Month: September 2023

The inequality of factor mobility

PNRJ critique of neoclassical economics, public policy, tribal paradigm , , , , , , , , , , , , , , , , , , ,

Sep 24 JDN 2460212

I’ve written before about how free trade has brought great benefits, but also great costs. It occurred to me this week that there is a fairly simple reason why free trade has never been as good for the world as the models would suggest: Some factors of production are harder to move than others.

To some extent this is due to policy, especially immigration policy. But it isn’t just that.There are certain inherent limitations that render some kinds of inputs more mobile than others.

Broadly speaking, there are five kinds of inputs to production: Land, labor, capital, goods, and—oft forgotten—ideas.

You can of course parse them differently: Some would subdivide different types of labor or capital, and some things are hard to categorize this way. The same product, such as an oven or a car, can be a good or capital depending on how it’s used. (Or, consider livestock: is that labor, or capital? Or perhaps it’s a good? Oddly, it’s often discussed as land, which just seems absurd.) Maybe ideas can be considered a form of capital. There is a whole literature on human capital, which I increasingly find distasteful, because it seems to imply that economists couldn’t figure out how to value human beings except by treating them as a machine or a financial asset.

But this four-way categorization is particularly useful for what I want to talk about today. Because the rate at which those things move is very different.

Ideas move instantly. It takes literally milliseconds to transmit an idea anywhere in the world. This wasn’t always true; in ancient times ideas didn’t move much faster than people, and it wasn’t until the invention of the telegraph that their transit really became instantaneous. But it is certainly true now; once this post is published, it can be read in a hundred different countries in seconds.

Goods move in hours. Air shipping can take a product just about anywhere in less than a day. Sea shipping is a bit slower, but not radically so. It’s never been easier to move goods all around the world, and this has been the great success of free trade.

Capital moves in weeks. Here it might be useful to subdivide different types of capital: It’s surely faster to move an oven or even a car (the more good-ish sort of capital) than it is to move an entire factory (capital par excellence). But all in all, we can move stuff pretty fast these days. If you want to move your factory to China or Indonesia, you can probably get it done in a matter of weeks or at most months.

Labor moves in months. This one is a bit ironic, since it is surely easier to carry a single human person—or even a hundred human people—than all the equipment necessary to run an entire factory. But moving labor isn’t just a matter of physically carrying people from one place to another. It’s not like tourism, where you just pack and go. Moving labor requires uprooting people from where they used to live and letting them settle in a new place. It takes a surprisingly long time to establish yourself in a new environment—frankly even after two years in Edinburgh I’m not sure I quite managed it. And all the additional restrictions we’ve added involving border crossings and immigration laws and visas only make it that much slower.

Land moves never. This one seems perfectly obvious, but is also often neglected. You can’t pick up a mountain, a lake, a forest, or even a corn field and carry it across the border. (Yes, eventually plate tectonics will move our land around—but that’ll be millions of years.) Basically, land stays put—and so do all the natural environments and ecosystems on that land. Land isn’t as important for production as it once was; before industrialization, we were dependent on the land for almost everything. But we absolutely still are dependent on the land! If all the topsoil in the world suddenly disappeared, the economy wouldn’t simply collapse: the human race would face extinction. Moreover, a lot of fixed infrastructure, while technically capital, is no more mobile than land. We couldn’t much more easily move the Interstate Highway System to China than we could move Denali.

So far I have said nothing particularly novel. Yeah, clearly it’s much easier to move a mathematical theorem (if such a thing can even be said to “move”) than it is to move a factory, and much easier to move a factory than to move a forest. So what?

But now let’s consider the impact this has on free trade.

Ideas can move instantly, so free trade in ideas would allow all the world to instantaneously share all ideas. This isn’t quite what happens—but in the Internet age, we’re remarkably close to it. If anything, the world’s governments seem to be doing their best to stop this from happening: One of our most strictly-enforced trade agreements, the TRIPS Accord, is about stopping ideas from spreading too easily. And as far as I can tell, region-coding on media goes against everything free trade stands for, yet here we are. (Why, it’s almost as if these policies are more about corporate profits than they ever were about freedom!)

Goods and capital can move quickly. This is where we have really felt the biggest effects of free trade: Everything in the US says “made in China” because the capital is moved to China and then the goods are moved back to the US.

But it would honestly have made more sense to move all those workers instead. For all their obvious flaws, US institutions and US infrastructure are clearly superior to those in China. (Indeed, consider this: We may be so aware of the flaws because the US is especially transparent.) So, the most absolutely efficient way to produce all those goods would be to leave the factories in the US, and move the workers from China instead. If free trade were to achieve its greatest promises, this is the sort of thing we would be doing.


Of course that is not what we did. There are various reasons for this: A lot of the people in China would rather not have to leave. The Chinese government would not want them to leave. A lot of people in the US would not want them to come. The US government might not want them to come.

Most of these reasons are ultimately political: People don’t want to live around people who are from a different nation and culture. They don’t consider those people to be deserving of the same rights and status as those of their own country.

It may sound harsh to say it that way, but it’s clearly the truth. If the average American person valued a random Chinese person exactly the same as they valued a random other American person, our immigration policy would look radically different. US immigration is relatively permissive by world standards, and that is a great part of American success. Yet even here there is a very stark divide between the citizen and the immigrant.

There are morally and economically legitimate reasons to regulate immigration. There may even be morally and economically legitimate reasons to value those in your own nation above those in other nations (though I suspect they would not justify the degree that most people do). But the fact remains that in terms of pure efficiency, the best thing to do would obviously be to move all the people to the place where productivity is highest and do everything there.

But wouldn’t moving people there reduce the productivity? Yes. Somewhat. If you actually tried to concentrate the entire world’s population into the US, productivity in the US would surely go down. So, okay, fine; stop moving people to a more productive place when it has ceased to be more productive. What this should do is average out all the world’s labor productivity to the same level—but a much higher level than the current world average, and frankly probably quite close to its current maximum.

Once you consider that moving people and things does have real costs, maybe fully equaling productivity wouldn’t make sense. But it would be close. The differences in productivity across countries would be small.

They are not small.

Labor productivity worldwide varies tremendously. I don’t count Ireland, because that’s Leprechaun Economics (this is really US GDP with accounting tricks, not Irish GDP). So the prize for highest productivity goes to Norway, at $100 per worker hour (#ScandinaviaIsBetter). The US is doing the best among large countries, at an impressive $73 per hour. And at the very bottom of the list, we have places like Bangladesh at $4.79 per hour and Cambodia at $3.43 per hour. So, roughly speaking, there is about a 20-to-1 ratio between the most productive and least productive countries.

I could believe that it’s not worth it to move US production at $73 per hour to Norway to get it up to $100 per hour. (For one thing, where would we fit it all?) But I find it far more dubious that it wouldn’t make sense to move most of Cambodia’s labor to the US. (Even all 16 million people is less than what the US added between 2010 and 2020.) Even given the fact that these Cambodian workers are less healthy and less educated than American workers, they would almost certainly be more productive on the other side of the Pacific, quite likely ten times as productive as they are now. Yet we haven’t moved them, and have no plans to.

That leaves the question of whether we will move our capital to them. We have been doing so in China, and it worked (to a point). Before that, we did it in Korea and Japan, and it worked. Cambodia will probably come along sooner or later. For now, that seems to be the best we can do.

But I still can’t shake the thought that the world is leaving trillions of dollars on the table by refusing to move people. The inequality of factor mobility seems to be a big part of the world’s inequality, period.

What is anxiety for?

PNRJ cognitive science, core principles, personal, tribal paradigm , , , , , , , , , , , , , , , , , , , ,

Sep 17 JDN 2460205

As someone who experiences a great deal of anxiety, I have often struggled to understand what it could possibly be useful for. We have this whole complex system of evolved emotions, and yet more often than not it seems to harm us rather than help us. What’s going on here? Why do we even have anxiety? What even is anxiety, really? And what is it for?

There’s actually an extensive body of research on this, though very few firm conclusions. (One of the best accounts I’ve read, sadly, is paywalled.)

For one thing, there seem to be a lot of positive feedback loops involved in anxiety: Panic attacks make you more anxious, triggering more panic attacks; being anxious disrupts your sleep, which makes you more anxious. Positive feedback loops can very easily spiral out of control, resulting in responses that are wildly disproportionate to the stimulus that triggered them.

A certain amount of stress response is useful, even when the stakes are not life-or-death. But beyond a certain point, more stress becomes harmful rather than helpful. This is the Yerkes-Dodson effect, for which I developed my stochastic overload model (which I still don’t know if I’ll ever publish, ironically enough, because of my own excessive anxiety). Realizing that anxiety can have benefits can also take some of the bite out of having chronic anxiety, and, ironically, reduce that anxiety a little. The trick is finding ways to break those positive feedback loops.

I think one of the most useful insights to come out of this research is the smoke-detector principle, which is a fundamentally economic concept. It sounds quite simple: When dealing with an uncertain danger, sound the alarm if the expected benefit of doing so exceeds the expected cost.

This has profound implications when risk is highly asymmetric—as it usually is. Running away from a shadow or a noise that probably isn’t a lion carries some cost; you wouldn’t want to do it all the time. But it is surely nowhere near as bad as failing to run away when there is an actual lion. Indeed, it might be fair to say that failing to run away from an actual lion counts as one of the worst possible things that could ever happen to you, and could easily be 100 times as bad as running away when there is nothing to fear.

With this in mind, if you have a system for detecting whether or not there is a lion, how sensitive should you make it? Extremely sensitive. You should in fact try to calibrate it so that 99% of the time you experience the fear and want to run away, there is not a lion. Because the 1% of the time when there is one, it’ll all be worth it.

Yet this is far from a complete explanation of anxiety as we experience it. For one thing, there has never been, in my entire life, even a 1% chance that I’m going to be attacked by a lion. Even standing in front of a lion enclosure at the zoo, my chances of being attacked are considerably less than that—for a zoo that allowed 1% of its customers to be attacked would not stay in business very long.

But for another thing, it isn’t really lions I’m afraid of. The things that make me anxious are generally not things that would be expected to do me bodily harm. Sure, I generally try to avoid walking down dark alleys at night, and I look both ways before crossing the street, and those are activities directly designed to protect me from bodily harm. But I actually don’t feel especially anxious about those things! Maybe I would if I actually had to walk through dark alleys a lot, but I don’t, and in the rare occasion I would, I think I’d feel afraid at the time but fine afterward, rather than experiencing persistent, pervasive, overwhelming anxiety. (Whereas, if I’m anxious about reading emails, and I do manage to read emails, I’m usually still anxious afterward.) When it comes to crossing the street, I feel very little fear at all, even though perhaps I should—indeed, it had been remarked that when it comes to the perils of motor vehicles, human beings suffer from a very dangerous lack of fear. We should be much more afraid than we are—and our failure to be afraid kills thousands of people.

No, the things that make me anxious are invariably social: Meetings, interviews, emails, applications, rejection letters. Also parties, networking events, and back when I needed them, dates. They involve interacting with other people—and in particular being evaluated by other people. I never felt particularly anxious about exams, except maybe a little before my PhD qualifying exam and my thesis defenses; but I can understand those who do, because it’s the same thing: People are evaluating you.

This suggests that anxiety, at least of the kind that most of us experience, isn’t really about danger; it’s about status. We aren’t worried that we will be murdered or tortured or even run over by a car. We’re worried that we will lose our friends, or get fired; we are worried that we won’t get a job, won’t get published, or won’t graduate.

And yet it is striking to me that it often feels just as bad as if we were afraid that we were going to die. In fact, in the most severe instances where anxiety feeds into depression, it can literally make people want to die. How can that be evolutionarily adaptive?

Here it may be helpful to remember that in our ancestral environment, status and survival were oft one and the same. Humans are the most social organisms on Earth; I even sometimes describe us as hypersocial, a whole new category of social that no other organism seems to have achieved. We cooperate with others of our species on a mind-bogglingly grand scale, and are utterly dependent upon vast interconnected social systems far too large and complex for us to truly understand, let alone control.

At this historical epoch, these social systems are especially vast and incomprehensible; but at least for most of us in First World countries, they are also forgiving in a way that is fundamentally alien to our ancestors’ experience. It was not so long ago that a failed hunt or a bad harvest would let your family starve unless you could beseech your community for aid successfully—which meant that your very survival could depend upon being in the good graces of that community. But now we have food stamps, so even if everyone in your town hates you, you still get to eat. Of course some societies are more forgiving (Sweden) than others (the United States); and virtually all societies could be even more forgiving than they are. But even the relatively cutthroat competition of the US today has far less genuine risk of truly catastrophic failure than what most human beings lived through for most of our existence as a species.

I have found this realization helpful—hardly a cure, but helpful, at least: What are you really afraid of? When you feel anxious, your body often tells you that the stakes are overwhelming, life-or-death; but if you stop and think about it, in the world we live in today, that’s almost never true. Failing at one important task at work probably won’t get you fired—and even getting fired won’t really make you starve.

In fact, we might be less anxious if it were! For our bodies’ fear system seems to be optimized for the following scenario: An immediate threat with high chance of success and life-or-death stakes. Spear that wild animal, or jump over that chasm. It will either work or it won’t, you’ll know immediately; it probably will work; and if it doesn’t, well, that may be it for you. So you’d better not fail. (I think it’s interesting how much of our fiction and media involves these kinds of events: The hero would surely and promptly die if he fails, but he won’t fail, for he’s the hero! We often seem more comfortable in that sort of world than we do in the one we actually live in.)

Whereas the life we live in now is one of delayed consequences with low chance of success and minimal stakes. Send out a dozen job applications. Hear back in a week from three that want to interview you. Do those interviews and maybe one will make you an offer—but honestly, probably not. Next week do another dozen. Keep going like this, week after week, until finally one says yes. Each failure actually costs you very little—but you will fail, over and over and over and over.

In other words, we have transitioned from an environment of immediate return to one of delayed return.

The result is that a system which was optimized to tell us never fail or you will die is being put through situations where failure is constantly repeated. I think deep down there is a part of us that wonders, “How are you still alive after failing this many times?” If you had fallen in as many ravines as I have received rejection letters, you would assuredly be dead many times over.

Yet perhaps our brains are not quite as miscalibrated as they seem. Again I come back to the fact that anxiety always seems to be about people and evaluation; it’s different from immediate life-or-death fear. I actually experience very little life-or-death fear, which makes sense; I live in a very safe environment. But I experience anxiety almost constantly—which also makes a certain amount of sense, seeing as I live in an environment where I am being almost constantly evaluated by other people.

One theory posits that anxiety and depression are a dual mechanism for dealing with social hierarchy: You are anxious when your position in the hierarchy is threatened, and depressed when you have lost it. Primates like us do seem to care an awful lot about hierarchies—and I’ve written before about how this explains some otherwise baffling things about our economy.

But I for one have never felt especially invested in hierarchy. At least, I have very little desire to be on top of the hiearchy. I don’t want to be on the bottom (for I know how such people are treated); and I strongly dislike most of the people who are actually on top (for they’re most responsible for treating the ones on the bottom that way). I also have ‘a problem with authority’; I don’t like other people having power over me. But if I were to somehow find myself ruling the world, one of the first things I’d do is try to figure out a way to transition to a more democratic system. So it’s less like I want power, and more like I want power to not exist. Which means that my anxiety can’t really be about fearing to lose my status in the hierarchy—in some sense, I want that, because I want the whole hierarchy to collapse.

If anxiety involved the fear of losing high status, we’d expect it to be common among those with high status. Quite the opposite is the case. Anxiety is more common among people who are more vulnerable: Women, racial minorities, poor people, people with chronic illness. LGBT people have especially high rates of anxiety. This suggests that it isn’t high status we’re afraid of losing—though it could still be that we’re a few rungs above the bottom and afraid of falling all the way down.

It also suggests that anxiety isn’t entirely pathological. Our brains are genuinely responding to circumstances. Maybe they are over-responding, or responding in a way that is not ultimately useful. But the anxiety is at least in part a product of real vulnerabilities. Some of what we’re worried about may actually be real. If you cannot carry yourself with the confidence of a mediocre White man, it may be simply because his status is fundamentally secure in a way yours is not, and he has been afforded a great many advantages you never will be. He never had a Supreme Court ruling decide his rights.

I cannot offer you a cure for anxiety. I cannot even really offer you a complete explanation of where it comes from. But perhaps I can offer you this: It is not your fault. Your brain evolved for a very different world than this one, and it is doing its best to protect you from the very different risks this new world engenders. Hopefully one day we’ll figure out a way to get it calibrated better.

Knowing When to Quit

PNRJ current events, personal, science and academia , , , , , , , , , ,

Sep 10 JDN 2460198

At the time of writing this post, I have officially submitted my letter of resignation at the University of Edinburgh. I’m giving them an entire semester of notice, so I won’t actually be leaving until December. But I have committed to my decision now, and that feels momentous.

Since my position here was temporary to begin with, I’m actually only leaving a semester early. Part of me wanted to try to stick it out, continue for that one last semester and leave on better terms. Until I sent that letter, I had that option. Now I don’t, and I feel a strange mix of emotions: Relief that I have finally made the decision, regret that it came to this, doubt about what comes next, and—above all—profound ambivalence.

Maybe it’s the very act of quitting—giving up, being a quitter—that feels bad. Even knowing that I need to get out of here, it hurts to have to be the one to quit.

Our society prizes grit and perseverance. Since I was a child I have been taught that these are virtues. And to some extent, they are; there certainly is such a thing as giving up too quickly.

But there is also such a thing as not knowing when to quit. Sometimes things really aren’t going according to plan, and you need to quit before you waste even more time and effort. And I think I am like Randall Monroe in this regard; I am more inclined to stay when I shouldn’t than quit when I shouldn’t:

Sometimes quitting isn’t even as permanent as it is made out to be. In many cases, you can go back later and try again when you are better prepared.

In my case, I am unlikely to ever work at the University of Edinburgh again, but I haven’t yet given up on ever having a career in academia. Then again, I am by no means as certain as I once was that academia is the right path for me. I will definitely be searching for other options.

There is a reason we are so enthusiastically sold on the virtue of perseverance. Part of how our society sells the false narrative of meritocracy is by claiming that people who succeed did so because they tried harder or kept on trying.

This is not entirely false; all other things equal, you are more likely to succeed if you keep on trying. But in some ways that just makes it more seductive and insidious.

For the real reason most people hit home runs in life is they were born on third base. The vast majority of success in life is determined by circumstances entirely outside individual control.


Even having the resources to keep trying is not guaranteed for everyone. I remember a great post on social media pointing out that entrepreneurship is like one of those carnival games:

Entrepreneurship is like one of those carnival games where you throw darts or something.

Middle class kids can afford one throw. Most miss. A few hit the target and get a small prize. A very few hit the center bullseye and get a bigger prize. Rags to riches! The American Dream lives on.

Rich kids can afford many throws. If they want to, they can try over and over and over again until they hit something and feel good about themselves. Some keep going until they hit the center bullseye, then they give speeches or write blog posts about ‘meritocracy’ and the salutary effects of hard work.

Poor kids aren’t visiting the carnival. They’re the ones working it.

The odds of succeeding on any given attempt are slim—but you can always pay for more tries. A middle-class person can afford to try once; mostly those attempts will fail, but a few will succeed and then go on to talk about how their brilliant talent and hard work made the difference. A rich person can try as many times as they like, and when they finally succeed, they can credit their success to perseverance and a willingness to take risks. But the truth is, they didn’t have any exceptional reserves of grit or courage; they just had exceptional reserves of money.

In my case, I was not depleting money (if anything, I’m probably losing out financially by leaving early, though that very much depends on how the job market goes for me): It was something far more valuable. I was whittling away at my own mental health, depleting my energy, draining my motivation. The resource I was exhausting was my very soul.

I still have trouble articulating why it has been so painful for me to work here. It’s so hard to point to anything in particular.

The most obvious downsides were things I knew at the start: The position is temporary, the pay is mediocre, and I had to move across the Atlantic and live thousands of miles from home. And I had already heard plenty about the publish-or-perish system of research publication.

Other things seem like minor annoyances: They never did give me a good office (I have to share it with too many people, and there isn’t enough space, so in fact I rarely use it at all). They were supposed to assign me a faculty mentor and never did. They kept rearranging my class schedule and not telling me things until immediately beforehand.

I think what it really comes down to is I didn’t realize how much it would hurt. I knew that I was moving across the Atlantic—but I didn’t know how isolated and misunderstood I would feel when I did. I knew that publish-or-perish was a problem—but I didn’t know how agonizing it would be for me in particular. I knew I probably wouldn’t get very good mentorship from the other faculty—but I didn’t realize just how bad it would be, or how desperately I would need that support I didn’t get.

I either underestimated the severity of these problems, or overestimated my own resilience. I thought I knew what I was going into, and I thought I could take it. But I was wrong. I couldn’t take it. It was tearing me apart. My only answer was to leave.

So, leave I shall. I have now committed to doing so.

I don’t know what comes next. I don’t even know if I’ve made the right choice. Perhaps I’ll never truly know. But I made the choice, and now I have to live with it.

The rise and plateau of China’s economy

PNRJ current events, development economics, public policy , , , , , , ,

Sep 3 JDN 2460191

It looks like China’s era of extremely rapid economic growth may be coming to an end. Consumer confidence in China cratered this year (and, in typical authoritarian fashion, the agency responsible just quietly stopped publishing the data after that). Current forecasts have China’s economy growing only about 4-5% this year, which would be very impressive for a First World country—but far below the 6%, 7%, even 8% annual growth rates China had in recent years.

Some slowdown was quite frankly inevitable. A surprising number of people—particularly those in or from China—seem to think that China’s ultra-rapid growth was something special about China that could be expected to continue indefinitely.

China’s growth does look really impressive, in isolation:

But in fact this is a pattern we’ve seen several times now (admittedly mostly in Asia): A desperately poor Third World country finally figures out how to get its act together, and suddenly has extremely rapid growth for awhile until it manages to catch up and become a First World country.

It happened in South Korea:

It happened in Japan:

It happened in Taiwan:

It even seems to be happening in Botswana:

And this is a good thing! These are the great success stories of economic development. If we could somehow figure out how to do this all over the world, it might literally be the best thing that ever happened. (It would solve so many problems!)

Here’s a more direct comparison across all these countries (as well as the US), on a log scale:

From this you can pretty clearly see two things.

First, as countries get richer, their growth tends to slow down gradually. By the time Japan, Korea, and Taiwan reached the level that the US had been at back in 1950, their growth slowed to a crawl. But that was okay, because they had already become quite rich.

And second, China is nothing special: Yes, their growth rate is faster than the US, because the US is already so rich. But they are following the same pattern as several other countries. In fact they’ve actually fallen behind Botswana—they used to be much richer than Botswana, and are now slightly poorer.

So while there are many news articles discussing why China’s economy is slowing down, and some of them may even have some merit (they really seem to have screwed up their COVID response, for instance, and their terrible housing price bubble just burst); but the ultimate reason is really that 7% annual economic growth is just not sustainable. It will slow down. When and how remains in question—but it will happen.

Thus, I am not particularly worried about the fact that China’s growth has slowed down. Or at least, I wouldn’t be, if China were governed well and had prepared for this obvious eventuality the way that Korea and Japan did. But what does worry me is that they seem unprepared for this. Their authoritarian government seems to have depended upon sky-high economic growth to sustain support for their regime. The cracks are now forming in that dam, and something terrible could happen when it bursts.

Things may even be worse than they look, because we know that the Chinese government often distorts or omits statistics when they become inconvenient. That can only work for so long: Eventually the reality on the ground will override whatever lies the government is telling.

There are basically two ways this could go: They could reform their government to something closer to a liberal democracy, accept that growth will slow down and work toward more shared prosperity, and then take their place as a First World country like Japan did. Or they could try to cling to their existing regime, gripping ever tighter until it all slips out of their fingers in a potentially catastrophic collapse. Unfortunately, they seem to be opting for the latter.

I hope I’m wrong. I hope that China will find its way toward a future of freedom and prosperity.

But at this point, it doesn’t look terribly likely.