Month: January 2026
When did Argentina lose its way?
From a new paper by Ariel Coremberg and Emilio Ocampo:
This paper challenges the increasingly popular view that Argentina’s economy performed relatively well under the corporatist import substitution industrialization (CISI) regime until the mid-1970s, and that its much-debated decline began only after 1975. Instead, it advances the alternative hypothesis that although real GDP per capita growth during this period was high by Argentina’s historical standards, it was low relative to the rest of the world, to typical comparator countries, and to what was achievable given the country’s factor endowments and investment levels. Distortions in relative prices and systemic capital misallocation generated significant inefficiencies that constrained economic dynamism and limited productivity gains. We support this hypothesis using a range of empirical methodologies—including comparative GDP per capita ratios, convergence analysis, growth accounting, and cyclical peak-to-peak analysis— complemented by historical interpretation. Although post-1955 modifications to the CISI regime temporarily improved performance, by the early 1970s it had exhausted its capacity to sustain growth. The prolonged stagnation that followed the 1975 crisis can be explained by the inability of successive governments to overcome the resistance of entrenched interest groups and thus complete the transition to an open market economy. Abrupt regime reversals fostered social conflict, political instability, and macroeconomic uncertainty, all of which undermined the sustained productivity gains required for long-term growth.
Via the excellent Samir Varma.
Childhood neighbors matter
We explore the role of immediate next door neighbors in affecting children’s later life occupation choice. Using linked historical census records for over 6 million boys and 4 million girls, we reconstruct neighborhood microgeography to estimate how growing up next door to someone in a particular occupation affects a child’s probability of working in that occupation as an adult, relative to other children who grew up farther away on the same street. Living next door to someone as a child increases the probability of having the same occupation as them 30 years later by about 10 percent. As an additional source of exogenous variation in exposure to next door neighbors, we exploit untimely neighbor deaths and find smaller and insignificant exposure effects for children who grew up next to a neighbor with an untimely death. We find larger exposure effects when intensity of exposure is expected to be higher, and document larger occupational transmission in more connected neighborhoods and when next door neighbors are the same race or ethnicity or have children of similar ages. Childhood exposure to next door neighbors has real economic consequences: children who grow up next to neighbors in high income or education occupations see significant gains in adult income and education, even relative to other children living on the same street, suggesting that neighborhood networks significantly contribute to economic mobility.
That is from a recent paper by Michael Andrews, Ryan Hill, Joseph Price, and Riley Wilson. Via Kris Gulati.
*Pee-wee as himself*
I loved this documentary, all three hours of it. Perhaps you need to be American, and to have lived in Pee-wee’s decades? In any case, the film is a wonderful reflection on self-knowledge, the changing status of “coming out” as gay in American history, celebrity, how fame happens, hippie culture, cancel culture, who your real friends are, narcissism, and much more. Pee-wee collaborated with the making of the film, but it seems pretty honest in portraying his life and later legal troubles. It turns out he was dying of cancer for years, but did not let on to the filmmakers. Here is the official trailer.
Saturday assorted links
1. Another AI-generated hit song.
4. Egg prices fell about twenty percent this year, GPT will tell you that supply is elastic.
5. How difficult is Spanish to understand in various countries? (I think Chilean Spanish is not as tough as suggested here.)
7. The premium that USG was paying on ten-year Treasuries is mostly gone.
Growth Experiences and Trust in Government*
From a new QJE paper by Timothy Besley, Christopher Dann, and Sacha Dray:
This paper explores the relationship between economic growth and trust in government using variation in GDP growth experienced over a lifetime since birth. We assemble a newly harmonized global dataset across eleven major opinion surveys, comprising 3.3 million respondents in 166 countries since 1990. Exploiting cohort-level variation, we find that individuals who experience higher GDP growth are more prone to trust their governments, with larger effects found in democracies. Higher growth experiences are also associated with improved perceptions of government performance and living standards. We find no similar channel between growth experience and interpersonal trust. Second, more recent growth experiences appear to matter most for trust in government, with no detectable effect of growth experienced during one’s formative years, closer to birth or before birth. Third, we find evidence of a “trust paradox” whereby average trust in government is lower in democracies than in autocracies. Our results are robust to a range of falsification exercises, robustness checks and single-country evidence using the American National Election Studies and the Swiss Household Panel.
Via Alexander Berger.
“Tyler Cowen’s AI campus”
That is a short essay by Arnold Kling. Excerpt:
Tyler’s Vision
As a student, you work with a mentor. At the beginning of each term, you and your mentor decide which courses you will take. If there are other students on campus taking them, great. If not, maybe you can take them with students at other schools, meeting remotely.
For each course, an AI can design the syllabus. Tyler gave an example of a syllabus generated by ChatGPT for a course on Tudor England. If you can find a qualified teacher for that course, great. If not, you could try learning it from ChatGPT, which would provide lessons, conversations, and learning assessments (tests).
Tyler thinks that 1/3 of higher ed right now should consist of teaching students how to work with AI. I do that by assigning a vibe-coding project, and by encouraging “vibe reading” and “vibe writing.”
The reason for proposing such a high proportion of effort to learning to work with AI is because we are in a transition period, where the capabilities of AI are changing rapidly. Once capabilities settle down, best practices will become established, and knowledge of how to use AI will be ingrained. For now, it is very hard to keep up.
It is possible, of course, that Tyler and I could be wrong. It could be that the best approach for higher ed is to keep students as far from AI as one can. I can respect someone who favors an anti-AI approach.
But I am disturbed by the lack of humility that often accompanies the anti-AI position in higher education. I have difficulty comprehending how faculty, at UATX and elsewhere, can express their anti-AI views with such vehemence and overconfidence. They come across to me like dinosaurs muttering that the meteor is not going to matter to them.
I believe the talk will be put online, but a few extra points here.
First, the one-third time spent learning how to use AI is not at the expense of studying other topics. You might for instance learn how to use AI to better understand Homer’s Odyssey. Or whatever.
Second, I remain a strong believer in spending many hours requiring the students to write (and thus think) without AI. Given the properties of statistical sampling, the anti-cheating solution here requires that only a small percentage of writing hours be spent locked in a room without AI.
Third, for a small school, which of course includes U. Austin, so often the choice is not “AI education vs. non-AI education,” rather “AI education vs. the class not being offered at all.”
Why should not a school experiment with two to three percent of its credits being AI offerings in this or other related manners? Then see how students respond.
Claims about AI and science
You should take these as quite context-specific numbers rather than as absolutes, nonetheless this is interesting:
Scientists who engage in AI-augmented research publish 3.02 times more papers, receive 4.84 times more citations and become research project leaders 1.37 years earlier than those who do not. By contrast, AI adoption shrinks the collective volume of scientific topics studied by 4.63% and decreases scientists’ engagement with one another by 22%.
Here is the full Nature piece by Qianyue Hao, Fengli Xu, Yong Li, and James Evans. The end sentence of course does not have to be a negative. Via the excellent Kevin Lewis.
The share of factor income paid to computers
Via Kevin Bryan.
Friday assorted links
2. Daniel Walker Howe, RIP (NYT). I recommend his books on early to mid- 19th century American history.
3. “…the 2nd least mobile player in the NBA on defense.”
4. Anthropic Economic Index report.
Why are groceries so expensive in NYC?
The lowest-hanging fruit is to simply legalize selling groceries in more of the city. The most egregious planning barrier is that grocery stores over 10,000 square feet are not generally allowed as-of-right in so-called “M” districts, which are the easiest places to find sites large enough to accommodate the large stores that national grocers are used to. Many of these districts are mapped in places that are not what people have in mind when they think “industrial” — mixed-use neighborhoods with lots of housing like stretches of Williamsburg’s Bedford Avenue and almost all of Gowanus, even post-rezoning, are in fact mapped as industrial districts.
To open a full-sized grocery store in these areas, a developer must seek a “special permit,” which requires the full City Council to get together and vote for an exception to the rules. This is a long, uncertain process, and has in the past even been an invitation to corruption.
Most famously, the City Council uses this power to keep out Walmart at the behest of unions and community groups. Thwarted in its plans to open a store in East New York — a low-income Brooklyn neighborhood that could desperately use more grocery options — the nation’s largest grocer instead serves New Yorkers with a store just beyond the Queens/Nassau line in Valley Stream, rumored to be the busiest Walmart in the country. New Yorkers with a car and the willingness to schlep beyond city limits — or pay the Instacart premium — get access to cheaper groceries; the rest get locked out.
When politicians are willing to approve a grocery store, the price can be high.
That is by Stephen Smith, via Josh Barro.
Michelle Tandler on NYC rent control
This is what I’m seeing: + 2.4 million rent-controlled apartments in a city with a massive housing shortage and 1.4% vacancy rate.
+ A huge % of these tenants are wealthy, white boomers using the units as pieds-a-terres while they spend their weekends and summers elsewhere.
+ Meanwhile, the government is using rent control to purposely drive down the value of multifamily housing, so that it can be purchased in a fire sale by the government.
+ The small-time landlords with big rent rolls of “stabilized” units are going under. Their portfolios end up in the arms of PE and foreign money (how are Progressives okay with this?) The banks will get hit by this too.
+ Because there is such a reduction in supply (~40% of units are price-controlled), leftover supply is ~33% more expensive + Because NYC gov is not friendly towards landlords, there is a lack of development –> even less supply
+ Rich and homeowners overwhelmingly support these laws b/c it drives up the value of their condos & co-ops (less supply –> higher prices for condos)
+ Big PE companies like these policies b/c they can buy buildings in fire sales and wait for rent control reform (5-10 years out)
+ Meanwhile – ~2.4 million units are rotting and won’t be brought up to code as tenants leave b/c the numbers don’t pencil –> 50k “ghost apartments” padlocked off market now, maybe 100k soon
+ Gen Z and the working class continue to vote for these policies, hoping they will be among the lucky few to win the lottery ticket of a rent-controlled apartment
+ Meanwhile, boomers hang onto their units and pass them to their children, family members, etc. –> NYC’s housing stock is rotting slowly, going offline, and becoming more expensive
Here is the link. Thoughts to ponder, whether or not you believe in all of those steps. Here is some Maryland data, not sophisticated econometrics.
Thursday assorted links
2. Does AI mean the demands on labor go up?
3. This obituary has plenty of interesting information about South Africa’s nuclear program (NYT).
4. Mercatus 1991 fellowship on state-level Indian economic policy.
5. Legal framework for crypto is hitting some snags (NYT).
6. “I find that parental transfers account for 13 percentage points (27%) of young households’ homeownership…Finally, I show that children of wealthy parents strategically use the illiquidity of housing as a commitment device to encourage transfers, resulting in a preference for illiquidity.” Link here.
China’s supply chain problems
They exist in manufacturing too, and perhaps this should help you feel a little better about American problems:
A January 2024 report on China’s wind power sector by researchers at Tsinghua University found that it remained heavily dependent on imports for crucial parts — including 60 per cent of the bearings that support their rotors, 70 per cent of the transistor modules used to convert power into grid-compliant electric current, and 100 per cent of logic modules used to control turbines in real time…
Consider lithium, cobalt, and manganese, three minerals used heavily in electric car btteries. The Chinese shares of global refining for these materials is overwhelming…But far smaller amounts of the raw materials come from mines in China – just 22 per cent, 3 percent and 4 per cent, respectively.
That is from Simon Mundy at the FT.
AI Physicians At Last
In 2004 (!) I wrote:
Many people complain that medicine is too impersonal. I think it is not impersonal enough. I have nothing against my physician (a local magazine says he is one of the best in the area) but I would prefer to be diagnosed by a computer. A typical physician spends most of the day playing twenty questions. Where does it hurt? Do you have a cough? How high is the patient’s blood pressure? But an expert system can play twenty questions better than most people. An expert system can use the best knowledge in the field, it can stay current with the journals, and it never forgets.
It took longer than it should have, but we are finally here. Today, most people already use AI to help diagnose and manage medical conditions, and now:
Utah is letting artificial intelligence — not a doctor — renew certain medical prescriptions. No human involved.
It’s a pilot program for routine renewals but a welcome start. The AMA, of course, is not pleased.
In a statement, Dr. John Whyte, CEO and executive vice president at the American Medical Association, said: “While AI has limitless opportunity to transform medicine for the better, without physician input it also poses serious risks to patients and physicians alike.”
One concern is misuse or abuse, including the possibility that people struggling with addiction could try to game automated systems to obtain drugs inappropriately. Another concern is missing subtle clinical red flags or drug interactions that a doctor would catch.
It’s amazing that anyone can say these things with a straight face. As far as I know, AI has never run a pill mill, unlike human physicians. And the AI
“missing subtle clinical red flags or drug interactions that a doctor would catch.” Is this a joke?
Not as good as Cowen-Tabarrok
Russia is preparing a new economics textbook for university students that aims to challenge what its authors call a “myth” that democracy drives economic growth and to revive the socialist economic theories of Soviet leader Josef Stalin, the head of a Kremlin-linked advisory body said.
Moscow has ramped up efforts to enforce its view of history and global politics in schools since launching its full-scale invasion of Ukraine in 2022, introducing mandatory patriotic classes and rewriting history curricula to align with the Kremlin’s wartime narratives.
Valery Fadeyev, chairman of Russia’s presidential human rights council, told the RBC news website that he is leading work on the textbook, which could be introduced as early as the next academic year for students of sociology, political science and history.
The 350-400-page book, tentatively titled “Essays on Economics and Economic Science,” is intended to present a broader view of economic development than mainstream liberal theory, Fadeyev said.
Here is the full story, via Frank W. The Kyiv School of Economics it ain’t…