Category: Current Affairs

Thomas Sargent is a wise man

by  Tyler Cowen in

The protests began on December 28, initially led by traders and business owners who took to the streets against the rapidly weakening economy, soaring inflation, and the sharp fall in the rial’s value. The currency’s decline has been dramatic: against the Indian rupee, the rial is now valued at just 0.000091 paise, while against the US dollar it has fallen to around 0.0000010 cents.

Most strikingly, the rial’s value against the euro has dropped to zero, meaning it is no longer accepted or exchangeable in any of the 27 European Union countries.

Five Key Drivers Behind the Rial’s Freefall

  • US and International Sanctions: Restricting access to dollars from exports, especially oil, has intensified pressure on the rial.
  • Hyperinflation: Consumer prices rose by 42.5% in December 2025, forcing citizens to seek foreign currencies, gold, or essentials instead of holding cash.
  • Weak Economic Growth: Iran’s GDP contracted by 1.7% in 2025, with further shrinkage projected in 2026, limiting government revenue and fiscal stability.
  • Policy Changes: Recent reforms requiring importers to purchase foreign currency at open-market rates increased demand for dollars overnight.
  • Political Unrest: Ongoing protests against clerical leadership and economic mismanagement have added a “risk premium,” accelerating currency depreciation.

Here is the full story.  And that was before what appears to be, as I am writing this post earlier in the evening, the air attack on Iran [now called off, for the time being at least].

Negative political externalities from migration to Britain?

by  Tyler Cowen in

Following up on my recent post, which suggested less skilled immigration into the UK has not been a disaster, the question has been raised about long-term negative political externalities.  Will not migrants enter the country and make electoral outcomes worse?  I would offer a few points in response:

1. If this is the argument, one needs to admit that immigration has gone well enough in the UK to date.  This argument is about the future, not the past.

2. The UK has indeed had a variety of poor leaders as of late.  It is very difficult to hold immigrants responsible for them, mostly it is the native white Brits who have been at fault.  You might not like how UK Muslims have shaped some of the Middle Eastern statements of Labour, but that is hardly a relevant factor behind the slowdown of the British economy, or of British gridlock.

3. There is a very real risk that Reform will win the next election and then implement bad economics policies, above and beyond whatever you think of their approach to immigration.  But if that is the real fear, it would be good to limit their popularity by talking up the positive side of immigration.  I am not suggesting that any of us should tell anything less than the full truth, but obviously there are many positive aspects of migration that even professional economists can get wrong.  Does immigration mean “higher home prices” or “capital gains for domestic homeowners”?  Well, both, but you hear much more about the former than the latter (even Gemini got that one wrong).  Let’s redress the balance, and lower the risk of future bad economic policy while we are at it.

4. Sometimes immigration weakens the demand for welfare state transfers, since the immigrants are viewed as outsiders.  In Britain, that would currently be a positive at current margins.  I recognize that is by no means the only political effect, but in any case do not assume that all of the political externalities are negative.

Above all else, it is difficult to paint immigrants as major villains for Britain’s troubles so far.  Just read through the original analysis again.  It has not been seriously countermanded, and do most of their problems are indeed the fault of the white people.

That all said, I would readily admit, and indeed stress, that a better set of migration policies could have put Britain in a much better position than it is today.

They are solving for the (electoral) equilibrium

by  Tyler Cowen in

Social Security also got quietly more generous during this period. Each year, the Social Security Administration compares the C.P.I.-W (the Consumer Price Index for Urban Wage Earners) for the third quarter to the third quarter of the previous year and, if needed, adjusts benefits upward to compensate for inflation. There happen to have been three years during Obama’s presidency — 2009, 2010, and 2015 — when the mathematically correct cost-of-living adjustment would have been negative. What actually happens in this case is that seniors get zero cost-of-living adjustment, which means that, in real terms, benefits ratcheted upward.

Then during the Biden administration, Congress ended up passing the Social Security Fairness Act, which increased Social Security benefits for a disproportionately affluent set of retirees with access to other pensions with very little fanfare. This happened via a hugely bipartisan vote, so even organizations that were critical of the idea when it was first proposed were mostly silent as it actually happened. Then during the 2024 presidential campaign, Donald Trump proposed “no tax on Social Security,” which is really just a way of making Social Security benefits mildly more generous for high-income seniors.

That is from Matt Yglesias.  It would be amazing if we got away with all of this!

Chairman Powell’s Statement

by  Alex Tabarrok in

Whether an independent Fed is desirable is beside the point. The core issue is lawfare: the strategic use of legal processes to intimidate, constrain, and punish institutional actors for political ends. Lawfare is the hallmark of a failing state because it erodes not just political independence, but the capacity for independent judgment.

What sort of people will work at the whim of another? The inevitable result is toadies and ideological loyalists heading complex institutions, rather than people chosen for their knowledge and experience.

Soumaya Keynes on the bleak labor market for economists

by  Tyler Cowen in

Third was the bleak labour market for newly minted PhD economists, which Wendy Stock of Montana State University told me could be one of the toughest ever. Hiring freezes helped to halve the number of US full-time academic postings between 2019 and 2025. In the most recent year alone, listings fell by more than during the Great Recession. And according to the most recent comparable data, since 2019 recruitment has shrivelled faster for economists than philosophers or linguists. Oof.

Here is the full FT piece, oof throughout.

Profile of George Borjas and his influence

by  Tyler Cowen in

More recently, his research has found new attention and urgency in President Donald Trump’s second term: Borjas, 75, worked as a top economist on the Council of Economic Advisers, a post he stepped down from last week.

Borjas is an immigrant and refugee who escaped Cuba for the United States in 1962 and later obtained citizenship — a point of tension he has referenced in his writing.

“Not only do I have great sympathy for the immigrant’s desire to build a better life, I am also living proof that immigration policy can benefit some people enormously,” he wrote in a 2017 opinion piece for the New York Times. “But I am also an economist, and am very much aware of the many trade-offs involved. Inevitably, immigration does not improve everyone’s well-being.”

One of Borjas’s direct contributions to the Trump administration this past year was his extensive behind-the-scenes work on Trump’s overhaul of the H-1B visa system for highly skilled workers that added a $100,000 fee, according to three people familiar with his work and a White House official, who all spoke on the condition of anonymity because they weren’t authorized to share internal deliberations. Borjas had previously written about the “well-documented abuses” of that program over the years.

The White House official said Borjas was among many Trump administration members involved in redesigning the H-1B visa program and confirmed that Borjas provided intellectual support for other Trump immigration initiatives last year.

Here is more from The Washington Post.

It is time to back off from Greenland

by  Tyler Cowen in

I do hope it falls eventually into U.S. hands, as I explain in my latest Free Press piece.  But now is not the time and furthermore that should happen voluntarily, not coercively.  Here is an excerpt:

The better approach is to let the Greenlanders choose independence on their own. They may be ready to do so. In a survey last year, 56 percent of Greenlanders favored independence from Denmark, with just 28 percent opposed. This should not be a tremendous surprise. The Danes have not always treated Greenland well; the legacy of Denmark taking away the children of Greenlanders 75 years ago still remains—and similar issues crop up to this day.

If and when Greenlanders do choose independence, the U.S. should, when conditions feel right, make a generous offer to Greenland. If they do not take the offer, we might try again later on, but we should not intimidate or coerce them. We should respect their right of independence throughout the process. That would increase the likelihood that the future partnership will be a cooperative and fruitful one.

The courtship could take 20 or 30 years, but I am pretty sure that eventually Greenlanders will see the benefits of a stronger U.S. affiliation.

I do not think that simply trying to “buy” Greenland is going to work. I am reminded of my own fieldwork, roughly 20 years ago, in a small Mexican village in the state of Guerrero. General Motors wanted to buy most of the land in and around the village, for the purpose of building a racetrack to test GM cars. It had a lot of money to offer, and at the time a family of seven in the village might have earned no more than $1,500 a year. But the negotiations never got very far. The villagers felt they were not being respected, they did not trust the terms of any deal, and they feared their ways of life would change irrevocably. The promise of better roads, schools, and doctors—in addition to whatever payments they might have negotiated—simply fell flat.

These are very important issues, so we need to get them right.

Ken Opalo outlook on Africa 2026

by  Tyler Cowen in

(4) Keeping with the theme of growing during hard times and in difficult contexts, Nigeria is projected to grow by at least 4.3% in 2026, with consumer demand rising by over 7%.

Tinubu’s strong medicine may have nearly killed the patient, but after two painful years Nigerians seem poised to get relief from improving macro conditions. The Naira will remain stable (despite downward pressure on oil prices), with inflation projected to decline to under 14% — down from over 20% in 2025. Also, by now we can conclude that Dangote Refinery’s $20b bet on the Nigerian economy is a success. He appears to be winning the war against the entrenched interests that for decades fed at the trough of crude exports, imports of refined products, and fuel subsidies. The impact of the refinery will be felt in the further stabilization of fuel prices in 2026.

Nigeria’s reform momentum will slow down ahead of the 2027 elections. It’s not yet clear whether the reforms knocked the economy into a growth path, or if the projected growth is just recovery from the initial steep contraction after Tinubu took office.

(5) South Africa, too, will grow in 2026 despite tariff and political pressure from Washington. The GNU is holding; and Pretoria has weathered geopolitical storms (including the rift with Trump’s America) much better than I anticipated.

After years of stagnation, there is an emerging consensus that South Africa will see improvements in its growth rate over the next three years (averaging 1.7%). The reform momentum will continue, including in the power sector and entrenchment of the rule of law. Local elections later this year, including the big one in Johannesburg, will likely put further pressure on the ANC to improve service delivery and overall quality of policymaking.

The whole post is of interest, interesting throughout.

The Molly Cantillon manifesto, A Personal Panopticon

by  Tyler Cowen in

I find this piece significant, and think it is likely to be one of the most important essays of the year:

A few months ago, I started running my life out of Claude Code. Not out of intention to do so, it was just the place where everything met. And it just kept working. Empires are won by conquest. What keeps them standing is something much quieter. Before a king can tax, he must count. Before he can conscript, he must locate. Before he can rule, he must see. Legibility is the precondition for governance…

The first thing Claude solved was product blindness. NOX now runs on a cron job: pulling Amplitude, cross-referencing GitHub, and pointing me to what needs building. It handles A/B testing, generates winning copy, and has turned customer support into a fully autonomous department.

Once I saw this was possible, I chased it everywhere. Email, hitting inbox zero for the first time ever, with auto-drafted replies for everything inbound. Workouts, accommodating horrendously erratic travel schedules. Sleep, built a projector wired to my WHOOP after exactly six hours that wakes me with my favorite phrases. Subscriptions, found and returned $2000 I didn’t know I was paying. The dozen SFMTA citations I’d ignored, the action items I’d procrastinated into oblivion. People are using it to, I discovered, run vending machines, home automation systems, and keep plants alive.

The feeling is hard to name. It is the violent gap between how blind you were and how obvious everything feels now with an observer that reads all the feeds, catches what you’ve unconsciously dropped, notices patterns across domains you’d kept stubbornly separate, and—crucially—tells you what to do about it.

My personal finances are now managed in the terminal. Overnight it picks the locks of brokerages that refuse to talk to each other, pulls congressional and hedge fund disclosures, Polymarket odds, X sentiment, headlines and 10-Ks from my watchlist. Every morning, a brief gets added in ~/𝚝𝚛𝚊𝚍𝚎𝚜. Last month it flagged Rep. Fields buying NFLX shares. Three weeks later, the Warner Bros deal. I don’t always trade, sometimes I argue with the thesis. But I’m never tracking fifteen tabs at 6am anymore.

It feels borderline unfair seeing around corners, being in ten places at once, surveilling yourself with the attention span of a thousand clones.

A panopticon still, but the tower belongs to you.

There is more at the link, or this link, and yes she is related to the 18th century Irish economist Richard Cantillon.

Yes, Western Europe will survive recent waves of migration

by  Tyler Cowen in

Over 1.2mn people came to the EU seeking protection in 2015, many displaced by worsening conflict in Syria. There were bitter political feuds in Brussels over asylum, border and relocation policies. January 2016 set a grim record for the number of migrants dying while attempting to cross the Mediterranean.

Now things have changed, as European Commission president Ursula von der Leyen made clear in December when she took the stage at a conference on migrant smuggling. After a major policy overhaul over the past two years, “Europe is managing migration responsibly,” she said. “The figures speak for themselves.”

Irregular arrivals of migrants to the EU recorded by its border agency Frontex dropped by 25 per cent in the 11 months to November 2024, and have been continuously declining since a recent peak of 380,000 arrivals registered in 2023.

New asylum applications have also decreased by around 26 per cent in the first nine months of last year, according to Eurostat data, as fewer Syrians are applying for protection since the fall of the authoritarian regime of Bashar al-Assad in late 2024.

Here is much more from Laura Dubois from the FT.