The failure of the greatest triumph of economics

One of the greatest triumphs of economic theory is that agents gain from trading with each other. The proof either from a Ricardian or an Edgeworth box framework is irrefutable and together with the Heckscher-Ohlin model have formed the basis for argument for free trade.

Reality has always been more complex however and recent research shows the consequences.

Cross-referencing congressional voting records and district-by-district patterns of job losses and other economic trends between 2002 and 2010, the researchers found that areas hardest hit by trade shocks were much more likely to move to the far right or the far left politically.
“It’s not about incumbents changing their positions,” said David Autor, an influential scholar of labor economics and trade at the Massachusetts Institute of Technology and one of the paper’s authors. “It’s about the replacement of moderates with more ideological successors.”
Mr. Autor added: “In retrospect, whether it’s Trump or Sanders, we should have seen in it coming. The China shock isn’t the sole factor, but it is something of a missing link.”

Autor adds:

Mr. Autor, like most economists, is still persuaded of the long-established benefits that global trade confers on the economy as a whole. But he recognizes that angry voters have valid reasons to be frustrated.
“It’s a matter of diffuse benefits and concentrated costs, but our political system hasn’t addressed those costs,” he said.
Some staunch defenders of globalization, like Gary Clyde Hufbauer, a senior fellow at the Peter G. Peterson Institute for International Economics in Washington, also acknowledge that the federal government has failed to adequately address the needs of workers dislocated by lowered import barriers.
But the benefit of free trade is “10 times the size of the losses,” he said. “Free trade really helps working-class people in terms of lower prices for products. The benefits are skewed toward people with lower income because they spend a much larger fraction of their income on merchandise.”

If the gains from trade are as large as economists claim to be then why hasn't the political system found a way to fully compensate the losers in terms of lifetime incomes. Let's say free trade lowers the price of clothing by one dollar. Why not impose a tax of say 90 cents on clothing and use this tax to compensate the workers who have lost their jobs as a result for as long as they would have worked (perhaps until age 65)? Or, target the losers, calculate the size of their losses in terms of lifetime incomes and then find a tax rate that would equate these losses. The tax would not be permanent but it would trade off a higher rate with a lower time frame for the tax. 

The problem with Hillary

This comment nailed it for me:

Cynthia Kral, 38, of Pittsburgh, said she would never vote for Mrs. Clinton. “I cannot trust her,” Ms. Kral said, adding that she planned to vote for a third-party candidate or write in Mr. Sanders’s name in the general election. “I feel like she can be bought on anything, and for her to be president — that kind of scares me.”

This and the obvious rush for the dollars that came after they left the White House.

Indiana Jones and the changing of time

Watched Indiana Jones and the Temple of Doom last weekend. I had not remembered very much of it. It probably won't pass the new sensibilities of today. I found the depiction of India and Indians somewhat offensive.

In contrast Raiders of the Lost Ark did not offend me but would John Rhys Davies as Sallah be accused of cultural appropriation today?

Is AlphaGo really such a big deal

In some ways yes as described in this article in Quanta with the same title as this post. But not mentioned often enough is this:

For the last 20 years, we’ve had exponential growth, and for the last 20 years, people have said it can’t continue. It just continues. But there are other considerations we haven’t thought of before. If you look at AlphaGo, I’m not sure of the fine details of the amount of power it was using, but I wouldn’t be surprised if it was using hundreds of kilowatts of power to do the computation. Lee Sedong was probably using about 30 watts, that’s about what the brain takes, it’s comparable to a light bulb.

This is from Geoff Hinton. Also interesting is this article on Demis Hassabis one of the founders of Deepmind on what the future might be:

Most AI systems are “narrow”, training pre-programmed agents to master a particular task and not much else. So IBM’s Deep Blue could beat Gary Kasparov at chess, but would struggle against a three-year-old in a round of noughts and crosses. Hassabis, on the other hand, is taking his inspiration from the human brain and attempting to build the first “general-purpose learning machine”: a single set of flexible, adaptive algorithms that can learn – in the same way biological systems do – how to master any task from scratch, using nothing more than raw data.

Netflix = Cable

Signed up for Netflix and the first thing I did was to see what movies were available:
Edge of Tomorrow? Nope.
Matrix? Nope.
Whiplash? Nope.
Snow White and the Huntsman? Nope.

It feels like cable TV - a whole lot of nothing except old reruns. I wanted movies on demand and all I got was cable.

Technology advances in stutter steps

I wanted a holodeck and all I got was a pair of goggles?

NYC impressions

The pedestrians are very aggressive. Example: Rather than wait for the walk signal they walk when when the lights are red for the cars. What if cars run the red light?

Example: Sometimes when there is a lull (and not absence of cars) because cars are turning away instead of coming straight, pedestrians surge into the street taking up half the road. They sometimes stare down drivers who are forced to stop even though they have the green light and they have occupied the street.

Traffic in Washington DC in comparison seems extremely sedate. Note to self when in DC: Take a deep breath and think, New York, New York.

Not related to NYC, but perhaps the culture that is NY? Last summer in update NY we stopped for lunch at an Italian restaurant. Near the end of the meal the waiter asked if I would be paying by cash or credit card. When I said credit he sighed and said it was too bad - if I were paying with cash he would not charge me the sales tax. (Yes, it was a rather expensive lunch.)