🚀 Faster, Please! Week in Review+ #12
Talking with Tyler Cowen, geothermal energy, the crypto crash, American schools, and 5 Quick Questions for economic historian W. Walker Hanlon on engineers and the Industrial Revolution
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As usual, I covered a wide range of subjects in the essays, Q&As, and micro reads on Monday and Thursday (or sometimes Friday), as well as a paywall-free issue on Wednesday. Enjoy the summaries, recaps, as well as a bit of new content (usually)!
In This Issue
— What we can learn about economic growth from a crashed Bugatti (May 16, 2022)
— The prospects for geothermal energy are heating up (May 18, 2022)
— The cryptocurrency crash and the US economy (May 19, 2022)
Best of 5 Quick Questions:
— Economist Tyler Cowen on innovation, China, talent, and more
— Education scholar Rick Hess on the American school system
⭐ Bonus: 5 Quick Questions for economic historian W. Walker Hanlon
💥 What we can learn about economic growth from a crashed Bugatti | Processing information, using energy to change the physical order of atoms in a way that gives them meaning or value, is what economies do. Think of economies as network-based supercomputers. And the greater the creative and computational capacity of these supercomputers — meaning the greater capability an economy has to make information grow — then the greater the possible complexity of economic activities and overall economic growth potential. Consider: Chile has a trade surplus with South Korea. But while Chile exports low-information copper, Korea exports high-information cars and car parts, along with electronic components. In this way. Korea, the far wealthier nation, demonstrates its higher computational capacity. What determines a nation's computational capacity is the size and depth of its social networks. One person can only know so much, after all. Complex products require large and effective networks of people: universities, companies, cities. There are important policy lessons here.
🔥 The prospects for geothermal energy are heating up | Yes, it’s theoretically possible to tap the caldera system under Yellowstone National Park and extract massive amounts of geothermal energy. That said, none of the three geothermal startups that recently addressed a Wall Street energy services symposium pitched the promising prospects of drilling into the Yellowstone supervolcano. Setting aside for a moment what the CEOs of these firms had to say, it’s good news that they were presenting to a Wall Street conference attended by exactly the sorts of companies that they might want to eventually partner with. Indeed, the existence of a massive oil and gas industry is another key reason to be excited about geothermal. Perhaps the most encouraging CEO comments were from Quaise CEO Carlos Araque who noted that it wasn’t so long ago that geothermal was a “hard sell.” But no longer. Araque: “I think the world has started to realize that to succeed in the energy transition we’re going to need much more than wind, solar, and batteries. ... [Geothermal] can eventually scale to the terawatt scale we’re going to need to decarbonize.”
📉 The cryptocurrency crash and the US economy | You might recall the Great Video Game Scare of 2017 when the media ran hard with some economic research about gaming and the work habits of young men. But it turns out the Global Financial Crisis was more to blame than the 2007 release of Halo 3.
Anyway, I thought of the video game controversy during the recent cryptocurrency crash. Might that big price decline push young men into the labor force? After all, cryptocurrency investors do skew younger and male. Time for all wannabee billionaires to start looking for a regular job. But this chart suggests crypto wealth has probably played a limited role in discouraging labor supply thus far. As such, the recent declines in crypto prices will provide only a limited boost to labor supply going forward, notes Goldman Sachs:
Of course, a trillion-dollar decline in crypto value might have effects beyond young men and work. But tanking the US economy probably isn’t one of them. After all, the US economy is pretty big. GS notes that recent price declines have likely reduced US crypto holdings by around $300 billion, which means they now account for only 0.3 percent of the total US household net worth of $150 trillion.
Best of 5 Quick Questions
▶ Tyler Cowen is a leading American economist and public intellectual. In addition, he’s a columnist at Bloomberg Opinion and co-writes the popular economics blog, Marginal Revolution. Cowen’s new book, co-written with Daniel Gross is Talent: How to Identify Energizers, Creatives, and Winners Around the World. Here’s a highlight from a long (more than five questions) and wide-ranging Q&A with him (which you can find here).
If it turns out that the 2030s are not like the high-productivity 1930s, and if it turns out that the 2020s are not like the high-productivity 1920s, what do you think went wrong?
That we lost our mojo; that we didn't keep our focus. If you look at the vaccines, we had those done by Operation Warp Speed — pretty much an independent institution. Not captured by the NIH or NSF or anyone else. Everyone felt a sense of urgency. We were willing to let corporations make a lot of money from this. … We could lose those attitudes very easily. It's quite possible. But we did it once very recently. And you just see so much talent in the biomedical space. I think there's at least a 60 percent chance this will keep on rolling and it will be one of many future developments that will just really impress us — not in all economic sectors, to be clear, but biomedical is a big deal for our lives.
▶ Rick Hess is a senior fellow and director of Education Policy Studies at the American Enterprise Institute. Rick is a prolific researcher and writer, and one of his best recent works is “Education after the Pandemic” in the winter 2022 issue of National Affairs.
Do we actually know how to improve student outcomes in this country? Is it just a matter of politics, or do we need to do a lot more education science to understand how kids can learn better?
Both. The things that we know that work tend to be pretty old-fashioned: setting clear expectations, making kids feel like they can accomplish it, giving them the confidence that they can, making sure we're giving kids clear modeling of what it looks like to master it, and then giving them a lot of chance to practice and get good feedback. Those things matter immensely. They matter most for kids who aren't getting that kind of modeling and support and feedback outside of school.
But there's also a ton we don't know. Part of the problem is that we have more than 20,000 people doing education research, and hardly any of them are interested in brain science. We know very little about how cognition works. We know very little about what environmental stimuli do to brain behavior: when it's easiest to learn, how to enhance plasticity of the mind. This is the stuff that we desperately need, and we haven't had nearly enough serious inquiry.
⭐Bonus: 5 Quick Questions for economic historian W. Walker Hanlon
Walker Hanlon is an associate professor in the department of economics at Northwestern University and the author of the recent working paper, “The Rise of the Engineer: Inventing the Professional Inventor During the Industrial Revolution.” I recently sat down with Walker for a podcast chat about that paper, which you can check out here. But the conversation didn’t stop there. I asked Walker an extra few questions about economic history, just for my loyal Faster, Please! readers.
1/ How is the engineering profession an innovation in the process of generating innovation?
I think what's different is that if you look at who was inventing stuff before engineers: It was mostly people who were manufacturers. They would own a business that produces, say, textiles, and they would invent some textile technology. But they're splitting their time. They're trying to run this business and sell their textiles, and then they're occasionally inventing stuff. Engineers are stepping back from that and saying that there are going to be people who are good at inventing stuff. Maybe it's for textiles today or steam engines tomorrow, but that's their specialty. And then they're going to monetize those in ways that don't require them to take a bunch of their time and run a business, ideally. They're going to just continue to focus on what they're good at, which is innovation.
2/ What are some other comparable inventions of new methods of invention throughout economic history?
I think this is a topic that we need more research on. The stuff that comes to my mind are: the development of the corporate research lab, which played an important role; I think the development of some of the government-supported research labs — sort of the Space Race stuff — pushed innovation forward in the middle of the 20th century; maybe the research university, which provides a basic science foundation that a lot of things build on. So I think that these may be similar shifts in how innovation or knowledge development is happening. But I think this is a topic where there's plenty more work for research.
3/ You're working on a book about the rise of laissez-faire policy in 19th century Britain. Could you give readers a little sneak preview of what that book's going to be about?
Britain in the 19th century is probably the most extreme example of a small-government, laissez-faire, committed system of government in a technologically advanced and politically stable country in history that I know of. And so that's a really interesting case to study and to think about, how did laissez-faire work? And I think the real question is why they ultimately moved away from it. And there's been a long-running debate going back to work by Dicey in the early 19th century about why this happened. The book explores that and tries to understand what caused that experiment to happen and what caused them to eventually then move away from it towards more of a welfare state.
4/ You had a 2018 paper about skilled immigration and American shipyards. Does that in any way inform current debates about immigration or about automation?
Yeah, absolutely. America was great at shipbuilding when ships were made out of wood, because we had a lot of wood. We were a world leader. When ships started to be made out of metal, Britain really took the lead in that industry. And for American shipyards to catch up, facing the competition across the Atlantic, they really needed to be able to hire these immigrant British shipbuilders who had these very special skills required for this very unique but important industry. And so it traces out the importance that immigrant group played in allowing the US industry to develop. So I think that has clear policy implications.
5/ You also wrote a paper about fog events in London and mortality. What did you find there?
You may or may not have some sense of London in the late 19th or early 20th century. There were these very foggy days, and it was polluted. And what this paper does is it basically looks at these fog events, which were driven by climate conditions. These caused a big spike in pollution exposure because fog locked pollution in the city. And the paper just looks at how costly that was. And it turns out that something like 2 percent of all of the deaths in London across this period can be attributed to this exposure due to this very heavy pollution, which was trapped in the city during these fog events. And so it allows us to think about long periods of time in a very polluted environment, and what those costs of pollution look like.
⭐Bonus/ Has the pandemic broadly changed your thinking about economics or prompted you to think about new potential areas of research?
It has certainly been very interesting from the perspective of an economic historian, because economic historians within the economics profession are the group that is, in some sense, in the best place to think about these things. We study things like the 1918 pandemic. I think that has both shown the benefits of this type of research, but also, I think, the risks, because each of these pandemics is also fundamentally different. They're very unique. And so it has been interesting to have that perspective from history that allows us to think about pandemics in the past and use that to inform what's going on. But on the other hand, they’re very unique: this particular pandemic and all of the big pandemics in the past. And it's made me more cautious about drawing too many lessons from these events.
Thanks for reading this far! Just a quick note for first-time visitors and free subscribers. In my twice-weekly issues for paid subscribers, I typically also include a short, sharp Q&A with an interesting thinker, in addition to a long-read essay. Here are some recent examples of those interviews: