Category: Uncategorized
In defense of Schumpeter
Factories of Ideas? Big Business and the Golden Age of American Innovation (Job Market Paper) [PDF]
This paper studies the Great Merger Wave (GMW) of 1895-1904—the largest consolidation event in U.S. history—to identify how Big Business affected American innovation. Between 1880 and 1940, the U.S. experienced a golden age of breakthrough discoveries in chemistry, electronics, and telecommunications that established its technological leadership. Using newly constructed data linking firms, patents, and inventors, I show that consolidation substantially increased innovation. Among firms already innovating before the GMW, consolidation led to an increase of 6 patents and 0.6 breakthroughs per year—roughly four-fold and six-fold increases, respectively. Firms with no prior patents were more likely to begin innovating. The establishment of corporate R\&D laboratories served as a key mechanism driving these gains. Building a matched inventor–firm panel, I show that lab-owning firms enjoyed a productivity premium not due to inventor sorting, robust within size and technology classes. To assess whether firm-level effects translated into broader technological progress, I examine total patenting within technological domains. Overall, the GMW increased breakthroughs by 13% between 1905 and 1940, with the largest gains in science-based fields (30% increase).
That is the job market paper of Pier Paolo Creanza, who is on the market this year from Princeton.
*Violent Saviors*
That is the new William Easterly book, and the subtitle is The West’s Conquest of the Rest. I liked this book very much, but found the title and also book jacket and descriptions misleading. I think of this work as a full-throated examination and study of the classical liberal anti-imperialist tradition. We have been needing such a thing for a long time. It is not that I expected Easterly to be poorly informed, but it amazes me how well he knows this material from a historical point of view. A lengthy (and good) discussion of E.D. Morel!
So recommended, and here’s hoping these traditions find some new legs and less crazy adherents.
Sunday assorted links
1. Farmers’ Almanac will cease publication.
2. Econ history job candidates this year, a list.
3. How an econ job market candidate should maximize his or her LinkedIn profile.
4. “Mamdani is under fire for charging people $13 per beer at his ‘victory party’.”
5. Burn-Murdoch covers Noy and Rao on polarizing media (FT).
Should USG support a 50-year mortgage?
More “affordability” from Trump!? From GPT-5:
Broad, government‑backed 50‑year mortgages would likely lower monthly payments but raise house prices, slow equity build‑up (and raise default risk in downturns), and increase interest‑rate risk in the financial system. As a general affordability policy for the U.S., that’s a poor trade‑off. If used at all, a 50‑year term should be tightly targeted (e.g., to loan modifications or to newly built homes only), not adopted wholesale for new purchases…
In the short run, sellers and incumbent owners capture much of the benefit via higher sale prices; first‑time buyers face higher entry prices…
Here is the whole answer. Albania has the right idea!
The first human arrivals in the New World may have sailed from northeast Asia
The first people to migrate to North America may have sailed from north-east Asia around 20,000 years ago. Experts have argued that prehistoric people in Hokkaido, Japan, used similar stone tools to those later found in North America, and suggest that seafarers may have travelled to the continent during the last ice age, bringing this stone technology with them. This adds weight to the theory that the first Americans arrived much earlier than previously thought.
And:
“By [around 30,000 years ago], Upper Palaeolithic seafarers were using sea-going vessels to access some of the outer islands in the Japanese archipelago … and were capable of negotiating the Kuroshio Current, one of the fastest in the world,” Davis and his colleagues write in their paper, published in October in the journal Science Advances. “This suggests that such experienced seafarers may also have been capable of handling adverse Pacific coastal currents.”
Nonetheless, the team also suggest that the journey could have happened at a much slower pace. In this reconstruction, the prehistoric seafarers gradually followed a route along the Pacific coast.
Here is the full story. I have long wondered why, every now and then, in Japan I see a person who looks a great deal like a “Native American.”
Saturday assorted links
1. Zvi (NN) on my podcast with Sam Altman. I will note that GPT-5 is very good at picking out restaurants for me in northern Spain, and Neruda you have to read in Spanish, otherwise it is lame.
2. Peter Thiel on young people and socialism (Free Press).
3. Is the Heritage Foundation imploding?
4. Fertility job market papers.
5. Iguana advisory for Florida.
6. The full twenty minute Sydney Sweeney GQ interview is worth watching. Few books about sociology are this valuable. And memed, about free trade.
Two books I hope you do not mood affiliate against
The firtst is Laura K. Field, Furious Minds: The Making of the MAGA New Right.
The author chronicles the history of the “New Right” from a left-wing perspective, and often in ways that non-Trumpers also will find objectionable. Still, the book has plenty of facts and substance, and it is the best history of this group I know of. There is plenty of biography and group identification in here, so it serves as a guidebook.
The second is Mahmood Mamdani, Slow Poison: Idi Amin, Yoweri Museveni, and the Making of the Ugandan State. I ordered this one before I knew who wrote it, namely Papa Mamdani. Again, there is plenty you can object to here, but it is an actual (partial) history of Uganda, interwoven with autobiography. The author actually tries to explain to you what was going on, rather than writing to “fill a gap in the literature,” or whatever. Too bad his actual views are so objectionable — Papa Mamdani, Uganda never had neoliberalism! Yet I am glad I bought it and will continue reading it, because it fills in many pieces of the story, most of all for the Ugandan campaigns against Israelis, the British, and Indians.
And there you go.
Friday assorted links
1. Private rooms in a nursing home do not seem to help individuals.
2. “We find that the height of Americans began to decline among those born around or before the early 1980s in parallel with the diminution in the rate of increase of life expectancy. The decline in adult height ranged from 0·68 ± 0.36 cm among white women to 1·97 ± 0.50 cm among Hispanic men and is statistically significant across all six demographic groups considered.” Link here.
4. Is there momentum in prediction markets?
5. Cluny Institute looking for a new partner.
6. Sam Altman on the role of government in AI.
7. Further discussion of Kosmos, the “AI scientist.” And from Tony Kulesa.
What I’ve been reading
1. Robert Fishman, Urban Utopias in the Twentieth Century: Ebenezer Howard, Frank Lloyd Wright, and Le Corbusier. There are a variety of books on these figures and this topic, but after buying and perusing a whole bunch of them, this is the one I found useful.
2. Meryle Secrest, Shoot the Widow: Adventures of a Biographer in Search of Her Subject. A highly entertaining quasi-autobiography, focusing on her work on the nine different biographies she wrote of some very different people. As far as I can tell, Secrest is 95 years old and living in the Washington, D.C. area — hope I run into her at Mama Chang some day. Though I suspect she lives in Bethesda.
3. Paul McCartney, Wings: A Story of a Band on the Run. Not really written by McCartney, but excerpts from interviews with parties involved with Wings, Paul included. Presented as if it were an oral history, which in part it is. Very well done, not for everyone obviously but it is for me. Macca and music aside, it is a good study of how to reinvent oneself, and how weird you need to be to actually succeed with that. Here is a good Ian Leslie review.
4. Eça de Queiros, Adam and Eve in Paradise. Originally from the 19th century, but translated into English only this year. A 60 pp. novella about exactly what the title indicates, noting that matters are not as simple as the first telling of that story might have suggested.
5. Daniel Baldwin Hess, editor, The Shoup Doctrine: Essays Celebrating Donald Shoup and Parking Reforms, is much needed and is exactly as it seeks to present itself.
Thursday assorted links
1. Those new service sector jobs.
2. Optimism is correlated with exceptional longevity.
3. “Kosmos has made 7 discoveries so far, which we are releasing today, in areas ranging from neuroscience to material science and clinical genetics, in collaboration with our academic beta testers. Three of these discoveries reproduced unpublished findings; four are net new, validated contributions to the scientific literature.” Link here.
4. The wisdom of Ross Douthat.
5. “Following large exogenous minimum wage increases, schedule unpredictability increases by 20% per week and schedules become even more responsive to weather shocks. This highlights how some of the welfare gains workers realize from a minimum wage may be offset by increased schedule unpredictability.” Link here to the paper.
6. Kevin Kelly’s essentials for independent travel in China.
7. New colossal statue for Alcatraz island? Recall Alex’s proposal.
8. Ross dialogue on feminization with Leah Libresco Sargent and Helen Andrews (NYT).
I worry about “affordability politics”
It focuses the listener’s attention on price rather than quantity. To many people it sounds better than “economic growth,” though often for the wrong reasons. I cover related points in my latest Free Press article:
Rather than suggesting beneficial economic reforms, the affordability mantra too often leads to “free lunch” thinking and political giveaways. It is a new form of economic populism—a more general rubric of which, after the volatility and disruptions of the Trump tariffs, I have had enough.
I am not opposed to “affordability” as an abstract concept. For instance, I find food prices shockingly high, even in so-so restaurants, and I wish the prices were lower. And if I were in charge of the economy, I would try to lower costs. But there are only so many ways to do that. One option would be to deregulate the energy sector, easing permitting for solar, wind, and nuclear power. Over a five- to 10-year time horizon, that would lead to cheaper energy and, indirectly, to modestly lower food prices. I would also repeal the Trump tariffs, which artificially inflate the cost of foreign goods. I might also refrain from minimum wage increases, which only cause the price of food to rise further.
But even in the best-case scenario, all of those actions would make food just a bit cheaper than it would be otherwise. I would hardly expect voters to hail my reign as a major triumph, or ask for more of the same. Instead, they might flock to the candidate who promises government-run grocery stores or price controls. Sound familiar?
I do not expect this problem to go away anytime soon, and now it is the Trump people too.
UATX Is Ending Tuition Forever
Thanks to a $100 million gift from Jeff Yass — the largest donation since UATX was founded in 2021 — we’re breaking the chains. His gift marks the launch of a $300 million campaign to build a university that sets students free.
Our bet: Create graduates so exceptional they’ll pay it forward when they succeed, financing the tuition of the next generation. When our students build important companies, defend our nation, advance scientific frontiers, build families, and create works that elicit awe, they’ll remember who made their excellence possible. And they’ll give back.
Here is the full announcement.
My excellent Conversation with Sam Altman
Recorded live in Berkeley, at the Roots of Progress conference (an amazing event), here is the material with transcript, here is the episode summary:
Sam Altman makes his second appearance on the show to discuss how he’s managing OpenAI’s explosive growth, what he’s learned about hiring hardware people, what makes roon special, how far they are from an AI-driven replacement to Slack, what GPT-6 might enable for scientific research, when we’ll see entire divisions of companies run mostly by AI, what he looks for in hires to gauge their AI-resistance, how OpenAI is thinking about commerce, whether GPT-6 will write great poetry, why energy is the binding constraint to chip-building and where it’ll come from, his updated plan for how he’d revitalize St. Louis, why he’s not worried about teaching normies to use AI, what will happen to the price of healthcare and hosing, his evolving views on freedom of expression, why accidental AI persuasion worries him more than intentional takeover, the question he posed to the Dalai Lama about superintelligence, and more.
Excerpt:
COWEN: What is it about GPT-6 that makes that special to you?
ALTMAN: If GPT-3 was the first moment where you saw a glimmer of something that felt like the spiritual Turing test getting passed, GPT-5 is the first moment where you see a glimmer of AI doing new science. It’s very tiny things, but here and there someone’s posting like, “Oh, it figured this thing out,” or “Oh, it came up with this new idea,” or “Oh, it was a useful collaborator on this paper.” There is a chance that GPT-6 will be a GPT-3 to 4-like leap that happened for Turing test-like stuff for science, where 5 has these tiny glimmers and 6 can really do it.
COWEN: Let’s say I run a science lab, and I know GPT-6 is coming. What should I be doing now to prepare for that?
ALTMAN: It’s always a very hard question. Even if you know this thing is coming, if you adapt your —
COWEN: Let’s say I even had it now, right? What exactly would I do the next morning?
ALTMAN: I guess the first thing you would do is just type in the current research questions you’re struggling with, and maybe it’ll say, “Here’s an idea,” or “Run this experiment,” or “Go do this other thing.”
COWEN: If I’m thinking about restructuring an entire organization to have GPT-6 or 7 or whatever at the center of it, what is it I should be doing organizationally, rather than just having all my top people use it as add-ons to their current stock of knowledge?
ALTMAN: I’ve thought about this more for the context of companies than scientists, just because I understand that better. I think it’s a very important question. Right now, I have met some orgs that are really saying, “Okay, we’re going to adopt AI and let AI do this.” I’m very interested in this, because shame on me if OpenAI is not the first big company run by an AI CEO, right?
COWEN: Just parts of it. Not the whole thing.
ALTMAN: No, the whole thing.
COWEN: That’s very ambitious. Just the finance department, whatever.
ALTMAN: Well, but eventually it should get to the whole thing, right? So we can use this and then try to work backwards from that. I find this a very interesting thought experiment of what would have to happen for an AI CEO to be able to do a much better job of running OpenAI than me, which clearly will happen someday. How can we accelerate that? What’s in the way of that? I have found that to be a super useful thought experiment for how we design our org over time and what the other pieces and roadblocks will be. I assume someone running a science lab should try to think the same way, and they’ll come to different conclusions.
COWEN: How far off do you think it is that just, say, one division of OpenAI is 85 percent run by AIs?
ALTMAN: Any single division?
COWEN: Not a tiny, insignificant division, mostly run by the AIs.
ALTMAN: Some small single-digit number of years, not very far. When do you think I can be like, “Okay, Mr. AI CEO, you take over”?
Of course we discuss roon as well, not to mention life on the moons of Saturn…
Wednesday assorted links
1. If Robin Hanson wrote a piece on charitable giving.
2. Are AI products boring? And when LLMs make all cover letters boring.
3. Citation gender gaps in top economics journals.
4. A guide to job market presentations in economics.
5. The AI “Minnesota goodbye.”
6. Big tech cashflow is still bigger than capex.
Incentives matter, and supply is elastic
Now we read that in a Harvard job market paper, by Olivia Zhao with co-author Edward Kong:
Pharmaceutical firms’ incentives to develop new drugs stem from expected profitability. We explore how market exclusivity, a policy that shapes these expectations, influences pharmaceutical innovation. First, we estimate the effects of extending market exclusivity for antibiotics, a drug class where private returns to development historically had not internalized the high social value of new innovation. Using a difference-in-differences approach, we find that a policy that approximately doubled the market exclusivity period for certain antibiotics increased innovative activity. Patent f ilings for antibiotics increased by 47%, and we find suggestive evidence that preclinical studies and phase 3 trial initiations also increased under the policy. Building on these empirical findings, we estimate a structural model of firms’ drug development decisions to predict how market exclusivity extensions of varying lengths would affect innovation in antibiotics and other therapeutic areas. Our reduced form and structural findings suggest that market exclusivity—especially if targeted to high-social-value, low-market-return areas—can be an effective tool for realigning incentives and stimulating innovation, but stress that baseline market size and interactions between market and patent exclusivities affect this policy lever’s impacts.
Here is the paper, I guess for such work, intended for such an audience, one does not refer to history’s greatest villain? And here is their paper on market incentives and antibiotics. Via Nicholas Decker.