Category: Uncategorized
Friday assorted links
The economics of U.S. LNG exports
I assess the climate impact of granting federal approval to all proposed U.S. liquified natural gas (LNG) export terminal projects, which would double U.S. export capacity by 2030. Results indicate a net decrease in global emissions through 2070, primarily due to higher local gas prices in the U.S., leading to lower domestic gas generation and accelerated renewable adoption.
That is from the job market paper of Constanza Abuin, from Harvard University.
Do you want a Democratic or Republican doctor?
Political polarization is increasingly affecting policymaking, but how is it influencing professional decision-making? This paper studies the differences in medical practice between Republican and Democratic physicians over 1999-2019. It links physicians in the Medicare claims data with their campaign contributions to determine their partyalignment. In 1999, there were no partisan differences in medical expenditure perpatient. By 2019, Republican physicians are now spending 13% more, or $70 annually per patient. We analyze four potential sources of this partisan difference: practice characteristics (i.e., specialization and location), patient composition, preferences for financial gain, and beliefs about appropriate care. Even among physicians in the same specialty and location treating patients for the same condition, Republican physicians spend 6% more, especially on elective procedures. Using a movers design, we also find large partisan differences for treating the same patient. We find no evidence that these partisan differences are driven by profit incentives. Instead, the evidence points to diverging beliefs. Republican physicians adhere less to clinical guidelines, consistent with their reported beliefs in prior surveys. The timing of the divergence matches the politicization of evidence-based medicine in Congress. These results suggest that political polarization may lead to partisan differences in the beliefs and behavior of practitioners.
That is from the job market paper of Woojin Kim from UC Berkeley. I found this one of the most interesting job market papers of this year.
The 92nd St. Y
Income Inequality
Robert Kuttner and Tyler Cowen in conversation, moderated by Jeff Greenfield
Thursday assorted links
More market price reactions
Market up like crazy (especially small caps),
1. Freddie Mac (FMCC) and Fannie Mae (FNMA) stocks just gained 35% and 30% respectively on the 2024 election news
https://x.com/Jon_Hartley_/status/1854278771546968569
2. Retail, solar and cannibis stocks all down.
https://x.com/Jon_Hartley_/status/1854286070000861638
While the overall stock market today gained on election news of market friendly regulatory and tax policies in the coming Trump Admin and Republican Senate & House (S&P500 +2.53%, Russell 2000 +5.84%), retail stocks, solar stocks and cannabis stocks all declined today amidst expectations of new tariffs, receding green energy subsidies, and failed cannabis legalization: Retail stocks: DLTR -6.5%, DG -5.1%, NKE -3.4%, YETI -3.0%, FIVE -9.9% Solar stocks: RUN -29.6%, SEDG -22%, ENPH -17%, FSLR -10% Cannabis stocks: CURA -30%, CGC -21%, TLRY -13%, CRON -7.1%
That is from Jon Hartley.
What I’ve been reading
1. Edwin Frank, Stranger Than Fiction: Lives of the Twentieth Century Novel. Very good short portraits of various classic novels, including Machado de Assis, Mann’s Magic Mountain, Dr. Moreau, Carpentier, Perec, and others. At this point I am usually sick of such books but this one I stuck with as it is rewarding throughout.
2. Peter Doggers, The Chess Revolution: From the Ancient World to the Digital Age, is a good book, though it is mostly interior to my current knowledge set.
3. Rebecca Charbonneau, Mixed Signals: Alien Communication Across the Iron Curtain. This book fit well into my recent “Soviet science” reading program. This is more of a “Cold War” book than a “UFO book.” And I learned the full saga behind the Byrds song “C.T.A. – 102” for the first time.
4. Geoffrey Wawro, The Vietnam War: A Military History, is the single best book on its topic and is both intelligent and highly readable.
Coming in 2025 is David Spiegelhalter, The Art of Uncertainty: How to Navigate Chance, Ignorance, Risk and Luck.
The Legacy of Robert Higgs, edited by Christopher J. Coyne, is a very good collection for those interested in the topics Bob worked on.
Louis Kaplow, law and economics professor at Harvard, rethinks merger analysis in Rethinking Merger Analyses.
I have not yet had a chance to start Agustina S. Paglayan, Raised to Obey: The Rise and Spread of Mass Education.
John Cassidy has a forthcoming collection of readings, Capitalism and its Critics, A History: From the Industrial Revolution to AI.
The market price reactions
The dollar surged by its most in two years and Wall Street was poised for big gains as Donald Trump’s historic US election victory sent investors around the world scrambling to price in a new regime of trade tariffs and tax cuts.
The US currency raced higher against the euro, the yen and the pound on Wednesday as traders returned to so-called “Trump trades” in expectation that the president-elect’s plans on tariffs and taxes would boost stocks, push up inflation and reduce the pace of interest rate cuts.
Wall Street was also on course for firm gains at Wednesday’s open, with futures on the S&P 500 index climbing 2 per cent and the Nasdaq 100 up 1.3 per cent.
That is from the FT. Bitcoin is up, and VIX is down.
Rising in status
1. Prediction markets
2. Competitive primary elections
3. Elon
4. French whales
5. The integrity of the American electoral system
6. J.D. Vance
7. The word “trifecta”
8. Twitter
9. Podcasts
10. Long podcasts
11. The Amish
12. Men
What else?
You don’t have to like all of those outcomes, but that is my assessment. Sometimes I do a “Falling in Status” companion post, but I feel any reasonable approach to that one would be mean-spirited, so I will leave it aside.
Political Sorting in the U.S. Labor Market
That is the central topic of the job market paper of Sahil Chinoy from Harvard University. Here is the abstract:
We study political sorting in the labor market and examine its sources. Merging voter file data and online résumés to create a panel of 34.5 million people, we show that Democrats and Republicans choose distinctive career paths and employers. This leads to marked segregation at the workplace: a Democrat or Republican’s coworker is 10% more likely to share their party than expected. Then, we ask whether segregation arises because jobs shape workers’ politics or because workers’ politics shape their job choices. To study the first, we use a quasi-experimental design leveraging the timing of job transitions. We find that uncommitted workers do adopt the politics of their workplace, but not workers who were already registered Democrats or Republicans. The average effect is too small to generate the segregation we document. To study the second, we measure the intensity of workers’ preferences for politically compatible jobs using two survey experiments motivated by the observational data. Here, we find that the median Democrat or Republican would trade off 3% in annual wages for an ideologically congruent version of a similar job. These preferences are strong enough to generate segregation similar to the observed levels.
Co-authored with Martin Koenen, also a job market candidate from Harvard. Koenen’s other papers, at the link, look very interesting too.
Artificial Intelligence, Scientific Discovery, and Product Innovation
This paper studies the impact of artificial intelligence on innovation, exploiting the randomized introduction of a new materials discovery technology to 1,018 scientists in the R&Dlab of a large U.S. firm. AI-assisted researchers discover 44% more materials, resulting in a 39% increase in patent filings and a 17% rise in downstream product innovation. These compounds possess more novel chemical structures and lead to more radical inventions. However, the technology has strikingly disparate effects across the productivity distribution: while the bottom third of scientists see little benefit, the output of top researchers nearly doubles. Investigating the mechanisms behind these results, I show that AI automates 57% of “idea-generation” tasks, reallocating researchers to the new task of evaluating model-produced candidate materials. Top scientists leverage their domain knowledge to prioritize promising AI suggestions, while others waste significant resources testing false positives. Together, these findings demonstrate the potential of AI-augmented research and highlight the complementarity between algorithms and expertise in the innovative process. Survey evidence reveals that these gains come at a cost, however, as 82% of scientists report reduced satisfaction with their work due to decreased creativity and skill underutilization.
That is from a new paper by Aidan Toner-Rodgers. Via Kris Gulati.
Track your ballot measure
Here is the link.
Tuesday assorted links
The Amazon nuclear project
Nuclear power plants are designed to withstand a plane crash. We are now getting a live experiment in whether the nuclear sector is built of similar stuff, after federal regulators dropped a bomb on Friday night. In a 2-1 vote, the Federal Energy Regulatory Commission rejected an amended interconnection agreement for the deal that sparked a frenzy for nuclear power stocks earlier this year: Amazon.com’s acquisition of a datacenter co-located with a reactor owned by Talen Energy Corp. Few saw it coming, and the sector dived on Monday morning.
Here is more from Bloomberg, via Nicanor.
Generative AI and the Nature of Work
Here is a new paper by the following set of authors: Manuel Hoffmann Harvard Business School, Sam Boysel Harvard Business School, Frank Nagle Harvard Business School, Sida Peng Microsoft Corporation, Kevin Xu GitHub, Inc. Here is the abstract:
Recent advances in artificial intelligence (AI) technology demonstrate considerable potential to complement human capital intensive activities. While an emerging literature documents wide-ranging productivity effects of AI, relatively little attention has been paid to how AI might change the nature of work itself. How do individuals, especially those in the knowledge economy, adjust how they work when they start using AI? Using the setting of open source software, we study individual level effects that AI has on task allocation. We exploit a natural experiment arising from the deployment of GitHub Copilot, a generative AI code completion tool for software developers. Leveraging millions of work activities over a two year period, we use a program eligibility threshold to investigate the impact of AI technology on the task allocation of software developers within a quasi-experimental regression discontinuity design. We find that having access to Copilot induces such individuals to shift task allocation towards their core work of coding activities and away from non-core project management activities. We identify two underlying mechanisms driving this shift – an increase in autonomous rather than collaborative work, and an increase in exploration activities rather than exploitation. The main effects are greater for individuals with relatively lower ability. Overall, our estimates point towards a large potential for AI to transform work processes and to potentially flatten organizational hierarchies in the knowledge economy.
Via the excellent Kevin Lewis.