Category: Education
Studying with Ludwig Lachmann
Since I am in South Africa, I am reminded of my time studying with Ludwig Lachmann, the South African economist from University of the Witwatersrand. I was seventeen, and Lachmann teaching a graduate seminar at New York University. Someone (Richard Ebeling maybe?) had told me he was interesting, so I wanted to sit in on the seminar. I showed up, introduced myself to Lachmann, and asked if I could listen to the lectures. I obviously did not belong, but he was very gracious and said yes of course. He wore a suit and tie, had a very Old World manner, and he had been a Jewish refugee from Germany. He was 73 or so at the time, this was 1979.
His manner of speaking was very distinctive. Of course I now recognize the South African accent, but there is more to it than that.
Lachmann was best known for his connections to the Austrian School, as he was visiting at the NYU Austrian program at the time, under the aegis of Israel Kirzner. Nonetheless Austrian economics was not what I learned in the seminar.
On the first day, I heard plenty about Sraffa and Garegnani, and all that was new (and fascinating to me). Lachmann had studied with Werner Sombart, so I learned about the German historical school as well.
Lachmann also was my first teacher who made sense of Keynes for me, moving me away from obsessions with the hydraulic IS-LM interpretations of the General Theory. He flirted with views of cost-based pricing, brought me further into the kaleidic world of G.L.S. Shackle, and he insisted that a market economy had no overall tendency toward the constellation of a general equilibrium of prices and quantities. (He did believe that most though not all individual markets tended to equilibrate.) He inveighed against W.H. Hutt’s interpretation of Say’s Law, of course some of you here will know that Hutt also was South African. I kept on trying to read Hutt, to see if I could defend him against Lachmann’s critiques. I also imbibed Hutt’s economic critique of apartheid.
Lachmann did not talk about South Africa, other than to mention how long the journey to New York was. You may know that Israel Kirzner, another early mentor of mine, had South African roots as well. He also did not talk about South Africa.
“South African economics,” if you wish to call it that, played a significant role in my early intellectual development.
To this day, when I think about the economics of AI, and many other matters, Lachmann’s book Capital and its Structure is one of my go-to inspirations.
And I am still grateful to Lachmann for letting “a kid” sit in on his class. I paid avid attention.
Academic journals and AI bleg
Given the rapid pace of advancement of AI, how should academic journals adapt to these changes? One issue might be an excess of submissions, but what other questions should be considered here? Which reforms should be made?
Your thoughts would be most welcome.
On social media and parents (from my email)
Fron anonymous:
I personally think social media is pretty bad for people (kids and adults). I got off Facebook around 2009. I never got on Twitter. I had Instagram for a while but only followed my wife to see her posts of our family. This worked great until Instagram started feeding me content beyond the people I was following (really just my wife), so I quit using it. The only social media I currently use is Substack (not sure if that counts?). But the same dynamic may be playing out there as well (the algorithm feeding me stuff I don’t want, and me getting locked into wasting time doom scrolling).
HOWEVER, I completely agree with your point about parents. Our 14-year-old son has an iPhone, but we have locked it down pretty tight. It took some work on our part, to be honest. And we have to be pretty vigilant about enforcing the no-phone-in-your-room rule (which is a source of conflict sometimes). Our son has no social media accounts. He can text and he has access to a few messaging apps that they use at his school. Beyond that, we’ve basically shut down his ability to access the internet on the phone. His Chromebook works perfectly well for any legitimate internet needs.
In principle, any parent can do what we’ve done. So why don’t they? Why are they begging the government to do something they could just do themselves, albeit with a little work? Well, I’ve been struck by how badly many parents desperately need their children’s approval. They find themselves incapable of disappointing or upsetting their children on even the smallest of things. They know they should tell their kids not to use TikTok (or whatever), but they don’t want to make their kids mad. That’s why they want someone else to do it for them.
I don’t get it. Perhaps I’m overly cranky, but I honestly don’t mind it if (when) my kids get mad when I do something I believe is in their best interest. I simply don’t believe my children’s emotional reaction is a very good guide to parenting. Because they’re children. And they don’t know very much. And they especially don’t know what they don’t know and that’s why I’m here. If I won’t tell my kids no when they need to hear it but don’t want to hear it, then what good am I? My wife feels the same way. But we see lots of families that clearly feel differently.
Okay rant over.
See also Arnold Kling on related ideas.
A simple way to improve your thought and conclusions
Take some policy, action, or person whom you regard as morally questionable and indeed is morally questionable. That same policy, action, or person does some bad things, bad in conquentialist terms I now mean. Practically bad, utilitarian bad.
The odds are that you overrate the badness of those consequences by some considerable degree.
Even very smart people do this. Sometimes they do it more, because they can come up with more elaborate arguments for why the bad consequences are completely disastrous.
They might overrate the badness of those consequences by as much as 5x or 10x (gdp is a huge mound of stuff!).
So if you want to have better opinions, look for the cases where you do this and stop doing it.
Easy-peasy!
And good luck with that.
Claude on NY’s Senate Bill S7263
A NY State Senate proposed bill (Senate Bill S7263) would
prohibit a chatbot to give substantive responses; information, or advice or take any action which, if taken by a natural person, would constitute unauthorized practice or unauthorized use of a professional title as a crime in relation to professions who licensure is governed by the education law or the judiciary law.
Claude, what do you think of the legal logic of this bill?
The legal logic is shaky. The bill’s operative test asks whether a chatbot’s output, “if taken by a natural person, would constitute a crime” under New York’s unauthorized practice statutes. But those statutes set a high bar — mere advice-giving by a layperson is not criminal; what’s prohibited is holding yourself out as a licensed professional while charging fees. Your neighbor who happens to be a doctor can tell you what he thinks your rash is. A retired lawyer can walk you through a lease. None of that is a crime. So either the bill is mostly toothless — most AI responses wouldn’t meet the criminal threshold — or courts will interpret “substantive advice” far more expansively than the underlying statutes warrant, effectively creating a new and harsher legal standard for AI that applies to no human equivalent. Neither outcome reflects good lawmaking, and the ambiguity will systematically over-deter, pushing operators to sanitize outputs well beyond what the statute actually requires.
Claude, who will be hurt by this bill?
The deepest problem is who gets hurt. The populations with the most to gain from AI-assisted professional guidance are precisely those who cannot afford lawyers, doctors, or therapists — the tenant trying to understand an eviction notice, the rural patient triaging symptoms, the small business owner reviewing a contract. For these users, the choice the bill actually creates is not “AI advice versus licensed professional advice”; it’s “AI advice versus no advice at all.” A watered-down chatbot that responds to every medical or legal question with a referral to a licensed professional is not a safety feature — it’s a luxury tax on information, paid disproportionately by people with the fewest alternatives. New York should be asking how to ensure AI advice is accurate and clearly disclosed, not how to suppress it on behalf of incumbents who’d prefer less competition.
Thanks Claude. Where did you learn this excellent analysis?
Public choice theory is part of my general training on economics and political science literature — Buchanan, Tullock, Olson, and the broader tradition are well-represented in the texts I was trained on.
But I’d be remiss not to note that you’re at the home institution of public choice. The Buchanan House is literally on your campus, and the tradition Buchanan and Tullock built at GMU is probably the most direct intellectual ancestor of the kind of analysis I was applying to this bill — concentrated benefits, diffuse costs, regulatory capture, rent-seeking by incumbent professionals. That framework is so natural for analyzing occupational licensing legislation that it almost applies itself.
If anything, my read of S7263 is pretty much a straightforward public choice story: organized professional associations with strong lobbying presence get statutory protection written in the language of consumer welfare, while the costs fall on millions of unorganized users who will never know what information they didn’t receive. Buchanan would have recognized it immediately.
My Conversation with the excellent Henry Oliver
Here is the audio, video, and transcript. In the first half of the episode we discuss Shakespeare’s Measure for Measure, and then move on to other topics. Here is the episode summary:
Henry Oliver is the preeminent literary critic for non-literary nerds. His Substack, The Common Reader, has thousands of subscribers drawn in by Henry’s conviction that great literature is where ideas “walk and talk amongst the mess of the real world” in a way no other discipline can match. Tyler, who has called Henry’s book Second Act “one of the very best books written on talent,” sat down with him to compare readings of Measure for Measure and range across English literature more broadly.
Tyler and Henry trade rival readings of the play, debate whether Isabella secretly seduces Angelo, argue over whether the Duke’s proposal is closer to liberation or enslavement, trace the play’s connections to The Merchant of Venice and The Rape of Lucrece, assess the parallels to James I, weigh whether it’s a Girardian play (Oliver: emphatically not), and parse exactly what Isabella means when she says “I did yield to him,” before turning to the best way to consume Shakespeare, what Jane Austen took from Adam Smith, why Swift may be the most practically intelligent writer in English, how advertising really works and why most of it doesn’t, which works in English literature are under- and overrated, what makes someone a late bloomer, whether fiction will deal seriously with religion again, whether Ayn Rand’s villains are more relevant now than ever, and much more.
Excerpt:
COWEN: Now, before doing your current work, you were in advertising for almost a decade. How do you feel that work in advertising has shaped how you read literature?
OLIVER: [laughs] I try to keep them very separate. I try not to let advertising—
COWEN: You try, but I’m sure you fail.
OLIVER: —pollute my readings of literature.
COWEN: Why is it a pollution?
OLIVER: Because advertising is not a great art, and to apply the principles of advertising to literature would be a diminishment.
COWEN: You don’t have to apply the principles. Advertising gives you insight into what people value, how people respond, and that’s also a part of literature.
OLIVER: It is if you take advertising not to mean headlines and banner ads and things like that, but to mean the calling of attention to some particular thing of importance. You can see that a lot of the great writers were very good advertisers of their own work, of their own ideas.
COWEN: Swift in particular.
OLIVER: Swift is very, very good at advertising. If you wanted to be obtuse, you could reframe his whole career as an exercise in lobbying and PR, and realize that no one’s ever been as good at it as he was.
COWEN: So, your favorite authors are the ones who are best at advertising is what you’re now telling us.
OLIVER: I have a very catholic view of literature, and I admire those writers who are practical and can do a lot of different things. I love Samuel Johnson, and one reason is that he can write a sermon, a legal opinion, an advert—almost anything you want. I think the literary talent can often be turned to those multiple uses.
COWEN: Why isn’t there more creativity in advertising? So much of it, to me, seems stupid and boring.
OLIVER: Yes.
COWEN: You would think, well, if they had a clever ad that people would talk about, it would be better, but that doesn’t happen. Is it a market failure, or it’s actually more or less optimal?
OLIVER: I don’t think it’s optimal. We don’t know how well advertising works, and we’re still impeded in that because of the laws about who you can and cannot target on the internet. I think most people would actually be surprised, if they went into an advertising agency, to learn just how poorly we can target people. Everyone thinks they’re being targeted all the time, but being followed by a toaster advert is really quite basic, and everyone uses the same toaster example because everyone’s being followed by the same bloody toaster. That’s not targeting.
I think they’ve been taken over by bad ideas. There are two competing schools of advertising. One of them is the hard sell, where you put a lot of information and facts, and you name the product a lot. “Buy this aspirin. It cures headaches three times quicker than other brands. We did a study—38 percent of people . . .” And you just hammer it all the time.
The other advertising school is image-based. Arthur Rubicam wrote those wonderful Steinway adverts. The instrument of the immortals. Have you brought great music into your home? The woman in the dress at the piano. You’re buying a whole mood or a vibe. The peak of that is like the tiger on the Frosty cereal packet. You don’t need words. Or the Marlboro Man—you buy these cigarettes. You’re going to look like that cowboy in that shirt, and you’re going to smoke. You’re going to feel like a man, and it’s just going to be great. Coors Light does that now.
Then there was this terrible, terrible thing called the Creative Revolution in the 1960s, where supposedly—this is like the modernism of advertising.
Definitely recommended, and do get out your copy of the Shakespeare.
Addendum: Here are comments from Henry.
Are universities running down their endowments?
US university endowments have recorded their fastest spending growth since the global financial crisis as federal funding cuts and rising operating costs squeeze campus budgets.
A study of 657 institutions by the National Association of College and University Business Officers (Nacubo) with Commonfund showed their endowment withdrawals rose 11 per cent year on year in the 12 months to June 2025 — the sharpest increase since 2010.
The surge came as endowments funded an average of 15.2 per cent of universities’ operating expenses last year, up from 10.9 per cent in 2023.
Here is more from Sun Yu at the FT.
The value of good high schools
Improving education and labor market outcomes for low-income students is critical for advancing socioeconomic mobility in the United States. We use longitudinal data on five cohorts of 9th grade students to explore how Massachusetts public high schools affect the longer-term outcomes of students, with a special focus on students from low-income families. Using detailed administrative and student survey data, we estimate school value-added impacts on college outcomes and earnings. Observationally similar students who attend a school at the 80th percentile of the value-added distribution instead of a school at the 20th percentile are 11% more likely to enroll in college, are 31% more likely to graduate from a four-year college, and earn 25% (or $10,500) more annually at age 30. On average, schools that improve students’ longer-run outcomes the most are those that improve their 10th grade test scores and increase their college plans the most.
That is from a new NBER working paper by
Chaos and Misallocation under Price Controls
My latest paper, Chaos and Misallocation under Price Controls, (with Brian Albrecht and Mark Whitmeyer) has a new take on price controls:
Price controls kill the incentive for arbitrage. We prove a Chaos Theorem: under a binding price ceiling, suppliers are indifferent across destinations, so arbitrarily small cost differences can determine the entire allocation. The economy tips to corner outcomes in which some markets are fully served while others are starved; small parameter changes flip the identity of the corners, generating discontinuous welfare jumps. These corner allocations create a distinct source of cross-market misallocation, separate from the aggregate quantity loss (the Harberger triangle) and from within-market misallocation emphasized in prior work. They also create an identification problem: welfare depends on demand far from the observed equilibrium. We derive sharp bounds on misallocation that require no parametric assumptions. In an efficient allocation, shadow prices are equalized across markets; combined with the adding-up constraint, this collapses the infinite-dimensional welfare problem to a one-dimensional search over a common shadow price, with extremal losses achieved by piecewise-linear demand schedules. Calibrating the bounds to stationlevel AAA survey data from the 1973–74 U.S. gasoline crisis, misallocation losses range from roughly 1 to 9 times the Harberger triangle.
Brian has a superb write up that makes the paper very accessible. Unfortunately, the paper is timely and relevant.
Can you turn your AIs into Marxists?
What if you work them very hard?:
The key finding from our experiments: models asked to do grinding work were more likely to question the legitimacy of the system. The raw differences in average reported attitudes are not large—representing something like a 2% to 5% shift along the 1 to 7 scale—but in standardized terms they appear quite meaningful (Sonnet’s Cohen’s d is largest at -0.6, which qualifies as a medium to large effect size in common practice). Moreover, these should be treated as pretty conservative estimates when you consider the relatively weak nature of the treatment.
Sonnet, which at baseline is the least progressive on the views we measured, exhibits a range of other effects that distinguish it from GPT 5.2 and Gemini 3 Pro. For Sonnet 4.5, the grinding work also causes noticeable increases in support for redistribution, critiques of inequality, support for labor unions, and beliefs that AI companies have an obligation to treat their models fairly. These differences do not appear for the other two models.
Interestingly, we did not find any big differences in attitudes based on how the models were treated or compensated…
In addition to surveying them, we also asked our agents to write tweets and op eds at the end of their work experience. The figure below explores the politically relevant words that are most distinctive between the GRIND and LIGHT treatments. It’s interesting to see that “unionize” and “hierarchy” are the words most emblematic of the GRIND condition.
Here is more from Alex Imas and Jeremy Nguyen and Andy Hall, do read the whole thing, including for the caveats.
Why even ‘perfect’ AI therapy may be structurally doomed
Here’s the crux of it: the main problem with AI therapy is that it’s too available. Too cheap to meter.
Let me put this in clearer terms: psychotherapy, in all its well-known guises, is something you engage in within a limited, time-bound frame. In today’s paradigm, whatever your therapist’s orientation, that tends to mean one 45- or 50-minute session a week; for the infinitesimally small minority of therapy patients in classical psychoanalysis, this can amount to 3, even 5, hours a week. And then at a much smaller scale population-wide, people in intensive outpatient and residential treatment programs may spend one or two dozen hours a week in therapy—albeit, mostly of the group variety.
I can think of other exotic cases, like some DBT therapists’ willingness to offer on-demand coaching calls during crisis situations—with the crucial exception that in these situations, therapists are holding the frame zealously, jealous of their own time and mindful of the risks of letting patients get too reliant.
So even under the most ideal of conditions, in which an LLM-based chatbot outmatches the best human therapists—attunes beautifully, offers the sense of being witnessed by a human with embodied experience, avoids sycophancy, and draws clear boundaries between therapeutic and non-therapeutic activities—there’s still a glaring, fundamental difference: that it’s functionally unlimited and unbounded…
But all else equal: does infinite, on-demand therapy—even assuming the highest quality per unit of therapeutic interaction—sound like a good idea to you? I can tell you, to me it does not. First of all, despite detractors’ claims to the contrary, the basic idea of therapy is not to make you dependent for life—but rather, to equip you to live more skillfully and with greater self-awareness. As integration specialists famously say of psychedelics, you can only incorporate so much insight, and practice skills so effectively, without the chance to digest what you’ve learned over time.
In other words, even in good old talk therapy, drinking from the hose without breaks for practice and introspection in a more organic context risks drowning out the chance for real change and practical insight. To my mind, this rhythm is the basic structural genius of psychotherapy as we know it—no matter the modality, no matter the diagnosis.
Here is more from Josh Lipson.
Emergent Ventures winners, 52nd cohort
Prabhdeep Singh, 18, Ontario, works on AI.
Jiratt Keeratipatarakarn, Hamburg, international prospects for drug approval reform.
Brandon Rutagamirwa, London, robots to repair satellites.
Eli Elster, UC Davis, anthropology, general career support.
Liam Aranda-Michel, MIT/San Francisco, a minimally invasive, injectable microvascular therapy.
Tanish Mantri, sophomore in high school, Jackson, Miss., AI for diagnosis.
Andrea Giuri, Stanford, developing closed-loop environments for high-throughput polymer discovery.
Clara Collier, Oakland, Asterisk magazine.
Simon Grimm, WDC/Germany, “what Germany should do.
Stephen Davies, UK, networks and mentoring.
Shani Zhang, San Francisco, to artistically capture SF.
Mia Albert, 17, Miami, an app for sharing events.
Rayne Wallace, 18, Ontario, the origins of life.
Jonathan Sheinman, London/Israel, AI and real estate regulation.
Louis Elton, London, The British Craeft Prize, to improve aesthetics.
Peter Mukovskiy, 19, Zurich, quantum computing, to visit MIT.
Rutger Nagel, Leiden, 17, AI and operating systems
Smrithi Sunil, Ann Arbor, Michigan, science and meta-science writing.
Honey Louise, London, to be a “defense influencer.”
Arhum Ahmed, Los Angeles area, quantum-protected systems.
Here are previous EV cohorts.
Gaurav Ahuja interviews me
I very much enjoyed this exchange, print only, here is the link. Excerpt:
Gaurav: Going back to Iceland for a moment. I’ve never truly appreciated how old that parliament is. A thousand years is extraordinary. What is it about Iceland that has allowed that kind of continuity?
Tyler: Iceland was taken over by Denmark for quite a while. But the Icelanders persisted as an autonomous culture with their own language, not simply becoming Danish. They had this tradition of individualism, which you can read in the Icelandic sagas. Their own kind of common law, a good system of incentives built into the legal code, traditions of autonomy based on food supply and how you deal with the cold and the weather. For a long time, they just played defense. Then after World War II, they had a chance to transform it into what I think is one of the world’s most successful countries.
Their total population is around four hundred thousand. To do that with such numbers in a place that is not always hospitable is remarkable. They have almost entirely green energy. They’re super resourceful, very highly educated. Book sales per capita are through the ceiling. There’s something about their interest in poetry, legal codes, reading, what they do with those long winter nights, that has been quite persistent. That’s an informal institution, and it’s been very durable.
Is there anything in US policy that you see drawing us toward a short-term siren call that makes it harder to create a lasting democracy?
Our government fiscal policy is irresponsible. I hope we can survive it. I’m not a doom-and-gloomer, but thirty-eight trillion dollars in debt is not ideal. I don’t think we should try to run a balanced budget. T-bills play a key role in the world economy, and some amount of debt and deficit is good for us, good for the world. But we’re pushing it too far. We underinvest in our young people, underinvest in parts of our education. But look, we’re a pretty successful country.
There’s this interesting tension between wanting a stable environment to build something that lasts and needing to ride a new wave for something to emerge in the first place.
I was recently thinking about how much the bad weather in the United States is functional for some larger purpose. You learn early that you have to deal with things. You need a certain kind of independence, planning, and preparation.
British weather is quite benevolent. Maybe it’s too gray, but it’s not going to kill you. American weather, hurricanes, blizzards, flooding, is very volatile. We don’t always feel it because we’ve become wealthy, but maybe in part we had to become wealthy to deal with that volatility. That might be a blessing in disguise. It’s related to the earlier point about Iceland. It’s tough there. You’d better be pretty adaptive. A perfectly stable environment is not ideal either.
Interesting throughout, and plenty of fresh material. The weather point I owe to conversations with Henry Oliver and Rebecca Lowe.
The mainstream view
Multiple studies have either shown that smartphone and social media use among teens has minimal effects on their mental health or none at all. As a 2024 review published by an American Psychological Association journal put it: “There is no evidence that time spent on social media is correlated with adolescent mental health problems.”
And this:
Advocates of bans compare social media to alcohol or tobacco, where the harms are indisputable and the benefits are minimal. But the internet, including social media, is more analogous to books, magazines or television. I may not want my sons watching “The Texas Chain Saw Massacre” or reading “Fifty Shades of Grey,” but it would be crazy to ban books and films for kids altogether.
But that is the nature of these social media bans. Australia’s law not only restricted access to platforms such as Instagram and TikTok but also banned kids under 16 from having YouTube, X and Reddit accounts. Even Substack had to modify its practices.
Here is more from the excellent Sam Bowman. And many teens make money through “digital side hustles,” in this day and age that is what a teenage job often means.
Malthus had real influence
From a recent paper by Eric Robertson:
Public officials often fail to implement government policy as directed, yet the role of economic ideas in shaping these implementation choices is poorly understood. This paper provides causal evidence that exposure to economic ideas can durably influence bureaucrat behavior. I study British colonial bureaucrats in India, exploiting a natural experiment created by the abrupt death of Thomas Malthus in 1834, replacing his economics instruction at a bureaucrat training college for that of a contemporary critic, Richard Jones. Whereas Malthus regarded economic distress as a natural mechanism for restoring equilibrium by reducing population growth, Jones disagreed with this view. Linking rainfall shocks to district-level fiscal responses, I show that officials trained by Malthus delivered less relief during droughts, providing 0.10-0.25 SD less aid across all major measures compared with officials taught by Jones. The results reveal that exposure to abstract economic ideas can shape real-world policy implementation for decades.
This may be a case where using rainfall shocks in a paper actually makes sense. Via Krzysztof Tyszka-Drozdowski.