Wednesday assorted links
1. Jon Hartley podcast with Robert Barro.
2. Dwarkesh questions about AI.
3. Why it is hard for women to date well.
4. “Social media constantly incentivizes disagreement, and therefore also demasculinization.”
5. WEF update.
6. It is hard to type mathematical symbols.
7. Ezra talks with Steven Hahn about Trump and American continuity (NYT). A little slow to get going, but has many important points.
Smith Reviews Stiglitz
Vernon Smith reviews Joe Stiglitz’s book The Road to Freedom:
Stiglitz did work in the abstract intellectual theoretical tradition of neoclassical economics showing how the standard results were changed by asymmetric or imperfect information. He is oblivious, however, to the experimental lab and field empirical research showing that agent knowledge of all such information is neither necessary nor sufficient for a market to converge to competitive supply-and-demand equilibrium outcomes.
Consequently, both the standard and the modified theories are irrelevant because buyers and sellers in possession only of dispersed, private, decentralized, value information easily converge to competitive price-quantity allocations in experimental markets over time via learning in repeat transactions.
…The first experiments, showing that complete WTP/WTA information was not necessary, were reported in Smith (1962), and none of us could any longer accept the standard and Stiglitz-modified theories. Further experiments, showing that such information was not sufficient, and that equilibrium prices need not require that markets clear, were reported in Smith (1965). (For propositions summarizing and evaluating observed empirical regularities in these experimental markets, see Vernon L. Smith, Arlington Williams, W. K. Bratt, and M. G. Vannoni, 1982, “Competitive Market Institutions: Double Auctions vs. Sealed Bid-Offer Auctions,” American Economic Review 72, no. 1, 58–77; and Vernon L. Smith, 1991, Papers in Experimental Economics, Cambridge: Cambridge University Press.) It was natural, in the first market experiments, to investigate those questions, such as the information state of traders, that were central to the abstract economic theory of the time.
So, the Akerlof-Stiglitz modifications of theory were founded on a false conditional and thus were not germane to practical market performance. They were born falsified.
…The needed policy implications are quite clear, and they have nothing to do with Stiglitz’s market failure and everything to do with how markets function. Indeed, the appropriate policy recommendation is to fully support the market-system maximization of prosperity, as did Friedman and Hayek, then use incentive mechanisms to improve the relative positions of those who are disadvantaged in that system. Never kill the goose that lays eggs of gold.
Rachel Glennerster calls for reforming foreign aid
Aid agencies already try to cover too many countries and sectors, incurring high costs to set up small programs. Aid projects are far too complicated, resembling a Christmas tree weighed down with everyone’s pet cause. With less money (and in the US, very few staff), now is the time to radically simplify. By choosing a few highly cost-effective interventions and doing them at large scale in multiple countries, we would ensure
- aid funds are spent on highly effective projects;
- we benefit from the substantial economies of scale seen in development;
- a much higher proportion of aid money goes to recipient countries, with less spent on consultants; and
- politicians and the public can more easily understand what aid is being spent on, helping build support for aid.
The entire piece is excellent.
We need more elitism
Even though the elites themselves are highly imperfect. That is the theme of my latest FP column. Excerpt:
Very often when people complain about “the elites,” they are not looking in a sufficiently elitist direction.
A prime example: It is true during the pandemic that the CDC and other parts of the government gave us the impression that the vaccines would stop or significantly halt transmission of the coronavirus. The vaccines may have limited transmission to some partial degree by decreasing viral load, but mostly this was a misrepresentation, perhaps motivated by a desire to get everyone to take the vaccines. Yet the vaccine scientists—the real elites here—were far more qualified in their research papers and they expressed a more agnostic opinion. The real elites were not far from the truth.
You might worry, as I do, that so many scientists in the United States have affiliations with the Democratic Party. As an independent, this does induce me to take many of their policy prescriptions with a grain of salt. They might be too influenced by NPR and The New York Times, and more likely to favor government action than more decentralized or market-based solutions. Still, that does not give me reason to dismiss their more scientific conclusions. If I am going to differ from those, I need better science on my side, and I need to be able to show it.
A lot of people do not want to admit it, but when it comes to the Covid-19 pandemic the elites, by and large, actually got a lot right. Most importantly, the people who got vaccinated fared much better than the people who did not. We also got a vaccine in record time, against most expectations. Operation Warp Speed was a success. Long Covid did turn out to be a real thing. Low personal mobility levels meant that often “lockdowns” were not the real issue. Most of that economic activity was going away in any case. Most states should have ended the lockdowns sooner, but they mattered less than many critics have suggested. Furthermore, in contrast to what many were predicting, those restrictions on our liberty proved entirely temporary.
Recommended.
Who needs a UBI?
CDPAP’s enrollment, workforce and total costs ballooned after the state relaxed eligibility rules in 2015. The number of people receiving care through the program surged from just under 20,000 in 2016 to almost 248,000 last year. New York state Medicaid spending on CDPAP in the last five years has more than tripled to about $9.1 billion.
New York needs to make changes to the program, which Hochul called “wildly expensive.”
…Jobs in home health make up an increasingly large share of the city and state’s overall economy. Between 2014 and 2024, home health aide jobs went from comprising 6% of New York City’s total private-sector jobs to 12%, according to Bill Hammond, the senior fellow for health policy at the Empire Center for Public Policy, a fiscally conservative think tank.
I am not sure all of these numbers fit together, and am not sure that the actual percentage of private sector jobs is 12 percent. Nonetheless, the growth here seems quite rapid. Here is more from Laura Nahmias at Bloomberg.
Tuesday assorted links
2. My interview with Diario Financiero (Chilean, in Spanish).
3. The AGI Chronicles, a book in the works, I have high hopes.
4. Shruti Rajagopalan named to the Project Syndicate 30 Forward Thinkers list.
5. Max Romeo, RIP, one song by him.
6. Circle is launching a new, stablecoin-based payments and remittance network.
7. My Niskanen podcast with Matt Grossman on building a science of progress.
8. Herbert Gans, RIP (NYT).
Congratulations to the 2025 John Bates Clark Medalist Stefanie Stantcheva
Awesome choice, she is one of my favorite economists, and she is also a super-nice person. Here is the report and list of winners, here are previous mentions on MR.
Deregulation suggestions
If you have ideas for cutting regulations, the US government wants to hear from you! This could be important. Provide details on the exact regulation in the CFR.
My debate with Dani Rodrik about tariffs and free trade
This occurred in Knoxville, you can watch it here. Lots of fun, and p.s. I am more of a free trader than he is. We did have some disagreements.
Is this a lot or a little?
“The Effect of Deactivating Facebook and Instagram on Users’ Emotional State” — by Hunt Alcott, et.al.
We estimate the effect of social media deactivation on users’ emotional state in two large randomized experiments before the 2020 U.S. election. People who deactivated Facebook for the six weeks before the election reported a 0.060 standard deviation improvement in an index of happiness, depression, and anxiety, relative to controls who deactivated for just the first of those six weeks. People who deactivated Instagram for those six weeks reported a 0.041 standard deviation improvement relative to controls. Exploratory analysis suggests the Facebook effect is driven by people over 35, while the Instagram effect is driven by women under 25.
What is wrong with the simple model that Facebook and Instagram allow you to achieve some very practical objectives, such as staying in touch with friends or expressing your opinions, at the cost of only a very modest annoyance (which to be clear existed in earlier modes of communication as well)?
Here is also a new paper on phone app usage in the classroom, by Billur Aksoy, Lester R. Lusher, and Scott E. Carrell:
Phone usage in the classroom has been linked to worsened academic outcomes. We present findings from a field experiment conducted at a large public university in partnership with an app marketed as a soft commitment device that provides incentives to reduce phone use in the classroom. We find that app usage led to improvements in classroom focus, attendance, and overall academic satisfaction. Analysis of time spent outside the classroom suggests a potential substitution effect: students using the app allocated less time to study, particularly on campus. Overall, though statistically insignificant, we find improvements in transcript grades associated with app usage.
Again NBER. I just do not see the compelling case for the apocalyptic interpretations here.
Long-Run Effects of Trade Wars
This short note shows that accounting for capital adjustment is critical when analyzing the long-run effects of trade wars on real wages and consumption. The reason is that trade wars increase the relative price between investment goods and labor by taxing imported investment goods and their inputs. This price shift depresses capital demand, shrinks the long-run capital stock, and pushes down consumption and real wages compared to scenarios when capital is fixed. We illustrate this mechanism by studying recent US tariffs using a dynamic quantitative trade model. When the capital stock is allowed to adjust, long-run consumption and wage responses are both larger and more negative. With capital adjustment, U.S. consumption can fall by 2.6%, compared to 0.6% when capital is held fixed, as in a static model. That is, capital stock adjustment emerges as a dominant driver of long-run outcomes, more important than the standard mechanisms from static trade models — terms-of-trade effects and misallocation of production across countries.
That is from a new NBER working paper by David Baqaee and Hannes Malmberg. Bravo to the authors for producing this result so quickly. And…as a side note…other forms of taxing capital can be bad too! Really. A number of people have spent the last twenty years tying themselves into knots on this question.
Monday assorted links
1. I find this illustrative, and also very, very naive. Here is a related query. I think this crowd is bad at modeling social systems and macro systems more generally. That is an intrinsically thing to do, but I would keep that in mind when reading “rationalist” analyses.
2. Yale sells $6 billion of its portfolio.
3. Strawberries in Senegal (NYT). And maybe the Straussians won’t like the new Maimonides translation?
4. The nuclear-powered flying hotel?
5. “Texas schools nix lesson over Virginia state flag’s exposed breast. The Roman goddess Virtus has been on the state flag since 1861, but the banner has only featured her bare breast since the early 20th century.” And: “A case of early 20th-century gender confusion led to the breast baring in the first place. In 1901, Secretary of the Commonwealth D.Q. Eggleston complained that Virtus “looked more like a man than a woman and wanted to correct it. He instructed designers to add the breast to clarify her sex,” the Virginian-Pilot reported in a 2023 deep dive into how Virginia wound up with the only state flag boasting an exposed nipple.”
6. Ethan Mollick on AGI. And resistance to the term AGI and its attainment. A good piece, with a cameo by Duchamp.
Pandemic Preparation Without Romance
My latest paper, Pandemic Preparation Without Romance, has just appeared at Public Choice.
Abstract: The COVID-19 pandemic, despite its unprecedented scale, mirrored previous disasters in its predictable missteps in preparedness and response. Rather than blaming individual actors or assuming better leadership would have prevented disaster, I examine how standard political incentives—myopic voters, bureaucratic gridlock, and fear of blame—predictably produced an inadequate pandemic response. The analysis rejects romantic calls for institutional reform and instead proposes pragmatic solutions that work within existing political constraints: wastewater surveillance, prediction markets, pre-developed vaccine libraries, human challenge trials, a dedicated Pandemic Trust Fund, and temporary public–private partnerships. These mechanisms respect political realities while creating systems that can ameliorate future pandemics, potentially saving millions of lives and trillions in economic damage.
Here’s one bit:
…in the aftermath of an inadequate government response to an emergency, we often hear calls to reorganize and streamline processes and to establish a single authority with clear responsibility and decision-making power to overcome bureaucratic gridlock. By centralizing authority, it is argued that the government can respond more swiftly and effectively, reducing the inefficiencies caused by a fragmented system.
Yet, the tragedy of the anti-commons was also cited to explain the failure of the government after 9/11. Indeed, the Department of Homeland Security was created to centralize a fragmented system and allow it to act with alacrity. Isn’t a pandemic a threat to homeland security? And what about the Swine Flu pandemic of 2009? While not nearly as deadly as the COVID pandemic, 60 million Americans were sickened, some 274 thousand hospitalized with over 12 thousand deaths (Shresha et al. 2011). Wasn’t this enough practice to act swiftly?
Rather than advocating for a reorganization of bureaucracies, I propose accepting the tragedy of the anti-commons as an inevitable reality. The tragedy of the commons is an equilibrium outcome of modern-day bureaucracy. Bureaucracy has its reasons and some of those reasons may even be reasonable (Wittman 1995). It is too much to expect the same institution to respond to the ordinary demands of day-to-day politics and to the very different demands of emergencies. Indeed, when an institution evolves to meet the demands of day-to-day politics it inevitably develops culture, procedures and processes that are not optimized for emergencies.
Instead of rearranging organization charts we should focus on what has proven effective: the creation of ad-hoc, temporary, public–private organizations. Two notable examples are Operation Warp Speed in the United States and the British Vaccine Taskforce. These entities were established quickly and operated outside regular government channels, free from the typical procurement, hiring, or oversight rules that hinder standard bureaucracies.
…Operation Warp Speed exemplified the “American Model” of emergency response. Rather than relying on command-and-control or government production, the American Model leverages the tremendous purchasing power of the US government with the agility and innovation of the private sector.
The only problem with the “American Model” was its inconsistent application.
I am especially fond of this paper because it is the first, to my knowledge, to cite separate papers from Alex, Maxwell and Connor Tabarrok.
Addendum: This paper isn’t about lockdowns. It’s about avoiding lockdowns!
“Growth is getting harder to find, not ideas”
Here is the thread, here is the paper:
Relatively flat US output growth versus rising numbers of US researchers is often interpreted as evidence that “ideas are getting harder to find.” We build a new 46-year panel tracking the universe of U.S. firms’ patenting to investigate the micro underpinnings of this claim, separately examining the relationships between research inputs and ideas (patents) versus ideas and growth. Over our sample period, we find that researchers’ patenting productivity is increasing, there is little evidence of any secular decline in high-quality patenting common to all firms, and the link between patents and growth is present, differs by type of idea, and is fairly stable. On the other hand, we find strong evidence of secular decreases in output unrelated to patenting, suggesting an important role for other factors. Together, these results invite renewed empirical and theoretical attention to the impact of ideas on growth. To that end, our patent-firm bridge, which will be available to researchers with approved access, is used to produce new, public-use statistics on the Business Dynamics of Patenting Firms (BDS-PF).
By Teresa C. Fort, Nathan Goldschlag, Jack Liang, Peter K. Schott, and Nikolas Zolas. Via Basil Halperin.
It’s happening, UAE edition
The United Arab Emirates aims to use AI to help write new legislation and review and amend existing laws, in the Gulf state’s most radical attempt to harness a technology into which it has poured billions.
The plan for what state media called “AI-driven regulation” goes further than anything seen elsewhere, AI researchers said, while noting that details were scant. Other governments are trying to use AI to become more efficient, from summarising bills to improving public service delivery, but not to actively suggest changes to current laws by crunching government and legal data.
“This new legislative system, powered by artificial intelligence, will change how we create laws, making the process faster and more precise,” said Sheikh Mohammad bin Rashid Al Maktoum, the Dubai ruler and UAE vice-president, quoted by state media. Ministers last week approved the creation of a new cabinet unit, the Regulatory Intelligence Office, to oversee the legislative AI push.
Here is more from the FT.