The New Bazaar

The China Shock of the 1990s and 2000s remains, even now, the subject of much debate. American consumers benefited from the cheaper goods that were imported from China. Some American businesses also benefited from importing cheaper equipment that was made in China. But other American businesses suffered from the competition, shuttering factories throughout the Rest Belt and South. How bad was it? What was the overall effect on workers? How did workers and communities adjust? Today’s episode is about the lessons of that shock for what might end up being a brand new shock: the AI Shock. Economists and many others are trying to figure out what it’s going to mean if AI itself ends up becoming a new source of competition for American businesses and American workers. One such economist is Adam Ozimek, Chief Economist at the Economic Innovation Group. Adam is the co-author of a new analysis about the right and wrong lessons to take from the China shock for the strange world that we now find ourselves in. (You can find that post at agglomerations.eig.org, EIG’s newsletter.)Adam speaks with Cardiff about the similarities and differences between the workers and towns affected by the two shocks, which characteristics matter most for people and places to become resilient to large shocks, how to think about automation and the collection of tasks that make up a job, and much more. Related links: Agglomerations Messy Jobs, by Luis Garicano

This episode is about an ambitious project to erect an entire new city in California, from scratch, about a one-hour drive north of San Francisco.The company that wants to build this city is called California Forever. It has bought about 70,000 acres of land in Solano County, starting in 2017. That’s about the size of two San Franciscos or one-and-a-half Miamis.What California Forever wants the city to be is two things.First: an urbanist, walkable city of about 400,000-500,000 people; zoned for density instead of suburban sprawl, with housing to rent or buy that’s affordable to middle income families; cool amenities; and located in a place where you would not expect to find it.Second: a tech manufacturing center, with new factories making actual physical stuff, and a big shipbuilding operation. A place that creates new jobs and businesses and tax revenues for the people that move there and the surrounding communities.Any project like this is immensely complicated, having to figure out transportation, engineering and logistical problems, waste disposal, how to attract people and businesses to the city, navigate local politics and how city governance is gonna work.Above all, California Forever has to figure out how to build something new and urban in California — a state with lots of wonderful stuff but also a place that’s known for its NIMBY dynamics, high taxes, zoned for suburban sprawl and single-family homes, endless regulatory or environmental reviews, water issues, union negotiations.The country needs more experiments like this. And many states, not just California, need to discover, or rediscover, the virtues of making it easier to create new housing and businesses, build factories, attract people, and just do stuff generally. And even if this project doesn’t work out, at least the rest of us get to learn the valuable economic and social lessons of what works and what doesn’t.Although Cardiff is rooting for the project to succeed, he also has quite a few questions about it. And it just so happens that this episode’s guest is exactly the person who can answer those questions. Jan Sramek is the Founder and CEO of California Forever. He started the company with the backing of tech investors and founders including John and Patrick Collison, Laurene Powell, Marc Andreessen, Michael Moritz, and a few others.Related links: California Forever websiteCalifornia Forever project overview deckClear a path for sweeping urban experiments such as California Forever (LAT)A City Is Broke. Can Billionaires’ Urbanist Dream Offer It a Last Chance? (NYT)

Arpit Gupta, a finance professor at NYU who has made important contributions on a startingly high number of topics, speaks with Cardiff about his latest contributions to the study of housing affordability, remote work, artificial intelligence, and finance. Arpit is on board with the basic YIMBY project of undoing the oppressive zoning codes that limit housing construction in so many parts of the country, but he doesn’t think the housing story ends there. Other obstacles will remain even in the case of further YIMBY progress, and in the meantime he has offered a variety of reform ideas that both complement YIMBY ideas and also prepare for a future after a YIMBY victory. Among them are re-thinking property taxes, accelerating depreciation schedules, and making it easier for factory housing to get to market. Arpit and Cardiff end with a chat about the ways that AI can help us understand housing regulations, what AI means for the future of finance, and what he is both optimistic and pessimistic about. Related links: Remote Work's Impact on ProductivityWork from Home and the Office Real Estate ApocalypseOffice to Residential ConversionsUnlock a Housing Boom through Depreciation BonusesThree Rules for AI in FinanceIndustrial Policy for Housing Construction

Stefanie Stantcheva is an economist at Harvard and the head of the Social Economics Lab, where her team has done extraordinary work investigating how people form their opinions about economic and political topics. That work was the subject of an earlier New Bazaar episode. In this episode, Stefanie chats with Cardiff about the findings in her paper (with co-authors Sahil Chinoy, Nathan Nunn, and Sandra Sequeira), “Zero-Sum Thinking and the Roots of US Political Differences,” which was just published in the American Economic Review. From the paper’s abstract: “We find that a more zero-sum mindset is strongly associated with more support for government redistribution, race- and gender-based affirmative action, and more restrictive immigration policies. Zero-sum thinking can be traced back to the experiences of both the individual and their ancestors, encompassing factors such as the degree of intergenerational upward mobility they experienced, whether they immigrated to the United States or lived in a location with more immigrants, and whether they were enslaved or lived in a location with more enslavement.” Stefanie and Cardiff also discuss:Rising anger in American societyThe subtle ways that the two major political parties are similar and different when it comes to zero-sum thinkingThe economic geography of zero-sum thoughtThe finding that surprised her the mostThe generational gap in zero-sum thinking between young and oldThe policy implications of her researchFinally, Stefanie previews her upcoming work on zero-sum thinking and concerns about AI. Related links:“Zero-Sum Thinking and the Roots of US Political Differences”“To understand America today, study the zero-sum mindset” (Stefanie’s guest essay in The Economist)  “Emotions and Policy Views” (Stefanie’s working paper with Yann Algan, Eva Davoine, and Thomas Renault)“Dancing with the Stars” (Stefanie’s paper with Ufuk Akcigit, Santiago Caicedo, Ernest Miguelez, and Valerio Sterzi)

EIG chief economist Adam Ozimek chats with Cardiff Garcia about Adam’s new post, AI and the Economics of the Human Touch. An excerpt: Either AI is so useless that we are in the middle of a bubble that’s about to burst and take the economy down with it, or AI is so powerful it’s going to replace us all and devastate the labor market.The pessimism in speculation about the economic effects of artificial intelligence is often so overwhelming that these opposing concerns can even come from the same person. AI is evolving fast enough that we should not entirely ignore the economic doomers, though it would be nice if they could at least be consistent.But it is essential to balance the discussion with some optimism. I can see glimmers of hope in a simple fact: There are many jobs and tasks that easily could have been automated by now — the technology to automate them has long existed — and yet we humans continue to do them. The reason is that demand will always exist for certain jobs that offer what I call “the human touch.”The specific jobs that require the human touch may themselves change or evolve, but I suspect that such jobs will continue to exist long into the future.Adam and Cardiff discuss the job that inspired Adam’s post, why the Olive Garden represents a hopeful future for work in an age of AI, the perils and promise of AI for caregiving jobs, and how Adam himself plans to prepare for the eventual automation of his daily tasks.Related links: Adam’s postAgglomerations homepage (subscribe!)