Thursday assorted links
1. “Robinhood launched agentic trading and an agentic credit card today that will allow AI agents to trade equities and make credit card purchases on customers’ behalf.” With cash back, of course.
3. Why has Napoleon so rarely been captured well on screen?
4. Guatemala agrees to joint strikes, with the U.S., against drug gangs (NYT).
6. Emmanuel Roman on the need for deeper and thicker European capital markets (FT).
Those new service sector economics jobs?
Russia has passed a law authorizing its central bank and other financial institutions to repel drone attacks with their own defense systems, as the country struggles to defend against Ukrainian strikes.
The law, passed by Russia’s lower house of parliament on Tuesday, will allow staff at Russia’s central bank to be armed and to operate the systems used to down unmanned aerial vehicle (UAV, or drone) attacks without the involvement of special forces.
Here is the full story.
Doc in a Box
The first review of the pilot for AI prescriptions refills in Utah is out and it looks very reasonable. In the 72% of cases where the AI recommend a refill at least one of two physicians agreed in 97% of cases.
In the 28% of Cases Where the AI Escalated to a Physician Without Recommending Renewal
o When the AI declined to recommend renewal without further information, a human telehealth appointment was arranged.
▪ For these patients, 69% of physician reviews agreed that the escalation was appropriate, and more information was needed to authorize a renewal.
▪ In the other 31% of cases, the physician determined the escalation was overly cautious.
● For a new system like this, overcaution is appropriate and welcome. In the long term, reducing overcaution without compromising safety would improve patient access to care, but we aren’t rushing to see that happen.
The founders of Doctronic, the firm running the AI doc, write:
The cost of compute drops roughly 10x every five years. At the same time, the demand for care continues to rise. An AI consultation that costs a few dollars today will cost pennies in a few years. So if AI can safely handle even a fraction of care, we’ve turned an unsolvable supply problem into an engineering problem. And engineering problems have solutions.
My excellent Conversation with Toby Wilkinson
Here is the audio, video, and transcript. Most of all, we cover Ptolemaic Egypt. Here is part of the episode summary:
Tyler and Toby cover how Alexander took over the empire almost without a fight, why Alexandria became the Manhattan of the ancient world, whether the era was as philosophically fertile as it was scientifically, whether your ancient doctor’s visit had positive expected value, what Egypt was actually exporting and selling, whether living standards rose above subsistence or stayed Malthusian, how the ethnic divide between Greek rulers and Egyptian subjects shaped society, what constrained the Ptolemaic Empire from becoming the next Rome, whether Cleopatra has been overhyped, what Julius Caesar was really thinking when he sided with her over her brother, the new frontiers in archeology, whether Herodotus can be trusted, what ancient Egypt knew about Israel and India, when Egyptian jewelry peaked and why, what triggered the sudden emergence of civilization across the ancient world, why a six-year-old Tyler knew King Tut better than Napoleon, and much more.
Excerpt:
COWEN: Either technologically or institutionally, what is it that the Persians had that the Egyptians did not?
WILKINSON: The Persians had a pretty formidable army. Their military technology was certainly superior to the Egyptians at the time that they conquered Egypt originally in the 6th century BC. Like many empires, I suppose, throughout history, they overreached themselves. They overextended themselves, and they found it increasingly hard to hold together this empire stretching all the way from the Aegean to the borders of India. Bits of the empire started to fragment and pull away. Egypt had always had this very strong sense of its own identity. When it had a chance to throw off the Persian yoke, it took it.
COWEN: Let’s think about some of the achievements of Ptolemaic Egypt as an era. Infrastructure. What did they do that was most impressive?
WILKINSON: Build Alexandria. Alexandria the city was a new foundation established by Alexander the Great to bear his name. Unlike all previous ancient Egyptian cities, it was a city built from the outset for commerce. It was a city built on the Mediterranean coast with a great natural harbor, with facilities for loading and offloading ships. It had a great lighthouse guarding the entrance to its harbor, which became one of the wonders of the world. The whole city was really designed from the get-go as a great commercial center looking outwards to the Mediterranean, rather than inwards to the rest of Egypt.
COWEN: Canals, artificial lake. What else did they do?
WILKINSON: They built a city quite unlike anything previously seen in the valley of the river Nile. In fact, any inhabitant today of a modern city would recognize the grid iron pattern of streets. Streets intersecting at right angles, that was something completely unheard of until this point in Egypt with vast public buildings. This was the Manhattan of the ancient world, if you like, in scale, in grandeur, and in the level of commercial activity.
And:
EN: What were the main exports of the Alexandria region? What are they selling, making?
WILKINSON: Oh, the two big exports that account for the lion’s share of Egypt’s wealth at the time are gold and grain. Gold has been mined in Egypt for millennia up to this point, but it’s still the place in the ancient world that produces large quantities of gold. Of course, gold has always been a great currency of international commerce.
Then Egypt is famed as the breadbasket of the ancient world. It produces a superabundance of grain thanks to the fertility of the Nile and the benign climate. It produces more than it needed for its own consumption, by comparison with poorer agricultural regions in Greece and Asia Minor, which struggled to produce enough food. Yes, gold and grain were the absolute engine of Egyptian prosperity.
COWEN: There’s metalwork, there’s glass. What else is there, manufacturing, as we would call it today?
WILKINSON: Oh, yes. There’s a big ceramics industry, so producing not just pots, but terracotta statues and votive objects. There’s glassmaking, as you’ve said. There’s advanced metallurgy, goldsmithing, ironworking, copper and bronze foundries. There’s what we might call the decorative arts, so sculpture, painting. All of these things thrived in ancient Alexandria.
COWEN: Do they have living standards sustainably above subsistence, or is this a Malthusian equilibrium, where they get some wealth and then more people survive and the wage falls again, and it doesn’t get much above what is required to keep people alive?
Recommended, informative and interesting throughout. And I am very happy to recommend all of Toby’s books, including his latest
What should I ask Richard Hanania?
Yes, I will be doing a Conversation with him. Richard does have a new book coming out, Kakistocracy: Why Populism Ends in Disaster. While I liked the book (and blurbed it), I do not feel our conversation about the book would be that interesting — too much beating up on the stupidities of other people, which is an activity not in short supply. So we agreed to (mostly) discuss Joseph Conrad’s Nostromo instead. Given that, what should I ask Richard?
Wednesday assorted links
1. As meat prices rise, the economics of Texas barbecue.
2. Economic historian Eric Jones has passed away.
3. Claims about the Pope and Claude. If true, further evidence for my Straussian hypothesis.
4. Koyama reviews Tyler Goodspeed on business cycles.
5. “Chinese battery manufacturer Calb has broken ground on a €2 Billion gigafactory in southern Portugal which is expected to represent more than 4% of the country’s GDP when in full swing.” Link here.
Seven ways to avoid losing your job to AI
That is the theme of my latest Free Press column, here is one excerpt:
Principle five: Run experiments.
This is a more general version of the healthcare point. AI will generate so many new ideas and hypotheses, including for drugs and medical devices, but not only. Become a tester. Test new battery designs, new educational techniques, or new methods of conserving valued wildlife.
The demand for experiments will rise sharply, and most of those cannot be done by robots, at least not anytime soon.
Principle six: Gather data.
AI is a marvelous tool, but it relies on knowing lots about the world. That can stem from reading the internet, watching videos of people folding clothes, and hearing recordings of voices, among many other ways of absorbing information.
The more powerful the AI, the higher the returns from feeding it data, because it will make smart and useful inferences from those data. But most data in our world have never been put into AI models. Just consider corporate records, historical archives, referee reports for failed scientific papers, accounts of lab procedures, and much more. Most of that remains virgin territory.
The next few decades will bring an immense investment in feeding more data into the AIs. So there will be new jobs in gathering environmental data, job safety data, construction site data, corporate and management data, public health data, agricultural data, education data, and much more. Those jobs could be yours.
Recommended.
Can liberals be pacifists?
This is mostly a podcast about Benjamin Britten, and in particular his War Requiem, with Rebecca Lowe (former singer and conductor, in addition to philosopher and also her current role at Mercatus).
Here is the YouTube, here is the transcript and further listening links. Excerpt:
LOWE: Yeah, so we should think about what it means for a conscientious objector to have written this work, which is supposed, in some sense, to maybe pay tribute to the soldiers. Maybe, in some sense, it’s supposed to play some role in the British response to the war. At a time when, of course, conscientious objectors had been seen as maybe betraying the nation. There are very interesting, tense questions about the choice of Britten to compose this work.
COWEN: And Benjamin Britten himself, he described the work as a reparation.
LOWE: Yes.
COWEN: Paid to the dead soldiers.
LOWE: That’s right.
COWEN: I think in some ways, he always had World War I more in mind than World War II. But other parties involved, of course, didn’t see it that way.
LOWE: That’s true.
COWEN: But Wilfred Owen was a World War I poet. And that was the formative experience for him, was World War I. And also, the Spanish Civil War influenced him greatly. So, he wanted to do this work, and I’m not sure he ever found a way to make it succeed with World War II. That, to me, is one of the drawbacks of the work.
Definitely recommended, it is fresh material throughout. Can you find a better podcast on Britten and his War Requiem, arguably his greatest work? And here is the Rebecca Lowe Substack and podcast more generally.
*How to Win a Trade War: An Optimistic Guide to an Anxious Global Economy*
That is the new Soumaya Keynes book, out today. I was happy to have blurbed this book, and here is an essay, on export restrictions, based on the book.
Quarantine sentences to ponder, that was then this is now edition…
Trump administration officials, confronted by overlapping outbreaks of Ebola and the hantavirus, have taken a more aggressive approach to locking down potentially exposed people than in past outbreaks, surprising many public health experts…
Dr. Jay Bhattacharya, acting director of the Centers for Disease Control and Prevention, drew notice during the Covid-19 pandemic for suggesting that the coronavirus should be allowed to spread freely among healthy people, and for arguing that mandatory quarantines and lockdowns were harmful to society.
Last week, however, he issued quarantine orders that cited public health laws for two passengers who wanted to leave the Nebraska facility and isolate in their home states.
Here is the full NYT story. Via Maxwell G.
Tuesday assorted links
1. How did the United States bend the health care cost curve?
2. Why are you reading fewer books?
3. Dean Ball on the Papal encyclical. My interpretation is a little different, and I suppose more Straussian. The Pope is basically telling us that AI is here to stay. If the detailed analysis seems thin to you, there is no need to distract from that more important and more essential message. That the Pope presented this with Anthropic, and for that matter quoted Tolkien/Gandalf, and allowed the use of em dashes, does not harm my interpretation. And here is what Perplexity thought I would say.
5. A one-time treatment for bad cholesterol? (NYT) And a Twitter thread.
A Beautiful Theory Falls to Ugly Data
My latest paper, A Test of the Coase Conjecture Using Prices of Electronic Books, with the excellent Tim Groseclose, has just been published. The Coase Conjecture is another one of Coase’s little ideas — the original paper is six pages — that has spawned hundreds of follow-up papers and thousands of citations.
The idea is simple. A monopolist of a durable good has a time-inconsistency problem. Set the monopoly price in period 1 and he will be tempted in period 2 to cut the price and mop up the customers whose valuations sit between the period-1 price and MC. But the same logic applies in period 2, and again in period 3, and so on — eventually the price unravels to MC. Consumers see this coming, the monopolist knows the consumers see it coming, and so the monopolist cuts price to MC in period 1. And since a “period” is just the interval between price changes, the whole unraveling happens — in Coase’s phrase — “in the twinkling of an eye.”
The theorists, most notably Gul, Sonnenschein and Wilson and Fudenberg, Levine and Tirole, formalized Coase’s insight and showed that under quite general conditions the logic goes through. Which is rather surprising, since, as Tim and I point out, Coase’s conjecture implies that many patents and copyrights are essentially worthless — a prediction wildly at variance with the facts. Other theorists, including Stokey, Ausubel and Deneckere, and Board and Pycia, have offered variants under which the Coase outcome does and does not obtain.
For all this theory, there have been almost no direct tests of the Coase Conjecture apart from a handful of lab experiments. Ours is one of the first papers to take the conjecture to the real world. We look at e-books, an unusually clean setting: digital goods are durable, marginal costs are low, resale is limited, and prices can be changed quickly. Using the prices of e-books that are in the public domain as a proxy for marginal cost, we ask: (a) do prices rapidly fall to MC, and (b) does the market clear in the first period? The answer to both is no. E-book prices begin well above MC, sales continue over many periods, and prices don’t even decline monotonically.
We reject the Coase Conjecture decisively.
The paper has an interesting history. The theorists (or the referees we guessed were theorists) praised the paper for taking the theory seriously but inevitably had a fillip to offer, distinguishing the world of pure theory from empirical tests. The empiricists, on the other hand, said our tests were too simple since no one takes the theory that seriously. It’s good to see the paper find a home!
We reject the Coase Conjecture decisively, but it remains to say why. We can rule out some explanations — it’s not rising MC, and it’s not the finiteness of buyers (which can support a perfectly price-discriminating Pac-Man equilibrium).
Two theories remain: 1) sellers can commit not to lower prices, and 2) the outside-options model of Board and Pycia. I prefer the former, my co-author prefers the latter. To me, commitment just isn’t that hard. The standard story is that profits are like cookies on the table and the monopolist can’t resist — but at least the people tempted by cookies get to eat the cookies! The Coase profits are illusory: the monopolist races to MC in period 1 precisely because they know they won’t resist later and as a result they don’t even get a taste of profit! Too clever by half. I say, show some backbone. Firms are *all about* commitment — to workers, consumers, contractors. Why not to a price? My co-author points out, however, that this is more Tabarrok-vibe than carefully laid out theory.
Tim likes the Board and Pycia model which begins with the plausible idea that consumers have outside options — if they don’t buy the book today, they will buy another book, rent the movie, or borrow from the library — and crucially, once they take the outside option, the consumer never returns to the market. You might think outside options would make it *harder* for the firm to set a high price, but Board and Pycia show in a very clever but extended argument that when you carefully work out the full equilibrium the opposite holds: outside options give firms a time-consistent incentive to set and keep a high price. Tim explains the argument further here (see also our paper for an intuitive breakdown).
In any case, the Coase Conjecture — at least as modelled by the theorists — fails in an environment most conducive to it.
A beautiful theory falls to ugly data.
The corporate tax rate really matters
Three findings emerge. First, improvements in aggregate tax competitiveness are positively and significantly associated with real GDP per capita growth, robust to a wide range of controls. Second, this aggregate effect is driven entirely by the corporate tax pillar; no other component displays a significant growth effect. Third, the corporate tax effect materializes contemporaneously and accumulates over time, with a statistically significant three-year cumulative effect of approximately 0.16 percentage points per one-point improvement in the corporate tax score. These results suggest that the full architecture of the corporate tax system, not merely the headline statutory rate, is what matters for growth.
That is from a recent paper by Michael Christla and Monika Köppl–Turyna. Via the excellent Samir Varma.
What I’ve been reading
1. Paul Mendes-Flohr, Martin Buber: A Life of Faith and Dissent. A beautifully written, first-rate intellectual biography of Buber. It is hard to imagine finding a better book on him.
2. Robert C. Austin and Artan R. Hoxha, Enver Hoxha: Twentieth-Century Tyrant. How did this strange story end up happening? This book offers the best set of explanations I have seen. But Hoxha himself remains a psychological cipher at the end of it all? It turns out he never thought Mao was much of an ideologue, being too influenced by Chinese culture and thought. Also I had not previously realize how much Albania’s growing youth population — with the most natalist demographics in Europe at the time — was considered a major threat to the regime.
3. Malachi Haim Hacohen, Karl Popper: The Formative Years 1902-1945. Such an excellent and high-level work. And the author is not afraid to accuse Popper of making everything about himself, and also writing on topics (Plato, Hegel, Marx) where he was less than well-informed. I had not known that Popper hated Toulmin’s Wittgenstein’s Vienna book, feeling that the actual Viennese environment at the time was far more positive and forward-looking than most intellectual historians were inclined to grant. Nor had I known how cut off Popper was during his New Zealand years, as there were no plane connections, New Zealand news did not cover foreign affairs very much, and the mail was painfully slow. Popper also wanted to turn the Mont Pelerin Society into a coalition group, including socialists. That did not happen.
4. Frank Callanan, James Joyce: A Political Life. An excellent, lengthy study, I now see Joyce as intensely political whereas I did not before. “His fiercely Parnellian critique of Ireland and Irish nationalism is only politically intelligible as written from within Irish nationalism. It is an argument addressed to Irish nationalists. The paradox of Joyce’s nationalism is that it is in his critique of nationalism that his nationalism is most evident.” As Italo Svevo once stated: “Joyce is twice a rebel, against England and against Ireland.”
5. Suzy Hansen, From Life Itself: Turkey, Istanbul, and a Neighborhood in the Age of Erdoğan. An insightful look into Erdoğan, Turkish Islamism, parts of Istanbul, and most of all how Turkey slid into autocracy. One of the best case studies I know of on how a fragile democracy can go away.
All of these books are very good. I’ve been seeing complaining in the press lately, and on social media, about the paucity of book reviews these days. Well, no one is stopping you from reviewing books! Just do it.
*Silent Friend*
An excellent and profound movie, large screen essential. I take this movie to be an engagement with the truths of German romanticism (set in Marburg, with Geothe and Rilke as relevant texts), and asking whether that romanticism decays over time, or simply morphs into new forms and thus renews itself, even in an age of high tech and near-universal measurement. The narrative swings back and forth between those two views like a pendulum, ultimately settling upon the notion of continuation. Was perhaps Stevie Wonder an influence too? The great Tony Leung stars, here is a trailer. Reviews are very positive but they do not seem to understand the film well?