Category: Current Affairs
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.
“Be careful what you wish for, you might get it!”
I said that to Ezra Klein about the current rightward vibes shift. What are some of the scenarios I had in mind?:
1. If the Republicans regulate social media companies to discriminate less against “the Right,” those regulations may someday be used against them.
2. Personal presidential issuance of crypto assets is not always (ever?) a good thing or lead to the right incentives. In the meantime, it might serve as a daily referendum on how much of a lame duck presidency we are having, a mixed blessing.
3. The conspiracy theorizing promoted by Trump and various minions could someday come back to bite them, or to sink Vance, or…I guess we will see. Don’t think you can keep this genie in the bottle, or use it only for preferred ends.
4. DOGE successes might centralize power in the executive branch in a manner that the Republicans later regret. That centralization can be more easily be used to expand government regulatory power than to contract it.
5. If there is a pandemic under Trump’s term, the cultivated anti-vaccine sentiment could make it much worse.
6. Rhetoric on taxes and central bank independence could (further) raise real interest rates, damaging the economy and also Republican electoral prospects.
7. The dwindling of various “safeguards” on rhetoric, as the Woke are dismantled, could end up harming later Republican or right-leaning targets of harmful rhetoric, including from other right-wingers. Some of you may feel this is absurd, but just wait.
8. I don’t think we really know what it would mean (will mean?) to put feminization seriously in reverse. I would note I see myself as a significant beneficiary of our more feminized society. I am pleased if more women decide to become “trad wives,” but it is not the circle I will hang around in either. This one really needs much further thought from its advocates, it is not enough to be fed up with the recent excesses. A lot of the people who claim to want more “trad wives” actually want more super talented women who can do that and be very successful in a career at the same time. I am all for that, but I also recognize when I am asking for a free lunch of sorts. I am not sure how elastic the supply is there. Nor am I sure how much such a change might boost birth rates — Iran anybody?
9. To the extent Trump succeeds, American politics will become all the more personality-driven. I see that as a mixed blessing, most likely more negative than positive in the longer run.
10. If Trump does something good for a foreign country you like or favor, he may ask for his pound of flesh in return.
Those are only a few options, the list is really pretty long. I am not panicked about the status quo, but I see it as fraught and unstable. And we haven’t even touched upon AGI advances.
More generally, I would stress that even the most optimistic person should not relinquish his or her sense of the tragic. A lot of Democrats were pretty ecstatic when Obama won a second term, but how happy are they now? Is that just them, or could it be you too?
I’ll say it again — be careful what you wish for, you might get it. The celebratory perspective can be important for getting things done, or for maintaining ideological coherence, but accuracy matters too, and the more accurate perspective should take all this into account.
Ezra Klein on the vibe shift
In July of 2024, Tyler Cowen, the economist and cultural commentator, wrote a blog post that proved to be among the election’s most prescient. It was titled “The change in vibes — why did they happen?” Cowen’s argument was that mass culture was moving in a Trumpian direction. Among the tributaries flowing into the general shift: the Trumpist right’s deeper embrace of social media, the backlash to the “feminization” of society, exhaustion with the politics of wokeness, an era of negativity that Trump captured but Democrats resisted, a pervasive sense of disorder at the border and abroad and the breakup between Democrats and “Big Tech.”
I was skeptical of Cowen’s post when I first read it, as it described a shift much larger than anything I saw reflected in the polls. I may have been right about the polls. But Cowen was right about the culture.
And the end bit:
Cowen may have correctly called the shift in vibes, but he isn’t particularly comfortable with it. If 2024 was partly a backlash to the Democratic Party and culture of the last four years, what might a backlash to this more culturally confident and overwhelming form of Trumpism look like?
“I’ve taken to insisting to my friends on the right: ‘Be careful what you wish for,’ ” Cowen told me. “You might get it.”
Here is the full NYT column.
The second attempted coup d’etat was partially successful
Here is some video. And a related note, don’t forget the ERA either. WSJ article here.
Thinking about Greenland critically (from the comments)
Should the U.S. recognize Somaliland?
I do not myself have a position on this issue, but I found this analysis by Ken Opalo interesting:
The main argument below is that while the people of Somaliland deserve and have a strong case for international recognition, such a development at this time would very likely take away the very incentives that have set them apart from the rest of Somalia over the last 33 years.
To be blunt, achieving full sovereignty with de jure international recognition at this time would do little beyond incentivizing elite-level pursuit of sovereign rents at the expense of continued political and economic development. What has made Somaliland work is that its elites principally derive their legitimacy from their people, and not the international system. Stated differently, full sovereignty runs the risk of separating both the Somaliland state and ruling elites from the productive forces of society; which in turn would free politicians (and policymakers) from having to think of their people as the ultimate drivers of their overall economic wellbeing. Just like in the rest of the Continent, the resulting separation of “suspended elites” from the socio-economic foundations of Somaliland society and inevitable policy extraversion would be catastrophic for Somalilanders.
The last thing the Horn needs is another Djibouti — a country whose low-ambition ruling elites are content with hawking their geostrategic location at throwaway prices while doing precious little to advance their citizens’ material well-being (Djibouti’s poverty rate is a staggering 70%).
There is much more at the link.
Some game theory of Greenland
It is commonly assumed that the U.S. “acquiring” Greenland, whatever that might mean, will result in greater U.S. control of the territory. Along some dimensions that is likely. But it is worth pondering the equilibrium here more seriously.
I observe, in many locations around the world, that indigenous groups end up with far more bargaining power than their initial material resources might suggest. For instance, in the United States Native Americans often (not always) can exercise true sovereignty. The AARP cannot (yet?) say the same. In Mexico, indigenous groups have blocked many an infrastructure project.
One reason for these powers is that, feeling outmatched, the indigenous groups cultivate a temperament of “orneriness” and “being difficult.” Some of that may be a deliberate strategic stance, some of it may be heritage from having been treated badly in the past and still lacking trust, and some of it may, over time, be acquired culture as the strategic stance gets baked into norms and behavior patterns.
Often, in these equilibria, the more nominal power you have over the indigenous group, the more orneriness they will have to cultivate. If you only want a few major concessions, sometimes you can get those better as an outsider. A simple analogy is that sometimes a teenager will do more to obey a grandparent than a parent. Fewer issues of control are at stake, and so more concessions are possible, without fear of losing broader autonomy.
So a greater American stake in Greenland, however that comes about, may in some regards end up being counterproductive. And these factors will become more relevant as more resource and revenue control issues come to the table. For some issues it may be more useful having Denmark available as “the baddie.”
It is worth thinking through these questions in greater detail.
The Greenland debates
I would say we have not yet figured out what is the best U.S. policy toward Greenland, nor have we figured out best stances for either Greenland or Denmark. I am struck however by the low quality of the debate, and I mean on the anti-U.S. side most of all. This is just one clip, but I am hearing very much the same in a number of other interchanges, most of all from Europeans. There is a lot of EU pearl-clutching, and throwing around of adjectives like “colonialist” or “imperialist.” Or trying to buy Greenland is somehow analogized to Putin not trying to buy Ukraine. Or the word “offensive” is deployed as if that were an argument, or the person tries to switch the discussion into an attack on Trump and his rhetoric.
C’mon, people!
De facto, you are all creating the impression that Greenland really would be better off under some other arrangement. Why not put forward a constructive plan for improving Greenland? It would be better yet to cite a current plan under consideration (is there one?). “We at the EU, by following this plan, will give Greenland a better economic and security future than can the United States.” If the plan is decent, Greenland will wish to break off the talks with America it desires. (To be clear, I do not think they desire incorporation. This FT piece strikes me as the best so far on the debates.)
Or if you must stick to the negative, put forward some concrete arguments for how greater U.S. involvement in Greenland would be bad for global security, bad for economic growth, bad for the U.S., or…something. “Your EU allies won’t like it,” or “Trump’s behavior is unacceptable” isn’t enough and furthermore the first of those is question-begging.
It is time to rise to the occasion.
p.s. I still am glad we bought the Danish West Indies in 1917. Nor do I hear many Danes, or island natives, complain about this.
My podcast with Reason
With Liz Wolfe and Zach Weissmueller:
The link here contains the YouTube video, text description, and links to audio versions at reason.com: https://reason.com/podcast/2025/01/10/tyler-cowen-why-do-we-refuse-to-learn-from-history/
Youtube page for embedding is here: https://www.youtube.com/watch?v=p-Kpyg2mFU8
Lots of about libertarianism and state capacity libertarianism, and The Great Forgetting, food at the end…interesting throughout!
Lunar spectrum markets in everything?
Private companies are staking claims to radio spectrum on the Moon with the aim of exploiting an emerging lunar economy, Financial Times research has found. More than 50 applications have been filed with the International Telecommunication Union since 2010 to use spectrum, the invisible highway of electromagnetic waves that enable all wireless technology, on or from the Moon.
Last year the number of commercial filings to the global co-ordinating body for lunar spectrum outstripped those from space agencies and governments for the first time, according to FT research. The filings cover satellite systems as well as missions to land on the lunar surface.
“We will look back and see this as an important inflection point,” said Katherine Gizinski, chief executive of spectrum consultancy River Advisers, which has filed for lunar spectrum for three satellite systems on behalf of other companies since 2021.
Here is more from Oliver Hawkins and Peggy Hollinger at the FT.
Noah Smith on L.A: fire lessons
The best piece I have seen so far, here is one bit:
Basically, the lessons I take away from the horrific L.A. fires are:
- The insurance industry as we know it is in big trouble.
- Climate change is making wildfires worse, but there’s not much we can do about that right now.
- Forest management needs to get a lot more proactive, but is being blocked by regulation.
- Wildfire preparedness is just a lot more important than it used to be.
And this:
Patrick Brown of the Breakthrough Institute estimates that in order to achieve the maximum economic benefit from wildfire suppression, California should be doing almost 4 times as much controlled burning as it currently aims to do, and almost 8 times as much as it’s currently doing. The gains over the last few years are welcome, but also woefully insufficient to the task.
Here is the entire essay. And this guy has a background in fires and forest management, a good piece.
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.
The sick leave culture that is German
Germans are the “world champions in sick leave”, according to the head of the country’s biggest insurer, who was criticised for demanding that workers without a doctor’s note are unpaid for their first day off.
With the economy slowing and the welfare system under pressure, Germany can ill afford its average per worker of 20 sick days a year, said Oliver Bäte, the chief executive of Allianz SE. The EU average is eight.
The figure of 20 days, based on research by the health insurer DAK, puts a further dent in Germany’s ailing work ethic reputation. Last April, Christian Lindner, then finance minister, admitted that the French, Italians and other nationalities worked “a lot more than we do”, after OECD data showed Germans put in significantly fewer working hours per year than their EU and British neighbours…
“In countries like Switzerland and Denmark people work a month longer per year on average — with comparable pay,” he pointed out.
Here is more from the Times of London. If you can get through the gate, you will see it is Mexico that is the work ethic country.
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.
That is from Sure. From yesterday’s WSJ:
And from the WaPo:
The odds are still against any deal, but this is not impossible either.