Peace and Free Trade
In The Spirit of the Laws, Montesquieu famously argued that:
…Peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.
Similar arguments were made by Kant, Cobden, Angell, and others. The effect of free trade on war was perhaps most pithily summarized by the aphorism “when goods don’t cross borders, soldiers will.” In Territory flows and trade flows between 1870 and 2008 Hu, Li and Zhang offer supporting evidence:
Countries gain and lose territories over time, generating territory flows that represent the transfer of territorial sovereignty. Countries also export and import goods, creating trade flows that represent the transfer of merchandise ownership. We find a substitution between these two international flows during the years 1870 and 2008; that is, country pairs with greater trade flows have smaller territory flows. This indicates how international trade enhances international security: reciprocal goods transactions discourage irreciprocal territorial exchanges.
Not all territorial exchange involves war but most do.
See also Polachek and Seigle in the Handbook of Defense Economics who find that “A doubling of trade leads to a 20% diminution of belligerence.”
What I’ve been reading
Owen Hatherley, Militant Modernism. A very good short book, defending “left wing modernism,” a much maligned target on the right these days. Hatherley himself is a much underrated figure, a commie who came along at the wrong time but a very good writer and thinker about aesthetics.
Stuart A. Reid, The Lumumba Plot: The Secret History of the CIA and a Cold War Assassination. For whatever reason, there are more good books about the Congo than most other parts of Africa. This is one of them. From 2023, but good enough to make a “best of non-fiction” list for a typical year. Very cleanly written as well.
Charles Callan Tansill, The Purchase of the Danish West Indies. Who would have thought that this 1966 volume, and Tansill, would be making a comeback? The biggest lesson for me here was how much the purchase was a live issue as early as 1867. And as the final purchase approached in 1917, the other European powers were by no means happy.
Richard Overy, Rain of Ruin: Tokyo, Hiroshima, and the Surrender of Japan is a short but very good and substantive look at the non-nuclear and also nuclear bombing campaigns.
Michael Krielaars, The Sound of Utopia: Musicians in the Time of Stalin. A surprisingly fresh and substantive book, which also does a good job integrating the first-person perspective of the author. I’ve read the standard biographies of Shostokovich, Prokofiev, and the like, and still learned a lot from this one.
There is Gregor Craigie, Our Crumbling Foundation: How We Solve Canada’s Housing Crisis.
Molly Worthen, Spellbound: How Charisma Shaped American History From the Puritans to Donald Trump is a very good book on an underexplored topic. In some ways tech has mattered less than you might think.
Stephen Witt, The Thinking Machine: Jensen Huang, Nvidia, and the World’s Most Coveted Microchip. A fun and well-informed look at its subject matter. There should be more books on one of the world’s most valuable companies, and yes here supply is elastic.
Marc Hijink, Focus: The ASML Way, Inside the Power Struggle Over the Most Complex Machine on Earth. You have to already want to read a book about ASML, but this is in fact the relevant book about ASML. To call it boring is to miss the point, because the company itself is somewhat boring.
Jeanette zu Furstenberg, Wie gut wir sind, zeigt sich in Krisenzeiten: Ein Weckruf. Exactly the wake-up call Germany needs.
Rainer Zitelmann, The Origins of Poverty and Wealth: My World Tour and Insights from the Global Libertarian Movement is a kind of travel memoir from a man who has become one of our most prolific writers on behalf of liberty.
And I was reading my own short commentary on Atlas Shrugged, from a few years ago.
Saturday assorted links
2. Is Tether the most profitable company in the world per employee?
3. Flow (trailer), the animated Latvian silent movie about a cat, dog, bird, capybara, and coatimundi, is excellent and unique.
4. Patrick Collison interviews Noah Smith.
5. Does more law lead to more economic growth, due to contingent clauses?
Letting China into the WTO was not the key decision
We study China’s export growth to the United States from 1950–2008, using a structural model to disentangle the effects of past tariff changes from the effects of changes in expectations of future tariffs. We find that the effects of China’s 1980 Normal Trade Relations (NTR) grant lasted past its 2001 accession to the World Trade Organization (WTO), and the likelihood of losing NTR status decreased significantly during 1986–92 but changed little thereafter. US manufacturing employment trends support our findings: industries more exposed to the 1980 reform have shed workers steadily since then without acceleration around China’s WTO accession.
That is from a new and forthcoming JPE article by George Alessandria, Shafaat Yar KhanArmen KhederlarianKim J. RuhlJoseph B. Steinberg.
U.S. Infrastructure: 1929-2023
By Ray C. Fair, an important contribution:
This paper examines the history of U.S. infrastructure since 1929 and in the process reports an interesting fact about the U.S. economy.Infrastructure stock as a percent of GDP began a steady decline around 1970, and thegovernment budget deficit became positive and large at roughly the same time. The infrastructure pattern in other countries does not mirror that in the United States, so the United States appears to be a special case. The overallresults suggest that the United States became less future oriented beginning around 1970, an increase in the social discount rate. This change has persisted. This is the interestingfact. The paper contains speculation on possible causes.
Here is the link. Via the excellent Kevin Lewis.
The new tariffs are bad
Or are they tariff threats instead? Still bad! From the FT:
Donald Trump has said he will hit the EU with tariffs, adding the bloc to a list of targets including Canada and Mexico and bringing the US to the brink of new trade wars with its biggest trading partners.
The US president acknowledged that the new tariffs could cause some market “disruption”, but claimed they would help the country close its trade deficits.
“The tariffs are going to make us very rich, and very strong,” Trump told reporters in the Oval Office.
Hours before his plan for tariffs of 25 per cent on Canada and Mexico was due to take effect on February 1, Trump also widened his threat to include the EU, which he said had treated the US “very badly”.
There is not any good argument for doing this. The simplest hypothesis here is that Trump has mistaken views on trade economics, and is raising tariffs for the same reason that I, if I were President, would be trying to cut them.
“It’s not a negotiating tool,” Trump said. “It’s pure economic. We have big deficits with, as you know, with all three of them.”
Of course this is a sign that further bad things will happen. Let us hope that the courts can strike these down…
The wisdom of Dwarkesh
Perhaps he imbibed a dose of Garett Jones?:
Even people who expect human-level AI soon are still seriously underestimating how different the world will look when we have it. Most people are anchoring on how smart they expect individual models to be. (i.e. they’re asking themselves “What would the world be like if everyone had a very smart assistant who could work 24/7?”.)
Everyone is sleeping on the collective advantages AIs will have, which have nothing to do with raw IQ but rather with the fact that they are digital—they can be copied, distilled, merged, scaled, and evolved at unprecedented speed.
Take a fully automated company. What would this look like, where all the workers and managers are AIs? I claim that AI firms will grow, coordinate, improve, and be selected-for in ways human firms simply can’t.
Here is the full essay, important throughout.
Friday assorted links
1. The Wandering Minstrel (Irish song).
2. My 2008 post on Sarah Palin. A bit too much ahead of its time, but directionally correct.
3. AI models as historians. And how to have a career after o3 drops. And low-hanging fruit in inference-time scaling.
4. Is there a murder gang of Sith vegans? Are they a rationalist death cult?
6. The fastest-selling adult novel in the last twenty years? (NYT)
*The African Gaze: Photography, Cinema and Power*
By Amy Sall. I love this picture book, or should I say photo book? Most of it is reproductions of photographs from the “golden age” of African photography, with profiles of each major photographer, plus a section on cinema as well.
One very good way to find “a picture book for you” is to visit a good museum bookshop, in this case for me it was the Kimball Museum in Fort Worth. Look around at the books with images. Find one that intrigues you, and then buy it, take it home and read and look through it. Do note this might cost 2x a normal book, but on average it is more than 2x better. It will open up whole new worlds. And it is not something your GPT is able to do (yet), though of course you can follow up with queries.
You can order the book here.
What should I ask Chris Arnade?
Chris Arnade…is an American photographer and writer. He worked for 20 years as a bond trader on Wall Street; in 2011, he started documenting the lives of poor people and their drug addictions and commenting on the state of the society of the United States. He did this through photographs posted on social media and articles in various media…
Here is Chris’s Substack, here is Chris on Twitter. So what should I ask him?
How did China’s internet become so cool amongst America’s youth?
That is the topic of my latest Bloomberg column. Here is part of the argument:
TikTok was briefly shut down earlier this month, and the site faces an uncertain legal future. America’s internet youth started to look elsewhere — and where did they choose? They flocked to a Chinese video site called RedNote, also known as Xiaohongshu, the name of the parent company. RedNote has more than 300 million users in China, but until recently barely received attention in the US.
And when young Americans visited RedNote, they were undoubtedly struck by an obvious fact: It is not the kind of site their parents would frequent. The opening page is full of Chinese characters, as well as shots of provocatively dressed women, weird animal and baby photos, and many images that, at least to this American viewer, make no sense whatsoever. Yet Chinese and American youth interact frequently there, for example trading tips for making steamed eggs properly.
I don’t plan on spending much of my time there, but that’s part of the point — and helps explain its appeal to American youth.
And this:
As for the AI large-language models, DeepSeek is a marvel. Quite aside from its technical achievements and low cost, the model has real flair. Its written answers can be moody, whimsical, arbitrary and playful. Of all the major LLMs, I find it the most fun to chat with. It wrote this version of John Milton’s Paradise Lost — as a creation myth for the AIs. Or here is DeepSeek commenting on ChatGPT, which it views as too square. It is hardly surprising that this week DeepSeek was the top download on Apple’s app store.
The model also has a scrappy and unusual history, having been birthed as a side project from a Chinese hedge fund. Whether or not that counts as “cool,” it does sound like something a scriptwriter would have come up with. And at least on American topics, DeepSeek seems more candid than the major US models. That qualifier is important: Don’t ask DeepSeek about Taiwan, the Uighurs or Tiananmen Square.
The most fundamental reason China is seen as cool is that…China is cool, at least in some subset of products.
The culture that is German (Roman)
We compare present-day regions that were advanced by Roman culture with those that remained outside of Roman influence. Even when accounting for more recent historical factors, we find that regions developed by Roman civilization show more adaptive personality patterns (Big Five) and better health and psychological well-being today. Results from a spatial regression discontinuity design indicate a significant effect of the Roman border on present-day regional variation in these outcomes. Additional analyses suggest that Roman investments in economic institutions (e.g., trade infrastructure such as Roman roads, markets, and mines) were crucial in creating this long-term effect. Together, these results demonstrate how ancient cultures can imprint a macro-psychological legacy that contributes to present-day regional inequalities.
That is from a recent paper by Obschonka, et.al., via Alexander Le Roy. Also on the German front:
The German parliament will debate on Thursday, January 30th whether to ban the opposition right-wing Alternative für Deutschland (AfD) party.
A group of lawmakers, 113 MPs, have called for parliament to discuss a motion which would invite the constitutional court to decide whether the party is unconstitutional.The motion is supported by MPs from the centre-right CDU/CSU alliance, the far-left Die Linke, as well as the two governing parties, the Social Democrats (SPD) and the Greens.
The signatories claim that the AfD “opposes central basic principles of the free democratic basic order,” questions human dignity, and strives for the “ethno-nationalist strengthening” of the German identity.
Of course the strongest support for AfD is not to be found in Trier. I would not myself support AfD, for both policy and cultural reasons. But I find it strange that Europeans so often see the United States as the locale where democracy is in danger. Right now AfD polls as the second most popular party in Germany — beat them at the ballot box!
Thursday assorted links
1. Malthusian migrations: the French diaspora is relatively small because the French had their fertility transition earlier.
2. About 31% of Bitcoin is potentially vulnerable to quantum computing attacks? Here is the associated project.
3. New way to visit an art museum, using o1.
4. New observations on India and America.
6. “Sun Ra Arkestra legend Marshall Allen releases debut album aged 100.”
FDA Deregulation of E-Cigarettes Saved Lives and Spurred Innovation
What would happen to drug development if the FDA lost its authority to prohibit new drugs? Would research and development boom and lives be saved? Or would R&D decline and lives be lost to a flood of unsafe and ineffective drugs? Or perhaps R&D would decline as demand for new drugs faltered due to public hesitation in the absence of FDA approval? In an excellent new paper Pesko and Saenz examine one natural experiment: e-cigarettes.
The FDA banned e-cigarettes as unapproved drugs soon after their introduction in the United States. The FDA had previously banned other nicotine infused products. Thus, it was surprising when in 2010 the FDA was prohibited from regulating e-cigarettes as a drug/device when a court ruled that Congress had intended for e-cigarettes to be regulated as a tobacco product not as a drug.
As of 2010, therefore, e-cigarettes were not FDA regulated:
…e–cigarette companies were able to bypass the lengthy and costly drug approval process entirely. Additionally, without FDA drug regulation, e–cigarette companies could also freely enter the market, modify products without approval, and bypass extensive post–market reporting requirements and quality control standards.
Indeed, it wasn’t until 2016 that the FDA formally “deemed” e-cigarettes as tobacco products (deemed since they don’t actually contain tobacco) and approvals under the less stringent tobacco regulations were not required until 2020. For nearly a decade, therefore, e-cigarettes were almost entirely unregulated and then lightly regulated under the tobacco framework. So, what happened during this period?
Pesko and Saenz show that FDA deregulation led to a boom in e-cigarette research and development which improved e-cigarettes and led to many lives saved as people switched from smoking to vaping.
The boom in research and development is evidenced by a very large increase in US e-cigarette patents. We do not see a similar increase in Australia (where e-cigarettes were not deregulated) nor do we see an increase in non e-cigarette smoking cessation products (figure 1a of their paper not shown here).
Estimating the decline in smoking and smoking-attributable mortality (SAM) is more difficult but the authors assemble a large collection of data broken down by demographics and they estimate that prohibiting the FDA from regulating e-cigarettes reduced smoking attributable mortality by nearly 10% on average each year from 2011-2019 for a total savings of some 677,000 life-years.
The authors pointedly compare what happened under deregulation of e-cigarettes–innovation and lives saved–with what happened to similar smoking cessation products that remained under FDA regulation–stagnation and no reduction in smoking attributable mortality.
A key takeaway on the slowness of FDA drug regulation is that it took 9 years before nicotine gum could be sold with a higher nicotine strength, 12 years before it could be sold OTC, and 15 years before it could be sold with a flavor. Further, a recent editorial laments that there has been largely non–existent innovation in FDA–approved smoking cessation drugs since 2006 (Benowitz et al., 2023). In particular, the “world’s oldest smoking cessation aid” cyctisine, first brought to market in 1964 in Bulgaria (Prochaska et al., 2013), and with quit success rates exceeding single forms of nicotine replacement therapy (NRT) (Lindson et al., 2023), is not approved as a drug in the United States.
The authors conclude, “this situation raises concern that drugs may be over–regulated in the United States…”. Quite so.
Addendum: A quick review on the FDA literature. In addition to classic works by Peltzman on the 1962 Amendments and by myself on what we can learn about the FDA from off-label pricing we have a spate of recent new papers including Parker Rogers, which I covered earlier:
In an important and impressive new paper, Parker Rogers looks at what happens when the FDA deregulates or “down-classifies” a medical device type from a more stringent to a less stringent category. He finds that deregulated device types show increases in entry, innovation, as measured by patents and patent quality, and decreases in prices. Safety is either negligibly affected or, in the case of products that come under potential litigation, increased.
and Isakov, Lo and Montazerhodjat which finds that FDA statistical standards tend to be too conservative, especially for drugs meant to treat deadly diseases (see my comments on their paper and more links in Is the FDA Too Conservative or Too Aggressive?)
See also FDA commentary, for much more from sunscreens to lab developed tests.
Keynes on the Soviet Union
I had not known of this passage, which I am packaging with its introduction from Gavan Tredoux:
John Maynard Keynes has the undeserved reputation of a critic of the USSR. Few know that he reviewed Sidney and Beatrice Webb’s mendacious tome The Soviet Union: a New Civilization (1935/1937/1943) fawningly. Perhaps the most embarrassing thing Keynes ever wrote. From his Complete Works 28:
“One book there is … which every serious citizen will do well to look into—the extensive description of Soviet Communism by Mr and Mrs Sidney Webb. It is on much too large a scale to be called a popular book, but the reader should have no difficulty in comprehending the picture it conveys. Until recently events in Russia were moving too fast and the gap between paper professions and actual achievements was too wide for a proper account to be possible . But the new system is now sufficiently crystallised to be reviewed. The result is impressive. The Russian innovators have passed, not only from the revolutionary stage, but also from the doctrinaire stage. There is little or nothing left which bears any special relation to Marx and Marxism as distinguished from other systems of socialism. They are engaged in the vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully over a territory so extensive that it covers one sixth of the land surface of the world. Methods are still changing rapidly in response to experience. The largest scale empiricism and experimentalism which has ever been attempted by disinterested administrators is in operation. Meanwhile the Webbs have enabled us to see the direction in which things appear to be moving and how far they have got. It is an enthralling work, because it contains a mass of extraordinarily important and interesting information concerning the evolution of the contemporary world. It leaves me with a strong desire and hope that we in this country may discover how to combine an unlimited readiness to experiment with changes in political and economic methods and institutions, whilst preserving traditionalism and a sort of careful conservatism, thrifty of everything which has human experience behind it, in every branch of feeling and of action.”
So no, sorry, Keynes cannot be GOAT.