What matters for central banks?

by  Tyler Cowen

This study examines the drivers of inflation levels, inflation variability, and growth variability collectively representing long-term central bank performance across 37 advanced economies in the Great Moderation era. A key finding is that central bank performance is consistently linked to the overall quality of institutions, while central bank-specific factors such as independence, exchange rate regimes, or inflation targeting show no significant impact. The analysis is extended to the 2022 inflation resurgence, using pre-2022 country characteristics. The results indicate that reliance on imports from Russia (likely gas) and its interaction with post-COVID GDP growth are the primary determinants, suggesting that the inflation surge was not a reversal of the Great Moderation.

That is from a recent paper by

Tanmay Khale on the decline in iconic songs over time (from my email)

by  Tyler Cowen in

https://x.com/wdavidmarx/status/1977162349107900770?s=46

A model that would explain this (which seems plausible to me for how judges generate these lists):

1. Come up with some metric for assessing works which is normalized such that the overall distribution is constant over time, usually by normalizing a metric that isn’t constant over time.

E.g. (a sports example) touchdowns scored by quarterback -> percentile of touchdowns scored by quarterback among currently active quarterbacks.

The metrics are less concrete for art, but I think people try to make similar adjustments in art as they do in sports (to make the distributions constant over time). The motivation that the judges would give for this is that one should assess each contribution based on how exceptional it was for its time.

2. Classing an achievement as “great” when it’s at least a certain percentile compared to whatever preceded it, by one of the metrics above. (“Oh wow, Johnson’s X was far more Y than anything preceding it, what an innovative work!”)

1. and 2. together will basically guarantee that you’ll have (by that definition) fewer great works over time; in the simple case where you’re looking for something that’s better than everything before it by some metric where the distribution is constant over time, the chance of observation n being better than everything preceding it is 1/n…

I don’t claim that judges are doing exactly this, but they only have to be doing some of this (e.g., their assessment criterion is 20% something like this) for it to lead to the behavior highlighted in the Twitter post!

China fact of the day

by  Tyler Cowen in

Chinese brand Mixue Ice Cream and Tea, the world’s largest fastfood chain by number of stores, is set to open its first location in New York as it continues to expand its overseas presence.

The beverage giant had 46,479 locations globally at the end of last year, with 41,584 of them located in China, according to the company’s annual report. Elsewhere in Asia, where its store count is 4,895, around 2,600 storefronts are located in Indonesia, with others in Vietnam, Thailand and Malaysia. About 70 percent of its overseas revenue comes from Indonesia and Vietnam, Bloomberg reported.

The fast-food outlet, known for its brightly colored menu, is most famous for its range of offerings — from bubble teas and ice cream to coffee or fruity concoctions often costing under $1. This makes them popular with university students, people on a tight budget or those who enjoy a bargain.

Here is the full story, note that makes it the number one fast food chain in the world.  Via Orikron.

French facts of the day

by  Tyler Cowen in

Macron’s government consistently spent more as a share of total output than any other OECD member, with the public sector accounting for over 57% of GDP in 2024. The telling trend is France’s divergence from its neighbors. When Macron took office, France’s debt-to-GDP ratio was 11 percentage points above the Eurozone average; by 2024, that gap had increased to 25 points. Public debt is set to hit 116% of GDP in 2025 and the deficit is set to double the EU average.

France’s fiscal stance under Macron reflects continuity with recent trends, rather than any break with the past. The Stability and Growth Pact sets a 3% deficit and a 60% debt reference. Since 2002, France has breached the limits every year, and the deficit limit every year except two. More telling, France’s deficit has exceeded the Eurozone average every single year since 2002. Its public debt has grown faster than its peers’ since 1995, with only a brief pause under President Sarkozy…

And:

In 2021, Macron signed a law that commits France to zero net land development by 2050 (and half by 2030), making it illegal to develop any land in France unless some existing city or village is demolished. His governments banned renting less-well-insulated homes, allowed councils to forbid building second houses, and imposed nation-wide rent controls.

That is from Luis and Pieter Garicano.

Nobel Prize in economics goes to Philippe Aghion and Peter Howitt and Joel Mokyr

by  Tyler Cowen in

Excellent choices.  Here is the press release with links to longer discussions of their works.

This is a prize for economic growth, and for the ideas of creative destruction.  Those are some of the most important ideas in economics, so I could not be happier with this pick.  Joel Mokyr in particular has been a long-time associate of GMU and Mercatus, so I would like to congratulate him in particular.

Aghion is at INSEAD in France, Howitt at Brown, and Mokyr at Northwestern.  It is also nice to see some people outside of “the usual schools” winning the prize.  Aghion and Howitt, of course, worked together to produce a model of creative destruction and economic growth.  Here are their key papers together.

Joel Mokyr is an economic historian, and best known for his pioneering work in explaining the Industrial Revolution in England.  Here are his best-known works.  Read The Lever of Riches and The Gifts of Athena and A Culture of Growth.  I have benefited most from The Enlightened Economy: An Economic History of Britain 1700-1850.  He has a new book coming out in November, with Tabellini and Greif.  It is correct to consider him as an “Enlightenment thinker.”  Brian Albrecht has a good thread on this.

Below you can find individual posts on Aghion, Howitt, and also Mokyr.  Here is Alex’s post on the prize.

The case for a Nobel to Joel Mokyr

by  Tyler Cowen in

Here is GPT-5 making the case.  Excerpt:

A micro‑foundation for growth: “useful knowledge,” its two forms, and the Industrial Enlightenment

Mokyr’s signature contribution is to put knowledge—not just capital, labor, or “institutions” in the abstract—at the center of modern growth. In The Gifts of Athena and subsequent papers and lectures, he distinguishes between:

  • Propositional knowledge (“knowledge what” about natural regularities), and

  • Prescriptive knowledge (“knowledge how” about techniques and production).

He argues that sustained growth arises when a society builds positive feedback between the two: deeper scientific understanding makes techniques improvable, while new techniques generate puzzles that push science forward. This is the Industrial Enlightenment: a culture that expects progress, rewards it, and knits together savants and artisans in a “Republic of Letters,” a kind of 18th‑century knowledge commons with rules for open exchange, replication, and credit…

In The Enlightened Economy and A Culture of Growth, Mokyr shows that the British/European break‑out ca. 1700–1850 was propelled less by isolated “heroic” inventions or factor prices alone and more by a cultural–epistemic shift: an elite market for ideas in a politically fragmented Europe created exit options for heterodox thinkers and incentives for rulers to compete for talent. This account complements rather than denies other forces (coal, wages, property rights), but it explains persistence—why growth became self‑sustaining.

…Joel Mokyr changed how economists explain the onset and persistence of modern growth. He supplied a historically grounded, analytically sharp account of how societies produce, organize, and circulate knowledge so that it becomes self‑amplifying. That account has not only reshaped economic history; it has supplied live ammunition for growth theory and for policy in a world where intangible, recombinable knowledge is the main engine of prosperity. The 2025 Nobel Committee’s decision to honor him alongside Aghion and Howitt simply makes explicit what many researchers have long recognized: innovations power growth, and Mokyr showed us how societies build the machinery that powers innovations.

Here is Mokyr in scholar.google.com.  Read The Lever of Riches and The Gifts of Athena and A Culture of Growth.  I have benefited most from The Enlightened Economy: An Economic History of Britain 1700-1850.  You can ask Joel just about anything concerning the Industrial Revolution and he will have an amazingly well-thought answer.  He has a new book coming out in November, with Tabellini and Greif.  It is correct to consider him as an “Enlightenment thinker.”  Brian Albrecht has a good thread on this.  And see Matt Yglesias.  Note also that Mokyr barely has a presence in the “top five” journals.

The case for a Nobel to Philippe Aghion

by  Tyler Cowen in

GPT-5 is very good at this, so I posed the question and here is the answer.  Excerpt:

Schumpeterian growth, made operational.
With Peter Howitt, Aghion’s 1992 Econometrica paper formalized growth “through creative destruction”: quality‑improving (vertical) innovations by entrants and incumbents drive productivity while rendering old technologies obsolete. The model delivers dynamic equilibrium, transitional dynamics (including no‑growth traps), and clear normative trade‑offs between innovation rents and competition. The paradigm was consolidated in two field‑defining books, Endogenous Growth Theory (1998) and the graduate‑level text The Economics of Growth (2009), and popularized for policymakers in The Power of Creative Destruction (2021/2023)…

Aghion (with Acemoglu and Zilibotti) showed that the right growth institutions depend on how close an economy is to the global frontier: early‑stage economies may need investment‑based strategies; frontier economies require selection, entry, and competition to sustain innovation. With Howitt, he integrated this into a unifying framework for “appropriate growth policy,” organizing the roles of competition, education, macro stabilization, and finance. This perspective reframed convergence and policy sequencing debates…

“Missing Growth from Creative Destruction” quantified how standard price imputation understates growth when new products replace old ones; their estimates suggest roughly ½ percentage point per year of “missing” US growth in 1983–2013. This reframes productivity‑slowdown diagnostics and national‑accounts practice…

Beyond specific papers, Aghion has built a field: the textbooks (Endogenous Growth Theory; The Economics of Growth) trained a generation of researchers; the policy synthesis (The Power of Creative Destruction) carried the ideas to cabinets and agencies; and his research group at the Collège de France continues to push on environment, productivity, and mobility. These are classic signs of Nobel‑level influence: a unifying paradigm that reshapes inquiry and policy across domains.

Right now Aghion is speaking to the committee and telling them that Europe should not be so dependent on tech advances from America and China.  Here are his books.  Here is the Nobel Committee on his work.  Here is GPT-5 with a detailed presentation of the Aghion-Howitt model, apologies for any errors but I could not do it better.

The case for a Nobel to Peter Howitt

by  Tyler Cowen in

He was born in Canada, by the way.  Here is the GPT-5 coverage.  Excerpt:

Operationalizing Schumpeter: the Aghion–Howitt model (1992).
With Philippe Aghion, Howitt built a tractable model in which vertical, quality‑improving innovations drive growth but also destroy incumbents’ rents—formally embedding creative destruction in general equilibrium. The model delivered falsifiable predictions (e.g., cyclical equilibria, no‑growth traps, intertemporal “business‑stealing” incentives) and a normative agenda (balancing innovation incentives with obsolescence costs). It re‑centered long‑run growth on firm‑level R&D decisions and market structure rather than on exogenous technology.

Competition and step‑by‑step innovation.
Subsequent work integrated IO with growth by allowing “neck‑and‑neck” rivalry and step‑by‑step catch‑up. The central empirical claim—an inverted‑U between product‑market competition and innovation—reconciles Arrow‑style replacement effects with escape‑competition effects and has been confirmed on rich panel data. This literature provided a bridge from theory to measurable policy levers (entry, pricing power, markups).

Here is GPT-5 with a detailed presentation of the Aghion-Howitt model, apologies for any errors but I could not do it better.  Here is the Nobel Committee on Howitt.

Science Policy Insider

by  Tyler Cowen in

That is a new Substack by Jim Olds, here is the introduction:

How science funding really works—from someone who ran the machinery at NSF and NIH.

I’m Jim Olds, former head of the National Science Foundation’s $750M Biological Sciences Directorate (2014-2018), NSF lead for President Obama’s BRAIN Initiative, and co-chair of the White House Life Sciences Subcommittee.

Over three decades in Washington D.C., I’ve seen how science policy actually works—not from the sidelines, but from inside the decision-making rooms. I’ve reviewed thousands of grants, managed billion-dollar budgets, and worked with everyone from Nobel laureates to members of Congress.

What you’ll get here:

– The real story of how funding decisions get made

– Insider analysis of science policy debates and initiatives

– Practical insights on what makes big science succeed or fail

– Honest perspectives on the challenges facing research funding

This isn’t speculation or critique from the outside. It’s the view from someone who was in the room where it happened.

This newsletter is free

Sunday assorted links

by  Tyler Cowen

1. Poisoning LLM samples.

2. Will Germany succeed in luring researchers from America?  A new Substack by Olaf Gersemann, in English about Germany.  And a post about German deregulatory efforts and their failures.

3. The semi-global spread of bird language.

4. Decoding without pictures.

5. PC on Melville and the 19th century, recommended.

6. Will more lending be freed up by relaxing bank capital rules? (FT)

7. Andrew Batson explores Indian classical music.