The Storyteller

There was once a boy who wanted to tell stories. These were exactly the sorts of stories you would expect a little boy to tell; they involved video game and cartoon characters that he thought were cool. They spent most of their time getting into fights that the boy would contrive some reason for. Sometimes the boy could be bothered to write these stories on paper, but most of the time he simply acted them out with an ever-growing army of action figures.

As the boy grew, he aspired to write down more of these stories, but was never very dedicated to the task. Every so often he would spend a lot of energy on an idea for a story and then drop it before he was finished. Long after he had become a man—to the extent that one could call him such a thing with a straight face—the number of completed works of fiction he had seen through in his lifetime could be counted on his hands.

However, he had been far from idle as a storyteller. At some point late in his childhood, he began to tell stories about things in the world he had heard about, and read about, and talked about, particularly the things he had talked with his father about. Current events, history, philosophy, and every sort of idea filled the thousands of stories that he told. Though he had never had a trouble writing essays for a grade, still he was quite bad at telling a good story to begin with. But he enjoyed it, and he kept at it. After more than a decade of such storytelling, he began to find that the number of stories he produced that he was proud of was beginning to exceed the ones he considered duds.

Yet the fact that he never spent any of that energy telling the kinds of stories that excited him as a boy ate at him. He thought, surely, as I have been telling stories all along, it would be a simple matter to switch over and start doing the other sort. But domain dependence turns out to be far narrower than he had thought; writing fiction was hard work, while writing nonfiction came as easily to him as breathing.

Finally he came to terms with the fact that there was no shortcut for rounding out his abilities as a storyteller. If he wanted to tell the stories he had so loved growing up, he would have to start in the same place that he had started with the stories he could now tell so effortlessly. He would have to commit to stories that he could finish, no matter how small. He would have to keep at it, rather than writing one story and then not doing another for months or years. He would have to accept that it would be a long time before he was ready to write stories that he could be proud of on a regular basis.

So, afraid that he might be setting himself for another false start, he began. He began with the simple story of how he got here, because it’s a story he already knew well and knew how to tell. And that is the story you have just finished reading.

An Homage to the Wimp Turned Badass


The eldest of the superhero icons, Superman and Batman, are badasses through and through. Superman was born stronger and faster than is humanly possible, along with having the ability to fly (among other things). Batman has no powers, but is well-rounded in his mortal badassness—not only is he fit and strong and capable of kicking your ass with ten different types of martial arts, but he’s also smart and mega-rich.

Spiderman came later than these two, and he is emblematic of a different sort of hero. Peter Parker was scrawny, a nerd, and—let’s be honest—something of a loser. How did he gain his powers? He was hanging around some boring science demonstration and pretty much got bit by it. Peter Parker was a wimp, but his powers turned him into a badass.


Spiderman was my hero of choice growing up. It was the 90’s, and comics in general and Marvel in particular were going through a weird time. But Spiderman nevertheless remained true to Stan Lee’s original vision of a superhero that had a lot of problems. Most of them were boring, normal human problems.

Perhaps it is because I grew up on Spiderman, but I am a huge sucker for the wimp to badass genre. After my consumption of Spiderman and American (non-web) comics in general fell, my main source for these stories has been Japanese manga and Korean manhwa.

Manga has a specific genre called shounen that is targeted to teenage boys that is rife with wimp to badass stories. The most emblematic is probably Naruto, current king of the manga mountain, about a ninja who has no skills at all but manages to achieve greatness through hard work.

As my teenage years are now nearly ten years behind me, it’s a bit embarrassing how addicted I can get to this formula in these settings. My current obsession is a manhwa series called The Breaker that comes out every Friday. Come Friday morning, I am eager to wake up so I can read the next 18 or so pages of Shioon Lee’s adventures. I sometimes get so impatient waiting for the next installment that I go back and reread a few hundred pages of the earlier parts!

By far my favorite work in this genre is the manga Holyland. Holyland has a great deal to recommend it: it doesn’t use super powers to spice up the fights, the artist actually knows a great deal about boxing and martial arts and the human body, and the female characters are actually proportioned like human beings, rather than some teenage boy’s deranged idea of a sexpot.

But the real draw is the main character, Kamishiro Yuu. Yuu is not like Spiderman. He doesn’t crack jokes, and his rise isn’t what you’d call a feel good story—though it has an excellent resolution. Bullied and marginalized socially, Yuu becomes stronger purely to overcome the feeling he has of being utterly pathetic. Once he is strong, the resentment he felt from being made to feel like garbage does not simply go away.


Mori Koji (the artist) introduces this darker element quite slowly and tactfully. At first it truly appears that Yuu is just an innocent bystandard who is defending himself from people who underestimate him. As the story progresses, however, it becomes clear that he takes a dark enjoyment in beating the shit out of people. The manga follows his character as he grows stronger, discovers this side of himself, is terrified by it, and fights against being consumed by it entirely. At the same time, the character is genuinely likable, as are the friends he makes along the way who help him resist falling into violence entirely.

I am not ashamed to say that I find it to be a masterpiece in the wimp to badass genre, and anyone who enjoys stories along this line owes it to themselves to give it a read.

Read from right to left

I have to say, as I get older I really wish that there were more stories in this genre that were set somewhere other than a High School. Even Spiderman started out there! But perhaps there’s something inherently juvenile about wanting to see scrawny nerds go around beating people up.

If so, my content consumption would seem to imply…a rather juvenile tendency in my tastes.

Oh well. If growing up means giving up my wimp to badass stories, then I don’t want to grow up.

Stories About Education

My piece this week at The Umlaut was inspired by the ongoing debate about online education. I say “inspired by” because, while it was my intention to write about online education at the outset, that’s not where I ended up at all. I came to feel that the whole debate wasn’t really about Udacity or any of the new sexy education tech of the moment, but rather about a general sentiment that something has gone horribly amiss in the American system of higher education.

Moreover, it became clear to me that there isn’t anything particularly special about the latest online offerings. Cheap, practical alternatives to the college path have existed for a long time now in the form of professional development courses, industry certifications, and vocational schools. For some reason, people tend to look down their noses at these options, if they even acknowledge them as options at all. I decided to make our weird priorities, and the consequences of them, the main thrust of my piece.

It’s always fascinating to me the different stories that we have about why we go through this crazy 16 year process called formal education. One thing I noticed is that proponents of the “online education is going to change everything” point of view tended to all subscribe to the notion that education was about information transfer. Their critics, on the other hand, were much more ambiguous in what they thought education was for—and seemed to lean towards some sort of cultural, rite of passage type argument.

Meanwhile, in economics, you have the signal theory of education. The short version of this is that the content of your education is more or less worthless, it’s really just about sending a signal to the market about what kind of worker you are. One of the biggest proponents of this point of view is Bryan Caplan, who is quite skeptical about online education’s ability to make a dent in the establishment. Unlike most of online education’s critics, he is arguing from a place of cynicism rather than idealism about the nature of education in general.

Information Transmission

The productivity of teaching, measured in, say, kilobytes transmitted from teacher to student per unit of time, hasn’t increased much. As a result, the opportunity cost of teaching has increased, an example of what’s known as Baumol’s cost disease. Teaching has remained economic only because the value of each kilobyte transmitted has increased due to discoveries in (some) other fields. Online education, however, dramatically increases the productivity of teaching.
-Alex Tabarrok, Why Online Education Works

The whole point of learning is that you learn something, right? It’s all about imparting information upon the student. Whether we’re talking about multiplication tables or the date and consequences of the Battle of Hastings, students are—in theory—supposed to walk away from the school year with more information in their brains than they had at the beginning of the year.

If this is your story of education, then brick-and-mortar education must surely be doomed. In the essay linked to above, Tabarrok points out three reasons why this would be so:

I see three principle advantages to online education, 1) leverage, especially of the best teachers; 2) time savings; 3) individualized teaching and new technologies.

The first point goes to the fact that a single recorded lecture or piece of writing can now be viewed by anyone anywhere in the world that has access to the Internet. Tabarrok’s TED talk has been watched 700,000 times, several hundred thousand times more than his non-recorded, un-uploaded lectures ever will be. This is the blockbuster effect. In theory, the very best lectures by the very best teachers can now dominate the education of everyone in the world.

The time savings comes from the fact that with a recorded lecture, you can be as concise as possible, since people who don’t get it the first time have the luxury of rewatching it as many times as they want. Meanwhile, the people who get it the first time can move right on to the next lecture, a convenience not afforded students in a classroom who have to wait while the teacher answers their classmates’ questions.

The individualized teaching comes from the fact that teachers can outsource the lecture part of education to online resources and spend the time they would have been lecturing answering individual questions instead, and talking one on one with students. This is what is called flipping the classroom.

Clay Shirky also subscribes to the education as information transmission story. In his post which kicked off a huge debate about online education and education in general, he compares Udacity and MOOCs to Napster and the MP3. Infinite copies can be made, it can be transmitted over the Internet, and it’s available at no charge. In a response to critics of the piece, he bluntly states what he believes to be the chief purpose of education:

What we do is run institutions whose only rationale—whose only excuse for existing—is to make people smarter.

I am highly skeptical of the information transmission story of education. I’m sure that some information does get transmitted, though, as Caplan points out, most students forget most of it, and it doesn’t even take very long. Moreover, as I outline in my Umlaut article, there have been more cost-effective methods for transmitting information to students for decades, and these have only multiplied in quantity and variety, and lowered in cost.

Yet still we treat the 16 year path from K-12 to a bachelor’s degree as the proper way of doing business. Does it really take 16 years for us to convey all the information we want conveyed to our youth, even without digital technology? I find this story hard to swallow. Something else must be going on here.

Manufacturing Persons of Quality

The classroom has rich value in itself. It’s a safe, almost sacred space where students can try on ideas for size in real time, gently criticize others, challenge authority, and drive conversations in new directions.

-Siva Vaidhyanathan, A New Era of Unfounded Hyperbole

My suspicion is that this whole formal education thing is just a case of cultural snobbery. K-12 makes a certain sense—there’s certainly a lot of value in promoting literacy and basic math skills. I don’t think there’s any reason why that should take until we’re 18, but there you go.

But college in particular was never about information transmission, back before the modern push to universalize attendance to it. College was where Persons of Quality went to learn how to sound intelligent when talking with other Persons of Quality.

We talk about college as if it’s the only thing standing between the average student and a lifetime of unemployment—or worse, a lifetime as a cashier or burger flipper at McDonald’s. But I think on some deeper level, people just think there is something wrong with the kind of people who don’t go to college. Or that college imbues its students with something glorious and unquantifiable that it is unjust to deny anyone access to.

But if you don’t want to work at McDonald’s, you could become, say, an electrician. According to the BLS, this requires 144 hours of technical training and then four years of paid apprenticeship, after which the median electrician makes $48,250 a year–enough to live comfortably. And this is just one example–there are tons of paths that cost enormously less in both money and time to avoid the burger-flipping or gas station clerk outcome, if avoiding that sort of work is your goal.

But if it’s not a lawyer or a doctor, we sneer at vocational education.

In the week leading up to submitting my piece at the Umlaut, I read a lot of responses to Tabarrok and Shirky’s arguments. One thing I found odd was that these critics seemed to have a less clear idea of just what education was for than Shirky or Tabarrok did. However, I detected cultural snobbery in the background. Take the Siva Vaidhyanathan quote above. Or the following:

As a student, when I was at Ohio State I took a class with Jennifer Cognard-Black, a graduate student. I had been reading George Orwell’s letters. I just went to her office hours and I was like, I’ve got these letters, aren’t they cool? And I had nothing to say! I was really just thrashing around, [it was] incoherent excitement. And she said, “So, what are you interested in, which part of it?” I don’t even remember what we said. It wasn’t that this was an intellectually transformative experience; it was that I was taken seriously as a thinker, and it validated the entire idea of being excited about George Orwell’s letters. It sounds like a small thing, but it wasn’t; it was huge.

That’s Aaron Bady, quoted in the Awl. Unlike most of the participants in this debate, Bady seems refreshingly clear that we don’t really know what this is all for:

The thing is, when you frame this as, “what does this give them for the rest of their lives?” one never really knows, and I think that’s the point; there is something, but it’s something we’re all discovering together. When we reduce education to job training; when we reduce it to, “we need X skills, so let’s do whatever causes X skill to come out,” you really close down all the possibilities.

So college is a place where you can be taken seriously as a thinker, but we don’t really know what value that will have for the rest of your life. But if you hone in on one particular thing, you’re being closed-minded about all the other possibilities.

As someone who spends a lot of time being excited by any number of nerd-equivalents to George Orwell, I feel confident saying that I’ve been able to live Bady’s experience over and over for something like half of my life. I did it online. When I was a teenager, I went from forum to forum, raging about politics and philosophy to anyone who would engage. And engage they did. I found plenty of people to share my excitement over esoteric intellectual subjects with over the years. After forums, it was blogs, which are obviously still a big part of it. Then Facebook and Twitter and the new wave of social tools grew up and it became that much easier to connect with others who would share my excitement.

So finding a group where you can be “taken seriously as a thinker” is easier than it has ever been. And I’m not sure it’s worth cramming billions of dollars in subsidies and encouraging people to take on hundreds of thousands of dollars in student loans to keep an open mind about what college might be about.

It would be unfair not to link to Bady’s own critique of Shirky here, which is much more targeted to Shirky’s specific arguments.

But from Bady, Vaidhyanathan, the author of the Awl piece, and elsewhere, I’ve sensed an implicit cultural judgment in the same family as complaints that we’re reading tweets rather than Tolstoy. I always wonder–why Tolstoy? A lot of people are reading Harry Potter, for instance. Are they somehow spiritually inferior if they haven’t also read Tolstoy, or some great classic?

I don’t meant to imply that there is no value in Tolstoy or in the great classics. I do mean to imply that obtaining that sort of value probably isn’t actually worth the enormous amount of money that is currently being spent on it by governments, charities, and private individuals. Especially when you can read Tolstoy for free online!

Signaling Theory

According to the signaling model, employers reward educational success because of what it shows (“signals”) about the student. Good students tend to be smart, hard-working, and conformist – three crucial traits for almost any job. When a student excels in school, then, employers correctly infer that he’s likely to be a good worker. What precisely did he study? What did he learn how to do? Mere details. As long as you were a good student, employers surmise that you’ll quickly learn what you need to know on the job.

-Bryan Caplan, The Magic of Education

Signaling theory in economics was pioneered by Michael Spence. The basic idea is that there are people with desirable qualities for employers, and people without them, but on the surface they seem identical. However, it turns out that obtaining a college degree costs less for the people with the desired qualities than the people without them. Maybe this is because those people tend to come from middle class families, and therefore have the financial support of their families. Or maybe this is because the people without the desirable qualities don’t have the discipline to make it through four years of coursework.

Whatever the reason, the cost differential is all that matters. The students could learn nothing but garbage for four years, but if they can get to the diploma at a lower cost than people without the qualities that are valued in the market, they will increase their lifetime earnings by getting the diploma.

Note that education policy understandably aims to lower the cost of access for everyone. If education is largely signaling, then this is extremely wasteful. Since the cost differential is what matters, then lowering the costs for everyone just raises the bar for obtaining the differential. In practice this means spending more years in college than people would have under a less generous policy. So, if signalling theory is what explains most of why people go to college, then our current policy is wasteful both in spending and in that it encourages people to waste their time for longer.

Caplan brings a lot of empirical arguments to bear to defend the signalling theory of education. Most of these are intended to demonstrate how worthless an education actually would be in the market, if all we cared about was the actual content of it. Consider the following:

Yes, I can train graduate students to become professors. No magic there; I’m teaching them the one job I know. But what about my thousands of students who won’t become economics professors? I can’t teach what I don’t know, and I don’t know how to do the jobs they’re going to have. Few professors do.

Many educators sooth their consciences by insisting that “I teach my students how to think, not what to think.” But this platitude goes against a hundred years of educational psychology. Education is very narrow; students learn the material you specifically teach them… if you’re lucky.

Other educators claim they’re teaching good work habits. But especially at the college level, this doesn’t pass the laugh test. How many jobs tolerate a 50% attendance rate – or let you skate by with twelve hours of work a week? School probably builds character relative to playing videogames. But it’s hard to see how school could build character relative to a full-time job in the Real World.

Caplan makes strong, provocative arguments, and I look forward to his book on the subject. I tend to think that at least part of education must be explained by the signalling model. On the ground, this was certainly a story that my fellow students would often pay lip service to. The story was not so systematic or formal as the actual economic theory of signalling; instead it took the form of the belief that all we really got out of college was a piece of paper that for some reason bestowed magical qualities upon us in the job market. Whether or not anyone really believed that depended on the mood you caught them in, but it was a well circulated story none the less.

I also wonder if there isn’t some marriage of the signalling story and the Person of Quality story to be found. What if what employers really want are people raised with a certain set of values, and going to college demonstrates a commitment to those values?

In the diffusion of innovations literature, new ideas and products spread lightning fast when they reach that big chunk of the population (labeled the “early majority” and “late majority”) where the vast majority of the people involved have very similar characteristics. This sets them apart from “innovators” and “early adopters” who tend to be richer or of higher status on some margin than the majority, and “late adopters”, who tend to be poorer and of lower status than the majority.

What if the chief benefit of universalizing formal western education in this country was that it made everyone a lot more like one another? Just as we’re more likely to marry or befriend people who are more like us, we also may be more likely to hire someone who is more like us, or invest in a company run by someone who is more like us, and so on. Maybe education has almost nothing to do with information transmission, but instead is some mixture of acculturation and signalling?

How Education Has Changed and Will Continue To

The bottom line is that we don’t really know what function education serves. There are a lot of stories and you can put the evidence together in various ways to defend many of them, many that contradict one another.

But it seems clear to me that the way education will change, and has been changing, is clear, regardless of what story you choose to believe.

It will change in the way that all things have changed since the onset of the Industrial Revolution–we will see bigger blockbusters and longer tails.

Let’s say you believe the information transmission story. Then, as Tabarrok pointed out, you will get blockbuster lectures and educational materials; stuff that is seen by an unprecedented number of people around the world who are eager to learn. You will also get long tail effects–a huge amount of variety, some of which only gets seen by perhaps a handful of people but which may nevertheless enrich them intellectually.

Let’s say you’re a believer that the world has been going to hell in a handbasket ever since we all stopped reading Tolstoy. Well, as I mentioned before, now anyone anywhere in the world with an Internet connection can access Tolstoy’s works, for free. And anyone anywhere in the world can write about Tolstoy, and Shakespeare, and how society is going to hell in a handbasket since there are people who would rather read Harry Potter. There will be a long tail of communities populated by people who subscribe to the culture of the Person of Quality.

Caplan is extremely skeptical that online education will have much of an impact if the signalling theory is correct. But there has been a long tail of credentialing for a long time–consider project management certification, or SAS certification, or any number of other industry specific certifications. And Russ Roberts pointed out that homeschooling went from being a marginal activity to gaining acceptance.

Moreover, there’s an argument to be made that our current way of paying for higher education is simply fiscally unsustainable–Shirky makes this case at length. So the nature of the average education may end up changing due to some combination of financial implosion in the traditional sector and innovation on the outside.

Education is already a power law industry, and it will always remain one. It will probably grow even more skewed than it is today. But the particulars are going to change, and the long tail will get longer. On the whole, I am optimistic.


After posting these, I received a couple of responses that tell a story of a different sort.

The thing that fascinates me about education is that no one can seem to agree on what it is for
Adam Gurri

@ That’s silly. It’s zero marginal cost babysitting.
Nathanael Snow

Along the same lines, my father added:

I think Shirky’s right: higher education is like the daily newspaper, a bundle of unrelated stuff. It all makes cultural sense, until it doesn’t. College was a place for the Great Middle Class to park their kids until they figured life out. The cost-benefit of that makes the commitment increasingly untenable…

Unleash the Practitioners

Richard Dawkins is famously optimistic about human knowledge, especially within the confines of science. He is–understandably–allergic to the brand of postmodernist who believes that reality is simply a matter of interpretation, or cultural narrative. He has a much repeated one-liner that comes off as quite devastating–“There are no postmodernists at 30,000 feet.

It’s quite convincing. Engineers were able to make airplanes because of knowledge that was hard-won by the scientific community. The latter developed and tested theories, which the former could then put to use in order to get us moving about in the air at 30,000 feet. Right?


Historian Philip Scranton has done extensive work demonstrating that the original developers of the jet engine had no idea of the theory behind it, which was only developed after the fact. The jet engine was arrived at through tinkering and rote trial and error.

Dawkins was correct that there is a hard reality that is undeniable, and led to many failed prototypes. But the background story of science that he subscribes to is simply incorrect in this instance. Scientists didn’t develop theory which practitioners could apply; the practitioners invented something that scientists then felt the need to explain.

What’s amazing is how often this turns out to be the case, once you start digging.

Practitioners Elevated Us to New Heights

If there is one book that should be mandatory reading for every student of history, it is Deirdre McCloskey’s Bourgeois Dignity. It lays out in stark fashion just how little we know about what caused the enormous explosion in our standard of living that started over two hundred years ago. She systematically works through every attempted explanation and effectively eviscerates them. Issues of the day seem small when put in the perspective of a sixteen-fold growth in our standard of living (conservatively measured), and the utter inability of theorists to explain this phenomena is humbling.

For our purposes here we focus on Chapter 38: “The Cause Was Not Science”.

We must be careful when throwing around words like science, as it means many things to many people. What McCloskey is referring to is the stuff that generally gets grouped into the Scientific Revolution; the high theory traded by the Republic of Letters.

The jet engine example I mentioned earlier is exactly the sort of thing McCloskey has in mind. Take another example, from the book:

“Cheap steel,” for example, is not a scientific case in point. True, as Mokyr points out, it was only fully realized that steel is intermediate between cast and wrought iron in its carbon content early in the nineteenth century, since (after all) the very idea of an “element” such as carbon was ill-formed until then. Mokyr claims that without such scientific knowledge, “the advances in steelmaking are hard to imagine.” I think not. Tunzelmann notes that even in the late nineteenth century “breakthroughs such as that by Bessemer in steel were published in scientific journals but were largely the result of practical tinkering.”” My own early work on the iron and steel industry came to the same conclusion. Such an apparently straightforward matter as the chemistry of the blast furnace was not entirely understood until well into the twentieth century, and yet the costs of iron and steel had fallen and fallen for a century and a half.

This story plays out over and over again–the hard work of material progress is done by practitioners, but every assumes that credit belongs to the theorists.

It turns out that it isn’t even safe to make assumptions about those industries where theory seems, from the outside, to really dominate practice. What could be more driven by economic and financial theory than options trading? Surely this must be a case more in line with traditional understandings of the relationship between theory and practice.

And yet Nassim Taleb and Espen Gaarden Haug have documented how options traders do not use the output of theorists at all, but instead have a set of practices developed over time through trial and error.

Back to McCloskey:

The economic heft of the late-nineteenth-century innovations that did not depend at all on science (such as cheap steel) was great: mass-produced concrete, for example, then reinforced concrete (combined with that cheap steel); air brakes on trains, making mile-long trains possible (though the science-dependent telegraph was useful to keep them from running into each other); the improvements in engines to pull the trains; the military organization to maintain schedules (again so that the trains would not run into each other: it was a capital-saving organizational innovation, making doubletracking unnecessary); elevators to make possible the tall reinforced concrete buildings (although again science-based electric motors were better than having a steam engine in every building;  but the “science” in electric motors was hardly more than noting the connection in 1820 between electricity and magnetism-one didn t require Maxwell’s equations to make a dynamo); better “tin” cans (more electricity); asset markets in which risk could be assumed and shed; faster rolling mills; the linotype machine; cheap paper; and on and on and on. Mokyr agrees: “It seems likely that in the past 150 years the majority of important inventions, from steel converters to cancer chemotherapy, from food canning to aspartame, have been used long before people understood why they worked…. The proportion of such inventions is declining, but it remains high today.”

In 1900 the parts of the economy that used science to improve products and processes-electrical and chemical engineering, chiefly, and even these sometimes using science pretty crudely-were quite small, reckoned in value of output or numbers of employees. And yet in the technologically feverish U.K. in the eight decades (plus a year) from 1820 to 1900, real income per head grew by a factor of 2.63, and in the next eight “scientific” decades only a little faster, by a factor of 2.88. The result was a rise from 1820 to 1980 of a factor of (2.63) • (2.88) = 7.57. That is to say-since 2.63 is quite close to 2.88-nearly half of the world-making change down to 1980 was achieved before 1900, in effect before science. This is not to deny science its economic heft after science: the per capita factor of growth in the U.K. during the merely twenty years 1980 to 1999 was fully 1.53, which would correspond to an eighty-year factor of an astounding 5.5. The results are similar for the United States, though as one might expect at a still more feverish pace: a factor of 3.25 in per capita real income from 1820 to 1900, 4.54 from 1900 to 1980, and about the same frenzy of invention and innovation and clever business plans as Britain after 1980.

Note that McCloskey is not saying that science hasn’t made any contribution at all, or that the contribution is small. Taleb does not make that claim either. What is at issue here is that the contribution of science to our material well being is not just overblown, but overblown by several orders of magnitude. McCloskey ultimately concludes that “We would be enormously richer now than in 1700 even without science.”

Yet They Are Everywhere in Chains

Alex Tabarrok thinks to road to the innovation renaissance is through focusing such funding on STEM majors and tailoring our patent system so it only provides protection for industries like pharmaceuticals where it appears to make the biggest positive difference. Even Michele Boldrin and David Levines, who otherwise believe in abolishing intellectual property entirely, agree with Tabarrok’s exception. And Tyler Cowen believes that part of what we need to do in order to climb out of the Great Stagnation is elevate the status of science and scientists.

With respect to these distinguished gentlemen, I disagree. The road to greater prosperity lies in breaking the shackles we have increasingly put around practitioners, and elevating their work, and their status.

Whether or not the specific skills implied by a STEM career contribute to progress, it is quite clear that what is taught in the classroom is unlikely to be what is practiced in the field–since the teaching is done by teachers, who are not as a general rule practitioners. And let us return to Scranton, McCloskey, and Taleb: the vast majority of our material wealth came from tinkering that is decidedly non-STEM.

If you want to make progress in pharmaceuticals, don’t do it by enforcing (or worse, expanding) patents, which inhibit trial and error by those who do not hold the patent. Instead, remove the enormous impediments we have put up to experimentation. The FDA approval process imposes gigantic costs on drug development, including the cost of delaying when a drug comes to market and greatly reducing the number of drugs that can be developed. There is an entire agency whose sole purpose is to regulate medical trials.

It is all futile–as I have said before, in the end, the general market becomes the guinea pigs for many years after the drug is available, and no conceivable approval process can change that fact. But if you think differently–if you think theorists can identify what treatments are likely to succeed ahead of time, and are capable of designing experiments that will detect any serious side-effects, then our current setup makes a lot of sense.

But that is not the reality. Nassim Taleb argued in his latest book that we should avoid treating people who are mostly healthy, because of the possibility of unknown complications. On the other hand, we should take way more risks with people who are dangerously ill than our current system allows.

The trend is going the other way. Because we have made developing drugs so expensive, it is much more profitable to try to come up with the next advil, that will be used to ease symptoms of a mild disease but purchased by a very wide market, than a cure for rarer but more deadly diseases. And it doesn’t matter what they try to do, because the ultimate use of a drug is discovered through practice, not through theory. But it does matter, in the sense that we’re currently wasting many rounds of trial and error taking putting people at risk to attempt to make small gains.

Thalidomide remains the iconic example of how this works. It was marketed as an anti-nausea drug but caused birth defects when pregnant women took it. Yet it is widely used today, for treating far more serious  problems than nausea.

You Cannot Banish Risk

Aside from overestimating the abilities of theorists, the reason the discovery process of practitioners has been so hamstrung is because people are afraid of the errors inevitable in a process of trial and error. Thalidomide babies were an error, a horrible one. But there is no process, no theory that will allow us to avoid unforeseen mistakes. The only path to the drug that cures cancer or AIDS or malaria is one that involves people being hurt by unforeseen consequences. As Neal Stephenson put it, some people have to take a lot of risks in order to reduce the long run risk for all of us.

And along with the unforeseen harms, there are unforeseen gains as well. Penicillin, arguably the single greatest advancement in medicine in the 20th century, was an entirely serendipitous discovery.

I do not know if the stories of a great stagnation are accurate, but I agree with Peter Thiel that our regulatory hostility towards risk taking impoverishes us all, and allows many avoidable deaths every year.

The only way to start pushing the technological frontier again like we did at the peak of the Industrial Revolution is to empower the practitioners rather than impair them.

Unleash the practitioners and progress will follow.

Stories of Progress and Stagnation

I grew up around computers and have always taken it for granted that we lived in a time of enormous innovation and growth. Within my lifetime, my family has gone from something that looks like this:

To all individually having iPhones, which are enormously more powerful machines, connected to the Internet, and robust platforms for a huge variety of independently developed software. Never mind our various laptops and desktop computers!

It seems to me that from around the point that the term “web 2.0” was coined to the market crash of 2008, the story about the state of things that most people accepted was the one I was inclined to accept by default; that we lived in an era of accelerating progress. That every year would see huge leaps over the previous year, and the year after that would see a leap of similar relative magnitude, and this would go on indefinitely.

There have always been stagnationists, but it’s only in the last couple of years that stagnation stories have started to become fashionable again. Tyler Cowen deserves no small amount of credit, as The Great Stagnation made an enormous splash when it came out in January of last year. While discussions of the recession up until then had been made up almost entirely of diagnosing the financial bubble, post-TGS discussions had to face the possibility that our present predicament might be part of larger, more structural trends. Regardless of whether the book changed anyone’s minds directly, there can be little doubt that it played a huge role in setting the agenda.

The debate that has emerged has fascinated me, both as someone who is deeply interested in our propensity to tell stories, and simply because it is extremely hard to determine who is correct.

The Death of Ambition and the Modern Game of Inches

Tyler Cowen credits PayPal founder and venture capitalist Peter Thiel with inspiring the story behind The Great Stagnation. Recently, Thiel debated Google Chairman Eric Schmidt on the subject of technology and progress. One section of that debate that made the rounds in the economics blogosphere concerned Google’s $50 billion in the bank.

Thiel argued that “if we’re living in an accelerating technological world”, Google should be able to invest that $50 billion in technology in a way that returns their investment many times over. Even if Googlers are claiming that we live in an era of progress, their actions speak to a more pessimistic assessment.

Thiel believes that we live in a deterministic world in which progress is made by making big bets on enormous projects. Part of the reason we no longer pursue some ambitions is that we have all become indeterminists; our resources are all tied up in hedging against uncertainty. Even though the tech sector is characterized by progress so stable and relentless that we refer to several specific trends as “laws”, the players are, if anything, more indeterminist in their worldview than average.

Google’s low-yielding $50 billion is the ultimate symbol of this. Google made nearly $10 billion in profits in 2011, and almost all of that came from search, their core product. Thiel’s argument is that if Google believed that we lived in a time of accelerating technological progress, where $10 billion a year breakthroughs were just lying around waiting to be invented, they would be spending every penny they had on attempting to make those breakthroughs happen.

More important than the cultural change, however, is the fact that public policy has systematically outlawed ambitious projects of any sort. From the debate with Schmidt:

The why questions always get immediately ideological. I’m Libertarian, I think it’s because the government has outlawed technology. We’re not allowed to develop new drugs with the FDA charging $1.3 billion per new drug. You’re not allowed to fly supersonic jets, because they’re too noisy. You’re not allowed to build nuclear power plants, say nothing of fusion, or thorium, or any of these other new technologies that might really work.

So, I think we’ve basically outlawed everything having to do with the world of stuff, and the only thing you’re allowed to do is in the world of bits. And that’s why we’ve had a lot of progress in computers and finance. Those were the two areas where there was enormous innovation in the last 40 years. It looks like finance is in the process of getting outlawed. So, the only thing left at this point will be computers and if you’re a computer that’s good. And that’s the perspective Google takes.

Further down, responding to criticism of the financial sector, he adds:

I disagree with the premise behind the question that there’s some sort of tradeoff between finance and other areas of innovation. I think it’s easy to be anti-finance at this point in our society, and I think the reality is we have an economy that got very lopsided towards finance, but it’s fundamentally because people weren’t able to do other things.

So, if you ask why did all the rocket scientists go to work on Wall Street in the ’90s to create new financial products, and you say well they were paid too much in finance and we have to beat up on the finance industry, that seems like that’s the wrong side to focus on. I think the answer was, no, they couldn’t get jobs as rocket scientists anymore because you weren’t able to build rockets, or supersonic airplanes, or anything like that. And so you have to ‑‑ it’s like why did brilliant people in the Soviet Union become grand master chess players? It’s not that there’s something deeply wrong with chess, it’s they weren’t allowed to do anything else.

In short, we have grown risk averse in both our culture and in our policy.

Science fiction writer Neal Stephenson is firmly in the stagnationist camp, and he definitely believes it is all about risk aversion. He has written:

 Innovation can’t happen without accepting the risk that it might fail. The vast and radical innovations of the mid-20th century took place in a world that, in retrospect, looks insanely dangerous and unstable. Possible outcomes that the modern mind identifies as serious risks might not have been taken seriously — supposing they were noticed at all — by people habituated to the Depression, the World Wars, and the Cold War, in times when seat belts, antibiotics, and many vaccines did not exist.

In Stephenson and Thiel’s story, true innovation is risky, bold, and visible, while what passes for innovation in modern times is peanuts by comparison. Stephenson pointed to the ongoing competition to build the world’s tallest building as an emblematic example of the problem. These days the tallest building in the world is only a few inches taller than the previous record-holder, and only holds the record for a few months as another slightly taller building is always being constructed in near parallel.

What Stephenson wants is for us to build a structure several orders of magnitude larger than anything that’s ever been built before; a structure that will hold the record for decades before it becomes technologically possible or financially conceivable to surpass it. To Stephenson as well as Thiel, that is what innovation should look like.

The stagnationist has no problem with the ground game, but is frustrated that there doesn’t seem to have been any passing game in forty years. Meanwhile everyone is going around presenting the incremental gains as though they were big breakthroughs. Neither Stephenson, Thiel, nor indeed Cowen, are impressed. You talk about all the wonders we’ve seen since the mass adoption of the Internet, but have they really moved the needle? Just think about penicillin, anesthetics, the automobile and the airplane, not to mention all the spillover innovations that came from putting a man on the moon!

At Founder’s Fund, the venture capital firm at which Thiel is a partner, they have a saying: “we wanted flying cars, and instead we got 140 characters.”

The Value of the Unseen

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

-Frederic Bastiat, What Is Seen and What Is Not Seen

I see a lot of truth in pieces of the arguments made by Thiel, Stephenson, and Cowen, but am uncertain whether I buy into all of it. My natural inclination has always been to dismiss stagnationist stories, and Stephenson’s fixation with big, visible things made me all the more skeptical. The stories I have grown close to over the years frequently point out how what seems to be plain truth is often, when you take a step back, a lot less clear and sometimes completely wrong. You think, for instance, that making something as simple as a pencil is the easiest possible task, but it turns out that there’s this huge process behind it in which no individual has enough knowledge to assemble a single pencil.

Take GDP as an example. It’s a nice point of reference, but if you start assuming that GDP–or even GDP per capita–is synonymous with national wealth, you run into some serious problems. GDP is essentially just aggregate spending. When you buy an iPhone for $199.99, you are adding $199.99 to this year’s GDP. It’s a great proxy for national income but it has many recognized problems. In what is perhaps a dated and vaguely sexist sounding example, Paul Samuelson came up with the following scenario:

Take Samuelson’s example of the man marrying his maid. Samuelson’s point is that the new bride continues doing the housework without being paid. But that would not mean that the work suddenly had no market value. So, in this case, GDP actually understates the market value of all final goods and services because this particular service is no longer exchanged on the market.

The valued activity–the housework–is still being done, but because there isn’t any spending involved, it isn’t measured in GDP.

Bryan Caplan has pointed out repeatedly that the consumption done on digital devices and on the Internet is hugely mismeasured by metrics like GDP. In one post, he points out one implication of all the various network products seeing success in the market today:

In the real world, network goods visibly improve all the time. But suppose they didn’t. Suppose the Facebook of today used the same source code as it did five years ago, but still attracted new users at the same rate as it did in the real world. Many economists would be tempted to call this “stagnation,” but they’d be wrong. Even if Facebook’s source code stayed the same, the mere fact that more people are using the product causes it to be better. Why? Because the point of the product is to amusingly interact with your friends. The more friends who use it, the more amusing it is.

The upshot: Economists (and people generally) underestimate true economic growth for all expanding network products. When you measure the quality of network products, you can’t simply look at them in isolation. You have to measure what you can do with them.

There are many dimensions in which Caplan argues that our measurement biases are worse than ever, but our standard of living is actually better than ever.

Looking at my own daily life, a huge amount of my consumption is simply not counted in GDP. I consume an enormous amount of content without paying anything for it. There’s also the reverse benefit–I can write lengthy posts like this one and put them in a public place, whereas before the Internet only the lucky few who managed to get published could do anything roughly equivalent.

If we are a groupish species, and I believe we are, then the ability to connect with others and increase the number of our shared experiences is a huge benefit. Clay Shirky’s excellent book, Here Comes Everybody, discusses how modern technology has reduced the transaction costs associated with group action, the benefits of which we are only beginning to understand. In his followup, Cognitive Surplus, he described how central hubs like Wikipedia are able to aggregate a few minutes of effort from enough sources to result in one enormously valuable resource.

Even after The Great Stagnation, many defend the story that progress is accelerating. In Race Against the Machine, Erik Brynjolfsson and Andrew McAfee argue that technological innovation has been going at a breakneck pace for decades, and we’re only now entering the second half of the chessboard. Yet their vision of progress has a caveat–we are currently at a moment where technology is replacing humans in performing certain tasks faster than entrepreneurs are coming up with new jobs that humans are better at than machines. Arnold Kling said it best:

 The paradox is this. A job seeker is looking for something for a well-defined job. But the trend seems to be that if a job can be defined, it can be automated or outsourced.

Still, overall well-being is going way up as machines become much, much more efficient at providing us with things that we value for rock bottom prices. So on net, we’re seeing tremendous progress.

Radical Uncertainty

Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

-Nassim Nicholas Taleb, The Black Swan

If our culture has embraced indeterminacy, or more accurately uncertainty, as Thiel thinks we have, then Taleb has taken this story farther than anyone. Whereas Thiel will argue:

 Several people have successfully started multiple companies that became worth more than a billion dollars. Steve Jobs did Next Computer, Pixar, and arguably both the original Apple Computer as well as the modern Apple. Jack Dorsey founded Twitter and Square. Elon Musk did PayPal, Tesla, SpaceX, and SolarCity. The counter-narrative is that these examples are just examples of one big success; the apparently distinct successes are all just linked together. But it seems very odd to argue that Jobs, Dorsey, or Musk just got lucky.

Taleb has no compunction with arguing that they got lucky–or, at the very least, that we are incapable of determining the difference between pure luck and its opposite. In Fooled By Randomness, he conjures up a scenario in which an eccentric rich person will pay $10 million to whomever wins a game of Russian Roulette. Someone might get lucky and win, but if they keep playing, the odds will eventually catch up with them. However, if the pool of players is large enough, you will get a handful of consistent winners even after many rounds of playing the game.

In addition, in time, if the roulette-betting fool keeps playing the game, the bad histories will tend to catch up with him. Thus, if a twenty-five-year-old played Russian roulette, say, once a year, there would be a very slim chance of his surviving until his fiftieth birthday–but, if there are enough players, say thousands of twenty-five-year-old players, we can expect to see a handful of (extremely rich) survivors (and a very large cemetery).

What you always miss out on when citing examples of people like Steve Jobs whose success seems so improbable at the individual level is that, with a big enough “cemetery” of people making similar attempts but failing, the probability of having a few people like him increases. Moreover, after the first success there is some preferential attachment, so to speak–while most startups that get funding do not succeed, the vast majority of startups don’t get any funding. Jack Dorsey’s first success increased the odds that even a stupid sounding idea would get funding the next time around, which increased his odds of succeeding. Now, there are a lot of people in a similar situation who did not then go on to have another success, but again, if the cemetery is big enough, you will end up with a few Jack Dorseys.

Again, the point is not to argue that everything is pure luck. The point is that the role that randomness plays in anything is unknowable. We have stories that persuade us to a greater or lesser extent, but in the end there is enormous uncertainty. Take the very debate over whether we are in a stagnation or a period of accelerating progress. The debate is very robust; with a great deal of evidence brought to bear on both sides of the argument. And everyone can think of alternative stories to fit the data–when I brought up Thiel’s conclusions about Google’s large cash horde, people immediately came up with alternative interpretations.

In Taleb’s world, progress and ill fortune are not smooth trendlines in either direction; they are lumpy. You get big, sudden breakthroughs, and huge, unexpected catastrophes (think of the turkey). So it can seem for a very long time like we’re going in either direction, and then one dramatic event today can have more of an impact on our well being than the past thirty years combined. In a way, the relatively short period since the onset of the Industrial Revolution is a big, dramatic event in the timescale of human history, and there is no guarantee that it will last. The progress could stop tomorrow, or the gains could be completely reversed by some countervailing dramatic event–say, nuclear war or a particularly virulent disease. Or, conversely, we could be at the foothill of a positive breakthrough of such a magnitude as to make the past 200 years look like nothing. There is simply no way to say.

F. A. Hayek was also a proponent of radical uncertainty; he believed that the only possible path to progress was through rote trial and error. It is possible to do the big things that the stagnationists want to see, but you’d better be prepared to see some colossal failures along the way. This begins to look more like Stephenson’s story about the role of risk, and there is certainly some overlap here.

But Thiel’s deterministic worldview is well outside of that overlap. Contra Thiel, the economist Frank Knight believed that the world is filled with irreducible and unquantifiable uncertainty. What’s more, Knight believed that progress was made and profit was found by entrepreneurs who deliberately sought out niches that had high degrees of uncertainty.

In this story of uncertainty and lumpy progress, Google’s $50 billion makes a lot of success. In a direct response to Thiel, Arnold Kling pointed out that under high uncertainty there is a high option value to waiting to invest.

Picture two possible scenarios–one in which Google develops the next big breakthrough in-house, another in which someone else develops it and Google acquires them. Google is clearly pursuing a lot of the former–famously, they are developing wearable computing and they have already clocked hundreds of thousands of miles on their fleet of automated cars. But their tens of billions of dollars in the bank suggests that they believe the big breakthroughs are going to come from outside of Google, rather than through their internal process.

This is frustrating to a hard determinist like Thiel who thinks we should be able to see what’s coming down the road and simply invest that $50 billion in it. But ultimately this is no different than any other make or buy decision that firms face; and how that split is made is a question that economists have analyzed since Coase. The fact that Google is sitting on so much money, from the perspective of this particular story, does not imply that they think we’re in the middle of a stagnation. Rather, it implies that they believe the market is more likely to supply the next $10 billion a year breakthrough than their own internal processes. That could speak to the weakness of their internal processes, or it could simply mean that the market is that much better at developing big breakthroughs than a single corporation could ever be.

Alex Tabarrok asked who will make the future if Google is just waiting for it. The answer provided by this story is that many players, in many firms, scattered across the market and across time will make the future, and many will do so in the hopes of a big payday from Google.

Cycles of Control and Resistance

This is the last story that I will examine here, and it comes from my former classmate Eli Dourado.

To really understand Eli’s story, you have to understand his larger framework. Despite the fact that economically-saavy libertarians believe very strongly in the power of incentives, most still seem to harbor the notion that the practical path forward for policy reform is through persuasion. And there is a story to be told in which this strategy has seen some success, with the neoliberal revolution for example.

In Eli’s framework, the incentives against governments adopting libertarian policies in a broad way are simply too powerful to overcome in the long run. Think about the big spam botnets. Botnets build up over time and become a low cost way to send people spam emails. After a while, one or two botnets will account for the vast majority of all spam. Security groups will get together and work to get one of the top ones taken out, and it will result in a big short term payoff–a recent takedown resulted in an estimated 50% drop in spam.

But the cost of building up a botnet is low enough, and the payoff for spam with an infinitesimal success rate is so high, that it doesn’t take long before the volume of spam is right back to where it was before the takedown. In Eli’s world, most good policies are like botnet takedowns–short term gains but a wash in the long run.

With that in mind, here’s is Eli’s more specific story about innovation:

First we need to differentiate between two kinds of innovation and think about their effects. The first kind of innovation is geared toward brute maximization of production. It is typically centralized and makes use of economies of scale. Examples might include an assembly line factory or a big, coal-fired power plant. Because these innovations tend to be centralized, they introduce points of control. The capital is typically fixed and therefore easy to tax and regulate. It’s well known in the development literature that it’s really hard for governments to control rural peasants who live off the grid. Once they move to the cities and plug into centralized services, it is easier to require them to send their children to school, for instance. Because these innovations introduce points of control, I will call them technologies of control.

On the other hand, not all innovations are about brute maximization of production. Some are about producing things that we already know how to produce in ways that have ancillary benefits. An important ancillary benefit is evading control. Examples of these innovations include 3D printers and solar power. The evasion of control that is possible with 3D printers is the subject of Cory Doctorow’s short story Printcrime. And portable solar power cells can make people harder to control by supplying electricity without the need to register an address, have a bank account, stay put, and so on. These are obvious examples, but control can be evaded through more subtle innovations as well. I will call innovations that circumvent points of control that can be used by governments or monopolies to exploit, tax, or regulate technologies of resistance.

Eli explicitly splits the difference between The Great Stagnation and Race Against the Machine. He posits that the Industrial Revolution was all about the technologies of control–people clustered into dense urban populations, and were employed in mass numbers by factories that produced on a scale that was unprecedented in human history. We saw massive improvements in the standard of living of industrializing nations in the blink of an eye.

But all the concentation and the mobility-reducing high capital costs made the sources of our new wealth easy targets for governments to come in and take a bigger and bigger cut. Beyond straight taxation, interest group pressures also created an incentive to exercise specific forms of control through government regulation, reducing the effectiveness of the technologies of control.

Still, the productive capacity of these technologies was such that we coasted all the way into the 1970’s before the deadweight of government regulation and taxation slowed us down. Since then, our resources have shifted to developing technologies of resistance, which is why Brynjolfsson and McAfee see accelerating innovation. It is accelerating, but it’s accelerating in a very specific area because of how difficult it is to control that particular area.

We do see welfare gains from innovation in the technologies of resistance, but they are not nearly as big as we could get with the technologies of control, were they not so bogged down with regulation. Resources are spent on creating robustness against control that would have otherwise been spent on maximizing pure economic growth, in the absence of efficiency-reducing regulation.

In this story, ideology, persuasion, and democracy will not help us. Every time the median voter swings more libertarian, we see the technologies of control begin to give us bigger gains again. But, like the botnet takedowns, it is only a matter of time before the regulations creep back in again. And we almost never see anything comparable to a botnet takedown in terms of orders of magnitudes–we see some small reforms that may be bigger or smaller in impact, but we’re talking 1% or 2% improvements, not 50% or 75%.

The only way to move to a better long run path is to change something fundamentally structural. Eli imagines an extreme version of such a change in his post on the utopia of infinite elasticity.

It’s tempting to think that the bond market is powerful because of corruption, but that is at most a proximate source of power. The real source of power is elasticity. The supply of financial capital is highly elastic; it moves around the globe in milliseconds. Try to tax it and the incidence of the tax will go elsewhere; burden it with regulations and it will flea to a more hospitable climate.

Imagine a world in which all factors of production were as mobile and elastic as financial capital. If labor and physical capital could flea instantaneously and at low cost from bad policies, there would be little danger from either the predatory or incompetent state. In short, it would be a libertarian utopia.

As with any ideal, Eli does not believe that such a world is possible to get to, but he does think that we can move closer to it. Maybe, rather than simply developing specific technologies of resistance, we can build a whole infrastructure of resistance. Maybe mass adoption of 3D printing and wireless mesh networks helps move us to a much more elastic world.

Otherwise, we will just be stuck in this race against coercion where we eek out progress in inches rather than big leaps. We may occasionally widen the gap, or set back coercion with the reform movement of the moment, but we’ll never see the enormous gains of the early Industrial Revolution on a regular basis again. In this story, you can take everything that Cato, the Hoover Foundation, and even Milton Friedman accomplished, and throw them in the garbage, and you won’t see much of a difference in the long run.

Instead of investing in lobbying, we should be investing in an infrastructure of resistance.

I have to admit that I find this to be the most fascinating story of all.