August 2, 2023
Some econ-related things I've been thinking about that I typed out real quick.
The Career
I've recently begun self-identifying as an econ bro, despite the fact that I think I'm pretty much the opposite of the classic archetype. It's a fun subject. The world is literally free econ rant material. The snacks on the table (a la Thaler coining "Nudge" theory from the cashews on a party dinner table), the places people are from and, of course, the cash, assets, and more that make the world go round. For a classic "generalist," interested in "society" with a feeble but existing appetite for the technical. I went from wanting to be the audacious type, like the ones who shorted the housing market in 2008 and made big bucks, to wanting to facilitate real-world "change" by developing cool interventions. This is saddled with doubt: development econ interventions interface with countries that arguably fall into learned helplessness and dependence, institutions that hire economists and don't hold them accountable or pursue research that doesn't coincide with much actual output and replication crises that permeate the social science.
Firstly, I question pursuing economics and the legitimacy of the field. I'm a hobbyist at best, but what does it mean to actually do things? I still have this stubborn thought that the blokes at the reserve are the ones doing "real" work. It's unglamorous, but the ones who work at the reserve, at least, have control over all our money. Interest rates being changed, money flow, and regulating financial markets are all at the mercy of the federal reserve. This summer, I'm trying my hand at policy where in an ideal world, you have to think tanks muster their capable human capital (self-incestuous, I'm aware), and they provide meaningful proposals to relevant stakeholders. The government, as this ominous body, can't be decent on their own, so expertise comes in to fill holes. The truth of the matter is that at very many steps along the way, things deviate from optimality.
How the field of economics as an academic pursuit has changed in terms of its structure is something I am kind of familiar with. There has been a lot of hype around pursuing a graduate degree in economics. Despite the fact that many current and former PhD holders are expressing their frustrations and advising against it, there is still a strong desire to acquire a doctorate in economics. In the past, when I was a starry-eyed individual striving to maximize my impact, even the altruistic vocational bible recommended getting a PhD in economics. However, I believe there has been some slight misguidance.
Getting into an economics graduate program, although less draining than other pursuits, has become much more competitive. It has become an unspoken practice to complete a pre-doctoral program, have a rigorous background in mathematics during undergraduate studies, and possess exceptional aptitude. This isn't necessarily a bad thing, as it allows the most talented individuals to succeed and raises the bar for better economists. Perhaps those who are deterred by these requirements are redirected toward more productive endeavours. Market forces come into play, and we select the best and brightest (within reason) to pursue economics. One major selling point in promotional essays was the lack of unemployment in the field, which is reasonable since economists should excel at delegating their labour.
When final-year Ph.D. candidates enter the job market, they go through a relatively formalized process compared to other disciplines. They engage in a frenzy of applications to employers hiring that year. Tech companies have been significant employers of economists, utilizing their expertise in market design and macroanalyses. However, recent events have shown a different picture. Even before the recent wave of intense layoffs, there was a notable incident involving Zillow's economics team, indicating that Frank Knight's notion of "free lunch" may not be a realistic expectation.
Now, let's talk about armchair economics and the modes of thinking we acquire from studying the subject. So, you want to be a decision theorist. Your somewhat unconscious Bayesian brain isn't cutting it, and you desire to incorporate "expected value" into your daily vocabulary. Generally, I think this is fine, but with the massive caveat that, like everything else, moderation is crucial. When reading economics books, I sometimes find fancy terms to articulate my existing intuitions, while other times, I feel radicalized, particularly towards a free-market direction. I would love to discuss how to balance personal and extrinsic motives with this anarchist-flavoured worldview. I suspect that leading a comfortable lifestyle plays a significant role in veering towards this ideology, causing value drift. Academia can gradually erode one's willingness to conform to anything close to the mainstream or acceptable, pushing individuals toward the extremes.
Think Tanks
On a smaller scale, we can look at think tanks. They're "independent" research institutes that publish articles, studies and memos that are generally meant to inform political/government stakeholders. People are generally untrusting of think tanks and at least wary about their impact. Detached from market forces and reliant on large funders: they have incentives to follow and are ubiquitous for practically selling "ideas" that promote the agendas of said funders. Partisanship, censorship, allegiances - remaining an objective institution is hard, if not even impossible. The Niskanen Center had a piece written about them earlier this year, despite clashes of opinion and ideological distance, They're eccentric and have gotten real things done: action-focused. They're known for cold-calling congressional offices and whacky approaches to their problem agendas.
Understanding Ruchir Agarwal - The Invisible Genius
I've found myself mentioning Ruchir Agarwal a lot. He's an economist with a broad range of focuses, generally interested in frontier economics. After some off-the-cuff conversations this past weekend, I felt a strong urge to synthesize my ideas. I left feeling really energized. Perhaps my attempts to appear more confident in other areas have led people to think I have "takes," but I've been intensely questioned on them these past few weeks or months. It's been great. I'm learning a lot and receiving near-instant feedback on my understanding of the areas I supposedly care about. I'm gaining new threads of knowledge that I'm excited to explore.
One area I'm particularly interested in is human capital. As expected, this topic leads to thinking about transformative AI and its implications for labour and consumption. There are nuances here, such as how our ability to produce is impacted by our ability to learn faster and the tools built to facilitate quicker knowledge sharing. On a more macro-scale, people have been looking at labour replacement, with researchers speculating that white-collar jobs will be impacted the most.
Anyways tangentially related to this sector of labour economics, there's the idea of brain drain.
I don't think I ever really internalized the concept of brain drain. I was always eager to leave home, my city, and explore the greater world.
In doing so, I let go of some local responsibility. For me, it made sense that if I reached a high level of competence and opportunities "elsewhere" seemed more worthwhile, it was a no-brainer to go there. Unlike some people from other countries, I know (the British, cough cough), I, like many other young Canadians, don't identify as the jingoist type. My country has treated me well, but I felt a cap on the potential for glory. Now, of course, glory isn't what I want, but in wanting to do big things - something that especially now, doesn't feel as resonant - here wasn't the place.
Flash, magnitude, and capital were all rewards in a game to be played. A game that felt smaller here, with fewer people to play against, lower stakes, and perhaps even apathy? Nevertheless, among the IMOers, contemplating my relationship with my home country and being excited about leveraging human potential to the fullest, Ruchir came up quite a bit. I found myself attempting to summarize his key paper on "geniuses" and the individual contributor.
Ruchir's general theory of change revolves around focusing on advanced, emerging, and frontier economies. He has examined various topics, ranging from health economics and the research and development landscape during the age of Operation Warp Speed to the mechanism design between private and central banks in an era where paper currency is no longer used. He has also explored international relations, and today, I'm particularly interested in his work on geniuses and, tangentially, high-skilled U.S. immigration.
So, I spent a good portion of the previous year thinking about talent search. My reasons were just another example of being at the mercy of an incentive landscape, and it's debatable how optimal it was. I've discussed this with people before. This need to give back, though not entirely driven by pure benevolence, has some selfish aspects: reconciling my guilt with the projects I worked on, even if they were to benefit others, and perhaps a saviour complex? I also had a need to do something of my "own," something relatively tangible, even though the best use of my time might have been something else or simply relaxing before the storm. Anyways, being of Nigerian and seeing very little African representation, I mainly helped out with the local training camp and worked with them on their projects. I also set up some small grants with a local U.S. student program aimed at math students. Looking back, I'm relatively okay with how it all went. However, I'm less sure if it was the best use of my time. But Ruchir has articulated the IMO community as one with the structure to connect and identify intelligent people.
It's pretty interesting. The Supreme Court heard two cases on the use of affirmative action in U.S. college admissions. It's a heated issue. The U.S. higher education system stands in a league of its own in almost every aspect: accessibility, variance, output, prestige, and so on. Ruchir's paper examines IMOs (International Math Olympiad participants) and their knowledge production. The link between IMO participation and pursuing a career in math research isn't tremendously strong. While the sheer intelligence required is transferrable, the activities themselves are different. Pursuing mathematics education-wise was strongly tied to performance at the IMOs. There was a penalty for participants from developing nations, as they were less likely to pursue PhDs at top schools, publish papers at the same frequency as their counterparts, and earn fewer citations. There's a spiel about MIT and how those who go through this pipeline are likely to be admitted at an institution that meets full-need and brings together a pool of very talented students. The least "gameable" school for those for whom the stakes are the highest.
Learned Helplessness, Poverty Traps, Development
So, a few months ago I was reading "Stubborn Attachments" and there's this excerpt that discusses individual time preferences. The ability of a person to think about their future selves. Humans used to be under constant pressure, we had to think about the near-term: what animals to run away from and, which ones were the easiest to kill for calories, how to survive till night because tomorrow wasn't a certainty. Our species (generally) lives with much more abundance and there's landscapes which mean it's possible to reap much much more reward when you think of the long-term. He mentions that “Young people, uneducated people, and those with lower IQs and problems with cognition or self-control find it hardest to make this connection. Those same people are also more likely to have problems with obesity, gambling, impulse control, and even violence." - "impatient choices are incorrect" and these people are "failing to imagine the future and its import.”
So it's extractable that those who consistently find themselves on the unfavourable side of the coin haven't factored in their longevity, isn't investing enough, thinking about the long-term. I look to the infamous s-shaped curve that models the poverty trap. Those who are low-income find it difficult to escape poverty because they can't invest in things that would improve their financial situation. These investments don't discretely improve their conditions but have outsized benefits over a greater span of time. It's not that easy to just put more of your very limited resources into education, job training, supplies for a new small business, technology, etc.: education about these options, making just enough to make ends meet, exploitation, limited assets and general dependence on subsistence means people stay trapped. However, there's a story that is slightly more nuanced in developed countries where people are still relatively poor. It leads to disputes about people exploiting public benefits and not lifting themselves from their bootstraps. More conservative and libertarian-leaning groups call for social welfare programs to be reduced as they perpetuate a "culture of poverty."
People identify this, and institutions with the means help. GiveDirectly makes unconditional cash transfers to the world's poorest, and the International Monetary Fund distributes capital to developing countries in hopes of enabling their economic stability and generally reducing poverty. The IMF is a fund, and as such, they give out a significant number of loans. Partnering nations have been accused of being too reliant, knowing that supporting themselves through their own means is largely unnecessary in the expectation that the IMF will be of help. The loans they give out are imperfect as well, with stringent conditions, and high interests, among other issues.
This extends to a lot of mediums, but how do we straddle the balance between agency, selection (for desired strata) and goodwill?
All of the above isn't novel at all, but it led to an interesting rabbit hole where I looked into the Hiding Hand Principle and thought about what it actually means to hold democracy as the golden standard and the impacts of the West imposing it on sub-Saharan Africa and other politically developing nations.
There was a random post in EconJobRumors (it's largely a cesspool in my opinion) but there was an interesting thread that looked into the argument of "imposition of democracy" as a non-optimal thing. So, Albert O. Hirschmann is known for coining the hiding hand principle, which basically extends the negative externalities of decision-paralysis to a larger scale. "Ignorance is bliss" as a statement is true according to Hirschmann. Decision-makers who overthink about future concerns will make worse-off decisions by virtue of not taking enough risks and actually taking action when it's needed. It coincides with the Planning Fallacy and other notions of risk-taking as a good thing even when accounting for the precautionary principle. We benefit a lot from ventures being invested in, even when all the information isn't perfectly laid out before us, or rather decision-makers. He also posited unbalanced growth as a mode for global welfare: poorer countries focused on the short-term and subsistence benefit from better-off countries doing even better because they have poorer decision-making skills, according to Hirschmann. When others do well, they are supposedly better able to stimulate their growth and mobilize their growth by replicating those who are already prosperous.
In this worldview, we somewhat abandon, overly benevolent social welfare programs, philanthriopies, etc. in exchange for doing what works and helping to extract the most dollar value from every dollar invested. Neglect makes people more creative? The Anonymous EconJobRumors poster outlined the following.
Assuming countries should want to lift themselves out of poverty, they are able to do so due to three factors:
Arguably, democracy doesn't enable most of these factors. Democracies are distributed and time-inefficient. Democracies being implemented in currently unstable governments also don't tend to form on their own or are at least a product of many many years of civil unrest with a low likelihood of success when implemented by the "people" internally. For the sake of economic growth, it's better to let "people" fend for themselves. It's interesting when you consider developing nations who are war-ridden, who have populations who are basically banking on external forces to implement something seemingly democratic to counteract often a major militant governmental power.
This is not focusing on learned helplessness per say, but wavers at this general idea that being lifted from deplorability might not always be a necessarily good thing. struggle is needed for growth. there is some question of moral relativism here. it's not at the level of whether murderous tyrannical governments should be allowed to exist, but you claim democracy is a right. Is any nation that persists without it, when there are actors that can intervene, a bad thing? a morally wrong one? this someone aligns with the Bolsheviks that split from the Russian Social Democratic Labour Party and the aligned (generally) marxist Mensheviks.
Some Questions