market share will continue to rise because (a) 40+ states allow charters and this number is increasing and (b) once a charter school is open it is difficult to close.

Yes, policies like charter school caps and moratoriums may slow charter growth down, but it will be incredibly difficult for union leaders to fully stop charters from growing in a world where charters are legal in 90% of states. Rolling back laws in this many states is unlikely.

Charter market share will continue to grow.

The Forces at Work: Unions Organize Where the Teachers Are 

A simple consequence of rising charter market share is a rise in the number of teachers who work at charter schools.

Unions received dues (and power) from having as many teachers as possible enrolled as members.

The more charter schools there are, the more it will be be worthwhile for unions to attempt to organize these teachers, for both financial and political purposes.

The Future of Union Incentives 

So we’re basically going to be in multi-round unionization game between unions and charter schools.

Most importantly, this new game (unionizing a lot of charters) will have very different incentives than the old game (unionizing a local monopoly).

Under the old game, the unions paid a relatively small price for being obstructionist: with only one school operator in town (the district), they didn’t have to worry too much about how their actions affected the performance or reputation of that school operator.

In the new game, the union has a new incentive structure: if they are overly obstructionist, they will reduce their ability  to unionize more charters in the future; however, if they are not obstructionist enough, unionizing a charter won’t slow down the growth of that operator (which is in the unions interest, as they want the district to last as long as possible, as it’s the easiest entity to unionize).

The unions thus want to add value to unionized teachers and at the same time hobble charter school growth.

The ideal play for unions is to: (a) unionize charter schools  (b) demonstrate value to their unionized charter teachers so they can unionize future schools (c) slow down the enrollment growth of unionized charter schools  (d) avoid having unionized charter schools go down in flames so they can unionize future schools.

My Guess

The conditions for charter school unionization are favorable compared to other sectors of the economy: you have a long history of unionization, strong and well-financed existing unions, an inability to outsource to other states or countries, and weak accountability for performance (compared to the financial market).

All of this bodes well for unionization.

But unionizing charters will require unions to moderate their behavior and become less antagonist with management, as they will be working in a market of providers rather than a district monopoly. This will require significant change in their leadership and culture. This is hard to do.

So where are we heading?

One interesting comparison group is nurses, which generally operate in a non-profit, physically anchored, and heavily regulated environment.

Overall, about 20% of nurses belong to a union.

And while most industries have seen declining union membership, nursing union membership has risen over the past 15 years.

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I think we will see the same thing happen in the charter sector.

That being said, given that unions have to independently organize each charter organization (which is very expensive), and that their success will be predicated on cultural change, I don’t think we’ll quickly move into a world of 100% charter unionization.

But will we see 20% of charter school teachers (compared to ~7% right now) organized in unions over the next decade or so?

I think so.

Book Review: Homo Deus

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Homo Dues is Yuval Harari’s follow-up to Sapiens, which was excellent.

I. Book Summary 

The Past 

For most of time, humans struggled to overcome three evils: famines, plagues, and wars.

In part because humans really had no good answers to these problems, God became the center piece of coping with this evils. It was God’s will, rather than human agency, that was the causal foundation for what happened on Earth.

The Turning Point 

The Enlightenment and the Industrial Revolution changed all this – rationality and science allowed humans to begin taming famines, plagues, and war – which also eroded God’s standing.

The Present 

Together, the emergence of the Enlightenment and the Industrial Revolution – as well as the decline of religion – led to a very turbulent 20th century, where numerous countries and societies experimented with new social structures.

Ultimately, capitalistic welfare states won out on the economic front, and Humanism (seeking meaning by looking inward rather than by following God’s will) is winning out on the social / spiritual front.

Because we’ve made so much progress defeating famine, plagues, and war – we’re now turning our attention to achieve immortality, happiness, and, ultimately, god like abilities.

The Future

Humanistic capitalism will be threatened by the rise of robots / computers that will undermine the foundations of both humanism and capitalism.

Because machines will be become more advanced than us, it won’t make sense for human intuition and reasoning to be the foundation for morality; and because machines will takeover the human economy, human centered capitalism / welfare states will no longer be the optimal way to structure an economy.

The two most likely futures are: techno-humanism (humans become part machine) or data-ism (humans become functionally obsolete and are replaced by intelligent machines that will likely not be conscious).

Harari indicates that techno-humanism would likely collapse on itself pretty quickly and that data-ism is our more likely future.

II. Harari is a Great Writer and Historian

It’s hard not to envy Harari as a writer: he’s logical, funny, insightful, and has an uncanny ability to elucidate complex subjects through pithy one-liners, stories, and thought experiments.

We’d all be a lot smarter if more non-fiction writers wrote with his intelligence.

Harari also does an incredible job of identifying and explaining the drivers of human material and cultural development.

III. Harari Adds Little to Futurism

Most of the main ideas in Harari’s analysis of the future can be found in deeper and more expansive works (writers along the lines of Ray Kurzwel, Robin Hanson, etc.)

While Harari’s writing and analytical abilities make him a first class historian, these skills do less work in enabling him to make insightful predictions about the future.

What I would have thought would be obvious topics of deep exploration – such as technical analysis of the computing power needed for a singularity type event, as well as the underpinnings of consciousness – receive very little treatment.

Harari just argues that data-ism will likely occur and that we can’t really predict what that will be like.

I would have loved to read a much deeper analysis of on how and when data-ism might occur, as well as some hard thinking about what economics and values might govern this new world.

Sapiens is required reading.

Homo Dues is worth reading, but, unfortunately, it’s not groundbreaking.

Wisdom of others: best books I read in 2016

Note that these are books I read in 2016, not necessarily those that were published in 2016.

Wealth of Humans – Ryan Avent

A great overview of the major trends that will affect employment, wages, and politics over the coming decades. This book significantly increased my belief that wage subsidies may be a key policy for increasing individual meaning and societal stability as we transition to the digital age. I reviewed the book here.

The Sovereign Individual: Mastering the Transition to the Information Age – James Dale Davidson and Lord William Rees-Mogg

This books wins the award for “highest authorial confidence in opinions I disagree with” – yet it made me think a lot, and I value books for the thoughts they generate just as much as the claims that are made.

The Age of Em: Work, Love and Life when Robots Rule the Earth – Robin Hanson

A fascinating book of predictions based on the idea of (1) applying social science literature to (2) hard science trends to (3) try to predict the future. I reviewed the book here.

Blood Oil: Tyrants, Violence, and the Rules that Run the World -Leif Wenar

Wenar’s argument – that we should not buy oil and minerals from states where the people have not given their assent for the sale – seems morally correct and politically impossible, for now. But the seeds of change often begin with clear arguments. Hopefully Wenar will have influence over the coming decades.

The Scapegoat – Rene Girard

Girard, a Christian, makes the argument that profoundness of Jesus’ death stems from the fact that it marks a historical shift in empathy: instead of siding with the mob that kills the outsider, with Jesus we side with the outsider.

I found this to be a compelling and beautiful argument. It also supports my belief that the origins of Christianity and Buddhism are intertwined with the transition from hunter and gather to agricultural societies. In a hunter and gather society, the group is everything. In agricultural societies, high degrees of inequality create more within group class based conflict, which opens up space for spiritual traditions based on poverty / outsiders / individual suffering / etc.

A People’s History of the United States – Howard Zinn

I’d never read it before. I’m only 25% finished as it’s so brutal to read. But it adds important context to the tales we’ve been told.

The Spoils of War: Greed, Power, and the Conflicts That Made Our Greatest PresidentsBruce Bueno de Mesquita, Alastair Smith

A good company on to Zinn. I didn’t agree with everything in this book but I like the framework: analyzing presidential war time decisions based on personal desires and psychology rather than simply national interest. I found the arguments about the Revolutionary War to be most compelling (war fueled in part by desire for territorial expansion and land owner wealth accumulation). Also right notes that we give too much status to war time presidents and not enough status to economic growth / peace presidents.

The Attention Merchants: The Epic Scramble to Get Inside Our Heads – Tim Wu

Wu makes a strong argument that “fake news” is a structural problem with deep historical roots: so long as advertisements drive revenues for media, we’ll always have problems with the consequences of fighting for eyeballs.

The Populist Explosion: How the Great Recession Transformed American and European Politics – Judis

Most interesting takeaway: leftist populist movements tend to involve two groups (the people vs. the elite) while right wing populist movements tend to involve three groups (the people vs. the elite + an out group).

The Last Days of Night: A Novel – Graham Moore

A great historical fiction novel about the corporate wars to win the race of making money off the electrification of America.

Hillbilly Elegy: A Memoir of a Family and Culture in Crisis – J.D. Vance

Made me think deeper about the historical perseverance of culture.

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World – Ruchir Sharma

Re-enforced the power of creating frameworks that combine the right metrics with psycho / social / cultural analysis. You need both to do diligence on countries or companies or people.

Younger Next Year: A Guide to Living Like 50 Until You’re 80 and Beyond – Chris Cowley and Henry Lodge

Ignore the occasional off-putting sexism and you’ll get great advice (I think). I have 100% adopted the physical routine but am still struggling with the dietary routine.

Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies – Charles Koch

Whatever you think of Koch politics, this is an insightful read on how a founder’s philosophy, psychology, and personal values infuse a company, for better or for worse.

Miracle Man – William Leibowitz

A fun read!

 

Here’s a better framework for thinking about Trump

As I’m reading anti-Trump and pro-Trump commentary, I’m finding very few pieces that fully explore the different possibilities of a Trump presidency.

So I tried to create a graph to chart what I think are three dominant considerations we should be using to understand the president elect.

A Framework for Understanding the President Elect 

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This framework captures 3 primary spectra:

Social Liberalism: Does a leader have respect for people of all races, gender, sexuality, religion, and places of birth?

Economics: Does a leader lean more toward populist economics (which often involves trade protectionism and anti-immigration stances) or globalist economics (which generally leans towards free trade and more immigration)?

Rule of Law: Does a leader behave within the established norms of domestic democracy and international rule of law, or does she lead by greatly damaging democratic institutions and grossly violating international law?

To chart some historical examples, I spent a few minutes trying to plot the last few American presidents and Hitler. I was just aiming to be directionally correct but am in no way trying to argue that I plotted these perfectly.

Each Variable is Very Important, But I Think Rule of Law is Probably Most Important

You could make reasonable arguments for each variable being the most important consideration.

If I had to argue for social liberalism, I’d say that even someone who works within the rule of law can do terrible harm to minority populations.

If I had to argue for economics, I’d say that someone who wrecks the international economic system could unleash untold suffering on the poor of the world.

In arguing for rule of law, I’m mostly arguing from this recent historical fact that so many of the world’s major mass deaths have been caused by dictators, such as Hitler, Mao and Stalin.

This graph is illustrative:

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I’d need to think harder before having stronger opinions on the relative importance of each variable.

The only thing I am confident in is that they’re all important.

When to Build Bridges, When to Join the Resistance 

I think both Trump and Clinton supporters have reasonable grievances about the world.

I don’t think that it’s in our country’s best long-term interest for each side to: (1) argue loudly about their legitimate grievances (2) not listen to the other side’s legitimate grievances and (3) not differentiate between policy differences and threats to the survival of the nation.

I think economics and immigration are policy differences.

I think respect for rule of law is an issue that gets at the survival of our nation.

And I think social liberalism sits between the two, in that it determines who receives the full benefit of the rule of law within our country, which in its most severe form can threaten the survival of our nation (slavery) but in other cases can be solved through the political process (gay marriage).

I think it’s worth trying to build bridges around policy and less severe forms of social illiberalism.

I think it’s worth considering more radical forms of resistance in cases of major threats to the rule of law and severe cases of social illiberalism.

In Sum

Our country is deeply divided about many issues.

It’s important to tease out the differences between these issues, both to understand ourselves and to understand the president elect.

I know that this is a rather unemotional way of trying to understand issues riven with deep emotions.

I’ve felt a lot over the past week – it’s been especially hard to hear stories of children in our schools who don’t feel safe – and I’ll continue to listen to these emotions.

But I also want to try and understand the way forward, and, for me, frameworks help.

Book Review: The Wealth of Humans

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I just finished Ryan Avent’s The Wealth of Humans: Work, Power, and Status in the Twenty-First Century.

Summary: Economic Disruptions Require New Social Contracts, which can be a Bloody Process 

Ryan’s primary argument is as follows:

1. Periods of rapid technological innovation usually lead to increased prosperity, but the transition can be very disruptive to the existing social and economic order.

2. During these periods of disruption, workers, the economic elite, and those in governmental power have to create the social contract will be for the new order. This is a very difficult process that involves a lot of trial and error.

3. The last time this happened was after the industrial revolution, where numerous wars and revolutions eventually led to a few dominant orders: capitalism and the welfare state (in the West, South and Central America, and parts of the East), socialist dictatorship (in China), and resource based dictatorships (primarily in the Middle East). Of these different variations, capitalism + the welfare state have proven most successful.

4. The digital revolution, which is being driven by continuing gains in computing power, will requite a new social order, especially if this revolution leads to massive surpluses of labor.

5. Creating a new social contact for this age could be just as bloody – or bloodier – than the last go around (WWI, WWII, Mao, the Cold War, etc.).

Reflection #1: Time Between Disruptions is Decreasing, Power of Weapons is Increasing 

I generally agree with Ryan’s argument. One additional issue to consider is that the time between economic singularities is decreasing. It took us a very, very longtime to get from hunter gathers to farmers, and a very longtime to get from farming to the industrial revolution.

It’s barely taken us a 150 year to get from the industrial revolution to the computing revolution.

And it’s likely that the computing revolution will seed another revolution (perhaps general artificial intelligence) in another 50-100 years – and who knows what next economic singularity will spring from superior artificial intelligence…

Additionally, technological advancement increases the power and scope of our weapons. We will likely continue to build new weapons that can wipe out humanity, such as synthetic viruses.

In short, the time between the rolls of the dice will decrease, while our odds of losing any given die roll may increase.

One way to reduce the odds of losing is to disperse ourselves and / or our decendents amongst the cosmos in order to decrease the fragility of single planet living.

Reflection #2: A Minor Guess of How to Ease Into the Next Social Order

The more I puzzle over the accelerating impacts of the digital revolution, the more I come back to wage subsidies as the best tool we have for stumbling our way into the next social order.

While universal basic incomes might at some time be warranted, this will be incredibly expensive (given current productivity) and we don’t yet know how to structure a modern society where many people simply don’t work.

Wage subsidies, on the other hand: (1) maintain the connection between work and income (2) lead to less economic distortion, especially compared to minimum wage raises (3) can be raised over time to maintain a sense of economic progress, and (4) help avoid an economy where purchasing power (and presumably social power) consolidates with the top 10%.

Reflection #3: What is Inflationary? What is Deflationary?

Over the past few decades, goods have faced deflationary pressures (most things you buy for day-to-day uses are cheaper now).

Education and healthcare, on the other hand, have been subject to inflationary pressures (they cost more than they used to).

From a pure material progress standpoint, a deflationary future means that wage subsidies might not be necessary to keep improving welfare.

However, if healthcare, housing, and education continue to eat up budgets, people will need higher wages to keep up, especially those that don’t receive government subsidies in these areas.

Lastly, it’s possible that even if purchasing power increases, if income inequality is still increasing, social unrest could still be a major issue.

All this is to say: it’s worth looking at both income and expense.

Reflection #4: Consider Yourself, Consider the Monkey, Consider the Dog 

To the extent humans survive the new social order that comes after an artificial intelligence singularity, it’s worth considering what this existence might be like.

Dogs, for example, have done quite well during the era of human dominance. Specifically, they were bred to be happier.

Dogs have also been provided a universal basic income in the form of shelter, food, and treats.

I often struggle with the gap between what I believe to be the best version of myself and the actual reality of the current version of myself. I sometimes get depressed by the lack of progress I’m making.

The fact is that it’s incredibly difficult to become an even better person once you’ve eaten up the low-hanging fruit of adopting classical liberal beliefs and not murdering your fellow humans.

So it’s worth noting that humans (perhaps?) have created the best version of dogs.

Perhaps our descendants will do the same for us, especially if we are able to bring value to whatever is they are seeking in life. Interestingly enough, more intelligent primates have not faired as well as dogs and cats. So don’t assume being #2 on the intelligence pecking order means you’ll be ok.

This may all sound crazy, but it seems extremely unlikely that humans are the endpoint of evolution. So it’s worth considering – what comes next?

Charter Schools Get Their Mojo Back

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It’s been a tough summer for charter schools.

From John Oliver to the NAACP to Elizabeth Warren, there’s been a lot of unfortunate takedowns.

And while these criticisms should not be ignored, they should also not be viewed as the final etchings on a tombstone – especially when the best of the charter school movement is delivering amazing victories across the country.

Mojo Moment #1: A Quarter Billion to Scale 

Elizabeth Warren aside, it’s worth remembering that a Democratic president (Bill Clinton) started the federal charter school program and a bipartisan majority in congress has continued to expand the program to this year’s current $250 million allocation.

See here for the winners.

In a time of federal dysfunction, it’s heartening to see the federal government at its best: investing in  educators to launch amazing new schools.

Mojo Moment #2: 50 Million to Build the Future of Schooling

The XQ prize was just announced and half of the ten winners were charter schools.

Of late, it has been common to criticize charter for failing to innovate.

Well, how about: a school developing virtually reality courses as a way to reinvent instruction; a mobile school to serve homeless students wherever they might be; and a school aiming to build a tech platform that could be the operating system for thousands of schools across the country?

Time will tell if these innovations can scale, but the breadth of their ambition is inspiring.

Mojo Moment #3: Thousands Rally for 100,000 More Charter Seats

Thousands of families and educators, joined by special guest Common, marched in New York City to support the doubling of the charter sector from 100,000 to 200,000 students.

I wish that those who criticize charters would grapple with the reality that families who are forced to send their children to failing public schools are marching in the streets for more high-quality charter schools.

With these rallies as a backdrop, calling for a moratorium on charter schools seems out of touch at best and malevolent at worst.

Government and civic leaders should be serving, not denying, families in need.

Scale, Innovation, Demand

When you’re growing great schools, reinventing what school can be, and thousands of families are asking for more – it’s worth taking some time to feel the wind at your back.

And it’s worth reminding yourself, that, to date, charter quality and charter market share have only moved in one direction: up.