Category: Current Affairs
China fact of the day
Marriages in China plunged by a fifth to the lowest level on record last year, a setback to efforts by the government to reverse a demographic crisis threatening the world’s second-biggest economy.
The number of marriage registrations fell to 6.1 million, according to statistics released by China’s Ministry of Civil Affairs on Saturday, after a post-pandemic increase to nearly 7.7 million in 2023. The tally for last year marks the fewest marriages since public records began in 1986 and is less than half the peak reached in 2013.
Here is more from Bloomberg News.
What should I ask Jennifer Pahlka?
Yes, I will be doing a Conversation with her. From Wikipedia:
Jennifer Pahlka (born December 27, 1969) is an American businesswoman and political advisor. She is the founder and former executive director of Code for America. She served as U.S. Deputy Chief Technology Officer from June 2013 to June 2014 and helped found the United States Digital Service. Previously she had worked at CMP Media with various roles in the computer game industry. She was the co-chair and general manager of the Web 2.0 conferences. In June 2023, she released the book Recoding America: Why Government Is Failing in the Digital Age and How We Can Do Better.
Recently she has been working on the Niskanen Institute state capacity project. So what should I ask her?
Greenland Next

Hat tip: Max
The exhaustion of rents
A computer expert who has battled for a decade to recover a £600m bitcoin fortune he believes is buried in a council dump in south Wales is considering buying the site so he can hunt for the missing fortune.
James Howells lost a high court case last month to force Newport city council to allow him to search the tip to retrieve a hard drive he says contains the bitcoins.
The council has since announced plans to close and cap the site, which would almost certainly spell the end of any lingering hopes of reaching the bitcoins. The authority has secured planning permission for a solar farm on part of the land.
Here is the full story, via Michael Rosenwald. It is of course amazing that the local authority owning the dump has no interest in recovering the money for itself.
Dwarkesh’s Question
One question I had for you while we were talking about the intelligence stuff was, as a scientist yourself, what do you make of the fact that these things have basically the entire corpus of human knowledge memorized and they haven’t been able to make a single new connection that has led to a discovery? Whereas if even a moderately intelligent person had this much stuff memorized, they would notice — Oh, this thing causes this symptom. This other thing also causes this symptom. There’s a medical cure right here.
Shouldn’t we be expecting that kind of stuff?
It’s a very good question. In 2023, I quipped, “I think they have, we just haven’t asked them.” Maybe, but less clear today. Dwarkesh reports that there have been no good answers.
USPS as a failed sovereign wealth fund
The U.S. government has a direct stake in natural resource wealth, collecting royalties from the extraction of minerals on federal land. In a good year, these royalties (which are dispersed to states) total around $20 billion, although the historic annual average is closer to $10 billion.
These figures pale in comparison to what is arguably America’s largest commercial endeavor: the U.S. Postal Service (USPS). The USPS relies on its vast network of land, buildings, trucks, and processing machines to generate about $80 billion in revenue per year. The obvious problem is that, unlike with Norway and Saudi Arabia’s black gold, the USPS can’t turn a profit on its large asset holdings. The agency lost $9.5 billion on net in FY 2024, and has burned through $100 billion over the past fifteen years…
To sum up: the U.S. isn’t Norway nor Saudi Arabia. Our largest asset-rich enterprise is really bad at making money and channeling investments to productive uses. And, it is for lack of trying; the USPS can do a far better job generating a return on assets such as property.
Here is the full Substack by Ross Marchand.
“Can America Win the AI War with China?”
A long video chat, with Geoffrey Cain, who is more hawkish than I am. Bari Weiss moderates. One argument I make is that America may prefer if China does well with AI, because the non-status quo effects of AI may disrupt their system more than ours. I also argue that for all the AI rival with China (which to be sure is real), much of the future may consist of status quo powers America and China working together to put down smaller-scale AI troublemakers around the rest of the world. Interesting throughout.
Three Simple Principles of Trade Policy
Are we in a trade war today? Who knows? Doesn’t really matter. It’s always a good time to review important principles. A good source is Doug Irwin’s Three Simple Principles of Trade Policy published in 1996. Below I have updated occasionally with more recent data.
Principle 1: A Tax on Imports is a Tax on Exports
Exports are necessary to generate the earnings to pay for imports, or exports are the goods a country must give up in order to acquire imports….if foreign countries are blocked in their ability to sell their goods in the United States, for example, they will be unable to earn the dollars they need to purchase U.S. goods.
…The equivalence of export and import taxes is not an obvious proposition, and it is often counterintuitive to most people. Imagine taking a poll of average Americans and asking the following question: “Should the United States impose import tariffs on foreign textiles to prevent low-wage countries
from harming thousands of American textile workers?” Some fraction, perhaps even a sizeable one, of the respondents would surely answer affirmatively. If asked to explain their position, they would probably reply that import tariffs would create jobs for Americans at the expense of foreign workers and thereby reduce domestic unemployment.Suppose you then asked those same people the following question: “Should the United States tax the exportation of Boeing aircraft, wheat and corn, computers and computer software, and other domestically produced goods?” I suspect the answer would be a resounding and unanimous “No!” After all, it would be explained, export taxes would destroy jobs and harm important industries. And yet the Lerner symmetry theorem says that the two policies are equivalent in their economic effects.
Exports and imports rise and fall together. It is surely obvious that if you want more imports you must export more (barring a bit of borrowing see below). The same thing is true in other countries. As a result, it is also true that when you import more you export more.

Principle 2: Businesses are Consumers Too
Business firms are, in fact, bigger consumers of imported products than are U.S. households.
As of 2024, more than 64% of imports are intermediate products. See here for the data.
By viewing imports not as final consumer goods but as inputs to U.S. production, policy makers can more clearly recognize that the issue is not so much one of “saving” jobs but of “trading off’ jobs between sectors. This brings home forcefully the most important lesson in all of economics-there is no such thing as a free lunch. Every action involves a trade-off of some sort. Higher domestic steel prices help employment in the steel industry but harm employment in steel-using industries. Higher domestic semiconductor prices help employment in the semiconductor industry but harm employment in semiconductor using industries. As john Stuart Mill wrote in 1848 in the context of import protection, “The alternative is not between employing our own country-people and foreigners, but between employing one class or another of our own country-people.”
Principle 3: Trade Imbalances Reflect Capital Flows
There is a fundamental equation of international finance that relates this net borrowing and lending activity to the current account. The equation is:
Exports – Imports = Savings – Investment
The powerful implication of this equation is that if a country wishes to reduce its trade deficit, the gap between its domestic investment and its domestic savings must be reduced.
…A country’s trade balance is related to international capital flows–not with open or closed markets, unfair trade practices, or national competitiveness. If a country wants to solve the “problem” of its trade deficit, it must reverse the international flow of capital into its country. In many cases net foreign borrowing can be reversed by reducing the government fiscal deficit. [emphasis added, AT]
Doug concludes:
These three simple principles of trade policy…[have] stood the test of time, they come as close to truths as anything economists have to offer in any area of policy controversy. Yet they are routinely denied, explicitly or implicitly, in trade policy debates in the United States and elsewhere. I do not imagine that a greater appreciation of these principles would invariably bring about more liberal trade policies; I offer them, rather, in the more modest hope that they might lead to sounder debates in which the real consequences of government policies are confronted more seriously than at present.
Hat tip: Erica York.
Deep Research considers the costs and benefits of US AID
You can read it here, summary sentence:
Based on the analysis above, the net assessment leans toward the conclusion that USAID’s benefits outweigh its costs on the whole, though with important qualifiers by sector and context.
Here is a useful Michael Kremer (with co-authors) paper. Here are some CRS links. Here is a Samo analysis. AID is a major contributor to the Gavi vaccine program, which is of high value. The gains from AID-supported PEPFAR are very high also.
To be clear, I consider this kind of thing to be scandalous. And I strongly suspect that some of the other outrage anecdotes are true, though they are hard to confirm, or not. How about funds to the BBC? While the “Elonsphere” on Twitter is very much exaggerating the horror anecdotes and the bad news, I do see classic signs of “intermediaries capture” for the agency, a common problem amongst not-for-profit institutions.
The Samo piece is excellent. For one thing he notes: “The agency primarily uses a funding model which pays by hours worked, thus incentivizing long-duration projects.” And the very smart Samantha Power, appointed by Biden to run AID, “…is in favor of disrupting the contractor ecosystem.” Samo also discusses all the restrictions that require American contractors to be involved.
Here is a study on how to reform AID, I have not yet read it.
Ken Opalo, in a very useful and excellent post, writes:
For example, in 2017 about 60% of USAID’s funds went to just 25 American organizations. Only 11% of U.S. aid goes directly to foreign organizations. The rest gets management via U.S. entities or multilateral organizations. This doesn’t mean that the 89% of aid gets skimmed off, just that an inefficiently significant share of the 89% gets gobbled up by overhead costs. In addition, this arrangement denies beneficiaries a chance at policy autonomy.
According to the very smart, non-lunatic Charlie Robertson:
My data suggests US AID flows in 2024 were equivalent to: 93% of Somalia’s government revenues, 61% in Sudan, just over 50% in South Sudan and Yemen
While I do not take cutting off those flows lightly, that seems unsustainable and also wrong to me as a matter of USG policy. Those do not seem like viable enterprises to me.
There are various reports of AID spending billions to help overthrow Assad. I cannot easily assess this matter, either whether the outcomes was good or whether AID mattered, but perhaps (assuming it was effective) such actions should be taken by a different agency or institution?
While US AID appears to pass a cost-benefit test, it does seem ripe for reform. Based on what I have read and heard, I would focus all the more on public health programs, and forget about “trade promotion,” “democracy promotion,” and more. I would get rid of virtually all of the consultants, and make direct transfers to worthy African and Ukraine programs, thus lowering overhead. If such worthy programs exist, why not give them money directly? Are they so hard to find? And if so, how trustworthy are these intermediaries really? What are they intermediating to?
So a housecleaning is needed here, but the important sources of value still should be supported.
Trumpian policy as cultural policy
The Trump administration has issued a blizzard of Executive Orders, and set many other potential changes in the works. They might rename Dulles Airport (can you guess to what?). A bill has been introduced to add you-know-who to Mount Rushmore. There is DOGE, and the ongoing attempt to reshape federal employment.
At the same time, many people have been asking me why Trump chose Canada and Mexico to threaten with tariffs — are they not our neighbors, major trading partners, and closest allies?
I have a theory that tries to explain all these and other facts, though many other factors matter too. I think of Trumpian policy, first and foremost, as elevating cultural policy above all else.
Imagine you hold a vision where the (partial) decline of America largely is about culture. After all, we have more people and more natural resources than ever before. Our top achievements remain impressive. But is the overall culture of the people in such great shape? The culture of government and public service? Interest in our religious organizations? The quality of local government in many states? You don’t have to be a diehard Trumper to have some serious reservations on such questions.
We also see countries, such as China, that have screwed-up policies but have grown a lot, in large part because of a pro-business, pro-learning, pro-work culture. Latin America, in contrast, did lots of policy reforms but still is somewhat stagnant.
OK, so how might you fix the culture of America? You want to tell everyone that America comes first. That America should be more masculine and less soft. That we need to build. That we should “own the libs.” I could go on with more examples and details, but this part of it you already get.
So imagine you started a political revolution and asked the simple question “does this policy change reinforce or overturn our basic cultural messages?” Every time the policy or policy debate pushes culture in what you think is the right direction, just do it. Do it in the view that the cultural factors will, over some time horizon, surpass everything else in import.
Simply pass or announce or promise such policies. Do not worry about any other constraints.
You don’t even have to do them!
They don’t even all have to be legal! (Illegal might provoke more discussion.)
They don’t all have to persist!
You create a debate over the issues knowing that, because of polarization, at least one-third of the American public is going to take your side, sometimes much more than that. These are your investments in changing the culture. And do it with as many issues as possible, as quickly as possible (reread Ezra on this). Think of it as akin to the early Jordan Peterson cranking out all those videos. Flood the zone. That is how you have an impact in an internet-intensive, attention-at-a-premium world.
You will not win all of these cultural debates, but you will control the ideological agenda (I hesitate to call it an “intellectual” agenda, but it is). Your opponents will be dispirited and disorganized, and yes that does describe the Democrats today. Then just keep on going. In the long run, you may end up “owning” far more of the culture than you suspected was possible.
Yes policy will be a mess, but as they say “man kann nicht alles haben.” The culture is worth a lot, both for its own sake and as a predictor of the future course of policy.
Now let’s turn to some details.
In the first week, Trump makes a huge point of striking down DEI and affirmative action (in some of its forms) as the very beginnings of his administration. The WSJ described it as the centerpiece of his program. Take origins seriously!
Early on, we also see so many efforts to make statements about the culture wars. Trans issues, for instance trans out of the military. No more “Black History Month” for the Department of Defense. There are more of these than I can keep track of, use Perplexity if you must.
It is no accident that these are priorities. And keep in mind the main point is not to eliminate Black History Month, though I do not doubt that is a favored policy. The main point is to get people talking about how you are eliminating Black History Month. Just as I am covering the topic right now.
How is that war against US AID going? Will it be abolished? Cut off from the Treasury payments system? Simply rolled up into the State Department? Presidential “impoundment” invoked? I do not know. Perhaps nobody knows, not yet. The point however is to delegitimatize what US AID stands for, which the Trumpers perceive as “other countries first” and a certain kind of altruism, and a certain kind of NGO left-leaning mindset and lifestyle.
The core message is simply “we do not consider this legitimate.” Have that be the topic of discussion for months, and do not worry about converting each and every debate into an immediate tangible victory.
What about those ridiculous nominations, starting with RFK, Jr.? As a result of the nomination, people start questioning whether the medical and public health establishments are legitimate after all. And once such a question starts being debated, the answer simply cannot come out fully positive, whatever the details of your worldview may be. People end up in a more negative mental position, and of course then some negative contagion reinforces this further.
JFK and UAP dislcosure? The point is to get people questioning the previous regime, why they kept secrets from us, what really was going on with many other issues, and so on. It will work. The good news, if you can call it that, is that we can expect some of the juicier secrets to be made public.
I think by now you can see how the various attempts to restructure federal employment fit into this picture. And Trump’s “war against universities” has barely begun, but stay tuned. Don’t even get me going on “Gaza real estate,” the very latest.
Finally, let’s return to those tariffs (non-tariffs?) on Canada and Mexico. We already know Trump believes in tariffs, and yes that is a big factor, but why choose those countries in particular? Well, first it is a symbol of strength and Trump’s apparent ability to ignore and contradict mainstream opinion. But also those are two countries most Americans have heard of. If Trump announced high tariffs on say Burundi, most people would have no idea what it means. They would not know how to debate it, and they would not know if America was debasing itself or thumbing its nose at somebody, or whatever.
Canada and Mexico gets the cultural point across. Canada, all the more so, and thus the Canadian tariffs might be harder to truly reverse. At least to many Yankee outsiders, Canada comes across as exactly the kind of “wuss” country we need to distance ourselves from.
To be clear, this hypothesis does not not not require any kind of cohesive elite planning the whole strategy (though there are elites planning significant parts of what Trump is doing). It suffices to have a) conflicting interest groups, b) competition for Trump’s attention, and c) Trump believing cultural issues are super-important, as he seems to. There then results a spontaneous order, in which the visible strategy looks just like someone intended exactly this as a concrete plan.
In a future post I may consider the pluses and minuses of this kind of political/cultural strategy.
US AID bleg
What are the best sources to read on US AID, and its costs and benefits? I am not interested in your anecdotes and adjectives, please offer serious research sources only. Thank you.
The New Consensus on the Minimum Wage
My take is that there is an evolving new consensus on the minimum wage. Namely, the effects of the minimum wage are heterogeneous and take place on more margins than employment. Read Jeffrey Clemens’s brilliant and accessible paper in the JEP for the theory. A good example of the heterogeneous impact is this new paper by Clemens, Gentry and Meer on how the minimum wage makes it more difficult for the disabled to get jobs:
…We find that large minimum wage increases significantly reduce employment and labor force participation for individuals of all working ages with severe disabilities. These declines are accompanied by a downward shift in the wage distribution and an increase in public assistance receipt. By contrast, we find no employment effects for all but young individuals with either non-severe disabilities or no disabilities. Our findings highlight important heterogeneities in minimum wage impacts, raising concerns about labor market policies’ unintended consequences for populations on the margins of the labor force.
Or Neumark and Kayla on the minimum wage and blacks:
We provide a comprehensive analysis of the effects of minimum wages on blacks, and on the relative impacts on blacks vs. whites. We study not only teenagers – the focus of much of the minimum wage-employment literature – but also other low-skill groups. We focus primarily on employment, which has been the prime concern with the minimum wage research literature. We find evidence that job loss effects from higher minimum wages are much more evident for blacks, and in contrast not very detectable for whites, and are often large enough to generate adverse effects on earnings.
Remember also that a “job” is not a simple contract of hours of work for dollars but contains many explicit and implicit margins on work conditions, fringe benefits, possibilities for promotion, training and so forth. For example, in Unintended workplace safety consequences of minimum wages, Liu, Lu, Sun and Zhang finds that the minimum wage increases accidents, probably because at a higher minimum wage the pace of work increases:
we find that large increases in minimum wages have significant adverse effects on workplace safety. Our findings indicate that, on average, a large minimum wage increase results in a 4.6 percent increase in the total case rate.
Note that these effects don’t always happen, in large part because, depending on the scope of the minimum wage increase and the industry, large effects of the minimum wage may be passed on to prices. For example here is Renkin and Siegenthaler finding that higher minimum wage increase grocery prices:
We use high-frequency scanner data and leverage a large number of state-level increases in minimum wages between 2001 and 2012. We find that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices.
Similarly, Ashenfelter and Jurajda find there is no free lunch from minimum wage increases, indeed there is approximately full pass through at McDonalds:
Higher labor costs induced by minimum wage hikes are likely to increase product prices.4 If both labor and product markets are competitive, firms can pass through up to the full increase in costs (Fullerton and Metcalf 2002). With constant returns to scale, firms adjust prices in response to minimum wage hikes in proportion to the cost share of minimum wage labor. Under full price pass-through, the real income increases of low-wage workers brought about by minimum wage hikes may be lower than expected (MaCurdy 2015). There is growing evidence of near full price pass-through of minimum wages in the United States….Based on data spanning 2016–20, we find a 0.2 price elasticity with respect to wage increases driven (instrumented) by minimum wage hikes. Together with the 0.7 (first-stage) elasticity of wage rates with respect to minimum wages, this implies a (reduced-form) price elasticity with respect to minimum wages of about 0.14. This corresponds to near-full price pass-through of minimum-wage-induced higher costs of labor.
You can draw your own conclusions about the desirability of the minimum wage, but the fleeting hope that it raises wages without trade-offs is gone. The effects of the minimum wage are nuanced, heterogeneous, and by no means entirely positive.
Sundry observations on the Trump tariffs
Brad Setser estimates the costs at 0.8 percent of U.S: gdp. I am not sure if he is considering exchange rate adjustments in that figure.
Kevin Bryan writes:
The problem with escalating, again, is that Canada is more reliant on US energy than vice versa, US ports than vice versa, US intermediate goods than vice versa, and DT is basically a narcissist. Again: no normal negotiation here, as the tariffs itself have no logical basis! 4/x
The fentanyl excuse seems like a flimsy (and should be illegal) one to let the exec branch set a tariff rate that constitutionally is Congress’ job. But maybe there is some “give Trump a fake win and de-escalate”. I worry about what that does in the future, though. 5/x
Ben Golub notes:
Modern supply chains don’t look like trade theory 101! They involve constant border crossings, each now hit by tariffs. Tariffs raise prices, but the more important thing they do is disrupt supply relationships.
So when a shock hits, you don’t just have a bit less activity by a few of the least profitable firms. You suddenly knock out some of the relationships (contracts) and some of the nodes (companies) in a large and very complex network. This can be pretty disruptive!
Here is Noah’s post. Here is the Yale Budget Lab on likely price effects in America.
Here is an Alan Beattie FT piece on how tariffs often matter less than you think. The size of the costs here can be disputed, but the most relevant fact is that there simply isn’t any upside to the Trump tariff policy. If you think it is about fentanyl, I have a prediction: the price of fentynal will not be rising anytime soon across the window of a one-year moving average. Here are some additional relevant points about fentanyl, which from Canada is not a major problem.
The new tariffs are bad
Or are they tariff threats instead? Still bad! From the FT:
Donald Trump has said he will hit the EU with tariffs, adding the bloc to a list of targets including Canada and Mexico and bringing the US to the brink of new trade wars with its biggest trading partners.
The US president acknowledged that the new tariffs could cause some market “disruption”, but claimed they would help the country close its trade deficits.
“The tariffs are going to make us very rich, and very strong,” Trump told reporters in the Oval Office.
Hours before his plan for tariffs of 25 per cent on Canada and Mexico was due to take effect on February 1, Trump also widened his threat to include the EU, which he said had treated the US “very badly”.
There is not any good argument for doing this. The simplest hypothesis here is that Trump has mistaken views on trade economics, and is raising tariffs for the same reason that I, if I were President, would be trying to cut them.
“It’s not a negotiating tool,” Trump said. “It’s pure economic. We have big deficits with, as you know, with all three of them.”
Of course this is a sign that further bad things will happen. Let us hope that the courts can strike these down…
What should I ask Chris Arnade?
Chris Arnade…is an American photographer and writer. He worked for 20 years as a bond trader on Wall Street; in 2011, he started documenting the lives of poor people and their drug addictions and commenting on the state of the society of the United States. He did this through photographs posted on social media and articles in various media…
Here is Chris’s Substack, here is Chris on Twitter. So what should I ask him?