Emergent Ventures UK Tranche

by  Tyler Cowen

I’m pleased to announce a new tranche of Emergent Ventures, focused specifically on progress-oriented projects in the United Kingdom. This initiative is made possible in partnership with Founders Pledge and Renaissance Philanthropy.

While EV has regarded the UK as a priority area from the beginning, this tranche enables increased support for pro-science, pro-progress projects at a critical time. Those interested can apply through the standard Emergent Ventures application process, selecting “United Kingdom” in the dropdown for “My project will affect.”

The smoking tax Laffer curve: Australia is not exempt from the laws of economics

by  Tyler Cowen in

Over the past decade, the excise rate per cigarette has tripled from 46c to $1.40. The excise now accounts for $28 of the average $40 price for a packet of 20 cigarettes.

For some time a rising tax was associated with the twin benefits of falling smoking rates and rising revenue, but after peaking at $16.3bn in 2019-20, federal excise receipts have plunged.

The March budget forecasts tobacco excise receipts will be just $7.4bn in this financial year – the lowest since 2012-13 – and will continue to fall to $6.7bn by the end of the decade.

Rather than a sudden collapse in smoking rates, experts point to an explosion in the availability of black market tobacco in recent years.

Here is the full story.

What (else) do unions do?

by  Tyler Cowen in

From a 2023 paper by Vojislav Maksimovic and Liu Yang:

Using plant-level data from the Census Bureau, we show that in addition to paying higher wages and benefits, unionized plants have lower and less effective incentives. Unionized plants do not exhibit the same positive associations between incentives and investment and growth found in non-unionized plants. This effect holds among both non-managerial and managerial employees, although it has a more pronounced influence on the former group. Consequently, unionized plants experience higher rates of closure, reduced investment, and slower employment growth. We also find significant spillover effects within the firm: partially unionized firms not only offer higher wages but also maintain weaker incentives in their non-unionized plants compared to their industry peers. These effects are economically significant and are half of our estimated reduction in incentives in unionized plants. This pattern aligns with the hypothesis that incentives in non-unionized plants create disutility for the median worker. Spillovers reduce employment and efficiency and make firms less attractive as potential targets, thus reducing the market’s effectiveness in allocating corporate assets. By leveraging recent changes in state-level right-to-work laws, we provide causal evidence that states that adopt such laws experience a boost in employment and investment.

Via KingoftheCoast.

The New Monetary Economics is underway, legislation allowing

by  Tyler Cowen in

Walmart & Amazon are looking into issuing their own stablecoins—cutting out banks, cards, and slow settlement. If laws like the Genius Act clear, we might be on the cusp of merchant-issued money. Are you ready for a world where checkout includes “Pay with WalmartCoin/AmazonCoin”?

Here is the tweet, here is the WSJ article. Here is my podcast with Alex on the new monetary economics. Note the tagline “What if the most radical ideas about money weren’t wrong—just early?”

The value of good management, and also talent allocation

by  Tyler Cowen in

Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200,000 white-collar workers and 30,000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers’ career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers’ specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers’ time at the firm.

That is from a recent paper by Virginia Minni.  Via the excellent Kevin Lewis.

Friday assorted links

by  Tyler Cowen

1. More economics-themed comedy coming to NYC.

2. Student assessment in the age of AI.

3. Amanda Feilding obituary (NYT): “She had a number of love affairs with men who also drilled small holes in their heads…”

4. The rise and fall of inheritance flows.

5. Rafael Yglesias, telephone!

6. New issue of Works in Progress.

7. Something about a guy and books, though he is wrong about Jean-Christophe.  Both Chris Weber and I love the book and have read it.  He is right that it is wonderful.

Which countries won’t exist in the 22nd century?

by  Tyler Cowen in

Or sooner, that is the topic of my latest essay for The Free Press.  Excerpt:

The most radical redefinition of the nation-state may be coming from Haiti, where preexisting forms of government appear to have collapsed altogether. Haiti has been a troubled place for a long time, but when I used to visit in the 1990s you could come and go intact—at least if you exercised commonsense precautions.

But since 2023, there have been no elected officials of any kind present in Haiti. That is highly unusual for what was supposed to be a democracy. Circa mid-2025, criminal gangs took control of most of Port-au-Prince, the capital and most populous city of the country. Murder rates are skyrocketing, and if somehow I were foolish enough to show my face in the country (by the way, the main airport is not usually open) it is likely I would be kidnapped almost immediately.

The remaining fragments of the government have taken to carrying out drone attacks on the criminal gangs, but without making much if any progress in reestablishing their rule. Mainly it is the warlords who are left, and who also run the country.

Various U.S. interventions, most notably under President Clinton in the 1990s, and UN-backed troop deployments have failed to prevent Haiti from falling to pieces. You can say the world has not tried hard enough, but you cannot say the world has not tried. There is still a Kenyan-led, UN-affiliated force in Haiti, but it does not appear to exert any significant influence.

One possibility is that a dominant gang emerges and becomes the new government, albeit a highly oppressive one. Yet it is far from obvious that consolidation is in the works, as in many situations we observe multiple, warring drug gangs as a persistent outcome. Most likely, Haiti will have ceased to be a sustainable nation-state with an identifiable government. It would better be described as a state of Hobbesian anarchy.

Worth a ponder.

One or two game theoretic observations

by  Tyler Cowen in

So far the campaign is a major “win” for (non-LLM) AI, though that is not yet a story.  There is a reason why Palantir was priced at 300x earnings.

If you are one of those Iranian leaders, or nuclear scientists, your calculus has to be that you can never step outside again, at least not anytime soon.  I believe that situation is unprecedented in the history of wartime?  It remains to be seen how much that will shape the logic of deterrence and in turn outcomes, but I will be pondering this and observing.

POTMR.

How New Zealand invented inflation targeting

by  Tyler Cowen in

…the very next day, [Roger] Douglas appeared on TV declaring his intention to reduce inflation to ‘around 0 or 0 to 1 percent’ over the next couple of years, and then went on to make several similar comments in the following days.

Douglas would soften his stance on specific timelines but ask the Reserve Bank and Treasury to develop public inflation goals for the next few years that would support his earlier statements. The Bank added 1 percentage point to Douglas’s upper range to account for the measurement bias in inflation data at that time, arriving at a target range of 0–2 percent. Michael Reddell, head of the Reserve Bank’s monetary policy unit, said it was settled on ‘more by osmosis than by ministerial sign-off’.

This development led officials to entertain the idea of making inflation targets part of the Bank’s monetary policy framework. David J. Archer, a former Assistant Governor, said inflation targets were eventually chosen ‘as the least bad of the alternatives available’.

…A new Reserve Bank Act was passed in December 1989 and came into effect in February 1990. Governor Don Brash was tasked with reaching the 0–2 percent target by the end of 1992. To the great surprise of many, it was achieved a year ahead of schedule in December 1991.

Here is much more from Oscar Skyes at Works in Progress.

What happened when Spain brought back the wealth tax?

by  Tyler Cowen in

From the Journal of Public Economics Twitter feed:

What happened when Spain brought back the Wealth Tax in 2011? Using variation in exposure, this paper finds: – No drop in savings, but drop in taxable wealth—mainly via legal avoidance – Asset shifting caused most revenue loss – Estimated revenue loss was 2.75x initial 2011 rev.

Here is the full paper by Mariona Mas-Montserrat, José María Durán-Cabré, and Alejandro Esteller-Moré.  Via Jerusalem Demsas.

Japan facts of the day

by  Tyler Cowen in

Japan must stop being overly optimistic about how quickly its population is going to shrink, economists have warned, as births plunge at a pace far ahead of core estimates.

Japan this month said there were a total of 686,000 Japanese births in 2024, falling below 700,000 for the first time since records began in the 19th century and defying years of policy efforts to halt population decline.

The total represented the ninth straight year of decline and pushed the country’s total fertility rate — the average number of children born per woman over her lifetime — to a record low of 1.15…

The median forecast produced by the National Institute of Population and Social Security Research (IPSS) in 2023 did not foresee the number of annual births — which does not include children born to non-Japanese people — dropping into the 680,000 range until 2039.

Here is more from Leo Lewis at the FT.

My Conversation with the excellent Any Austin

by  Tyler Cowen in

Here is the audio, video, and transcript.  Here is an introduction to Any Austin:

Any Austin has carved a unique niche for himself on YouTube: analyzing seemingly mundane or otherwise overlooked details in video games with the seriousness of an art critic examining Renaissance sculptures. With millions of viewers hanging on his every word about fluvial flows in Breath of the Wild or unemployment rates in the towns of Skyrim, Austin has become what Tyler calls “the very best in the world at the hermeneutics of infrastructure within video games.” But Austin’s deeper mission is teaching us to think analytically about everything we encounter, and to replace gaming culture’s obsession with technical specs and comparative analysis with a deeper aesthetic appreciation that asks simply: what are we looking at, and what does it reveal?

Excerpt:

COWEN: The role in history is important to me. Now AI-generated art would have its own role in history, but it wouldn’t compete directly with Michelangelo. When it comes to movies, I think it’s different because mostly when I’m seeing movies, I’m seeing new movies that don’t yet have a role in history. If the new movie were made in part or fully by the AI, or maybe I’m making it myself, I don’t think I would be any less interested. It’s all artifice anyway.

AUSTIN: There’re two things I take a little issue with there. I don’t take issue with the fact that the role in history is important and beautiful, but the fact that you can watch a movie and get an emotional thing from it without having its role in history implies that there’s some intrinsic, whatever, value to the movie itself, et cetera. Is the implication there that if you didn’t know the role in history of Michelangelo’s David, or whatever, you would look at it and go, “That’s just a guy.” Do you think there’s no intrinsic something to that thing?

COWEN: There’s some, but if I didn’t understand Christianity, Florence, the Renaissance, I think it would lose more than half its value.

AUSTIN: Which artistic mediums is that true for you, and which ones isn’t it? Like music —

COWEN: Abstract music — the role in history is not that important in most cases.

AUSTIN: It’s more of a supplement to you. It makes it more fun to learn about. If you know that Mozart was in the place with these people and were . . . If you understand all of that stuff, it’s fun.

COWEN: That’s 10 percent of the value, but not that much.

AUSTIN: Is it 10 percent . . . Is it the same type of value to you? Or is it just a separate thing to know —

COWEN: Separate thing. With opera, the role in history becomes important again. You hear Don Giovanni. You know about Romanticism, the Enlightenment, Casanova. It all makes much more sense, and it’s funnier.

And this:

COWEN: I have a favorite infrastructure. For me, it would be bridges, ports, and harbors. Do you have a favorite infrastructure?

AUSTIN: Definitely. I’m a big fan of . . . Oh, man, bridges are really good. Bridges, ports, harbors. Roads are good. Actually, no, it’s the stuff we don’t see. Sewage is pretty crazy to me. That we’ve managed to take care of all of that is pretty wild. Energy infrastructure is really fascinating to me.

COWEN: I love wind power turbines.

AUSTIN: Wind power turbines are scary, but I respect your opinion. Nuclear power plants are awesome. Really, really cool.

COWEN: Agreed.

AUSTIN: We should have more. That’s not a policy thing. I think they’re neat. We should build them for the aesthetics, honestly. We should just build those towers. Forget about the —

COWEN: You don’t need the power. Just build the thing. That’s why it’s an artwork.

AUSTIN: Yes, I agree. You have to put in some kind of steam thing because you want to see the steam coming out of it, but just generate steam for no reason. Don’t put any fans in or any spinning turbines or anything. Just have them.

COWEN: We would have historical context like with the sculptures, right?

Definitely recommended, an excellent and very different episode.

And note that Conversations with Tyler now has a dedicated YouTube channel.  Subscribe at youtube.com/@CowenConvos.