What we’re reading (8/3)
“What’s Happening With The Economy? The Great Wealth Transfer” (Ray Dalio on LinkedIn). “The economy clearly isn’t reacting in the usual way to the Fed’s tightening; it is much stronger than normal and stronger than expected. Why is that? There was a big government-engineered shift in wealth from 1) the public sector (the central government and central bank) and 2) holders of government bonds to 3) the private sector (i.e., households and businesses). This made the private sector relatively insensitive to the Fed’s very rapid tightening to a more normal monetary policy. As a result of this coordinated government maneuver, the household sector’s balance sheets and income statements are in good shape, while the government’s are in bad shape.”
“How The Recession Doomers Got The U.S. Economy So Wrong” (The Atlantic). “In 2022, it was a matter of conventional and nearly universal wisdom that the 2023 economy would be a nightmare. Last October, a Bloomberg economic model said that the odds of a U.S. recession this year were 100 percent. No, not 99.99 percent, as in the odds that you’ll avoid being struck by lighting this evening. One hundred percent, as in the odds that you’ll avoid falling into a time-bending wormhole that spits you out in 17th-century Versailles at a dinner table with Louis XIV.”
“Workers To Employers: We’re Just Not That Into You” (Wall Street Journal). “Early on, remote work looked like a win-win: Employees got to work where and when they pleased, and employers got more productivity. It turns out only the first part of that bargain came true. Employees still love remote work, but recent studies find no boost to productivity and a decline for fully remote work. And yet most employers have given up on prodding staff to return to the office full time.”
“Left Digit Bias In Medicine” (Marginal Revolution). “You have probably heard of left-digit bias—the idea that $7.99 seems cheaper than $8, even though $8 is only negligibly different than $8.01. Left-digit bias is widely observed in pricing but the effect is more general. A car with 39,990 miles on the odometer, for instance, sells for more than a car with 40,005 miles (so be smart and buy the car with 40,005 miles). Could left-digit bias show up in medicine? People who end up in the emergency room complaining of chest pains a few weeks before their 40th birthday are very similar to people who end up in the emergency room with chest pains a few weeks after their 40th birthday. But on a chart, the former are 39 years old and the latter are 40. The big 40 is a heuristic among physicians for potential heart attack. Looking at more than five million patient records, the economist Stephen Coussens found that patients who were slightly over the age of 40 were almost 10% more likely to be tested for a heart attack than those just under 40.”
“How People Decide Who Is Correct When Groups Of Scientists Disagree” (Branden B. Johnson, Marcus Mayorga, and Nathan F. Dieckmann, Risk Analysis). “Uncertainty that arises from disputes among scientists seems to foster public skepticism or noncompliance. Communication of potential cues to the relative performance of contending scientists might affect judgments of which position is likely more valid. We used actual scientific disputes—the nature of dark matter, sea level rise under climate change, and benefits and risks of marijuana—to assess Americans’ responses (n = 3150). Seven cues—replication, information quality, the majority position, degree source, experience, reference group support, and employer—were presented three cues at a time in a planned-missingness design. The most influential cues were majority vote, replication, information quality, and experience.”
