The politics of using AI

Using new data from the Gallup Workforce Panel, we document a persistent partisan gap in self-reported AI use at work: Democrats are consistently more likely than Republicans to report frequent use. In 2025:Q4, for example, 27.8% of Democrats report using AI weekly or daily, compared with 22.5% of Republicans. Democrats also report deeper task-level integration, using AI in 16% more work activities than Republicans. Consistent with this, Democrats are employed in occupations with higher predicted AI exposure based on task-content measures and report larger perceived differences in AI-related job displacement risk. However, in regression models the partisan gap in AI use disappears once we control for education, industry, and occupation, indicating that observed differences primarily reflect compositional variation rather than political affiliation per se.

That is from a new paper by Nicholas Bloom and Christos Makridis.

Poverty reduction is slowing down

The basic reason why I’m not very optimistic about Africa’s growth prospects under current conditions is that the track record is extremely poor, and there’s little reason to think that anything fundamental has changed. Between 1992 and 2022, median income in China grew at an average annualized rate of 6.6 percent per year; in India it grew at a rate of 2.9 percent per year; but in sub-Saharan Africa it grew at just 1.6 percent per year, less than the rate of growth exhibited in the famously stagnant (and much wealthier) United Kingdom. But in much of the continent the picture has been worse than mere slow growth. Some countries that were relatively stable a few decades ago are now in a state of apparently permanent civil conflict, as in the Democratic Republic of the Congo (DRC) or Somalia; while other countries that have been blessed by relative stability, such as Kenya, Malawi, or Zambia, are poorer on a median income basis than they were in the ‘80s or ‘90s.

There are many things to say about why economic growth in Africa has been so disappointing, from the primacy of extractive resource sectors to the dominance of predatory elites to the poor state of human capital to the ubiquity of corruption to the absence, in many places, of a strong state monopoly on legitimate violence. But these are merely surface-level problems: the fact that these conditions exist in nearly every country in Africa, despite their widely varying historical experiences and the different ideologies with which their states have experimented, suggests that the fundamental problem is not so much with the state but the society underlying the state. If you were to describe this problem briefly, you could do quite well with something like “kinship groups crowd out effective institutions.” African societies have extraordinarily strong kinship ties, such that impersonal institutions and relationships are systematically subordinated to family, clan, and ethnic loyalties; as a result many African societies have found it extraordinarily difficult to build effective states and civil societies that are capable of doing what states and civil societies are supposed to do. (For a more complete elaboration of this view, see my article on why African nations don’t have large firms.) Solving that problem took Europe roughly a millennium; and that was when people didn’t have access to AK-47s.

Here is more from David Oks.

This security will be pricing *something* (but what?)

Alphabet has lined up banks to sell a rare 100-year bond, stepping up a borrowing spree by Big Tech companies racing to fund their vast investments in artificial intelligence this year.

The so-called century bond will form part of a debut sterling issuance this week by Google’s parent company, according to people familiar with the matter. Alphabet was also selling $15bn of dollar bonds on Monday and lining up a Swiss franc bond sale, the people said.

Century bonds — long-term borrowing at its most extreme — are highly unusual, although a flurry were sold during the period of very low interest rates that followed the financial crisis, including by governments such as Austria and Argentina.

Here is more from the FT, let us see how the yield comes in…

For a long time I have been predicting the return of phrenology

Yup:

Human capital—encompassing cognitive skills and personality traits—is central for labor-market success, yet personality remains difficult to measure at scale. Leveraging advances in AI and comprehensive LinkedIn microdata, we extract the Big 5 personality traits from facial images of 96,000 MBA graduates, and demonstrate that this novel “Photo Big 5” predicts school rank, job matching, compensation, job transitions, and career advancement. The Photo Big 5 provides predictive power comparable to race, attractiveness, and educational background, and is only weakly correlated with cognitive measures such as test scores. We show that individuals systematically sort into occupations where their personality traits are valued and earn higher wages when traits align with occupational demands. While the scalability of the Photo Big 5 enables new academic insights into the role of personality in labor markets, its growing use in industry screening raises important ethical concerns regarding statistical discrimination and individual autonomy.

That is from a new NBER working paper by Marius Guenzel, Shimon Kogan, Marina Niessner & Kelly Shue.

Why is Singapore no longer “cool”?

To be clear, I am not blaming Singapore on this one.  But it is striking to me how much Americans do not talk about Singapore any more.  They are much, much more likely to talk about Europe or England, for instance.  I see several reasons for this:

1. Much of the Singapore fascination came from the right-wing, as the country offered (according to some) a right-wing version of what a technocracy could look like.  Yet today’s American political right is not very interested in technocracy.

2. Singapore willingly takes in large numbers of immigrants (in percentage terms), and tries to make that recipe work through a careful balancing act.  That approach still is popular with segments of the right-wing intelligentsia, but it is hardly on the agenda today.  For the time being, it is viewed as something “better not to talk about.”  Especially in light of some of the burgeoning anti-Asian sentiment, for instance from Helen Andrews and some others.  It is much more common that Americans talk about foreign countries mismanaging their immigration policies, for instance the UK and Sweden.

3. Singaporean government looks and feels a bit like a “deep state.”  I consider that terminology misleading as applied to Singapore, but still it makes it harder for many people to praise the place.

4. Singapore is a much more democratic country than most outsiders realize, though they do have an extreme form of gerrymandering.  Whatever you think of their system, these days it no longer feels transgressive, compared to alternatives being put into practice or at least being discussed.  Those alternatives range from more gerrymandering (USA) to various abrogations of democracy (potentially all over).  In this regard Singapore, without budging much on its own terms, seems like much more of a mainstream country than before.  That means there is less to talk about.

4b. Singapore’s free speech restrictions, whatever you think of them, no longer seem so far outside the box.  Trump is suing plenty of people.  The UK is sending police to knock on people’s doors for social media posts, and so on.  That too makes Singapore more of a “normal country,” for better or worse (I would say worse).

5. The notion of an FDI-driven, MNE-driven growth strategy seems less exciting in an era of major tech advances, most of all AI.  Singapore seems further from the frontier than a few years ago.  People are wishing to talk about pending changes, not predictability, with predictability being a central feature of many Singaporean service exports.

6. If you want to talk about unusual, well-run small countries, UAE is these days a more novel case to consider, with more new news coming out of it.

Sorry Singapore, we are just not talking about you so much right now!  But perhaps, in some significant ways, that is a blessing in disguise.  At least temporarily.  I wrote this post in part because I realize I have not much blogged about Singapore for some years, and I was trying to figure out why.

Addendum, from Ricardo in the comments:

These are good points. I would add:

7. It used to be that Singapore was a poster-child of globalization, showing how a country can succeed by opening up free trade, foreign investment, and skilled immigration. Since globalization is uncool on the right, and arguably is uncool across the political spectrum, the country doesn’t serve anyone’s narratives.

As far as the political right is concerned, I would also add:

8. Health care policy is boring for the American right. During the Obama years, it was common to see people on the right bring up Singapore’s health care system as an alternate way of doing things (always ignoring things like the prominent role that state hospitals play in the system and the restrictions put on private health insurance companies there). Now that there isn’t a center-left policy proposal to fight against on the health care front, the example of Singapore is no longer interesting or useful.

Bryan Caplan on immigration backlash

Bryan writes:

Tyler tries to cure my immigration backlash confusion, but not to my satisfaction.  The overarching flaw: He equivocates between two different versions of “backlash to immigration.”

Version 1: Letting in more immigrants leads to more resistance to immigration.

Version 2: Letting in more immigrants leads to so much resistance to immigration that the total stock of immigration ultimately ends ups lower than it would have been.

Backlash in the first sense is common, but no reason for immigration advocates to moderate.  Backlash in the second sense is a solid reason for immigration advocates to moderate, but Tyler provides little evidence that backlash in this sense is a real phenomenon.

Do read the whole thing, but I feel I am obviously right here.  Bryan should read newspapers more!  If I did not provide much evidence that backlash is a significant phenomenon, it is because I thought it was pretty obvious.  A few points:

1. I (and Bryan all the more so) want more immigration than most voters want.  But I recognize that if you strongly deny voters their preferences, they will turn to bad politicians to limit migration.  So politics should respect voter preferences to a reasonable degree, even though at the margin people such as myself will prefer more immigration, and also better immigration rules and systems.

2. The anti-immigrant politicians who get elected are very often toxic.  And across a wide variety of issues.  The backlash costs range far wider than just immigration policies.  (I do recognize this does not apply in every case, for instance Meloni in Italy seems OK enough and is not a destructive force.  She also has not succeeded in limiting migration, and probably cannot do so without becoming toxic.  So maybe that story is not over yet.  In any case, consider how many of the other populist right groups have a significant pro-Russia element, Russia being right now probably the most evil country in the world.)

3. If immigration runs “out of control” (as voters perceive it) in your country, there will be anti-immigrant backlash in other countries too.  For instance in Japan and Poland.  Bryan considers only backlash in the single country of origin.  In Japan, for instance, voters just handed their PM a new and powerful mandate, in large part because of the immigration issue.  The message was “what is happening in other countries, we do not want that happening here.”  The globalization of communications and debate increases the scope and power of the backlash effect considerably.

Most of all, it is simply a mistake to let populist right parties become the dominant force in Europe, and sometimes elsewhere as well.  You might think it is not a mistake because we need them to limit migration.  Well, that is not my view, but I am arguing it is a mistake to get to that margin to begin with.

In short, we need to limit migration to prevent various democracies from going askew.  Nothing in that argument contradicts the usual economic (and other) arguments for a lot of immigration being a good thing.  And still it is a good thing to try to sell one’s fellow citizens on the case for more immigration.  Nonetheless we are optimizing subject to a constraint, namely voter opinion.  Why start off an intertemporal bargaining game by trying to seize as much surplus (immigration) as possible?  That to me is obvious, more obvious every day I might add.

*Codex*

No, this is not an AI post.  Codex is a NYC bookshop at 1 Bleecker St., at Bowery.  It is quite extraordinary in its curation of used books.  The fiction section is large, yet you can pick up virtually any title on the shelves and it is worth reading.  A wonderful place to go to get reading ideas, plus the prices are reasonable and the used books are in decent shape.  Such achievements should be praised.

Sunday assorted links

1. How to change economics.

2. Charter city plans for Nevis? (FT)

3. Michelangelo’s foot for $27 million.

4. Philosophy intern position at Mercatus.

5. Taking governmental equity stakes in American companies.

6. The One Child Policy was not even the most important way the Chinese government discouraged births.

7. More invisible graveyards?

8. The Inkhaven Residency (for writers).

9. The political status of the Faroes (NYT).

You gotta’ believe!

AI technology can generate speculative-growth equilibria. These are rational but fragile: elevated valuations support rapid capital accumulation, yet persist only as long as beliefs remain coordinated. Because AI capital is labor-like, it expands effective labor and dampens the normal decline in the marginal product of capital as the capital stock grows. The gains from this expansion accrue disproportionately to capitalists, whose saving rate rises with wealth, raising aggregate saving. Building on Caballero et al (2006), I show that these features generate a funding feedback—rising capitalist wealth lowers the required return—that can produce multiple equilibria. With intermediate adjustment costs, elevated valuations are the mechanism that sustains a transition toward a high-capital equilibrium; a loss of confidence can precipitate a self-fulfilling crash and reversal.

That is from a new NBER working paper by Ricardo J. Caballero.

A new hypothesis (from my email)

From Anonymous:

Hello Professor Cowen,

I hope all is well with you and that you have navigated the recent weather alright.

I have a thought that I wanted to run by you that related to phones and teen anxiety.

You have cited a variety of studies that say that phones and social media do not cause anxiety. As you may recall, I have taught junior high and high school for almost 30 years. I did see a big spike in anxiety for my students, especially females, around the years 2010-2017/18ish. I used to think “phones,” but now I’m not sure. The anxiety spike has declined. My last ‘anxious’ class of seniors are now seniors in college. Students today are on the phones as much as those in the past.

Here is my theory: Students started to feel more anxious around 2010 because they could sense the coming seismic cultural and political shifts coming, of which phones were a harbinger or carrier. They were mostly not conscious of this, and couldn’t express it, but they were trying to cope.

Now, they have coped. My current seniors have unusual political ideas but are mostly optimistic. I contrast them to a centrist friend of mine who does some DC work and constantly thinks the sky is falling.

Now, adults are more anxious, not students. Adults are starting to see these seismic shifts and they are trying to cope. Perhaps they are projecting their own anxiety onto their kids, and are behind the times with the cause. Phones may have helped drive anxiety 10 years ago, but maybe not anymore. Students have coped and adjusted to a new equilibrium.

It is also possible that phones serve as a good/useful “myth” (I mean this in a positive sense) for the shifts we are seeing and the anxiety many feel . We need something tangible to hold our thoughts on the shifts in culture, and we have chosen phones. Thus, the clash over phones today might be between those who think in mythic/symbolic ways, and those who think in more scientific ways. Both are right in their own perspective. The new cultural and political shifts over the last 10-15 years would naturally bring on anxiety. Phones are not the cause of the shift, but a good symbol of it.

Sebastian Galiani on the Marginal Revolution

The most successful economics blog in the world is called Marginal Revolution.
That is not an accident….

Consider a few common mistakes that reappear whenever marginal thinking is abandoned:

    • Treating the owner’s biography—wealth, identity, status—as if it entered the firm’s marginal conditions. It does not.
    • Confusing redistribution with allocation. Redistribution is a legitimate political choice, but it should not be smuggled into production decisions where it distorts incentives and blocks reallocation.
    • Ignoring opportunity cost. Resources used to sustain one activity are resources not used elsewhere. The relevant question is always: what is the next best alternative?
    • Believing that efficiency is static. In reality, efficiency is dynamic, and depends precisely on the ability of resources to move when margins change.

One of the most uncomfortable implications of marginal analysis is that reallocation is essential. Labor and capital must sometimes leave declining uses so they can enter expanding ones. That process is rarely smooth, and never painless. But blocking it does not make an economy more humane; it makes it poorer.

The twentieth century gave this insight a name. Joseph Schumpeter called it creative destructionJános Kornai warned that when losses are systematically covered—when budget constraints are soft—adjustment never happens, inefficiency becomes chronic, and stagnation follows.

Marginal analysis explains why. If losses have no consequences, margins lose meaning. Prices stop signaling scarcity. Productivity differences stop guiding allocation. The economy becomes a museum of preserved structures rather than a system that adapts.

Excellent throughout, here is the link.

Saturday assorted links

1. Indeed the Turner watercolor went for 165k, well above the estimate.  The Hubert Robert for 53k.

2. Reason and Rationality program for middle school students.  High school program here.

3. In defense of hallucinations? Note that Princeton Law Review does not exist.

4. Economics of a Super Bowl ad.

5. Searchable database of every book mentioned on Conversations with Tyler.

6. Prophets of the Leopold Aschenbrenner.

7. David Pilling reviews Joe Studwell’s new Africa book (FT).

8. Are there just as many female autistics?

9. Brazil is still in better fiscal shape than is Argentina.

FT podcast with Soumaya Keynes

Mostly about the economics of food, this is from their episode summary:

If you want to understand food – and eat better – economics is a good place to start. How do immigration patterns shape a country’s cuisine? How do labour laws make our working lunches worse? And why do strip malls serve such good grub?

About 33 minutes, here are the links:

Apple: https://podcasts.apple.com/us/podcast/what-an-economist-eats-for-lunch-in-2026-with-tyler-cowen/id1746352576?i=1000748476307

Spotify: https://open.spotify.com/episode/30oLOLQZvGmvxJzA31X3qK