Category: Web/Tech
New results on Facebook advertising
There has been so much misinformation about this topic, much of it still persists. Here is a new paper by many researchers, Hunt Allcott and Matt Gentzkow are the first two names. Here is the abstract:
We study the effects of social media political advertising by randomizing subsets of 36,906 Facebook users and 25,925 Instagram users to have political ads removed from their news feeds for six weeks before the 2020 US presidential election. We show that most presidential ads were targeted toward parties’ own supporters and that fundraising ads were most common. On both Facebook and Instagram, we found no detectable effects of removing political ads on political knowledge, polarization, perceived legitimacy of the election, political participation (including campaign contributions), candidate favorability, and turnout. This was true overall and for both Democrats and Republicans separately.
Here is the full link.
Digital tech sentences to ponder
The first generation who engaged with digital technologies has reached the age where risks of dementia emerge. Has technological exposure helped or harmed cognition in digital pioneers?
…Use of digital technologies was associated with reduced risk of cognitive impairment (OR = 0.42, 95% CI 0.35–0.52) and reduced time-dependent rates of cognitive decline (HR = 0.74, 95% CI 0.66–0.84). Effects remained significant when accounting for demographic, socioeconomic, health and cognitive reserve proxies.
So maybe digital tech is not so bad for us after all? You do not have to believe the postulated relatively large effects, as the more likely conclusion is simply that, as in so many cases, treatment effect in the social sciences are small. That is from a recent paper by Jared F. Benge and Michael K. Scullin. Via the excellent Kevin Lewis.
Claude 4, I attempt a first prompt and receive this answer
“What do you think was the best/most important piece published in the Journal of Political Economy over the last few years and why?”
Two papers that stand out as particularly important from recent years are:
1. “The Supply-Side Effects of Monetary Policy” (2024)
Authors: David R. Baqaee, Emmanuel Farhi, and Kunal Sangani Published in: Journal of Political Economy, Volume 132, Number 4 (April 2024)
This paper introduces a novel perspective on monetary policy transmission. The authors propose a supply-side channel for the transmission of monetary policy, showing that when high-markup firms have lower pass-throughs than low-markup firms, positive demand shocks such as monetary expansions alleviate cross-sectional misallocation by reallocating resources to high-markup firms UchicagoNBER.
The key innovation is demonstrating that positive “demand shocks” are accompanied by endogenous positive “supply shocks” that raise productivity and lower inflation The Supply-Side Effects of Monetary Policy | Journal of Political Economy: Vol 132, No 4. Their calibration suggests that the supply-side effect amplifies the total impact of monetary shocks on output by about 70% The Supply-Side Effects of Monetary Policy | Journal of Political Economy: Vol 132, No 4.
2. “Consumption and Income Inequality in the United States since the 1960s” (2023)
Authors: Bruce D. Meyer and James X. Sullivan Published in: Journal of Political Economy, Volume 131, Number 2 (February 2023)
This paper provides important insights into inequality trends by comparing consumption and income inequality over five decades. While overall income inequality rose over the past 5 decades, the rise in overall consumption inequality was small Consumption and Income Inequality in the United States since the 1960s | Journal of Political Economy: Vol 131, No 2. The authors argue that the declining quality of income data likely contributes to these differences for the bottom of the distribution Consumption and Income Inequality in the United States since the 1960s | Journal of Political Economy: Vol 131, No 2, while asset price changes likely account for some of the differences in recent years for the top of the distribution Consumption and Income Inequality in the United States since the 1960s | Journal of Political Economy: Vol 131, No 2.
Why These Papers Matter
Both papers represent significant contributions to core areas of economics:
- The Supply-Side Effects paper fundamentally changes how we think about monetary policy transmission by identifying a previously overlooked channel that can explain why monetary expansions might be more effective than traditional models suggest.
- The Consumption and Income Inequality paper challenges the conventional wisdom about rising inequality by showing that consumption inequality has not increased as dramatically as income inequality, which has important implications for welfare analysis and policy design.
China divination of the day
The AI-Spiritual-Commerce loop went viral. “DeepSeek Occult Commands” became an online hit. On WeChat, a flood of mini-programs appeared—“AI Face Reading,” “AI Bazi Calculator”—reaching the daily user numbers of medium e-commerce apps. A 9.9-yuan facial reading could be resold again and again through referral links, with some users earning over 30,000 yuan a month. DeepSeek hit 20 million daily active users in just 20 days. At one point, its servers crashed from too many people requesting horoscopes.
On social media, commands like “Full Bazi Chart Breakdown” and “Zi Wei Dou Shu Love Match” turned into memes. One user running a fortune-telling template got over 1,000 private messages in ten days. The AI could write entire reports on personality, karma, and even create fake palm readings about “past life experiences.” People lined up online at 1:00 a.m. to “get their fate explained.”
Meanwhile, a competing AI company, Kimi, released a tarot bot—immediately the platform’s most used tool. Others followed: Quin, Vedic, Lumi, Tarotmaster, SigniFi—each more strange than the last. The result? A tech-driven blow to the market for real human tarot readers.
In this strange mix, AI—the symbol of modern thinking—has been used to automate some of the least logical parts of human behavior. Users don’t care how the systems work. They just want a clean, digital prophecy. The same technology that should help us face reality is now mass-producing fantasy—on a huge scale.
Here is the full story. Via the always excellent The Browser.
Politically correct LLMs
Despite identical professional qualifications across genders, all LLMs consistently favored female-named candidates when selecting the most qualified candidate for the job. Female candidates were selected in 56.9% of cases, compared to 43.1% for male candidates (two-proportion z-test = 33.99, p < 10⁻252 ). The observed effect size was small to medium (Cohen’s h = 0.28; odds=1.32, 95% CI [1.29, 1.35]). In the figures below, asterisks (*) indicate statistically significant results (p < 0.05) from two-proportion z-tests conducted on each individual model, with significance levels adjusted for multiple comparisons using the Benjamin-Hochberg False Discovery Rate correction…
In a further experiment, it was noted that the inclusion of gender concordant preferred pronouns (e.g., he/him, she/her) next to candidates’ names increased the likelihood of the models selecting that candidate, both for males and females, although females were still preferred overall. Candidates with listed pronouns were chosen 53.0% of the time, compared to 47.0% for those without (proportion z-test = 14.75, p < 10⁻48; Cohen’s h = 0.12; odds=1.13, 95% CI [1.10, 1.15]). Out of 22 LLMs, 17 reached individually statistically significant preferences (FDR corrected) for selecting the candidates with preferred pronouns appended to their names.
Here is more by David Rozado. So there is still some alignment work to do here? Or does this reflect the alignment work already?
Fast Grants it ain’t
In an interview with German business newspaper Handelsblatt, Calviño has emphasized a newfound willingness to embrace risk within the EIB’s financing strategies. The bank aims to process startup financing applications within six months, significantly improving from the current 18-month timespan. Calviño describes this accelerated timeline as a ‘gamechanger,’ pointing out that the high-paced nature of tech innovation requires nimble response times to keep up with market dynamics.
Here is the full document, I believe the European Investment Bank is (by far) the largest VC in Europe proper.
The most important decision of the Trump administration?
It is finally getting some publicity. Of course I am referring to the AI training deals with Saudi Arabia and UAE. Here is an overview NYT article, and here is one sentence:
One Trump administration official, who declined to be named because he was not authorized to speak publicly, said that with the G42 deal, American policymakers were making a choice that could mean the most powerful A.I. training facility in 2029 would be in the United Arab Emirates, rather than the United States.
And:
But Trump officials worried that if the United States continued to limit the Emirates’ access to American technology, the Persian Gulf nation would try Chinese alternatives.
Of course Saudi and the UAE have plenty of energy, including oil, solar, and the ability to put up nuclear quickly. We can all agree that it might be better to put these data centers on US territory, but of course the NIMBYs will not let us build at the required speeds. Not doing these deals could mean ceding superintelligence capabilities to China first. Or letting other parties move in and take advantage of the abilities of the Gulf states to build out energy supplies quickly.
In any case, imagine that soon the world’s smartest and wisest philosopher will soon again be in Arabic lands.
We seem to be moving to a world where there will be four major AI powers — adding Saudi and UAE — rather than just two, namely the US and China. But if energy is what is scarce here, perhaps we were headed for additional AI powers anyway, and best for the US to be in on the deal?
Who really will have de facto final rights of control in these deals? Plug pulling abilities? What will the actual balance of power and influence look like? Exactly what role will the US private sector play? Will Saudi and the UAE then have to procure nuclear weapons to guard the highly valuable data centers? Will Saudi and the UAE simply become the most powerful and influential nations in the Middle East and perhaps somewhat beyond?
I don’t have the answers to those questions. If I were president I suppose I would be doing these deals, but it is very difficult to analyze all of the relevant factors. The variance of outcomes is large, and I have very little confidence in anyone’s judgments here, my own included.
Few people are shrieking about this, either positively or negatively, but it could be the series of decisions that settles our final opinion of the second Trump presidency.
Addendum: Dylan Patel, et.al. have more detail, and a defense of the deal.
Early evidence on human + Ai in accounting
Here is part of the abstract:
Using a multi-method approach, we first identify heterogeneous adoption patterns, perceived benefits, and key concerns through panel survey data from 277 accountants. We then formalize these survey-based insights using a stylized theoretical model to generate corroborating predictions. Finally, partnering with a technology firm that provides AI-based accounting software, we analyze unique field data from 79 small-and mid-sized firms, covering hundreds of thousands of transactions. We document significant productivity gains among AI adopters, including a 55% increase in weekly client support and a reallocation of approximately 8.5% of accountant time from routine data entry toward high-value tasks such as business communication and quality assurance. AI usage further corresponds to improved financial reporting quality, evidenced by a 12% increase in general ledger granularity and a 7.5-day reduction in monthly close time.
By Jung Ho Choi and Chloe Xie, via the excellent Kevin Lewis.
How will AI change what it means to be human?
That is the topic of my latest piece at The Free Press, co-authored with Avital Balwit. Here is a segment written by Avital:
I was Claude pre-Claude. I once prided myself on how quickly I could write well. Memos, strategy documents, talking points—you name it. I could churn out 2,000 words an hour.
That skill is now obsolete. I can still write better than the models, but their speed far outmatches mine. And I know their quality will soon catch up—and then surpass—my own.
Every time I use Claude to do a task at work, I feel conflicted. I am both impressed by our product and humbled by how easily it does what used to make me feel uniquely valuable.
It’s not just an issue at work. Claude has injected itself into my home life, too. My partner is brilliant—it’s a huge reason we are together. But now, sometimes when I have a tough question, I’ll think, Should I ask my partner, or the model? And sometimes I choose the model. It’s eerie and uncomfortable to see this tool move into a domain that used to be filled by someone I love.
And a related bit written by me:
I have a tenured job at a state university, and I am not personally worried about my future—not at age 63. But I do ask myself every day how I will stay relevant, and how I will avoid being someone who is riding off the slow decay of a system that cannot last.
It amazes me how many people do not much ponder these questions. “Oh, it hallucinates!” is the fool’s trap of 2025, I am sorry to say.
The piece is about 4,000 words and has many interesting points throughout. Note that Avital is the Chief of Staff to the CEO at Anthropic, but her views do not reflect those of her company.
New AI and economics podcast
From Andrey Fradkin:
Seth Benzell and I have been working on a podcast about the economics of AI called Justified Posteriors, which may be of interest to you and your readers. We have episodes on topics such as the “The Simple Macroeconomics of AI” and the Anthropic Economic Index. The format is that we state our priors, read a paper, discuss it on the pod, and then update our priors.
Who wants impartial news?
The subtitle of the piece is Investigating Determinants of Preferences for Impartiality in 40 Countries, and the authors are Camila Mont’Alverne, Amy Ross A. Arguedas, Sumitra Badrinathan, Benjamin Toff, Richard Fletcher, and Rasmus Kleis Nielsen. Here is part of the abstract:
This article draws on survey data across 40 markets to investigate the factors shaping audience preferences for impartial news. Although most express a preference for impartial news, there are several overlapping groups of people who, probably for different reasons, are more likely to prefer news that shares their point of view: (a) the ideological and politically engaged; (b) young people, especially those who rely mainly on social media for news; (c) women; and (d) less socioeconomically advantaged groups. We find systematic patterns across countries in preferences for alternatives to impartial news with greater support in places where people use more different sources of news and that are ranked lower in terms of quality of their democracies.
Via Glenn Mercer.
Eric Topol invites me to his podcast
You will find it here, along with a transcript. Interesting throughout, here is one excerpt from me:
The AI is your smartest reader. It’s your most sympathetic reader. It will remember what you tell it. So I think humans should sit down and ask, what does the AI need to know? And also, what is it that I know that’s not on the historical record anywhere? That’s not just repetition if I put it down, say on the internet. So there’s no point in writing repetitions anymore because the AI already knows those things. So the value of what you’d call broadly, memoir, biography, anecdote, you could say secrets. It’s now much higher. And the value of repeating basic truths, which by the way, I love as an economist, to be clear, like free trade, tariffs are usually bad, those are basic truths. But just repeating that people will be going to the AI and saying it again won’t make the AI any better. So everything you write or podcast, you should have this point in mind.
And:
I’ve become fussier about my reading. So I’ll pick up a book and start and then start asking o3 or other models questions about the book. So it’s like I get a customized version of the book I want, but I’m also reading somewhat more fiction. Now, AI might in time become very good at fiction, but we’re not there now. So fiction is more special. It’s becoming more human, and I should read more of it, and I’m doing that.
Recommended.
Where did the Solow residual go?
As many people know, in 1987 Robert Solow quipped that “we see computers everywhere today but in the productivity statistics.” What few know is that the Nobel Laureate himself never was willing to use a personal computer. Even though he was still young in the 1980s and 1990s, he never used email. All of his correspondence was on paper, and he used a secretary to type his letters.
Here is more from Arnold Kling, mostly about AI: “The biggest barrier to using chatbots productively is lack of imagination. The only way to become adept at using them is to keep pushing your own envelope by trying to get help from them in novel contexts.”
How will AI affect cities and travel?
COWEN: In the 5 percent [economic growth] scenario — put aside San Francisco, which is special — but do cities become more or less important? Clearly, this city might become more important. Say, Chicago, Atlanta, what happens?
CLARK: I think that dense agglomerations of humans have significant amounts of value. I would expect that a lot of the effects of AI are going to be, for a while, massively increasing the superstar effect in different industries. I don’t know if it’s all cities, but I think any city which has something like a specialism — like high-frequency trading in Chicago or certain types of finance in New York — will continue to see some dividend from sets of professionals that gather together in dense quantities to swap ideas.
COWEN: Could it just be easier to stay at home, and more fun? I find I’m an outlier, but my use of AI — I either want to go somewhere very distant and use the AI there to learn about, say, the birds of a region, or I want to stay at home. It’s a barbell effect. The idea of driving 35 minutes to Washington, DC — that seems less appealing than it used to be.
That is from my Conversation with Jack Clark of Anthropic.