4. The EU AI regulatory statement (on first glance not as bad as many had expected?).
5. The NBA Play-In was in fact a big success. Is the implication that other sports do not experiment enough with producing more fame/suspense at various margins? Basketball games are simply a much better product when the players are trying their best.
8. Ideas matter.
It has been essential for following the controversy over the university presidents. The conflicts in the Middle East. The unfolding of the Open AI saga. The attempt to demonstrate superconductivity. And much more. It is much less about “some academic or pundit giving you a steady stream of their thoughts.” And much more “where the action is.” Some of that springs from Elon’s rules changes, but a lot of it comes from having a world full of action, both good and bad. And the fullness of action in the world is, in my view, not about to let up.
So you all should be long Twitter. And those who have left are missed far less than they might have wished.
3. Erik Hoel on the marginal value of intelligence, and AI. And with a clever restatement: “call it the supply paradox of AI: the easier it is to train an AI to do something, the less economically valuable that thing is”
Crypto and bitcoin, among their other uses, are Rorschach tests for commentators. As these institutions evolve, are you capable of changing your mind and updating in response to new data? Sadly, many people are failing that test and instead staking out inflexible ideological ground.
Bitcoin prices are now in the range of $44,000, and the asset has more than doubled in value this year. Perhaps more surprisingly yet, NFT markets are making a comeback. Many of the older NFT purchases remain nearly worthless, but interest in the asset class as a whole has perked up.
These developments should induce us to reevaluate crypto in a positive direction. If in the past you have argued that crypto is a bubble, can it be the bubble is back yet again? Typically bubbles, once they burst, do not return in a few years’ time. You still will find Beanie Babies on eBay, but they are not surrounded by any degree of excitement. Similarly, the prices of Dutch tulip bulbs appear normal and well-behaved, as that bubble faded out long ago. Bitcoin, in contrast, has attracted investor interest anew time and again.
It is time to realize that crypto is more like a lottery ticket than a bubble or a fraud, and it is a lottery ticket with a good chance of paying off. It is a bet on whether it will prove possible to build out crypto infrastructure as a long-term project, integrated with mainstream finance. If that project can succeed, crypto will be worth a lot, probably considerably more than its current price. If not, crypto assets will remain as a means for escaping capital controls and moving money across borders, or perhaps to skirt the law with illegal purchases.
What might such an infrastructure look like? To make just a few guesses, your crypto wallet might be integrated with your Visa and other credit cards (perhaps using AI?). Fidelity, Vanguard, large banks and other mainstream financial institutions will allow you to hold and trade crypto, just as you might now have a money market fund. Crypto-based lending could help you invest in high-return, high-risk overseas opportunities with some subset of your portfolio. Stablecoins will circulate as a form of “programmable money,” and they will circulate on a regular and normal basis; such a plan was just initiated by the French bank SocGen. On a more exotic plane, AI-based agents, denied standard checking accounts, might use crypto to trade with each other.
I’m not arguing such scenarios are either good or bad, simply that the market sees some chance of them happening. And they are far more than “crypto is a fraud or a bubble.”
Whether that infrastructure will meet market and regulatory tests is difficult to forecast. It has never happened before, and thus no one can claim to be a true expert on the matter. Thus your opinion of crypto should be changing each and every day, as you observe fluctuations in market prices and other changes in the objective conditions.
In this perspective, there are some pretty clear reasons why the price of bitcoin is higher again. First, real interest rates have been falling, and fairly rapidly. Ten-year rates are now closer to four per cent than to five per cent. Since crypto financial infrastructure is a long-term project that won’t be completed in a year or two, lower real interest rates raise the value of that project considerably. The value of bitcoin rises as well, just as many other long-term assets rise in value with lower real interest rates. And if interest rates continue to fall, crypto prices could easily continue to rise.
The resurgence of crypto likely has other causes. The story of SBF is receding from the headlines with the end of his trial. That makes crypto look less scammy. On the regulatory side the United States did not try to shut down Binance, in spite of alleged scandals at the exchange. That is the regulators signaling they are not going to try to destroy crypto. Soon the SEC may approve spot bitcoin ETFs, which would make it easier and safer to invest in that asset. Nor have state laws popped up that might be trying to shut down crypto markets. Finally, the election of Donald Trump as President has not faded as a possibility, and in the past Trump has been supportive of crypto. Overall, the tea leaves are signaling that the U.S. government is making its peace with crypto, or at least with some parts of the market.
So with crypto the most important thing is to keep an open mind. As of late, events have been doing much to signal open and growing possibilities, rather than a world where crypto is shut down.
2. Alex & Books summarizes some of my takes on reading (though he gets the number of books wrong).
CEOs are increasingly making public statements on contentious social issues. In this paper, we examine what motivates CEOs to engage in social activism. We show that CEO social activism is a strategic choice and not necessarily an expression of the CEO’s own political views. Republican-donor CEOs are three-times more likely to make social statements with a liberal-slant. They are also more likely to make social statements when their firm’s operating environment is politically polarized, and when their employees are Democrat-leaning. Such statements are associated with a 3% increase in consumer visits to a firm’s stores in Democrat counties without significantly reducing them in Republican counties. CEO activism is also associated with a 0.12% gain in firm value, increased quarterly sales turnover, and a reduced likelihood of shareholder activism on social issues. Our results suggest that corporate actions that appear to be stakeholder-driven can be motivated by economic concerns.
Here is one:
McTaggart wore his eccentricities with pride. He rode a tricycle. He walked “with a curious shuffle, back to the wall, as if expecting a sudden kick from behind,” a fact that may or may not be explained by his having been bullied at boarding school. He saluted every cat he met. His dissertation for a fellowship at Trinity, later published as Studies in the Hegelian Dialectic; had elicited from that older Apostle, Henry Sidgwick, the remark; “I can see that this is nonsense, but what I want to know is whether it is the right kind of nonsense.” Apparently, it was.
That is from Nikhil Krishnan, A Terribly Serious Adventure: Philosophy and War at Oxford 1900-1960. Another recent book dealing with both philosophy and war at Oxford is M.W. Rowe’s very thorough J.L. Austin: Philosopher & D-Day Intelligence Officer. Here is that book’s best weird philosopher anecdote:
Robert Paul Wolff noted Quine’s frequent lack of small talk, and his tactics for brushing off unwanted questioners, but his deeper doubts were crystallized by an incident some years later:
“Quine obviously had a sensual side to his nature to complement his intellect, as his attractive second wife and his love of food and jazz attested. But I always thought there was some element of humanity missing from his makeup that gave him a rather cold aura. Quine had just returned from a trip to Germany — this was not fifteen years after the war remember — and he was describing a tour he had taken of SS torture chambers. He exhibited an eerie fascination with the technical efficiency of the facility that struck me as devoid of any real human appreciation of its demonic purpose.”
But at Oxford, Quine was perfectly charming, and his erudition and accomplishments — besides logic and jazz, he was an expert on maps, widely travelled, and said to speak eight languages — ensured considerable social success…
As for the broader book, I had not known the extent to which Austin was a significant and highly successful intelligence officer. It is a very good book if you are interested in hundreds of pages on this topic.
6. “We introduce a new approach to decode and interpret statutes and administrative documents employing Large Language Models (LLMs) for data collection and analysis that we call generative regulatory measurement. We use this tool to construct a detailed assessment of U.S. zoning regulations. We estimate the correlation of these housing regulations with housing costs and construction. Our work highlights the efficacy and reliability of LLMs in measuring and interpreting complex regulatory datasets.” Link here.
Here is three and a half minutes of their testimony before Congress. Worth a watch, if you haven’t already. I have viewed some other segments as well, none of them impressive. I can’t bring myself to sit through the whole thing.
I don’t doubt that I would find their actual views on world affairs highly objectionable, but that is not why I am here today. Here are a few other points:
1. Their entire testimony is ruled by their lawyers, by their fear that their universities might be sued, and their need to placate internal interest groups. That is a major problem, in addition to their unwillingness to condemn various forms of rhetoric for violating their codes of conduct. As Katherine Boyle stated: “This is Rule by HR Department and it gets dark very fast.”
How do you think that affects the quality of their other decisions? The perceptions and incentives of their subordinates?
2. They are all in a defensive crouch. None of them are good on TV. None of them are good in front of Congress. They have ended up disgracing their universities, in front of massive audiences (the largest they ever will have?), simply for the end goal of maintaining a kind of (illusory?) maximum defensibility for their positions within their universities. At that they are too skilled.
How do you think that affects the quality of their other decisions? The perceptions and incentives of their subordinates?
What do you think about the mechanisms that led these particular individuals to be selected for top leadership positions?
3. Not one came close to admitting how hypocritical private university policies are on free speech. You can call for Intifada but cannot express say various opinions about trans individuals. Not de facto. Whether you think they should or not, none of these universities comes close to enforcing “First Amendment standards” for speech, even off-campus speech for their faculty, students, and affiliates.
What do you think that says about the quality and forthrightness of their other decisions? Of the subsequent perceptions and incentives of their subordinates?
What do you think about the mechanisms that led this particular equilibrium to evolve?
Overall this was a dark day for American higher education. I want you to keep in mind that the incentives you saw on display rule so many other parts of the system, albeit usually invisibly. Don’t forget that. These university presidents have solved for what they think is the equilibrium, and it ain’t pretty.
Can gun buybacks work? Some simple economics suggests, no! The first of our videos on the elasticity of supply, Why Housing is Unaffordable, illustrated inelastic supply. Today’s video on gun buybacks illustrates elastic supply. Our gun buyback video hits the sweet spot for MRU videos—solid economics leading to surprising conclusions illustrated in an entertaining and accurate way.
Of course, both of these videos draw upon and pair great with our textbook, Modern Principles of Economics.
That is the topic of my latest Bloomberg column, here is one bit:
As recent research indicates, the recent inflation has been very costly. The 2021-2022 inflation cost more than 3% of national income in France, Germany and Spain, and about 8% of national income in Italy, higher costs than what a typical recession would bring.
It is striking how much those costs fall on the elderly, which is one reason that lowering inflation rates has been such a priority. The elderly usually have the most accumulated savings, and less time to make up for inflationary losses by subsequent compounding. Older people are also more likely to own homes, so face higher home heating bills when energy prices rise. Overall, in the last several years, a low-income retired household in Italy might have taken income cuts of up to 20%, while a middle-aged household in the euro area might have seen a typical income cut of 5%.
…Not everyone lost from the inflation. Young households in Spain, for instance, gained more than 5% in income. The simplest way a household might gain from inflation is that its debt liabilities decline in real, inflation-adjusted value. On average, the young are more likely to be in debt than the elderly, and own fewer assets. Inflation also tends to lower the value of tenured jobs, such as in academia, and younger people are less likely to hold such posts. The young also tend to have more time in their lives to adjust to negative economic shocks, by for instance geographic or career migration.
Overall, an estimated 30% of the households in the euro area gained from the inflationary shock. Almost half of 25- to 44-year-olds benefited.
On net, the inflation remains a clear negative. But how many other eurozone policies manage to favor the young?
Here is the underlying research by Filippo Pallotti, Gonzalo Paz-Pardo, Jiri Slacalek, Oreste Tristani, and Giovanni L. Violante.
Could you really go for exactly one McDonald’s Chicken McNugget right about now? Well then, hop over to Switzerland and chow down!
Working with TBWA, local McD’s are tapping into a mathematics-themed meme by offering a single-McNugget selection to celebrate the menu staple’s 40th birthday.
Fans love to indulge in jokey theorems about the breaded bites of bliss. There’s also intense competition over who gets the final McNugget.
This campaign goofs on the whole numerical bit. Plus, per press materials, “Everyone gets the last nugget.”
…Each special Nug sells for 1.20 Swiss francs while supplies last. A regular box of four costs 4.80.
Here is the full story, via Benjamin Schneider.
6. How are global poverty stats revised if we consider the value of public goods? Do consider Amory Gethins on the job market from Paris School of Economics.
p.s. Do note the correction on today’s insider trading post, the main result probably is not correct.
Recent scholarship shows that informed traders increasingly disguise trades in economically linked securities such as exchange-traded funds (ETFs). Linking that work to longstanding literature on financial markets’ reactions to military conflict, we document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack. The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic. Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv. For one Israeli company alone, 4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or avoided losses) of 3.2 billion NIS on that additional short selling. Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks. We identify similar patterns in the Israeli ETF at times when it was reported that Hamas was planning to execute a similar attack as in October. Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading. We contribute to the growing literature on trading related to geopolitical events and offer suggestions for policymakers concerned about profitable trading on the basis of information about coming military conflict.