Category: Uncategorized
Spying makes a comeback
That is the theme of my latest Free Press article, here is one excerpt:
It may look like merely the latest story of a wealthy, powerful man making an irresponsible decision. But below the surface, it is also a harbinger of the erosion of privacy today, as well as the acceleration of espionage and the increasing value of secrets. More time and resources are going to be devoted to uncovering secrets, with honeypotting only one part of a larger picture: more spying, more attempted honeypotting, more private surveillance, more attempts to record (and search, using AI) conversations, more hacks of phones and computers, and more attempts to use AI to figure out the details of people’s lives and plans. Life is going to feel much more cloak-and-dagger, especially for the wealthy and influential…
The wealthy and influential are likely to take ever-greater care to minimize public scrutiny, protect their digital privacy, prevent journalists from going through their trash, and travel incognito, and their language in (supposedly) private conversations will have to be more guarded as well. We now live in an era where NDAs for hookups and even dinner dates are a thing.
Worth a ponder, as in the pending world secrets will be more valuable than before. The super-wealthy and their companies can be decisive actors, there are more prediction markets than before, and AI is equalizing the value of high-quality but publicly available information.
Are RCTs underpowered?
Maybe so:
We study the statistical credibility of randomized controlled trials (RCTs) in development economics and the optimal allocation of resources to replication. Using 745 principal-hypothesis tests from 190 articles in leading economics journals, we find that actual t-statistics peak well below the theoretical benchmark of 2.8 expected under 80 percent power, though above values associated with p-hacking. This suggests many RCTs are underpowered. Estimating an empirical Bayes mixture model that accounts for selective publication, we find that approximately 30 percent of published rejections are false discoveries, with average directional power at only 40 percent. At conventional significance thresholds, the posterior probability of a false discovery reaches 66 percent. Doubling original sample sizes lowers the average false discovery rate by five percentage points, whereas tightening the significance threshold to 0.005 yields a larger reduction at the cost of total discoveries. Finally, we characterize a funder’s optimal replication policy under a fixed budget and an evidence standard. Under standard regularity conditions, replications concentrate in an intermediate interval of original test statistics, and the optimal replication sample size is single-peaked in the original t-statistic. Illustrative calibrations show that successful replications reduce aggregate false discovery rates to 1.8–7.8 percent, depending on the evidence standard.
That is from a new paper by
Tuesday assorted links
2. Hayek for our time, by Cass Sunstein, free download for two weeks.
3. Works in Progress is looking for business and finance writers.
4. Matthew Lilley on Harvard grad students. I believe they teach the permanent income hypothesis there?
5. Ethan Mollick on Fable 5.2.
*Godzilla: Minus Zero* (no spoilers)
This is a morally serious movie (really). And Ghidorah stars! The whole thing is about twenty minutes too long, but mostly very good. And like many in the Godzilla series, it offers extended and instructive commentary on American-Japanese relations, and how the Japanese view them. Not for everyone, but I am glad I went.
Monday assorted links
The Paraguayan bank story
Despite its weaknesses, Paraguay’s young democracy was still able to deliver under stress. Its free, boisterous press was the first to sound the alarm about Peña’s shenanigans. The Central Bank’s supervision chief did his job: he examined ueno’s numbers and recommended blocking the sale of its bad loans to a related company (Peña had appointed him to a different agency four days earlier). Legislators, including most of Peña’s fellow Colorados, moved swiftly to investigate and impeach the president. Prosecutors, who belong to a Public Ministry not always independent of the executive, ordered the arrest of ueno’s top directors the day the Central Bank took over the bank. They ordered Peña’s arrest the minute Congress impeached him—all within less than a week.
One of Paraguayan democracy’s greatest accomplishments has been earning an investment-grade rating for its sovereign debt, from Moody’s in 2024 and S&P in 2025. The macroeconomic and financial management behind it, through the finance ministry and the Central Bank, has brought low inflation and overall stability. As a result, Paraguayans can save, invest, and run their households and businesses like never before, and per capita GDP has grown steadily for three decades. That same framework is now repaying ueno’s small depositors through a deposit guarantee of up to $38,000 per person and, so far, has kept the panic from spreading to other banks. Whether it can also make whole the pension fund and the state agencies with hundreds of millions of dollars at stake is the next test.
Last but not least, there’s a big dog that hasn’t barked in this crisis. Unlike almost all of Paraguay’s previous political crises, the military has been a non-entity. No military leader has stepped forward to offer a solution, the press doesn’t even mention the military, and nobody on the streets expects or wishes a military solution. That’s a major democratic win.
Here is much more from Tomas Mandl, who also has an excellent book on Paraguay.
Sunday assorted links
2. Does AI instead commodify jobs?
3. The digital world is making Islam more diverse (The Economist).
4. “An affair with an economist exposed the calculus of modern dating.” (New Yorker)
5. “How Much Economic Value Do AI Systems Produce per Unit of Energy?”
6. John Gray will be writing a column for Unherd.
7. How France took over basketball (New Yorker).
8. “If existing AI capabilities are widely adopted, they could double research output in some fields.”
Saturday assorted links
Was Mossadegh a liberal, democratizing force?
One reads and hears so many times that Iran was on the path to democracy until a CIA coup installed the Shah in 1953. It turns out that account is quite wrong, as is detailed by Simon Sebag Montefiore:
As his support in the Majlis ebbed, Mosaddegh demanded autocratic powers. Both the shah and Majlis refused. On 16 July 1952, Mosaddegh resigned and the shah appointed the ‘Old Fox’ Qavam…On 21 July, five days later [after a shooting], the mobs forced Mosaddegh’s reinstatement.
…Mosaddegh had not been able to resist the temptation of supreme power. His attempt to undermine the monarchy by getting control of the army and to declaw the army by purging officers and making budget cuts had offended supporters of both. The demeaning of the monarchy, secular policies and prosecution of Fadayan assassins had offended the clergy. His moves to bypass the democratically elected parliament by taking plenary powers outraged liberals and democrats. Alienating all of them, Mosaddegh quickly lost control, languishing, pyjama-clad and close to nervous breakdown, in his residence.
…When the police chief was assassinated, Mosaddegh ordered mass arrests that led to Malija members flooring a vote of no conffidence. The once idealistic premier, resorting to authoritarian measures, called a faked plebiscite [with no secret ballot the results were 2 million yes, 1,207 no] to dismiss parliament and huge demonstrations to support him by the communists.
So it was one bad guy succeeding another. Montefiore also argues that what brought down Mossadegh was a second Iranian coup, not the initial coup attempt organized by the CIA.
That is all from the new and excellent The Cauldron: The Making of the Modern Middle East.
Friday assorted links
1. What will happen with Texas data centers? And more on that.
2. What is the half life of a claim about LLMs?
3. YouTube video created by AI. Titled Der Zauberberg.
4. Data centers tend to be put in places with relatively flat supply curves.
5. “According to Twenge, one of the great Cassandras of teen mental health in America, the current trajectory is now best described as a “longstanding trend in improvement.”” (NYT)
6. ANC now a minority party (FT, David Pilling).
The Global Office
This paper argues that globalisation’s frontier has shifted from manufacturing GVCs to services GVCs: from the Global Factory to the Global Office. While the Factory remains larger in gross trade, the Office is growing much faster. A heatmap of trade in intermediates shows that the Factory is bloc-shaped and dominated by China, whereas the Office is star-shaped and dominated by America. Gravity estimates show that distance matters less for Office exports, but time zones matter more: each hour of time-zone separation reduces Office exports by roughly 4%, while having no effect on Factory exports. Importantly, all of the world’s export-linked net job creation between 2008 and 2022 occurred in digitally delivered services rather than manufacturing, and trade-linked service jobs command higher average pay globally. The Factory-to-Office shift is also reshaping development. Most emerging economies have seen export-led growth tilt towards services, but their service exports are not yet large enough to drive overall GDP growth the way manufacturing did historically. The big picture is that globalisation’s second unbundling is running out of steam even as its third unbundling is powering ahead. The paper, which raises more questions than it answers, closes with the conjecture that the future of trade is services.
That is from a new NBER working paper by Richard Baldwin.
Natasha Cowen guest posts on Caffrey
I am on my way back home from Armenia, where I was on a Fulbright teaching U.S. securities regulation to Armenian law students. I’m an active user of AI for multiple areas of my life, including my professional life. When I just started preparing for teaching this class, I had a plan: I would use AI to help me write my slides. I would give it prompts, so that it would roughly know the content of each slide and then it would do the beautification part. [account of what was not working]
Then one day, I spoke to a friend who works for a financial regulator, just like I used to, and she told me that she uses Caffrey. It’s a startup and I had never heard of it before this conversation. They specialize in legal research. I reached out to them and asked whether they would give me permission to use it, which they did after meeting with me. To be honest, I didn’t have very high hopes. After all, I have already used two most advanced systems. But I was very pleasantly surprised. Caffrey is founded by lawyers. They understand how important it is for the legal advice and research to be accurate. I gave Caffrey my slides, asked it to verify all legal information in them, and it did an amazing job. I have been working in this field myself for 20 years, so I believe that I can evaluate very well whether something is done properly, and I have nothing except for high praise for Caffrey. The only reason I’m writing this post is because I want others to benefit. And I want Cafffrey to succeed. This would be good for the field of financial regulation, for the lawyers who work in it, and for their clients.
Thursday assorted links
2. Data on the flattening of consumer culture (NYT). One-sided, but still of interest.
3. A new and better measure of how much of educational value is signaling.
4. Inside joke concerning the Pope that only some Beatles fans will get.
5. U.S. productivity growth is looking up.
6. NYT on Dario.
My very good Conversation with Richard Hanania
Here is the video, audio, and transcript. Here is part of the episode summary:
The first half of the conversation stays close to the text [Conrad’s Nostromo], covering the novel’s political backdrop, its deliberately scrambled timeline, the near-total absence of religion in Conrad’s universe, Nostromo’s own vanity and treatment of women, a close reading of the “folly and murder” passage, the Fredric Jameson claim that no Latin American author could have written this book, and their very different research methods for preparing. Then the conversation opens outward, moving through why Latin America has unusually high crime despite not being especially poor, Panama’s surprising success story, Shakespeare’s objective greatness, the state of media criticism after the AI boom, who on the populist right is actually worth reading, why conservative women hug and liberal women shake hands, what Hanania wants to write and learn next, and more.
Excerpt:
COWEN: Here’s one thing that struck me, and I’m not sure you’ll agree. Early in the novel, there’s all this talk about the Italians and Garibaldi and liberty, and the extent to which I think this book is also a critique of classical liberalism is what surprised me reading it for the second time. The first time was probably, I’d guess, 30 years ago, that Conrad is not against the classical liberal prescription, really, but he views it as another pathology inserted into a hopeless situation.
It just morphs into some form of corruption and interest groups. It’s replaced by the autocrats, but it turns out to not really matter more. There’s, again, this dead hand of history. The indigenous groups, their customs, their norms are really what rule the area. The foreigners come and go, and they may steal or extract wealth, but at the end of the day, the talk of liberty and democracy, for him, it’s a kind of fraud. I think it’s also a recognition that imperialism was not going to do the job.
HANANIA: Don’t you think that the Occidental Province had a higher GDP per capita than the rest of the country? It wasn’t just they made money. It seems like there was real wealth. Getting to the end, to the spoilers, the miners actually march on the city because they’re so loyal to Gould. They like what’s going on. There is actual improvement in people’s lives. It’s not that nihilistic, right?
COWEN: It may be higher GDP, but keep in mind GNP may be what counts. I don’t think Conrad thought in those terms. I don’t read him as a consequentialist, though I’m mostly one myself. For him, progress is about moral progress. He doesn’t see a lot of moral progress in this setting. The point that that’s not happening is, for him, at least more important than, oh, living standards went up a bit or, well, isn’t this better than the even poorer societies they had earlier on? I think he grew up in what we now call Poland, but then was ruled by Russia. The idea of foreign rule is something he had such a strong instinctive dislike of. And you see it in his other books as well that he’s a cynic about foreign presence, though I don’t think he’s saying things were better before.
HANANIA: No, I don’t think I agree.
COWEN: I didn’t think you would agree. That’s why I said that.
HANANIA: There is a noble savage idea. There’s one part where he goes into the rant when Sotillo, the general, is torturing Hirsch. I think he goes into a rant about how primitive man did not devise as much sadistic torture, which I don’t think is probably true, but that’s Conrad’s idea. Basically, there’s a kind of innocence there.
I look at the Hernandez and the robbers and the people who are living in the countryside. Those people are purest case of noble savage. There is part of that. You’re right. Conrad is into honor. This is a book about love and men caring about women. There’s Monygham, the doctor’s loyalty to Mrs. Gould, and then Decoud’s loyalty to Antonia. His other books are about this. Yes, he’s a romantic. He’s not a romantic in politics. He thinks politics is a dirty—
COWEN: Agreed.
HANANIA: —unromantic world. If he thinks socialism and populism on a scale of one to 10 are like a one and classical liberalism is a four, to me, he’s a classical liberal, even though he’s not an eight or a nine on classical liberalism.
COWEN: I think I read him as believing in contingency as the most important truth of politics and a geographic relativism. I don’t think he has much Rousseau in him of idealizing the noble savages, but he sees the noble savages are not noble. They’re terrible, but what’s terrible in them gets recreated in us at higher levels of wealth and power. That, for him, is the most fundamental truth of politics.
Interesting throughout, recommended. And here is Richard’s prescient recent book Kakistocracy: Why Populism Ends in Disaster.