SEPTEMBER 28 2017

Carlos Carvalho, Andrea Ferrero, Fernanda Nechio, San Francisco FED: Demographic Transition and Low U.S. Interest Rates. Interest rates have been trending down for more than two decades. One possible explanation is the dramatic worldwide demographic transition, with people living longer and population growth rates declining. This demographic transition in the United States—particularly the steady increase in life expectancy—put significant downward pressure on interest rates between 1990 and 2016. Because demographic movements tend to be long-lasting, their ongoing effects could keep interest rates near the lower bound longer. This has the potential to limit the scope for central banks to respond to future recessionary shocks.

Claire Cain Miller, NYT: How Did Marriage Become a Mark of Privilege? Marriage, which used to be the default way to form a family in the United States, regardless of income or education, has become yet another part of American life reserved for those who are most privileged. Fewer Americans are marrying over all, and whether they do so is more tied to socioeconomic status than ever before. In recent years, marriage has sharply declined among people without college degrees, while staying steady among college graduates with higher incomes. Currently, 26 percent of poor adults, 39 percent of working-class adults and 56 percent of middle- and upper-class adults ages 18 to 55 are married, according to a research brief published from two think tanks, the American Enterprise Institute and Opportunity America.

George J. Borjas, LaborEcon, Who Emigrates From Denmark? The paper makes a neat theoretical contribution. It derives the conditions that determine whether the skill distribution of the emigrants stochastically dominates (or is stochastically dominated by) the skill distribution of the stayers. Because the rewards to skills in Denmark are low (relative to practically all possible destinations), the model predicts that the emigrants will be positively selected, and that the skill distribution of the movers will stochastically dominate that of the stayers. Our analysis of administrative data for the entire Danish population between 1995 and 2010 strongly confirms the implications of the model. Denmark is indeed seeing an outflow of its most skilled workers. And that is one of the consequences that a very generous welfare state must learn to live with.

World Bank warns of 'learning crisis' in global education. Millions of young students in low and middle-income countries face the prospect of lost opportunity and lower wages in later life because their primary and secondary schools are failing to educate them to succeed in life. Warning of ‘a learning crisis’ in global education, a new Bank report said schooling without learning was not just a wasted development opportunity, but also a great injustice to children and young people worldwide. According to the report, when third grade students in Kenya, Tanzania, and Uganda were asked recently to read a sentence such as “The name of the dog is Puppy” in English or Kiswahili, three-quarters did not understand what it said. In rural India, nearly three-quarters of students in grade 3 could not solve a two-digit subtraction such as “46 – 17”—and by grade 5, half still could not do so.

Erik Brynjolfsson, Daniel Rock Chad Syverson, MIT Sloan School of Management: Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics. Systems using artificial intelligence match or surpass human level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices. Yet measured productivity growth has fallen in half over the past decade, and real income has stagnated since the late 1990s for a majority of Americans. We describe four potential explanations for this clash of expectations and statistics: false hopes, mismeasurement, redistribution, and implementation lags. While a case can be made for each explanation, we argue that lags are likely to be the biggest reason for paradox. The most impressive capabilities of AI, particularly those based on machine learning, have not yet diffused widely. More importantly, like other general purpose technologies, their full effects won’t be realized until waves of complementary innovations are developed and implemented. A portion of the value of this intangible capital is already reflected in the market value of firms. However, most national statistics will fail to capture the full benefits of the new technologies and some may even have the wrong sign.

Digitopoly: Remarks from Daniel Kahneman on AI and deep learning (video). Kahnemans brilliant comments starts by stating that AI and deep learning have developed much faster the last eight years than anyone would have expected. There is no reason that AI could not perform anything that a human mind could. On the contrary, human brains are very random noisy and always do different predictions on the same question. Already AI do better predictions and decisions in most areas, and humans should be replaced with machines as soon as possible. AI will excel in logic, emotional intelligence and wisdom very soon. Most elderly will prefer being taking care of by a nice robot instead of a grumpy child or relative.

Sam Benson Smith, Readers Digest: Why September Babies Are More Successful, According to Science. At young ages, this natural several-month leg-up is crucial, as childhood development grows in leaps and bounds relative to any other time in one’s life. The National Bureau of Economic Research conducted the study which confirmed the cutoff-date advantage, taking into account success metrics of the observed children (ages 6 to 15). Children born in September were more likely to get into a better college, more likely to have higher overall test scores, and were less likely to be incarcerated for crimes. As a child’s birthdate got farther and farther from September, college quality dropped, test scores dipped, and incarceration rates climbed.