Category: History
On the future of war
Murphy: What do you think we need to do to avoid major conflict over the next 25 years? Or do you think it can be avoided?
Cowen: I just think there’ll be more festering conflicts. Consider the difference between World War One and World War Two. World War two is very decisively settled. That’s quite rare in history. And you had a clear, small number of victors that largely agreed. And US & UK set things up. That didn’t happen after World War One.
Yeah, there was a League of Nations that didn’t work. It collapsed again. Future conflicts will be more like World War One than World War Two. Yeah, there’s too many nuclear weapons out there, for one thing. Are we really going to decisively defeat Russia in anything, ever? Who knows? But I wouldn’t count on it.
I’m very struck by this recent conflict between Thailand and Cambodia, which is a nothing burger, but I think people are making a mistake by ignoring it. What it’s showing us is that two countries can find it worthwhile to conduct a nothing burger war every now and then a few weeks, and it’s never really over.
It never really escalates. It just goes on and I think we’ll just see more of that. East Africa feels quite dangerous at the moment.
Murphy: I mean, Azerbaijan.
Cowen: Things like that. And they’ll just multiply and not quite. You know, some of them will be settled. But as a whole, they won’t be settled, and they won’t give birth to, like, the new UN, the new Bretton Woods, the new whatever. The A’s will build their own institutions. Let’s wish them luck.
That was recorded several months ago with Nebular, here are the links:
We’ve just published the video on YouTube, X, Spotify, and Apple Podcasts. We also published some extended show notes and the transcript on Substack.
How frequent are price bubbles?
We examine the historical frequency of stock market booms, crashes, and bubbles in the United States from 1792 to 2024 using aggregate market data and industry-level portfolios. We define a bubble as a large boom followed by a crash that reverses the market’s prior gains. Bubbles are extremely rare. We extend the industry-level analysis of Greenwood, Shleifer, and You (2019) through 2024 and replicate their findings out of sample using Cowles Commission industry data from 1871 to 1938. Booms do not reliably predict crashes, but they do predict higher subsequent volatility, increasing the likelihood of both large gains and large losses.
That is from a new NBER working paper by William N. Goetzmann, Otto Manninen, and James Tyler.
The Vietnam War and racial integration
The Vietnam draft conscripted hundreds of thousands of young Americans into an integrated military. I combine near-random draft lottery variation with administrative voter data to study the long-run racial integration effects of coerced national service. Black and Native American veterans became more likely to marry white spouses, identify as Republicans, and live in more-integrated neighborhoods. Improved economic standing may partly mediate these effects. Effects are larger for Southerners and are precisely null for white veterans. Coerced military service generates substantial but asymmetric cross-racial political convergence and racial integration: Vietnam-era service caused about 20 percent of affected cohorts’ interracial marriages.
That is from a recent NBER working paper by Zachary Bleemer.
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.
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.
What should I ask Katja Hoyer?
Yes I will be doing a Conversation with her. She is the author of a forthcoming book on Weimar, namely Weimar: Life on the Edge of Catastrophe. Note that much of the book considers the city of Weimar, mostly in Nazi times, and not just the Weimar era. She also has published Beyond the Wall: A History of East Germany, and Blood and Iron: The Rise and Fall of the German Empire 1871-1918. She is active in journalism, podcasting, and is a visiting research fellow at King’s College London. She was born in East Germany and is both British and German.
So what should I ask her?
One measure of economics GOAT
Who is the greatest economist of all time? This paper provides one potential measure that, along with other considerations, can contribute to debates on who the greatest economist of all time is. We build a novel dataset on the percentage of history of economic thought textbooks dedicated to top economists, using 43 distinct textbooks (1st editions, when available) published between 1901 and 2023. As a percentage of total book pages, Adam Smith has the highest share at 6.69%, beating out Ricardo (5.22%), Mill (3.83%), and Marx (4.36%). Just over 32% of all textbooks allocated most of their pages to Adam Smith, followed by Marx with 18.6%, Mill with 13.95%, and Ricardo with 11.3%. While interesting as a history of economic thought project, such an exercise isn’t merely amusing pedantry; it can provide insight into the types of contributions, research questions, and methodologies that have had the most enduring impact in economics. It may also inform future authors of history of economic textbooks.
That is from a new paper by Gabriel Benzecry and Daniel J. Smith. There is of course also my generative book on this topic at econgoat.ai.
The Macroeconomic Effects of Tariffs
We study the macroeconomic effects of tariff policy using U.S. historical data from 1840–2024. We construct a narrative series of plausibly exogenous tariff changes – based on major legislative actions, multilateral negotiations, and temporary surcharges – and use it as an instrument to identify a structural tariff shock. Tariff increases are contractionary: imports fall sharply, exports decline with a lag, and output and manufacturing activity drop persistently. The shock transmits through both supply and demand channels. Prices rise in the full sample but fall post-World War II, a pattern consistent with changes in the monetary policy response and with stronger international retaliation and reciprocity in the modern trade regime.
That is from a new NBER working paper by
Why the “Lesser Included Action” Argument for IEEPA Tariffs Fails
The Supreme Court yesterday struck down Trump’s IEEPA tariffs, holding that the statute’s authorization to “regulate… importation” doesn’t include the power to impose tariffs. The majority’s strongest argument is simple: every time Congress actually delegates tariff authority, it uses the word “duty,” caps the rate, sets a time limit, and requires procedural prerequisites. IEEPA has none of these.
The dissent pushes back with an intuitively appealing argument: IEEPA authorizes the President to prohibit imports entirely, so surely it authorizes the lesser action of merely taxing them. If Congress handed over the nuclear option, why would it withhold the conventional weapon? Indeed in his press conference Trump, in his rambling manner, made exactly this argument:
“I am allowed to cut off any and all trade…I can destroy the trade, I can destroy the country, I’m even allowed to impose a foreign country destroying embargo…I can do anything I want to do to them…I’m allowed to destroy the country, but I can’t charge a little fee.”
The argument is superficially appealing but it fails due to a standard result in principal-agent theory.
Congress wants the President to move fast in a real emergency, but it doesn’t want to hand over routine control of trade policy. The right delegation design is therefore a screening device: give the President authority he will exercise only when the situation is truly an emergency.
An import ban works as a screening device precisely because it is very disruptive. A ban creates immediate and substantial harm. It is a “costly signal.” A President who invokes it is credibly saying: this is serious enough that I am willing to absorb a large cost. Tariffs, in contrast, are cheaper–especially to the President. Tariffs raise revenue, which offsets political pain. Tariff incidence is diffuse and easy to misattribute—prices creep, intermediaries take blame, consumers don’t observe the policy lever directly. Most importantly tariffs are adjustable, which makes them a weapon useful for bargaining, exemptions, and targeted favors. Tariffs under executive authority implicitly carry the message–I am the king; give me a gold bar and I will reduce your tariffs. Tariff flexibility is more politically appealing than a ban and thus a less credible signal of an emergency. The “lesser-included” argument gets the logic backwards. The asymmetry is the point.
Not surprisingly, the same structure appears in real emergency services. A fire chief may have the authority to close roads during an emergency but that doesn’t imply that the fire chief has the authority to impose road tolls. Road closure is costly and self-limiting — it disrupts traffic, generates immediate complaints, and the chief has every incentive to lift it as soon as possible. Tolls are cheap, adjustable, and once in place tend to persist; they generate revenue that can fund the agency and create constituencies for their continuation. Nobody thinks granting a fire chief emergency closure authority implicitly grants them taxing authority, even if the latter is a lesser authority. The closure and toll instruments have completely different political economy properties despite operating on the same roads.
The majority reaches the right conclusion by noting that tariffs are a tax over which Congress, not the President, has authority. That is constitutionally correct but the deeper question is why the Framers lodged the taxing power in Congress — and the answer is political economy. Revenue instruments are especially easy for an executive to exploit because they can be targeted. The constitutional rule exists to solve that incentive problem.
Once you see that, the dissent’s “greater includes the lesser” inference collapses on its own terms. A principal can rationally authorize an agent to take a dramatic emergency action while withholding the cheaper, revenue-lever not despite the fact that it seems milder, but because of it. The blunt instrument is self-limiting. The revenue instrument is not. That asymmetry is what the Constitution’s categorical division of powers preserves — and what an open-ended emergency delegation would destroy.
A Republic, if you can keep it
The conclusion of Justice Gorsuch’s concurrence in the tariff case:
For those who think it important for the Nation to impose more tariffs, I understand that today’s decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem
arises. But the deliberative nature of the legislative process was the whole point of its design. Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man. There, deliberation tempers impulse, and compromise hammers
disagreements into workable solutions. And because laws must earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day. In all, the legislative process helps ensure each of us has a stake in the laws that govern us and in the Nation’s future. For some today, the weight of those virtues is apparent. For others, it may not seem so obvious. But if history is any guide, the tables will turn and the day will come when those disappointed by today’s result will appreciate the legislative process for the bulwark of liberty it is.
My excellent Conversation with Joe Studwell
Here is the audio, video, and transcript. The conversation is based around Joe’s new and very good book How Africa Works: Success and Failure in the World’s Last Developmental Frontier. Here is part of the episode summary:
Tyler and Joe explore whether population density actually solves development, which African countries are likely to achieve stable growth, whether Africa has a manufacturing future, why state infrastructure projects decay while farmer-led irrigation thrives, what progress looks like in education and public health, whether charter cities or special economic zones can work, and how permanent Africa’s colonial borders really are. After testing Joe’s optimism about Africa, Tyler shifts back to Asia: what Japan and South Korea will do about depopulation, why industrial policy worked in East Asia but failed in India and Brazil, what went wrong in Thailand, and what Joe will tackle next.
Excerpt:
COWEN: Does Africa have a manufacturing future? Is robotics coming, AI, possibly some reshoring?
STUDWELL: Yes. I believe that Africa does have a manufacturing future.
COWEN: But making what? And at what cost of energy?
STUDWELL: They will start, as everybody does, producing garments, producing textiles, which in certain enclaves is already going on in Madagascar, in Lasutu, in Morocco, and they’ll move on to other things. They’ll start with those things because they are the most labor cost-sensitive products.
Africa is now in a position where — depending on which state you’re looking at, and taking China as a reference point — the cost of labor is now between a half and one-tenth of what it is in China. Factory labor is now around $600 a month at its cheapest. In a country like Ethiopia or Madagascar, it’s $60 or $65 a month. So, it’s a 10th of the cost, and that’s already beginning to have a bit of effect, often with Chinese firms moving production to Africa.
So, I think there is a future for manufacturing. It will depend on the extent to which African governments understand that you don’t really move forward fast for very long without manufacturing, that every developed country — apart from a few petro states and financial centers — has gone through a manufacturing phase of development. It depends on the extent to which African governments engage with that, but some, without doubt, will.
The Ethiopians, for instance, have already attempted to do that. What they’re trying to do has been somewhat derailed by the two-year civil war that took place from 2020, but they’re back on it now, and they’re trying to move forward.
The idea that robotics and AI are going to change the story I personally do not buy, principally for two reasons. One is the cost reason, because whenever people talk about what’s happening with robotics, no one ever talks about the cost of robots. In garmenting, for instance, even a basic robot will cost you in excess of $100,000, and you pay the cost upfront, and you’ve then paid that, whether there’s demand for your products or not. Also, in garmenting and in textiles, robots don’t work very well because they can’t work with material very well. They’re much better at working with solid things.
So, you’ve spent $100,000 for a robot when you can go out in somewhere like Tana in Madagascar and get another skilled — because they’ve been doing it now for 20 years — garmenting employee for $60 or $65 to make the new order that you just got. And if the order doesn’t come through, you can sack them. You see what I’m saying? There’s a point about the cost of robotics.
COWEN: But think of automation more generally — it’s not that expensive. Most countries are de-industrializing. Even South Africa has been de-industrializing for a while, and China maybe has peaked out at industrialization, measured in terms of employment. It’s hard to trust their numbers. But maybe just everywhere is going to deindustrialize, and that will be very bad for Africa.
STUDWELL: I don’t think so. I think South Africa is deindustrializing because the ANC has followed a hyper-liberal approach to economic policy. I don’t think the ANC has ever really understood economic policy, frankly, so South Africa is an outlier in that respect. There are many other states in Africa, whether Nigeria or Ethiopia, which understand they’ve got to have a manufacturing future and intend to pursue one.
Then, as I was saying, the other point is, what people miss is the flexibility with robotics and AI. There’s very limited flexibility with robotic and automated production. When demand goes up, you can’t just stick in more robots, but when demand goes up in a people-operated factory, where the cost of labor is low, you can stick in more people and produce more.
Just one example: during COVID, when everybody was having home deliveries of supermarket goods, the price of a UK firm called Ocado, which runs a supermarket, but was also developing the software and consulting around building blind warehouses went up through the roof, but now it’s down through the floor.
And only last week, Kroger supermarket in the US said, “We’re closing five of these super-modern blind warehouses.” And the reason, fundamentally, is because they lack the flexibility that human labor brings to the job. So, I’m not saying that robots, automation, and AI are not important. They are important. What I am saying is that they are not going to derail a manufacturing future for a number of African countries that aggressively pursue it.
COWEN: But there’re a lot of developing nations around the world — you could look at India, you could look at Pakistan, even Thailand — where manufacturing has not taken off the way one might have wanted. There’re just major forces operating against it. And in the US, manufacturing employment was once 37 percent of the workforce; now it’s 7 percent to 8 percent.
It just seems like it’s swimming upstream for Africa — which again, has quite expensive energy — to think it will do that well. And again, South Africa had very good technology, pretty high state capacity. I don’t see the alternate world state where a wiser ANC would have made that work.
STUDWELL: Well, oddly enough, before the end of Apartheid, the manufacturing performance of South Africa was really not bad at all, with classic industrial policy, quite high levels of protection, and so forth. I think that demand for manufactured goods will continue to be high around the world, and the labor cost will continue to be a prime determinant of where producers go for low value-added goods. So, I think that the opportunity is there for African countries.
COWEN: But say there’re transportation costs internally, energy costs, political order uncertainty. Where’s the place where people really want to put all these manufacturing firms?
Interesting throughout, recommended.
The fertility asymptote?
From a recent paper by Sebastian Galiani and Raul A. Sosa:
Fertility rates have fallen below replacement in most countries, fueling predictions of demographic collapse. We show these forecasts overlook a crucial fact: societies are not homogeneous. Using the Bisin–Verdier model of cultural transmission with endogenous fertility and direct socialization, calibrated to U.S. and global data, we find that high-fertility, high-retention groups persist, gain share, and lead the total population to grow. Even if fertility remains below replacement in every country, extinction is unlikely. Simulations imply continued growth with pronounced compositional change, driven especially by religious communities with high fertility. In our ten-generation world calibration, Muslims become the largest tradition.
I am pleased to hear that extinction is unlikely.
Rebuilding our world, with reference to strong AI
When 2012 passed into 2013, we did not have to rebuild our world, not in most countries at least. It sufficed to make adjustments at the margin.
After the Roman Empire fell, parts of Europe had to rebuild their worlds. It took a long time, but they ended up doing pretty well.
After the American Revolution, the newly independent colonies had to rebuild their own world. They did so brutally, but with considerable success.
After WWII, Western Europe had the chance to rebuild its own world, and did a great job.
We moderns are not used to having to rebuild our world.
It is now the case that strong AI is here/coming, and we will have to rebuild our own world. Many of us are terrified at this prospect, others are just extremely pessimistic. It seems so impossible. How are all the new pieces supposed to fit together? Who amongst us can explain that process in a reassuring way?
Yet we have done it many times before. Not always with success, however. After WWI ended, Europe was supposed to rebuild its own world, but they came up with something far worse than what they had before. Nonetheless, in the broader sweep of history world rebuilding projects have had positive expected value.
And so we will rebuilding our world yet again. Or maybe you think we are simply incapable of that.
As this happens, it can be useful to distinguish “criticisms of AI” from “people who cannot imagine that world rebuilding will go well.” A lot of what parades as the former is actually the latter.
In any case, it all will be quite something to witness.
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.
At the Grand Egyptian Museum
Neal Spencer has a good review at the LRB, excerpt:
Over the past few decades, however, Egyptian museums have pivoted away from Europe and America. The National Museum of Egyptian Civilisation, which opened in 2021, rejected the traditional division of artefacts into pharaonic, Coptic, Greco-Roman and Islamic eras (a framework associated with European academic disciplines). The Grand Egyptian Museum, announced at the height of Hosni Mubarak’s rule and styled ‘the largest museum in the world dedicated to the people, history and culture of Ancient Egypt’, opened in November last year with a lavish ceremony broadcast round the world. It is estimated to have cost more than $1 billion ($300 million of which was a loan from Japan) and sprawls over an area the size of seventy football pitches. The financial crash of 2008, the Arab Spring and Covid meant that its construction took almost twenty years. Much has changed in that time. The last decade of construction took place under the military regime of Abdel Fattah el-Sisi, who installed one of his generals as its head – the first non-Egyptologist to direct a major Egyptian museum.
I saw the museum shortly after the opening and found it pretty spectacular, both the building/setting and the collection. It is worth making a trip to Cairo just to see this, and it now can be considered one of the world’s great museums and history sites (yes I had seen the earlier incarnation of the museum, years ago). The very wise Rasheed Griffith also gave the museum an A+.