The Effect of European Monarchs on State Performance
We create a novel reign-level data set for European monarchs, covering all major European states between the 10th and 18th centuries. We first document a strong positive relationship between rulers’ cognitive ability and state performance. To address endogeneity issues, we exploit the facts that (i) rulers were appointed according to hereditary succession, independent of their ability, and (ii) the widespread inbreeding among the ruling dynasties of Europe led over centuries to quasirandom variation in ruler ability. We code the degree of blood relationship between the parents of rulers, which also reflects “hidden” layers of inbreeding from previous generations. The coefficient of inbreeding is a strong predictor of ruler ability, and the corresponding instrumental variable results imply that ruler ability had a sizeable effect on the performance of states and their borders. This supports the view that “leaders made history,” shaping the European map until its consolidation into nation states. We also show that rulers mattered only where their power was largely unconstrained. In reigns where parliaments checked the power of monarchs, ruler ability no longer affected their state’s performance.
By Sebastian Ottinger and Nico Voigtländer, from Econometrica. Here are less gated versions. Via the excellent Kevin Lewis.
Monday assorted links
1. One way the demand for donkeys and horses might rise (speculative).
2. Is France the anti-frontier?
3. “We found that extreme temperatures and added precipitation each independently amplified social-media activity, effects that persisted within individuals.” Big effects.
4. AI art at auction, at Christie’s. The Holly Herndon is a bargain, and will go for well over its estimate.
5. Cass Sunstein, What are We in the Midst Of? (All of those?)
6. “Marketers need to be writing for AI” (Bloomberg)
7. Times of London resurrects its “Best books of the year” Sunday feature, the best feature of an excellent newspaper.
8. I guess since the CDC deleted the information on cat to human avian flu transmission, it isn’t true? (NYT)
9. The Anthropic Economic Index. And the related research paper.
Niall Ferguson on world music
Worlds collide, as Niall is interviewed (very effectively) in Songlines magazine, and yes I am a loyal subscriber. Excerpt:
As part of the Empire series, Ferguson also went to West Africa and filmed in Sierra Leone and, subsequently, Ghana and Senegal. He regrets not seeing Youssou N’Dour, who wasn’t going to be on stage until 2am, as they had to be up early to film. At the same time, he says he got turned on to Amadou & Mariam and Tinariwen. “But Africa’s such a vast continent you’ll never know all the music. [BBC] Radio 3 is often throwing things at me that I’m not expecting. Thank God the BBC is willing to play unusual and esoteric African music, and I’ve benefitted hugely from that eclectic programming.”
He is quick to mention Sierra Leone’s Refugee All Stars, who were formed by a group of Guinean refugees during the civil war in Sierra Leone. “Their song ‘Living Like a Refugee’ is an anthem for our times,” he says…
It’s such a gift to listen to [the] music of Tinariwen or Sierra Leone’s Refugee All Stars and enjoy it and not think ‘I’m now listening to African music.’ It’s just as life-affirming as Mozart.”
Recommended.
It’s later than you think
Here is a short essay by Hollis Robbins on AI and education, excerpt:
Every faculty member should begin to write a detailed memo specifying the following: “What specific knowledge do I possess that AGI does not? What unique insights or capabilities can I offer that exceed AGI systems? Which students, and in which topics, would benefit enough to pay to learn from me and why?” Faculty who cannot produce this memo with concrete, defensible answers have no place in the institution. There is no middle ground.
Every dean must immediately audit their course catalog against one criterion: what advanced knowledge or skills does this course offer that AGI cannot replicate? Each course must demonstrate specific knowledge transfer or skill development that exceeds AGI capabilities. It will become obvious that the highest value courses are those aligned with specific faculty expertise. General education courses focused on basic knowledge transfer become indefensible. If the information is general enough to be called “general education,” AGI can deliver it more effectively than any human instructor. This will eliminate most of the current curriculum.
Universities will retain faculty in three categories: those advancing original research beyond AGI capabilities, those who teach the use of advanced equipment and sophisticated physical skills, and those handling previously undiscovered source materials or developing novel interpretations that outstrip AGI’s analysis. In the sciences, this means laboratory-based faculty who validate AGI-generated research proposals and offer advanced hands-on training with advanced equipment. In engineering and the arts, it’s faculty who guide students in high-level physical manipulation, augmented by AI tools. In the humanities, it’s scholars working with newly discovered primary sources, untranslated manuscripts, or archaeological evidence not yet processed by AI, as well as those creating fundamentally new interpretive frameworks that transcend AGI’s pattern-recognition capacities.
The curriculum narrows dramatically. Most lecture courses disappear. What remains are advanced research seminars where faculty share findings from new source materials or original experiments, intensive laboratory and studio sessions for hands-on skills, and research validation practicums where students learn to test AGI hypotheses. This represents a 60-70% reduction in current faculty positions, with remaining roles requiring fundamentally different capabilities than traditional academic work.
There is more of interest at the link.
New York City fact and poetic passage of the day
If the coastline of the New York Harbor region were stretched out, it would be longer than the state of California. New York City’s waterfront is bigger than those of Miami, San Francisco, Los Angeles, and Boston combined. As vast as it is, the area that is officially known as the New York-New Jersey Harbor Estuary is even more staggering in its complexity, encompassing such a concatenation of inlets, margins, banks, strands, runnels, rivers, reefs, rivulets, coves, creeks, and kills; of brooks, basins, bays, shoals, shores, islands, islets, and peninsulas, of jetties, bluffs, heights, scallops, spits, crags, beaches, reaches, bends, bights, channels, sandbars, sounds, and points, as to be virtually unmatched in the United States.
That is from the new and fun book by Russell Shorto, Taking Manhattan: The Extraordinary Events that Created New York and Shaped America.
Sunday assorted links
1. Quantum technologies for health care? (speculative!)
2. ChatGPT comments on Tanner Greer.
3. Mercatus looking to hire additional AI policy scholars.
5. “The owner of the theatre I’ve performed at a few times invited me to put on my own economics-themed comedy variety show :). The first one will take place February 17 at 7pm: EconLOL, the world’s first, best, and only economics-themed comedy variety show. There will also be a livestream.”
Minimum Wages, Efficiency, and Welfare
Recently Alex raised some doubts, to say the least, about the Card-Krueger view of minimum wage hikes. Well, it turns out there is more, and a new consensus is on the verge of forming. Here are David Berger, Kyle Herkenhoff, and Simon Mongey, from a new Econometrica piece:
Many argue that minimum wages can prevent efficiency losses from monopsony power. We assess this argument in a general equilibrium model of oligopsonistic labor markets with heterogeneous workers and firms. We decompose welfare gains into an efficiency component that captures reductions in monopsony power and a redistributive component that captures the way minimum wages shift resources across people. The minimum wage that maximizes the efficiency component of welfare lies below $8.00 and yields gains worth less than 0.2% of lifetime consumption. When we add back in Utilitarian redistributive motives, the optimal minimum wage is $11 and redistribution accounts for 102.5% of the resulting welfare gains, implying offsetting efficiency losses of −2.5%. The reason a minimum wage struggles to deliver efficiency gains is that with realistic firm productivity dispersion, a minimum wage that eliminates monopsony power at one firm causes severe rationing at another. These results hold under an EITC and progressive labor income taxes calibrated to the U.S. economy.
Here is the link to Econometrica. Here is an earlier NBER working paper version.
Saturday assorted links
1. Long-form interview with Cesar Gaviria, Colombia’s reforming president.
3. Both AI and I had a role in this time travel research paper story.
4. Knausgaard owns a copy of Parfit, and does not tie his sneaker laces.
6. “Be it resolved that the California Faculty Association will fight to protect academic labor from the incursion of AI…” Good luck people!
7. Legal roadblocks in the path of Trump.
8. The great Donald Shoup has passed away.
9. Acemoglu on a bunch of stuff (FT).
The Licensing Racket
I review a very good new book on occupational licensing, The Licensing Racket by Rebecca Haw Allensworth in the WSJ.
Most people will concede that licensing for hair braiders and interior decorators is excessive while licensing for doctors, nurses and lawyers is essential. Hair braiders pose little to no threat to public safety, but subpar doctors, nurses and lawyers can ruin lives. To Ms. Allensworth’s credit, she asks for evidence. Does occupational licensing protect consumers? The author focuses on the professional board, the forgotten institution of occupational licensing.
Governments enact occupational-licensing laws but rarely handle regulation directly—there’s no Bureau of Hair Braiding. Instead, interpretation and enforcement are delegated to licensing boards, typically dominated by members of the profession. Occupational licensing is self-regulation. The outcome is predictable: Driven by self-interest, professional identity and culture, these boards consistently favor their own members over consumers.
Ms. Allensworth conducted exhaustive research for “The Licensing Racket,” spending hundreds of hours attending board meetings—often as the only nonboard member present. At the Tennessee board of alarm-system contractors, most of the complaints come from consumers who report the sort of issues that licensing is meant to prevent: poor installation, code violations, high-pressure sales tactics and exploitation of the elderly. But the board dismisses most of these complaints against its own members, and is far more aggressive in disciplining unlicensed handymen who occasionally install alarm systems. As Ms. Allensworth notes, “the board was ten times more likely to take action in a case alleging unlicensed practice than one complaining about service quality or safety.”
She finds similar patterns among boards that regulate auctioneers, cosmetologists and barbers. Enforcement efforts tend to protect turf more than consumers. Consumers care about bad service, not about who is licensed, so take a guess who complains about unlicensed practitioners? Licensed practitioners. According to Ms. Allensworth, it was these competitor-initiated cases, “not consumer complaints alleging fraud, predatory sales tactics, and graft,” where boards gave the stiffest penalties.
You might hope that boards that oversee nurses and doctors would prioritize patient safety, but Ms. Allensworth’s findings show otherwise. She documents a disturbing pattern of boards that have ignored or forgiven egregious misconduct, including nurses and physicians extorting sex for prescriptions, running pill mills, assaulting patients under anesthesia and operating while intoxicated.
Read the whole thing.
How effective was pandemic aid?
We use an instrumental-variables estimator reliant on variation in congressional representation to analyze the macroeconomic effects of federal aid to state and local governments across all four major pieces of COVID-19 response legislation. Through December 2022, we estimate that the federal government allocated $603,000 for each state or local government job-year preserved. Our baseline confidence interval allows us to rule out estimates smaller than $220,400. Our estimates of effects on aggregate income and output are centered on zero and imply modest if any spillover effects onto the broader economy.
That is from a new paper by Jeffrey Clemens, Philip Hoxie, and Stan Veuger. Via the excellent Kevin Lewis.
*Atlantic Cataclysm*
The author is David Eltis and the subtitle is Rethinking the Atlantic Slave Trades. Here is one summary passage:
While Europe’s role in the slave trade may have been secondary it can scarcely be described as minor. The traffic was broadly based, with ninety-six European ports dispatching at least one voyage to Africa. Almost every port large enough to initiate transoceanic trade participated in the business. Owners, their employees and, most important, the public had unquestioning support for the business until the last quarter of the eighteenth century. The Portuguese and Spanish created the Atlantic slave-trading system, and they were the last to abandon it. They dispatched more voyages and carried off far more enslaved women and men than did the British throughout the era.
Eltis also writes:
Generally, the new data reveals a sense of equality between buyer and seller on the African littoral, at least until late in the slave trade era…Africanists have yet to take on board new population estimates for African regions in 1850 and match these with new estimates of the exodus of people that are now available. It now seems unlikely that outside influences transformed the nature of slavery in Africa.
And note:
…only four other jurisdictions in the Americas received more African captives than Barbados.
A very useful and important book on what is (yes) still a topic underrated in import.
The Afrikaner exception
The White House just issued an executive order on South Africa that includes admitting Afrikaner South Africans as refugees to the United States
Here is one of many reports. Let me first say that I am happy to have more Afrikaners in the United States. It reminds me of my “open borders for Belarus” proposal — numbers are limited and assimilation is not going to be a problem.
That said, the symbolism here can only be described as…grotesque. South Africa is a poorly governed country, so you can find many examples of bad policy decisions foisted on Afrikaners. But, if one is going to make generalizations about classes, blacks in South Africa suffer far more from that poor governance. This Executive Order, taken in context, is a deliberate attempt to invert the actual reality of the situation, and make a subset of the whites the supposed real victims. You don’t even have to get into apartheid history to see the outrageousness of this framing.
Ironically (is that the right word?), the order itself would seem to require the resurrection of the old-style racial classification system of apartheid South Africa. Who exactly is an Afrikaner? What if you are just “white”? Mixed race? Colored, with some Afrikaner blood in your background? Do we need a new version of the Population Registration Act to decide exactly who qualifies as a refugee?
This one could better be rethought, in any case I take it as an unpleasant and ominous sign of further changes.
“By your culture, we shall know ye”
From President Trump:
At my direction, we are going to make the Kennedy Center in Washington D.C., GREAT AGAIN. I have decided to immediately terminate multiple individuals from the Board of Trustees, including the Chairman, who do not share our Vision for a Golden Age in Arts and Culture. We will soon announce a new Board, with an amazing Chairman, DONALD J. TRUMP! Just last year, the Kennedy Center featured Drag Shows specifically targeting our youth — THIS WILL STOP. The Kennedy Center is an American Jewel, and must reflect the brightest STARS on its stage from all across our Nation. For the Kennedy Center, THE BEST IS YET TO COME!
Here is the link, and I will keep an eye on what happens there and report back.
Michael Pettis responds in the FT
Robert Armstrong at the FT gives him a chance to respond to Noah and Krugman and me, here are links to the originals:
[Armstrong] Cowen argues that intervention in the short term, as you have proposed, is counterproductive because demand shortfalls will resolve themselves as price adjustments. What is your response?
Pettis: While I understand Cowen’s reliance on the “Econ 101” model, which assumes that prices always adjust to balance supply and demand, this framework isn’t relevant in the context of current global economic conditions. Prices have not adjusted in the US or many other countries over several decades. Take China as an example, where price deflation has persisted and consumption has remained exceedingly low for years. To manage the gap between production and consumption, China has had to resort to extraordinarily high levels of investment and, as the cost of this wasteful investment has recently shown up in the form of the fastest- growing debt burden in history, to the highest trade surpluses in history.
So why hasn’t the demand shortfall “gone away”, as Cowen’s model would predict? The answer lies in China’s trade and industrial policies, which enhance global manufacturing competitiveness at the expense of domestic consumption. These policies include an undervalued currency, repressed interest rates, highly directed credit, and, yes, tariffs. These policies, together with strict controls on trade and even stricter controls on the capital account, have prevented any natural adjustment from taking place. This matters, because a country’s internal imbalances created by domestic policies lead automatically to its external imbalances which, in turn, must be reflected in the external imbalances of the trade and investment partners of that country. That is how internal policies in one country will lead automatically to changes in the internal conditions in other countries. Cowen’s models may well be internally consistent, but they are based on simplified assumptions that clearly fail to describe the real-world factors that shape trade imbalances.
I’ll say a few points in response:
1. Pettis says “While I understand Cowen’s reliance on the “Econ 101” model, which assumes that prices always adjust to balance supply and demand, this framework isn’t relevant in the context of current global economic conditions. Prices have not adjusted in the US or many other countries over several decades.” The first sentence there is just the usual anti-economics slur. In fact the (numerous) models I have in mind are workhorses from PhD level international macroeconomics, not from “Econ 101.” And can he really mean “Prices have not adjusted in the US or many other countries over several decades”? Run that one through o1 pro if you have any doubts, it is about as flat out wrong as a proposition about economics can get.
2. The rest of the answer just repeats his usual about China. It does not even attempt to answer why, in the medium-term or long-term, as prices adjust, demand imbalances in the United States do not go away.
3. In another part of the interview, which I will not reproduce for reasons of copyright, Pettis responds to my criticism of his claim that America had weak [sic] demand during 2022-2023. His answer is to focus on this: “Contrary to Cowen’s claim, US business investment is not constrained by a lack of American savings.” That is not something I ever said or wrote, it is something I do not believe, and it completely fails to answer my rather obviously correct criticism of Pettis on U.S. demand.
4. I will let Noah handle the rebuttals to him, if he so chooses. I will however mark his response to Krugman and Smith, on the counterproductive nature of tariffs on intermediate goods, as just abysmally bad and off point. This is one of the most obtuse rebuttals I have read, ever.
5. If you are curious, here is Maurice Obstfeld, a Nobel-quality international economist, on Pettis and related issues.
Friday assorted links
1. Using AI to cut government spending.
2. “I built RPLY to never miss a text again. Staying in touch should be effortless—RPLY finds your unanswered texts, instantly suggests AI-powered drafts, and syncs across all your Apple devices, meeting you where you already are.” Link here. Techcrunch article here. Much more of this on the way.
3. Katherine Rundell on children’s books.
4. Allen Sanderson has passed away.
5. The Trump Executive Orders as radical constitutionalism?
6. High school summer program at Princeton and Swarthmore.
7. Comments on US AID and its current status.
8. Fast-track approvals starts for New Zealand.
10. Fergus annotates my Conversation with Ross Douthat, from an Evangelical Christian point of view.