Garett Jones returns to the podcast to discuss the issue of ethnic diversity. There is a wide body of research showing that ethnic diversity can reduce the productivity of teams, firms, and even whole countries.
Two days ago, Britain voted to leave the European Union (EU). The “leave” option won with 52 percent of the vote, leaving elites and the media frustrated with voters for choosing what they perceive to be the “wrong” option.
The EU can be thought of as three things: A trade union known as the European Economic Area (or EEA), a currency union (the Euro) which Britain was never a part of, and a central regulatory body. Continue reading Brexit, The European Union, and the European Economic Area with Sam Bowman
When I think of emulation, I think of retro gaming. My Android phone can easily emulate a Super Nintendo, a gaming console from the 1990s, and it can do that because the phone is much more powerful than the Super Nintendo and because we know exactly how a Super Nintendo works. My guest for this episode, Robin Hanson, argues that we may one day be able to emulate human brains. His book, The Age of Em, provides a detailed analysis of what a society made largely of emulated humans would be like.
Whole brain emulation is unlike my emulated Super Nintendo in many ways. With the brain, we’re trying to emulate something that we couldn’t build ourselves. The challenge is in developing a sufficiently accurate model of each part of the brain that is necessary for it to function. If we knew how each node in the brain worked, if we could model it such that our node would take the same inputs, produce the same change in its internal state, and send the same outputs as biological brain cells, then all that would remain would be to find the precise network of cells in a biological brain. This could be achieved by scanning an actual human brain. The brain could then be emulated by a sufficiently powerful computer. The emulated brain would have precisely the same memories and thought processes as the person who was scanned. Hanson calls these emulated individuals “ems.”
Hanson applies standard theoretical tools to the analysis of this em economy. Here are some of the implications:
1. Ems will be able to operate much faster or much slower than normal human brains.
The cost of running an emulation faster or slower is roughly linear in the speed. That means that for ems working on time-sensitive tasks, a race to develop some new technology first for example, they will likely work many times faster than biological humans, perhaps experiencing weeks or months in the blink of an eye. Ems that work alongside biological humans, for instance those engaged in services, would likely run at the same speed as we do. Ems could also run at slower-than-human speeds, which might be used as a sort of low-cost retirement for ems who have completed their working lives.
2. Most ems will probably live at subsistence.
We live in a world where the supply of human labour is limited by biology. Ems will not be so limited. Once a single em exists, making a copy will only be as costly as the processing power needed to run that copy. This means that the value of em labour will fall to the marginal cost of running an em. The em economy is a Malthusian economy, where the em population can vary instantaneously to keep up with the need for em labour.
However, subsistence might not be as bad for an em as it has been for most humans through history. Ems need not fear starvation or disease. Their consumption goods will all be simulated, and in a world of extremely cheap processing power, simulated luxuries would be cheap as well.
3. An em can work 99 percent of the time and go on vacation for 99 percent of the time, too.
This may seem paradoxical, but it follows from the possibility of creating and deleting copies at will. Suppose you have one em plumber. Each day he can make 99 copies of himself, in order to perform 99 plumbing jobs while he relaxes on a simulated beach, deleting the copies at the end of the day. While 99 percent of his processing power is being used to complete plumbing jobs, each em experiences a life of leisure followed by a single day of work.
4. Biological humans will be a true rentier class.
In a world populated by ems, the value of human labour will fall to near zero. An em brain can do anything a human brain can do, and ems will be produced until their marginal value falls to the cost of processing them. Biological humans won’t be able to count on the value of their labour to sustain them, but they will earn vastly more from the wealth they already own. An em economy will grow very quickly, and thus will be able to give very high returns to the owners of capital.
5. The age of em might only last a few years before the next major change.
Robin compares the development of an em economy to three past changes in our society: The evolution of our latest non-human ancestors into humans, the move from a hunter-gatherer society to a farming society, and the birth of our modern industrial society. He observes that with each transition, the growth rate (measured as the increase in brain size before the evolution of humans and as economic growth thereafter) has increased and the period between transitions has shrunk. As ems will be able to experience far more time than we do, and since an em economy will be capable of extremely high growth, it won’t take long for em society to produce the next radical shift. Perhaps just a year or two.
What will that shift entail? Robin declines to speculate, as there are too many degrees of freedom to predict with any degree of accuracy.
Read Scott Alexander’s review of the book, which I mentioned during the interview.
Mark Thornton is a Senior Fellow at the Mises Institute. He is the author of many books, including The Economics of Prohibition (which you can access for free here), which is also the topic of this episode.
1. Does drug prohibition help stop poverty and homelessness?
The conventional wisdom on drugs is simple: you see drugs and drug abuse mixed with poverty and homelessness and it makes intuitive sense that drugs play a role in causing poverty. It seems to follow that by criminalizing drugs, you can take them out of the equation and help solve the other problems.
Mark disputes this conventional wisdom. First, the causation doesn’t necessarily go from drugs to poverty. Poverty can cause people to abuse drugs and mental illness can cause both self-medication and poverty. Second, if you legalize drugs, they won’t be sold on the street. Instead, they’ll be sold by legitimate businesses with a particular interest in maintaining their reputation and not harming their customers. Prohibition is what creates the black market, which in turn generates violence, crime, and more potent and dangerous drugs, all of which exacerbate poverty. You can’t clean up the social problems related to drugs by criminalizing them when criminalizing them is what caused many of those problems.
2. The Suburban Heroin Epidemic
Mark recently authored an article called The Legalization Cure for the Heroin Epidemic. In the article, he calls attention to the rising number of overdose deaths in the United States:
The number of drug overdoses in the US is approaching 50,000 per year. Of that number nearly 20,000 are attributed to legal pain killers, such as Oxycontin. More than 10,000 die of heroin overdoses. I believe these figures vastly underestimate the number of deaths that are related to prescription drug use.
Ancient Rome went from a thriving civilization to a dystopia before its eventual collapse. My guests today explain how that happened. Lawrence Reed and Marc Hyden co-authored “The Slow-Motion Financial Suicide of the Roman Empire.” Lawrence is the President of the Foundation for Economic Education, and Marc is a political activist and amateur Roman historian.
Many accounts of the fall of Rome focus on military problems and the barbarian invasions. However, the Empire was in decline long before the barbarians showed up to finish it off. The barbarians didn’t kill the Roman Empire; the Roman Empire committed suicide. There were six important factors in the Empire’s decline:
1. Political violence became normalized.
The populist reformer Tiberius Gracchus redistributed public farmland to Roman citizens. His reforms angered the Senate, and his political enemies clubbed him to death in 133 BCE. This was the first open political assassination in Rome in nearly four centuries, but it wouldn’t be the last. Suddenly, it became acceptable for powerful Romans to kill their political enemies, and this would spell doom for Rome’s republican government.
2. The Roman state gave ever-increasing amounts of free food and entertainment to the masses.
Despite having killed Tiberius Gracchus, the senate did not repeal his reforms in an effort to assuage the masses. Tiberius’ brother Gaius Gracchus would take his brother’s position and further his reforms, also introducing a system of subsidized grain for the masses. When Gaius also succumbed to political violence, most of his reforms died with him, but not the grain dole. The dole was retained and expanded, proving a huge burden on the Roman state. Successive generations of Roman leaders would buy political popularity with panem et circenses (bread and circuses). The Roman people came to value the dole over all other values. When the emperor Caligula was assassinated, there was a brief opportunity to restore the Republic, but the people preferred the rule of strong men who could provide them with ever more panem et circenses.
3. Roman armies became personally loyal to their generals rather than being loyal to the Roman state or the people. Continue reading Rome’s Economic Suicide with Lawrence Reed and Marc Hyden
Garett Jones is Associate Professor of Economics and BB&T Professor for the Study of Capitalism at the Mercatus Center, George Mason University. His book, Hive Mind: How Your Nation’s IQ Matters so Much More than Your Own is the subject of this episode.
The book deals with an empirical puzzle: IQ is a weak predictor for earnings. We all know high-IQ people who live paycheque to paycheque, and lower IQ people who succeed brilliantly. And yet, when we look at the relationship between nations’ average IQ scores and their incomes, the relationship is strong. Nations with the highest average IQ scores are eight times wealthier than nations with the lowest IQ scores. How can we resolve this apparent contradiction?
Garett documents five main channels for the spillover effects of IQ:
1. Smarter people are more patient, they save more and build up more capital.
When economists test people’s patience, high-IQ people tend to be more willing to wait for a larger amount of money in the future rather than taking a smaller sum now. This is important at the national level because savings tend to stay within a country* and fund investments within that country. That means living in a higher IQ nation generally means having more capital available to compliment your labour. Continue reading Hive Mind, IQ, and the Wealth of Nations with Garett Jones
Ash Navabi returns to the podcast to discuss his essay, “Will Iceland’s Sovereign Money Proposal End Economic Crises?”
In April of 2015, Frosti Sigurjonsson, Member of the Parliament of Iceland and Chairman of the Committee for Economic Affairs and Trade, made a bold proposal to end fractional reserve banking and replace it with a system he calls “sovereign money.”
Fractional reserve banking is the system under which banks create money by lending out a portion of depositors’ money, keeping only a fraction to pay out on demand. One problem with fractional reserve banking is that the mismatch between banks’ assets and liabilities leaves them exposed to bank runs and financial panics. To solve this problem, the central banks of the world function as “lenders of last resort” to save insolvent banks from going under. However, the more insidious problem with fractional reserves is that the injection of new money directly into credit markets artificially lowers interest rates and incentivizes entrepreneurs to take on longer term projects than the real savings available in the economy can sustain. Having central banks intervene to keep the cheap credit flowing does nothing to address this problem, and in fact makes it worse. Continue reading Icelandic Sovereign Money with Ash Navabi
There’s another Afterthoughts episode of Economics Detective Radio. It’s exclusive bonus content for those who support me on Patreon. In this episode, I discuss my recent conversation with Cornelius Christian.
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Cornelius Christian is an Assistant Professor of Economics at St. Francis Xavier University. His research concerns development economics, economic history, and the economics of conflict and violence, which is the topic of this episode of Economics Detective Radio.
Cornelius’ paper “Lynchings, Labour, and Cotton in the US South” deals with violence against black people in the post-reconstruction South. Historians have hypothesized that there was an economic motive to lynchings, noting that more of them occurred when cotton prices were low. Black and white workers competed with one another in the agricultural labour market. Cornelius’ findings indicate that lynchings were used by white labourers to scare black workers out of the labour market, thus raising their own wages. He finds that lynchings happen in the wake of economic shocks when agricultural wages are low. He also finds that, when lynchings occur in a given area, black people tend to migrate out of the area and agricultural wages rise for the remaining white workers. Continue reading Violence, Lynchings, Civil War, and Witch Trials with Cornelius Christian
…or How I Learned to Stop Worrying and Love Inequality.
David R. Henderson is a research fellow at Stanford University’s Hoover Institution, and a professor of economics at the Graduate School of Business and Public Policy, Naval Postgraduate School, in Monterey, California.
Thomas Piketty’s Capital in the 21st Century managed to do something unprecedented among equation-dense economic tomes, it became the #1 selling book on Amazon.com. The book tapped in to a hot topic among politicians and the general public: the high (and possibly rising) wealth and income shares of the top 1%. However, David points out that although the book was a best-seller, it wasn’t actually a best-reader. Amazon logs the sentences people highlight, and the top five most-highlighted sentences in Capital all appear in the first 26 pages. It seems that, at least among kindle readers, most people didn’t make it past the introduction. It appears that people buy the book to back up the views they already hold. Continue reading Income and Wealth Inequality with David R. Henderson