My GOAT book now has updated software/AI
Tuesday assorted links
Occupational Licensing Around the World
Hartley and Kleiner have a new Fed Minneapolis working paper surveying workers around the world to measure occupational licensing by country. In the United States, occupational licensing has increased substantially over time, so one might expect licensing to rise with income. Their headline result is the opposite: occupational licensing is negatively correlated with GDP per capita. Many developing countries such as India, South Africa, and the Philippines have a lot of occupational licensing while Denmark, Sweden and France have relatively little. Similarly, countries which rate poorly in measures of government quality, such as regulatory quality, political stability, the rule of law, and corruption have more occupational licensing.
I do have some concerns, however. The figure for India of 42% of workers requiring a government license seems too high. Admittedly this is the home of the License Raj but I worry about the survey results. In order to mark a surveyed worker as requiring an occupational license HK require that the worker say that a) they have a license and b) a license is required to work in their profession. But in India there are many workers who do not have a license and a license is required to work in their profession–HK, however, consider these workers confused and drop them from the analysis. That is appropriate for a developed country where there aren’t many illegal unlicensed workers but, as the authors later discuss, informality is very high in India so working illegally is not uncommon.
Including these workers would make the true India figure even higher than HK report but I think with such a high degree of informality we also have to wonder whether survey responders in India really are responding the same way as in Germany. Perhaps they are reporting a license isn’t really required since very few workers have one. In India, for example, some 60% of “licensed” drivers have an fake or invalid license and many have no license at all so maybe workers are just reporting the facts on the ground.
Within the United States, professions are regulated in some states but not others—Louisiana, for instance, requires florists to be licensed. (Do license-holding Louisiana florists produce better, safer arrangements? I don’t think so.) Given this variation even within a single country, we’d expect considerable variation across countries too. Multiple independent surveys—not just HK—confirm that Denmark, Sweden, and even France have less occupational licensing than the United States. Since these countries have high state capacity, we can rule out the hypothesis that licensing exists for safety or quality. The implication is clear: occupational licensing is often about rent-seeking, not quality assurance.
Addendum: See also my review of Allensworth’s The Licensing Racket which finds that licensing board spend most of their time and effort on regulating entry rather than quality and my paper on the surprise delicensing of occupational licensing in the funeral industry in Colorado.
Incentives matter, installment #1637
I had long wondered about this:
Performance metrics can misalign individual and organizational incentives. We study a clean case: an NBA player holding the ball as a quarter expires must choose between a low-probability “heave” that can only help his team and protecting his shooting statistics. We model this decision as a metric-driven principal-agent problem and test it using play-by-play data from 2015-16 through 2025-26, exploiting the 2025-26 Heave Rule, which removed the individual statistical penalty for end-of-quarter heaves. Before the reform, players heaved on 58 percent of opportunities; reluctance was concentrated among efficient shooters and players in contract years, as the model predicts. After the reform, the heave rate jumped to 94 percent, the efficiency gradient collapsed, and difference-indifferences estimates using the untreated fourth quarter confirm the effect is sharp, immediate, and smallest among the players with the least efficiency to protect. Removing a metric distortion realigned individual behavior with team objectives almost completely.
That is from a recent paper by James W. Kemper and Noah Liptack,titled “Overcoming Misaligned Incentives: Evidence from the NBA Heave Rule.” Via the excellent Kevin Lewis.
Creating your own religion in an AI-drenched world
Religious life, I think one thing we’ll see, and this is, again, pretty soon, it won’t be hard to create your own religion. I’m not sure many people will do this. I don’t think most people will. But they’ll be like accretions to the religions we have now. And I think with Fable 5, you could even do this already. Like, you ever actually try to read through the Hindu sacred texts? They’re pretty naughty, pretty detailed, quite long. Many parts are great and dramatic. I wouldn’t say they’re smoothly or evenly written. Not all of it is well written. They have significant meaning. For some people, a lot of people consume them through stories they’re told with their children. It’s not that every Hindu is like reading through the whole Ramayana. That’s all fine. But if you can sit down with, you know, the latest quad, whatever, and create your own set of sacred books. Again, I think like 2% of people are going to do this. Not most people. People have other interests, other hobbies. A lot of people aren’t religious. But if 2% of people do this, you end up with a lot of new religious accretions. Some of them will be totally new religions. But I think a lot will just be like, here are my sacred books of Christianity, or my add-ons to the Book of Mormon, or my whatever’s. There’ll be this extreme religious diversity. I don’t know, too much, too little. I think it will be quite different.
Again, that is from my recent DeepMind talk. Perhaps two percent is too high, and only a fraction of one percent of the population will do this, with agents. You still end up with a great deal of religious accretion and innovation.
Persistent Inequality in Publishing in Economics
This paper documents new facts about concentration in publishing in economics. First, the profession grows downward . The number of economists grew almost sixfold since 1990, but new entrants publish in lower-tier journals while incumbents hold the top. Second, there is high and persistent concentration at the top. Along with the downward growth, the top-1% authors accounted for 38.4% of top-5 publication credit in 1990 and for 78.3% in 2025. Third, the persistence is widespread within cohorts, within subfields, and within gender. Fourth, new journals only slightly dilute concentration. Fifth, elite authors diversify on topics faster than the rest of the profession. We interpret the findings with a screening model of attention under information overload. The evidence is consistent with the model: as the field grows, citations concentrate on established work and the conditional citation premium of top-author papers narrows.
By Ricardo Dahis, via the excellent Samir Varma.
The wisdom of Conor Sen
The age 20-24 unemployment rate is now ~unchanged since the AI boom began…
Link and picture here.
Monday assorted links
2. Claims about cats (NYT). I guess they have no Coase theorem after all.
3. Iran and the Strait (WSJ).
4. “I used to be one of these people.” And Timothy Lee. As for this exchange, in the 2040 scenario strong AI is a power magnet in a way that milk or eggs or electricity are not. I do understand the claim that one might prefer this extreme governmental power to a greater role for the private sector, but extreme governmental power it is going to be, again at least under the 2040 scenario assumptions about the spread and efficacy of AI.
5. Scott Sumner engages with Fable on market monetarism.
6. “The number of students admitted to Ph.D. programs this fall dropped 15 percent from the previous year, according to data from over 50 top research universities…” (NYT) Partial data suggest that the year before the decline may have been eleven percent.
“Markets are competitive if and only if P != NP”
I prove that competitive market outcomes require computational intractability. If P = NP, firms can efficiently solve the collusion detection problem, identifying deviations from cooperative agreements in complex, noisy markets and thereby making collusion sustainable as an equilibrium. If P != NP, the collusion detection problem is computationally infeasible for markets satisfying a natural instance-hardness condition on their demand structure, rendering punishment threats non-credible and collusion unstable. Combined with Maymin (2011), who proved that market efficiency requires P = NP, this yields a fundamental impossibility: markets can be informationally efficient or competitive, but not both. Artificial intelligence, by expanding firms’ computational capabilities, is pushing markets from the competitive regime toward the collusive regime, explaining the empirical emergence of algorithmic collusion without explicit coordination.
From Philip Z. Maymin. File under “Claims…”
My talk at DeepMind
Here is a transcript of my remarks, anything from the audience (Q&A with comments) has been cut out. Excerpt:
The problem will not be how does my life get meaning, but how do I deal with all the meaning my life will have? A kind of exhaustion. And this comes up in the labor supply debates. So again, there’s one point of view like, oh, there’s AGI, there’s going to be mass unemployment. The more moderate, reasonable point of view is not that there’s mass unemployment. Many jobs still require humans. There’s comparative advantage. But total leisure time will go up. I think that’s likely the correct view, but across what time horizon?
If you think about your lives today, like I’m much busier and I’m busier because of AI. I’m working much harder. I don’t have to do that. But the point is my relative wage gradient for working harder today, it’s really quite extreme. And if I were, say, an 18 year old, I would feel I really had to work hard not to fall behind. There’s this new thing coming to the world. All sorts of people will be jumping on it. If I only start looking at it when I’m age 23, I’m behind by X number of years. So I would truly be working hard. At age 64, I don’t have to feel I need to work that hard. I can always just say if I choose to, well, I’m going to run out the clock, as they say, just kind of step back and wait until I die and I’ll be fine. I’m not going to do that.
Every time a new model comes out, I’m still excited. I used to be very excited. But they come out more and more frequently. And now I look at my calendar and I’m like, uh-oh, could you all wait a week, please? Because you want to be ready. You want to play around with it. You want to test it out. You want to talk about it with your friends. It’s a slight bit of an exhaustion. And again, for you all working here, you have access to models that haven’t come out yet or maybe will never come out. But all the time, you have fresh stimuli. And I hope, I think you must all be drenched in meaning. And you’re like, oh, my goodness, someone else tells me, look at this new model. What do I do with that?
So I think sometimes, like, when will the time come when the leisure dividend from AI arrives? No one is forcing you to work harder. But there’s a substitution effect from the higher implicit wage on your future earnings that if you work harder now, it will have a payoff. You’ll at least avoid being behind.
Interesting throughout, definitely recommended.
Sunday assorted links
The Trump Administration’s Threat to Scientific Research
In The Nationalization of American Science I warned that the Trump administration’s rewriting of the seemingly mundane Regulation for Federal Financial Assistance was a tremendous threat to America’s historically successful decentralized system of science funding. Many others are now sounding the alarm.
It’s not surprising that organizations like the AAAS oppose the rule, albeit with unusually strongly worded dissents:
This latest move is a brazen power grab by the Director of the Office of Management and Budget to buck the will of Congress and the American people and will make future discoveries less likely. If this rule becomes final, Americans’ hopes for future cures, national security and economic strength will rely on the scientific sensibilities of the nation’s chief bureaucrat. Alzheimer’s disease will not be cured by a budget analyst from either political party.
But we are now seeing strong pushback from independent thinkers such as:
Grayson Logue writing at The Dispatch:
A sweeping new rule proposed by the Trump administration could remake how that money is awarded and give the president and his political appointees discretion to cancel funding or target recipients for virtually any reason—with little opportunity for recourse.
White House officials argue the new rule is necessary to assert more accountability over federal grantmaking, but observers fear the shift will expand opportunities for politicization, abuse, and even corruption for an administration that has already demonstrated a penchant for using the levers of the federal government to punish partisan enemies and reward ideological allies.
if I was trying to ruin American leadership in scientific research this is pretty much the kind of rule I would write…One of the genuine difficulties with observing the second Trump term is that the assault on state capacity and impartiality has been so multipronged that it is difficult to keep track of everything going on. But these proposed rule changes are monumental and catastrophic.
and Noah Smith:
MAGA’s attack on science is even worse than it looks…despite science’s overwhelming popularity and public trust, Trump and his administration are launching an unprecedented and devastating attack on American science — cutting funding, and forcing science projects to undergo ideological review by government commissars.
It may be that the Trump administration has pushed too far, but my real worry is that we are losing an equilibrium. Science was never completely independent of politics, of course, but even at the worst of times, funding was decentralized and the culture-war material that dominated the headlines was never more than a tiny fraction of the whole. Like an independent judiciary, independent science has been an American virtue. COVID policy, gender policy, and now the Trump administration’s weaponization of these mistakes may have destroyed that equilibrium.
As I wrote in my original post, we are adopting the loser policies of authoritarian nations but those policies are the norm elsewhere for a reason. Centralized control of science is the default because it serves the people in power of whatever party. Decentralization is the fragile exception—a historically unusual achievement that is easier to destroy than rebuild.
Addendum: And here is Andrew Gelman.
*A Tale of Three Cities*
The author is Bob Harris, and the subtitle is The Life and Times of Lord Daer 1763-1794. Who is Lord Daer? Don’t worry about that! So many books on the Scottish Enlightenment cover one particular thing, but somehow fail to give the reader a proper sense of life on the ground. I found this is the best book I know for actually communicating what it was like to live during, and participate in, the Scottish Enlightenment. Maybe to achieve that end it is necessary to focus on the life of a figure who was less than totally famous? Definitely recommended, this book should be better known.
*Who Thinks Like an Economist?*
That is the title of a recent book by Beatrice Magistro. Some key results are:
Economic knowledge consistently predicts higher support for welfare-enhancing policies (Eurozone membership, free trade, and EU immigration), independent on whether individuals stand to gain or lose initially from globalization. This challenges conventional self-interest accounts and instead highlights the role of economic knowledge — and potentially time preferences — in shaping globalization attitudes.
Economic knowledge also predicts a lower discount rate, even after adjusting for years of education.
I would say that over the years I have altered my perspective a bit on these issues. I used to think these factors were correlated, in large part, through a kind of wisdom. I now think that more of the effect, however much I may sympathize with it, runs through sociological expectation and perceived obligation, combined with conformity and signaling pressures.
New space policy Substack from Mercatus
We are Rebecca, Max, and Aakrith. We are researchers at The Mercatus Center, a research organization dedicated to classical liberal ideas. Rebecca is a philosopher, Max is an economist, and Aakrith is a political scientist. Together, we are the Space Team, and this is our Substack.
We’re here to persuade you that space policy is increasingly important. And that getting space policy right offers humankind astonishing opportunities. In particular, we’re currently thinking hard about innovation, competition, federalism, property rights, and life in space.
Here is the link.