AI Improves Student Learning and Engagement
In our paper on online education, Tyler and I wrote:
One model of a future course is a super-textbook: lectures, exercises, quizzes, and grading all available on a tablet with artificial intelligence routines guiding students to lectures and exercises designed to address that student’s deficits and with human intelligence—tutors—on call on an as-needed basis, possibly for extra marginal fees.
We were wrong only in thinking that human tutors would be wanted and needed. Toda,y it is clear that AI tutors will be available 24-7 for all students. Online education was already at least as good on average as in-class education for large classes like Physics and Economics 101 and much cheaper. Combined with AI tutors who can offer individualized instruction and encouragement (!) the online-AI model looks better.
A study at Harvard compared physics students who worked with an AI tutor against a human-led, active learning classroom. Note that the AI was paired not against boring lectures but against an active learning classroom with an experienced and motivated teacher.
Not only did the AI tutor seem to help students learn more material, the students also self-reported significantly more engagement and motivation to learn when working with AI.
“It was shocking, and super exciting,” Miller said, considering that PS2 is already “very, very well taught.”
“They’ve been doing this for a long time, and there have been many iterations of this specific research-based pedagogy. It’s a very tight operation,” Miller added.
Who Loses from Immigration Restrictions?
A good summary from the excellent Jeffrey Miron on the effects of the Indian Chinese Exclusion Act (repeated here, no indent):
A long-standing concern about immigration is that it might reduce job opportunities for native workers:
In 1882, the US government passed the Chinese Exclusion Act, which banned laborers born in China from entering the United States and prevented individuals born in China already residing in the United States from obtaining citizenship or reentering the country. … Proponents argued that Chinese workers—who constituted 12 percent of the male working-age population and 21 percent of all immigrants in the Western United States—reduced economic opportunities for white workers.
Yet in 1882, similarly to now,
… many business owners opposed the Act. They worried that highly productive Chinese labor could not be easily replaced and that a sweeping ban would lead to significant economic losses.
So what were the Act’s effects? According to recent research,
… the Act reduced the Chinese labor supply by 64 percent. A reduction occurred for both skilled and unskilled workers. …
This is presumably what the Act’s supporters intended. In addition, however,
the Act reduced the white male labor supply by 28 percent and lowered this group’s lifetime earnings. …
Further, and relevant to current debates,
the Act reduced total manufacturing output by 62 percent and the number of manufacturing establishments by 54–69 percent.
What is the explanation? Reduced immigration means higher labor costs. This implies reduced output, and thus reduced demand for native labor, even if businesses partially substitute native for immigrant labor. Reduced immigration can therefore be “lose-lose,” hurting native workers and businesses, in addition to harming immigrants.
Milei Implements Peer Approval for Food
Reason: In a sweeping move to overhaul Argentina’s food trade policies, Javier Milei’s administration officially deregulated food imports and exports on Monday. The reform, outlined in Decree 35/2025, seeks to boost foreign trade, cut bureaucratic red tape, and lower consumer prices.
Federico Sturzenegger, head of the Ministry of Deregulation and State Transformation, explained in a post on X that the measure “seeks cheaper food for Argentines and more Argentine food for the world.”
Under the new policy, food products and packaging certified by countries with “high sanitary surveillance” can now enter Argentina without any additional registration or approval processes. These items will be automatically recognized under the Argentine Food Code, cutting down on administrative delays and costs for importers.
The legislation identifies countries such as Australia, New Zealand, Canada, the United States, Israel, Japan, Switzerland, and the United Kingdom, as well as the European Union, as having similar or higher sanitary standards than Argentina.
As Sturzenegger explains in his post, this measure “eliminates requirements to register and authorize: samples, products, establishments, warehouses, utensils, and containers (32 pages of paperwork).”
An excellent “peer approval” policy and one that I have long supported when it comes to the FDA and drug approvals. In fact, since 2010 the US FDA has begun to recognize other countries as having comparable food safety systems. To date, Canada, Australia and New Zealand have been recognized with a Systems Recognition partnership.
Systems Recognition (SR) is a partnership between the U.S. Food and Drug Administration (FDA) and a foreign regulatory counterpart, in which the agencies have concluded that they operate comparable regulatory programs that yield similar food safety outcomes.
Argentina’s policy is unilateral and assumes equivalence if a country uses recognized standards (e.g., Codex Alimentarius) or has high sanitary vigilance while the FDA’s SR policy is bilateral and involves more regulatory harmonization and investigation. I prefer the Argentinian approach. Nevertheless, both programs have the goals of simplifying trade, avoiding duplicate inspections, and helping to prioritize scarce inspection resources.
I encourage the FDA to build on SR for food and extend it to drugs. This could be done in a minor and major way, both of which would useful. The minor reform would be peer approval for already-approved US drugs. In this way, importation could ease drug shortages. The FDA has done this in the past on an ad-hoc basis but it should be made permanent. The second, more major reform, would to extend peer-approval to any drug or device approved by a stringent authority.
Democracy, Capitalism and Monarchy (Yarvin)
The Yarvin interview in the NYTimes magazine illustrates the change in vibes, but frankly, I was bored. It’s amusing when Yarvin tweaks liberals by pointing out that FDR was an authoritarian, but Liberal Fascism did it better.
More generally, much of Yarvin’s thinking is superficial. He thinks, for example, that capitalism works because firms are monarchies.
Yes. I think that having an effective government and an efficient government is better for people’s lives. When I ask people to answer that question, I ask them to look around the room and point out everything in the room that was made by a monarchy, because these things that we call companies are actually little monarchies. You’re looking around, and you see, for example, a laptop, and that laptop was made by Apple, which is a monarchy.
There are many errors here. First, Apple is one firm among countless others most of which do not produce hugely successful products. The big question is not how Apple produces but how Apple is produced. Firms operate as planned entities but they are embedded in and constrained by a broader sea of market competition. It’s the competitive environment that drives innovation, efficiency, and consumer satisfaction.
Second, Mises was closer to the truth when he wrote in Planned Chaos that it’s the consumers not the producers who are monarchs:
In the market economy the consumers are supreme. Their buying and their abstention from buying ultimately determine what the entrepreneurs produce and in what quantity and quality. It determines directly the prices of consumer goods and indirectly the prices of all producer goods, viz., labor and material factors of production. It determines the emergence of profits and losses and the formation of the rate of interest. It determines every individual’s income…The market adjusts the efforts of all those engaged in supplying the needs of the consumers to the wishes of those for whom they produce, the consumers. It subjects production to consumption.
Capitalist firms are disciplined by the necessity of persuading consumers to purchase their products and by competition. Successful firms must continuously meet our desires and needs to survive. When Apple fails to do so, it will face the same fate as countless firms before it—obsolescence and failure.
Markets do hold lessons about governance, but Yarvin draws the wrong conclusions. Democracy, not monarchy, is the political system most analogous to capitalism. As Mises observed, “The market is a democracy in which every penny gives a right to vote.” The analogy works both ways: voting in a democracy mirrors spending in a market. Both systems empower individuals—consumers or voters—to shape outcomes, whether by determining market success or selecting leaders.
Democracy and capitalism are both examples of open-access orders, systems characterized by dispersed power, low barriers to entry, and transparent, universally applicable rules. Such features foster adaptability, accountability, and broad participation—qualities essential to both economic and political success.
The West does face a modest “crisis” of democracy, but the root of this crisis lies in expecting democracy to do too much. We have collectivized decisions which are best left in the hands of individuals and markets but democracy is not a good way of making collective decisions.
Democracy is best understood as a constraint on government power, akin to a Bill of Rights, federalism, and the separation of powers. Democracy’s virtue is in providing a mechanism to remove bad rulers without resorting to bloodshed and its primary value lies in preventing catastrophic outcomes like mass famines and democide—a significant and undeniable merit. Autocracies and monarchies perform much less well on the big issues and, contrary to what many people think, autocracies do not grow faster, win more wars, or perform better on any meaningful comparison that has been investigated.
It is also essential to recognize that “democracy” encompasses a wide range of structures—parliamentary, presidential, constitutional, and more—and there is plenty of room for improved choice within the broader category. We can improve our democracy.
The real lesson from markets is not to create monarchs but to design systems that create choice and competition and allow citizens to remove leaders when they fail.
Hat tip for discussion: Connor.
Keep an Eye on Crypto Regulation
Crypto regulation is likely to change very rapidly. I expect that SAB 121 will be overturned, perhaps even today. Overturning SAB 121 wouldn’t even be controversial because, as I wrote earlier, Democrats and Republicans in the House and Senate both voted to overturn SAB 121 which was saved only by Biden’s veto.
Essentially, SAB 121 made it prohibitive for banks to offer custody services for crypto because that service would then impact all kinds of risk and asset regulations on the bank. Aside from singling out crypto, the SEC is not a regulator of banks so this seemed like a regulatory overreach.
I also hope that the tax rules on staking are simplified. Staking rewards paid in tokens should not be taxed until sold. Just as apples aren’t taxed when they grow on the tree but only when sold.
There are also a number of interesting cases working the way through the courts. Lewellen v. Garland seeks to clarify that crypto projects that don’t custody funds are not money transmitters (they can’t be since they never control funds and have no way of knowing the customer information that money transmitters must provide to the government). The case is particularly interesting to me because Lewellen, the plaintiff, is suing to set up a crypto based assurance contract based, in part, on my work (see also here with Cason and Zubrickas):
Pharos fills an important gap in the existing cryptocurrency financial system. Lewellen has seen that there are “public goods” that many people would be happy to contribute to financially, but only if supporters can be assured that the full amount to fund the public good will be raised. In other words, they will contribute if they can be assured that the public good will be deployed. Partial fundraising for these projects would not be acceptable. Examples include building infrastructure such as a bridge or hospital, building a war monument, funding an event like a festival or conference, funding a medical trial or scientific study, filing an advocacy lawsuit, or funding a movie production or other cultural good. Nobody wants to pay for these endeavours without knowing that others will pay enough to complete the project.
To address this dilemma, Pharos would deploy the concept of “assurance contracts.” An assurance contract is a system in which contributors commit money that is released to the planned recipient only if the fundraising goal is met by a certain date. Otherwise the money is returned to the would-be contributors. By promising a refund if the required amount is not raised, assurance contracts encourage more public goods to be funded through voluntary contributions. See Tabarrok, The Private Provision of Public Goods via Dominant Assurance Contracts, 96 Pub. Choice 345, 345-48 (1998).
Atlas Shrugged as Novel
The conversation between Henry Oliver and Hollis Robbins about Atlas Shrugged as a novel is excellent. I enjoyed especially the discussion of some of the minor characters and the meaning of their story arcs.
Hollis: There are some really wonderful minor characters. One of them is Cherryl Taggart, this shop girl that evil Jim Taggart meets one night in a rainstorm, and she’s like, “Oh, you’re so awesome,” and they get married. It’s like he’s got all this praise for marrying the shop girl. It’s a funny Eliza Doolittle situation because she is brought into this very wealthy society, which we have been told and we have been shown is corrupt, is evil, everybody’s lying all the time, it’s pretentious, Dagny hates it.
Cherryl Taggart is brought into this. In the beginning, she hates Dagny because she’s told by everybody, “Hate Dagny, she’s horrible.” Then she comes to her own mini understanding of the corruption that we understand because Dagny’s shown it in the novel, has shown it to us this entire time. She comes to it and she’s like, “Oh my God,” and she goes to Dagny. Dagny’s so wonderful to her like, “Yes. You had to come to this on your own, I wasn’t going to tell you, but you were 100% right.” That’s the end of her.
Henry: Right. When she meets Taggart, there’s this really interesting speech she has where she says, “I want to make something of myself and get somewhere.” He’s like, “What? What do you want to do?” Red flag. “What? Where?” She says, “I don’t know, but people do things in this world. I’ve seen pictures of New York,” and she’s pointing at like the skyscrapers, right? Whatever. “I know that someone’s built that. They didn’t sit around and whine, but like the kitchen was filthy and the roof was leaking.” She gets very emotional at this point. She says to him, “We were stinking poor and we didn’t give a damn. I’ve dragged myself here, and I’m going to do something.”
Her story is very sad because she then gets mired in the corruption of Taggart’s. He’s basically bit lazy and a bit of a thief, and he will throw anyone under the bus for his own self-advancement. He is revealed to be a really sinister guy. I was absolutely hissing about him most of the time. Then, let’s just do the plot spoiler and say what happens to Cherryl, right? Because it’s important. When she has this realization and Taggart turns on her and reveals himself as this snake, and he’s like, “Well, what did you expect, you idiot? This is the way the world is.”
Hollis: Oh, it’s a horrible fight. It’s the worst fight.
Henry: Right? This is where the melodrama is so good. She goes running out into the streets, and it’s the night and there are shadows. She’s in the alleyway. Rand, I don’t have the page marked, but it’s like a noir film. She’s so good at that atmosphere. Then it gets a little bit gothic as well. She’s running through the street, and she’s like, “I’ve got to go somewhere, anywhere. I’ll work. I’ll pick up trash. I’ll work in a shop. I’ll do anything. I’ve just got to get out of this.”
Hollis: Go work at the Panda Express.
Henry: Yes. She’s like, “I’ve got to get out of this system,” because she’s realized how morally corrupting it is. By this time, this is very late. Society is in a– it’s like Great Depression style economic collapse by this point. There really isn’t a lot that she could do. She literally runs into a social worker and the social– Rand makes this leering dramatic moment where the social worker reaches out to grab her and Cherryl thinks, “Oh, my God, I’m going to be taken prisoner in. I’m going back into the system,” so she jumps off the bridge.
This was the moment when I was like, I’ve had this lurking feeling about how Russian this novel is. At this point, I was like, “That could be a short story by Gogol,” right? The way she set that up. That is very often the trap that a Gogol character or maybe a Dostoevsky character finds themselves in, right? That you suddenly see that the world is against you. Maybe you’re crazy and paranoid. Maybe you’re not. Depends which story we’re reading. You run around trying to get out and you realize, “Oh, my God, I’m more trapped than I thought. Actually, maybe there is no way out.” Cherryl does not get a lot of pages. She is, as you say, quite a minor character, but she illustrates the whole story so, so well, so dramatically.
Hollis: Oh, wow.
Henry: When it happens, you just, “Oh, Cherryl, oh, my goodness.”
Hollis: Thank you for reading that. Yes, you could tell from the very beginning that the seeds of what could have been a really good person were there. Thank you for reading that.
Henry: When she died, I went back and I was like, “Oh, my God, I knew it.”
Hollis: How can you say Rand is a bad writer, right? That is careful, careful plotting, because she’s just a shop girl in the rain. You’ve got this, the gun on the wall in that act. You know she’s going to end up being good. Is she going to be rewarded for it? Let me just say, as an aside, I know we don’t have time to talk about it here. My field, as I said, is 19th century African American novels, primarily now.
This, usually, a woman, enslaved woman, the character who’s like, “I can’t deal with this,” and jumps off a bridge and drowns herself is a fairly common and character. That is the only thing to do. One also sees Rand heroes. Stowe’s Dred, for example, is very much, “I would rather live in the woods with a knife and then, be on the plantation and be a slave.” When you think about, even the sort of into the 20th century, the Malcolm X figure, that, “I’m going to throw out all of this and be on my own,” is very Randian, which I will also say very Byronic, too, Rand didn’t invent this figure, but she put it front and center in these novels, and so when you think about how Atlas Shrugged could be brought into a curriculum in a network of other novels, how many of we’ve discussed so far, she’s there, she’s influenced by and continues to influence.
A Galt’s Gulch for Talent
A new paper in the QJE, The Global Race for Talent: Brain Drain, Knowledge Transfer, and Growth, by Marta Prato uses extensive data on inventors and their migration to make the following points.
(i) gross migration is asymmetric, with brain drain (net emigration) from the EU to the United States; (ii) migrants increase their patenting by 33% a year after migration; (iii) migrants continue working with inventors at origin after moving, although less frequently; (iv) migrants’ productivity gains spill over to their collaborators at origin, who increase patenting by 16% a year when a co-inventor emigrates.
Notice that migration doesn’t just relocate talent from the EU to the US; it amplifies talent. Preventing “brain drain” would create short-term gains for the EU but retaining talent at lower productivity would stifle long-term innovation and patenting, ultimately slowing growth for both the EU and the world. In short, even the EU gains from sending talent to the US! The effect would be much larger if we can import high-skill immigrants from countries where their skills are even less productive than in the EU. Ideally, other nations could replicate the US institutions that supercharge productivity, creating global economic gains. For now, however, the US seem to be a unique Galt’s Gulch for talent.
Prato concludes with a practical suggestion:
On the migration policy side, doubling the size of the U.S. H1B visa program increases U.S. and EU growth by 4% in the long run, because it sorts inventors to where they produce more innovations and knowledge spillovers.
Of course, when we expand the H1B program, we should allocate the visas by compensation rather than by lottery. (Jeremy Neufeld runs the numbers). In this way, we would get the most valuable workers. And please don’t tell me that we need a lottery so some poor startup can hire workers. No. Unless you have some compelling argument for why there is a massive externality and why lotteries (lotteries!) are the best way to target that externality we should let price allocate.
The Remarkable Life of Ibelin
The Remarkable Life of Ibelin (Netflix) is one of the best and best-crafted documentaries that I have ever seen. It tells the story of Mats Steen, a Norwegian boy living with Duchenne muscular dystrophy. As the disease relentlessly robs him of mobility, Mats turns to the online world, spending much of his time immersed in World of Warcraft. (No spoilers.)
To Mats’ parents, his growing screen time is a source of worry and a reminder of the physical limitations imposed by his condition: a life confined to a wheelchair, seemingly isolated and devoid of traditional social connections. By his early twenties, Mats is capable of moving only a few fingers—just enough to click a mouse. But what else, his parents wonder, is there for him?
The documentary follows Mats’ until his death at the age of 25. On the surface, it’s a tragic yet predictable narrative of a young life overshadowed by illness. What happens next transforms the story. After Mats’ passing, his parents post a notice of his death on his blog. To their astonishment, messages pour in from all over the world. Strangers write heartfelt tributes, sharing stories of how Mats profoundly impacted their lives. In the online realm, Mats was known as Ibelin, a vibrant personality who had cultivated deep friendships, inspired others, and even experienced romantic relationships.
The documentary then retells Mats’ story but this time as Ibelin and it does so in such a way that we feel the exhilaration and freedom that Mats must have felt when he discovered that he could have a flourishing life in a new realm. It’s brilliant conceived and aided by the fact that Mat’s entire online life–which in many ways is his life–has been recorded. Everything he said and did, 42,000 pages of text, is preserved online. (As Tyler has said, if you want to be remembered, write for the AIs.)
The film raises profound questions: If heaven is incorporeal, is an online existence closer to a heavenly life than the physical one? What defines an ideal romance? What constitutes true friendship? Highly recommended.
The Borda Count is the Best Method of Voting
It’s well known that the voting methods we use are highly defective, as they fail to meet fundamental criteria like positive responsiveness, the Pareto principle, and stability. Positive responsiveness (monotonicity) means that if a candidate improves on some voters’ ballots, this should not reduce the candidate’s chances of winning. Yet, many voting methods, including runoffs and ranked-choice voting, fail positive responsiveness. In other words, candidates who became more preferred by voters can end up losing when they would have won when they were less preferred! It’s even more shocking that some voting systems can fail the Pareto principle, which simply says that if every voter prefers x to y then the voting system should not rank y above x. Everyone knows that in a democracy a candidate may be elected that the minority ranks below another possible candidate but how many know that there are democratic voting procedures where a candidate may be elected that the majority ranks below another possible candidate or even that democratic voting procedures may elect a candidate that everyone ranks below another possible candidate! That is the failure of the Pareto principle and the chaos results of McKelvey–Schofield show that this kind of outcome should be expected.
Almost all researchers in social choice understand the defects of common voting systems and indeed tend to agree that the most common system, first past the post voting, is probably the most defective! But, as no system is perfect, there has been less consensus on which methods are best. Ranked choice voting, approval voting and the Borda Count all have their proponents. In recent years, however, there has been a swing towards the Borda Count.
Don Saari, for example, whose work on voting has been a revelation, has made strong arguments in favor of the Borda Count. The Borda Count has voter rank the n candidates from most to least preferred and assigns (n-1) points to the candidates. For example if there are 3 candidates a voter’s top-ranked candidate gets 2 points, the second ranked candidate gets 1 point and the last ranked candidate 0 points. The candidate with the most points overall wins.
The Borda Count satisfies positive responsiveness, the Pareto principle and stability. In addition, Saari points out that the Borda Count is the only positional voting system to always rank a Condorcet winner (a candidate who beats every other candidate in pairwise voting) above a Condorcet loser (a candidate who loses to every other candidate in pairwise voting.) In addition, all voting systems are gameable, but Saari shows that the Borda Count is by some reasonable measures the least or among the least gameable systems.
My own work in voting theory shows, with a somewhat tongue in cheek but practical example, that the Borda Count would have avoided the civil war! I also show that other systems such as cumulative voting or approval voting are highly open to chaos, as illustrated by the fact that under approval voting almost anything could have happened in the Presidential election of 1992, including Ross Perot as President.
One reason the Borda Count performs well is that it uses more information than other systems. If you just use a voter’s first place votes, you are throwing out a lot of information about how a voter ranks second and third candidates. If you just use pairwise votes you are throwing out a lot of information about the entire distribution of voter rankings. When you throw out information the voting system can’t distinguish rational from irrational voters which is one reason why the outcomes of a voting system can look irrational.
Eric Maskin has an important new contribution to this literature. Arrow’s Independence of Irrelevant Alternatives (IIA) says that if no voters change their rankings of x and y then the social ranking of x and y shouldn’t change. In other words, if no voter changes their ranking of Bush and Gore then the outcome of the election shouldn’t change regardless of how Nader is ranked (for the pedantic I exclude the case where Nader wins.) The motivation for IIA seems reasonable, we don’t want spoilers who split a candidate’s vote allowing a less preferred candidate, even a Condorcet loser to win. But IIA also excludes information about preference intensity from the voting system and throwing out information is rarely a good idea.
What Maskin shows is that it’s possible to keep the desirable properties of IIA while still measuring preference intensity with what he calls modified IIA, although in my view a better name would be middle IIA. Modified or middle IIA says that an alternative z should be irrelevant unless it is in the middle of x and y, e.g. x>z>y. More precisely, we allow the voting system to change the ranking of x and y if the ranking of z moves in or out of the middle of x and y but not otherwise (recall IIA would forbid the social ranking of x and y to change if no voter changes their ranking of x and y).
Maskin shows that the Borda Count is the only voting system which satisfies MIIA and a handful of other desirable and unobjectionable properties. It follows that the Borda Count is the only voting system to both measure preference intensity and to avoid defects such as a spoilers.
The debates over which is the best voting system will probably never end. Indeed, voting theory itself tells us that multi-dimensional choice is always subject to some infirmities and people may differ on which infirmities they are willing to accept. Nevertheless, we can conclude that plurality rule is a very undesirable voting system and the case for the Borda Count is strong.
Canada’s Comparative Advantages
Jay Martin writes a provocative post, Has Canada Become a Jamaican Bobsled Team?
if Canada were to become a state, it would be the third poorest in the country, right behind Alabama.
Everybody talks about the American debt issue, but Canadian households bear more debt relative to their income than any other G7 country. The average Canadian now spends 15% of their income on debt servicing.
This is a stark shift from 2008 when Canada emerged from the global financial crisis with a healthier balance sheet than any other G7 nation.
One indicator I pay close attention to is corporate investment per worker.
Every year, businesses invest in growth – new technology, new projects, new employees or products. If you take the total number that businesses invest during a calendar year, and divide that by the number of active workers in the country, you get the corporate investment per worker.
In the U.S., businesses invest about $28,000 per worker. In Canada, that number is only $15,000—nearly half.
Corporate investment is what drives future productivity, economic growth, and opportunity. The higher the number, the brighter the future.
What is Canada’s comparative advantage?
…we have vast natural resources, we have easy-to-navigate geography, we have the world’s longest coastline that spans three oceans – allowing direct access to every global market, and the largest shared international land border, on the other side of which is the worlds wealthiest, hungriest customer.
We have product. And we have a direct line to the consumer.
We are not capitalizing on these advantages because we have been sold a narrative discouraging investment in the industries where we outperform the world.
…The narrative that Canada should abandon its resource sector to pursue conceptual industries like hydrogen power or electric vehicle production is both misguided and damaging. These are fields where Canada has little experience or infrastructure, we are not competitive, and the evidence is in our economic data.
I would add one point. The issue shouldn’t be framed as extracting natural resources versus high-tech investment, as if mining, oil and gas, lumber and agriculture were simple brute-labor industries. In fact, there is plenty of room for artificial intelligence to dramatically increase the rate at which profitable mines are discovered. Industrial robotics and automation are the future of mining. Agriculture is a high-tech industry from genetic engineering to robotic laser weeding to satellite based based crop monitoring.
Indeed, Canada’s best chance to stay at the forefront of technology lies in exploiting its comparative advantages.
Economics in the Age of Algorithms
Great talk from Sendhil Mullainathan. He discusses how machine learning differs from causal inference, how ML can be used to develop new and strikingly original hypotheses, why economists are necessary for the design of recommendation systems and algorithms. Deep but accessible. Provides a very important roadmap for how humans and AI can work together on science.
Congestion Tolls versus Congestion Pricing
New York’s new congestion fee appears to be reducing commuting times on key routes (see Tyler and this thread from Michael Ostrovsky). The toll only has two rates, however, on-peak (5 AM to 9 PM on weekdays and 9 AM to 9 PM on weekends) $9 and off-peak ($2.50). I like the way Vitalik Buterin explained a key weakness:
I wish the tolls were dynamic. Price uncertainty is better than time uncertainty (paying $10 more today is fine if you pay $10 less tomorrow, but you can’t compensate being 30 min late for a flight or meeting by being 30 min early to the next one).
Exactly right. Tyler and I make the same point about price controls (ceilings) in Modern Principles. A price ceiling substitutes a time price for a money price. But this isn’t a neutral tradeoff—money prices benefit sellers, while time prices are pure waste (see this video for a fun illustration).
Here in Northern Virginia the toll on I-66 to Washington is dynamic and on-average varies by more than a factor of 6 during peak hours. Everyone complains about congestion pricing when it is first introduced but people get used to it quickly. Albeit in VA we still have the option of paying no-toll which perhaps eases the transition.
Martha
Martha (Netflix): A compelling bio on Martha Stewart. Her divorce from Andrew Stewart happened more than 30 years ago so the intensity of her anger and 
bitterness comes as a surprise. With barely concealed rage, she recounts his affairs and how poorly he treated her. “But didn’t you have an affair before he did?” asks the interviewer. “Oh, that was nothing,” she replies waving it off, “nothing.”
Stewart’s willpower and perfectionism are extraordinary. She becomes the U.S.’s first self-made female billionaire after taking her company public in 1999. Then comes the insider trading case. The amount in question was trivial—she avoided a $45,673 loss by selling her ImClone stock early. Stewart was not an ImClone insider and not guilty of insider trading. However, in a convoluted legal twist, she was charged with attempting to manipulate her own company’s stock price by publicly denying wrongdoing in the ImClone matter. Ultimately, she was convicted of lying to the SEC. It’s worth a slap on the wrist but the lead prosecutor is none other than the sanctiminous James Comey (!) and she gets 5 months in prison.
Despite losing hundreds of millions of dollars and control of her own company, Martha doesn’t give up and in 2015, now in her mid 70s, she creates a new image and a new career starting with, of all things, a shockingly hard-assed roast of Justin Bieber. The Bieber roast leads to a succesful colloboration with Snoop Dogg. Legendary.
Stewart is as compelling a figure as Steve Jobs or Elon Musk. Not entirely likable, perhaps, but undeniably admirable.
Nuclear Deregulation
Nuclear deregulation. Yes, I know how that sounds but bear with me. As Koopman and Dourado write in the WSJ:
The Atomic Energy Act of 1954 established a precise framework for nuclear regulation, requiring federal licensing only for facilities that either use nuclear material “in such quantity as to be of significance to the common defense and security” or use it “in such manner as to affect the health and safety of the public.” This careful distinction recognized that not every nuclear reactor poses meaningful risks.
Those qualifiers were intentional but for a long time were unimportant because nuclear reactors were big and potentially quite dangerous but that was 70 years ago! Today, there are small, safe nuclear reactor designs which meet the requirements of the 1954 Act.
Small modular reactors are dramatically different from the massive reactors envisioned during the Cold War. The reactors at issue in this case generate a fraction of the power of conventional nuclear plants—around 20 megawatts or less—and are designed with modern safety features that would release close to zero radiation even in a worst-case meltdown scenario. Last Energy’s design operates entirely inside a container with 12-inch steel walls that has no credible mode of radioactive release even in the worst reasonable scenario.
Even in such a scenario, according to the plaintiffs, radiation exposure would be less than a tenth what the NRC has deemed too safe to require regulation in other contexts—and less than 1/800th of a routine abdominal CT scan.
The NRC should not be regulating these reactors. Small scale nuclear should be regulated like x-Ray machines or gas turbines not like billion dollar nuclear power plants, the current rule. Reasonable regulation will allow iterative innovation. As I sais in my post Give Innovation a Chance, innovation is a dynamic process. You must build to build better.
Yet the NRC is stifling this progress. The licensing process alone can take up to nine years. Small modular reactor company NuScale spent more than $500 million just to get its design certification approved by the NRC, a process that took more than two million hours of labor and required millions of pages of information. NuScale still needs to apply for its license, which will multiply these costs.
The NRC rule is currently being challenged in State of Texas v. U.S. Nuclear Regulatory Commission. I think the case has a good chance of winning which would be a wonderful win for energy abundance.
The Intelligence Revolution
We believe that, in 2025, we may see the first AI agents “join the workforce” and materially change the output of companies.
…We are beginning to turn our aim beyond that, to superintelligence in the true sense of the word. We love our current products, but we are here for the glorious future. With superintelligence, we can do anything else. Superintelligent tools could massively accelerate scientific discovery and innovation well beyond what we are capable of doing on our own, and in turn massively increase abundance and prosperity.
This sounds like science fiction right now, and somewhat crazy to even talk about it. That’s alright—we’ve been there before and we’re OK with being there again. We’re pretty confident that in the next few years, everyone will see what we see, and that the need to act with great care, while still maximizing broad benefit and empowerment, is so important. Given the possibilities of our work, OpenAI cannot be a normal company.
From Sam Altman.
The intelligence revolution is going to be bigger, more impactful and more wrenching than the industrial revolution.