Should Catalonia receive more financial independence?
Jesús details how Spain already operates one of the most decentralized fiscal systems in the world, “more latitude than most U.S. states,” he notes, yet Catalonia now seeks the bespoke privileges long enjoyed by the Basque Country and Navarra. The Regional Authority Index rates how much self‑rule and shared rule each country’s sub‑national governments actually wield. In its last update the index places Spain as the most decentralized unitary state in the sample and fourth overall among 96 countries.
Those northern provinces collect every euro on their own soil and forward a modest remittance to the central treasury, a setup that Fernández‑Villaverde brands “a Confederate relic.” Extending it to Catalonia, he argues, would hollow out Spain’s common‑pool finances, deepen inter‑regional resentment and erode the principle of equal citizenship, while turning the national revenue service into little more than a mailbox for provincial checks.
That is from the episode summary of a podcast of Rasheed Griffith with Jesús Fernandez-Villaverde. On the Catalan language, matters look grim in any case:
Right now around only 55% of births in Catalonia are born from a mother that was born, actually not even Catalan, that was born in Spain. That basically tells you that only 40, 45%, perhaps even a little bit less of mothers that were born in Spain speak Catalan at home. At this moment, I will say that less than 30, 28% of kids born in Cataluña, perhaps even less, will speak Catalan at home.
It amazes me how many people ignore the reality that a host of leading economists led or endorsed a constitution-violating movement to separate Catalonia from the rest of Spain and not long ago. The podcast will tell you more. It is also interesting throughout, including on Spanish history since the 19th century.
Why does renovating the Fed cost so much?
Here is a good WSJ piece on that question. Excerpt:
For example, members of the fine arts commission in 2020 recommended that the Fed use more marble to better match the original buildings. The Fed had initially proposed using more glass in an effort to represent the Fed’s transparency, according to the commission’s meeting minutes. The Fed amended the design to incorporate more marble.
To be clear, I am fine with an unabashedly elitist approach to designing or redesigning a central bank building, at least provided one’s domestic politics is able to sustain such a thing. I am glad for instance that the Cleveland Fed is quite a nice building, and I wish more DC architecture were of comparable quality, noting that these days we are not very good at constructing Beaux Arts buildings, and for DC modernist styles do not always fit the surroundings very well, thus creating a broader dilemma.
Friday assorted links
USA fact of the day
You know what’s cool… a quadrillion tokens. We processed almost 1,000,000,000,000,000 tokens last month, more than double the amount from May.
That is from Demis Hassabis. And here is Demis discussing his own work schedule.
Partisan Bias in Professional Macroeconomic Forecasts
Here is a recent paper by Benjamin S. Kay, Aeimit Lakdawala, and Jane Ryngaert:
Using a novel dataset linking professional forecasters in the Wall Street Journal Economic Forecasting Survey to their political affiliations, we document a partisan bias in GDP growth forecasts. Republican-affiliated forecasters project 0.3-0.4 percentage points higher growth when Republicans hold the presidency, relative to Democratic-affiliated forecasters. Forecast accuracy shows a similar partisan pattern: Republican-affiliated forecasters are less accurate under Republican presidents, indicating that partisan optimism impairs predictive performance. This bias appears uniquely in GDP forecasts and does not extend to inflation, unemployment, or interest rates. We explain these findings with a model where forecasters combine noisy signals with politically-influenced priors: because GDP data are relatively more uncertain, priors carry more weight, letting ideology shape growth projections while leaving easier-to-forecast variables unaffected. Noisy information therefore amplifies, rather than substitutes for, heterogeneous political priors, implying that expectation models should account for both information rigidities and belief heterogeneity. Finally, we show that Republican forecasters become more optimistic when tax cuts are salient in public discourse, suggesting that partisan differences reflect divergent beliefs about the economic effects of fiscal policy.
Here is the SSRN link.
What should I ask George Selgin?
Yes, I will be having a Conversation with him, live at the Cato Institute on September 26th, here is some basic information:
Website: https://www.cato.org/events/false-dawn-new-deal-promise-recovery-1933-1947
Registration: https://register.cato.org/false-dawn-new-deal-promise-recovery-1933-1947/register
We will start with George’s new and excellent book False Dawn: The New Deal and the Promise of Recovery 1933-1947. But of course George has a long and distinguished record in monetary economics, free banking, macro, and ngdp ideas, as well as productivity norms for monetary policy.
So what should I ask him?
*The Economist* on the speed of AI take-off
A booming but workerless economy may be humanity’s ultimate destination. But, argues Tyler Cowen of George Mason University, an economist who is largely bullish about AI, change will be slower than the underlying technology permits. “There’s a lot of factors of production…the stronger the AI is, the more the weaknesses of the other factors bind you,” he says. “It could be energy; it could be human stupidity; it could be regulation; it could be data constraints; it could just be institutional sluggishness.” Another possibility is that even a superintelligence would run out of ideas. “ AI may resolve a problem with the fishermen, but it wouldn’t change what is in the pond,” wrote Philippe Aghion of LSE and others in a working paper in 2017.
Here is the full piece, of interest throughout.
Thursday assorted links
1. Alvin Lucier’s brain is still making music. He died in 2021.
4. America’s AI action plan. Full plan here.
5. Charles Mann on what keeps the lights on.
6. A historical political economy of Kenya.
7. How much does education benefit the global poor?
8. ACX grants.
USA fact of the day
…fraction of children living with two parents is highest it’s been since 1991 (which wouldn’t be surprising with less teen/v young pregnancy)…
That is from Kevin Bryan, here is the source material.
My excellent Conversation with Helen Castor
Here is the audio, video, and transcript. Here is part of the episode summary:
Tyler and Helen explore what English government could and couldn’t do in the 14th century, why landed nobles obeyed the king, why parliament chose to fund wars with France, whether England could have won the Hundred Years’ War, the constitutional precedents set by Henry IV’s deposition of Richard II, how Shakespeare’s Richard II scandalized Elizabethan audiences, Richard’s superb artistic taste versus Henry’s lack, why Chaucer suddenly becomes possible in this period, whether Richard II’s fatal trip to Ireland was like Captain Kirk beaming down to a hostile planet, how historians continue to discover new evidence about the period, how Shakespeare’s Henriad influences our historical understanding, Castor’s most successful work habits, what she finds fascinating about Asimov’s I, Robot, the subject of her next book, and more.
Here is an excerpt from the opening sequence:
COWEN: Richard II and Henry IV — they’re born in the same year, namely 1367. Just to frame it for our listeners, could you give us a sense — back then, what was it that the English government could do and what could it not do? What is the government like then?
CASTOR: I think people might be surprised at quite how much government could do in England at this point in history because England, at this point, was the most centralized state in Europe, and that has two reasons. One is the Conquest of 1066 where the Normans have come in and taken the whole place over. Then, the other key formative period is the late 12th century when Henry II is ruling an empire that stretches from the Scottish border all the way down to southwestern France.
He has to have a system of government and of law that can function when he’s not there. By the late 14th century, when Richard and Henry — my two kings in this book — appear on the scene, the king has two key functions which appear on the two sides of his seal. On one side, he sits in state wearing a crown, carrying an orb and scepter as a lawgiver and a judge. That is a key function of what he does for his people. He imposes law. He gives justice. He maintains order.
On the other side of the seal, he’s wearing armor on a warhorse with a sword unsheathed in his hand. That’s his function as a defender of the realm in an intensely practical way. He has to be a soldier, a warrior to repel attacks or, indeed, to launch attacks if that’s the best form of defense. To do that, he needs money.
For that, the institution of parliament has developed, which offers consent to taxation that he can demonstrate is in the national interest. It has also come to be a law-making forum. Wherever he needs to make new laws, he can make statute law in Parliament that therefore, in its very nature, has the consent of the representatives of the realm.
COWEN: What is it, back then, that government cannot do?
CASTOR: What a government doesn’t have in the medieval period is, it doesn’t have a monopoly of force. In other words, it doesn’t have a police force. It doesn’t have a professional police force, and it doesn’t have a standing army, or at least by the late Middle Ages, England does have a permanent garrison in Calais, which is its outpost on the northern coast of France, but that’s not a garrison that can be recalled to England with any ease.
So, enforcement is the government’s key problem. To enforce the king’s edicts, it therefore relies on a hierarchy of private power on the landed, the great landowners of the kingdom, who are wealthy because of their possession of land, but crucially, also have control over people, the men who live and work on their land. If you need to get an enforcement posse — this is medieval English language that we use when we talk of sheriffs and posses — the county posse, the power of the county.
If you need to get men out quickly, you need to tap into those local power structures. You don’t have modern communications. You don’t have modern transport. The whole hierarchy of the king’s theoretical authority has to tap into and work through the private hierarchy of landed power.
COWEN: Why do those landed nobles obey the king? They’re afraid of the future raising of an army? Or they’re handed out some other benefit? What keeps the incentives all working together to the extent they stay working together?
CASTOR: They have a very important pragmatic interest in obeying the king because the king is the keystone of the hierarchy within which they are powerful and wealthy. Of course, they want more power and more wealth for themselves and for their dynasty, but importantly, they don’t want to risk everything to acquire more if it means serious danger that they might lose what they already have.
They have every interest in maintaining the hierarchy as it already is, within which they can then . . . It’s like having a referee…
A very good episode, definitely recommended. I enjoyed all of Helen’s books, most notably the recent
That was then, this is now, AI edition
COWEN: They can now do Math Olympiad problems. There’s one forecast by someone working on this that, within a year, they’ll win Math Olympiads. It could be wrong, but when you say that it’s only a year away, I would take that pretty seriously.
That was from my Nate Silver CWT taped on July 22, 2024. We just taped a new episode today…
Wednesday assorted links
1. State-level arts funding is to some extent substituting for federal arts funding.
2. Norwegian sovereign wealth fund deploys AI. And more thinking is not always good for the AI.
3. Some Amish settlements have TFR above 10. And Colombia is now at 1.2. And coupling rate vs. fertility rate.
China fact of the day
China alone accounts for almost 1000 hotels that include Vienna in their name, far more than any country, including Austria itself.
This article is more generally about what you learn when you study 25,000 hotel names and look for common patterns. Via the excellent Samir Varma.
USA fact of the day
Federal Reserve Board operating expenses have *quadrupled* from 2004 to 2023, reaching ~$1 billion in 2023, according to the Annual Reports of the Board of Governors of the Federal Reserve System.
That is from Jon Hartley. It is of course correct that the other effects of the Fed far outweigh the size of these expenditures. Nonetheless, it is worth asking, given these numbers, whether the system in place is generating good decisions. That in turn said, we do not currently have an “appropriate set of askers.”
Markets in everything, bet on tariff repeal edition
Cantor Fitzgerald, a financial services company led by the sons of US Commerce Secretary Howard Lutnick, has offered to buy the right to hundreds of millions of dollars in potential refunds from companies that have paid Trump’s tariffs.
The offer means that the sons of the pro-tariff commerce secretary, Kyle and Brandon, have made a way for investors to bet that President Donald Trump’s signature tariffs will be struck down in court.
Here is the full story.