The Cost of Knowledge and Economic Growth

This is the idea explored in a newish dissertation by James Dowey, formerly of the LSE.  

Here’s the abstract:

This thesis argues that the British Industrial Revolution, which marked the beginning of sustained modern economic growth, was facilitated by the blossoming in eighteenth and early nineteenth century Britain of the world’s first infrastructure for commercial R&D, composed of a network of ‘Knowledge Access Institutions’ (KAIs): scientific societies, ‘mechanics institutes’, public libraries, masonic lodges and other organisations. This infrastructure lowered the cost of access to knowledge for scientists, inventors and entrepreneurs, raising the productivity of R&D and encouraging a sustained increase in R&D effort. This contributed to the acceleration in technological innovation that lay behind the transition to modern economic growth. First, I define the concept of KAIs and explain how they affected the rate of economic growth. Second, I present detailed data on the KAI infrastructure and estimate its effect on the rate of technological innovation during the British Industrial Revolution, using newly constructed spatial datasets on British patents between 1700 and 1852 and exhibits at the Great Exhibition of 1851. Third, I argue that KAIs were largely exogenous to industrialisation, rooted instead in the intellectual developments of the Scientific Revolution and European Enlightenment. Fourth, I show that the prevalence of Knowledge Access Institutions was correlated with the emergence of modern economic growth across countries in the late nineteenth century and that the cost of access to knowledge was a binding constraint to economic progress shared by many countries during this period. Finally, based on the case of late nineteenth century US manufacturing, I investigate the extent to which the emergence of modern economic growth depended on the incentives to innovate rather than the capabilities lent by access to knowledge and other factors. The thesis suggests that the sharp fall in the cost of access to knowledge that we are currently experiencing may give rise to an acceleration in the rate of technological innovation in the coming decades and that policymakers should direct some effort towards mitigating the potentially harmful effects of rapid technological change. 

Dowey is quite the optimist. From his conclusion:


As such, the main policy prescription arising from this thesis is that rather than focus our concern too narrowly on Gordon’s prediction of stagnation we must also dedicate our efforts to guarding against a competing dystopia. This is the risk that technological change in the twenty-first century will occur so rapidly that we will find it quite painful to adapt to it. 

One might also ask whether the modern KAIs such as Google, Facebook, Twitter, Instagram, etc., are not only driving innovation internally but generating innovation outside their space. This is surely the case. But perhaps its much more important than previously realized. 

"The Poverty of Slavery"

Vincent Geloso reviews Robert E. Wright’s The Poverty of Slavery: How Unfree Labor Pollutes the Economy:

One ought to remember that, in the early days of the American Republic, slavery was seen as a necessary evil which would have, eventually, to be eradicated. However, this view gradually changed to one where slaves were considered lesser human beings which were not responsible enough to be free. This became the leitmotiv not only of slaveowners but also of non-slaveholding southerners. As slaveowners had the ability to shape laws, they had the ability to set the parameters of any discussion and, as such, possessed a strong advantage in imposing their preferred explanation and propositions. In a way, they increased the costs of holding an egalitarian ideology in ways which still persisted into the Reconstruction, Jim Crow and contemporary eras. This form of “intellectual” pollution was caused by unfree institutions. [emphasis is PW’s]

Does Being Social Also Make Us More Likely to be Wrong?

A few years ago, a couple of neuroscientists asked a bunch of strangers to answer general questions with knowable answers. For instance, “what’s the distance of the border between Italy and Switzerland?” and “how much did the population of Zurich increase in 2006?”

Most of these people had to estimate their answers because they didn’t know the exact answers (who carries around this knowledge?). The neuroscientists then gave most of the strangers one of two sets of additional information. The first group received a table depicting how everyone else in the study answered each of the questions. The second group received the average answer provided by the group. A third group didn’t receive any information on the answers of the other study participants.

The strangers were then asked to answer the questions a second time with some now knowing how the group responded the first time around. And what did they find? The group of folks who were confident in their first estimate were more accurate.

Now, this was a one-time thing. The neuroscientists weren’t asking the strangers to develop a collective wisdom around the estimates. They were asking many of them to take a shot in the dark and then, when confronted with new information, those people thought “yeah, I’m probably wrong and someone else probably has a better idea.” Except their peers usually didn’t have a better idea. Instead, the estimates got worse.

To improve on the group estimates, the researchers went back to the first set of results and put a great weight on the results of people who were less likely to change their mind. This improved the wisdom of the group even more than the first set of estimates where each estimate was given an equal ranking.

There are two important points here. It’s possible that the folks who didn’t change their estimates knew that they were more likely to be right than the group as a whole. And, as it turns out, their estimates were more likely to be closer to the correct answer. However, it can also be said that those estimates made independent from group were more accurate.

In real life, it’s rare for folks to develop estimates independent from any group. In other words, we usually aren’t all strangers analyzing the same problems without knowledge of other people trying to do the same thing. This goes for experts and non-experts alike.

Therefore, in someone’s version of a utopia (perhaps Plato), you can envision a society of experts who spend all their time independently analyzing and developing solutions to complex problems. But as soon as you make the views of the group available to everyone else in the group… well… things can get worse.

One way to improve upon group estimates is to look for the outliers. Who is willing to stick with their estimates even when it isn’t the popular view? This group is probably wrong too but, to the extent that independence matters, their views may be less wrong than everyone else. 

A New Approach to the Position of House Chaplain


With the recent dismissal of the House Chaplain, Patrick Conroy, there has been some discussion of who should be offered the job along with the appointment of a search committee. And with most things in Washington the next appointment has become political.

But this also creates an opportunity for the House to move in a slightly different direction.

The position of House and Senate Chaplains goes back to 1789.


All 60 House Chaplains and the 62 Senate Chaplains have represented a denomination of Christianity. The first three House Chaplains were Presbyterian while the first eight Senate Chaplains were Episcopalian.  Since then at least 10 Christian denominations have been represented.

The practice of appointing a chaplain is related to the ability of the House and Senate to elect their own officers. However, besides tradition there isn’t anything mandating that the office be held by a single person representing a Christian denomination.  

Rather than appointing a new chaplain the House should elect spiritual advisers from various backgrounds to serve on an interfaith council. The council can be comprised of 20 to 30 women and men representing different faith traditions. Each member could come in for a week to help open the legislative day. Furthermore, Members of the House could call on them for advice.

The United States has a long history of fostering a competition religious ideas. The growth in the diversity of religious thought and practice has largely been the result of an extremely limited regulatory environment and freedom of assembly.

When this competition produces differences in opinions on how to conduct oneself and live a good life, the only reasonable outcome is for the government to protect the freedom of thought by removing itself, or staying removed, from differences on disputed subjects. At the same time, when different traditions arrive at the same conclusion, perhaps policymakers should take note. 

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Improving the Aggregated Estimates of Ordinary People (and Experts too).

In the Journal of the Royal Society Interface a team of researchers has published a new method of aggregating estimates produced of non-experts to improve the accuracy of the collective estimate – that is, the so called “wisdom of the crowd.”

Estimates produced by non-experts and experts experience several forms of error. Specifically, individual estimates are rarely independent which can influence the accuracy of the collective estimate.

For instance, every day both experts and non-experts interact socially with their networks before being asked to provide their perspective on situations. In an experiment described in the paper that involved asking folks to guess the number of gumballs in a jar, only 38 percent of the participants discounted social information that was feed to them with the intent of skewing their view (truly fake news). In other words, their estimates of the number of gumballs both before and after receiving false information from others in the crowd were identical.

The study also found that the larger the social group the more important the information in skewing the independence of the estimates. Therefore, if you’re dealing with large social groups with good information sharing it actually shrinks the distribution of estimates.  

Other studies have found that incorporating experts into the population can improve estimates. In other words, including experts in the group providing estimates (rather than apart or above the group) can improve the aggregated estimates of the entire group.

However, the new methods in the paper using a maximum likelihood aggregator appears to improve the crowd estimates irrespective of knowing anything about the background of the crowd. 

Why You Should Take the President's Rescissions Request Seriously

For most of our history it was common for Presidents to indefinitely withhold spending appropriated by Congress. This practice is called “impoundment” and dates back to the Jefferson Administration.

The practice actually makes some sense. This is especially true in a world where the legislature isn’t constantly legislating. If Congress appropriates money for a purpose in September and by April of the next year the underlying purpose behind the funding has changed it may make sense to stop the activity even if there’s still money in the budget to spend.

The opposite of impoundment is a deficiency appropriation. Deficiency appropriations occur when the agencies or departments place the Federal government into an obligation to spend money without an appropriation from Congress. An appropriation is direction to make a payment (e.g., “the Secretary may/must go do this thing”) and the source of payment (e.g., with funds from the Treasury).

Then came along Mr. Nixon who, as President, impounded about 4 percent of total appropriated budget authority in one year. Nixon’s justification for impoundment was that he was trying to put downward pressure on inflation by cutting the budget deficit.

However, Nixon’s actions upset Congress who passed the Impoundment Control Act (ICA) as part of the Congressional Budget Act of 1974. The ICA prohibited the impoundment of appropriations but it also established a special process for considering a cancellation of appropriations – called a rescission – as determined by the President.

The special process says whenever the President determines that:

1)    “budget authority will not be required to carry out the full objectives or scope of programs for which it is provided”; or

2)    “scope of programs for which it is provided or that such budget authority should be rescinded for fiscal policy or other reasons (including the termination of authorized projects or activities for which budget authority has been provided)”; or

3)    “all or part of budget authority provided for only one fiscal year is to be reserved from obligation for such fiscal year…”

then he or she can transmit a special message to the Congress for expedited consideration of the spending reductions. The President can also withhold spending money associated with the rescission request for 45 days.

If Congress doesn’t act on the request the President must release the money after the 45-day period and cannot include the same request in future special rescissions messages to Congress.

Of course, this doesn’t prevent or compel Congress from cancelling an appropriation that’s already been made. In fact, Congress routinely rescinds budget authority from previously enacting bills to pay for new appropriations.

But the process initiated by the President’s message is interesting for a few reasons. First, there is an automatic discharge from committee for any rescissions bill introduced on the basis of the President’s message after 25 days. Therefore, if a Member of Congress writes a rescissions bill that is referred to a committee, that bill can go straight to the floor after 25 days if the committee fails to act.

Second, there appears to be a non-debatable motion to proceed to the bill. Therefore, the vote to get on the bill would require only a simple majority (51 votes) in the Senate.

Third, total debate time is limited in the Senate to 10 hours. Therefore, once the Senate is on the bill it cannot be filibustered. At the end of the 10 hours, the Senate would proceed to a “vote-o-rama” where amendments could be offered as long as they have something to do with the bill under consideration.

Reports are that the White House will send over a request to rescind about $25 billion after the House returns from its recess (the week of May 7). But even with reports from the Senate that the request is “dead on arrival” the legislative opportunities created by the request and special process make it worth taking seriously. 

Could Your Mother's Birth Order Influence Your Educational Attainment?

That's the question in a new paper from NBER.

Here’s the abstract:

There has long been interest in the extent to which effects of social stratification extend and persist across generations. We take a novel approach to this question by asking whether birth order and sibling group size in the parental generation influences the educational attainment of their children. To address this question we use Swedish population data on cohorts born 1960-1982. To study the effects of parental birth order and family size we apply a cousin fixed effects design and exploit information on twin births in the parents generation. Relative to having a first-born mother, having a second-born or fifth-born mother is associated with educational attainment at age 30 being 4% and 8% of a standard deviation lower, respectively. After adjusting for attained parental education and social class, the parental birth order effect is heavily attenuated. Nevertheless, we do find that children who share the same birth order and gender as their parents attain slightly more education, and this is particularly pronounced when the parents have higher levels of education themselves. We do not find clear or consistent evidence for parental sibling group size effects. Overall our results suggest that birth order and family size effects operate through a Markovian process of transmission.

Are You a Utilitarian? (And My First Podcast)

From Scientific American (May 2018):

In a paper published online in December 2017 in the journal Psychological Review entitled “Beyond Sacrificial Harm,” University of Oxford scholars Guy Kahane, Jim A. C. Everett and their colleagues aim to rehabilitate the dark side of utilitarianism by separating its two dimensions: (1) “instrumental harm,” in which it is permissible to sacrifice the few to benefit the many, and (2) “impartial beneficence,” in which one would agree that “it is morally wrong to keep money that one doesn’t really need if one can donate it to causes that provide effective help to those who will benefit a great deal.” You can find out what type you are by answering the nine questions in the authors’ Oxford Utilitarianism Scale.

Here’s the scale.

I scored a 32 out of a possible 63 on the overall utilitarianism scale which was driven almost exclusively by a very high score on “impartial beneficence.”

The piece goes on:

…if we can decouple the sacrificial side of utilitarianism from its more beneficent prescriptions, moral progress may gain some momentum. Better still would be the inculcation into all our moral considerations the beneficence as an internal good rather than an ethical calculation.

I think this is on to something.

As I’ve written, John Stuart Mill (in his defense of utilitarian ethics) had a certain respect for Christ’s Golden Rule:

…the happiness which forms the utilitarian standard of what is right in conduct, is not the agent’s own happiness, but that of all concerned. As between his own happiness and that of others, utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator. In the golden rule of Jesus of Nazareth, we read the complete spirit of the ethics of utility. To do as you would be done by, and to love your neighbor as yourself, constitute the idea perfection of utilitarian morality.” (Utilitarianism)

But the problem with Mill (and perhaps utilitarianism) is not that the agent (that’s you!) is required to be completely neutral in order to effectuate the Golden Rule of “loving your neighbor as yourself.” 

Rather, Christ’s Golden Rule requires a perfectly interested spectator. Interested in their own wellbeing and that of others. Especially those people who you cannot stand!

Asking people to love others who cannot love themselves is hopeless. They won’t get it. This is the true joie de vivre. In other words, it’s not enough to just treat everyone equally. You have to treat everyone equally and well. Including yourself!

For those interested in more I’ve recorded a 30-minute podcast episode on economics and the Golden Rule (see below). I’m turning this into a public talk to be delivered later this year called “Was the Good Samaritan a Bad Economist?” Warning: I jump right into the good stuff without much of an introduction.