π Faster, Please! Week in Review #33
The Indian Century; US vs China; Facebook and competitive capitalism; the economics of immigration; the Fukushima meltdown and the Precautionary Principle
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Melior Mundus
In This Issue
Essay Highlights:
β Why the 21st Century might be the Indian Century (but could still be another American Century)
β Are China and America destined for war? Trade vs. the Thucydides Trap
β Meta/Facebook and the state of American competitive capitalismBest of 5QQ
β 5 Quick Questions for β¦ economist Giovanni Peri on the economics of immigrationBest of the Pod
β A conversation with economist Matthew Neidell on the 2011 Fukushima nuclear meltdown and the unintended consequences of rejecting nuclear power
Essay Highlights
β‘ Why the 21st Century might be the Indian Century (but could still be another American Century)
In the new NBER working paper βThe Future of Global Economic Power," the researchers write, "Productivity growth and its interaction with demographic change are the main drivers of future economic power." So by 2100, India could be an economic powerhouse, with a third of world economic output, though it would still be just 35 percent as productive as the US. Although a huge leap from todayβs seven percent level, thatβs βstill miles away from the US, China, and WEU.β What would this mean for the United States? As other nations grow richer, there is far less incentive for their strivers to move to America. You can open your borders all you want, but people have to want to come. Pro-immigration reform should be top of mind for American policymakers. The study also illustrates the power of productivity growth. If it is critical for higher living standards and sustained global power, then I see little reason why it should not have substantive impact on all policy debates, including education, immigration, science investment, and trade. Rather than assume the productivity gains of other nations will fizzle, we should do all we can to accelerate our own.
β Are China and America destined for war? Trade vs. the Thucydides Trap
History suggests a tendency toward war when an existing great power is challenged by an emerging power. In Thucydidesβ famous account of the Peloponnesian War, the ancient Athenian historian concluded that βit was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.β The baseline case countering a conflict between the US and China: The economic ties between the two countries make war so economically costly as to be highly unlikely. Imports from China in 2021 reached $540 billion β near the pre-trade war peak. But the sweeping restrictions issued by the Biden administration on selling semiconductors and chip-making equipment to China donβt support the view that the Thucydides Trap can be avoided this time. The current political reality in Congress is one of alarm about China β its military might, technological prowess, economic predation, and human rights record. The silver lining here is that the China threat could make it easier to promote pro-progress policies. When America has accomplished big things in the past β the GI Bill, the National Highway System, the Apollo program β they were typically enabled by various special circumstances, such as national security or some crisis.
βΎ Meta/Facebook and the state of American competitive capitalism
Capitalism without failure isnβt capitalism at all. And failure should be driven by companies competing in the marketplace (as opposed to the halls of political power). That dynamic struggle is what pushes businesses to innovate and invest with the goal of improved quality or lower prices. In the US, companies typically get big because they are doing something that the users of the goods and services they offer find valuable. And they typically stay big or even dominant by working hard to remain on top. When people talk about the need to βbreak upβ Big Tech, Facebook has typically been Public Enemy #1. Over and over again, Facebook has been painted as an all-powerful three-headed dragon β Facebook, WhatsApp, Instagram β they should never have been allowed to exist and might well never fail without government action. But now, the Facebook forever dynasty has fallen on hard times. As The Economist reports, "Since its rebranding [as Meta] the companyβs share price has dropped by 60%, destroying more than half a trillion dollars of market value." It's an important piece of evidence that even the biggest players in that economy are not immune from the forces of creative destruction.
Best of 5QQ
π‘ 5 Quick Questions for β¦ economist Giovanni Peri on the economics of immigration
Giovanni Peri is a professor of economics at the University of California, Davis. His work centers on immigration, including the recent working papers βAre Immigrants more Left leaning than Natives?β with Riccardo Turati and Simone Moriconi and βComparing the Effects of Policies for the Labor Market Integration of Refugeesβ with Mette Foged and Linea Hasager.
You have a new working paper about the labor market outcomes of refugees in Denmark, coauthored with Mette Foged and Linea Hasager. What policy lessons should the US learn from this study?
We find the most effective policies for the labor market integration of refugees to be intensive language training in the early years after arrival and placement in cities with strong labor markets (low unemployment). We also found that reducing initial welfare payments for them, when they do not have language skills yet, does not push them to enter and stay in the labor market in the long run. Rather, it reduces their available income, putting them at higher risk of poverty and crime. Additionally, concentrating refugees where other people from the same country leave is not a policy with positive employment and earning effects in the long run.
Best of the Pod
Matthew Neidell is an economist in the Department of Health Policy andΒ Management at Columbia University's Mailman School of Public Health. In 2021, Matt coauthored aΒ paper on those unintended consequences called βThe unintended effects from halting nuclear power production: Evidence from Fukushima Daiichi accident.β
Do you have a sense that people overestimate the fatalities from nuclear accidents? I don't know if you watched the Chernobyl miniseries on HBO. It would be very easy for someone kind of watching that and maybe half on their phone to think that hundreds of thousands of people died. And I recently watched a documentary, I think it was on Netflix, about Three Mile Island. They also tried to give the sense that many, many people died, even though the evidence seems pretty anecdotal, what they did give. They didn't bring a lot of experts and economists talking about deaths. In political decision-making, it's easy for politicians to focus on highly visible costs and highly visible benefits. But it seems like with nuclear, they're also looking at costs that perhaps don't even exist, that there's just the sense that it's a lot more dangerous than what it is.
I think that's right. Part of it is about salience. When we think about a nuclear meltdown, it's a shot heard around the world. Everyone knows about Fukushima and everybody knows about Chernobyl. Even if we have the opportunity to forget about Chernobylβnot that we should forget about Chernobyl, we should still remember and learn from Chernobylβwe still have reminders about Chernobyl and the miniseries coming out and telling us how bad it was. If we had a Chernobyl-like incident every five years, we'd be having a different conversation. Then we could say, βMaybe nuclear should be off the table. Maybe it's not worth it.β
But we have very different calculations. We've had one Chernobyl, the worst incident we've had. And then the second-worst incident we've had is Fukushima, where we have 1200 or so deaths. It's orders of magnitude better, and that's only the second-biggest accident that we've had. And if that's what things are like going forward, that's much safer, clearly much safer than Chernobyl. I think the interesting thing embedded in the question you're asking me is about the salience, that we hear about the deaths from these accidents. But the deaths from coal and the deaths from gas, you don't hear about them. They're just in the background. Every day there are people dying from particulate matter, but we're not saying, βIt's because of the burning of coal we now have this person dying from particulate matter.β It's just that we know there are some people that are dying and we can later statistically attribute it to the burning of fossil fuels. But it's not reaching salience the same way that a nuclear accident is reaching salience.
An analogy that comes to mind is thinking about flying versus driving. Flying, statistically speaking, is so much safer than driving. The amount of airplane-related deaths in a given year is very small, but the amount of deaths from car accidents is, again, orders of magnitude higher. Car accidents are happening every day, and the only way you really hear about car accidents, other than if it's a really famous person who's involved, is your local news. They're not making national news. But when a plane crash happens, it's national newsβit's international news. But when was the last big plane crash that happened? I don't know. I couldn't tell you. It has to have been at least several years away. I know COVID put a lot of pause on a lot of travel, but it has to be years away from when that last accident happened. Yet I think a lot of people are more scared of flying than they are of driving, even though the risks of death from driving are much higher than the risks of death from flying.
Iβm certain you did!
Did you publish the US/China war piece and the 5QQ the other day?