Category: Economics
The Decline in the Transmission of Scientific Ideas
We document that the diffusion of new scientific ideas beyond their field of origin has declined substantially over the past four decades. This contraction is closely linked to increasing specialization in scientific language: research that employs more technical terminology tends to be adopted less broadly. We develop a theory of scientific discovery in which the diffusion of new ideas depends on the degree to which potential adopters can understand and process them. When introducing their discoveries, scientists face a tradeoff between technical communication targeted at their immediate peers and more accessible language meant to reach broader audiences. As knowledge accumulates and research at the frontier builds on deeper layers of prior work, this tradeoff increasingly favors specialized language, limiting diffusion. Policy interventions that align scientists’ incentives can broaden adoption and increase the social value of scientific research.
That is from a new NBER conference paper by Enrico Berkes and Ruben Gaetani.
In relative terms, maybe children do not cost more than before?
Despite rapid inflation in childcare and tuition prices, the goods-and-services CCI closely tracks adult prices, as these increases are offset by children’s lower exposure to shelter and by slower price growth elsewhere in the child basket. Households devote substantially more real resources to children than they did in 1990, but this increase parallels the growth of real adult consumption rather than reflecting a child-specific rise in prices. A similar offsetting pattern appears for parental time: the rising value of women’s time is largely counterbalanced by declining motherhood penalties in earnings and work hours, so forgone market work adds little to relative cost growth. The main departure from this stability comes from the growing amount of leisure displaced by childcare; valuing that time raises the CCI, although the magnitude depends on the shadow value assigned to leisure.
A surprising and important result, from a new paper by Christina Patterson and Heather Sarsons.
A natural experiment in economics
To study whether and how academics respond to political pressure, we exploit a natural experiment: the publication in early 2025 of a “blacklist” of words flagged by the U.S. government. We find that the release of this list led to a sharp reduction in the use of these flagged words among economists at universities that rely heavily on federal funding, relative to scholars from institutions that are less dependent on federal funding or based in the UK. The drop is driven by content related to gender, race, and environment. We show that changes are not simply semantic but reflect actual paper content and that neither the individual funding status nor time-invariant author characteristics are driving the effects. We also document interesting heterogeneous effects by department quality and author gender and ethnicity. Our findings are consistent with the idea that scholars respond strongly to political pressure.
That is from a new paper by Dominic Rohner, Oliver Vanden Eynde, and Philine Widmer. I should note that the authors frame their results in terms of “Science under threat,” which indeed is in the title of their paper. I do see some of that in operation, but I also see a lot of “removing incentives for pandering.” Your own weights here may vary.
Crypto markets in everything? (moo)
Farmers in Parana, Brazil, struggling to get banks to loan them cash, became the first to tokenize livestock and place 10 dairy milk cows’ tokens for trade on the country’s B3 national stock exchange. They generated nearly $20,000 in credit backed by their cattle, signaling the potential of tokenizing RWAs as a financing tool.
The dairy cow tokenization in Brazil is a world first and serves as a test in a real-world scenario in which farmers are facing increasingly stringent lending limits imposed by local banks on small agricultural businesses.
“We take the cow, which is a real and tangible asset, and transform it into a digital asset backed by a unique code monitored in real time,” Thiago Martins of Cowmed, a Brazilian Agtec company, told CNNBrasil recently.
…“This digitization allows for formal registration with B3 as a movable asset,” Martins added. “The process is simple and gives the producer an advantageous opportunity to finance themselves, opening a new alternative for collateral at a time of strong credit restrictions in agribusiness.”
To turn cattle into trusted financial guarantees or collateral without requiring inspectors to visit the property, Cowmed equips cows with an AI-powered Smarty Collar. These collars constantly monitor health, behavior, and location. The raw data is then converted into an encrypted digital identity tied directly to the B3 credit agreement.
Continuous tracking of cattle prevents farmers from double-pledging the same cattle across multiple loans. It also includes built-in safeguards that allow the farmer to swap one dead cow for a live one.
Cowmed already tracks about 100,000 dairy cows across more than 1,000 farms. The herd is worth over $395 million. The company expects up to 20% of its network to adopt this tokenized financing model, unlocking $77.6 million in fresh credit for the agricultural sector.
Here is the full story.
European Fact of the Day, Again
This year, like last year, “the European Union will again make more money from fining US tech companies Than from the total tax income from Europe’s own public tech companies!”
Alex Tabarrok on the Economic Analysis of Crime
I tell my Gary Becker story, why I like police more than prisons, how criminals are like children and more.
What should I ask Gita Gopinath?
Yes I will be doing a Conversation with her. From Wikipedia:
Gita Gopinath…is an Indian-American economist who is currently serving as the Gregory and Ania Coffey professor of Economics at Harvard University and previously served as the first deputy managing director of the International Monetary Fund (IMF), from 21 January 2022 to 31 August 2025. Before that she also served as chief economist of the IMF between 2019 and 2022.
Here is Gita on scholar.google.com, she is an expert in international finance and exchange rates, and also international capital flows, among other topics. Here is Gita on Twitter. So what should I ask her?
The economic effects of GLP-1s
We estimate the causal impacts of GLP-1 treatment on labor market outcomes using linked Danish administrative data and a matched stacked difference-in-differences design. We compare patients who initiate GLP-1 treatment during the first two years of Semaglutide availability to observably similar patients who initiate four years later. We find that GLP-1 treatment reduces long-term sickness leave by 17.3%. We estimate total fiscal benefits of GLP-1 initiation of approximately 1.3–1.5% of annual labor income per employed individual. We do not detect statistically significant or economically meaningful impacts on income, labor force participation, or employment over four years.
That is from a new NBER working paper by
Building luxury homes is good for the poor
Tej Parikh writing in the FT:
…high-end developments unlock long housing chains. As higher-income households move into newly built units, they free up older properties, raising supply and slashing prices for middle- and lower-end housing through a process known as filtering. Numerous international studies underscore this positive ripple effect.
One published last year tracked households that moved into a newly built 512-unit condominium tower in Honolulu, Hawaii. It found that the building created at least 557 vacancies in older and cheaper apartments across the city in just three years, with market-rate units more likely to release the largest chains.
Filtering can also be widespread. A 2021 study in Helsinki using geo-coded population data found that every 100 new market-rate units in the city centre led to around 60 units becoming available in the city’s bottom half of neighbourhoods by income. An analysis across all homes in Sweden over several decades concluded that “new homes, even those initially primarily inhabited by rich people, lead to substantial trickle-down effects that also benefit the poor”.
Other US studies highlight how market-rate developments benefit less well-to-do local residents by lowering housing costs. In San Francisco, a 2021 paper found new developments lowered the risk of eviction notices for residents in rent-stabilised housing. Even “luxury” developments in New York City — which Mamdani has criticised — have been shown to contribute to lower local rents and sales prices.
or David Attenborough:
Trial Lawyers Lobby Against Autonomous Vehicles
Roughly 37,000–40,000 Americans die in auto accidents every year. We now have large‑scale, real‑world evidence—from Waymo and a joint analysis with Swiss Re—that driverless operations can be substantially safer than matched human driving within their current operating domains. The latest data show that over 220 million miles driven, Waymo vehicles–in Los Angeles, San Francisco, Phoenix, Austin and Atlanta–have 94% fewer serious injuries, 82% fewer air bag deployments, and 93% fewer pedestrian injuries. The evidence is not fully independent, but it is unusually transparent, large‑scale evidence.
So with thousands of lives annually in the balance who is against autonomous vehicles (AVs)? Trial lawyers. Remarkably the trial lawyers saw the writing on the wall very early and the have been lobbying against AVs for nearly a decade! The American Association for Justice, the trial lawyers’ lobby, has been a prominent opponent to AV legislation (see also reports here). (They have been joined by Democrats worried about labor and demanding that heavy trucks be excluded).
The trial lawyers earn a huge amount litigating ordinary auto accidents–Annual U.S. auto insurance payouts (liability + PIP/MedPay) are on the order of $180–220B and trial lawyers are very eager to retain the right to sue car manufacturers for product liability. In my view, product liability isn’t useful as a safety device in this field. Instead, the solution is simple. Every car should be required to be insured, regardless of driver. Indeed, Waymo vehicles are already insured at $5 million liability coverage per vehicle, far higher levels than most human drivers are covered.
The UK’s Automated and Electric Vehicles Act 2018 does basically this–a single insurer covers the vehicle whether the human or the automated system is driving; the victim is compensated directly by the insurer, no need to establish product defect; the insurer then subrogates against the manufacturer if the software was at fault. Victims get paid fast, manufacturers face the cost of their defects through recoveries and premiums, and the high-transaction costs (i.e. lawyer fees!) and messy manufacturer-versus-victim litigation is replaced by insurer-versus-manufacturer bargaining between repeat players who settle efficiently.
The great thing about this system is that insurance almost certainly deters better than tort: fleets generate data that makes experience rating precise, so insurers become continuous safety regulators, whereas litigation delivers a noisy, lagged, lottery like signal depending on safety-irrelevant factors of the jury and the locale.
We have the best data on Waymo, Tesla data is murkier but note how well this works with the insurance system. Let the insurers decide how much to charge Tesla robotaxis and FSD drivers–they will internalize the externality far better than tort lawyers. In short, insurance works great for accident victims but not for trial lawyers. Indeed, if the trial lawyers have their way accident victims will continue to be buried in an invisible graveyard.
Hat tip: Andy Hall and Jon Slotkin.
What should I ask Luis Garicano?
Yes I will be doing a Conversation with him. From Wikipedia:
Luis Garicano Gabilondo (pronounced [ˈlwis ɣaɾiˈkano]; born 1967) is a Spanish economist and politician who was a Member of the European Parliament (MEP) from 2019 to 2022. He was also vice president of Renew Europe and vice president of the European political party Alliance of Liberals and Democrats for Europe (ALDE Party). Before entering politics, he was a professor of strategy and economics at IE Business School in Madrid and at the London School of Economics (LSE). After leaving the European Parliament he has returned to academia as a visiting professor at Columbia Business School and at the University of Chicago Booth School of Business. In 2023, returned to LSE as full professor at the School of Public Policy.
He is one of the leading European economic liberals, here is his home page. Here is his Google scholar page. Here is Luis on Twitter. he also has a very good book coming out called Messy Jobs, co-authored with Jim Li and Yanhui Wu. So what should I ask him?
The small business boom
Across the country, founders like Ms. Winkler are powering an entrepreneurial renaissance.
Jump-started by the pandemic, when a confluence of factors including mass layoffs and remote work led to a flood of business creation, and supercharged by the rise of artificial intelligence, start-up activity is booming after a decades-long slump.
Americans filed 5.7 million applications last year to start new businesses, according to the Census Bureau, the most in the two decades the government has kept track. New business applications through the first half of this year continued to climb…
More recently, there are signals that A.I. is adding fuel.
A recent paper from economists at the University of British Columbia and the Stockholm School of Economics found that generative A.I. was “spurring entrepreneurial activity” in the United States, both by giving rise to new ventures built around the technology and by making it cheaper to start enterprises.
“A.I. tools can do very many different things very well,” said Jan Bena, an associate professor at the University of British Columbia and one of the study’s authors. “That’s the reason why you see so much entry.”
According to a recent report from Gusto, a small-business payroll and benefits service, nearly 60 percent of founders on its platform who started businesses last year said they used A.I., and half said the technology made it cheaper and faster.
Here is more from Sydney Ember at the NYT. Via Josef.
A Phone is a Cow
Philip Auerswald’s A Phone is a Cow is three books in one, it’s a history of the mobile phone, it’s a business biography of Iqbal Quadir, who brought the cell phone to Bangladesh at at time when that seemed quixotic and doomed to fail, and it’s a theory of economic growth. It succeeds on all three levels.
…relatively few technologies have managed to reach the majority of the world’s people. Fire. Writing. The cookpot. The portable radio. These all succeeded. Yet most people in the world have never flown in an airplane. Most do not own a car or a bicycle. And, until recently, most still did not have access to a safe, sanitary toilet in their home. The list goes on.
The mobile phone reached the global majority more rapidly than any technology that had come before. How did this happen?
The title, by the way, comes from Quadir’s insight that just as Grameen Bank lent to villagers so they could purchase productive assets like a cow, Grameenphone could lend villagers the money to buy a phone—which then became a revenue-generating asset in its own right.
Addendum: Auerswald on Econ Talk with Russ Roberts.
Governing agentic AI
From a new paper by Shruti Rajagopalan:
AI agents now transact, publish, and act on external systems without contemporaneous human approval, creating new regulatory challenges. A growing literature has responded with proposals for legal personhood. This Article argues that personhood is neither necessary nor sufficient, shifting the question from status to enforcement. The Article first shows that for two millennia, nonhuman legal personality, from the Roman universitas to the corporation, the Hindu idol, the waqf, and the river, has operated through human officeholders the law can locate, question, prosecute, and replace. Agentic AI inverts that design, exercising practical agency without legal status, sometimes with no identifiable human in the responsibility-bearing role. The Article then sorts deployments into three categories: first, where one firm builds and deploys the agent; second, where the developer and deployer are separate but known; and third, where there is no identifiable developer or deployer. The Article stress tests each agent deployment category against five liability doctrines: agency law, products liability, enterprise liability, negligence, and strict liability. It demonstrates that each fails at different points in the third category for the same reason: the absent responsibility-bearer. Bare personhood would supply a caption without a representative, assets, or a mechanism for cessation. Finally, the Article assembles an alternative from regimes governing aircraft, ships, drones, driverless cars, and motor carriers. It develops a six-layer stack—registration, identification, verification, financial responsibility, lifecycle traceability, and suspension—so a responsibility-bearer can be identified, liability imposed, and the activity suspended. These layers place the human back at the end of the chain.
I would say that social science now has new frontiers, let us hope it blossoms in response.
The Equal Pay Madness Just Got Madder
In my post Equality Act 2010 I discussed the UK’s absolutely insane wage policy:
In short, supply and demand have been replaced by judges and labor boards with the authority to deem which jobs are “equal” and therefore should be paid equally….No one is alleging that male and female warehouse workers were paid unequally or that male and female retail workers were paid unequally or that there was any direct or indirect discrimination. The only claim is that warehouse workers, who are less likely to be female than retail workers, earn more than retail workers. And since these jobs have been judged “equal,” the company has violated Equality Act 2010.
…The warehouse workers were almost 50% female (47.25%). So females were not barred from the higher paying jobs. The fact that 77.5% of the retail workers were female suggests that retail work has special appeal to females relative to males and thus that there are compensating differentials. Any of the three female plaintiffs could have taken jobs in the warehouse. If the jobs are equal and the warehouse jobs pay more this is, on the plaintiffs’ theory, “puzzling”. [Or, as Ayn Rand would say, blank out.]
In fact, the court case reveals that Next was struggling to fill the warehouse positions and offered any retail employee—including the plaintiffs—the opportunity to switch to warehouse work. On cross-examination, one of the plaintiffs admitted that, given the unpleasant conditions in the warehouse—described by the court as “the drone of machinery,…vibration, alarm sirens and the screeching of machinery, wheels and rollers, continuously present in all areas”—the warehouse job “did not seem particularly attractive” compared to the greater autonomy and more appealing environment of the retail job. The plaintiff added that she would only have considered the warehouse job if it paid “a lot more money.”
Well, here is the update. The outgoing Keir Starmer government is trying to massively expand these laws. The “equal value” framework previously applied only to sex discrimination; under the proposed law, employees could also bring equal-value claims based on race and disability. Remember, these laws have nothing to do with discrimination—they are about demanding, at the point of a gun, that apples and oranges sell for the same price because they’re both fruit.
The new law would also establish an Equal Pay Regulation and Enforcement Unit. As I said, Orwellian.
See also my post, How Britain Become as Poor as Mississippi.