Eric Hanushek on the import of schooling quality declines
My recent research at Stanford University translates the achievement declines into implications for future economic impacts. Past evidence shows clearly that people who know more earn more. When accounting for the impact of higher achievement historically on salaries, the lifetime earnings of today’s average student will be an estimated 8 percent lower than that of students in 2013. Because long-term economic growth depends on the quality of a nation’s labor force, the achievement declines translate into an average of 6 percent lower gross domestic product for the remainder of the century. The dollar value of this lower growth is over 15 times the total economic costs of the 2008 recession.
Here is the full Op-Ed, noting that Eric compares this decline to the effects of an eight percent income tax surcharge. I have not read through this work, though I suspect these estimates will prove controversial when it comes to causality. In any case, file this under “big if true,” if only in expected value terms.
Friday assorted links
1. Those semi-new service sector jobs how to get people to leave a cult.
2. What was Alice Munro actually writing about? So often people are writing about themselves.
3. The New Yorker on Paul Collier and Britain.
4. Claims about LLMs and stock returns.
5. Live version of “I Hear a Symphony,” you can skip the thirty second intro.
6. The Harvard endowment’s single biggest public investment is now Bitcoin.
Some second-order effects of unaffordable housing
This is one of the best, most interesting, and most important papers I have seen of late:
Housing affordability has declined sharply in recent decades, leading many younger generations to give up on homeownership. Using a calibrated life-cycle model matched to U.S. data, we project that the cohort born in the 1990s will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents’ generation. The model also shows that as households’ perceived probability of attaining homeownership falls, they systematically shift their behavior: they consume more relative to their wealth, reduce work effort, and take on riskier investments. We show empirically that renters with relatively low wealth exhibit the same patterns. These responses compound over the life cycle, producing substantially greater wealth dispersion between those who retain hope of homeownership and those who give up. We propose a targeted subsidy that lifts the largest number of young renters above the “giving-up threshold.” This policy yields welfare gains that are 3.2 times those of a uniform transfer and 10.3 times those of a transfer targeted to the bottom 10% of the wealth distribution, while also increasing homeownership rate, raising work effort, and reducing reliance on the social safety net.
That is from Seung Hyeong Lee of Northwestern and Younggeun Yoo of University of Chicago. Via the excellent Kevin Lewis.
Nano Banana Pro does Marginal Revolution
My very fun Conversation with Blake Scholl
Here is the audio, video, and transcript. This was at a live event (the excellent Roots of Progress conference), so it is only about forty minutes, shorter than usual. Here is the episode summary:
Blake Scholl is one of the leading figures working to bring back civilian supersonic flight. As the founder and CEO of Boom Supersonic, he’s building a new generation of supersonic aircraft and pushing for the policies needed to make commercial supersonic travel viable again. But he’s equally as impressive as someone who thinks systematically about improving dysfunction—whether it’s airport design, traffic congestion, or defense procurement—and sees creative solutions to problems everyone else has learned to accept.
Tyler and Blake discuss why airport terminals should be underground, why every road needs a toll, what’s wrong with how we board planes, the contrasting cultures of Amazon and Groupon, why Concorde and Apollo were impressive tech demos but terrible products, what Ayn Rand understood about supersonic transport in 1957, what’s wrong with aerospace manufacturing, his heuristic when confronting evident stupidity, his technique for mastering new domains, how LLMs are revolutionizing regulatory paperwork, and much more.
Excerpt:
COWEN: There’s plenty about Boom online and in your interviews, so I’d like to take some different tacks here. This general notion of having things move more quickly, I’m a big fan of that. Do you have a plan for how we could make moving through an airport happen more quickly? You’re in charge. You’re the dictator. You don’t have to worry about bureaucratic obstacles. You just do it.
SCHOLL: I think about this in the shower like every day. There is a much better airport design that, as best I can tell, has never been built. Here’s the idea: You should put the terminals underground. Airside is above ground. Terminals are below ground. Imagine a design with two runways. There’s an arrival runway, departure runway. Traffic flows from arrival runway to departure runway. You don’t need tugs. You can delete a whole bunch of airport infrastructure.
Imagine you pull into a gate. The jetway is actually an escalator that comes up from underneath the ground. Then you pull forward, so you can delete a whole bunch of claptrap that is just unnecessary. The terminal underground should have skylights so it can still be incredibly beautiful. If you model fundamentally the thing on a crossbar switch, there are a whole bunch of insights for how to make it radically more efficient. Sorry. This is a blog post I want to write one day. Actually, it’s an airport I want to build.
And;
COWEN: I’m at the United desk. I have some kind of question. There’s only two or three people in front of me, but it takes forever. I notice they’re just talking back and forth to the assistant. They’re discussing the weather or the future prospects for progress, total factor productivity. I don’t know. I’m frustrated. How can we make that process faster? What’s going wrong there?
SCHOLL: The thing I most don’t understand is why it requires so many keystrokes to check into a hotel room. What are they writing?
What are they writing?
Thursday assorted links
1. Reddit thread on Beatriz Villaroel.
3. Suisun City and California Forever (NYT).
4. The male boom in Orthodox Christianity in the U.S. (NYT).
5. More on Harvard graduate cutbacks.
6. Paul Ekman, RIP. And more here.
7. GPT-5.1 has been released, pretty quietly.
8. Summers will not finish the semester teaching at Harvard.
Confidently Wrong
If you’re going to challenge a scientific consensus, you better know the material. Most of us, most of the time, don’t—so deferring to expert consensus is usually the rational strategy. Pushing against the consensus is fine; it’s often how progress happens. But doing it responsibly requires expertise. Yet in my experience the loudest anti-consensus voices—on vaccines, climate, macroeconomics, whatever—tend to be the least informed.
This isn’t just my anecdotal impression. A paper by Light, Fernbach, Geana, and Sloman shows that opposition to the consensus is positively correlated with knowledge overconfidence. Now you may wonder. Isn’t this circular? If someone claims the consensus view is wrong we can’t just say that proves they don’t know what they are talking about. Indeed. Thus Light, Fernbach, Geana and Sloman do something clever. They ask respondents a series of questions on uncontroversial scientific topics. Questions such as:
1. True or false? The center of the earth is very hot: True
2. True or false? The continents have been moving their location for millions of years and will continue to move. True
3. True or false? The oxygen we breathe comes from plants: True
4. True or false? Antibiotics kills viruses as well as bacteria: False
5. True or false? All insects have eight legs: False
6. True or false? All radioactivity is man made: False
7. True or false? Men and women normally have the same number of chromosomes: True
8. True or false? Lasers work by focusing sound waves: False
9. True or false? Almost all food energy for living organisms comes originally from sunlight: True
10. True or false? Electrons are smaller than atoms: True
The authors then correlate respondents’ scores on the objective (uncontroversial) knowledge with their opposition to the scientific consensus on topics like vaccination, nuclear power, and homeopathy. The result is striking: people who are most opposed to the consensus (7, the far right of the horizontal axis in the figure below) score lower on objective knowledge but express higher subjective confidence. In other words, anti-consensus respondents are the most confidently wrong—the gap between what they know and what they think they know is widest.
In a nice test the authors show that the confidently wrong are not just braggadocios they actually believe they know because they are more willing to bet on the objective knowledge questions and, of course, they lose their shirts. A bet is a tax on bullshit.
The implications matter. The “knowledge deficit” approach (just give people more fact) breaks down when the least-informed are also the most certain they’re experts. The authors suggest leaning on social norms and respected community figures instead. My own experience points to the role of context: in a classroom, the direction of information flow is clearer, and confidently wrong pushback is rarer than on Twitter or the blog. I welcome questions in class—they’re usually great—but they work best when there’s at least a shared premise that the point is to learn.
Hat tip: Cremieux
Mexico facts of the day
I have been expecting this for a long time, but it came more quickly than I thought:
Mexico is now the world’s top buyer of U.S. goods, according to data released by the U.S. government on Wednesday, outpacing Canada for the first time in nearly 30 years.
The data highlighted how Mexico and the United States have, despite periodic political tensions, become deeply intertwined in business, and how much global trade patterns have shifted in a short period. Only two years ago, Mexico became the country that sold the most goods to the United States, surpassing China.
“Mexico is the United States’ main trading partner,” said Marcelo Ebrard, Mexico’s economy minister, during the president’s daily news conference on Wednesday.
Here is more from the NYT. Via Brian Winter. As I have been telling people for decades now, visiting Mexico, learning about Mexico, and learning Spanish are very good investments in understanding the world, most of all if you live in the USA.
American democracy is very much alive, though not in all regards well
The Democrats who won in the November elections are all going to assume office without incident or controversy.
The Supreme Court is likely to rule against at least major parts of the Trump tariff plan, his signature initiative. Trump already has complained vocally on social media about this. He also preemptively announced that some of the food tariffs would be reversed, in the interests of “affordability.”
National Guard troops have been removed from Chicago and Portland, in part due to court challenges. The troops in WDC have turned out to be a nothingburger from a civil liberties point of view.
Here is an account of November 18 and all that happened that day:
* House votes 427-1 to release the Epstein files, a veto-proof+ majority
* A federal judge blocked GOP redistricting map in Texas, meaning net net with CA measure passed, Democrats could pick up seats for 2026, KARMA!
* A federal appeals court, including two Trump appointed judges, rejected Trump’s defamation lawsuit against CNN over the term “Big Lie,” finding the case meritless
* Corporate Public Broadcasting agree to fulfill its $36 million annual contract with NPR, after a judge told Trump appointees at CPB that their defense was not credible
* A NY judge dismissed Trump’s calling of New York’s law barring immigration arrests in state and local courthouses.
The Senate also sided with the House on the Epstein files. Nate Silver and many others write about how Trump is now quite possibly a lame duck President.
I do not doubt that there are many bad policies, and also much more corruption, and a more transparent form of corruption, which is corrosive in its own right. But it was never the case that American democracy was going to disappear. That view was one of the biggest boo-boos held by (some) American elites in recent times, and I hope we will start seeing people repudiating it.
I think the causes of this error have been:
1. Extreme dislike of the Trump administration, leading to emotional reactions when a bit more analysis would have done better.
2. Pessimism bias in the general sense.
3. Recency bias — for the earlier part of the term, Congress was relatively quiescent.
4. Cognitive and emotional inability to admit the simple truth of “democracy itself can lead to pretty bad outcomes,” thus the need to paint the status quo as something other than democracy.
5. The (largely incorrect) theory of good things happening in politics is “good people will them,” so from that starting point if you see bad people willing bad things you freak out. The understanding was never “spontaneous order” enough to begin with.
Any other?
Google Scholar Labs
Brings AI to Google Scholar, find it here. Via Joshua Gans. And yes this does mean that the academics also are, or at least ought to be, writing for the AIs.
Matt Yglesias on aphantasia
What I tend to approach from the outside are unpleasant experiences. Life is a mix of ups and downs, but I’m not really haunted by sad experiences or disturbing things that I’ve seen. I can tell you about the time I found a dead body in the alley and called the authorities to report it, and my recollection is it was pretty gross, but I certainly don’t have any pictures of that in my iPhone.
Sometimes I see something that causes me to update my views of the world. But when I saw the body, I was already aware, factually, that drug overdose deaths were becoming common in D.C., so I felt that I hadn’t really learned anything new. At the time I was victimized by crime, the amount of violent crime in this city had been on a steady downward trend for a very long time, so it didn’t cause me to change my views at all. Several years later, that downward trend started to reverse and, after a few years of gradual growth, there were some sharp jumps, and then I got worried and started calling for policy changes.
And I think this is a strength of the aphantasic worldview. Something bad happened to me that was statistically anomalous, so I didn’t change my views. When the broader situation changed, I did change my views, even though actually nothing bad happened to me personally. And that’s because the right way to assess crime trends is to try to get a statistically valid view of the situation, not overindex on the happenstance of your life.
Here is the full essay. Here is Hollis Robbins on related issues.
Wednesday assorted links
1. Roon visits DC.
2. The UK is outlawing ticket scalping?
3. How the internet made the far right.
4. NYT on Solvej Balle. And from The New Yorker.
5. Claims about risk and prediction markets.
6. On the dropping non-binary rates.
7. Some art prices, including one golden toilet arbitrage result (NYT).
Cyprus and multiple state sovereignties
I am struck by how many layers of sovereignty there are in Cyprus, sometimes but not always conflicting. There is Greek Cyprus, Turkish Cyprus (the Turkish interpretation), Republic of Cyprus under Turkish occupation (the Greek interpretation), unified Cyprus (recognized by the EU and also many Cypriot citizens, though the Turkish part is exempt from EU laws and obligations, in any case not recognized by Turkey), the EU, and last but not least Britain claims and possesses, as full sovereign, three percent of Cyprus territory, an arrangement contested by no one.
Arguably you could add “Turkey” to that list. The Turkish government does not claim sovereignty over any part of Cyprus, but they put the flag everywhere, they guarantee defense, the currency is the Turkish lira, and they have a de facto veto over major decisions. It is Turkey in everything but name, though there is a passport check when visitors fly in from Istanbul. Keep in mind that the earlier 1974 Turkish invasion deprived what is now Greek Cyprus of its then main cargo port and main airport.
While matters have been peaceful for some while now, I fear these political arrangements limit the ability of Cyprus to exploit scale. The island has only about 1.3 million people, so complications do not help their ability to attract high-productivity investment.
Is the AI sector currently a bubble?
Possibly, but do not jump to that conclusion too quickly, as I argued in my latest Free Press column. Excerpt:
Nvidia is often considered a bellwether AI stock. That’s because much of its revenue comes from selling graphics processing units to power advanced AI systems, meaning that its success gives investors insight into the health of the sector overall. Currently, Nvidia’s stock-price-to-earnings ratio is in the 54 to 55 range, roughly twice the typical market average. That means the market expects great things from this stock. Those projections may or may not be validated, but it’s hard to conclude they’re entirely divorced from reality…
Keep in mind that the tech sector as a whole is still earning more than it is shelling out in capital expenditures. The current AI boom is being financed by earnings more than by new issuance of debt, which makes it less prone to a sudden crash. By one estimate, capital expenditures in Big Tech are about 94 percent of cash flow in 2025. You could imagine that number moving into unstable territory, but so far, the U.S. tech sector is managing to pay its bills without going into debt.
You may recall we are coming off a period when everyone complained that the big tech companies were sitting on trillions of dollars in cash and capital. Now, they are spending it, and complaints are heating up once again. Damned if they do, damned if they don’t.
In fact, what we are seeing right now is a shortage in the AI sector’s capacity to meet demand. Major tech companies are investing in more computing capacity, but they still cannot serve all the customers who want access to AI systems. That augurs well for the future of the sector, even if there are dips and spills along the way.
As usual, we will see, but if you are calling it a bubble after an initial price dip or corporate shake-out, that is exactly the fallacy you are not supposed to be slipping into.
Tuesday assorted links
1. “Underrated reason for this [relative non-politicization] being true is not that econ has more political diversity (though it does) but instead a more *international* faculty than humanities and other social sciences. Like literally 2/3rd. Domestic politics and identity fights necessarily play a smaller role.” From Kevin A. Bryan.
3. Ruxandra on IVF (NYT).
4. And more from Gavin Leech, this time on Chinese AI models.
5. Has there been upward genetic drift for the British?
6. New J.S: Bach music discovered and now recorded. Starts at 15:30. Decent but not great.