Category: Uncategorized
Economic inequality does not equate to poor well-being or mental health
A meta-analysis of 168 studies covering more than 11 million people found no reliable link between economic inequality and well-being or mental health. In other words, living in a place that has large gaps between the rich and poor does not affect these outcomes, with implications for policy.
Here is the Nature link, this claim has been bad science all along.
One bad trend from 2025, diminution of the dollar’s safe haven status
It used to be that if you were worried about the future, you would move into dollars as the safe haven—in finance terms a countercyclical asset, which stays resilient when higher-risk assets fall. But if the United States’ own government and policies are unpredictable, and its economy is volatile, you will look for some other hedges instead. Chaos in the U.S., and particularly in the White House, is pushing investors to find alternatives to the dollar.
And so investment funds have been pouring into the precious metals, boosting their prices. While the current high price of silver reflects many factors, some of them technical and quite specific, the shift in risk attitudes has become pronounced over the last year.
The bottom line is that America is less of a safe haven than it used to be. When President Donald Trump announced his heavy tariff plan on “Liberation Day,” the dollar fell. That’s contrary to ordinary economic theory, which suggests that as Americans send fewer dollars abroad to buy imported goods, the dollar should rise. Traders, though, started to view the United States itself as a source of risk. It felt as if the right thing to do was to run away from the dollar. As a result, the dollar is down nearly 10 percent this year.
Here is more from me at The Free Press.
Thursday assorted links
1. How a research trip to Antarctica deals with time zones (NYT).
3. What kind of books did people buy in 2025? (NYT)
4. Notes on Taiwan.
6. What Shruti has been reading, including about India but not only.
7. On the compute theory of everything.
Dan Wang 2025 letter
Self-recommending, here is the link, here is one excerpt:
People like to make fun of San Francisco for not drinking; well, that works pretty well for me. I enjoy board games and appreciate that it’s easier to find other players. I like SF house parties, where people take off their shoes at the entrance and enter a space in which speech can be heard over music, which feels so much more civilized than descending into a loud bar in New York. It’s easy to fall into a nerdy conversation almost immediately with someone young and earnest. The Bay Area has converged on Asian-American modes of socializing (though it lacks the emphasis on food). I find it charming that a San Francisco home that is poorly furnished and strewn with pizza boxes could be owned by a billionaire who can’t get around to setting up a bed for his mattress.
And:
One of the things I like about the finance industry is that it might be better at encouraging diverse opinions. Portfolio managers want to be right on average, but everyone is wrong three times a day before breakfast. So they relentlessly seek new information sources; consensus is rare, since there are always contrarians betting against the rest of the market. Tech cares less for dissent. Its movements are more herdlike, in which companies and startups chase one big technology at a time. Startups don’t need dissent; they want workers who can grind until the network effects kick in. VCs don’t like dissent, showing again and again that many have thin skins. That contributes to a culture I think of as Silicon Valley’s soft Leninism. When political winds shift, most people fall in line, most prominently this year as many tech voices embraced the right.
Interesting throughout, plus Dan writes about the most memorable books he read in 2025.
Taxation in a strong AI world
Here is Dwarkesh’s tweet, based on his recent paper with Trammell, raising the issue of whether wealth taxes will become desirable in the future. A few points:
1. I think quality homes in good locations will be extremely valuable. Those could be taxed more. You could call that a wealth tax, but arguably it is closer to a “housing services tax.”
2. You could put higher consumption taxes on items the wealthy purchase to a disproportionate degree. Paintings and yachts, and so on. Tom Holden argues: “In a world in which capital is essentially the only input to production, taxing capital reduces the growth rate of the economy. Whereas at present capital taxes have only level effects. So if anything, capital taxes will become less desirable as the labour share falls.”
3. I think the amount of money spent on health care will go up a lot. And people will live much longer, which will further boost the amount spent on health care. Taxing health care more is the natural way to address fiscal problems. Some people will fly abroad for their knee surgeries, but for a long time most health care will be consumed nearby, even in a strong AI world. If the way we keep the budget sane is to have people die at 95 instead of 97, there may be some positive social externalities from the shorter life spans. We also could use some of that money for birth subsidies.
4. As a more general point, capital will not be a perfect substitute for labor, or anything close to that, anytime soon.
5. Final incidence of the AI revolution is not just about the degree of substability of capital for labor. It is also about supply and demand elasticities in goods and services markets. For instance, to the extent AI makes various services much cheaper, real wages are rising not falling. That may or may not be the dominant effect, but do not assume too quickly that wages simply fall.
5b. It is not an equilibrium for capital to simply “have all the goodies.” Let’s say that Simon Legree, using advanced AI, can produce all the world’s output using a single watt of energy. And no one else with an AI company can produce anything to compete with that (this already sounds implausible, right?). If Simon simply hoards all that output, he has no profit, though I guess he can cure his own case of the common cold. The prices for that output have to fall so it can be purchased by someone else. The nature of the final equilibrium here is unclear, but again do not assume all or even most of the returns will stay with capital. That is almost certainly not the case.
Addendum: Here is some follow-up from Dwarkesh. I think he is talking about a world very different from our own, as there is talk of ownership of galaxies. That said, many other people wish to implement his ideas sooner than that.
Wednesday assorted links
1. New data on the economics of LLMs: “Fifth, we estimate preliminary short-run price elasticities just above one, suggesting limited scope for Jevons-Paradox effects.”
2. How much is Germany still using fax machines?
3. Top ten pieces from Works in Progress.
4. MIE claims about Slovenia. Cheap talk, or can this be true?
6. Top economics papers from 2025?
7. The best “best movies of the year” set of lists I have seen.
8. The basics on Sudan. And more ongoing trouble in the Gulf and in East Africa. I hope this is not the big story of the year to come, but fear it may be.
Existential Risk and Growth
By Philip Trammell and Leopold Aschenbrenner, a new paper:
Technological development raises consumption but may pose existential risk. A growing literature studies this tradeoff in static settings where stagnation is perfectly safe. But if any risky technology already exists, technological development can also lower risk indirectly in two ways: by speeding (1) technological solutions and/or (2) a “Kuznets curve” in which wealth increases a planner’s willingness to
pay for safety. The risk-minimizing technology growth rate, in light of these dynamics, is typically positive and may easily be high. Below this rate, technological development poses no tradeoff between consumption and cumulative risk.
Self-recommending…
Tuesday assorted links
1. Ulkar on Kodaly and the cello.
2. “Lowbrow fiction is good sex and highbrow fiction is bad sex.”
3. The economics of Duke University.
4. Beginner’s Guide to the Mahabharata and Ramayana.
5. Andrew Batson on music of the year for him.
6. Model this (claim about Freemasonry and the British police).
7. Zhengdong Wang year end letter on AI.
8. I do not think these particular estimates are reliable, nonetheless murder rates would be much higher if not for medical advances.
What is the greatest artwork of the century so far?
That question is taken from a recent Spectator poll. Their experts offer varied answers, so I thought at the near quarter-century mark I would put together my own list, relying mostly on a seat of the pants perspective rather than comprehensiveness. Here goes:
Cinema
Uncle Boonmee, In the Mood for Love, Ceylan’s Winter Sleep, Yi Yi, Artificial Intelligence, Her, Y Tu Mama Tambien, Four Months Three Weeks Two Days, from Iran A Separation, Oldboy, Silent Light (Reygadas), The Three Burials of Melquiades Estrada, Get Back, The Act of Killing, Master and Commander, Apocalypto, and New World would be a few of my picks. Incendies anyone?
Classical music (a bad term these days, but you know what I mean):
Georg Friedrich Haas, 11,000 Strings, Golijov’s Passion, John Adams Transmigration of Souls, The Dharma at Big Sur, Caroline Shaw, and Stockhausen’s Licht operas perhaps. Typically such works need to be seen live, as streaming is no substitute. As for recordings, recorded versions of almost every classic work are better than before, opera being excluded from that generalization. So the highest realizations of most classical music compositions have come in the last quarter century.
Fiction
Ferrante, the first two volumes of Knausgaard, Submission, Philip Pullman, and The Three-Body Problem. The Marquez memoir and his kidnapping book, both better than his magic realism. The Savage Detectives. Sonia and Sunny maybe?
Visual Arts
Bill Viola’s video art, Twombly’s Lepanto series, Cai Guo-Qiang and Chinese contemporary art more generally (noting it now seems to be in decline), the large Jennifer Bartlett installation that was in MOMA, Robert Gober. Late Hockney and Richter works. The best of Kara Walker. The second floor of MOMA and so much of what has been shown there.
Jazz
There is so much here, as perhaps the last twenty-five years have been a new peak for jazz, even as it fades in general popularity. One could mention Craig Taborn, Chris Potter, and Marcus Gilmore, but there are dozens of top tier creators. Cecile McLorin Salvant on the vocal side. Is she really worse than Ella Fitzgerald? I don’t think so.
Popular music (also a bad term)
The best of Wilco, Kanye, D’angelo, Frank Ocean, Bob Dylan’s Love and Theft. How about Sunn O)))? No slight intended to those listed, but I had been hoping this category would turn out a bit stronger?
Television
The Sopranos, the first two seasons of Battlestar Galactica, Srugim, Borgen, and Curb Your Enthusiasm.
Assorted
Hamilton, and there is plenty more in theater I have not seen. At the very least one can cite Stoppard’s Coast of Utopia and Leopoldstadt. There is games and gaming. People around the world, overall, look much better than ever before. The Museum of Islamic Art in Doha and the reoopened Great Egyptian Museum in Cairo. The new wing at MOMA. Architecture might need a post of its own, but I’ll start by citing the works of Peter Zumthor. (Here is one broader list, it strikes me as too derivative in style, in any case it is hard to get around and see all these creations, same problem as with judging theatre.) I do not follow poetry much, but Louise Glück and Seamus Heaney are two picks, both with many works in the new century. The top LLMs, starting (but not ending) with GPT-4. They are indeed things of beauty.
Overall, this list seems pretty amazing to me. We are hardly a culture in decline.
I podcast again with Kevin Gentry
Monday assorted links
1. Medical breakthroughs from 2025.
2. 52 things Kent Hendricks learned in 2025.
3. Séb Krier.
4. Nusantara (NYT). A good piece, good photos.
5. What is the difference between cheap vs. expensive jeans?
Top Posts of 2025
Here are the top MR posts of 2025 as measured by page views. Number one post goes to Tyler:
An excellent post that pairs well with another Tyler post, also in the top ten, A median voter theory of right-wing populism which has the punchline:
The right-wing populists are gaining ground in so many countries because the cultural liberals in various parliaments and congresses are extremely reluctant to meet the preferences of their median voters.
Number two was also a Tyler post. Why I think AI take-off is relatively slow, an excellent accounting of AI economic and institutional bottlenecks. This pairs well with another top-ten post in which Tyler announces that AGI is already here. Both posts are correct. An interesting conundrum.
Third and fourth are two of my posts:
3. UCSD Faculty Sound Alarm on Declining Student Skills
4. One-Third of US Families Earn Over $150,000
Next is Tyler’s rundown of non-fiction books. Well worth re-reading.
5. Best non-fiction books of 2025 with one late addition.
Next I was pleased to see my post in which I explain some standard economics but in a deeper, more fundamental way than is usually done: One of my favorite posts of the year:
Why Do Domestic Prices Rise With Tariffs?
Zephyr Teachout’s op-ed wasn’t fun to read but I admit I did have some fun writing a response
Here’s another issue which makes me mad. The destruction of boarding houses, a perfectly reasonable housing form that reduces homelessness. Or to put it more simply, why is sharing a house illegal? Outrageous.
The War on Roommates: Why Is Sharing a House Illegal?
I am all for American greatness but the approach of the Trump administration is often backwards. I pointed out the big differences between the Sputnik moment and what I called the DeepSeek Moment in two posts.
The Sputnik vs. DeepSeek Moment: Why the Difference? and The Sputnik vs. Deep Seek Moment: The Answers.
I was pleased that David Brooks picked up on my framing in the NYTimes.
Finally my post The Library Burned Slowly sparked a brief spat with Chris Rufo. Rufo’s ability to turn the tools of the left on them is impressive but I haven’t changed my mind that “Bludgeoning your enemies is fun while it lasts but you can’t bludgeon your way to a civilization.”
What were your favorite posts of the year, either at MR or elsewhere?
J. M. W. Turner, financial arbitrageur
Abstract. J. M. W. Turner is famous for his achievements in graphic arts. What is not known is that he engaged in some pioneering market arbitrage, a profitable and risk-free swapping of British government securities. His activities lead to interesting insights into British markets of the 19th century. Financial innovation frequently created profitable arbitrage opportunities. However, among regular investors it seems that it was mostly mavericks like Turner who took advantage of them. Apparently there were strong cultural factors that inhibited most people from imitating him, which allowed obvious pricing anomalies to persist for extended periods.
That is from a recent paper by Andrew Odlyzko. Via Colin.
The Inflation Attention Threshold
From Oliver Pfäuti:
The recent inflation surge brought inflation back on people’s minds. I quantify when and how much attention to inflation changes and derive the macroeconomic implications of these attention changes. I estimate an attention threshold at an inflation rate of 4%, that attention doubles when inflation exceeds this threshold, and that supply shocks have stronger and more persistent effects on inflation in times of high attention. Developing a model featuring the attention threshold, I show that the observed attention changes offer a joint explanation for the recent inflation surge, its interplay with inflation expectations, and the long last mile of disinflation.
Here is the paper.
Canada fact of the day
Since 2015, Canada has tripled its Indigenous spending – paying more than on national defense. Over those same years, Indigenous people have suffered a catastrophic collapse in health and well-being: on average almost a full decade of lost life expectancy.
That is from David Frum.