The unraveling of Obamacare?
Paul Krugman has a recent post defending the exchange subsidies and tax credits that the Republicans wish to cut, talking with Jonathan Cohn about the “premium apocalypse” (and here). Whether or not one agrees with Krugman normatively, the arguments if anything convince me that Obamacare probably is not financially or politically stable.
To recap some history briefly:
1. Prior to passage, ACA advocates assured us that all three “legs of the stool” were necessary, most of all the mandate, to prevent adverse selection and skyrocketing premia. That argument made sense and was accepted by most economists, whether or not they favored ACA.
2. Obamacare passes by razor-thin margins, with a mandate.
3. The mandate proves extremely unpopular. Whether or not it is efficient, it puts a disproportionate share of the cost burden on other policy purchasers through the exchanges. The Republicans run against ACA and make some big gains.
4. Trump in essence “saves” Obamacare by in essence defusing enforcement of the mandate. The people who hated paying the very high premia could now back out of the system without getting into real trouble. As a result, much of the opposition to Obamacare, and the scare stories about expensive policies, dissipates.
5. Contrary to the predictions of the economists, Obamacare does not collapse. Enough people kept on signing up, perhaps because there is often a fair degree of “positive selection” into insurance coverage. Still, one has to wonder whether this will last.
6. Under the Biden administration, the Democrats support the continuation of premium support, but not with massive enthusiasm. It is expensive, though of course the Democrats did understand this is a centerpiece of Obamacare and they cannot give up on it. If you are calling the current situation a “premium apocalypse,” a lot of money has to be involved.
7. Putting aside the current Trump plans and the government shutdown and concomitant fight, how stable is this budget allocation over time? Is it possible that the economists (including Krugman and David Cutler) were right all along, albeit with a long lag, and the exchanges ultimately cannot work without a mandate? And that the premium support will just get more and more expensive?
It seems to be this scenario, while hardly proven, is really quite possible. One can blame Trump of course, but maybe the allocation no longer is sustainable over the medium term?
During the ACA debates, Megan McArdle frequently made the point that such a big policy passed by such small margins could not so easily last. A lot of people wanted to look past that observation, but was she so wrong?
Addendum: By the way, how are we supposed to pay for all of this? Repealing the recent Trump tax cuts and raising taxes on the rich doesn’t seem to come close to bringing the budget into balance. Endorse a VAT if you wish, but then do so! And let us have that debate. In the meantime everyone is just playing games with us.
Sunday assorted links
1. “Accurately accounting for that misreporting may reduce rather than increase top shares of income.”
2. Marc Rowan and the universities (NYT).
4. Insights about Singapore hawker centre signs.
5. “The economist Tyler Cowen wrote that Average Is Over. It would be a bigger threat to civic peace if even Far Above Average Is Over.” (FT)
6. How does being part of a historic district affect the value of your home?
7. By no means do I agree with all of this, but if you are looking for a different take on Fed independence…
Virginia fact of the day
Virginia saw one of the smallest increases in electricity costs in the nation this past year, per new federal data, but it could get even higher as data centers proliferate statewide…
By the numbers: Between May 2024 and May 2025, the average cost of electricity for residential customers in Virginia rose about 3%, from 14.95 cents to 15.41 cents, according to the U.S. Energy Information Administration.
The negative media bias aside, I find this encouraging. OK, “…could get even higher,” but the nationwide average was 6.5%. Here is the full story. Via Andy Masley.
The ai Boom
The tiny country of Anguilla (pop 15,000) has an official country top-level domain code for the internet of .ai. Domain name registrations have surged from 48,000 in 2018 to 870,000 in the year to date and that source of revenue alone now accounts for nearly 50% of state revenues.
Hat tip: Cremieux based on this analysis.
Thiel and Wolfe on the Antichrist in literature
Jonathan Swift tried to exorcise Baconian Antichrist-worship from England. Gulliver’s Travels agreed with New Atlantis on one point: The ancient hunger for knowledge of God had competition from the modern thirst for knowledge of science. In this quarrel between ancients and moderns, Swift sided with the former.
Gulliver’s Travels takes us on four voyages to fictional countries bearing scandalous similarities to eighteenth-century England. In his depictions of the Lilliputians, Brobdingnagians, Laputans, and Houyhnhnms, Swift lampoons the Whig party, the Tory party, English law, the city of London, Cartesian dualism, doctors, dancers, and many other people, movements, and institutions besides. Swift’s misanthropy borders on nihilism. But as is the case with all satirists, we learn as much from whom Swift spares as from whom he scorns—and Gulliver’s Travels never criticizes Christianity. Though in 2025 we think of Gulliver’s Travels as a comedy, for Swift’s friend Alexander Pope it was the work of an “Avenging Angel of wrath.” The Anglican clergyman Swift was a comedian in one breath and a fire-and-brimstone preacher in the next.
Gulliver claims he is a good Christian. We doubt him, as we doubt Bacon’s chaplain. Gulliver’s first name, Lemuel, translates from Hebrew as “devoted to God.” But “Gulliver” sounds like “gullible.” Swift quotes Lucretius on the title page of the 1735 edition: “vulgus abhorret ab his.” In its original context, Lucretius’s quote describes the horrors of a godless cosmos, horrors to which Swift will expose us. The words “splendide mendax” appear below Gulliver’s frontispiece portrait—“nobly untruthful.” In the novel’s final chapter, Gulliver reflects on an earlier promise to “strictly adhere to Truth” and quotes Sinon from Virgil’s Aeneid. Sinon was the Greek who convinced the Trojans to open their gates to the Trojan horse: one of literature’s great liars.
Here is the full article, interesting and varied throughout.
Saturday assorted links
1. Jonathan Ross podcast. While Jonathan is doing very, very well, he remains underrated.
2. Colombia vs. “Brayan” (NYT).
5. Estate sale with beautiful Philly town home and 100,000 books.
6. Georg Friedrich Haas, innovator (NYT).
7. Learning to live with Chinese surpluses (FT).
8. This Renoir is a bargain. Overall some strong items in the sale.
AI Scientists in the Lab
Today, we introduce Periodic Labs. Our goal is to create an AI scientist.
Science works by conjecturing how the world might be, running experiments, and learning from the results.
Intelligence is necessary, but not sufficient. New knowledge is created when ideas are found to be consistent with reality. And so, at Periodic, we are building AI scientists and the autonomous laboratories for them to operate.
…Autonomous labs are central to our strategy. They provide huge amounts of high-quality data (each experiment can produce GBs of data!) that exists nowhere else. They generate valuable negative results which are seldom published. But most importantly, they give our AI scientists the tools to act.
…One of our goals is to discover superconductors that work at higher temperatures than today’s materials. Significant advances could help us create next-generation transportation and build power grids with minimal losses. But this is just one example — if we can automate materials design, we have the potential to accelerate Moore’s Law, space travel, and nuclear fusion.
Our founding team co-created ChatGPT, DeepMind’s GNoME, OpenAI’s Operator (now Agent), the neural attention mechanism, MatterGen; have scaled autonomous physics labs; and have contributed to important materials discoveries of the last decade. We’ve come together to scale up and reimagine how science is done.
The AI’s can work 24 hours a day, 365 days a year and with labs under their control the feedback will be quick. In nine hours, AlphaZero taught itself chess and then trounced the then world champion Stockfish 8, (ELO around 3378 compared to Magnus Carlsen’s high of 2882). That was in 2017. In general, experiments are more open-ended than chess but not necessarily in every domain. Moreover context windows and capabilities have grown tremendously since 2017.
In other AI news, AI can be used to generate dangerous proteins like ricin and current safeguards are not very effective:
Microsoft bioengineer Bruce Wittmann normally uses artificial intelligence (AI) to design proteins that could help fight disease or grow food. But last year, he used AI tools like a would-be bioterrorist: creating digital blueprints for proteins that could mimic deadly poisons and toxins such as ricin, botulinum, and Shiga.
Wittmann and his Microsoft colleagues wanted to know what would happen if they ordered the DNA sequences that code for these proteins from companies that synthesize nucleic acids. Borrowing a military term, the researchers called it a “red team” exercise, looking for weaknesses in biosecurity practices in the protein engineering pipeline.
The effort grew into a collaboration with many biosecurity experts, and according to their new paper, published today in Science, one key guardrail failed. DNA vendors typically use screening software to flag sequences that might be used to cause harm. But the researchers report that this software failed to catch many of their AI-designed genes—one tool missed more than 75% of the potential toxins.
Solve for the equilibrium?
New data on social media
It has gone largely unnoticed that time spent on social media peaked in 2022 and has since gone into steady decline, according to an analysis of the online habits of 250,000 adults in more than 50 countries carried out for the FT by the digital audience insights company GWI. And this is not just the unwinding of a bump in screen time during pandemic lockdowns — usage has traced a smooth curve up and down over the past decade-plus.
Across the developed world, adults aged 16 and older spent an average of two hours and 20 minutes per day on social platforms at the end of 2024, down by almost 10 per cent since 2022. Notably, the decline is most pronounced among the erstwhile heaviest users — teens and 20-somethings…
Additional data from GWI trace the shift. The shares of people who report using social platforms to stay in touch with their friends, express themselves or meet new people have fallen by more than a quarter since 2014. Meanwhile, reflexively opening the apps to fill up spare time has risen, reflecting a broader pernicious shift from mindful to mindless browsing.
Here is more from John Burn-Murdoch in the FT. I was just doing as Aspen podcast two nights ago, where I spoke of social media as a problem that, in time, largely would solve itself. You also may recall my recent post about declining rates of depression for young adults. That said, you might wonder what exactly is the correct definition of social media (MR comments section?), and whether this study is tracking the proper conception of it.
For the pointer I thank Adrian Kelly.
Türkiye’s Homemade Crises
Türkiye’s response to post-pandemic inflation is a cautionary tale of how political pressure for low interest rates can create macroeconomic instabilities. While central banks worldwide raised interest rates to combat inflation in 2021-2023, Turkish authorities pursued the opposite strategy: cutting real rates to deeply negative levels while implementing financial engineering tools, FX interventions, and financial repression to stabilize markets. The centerpiece was a novel FX-protected deposit scheme (KKM) that guaranteed depositors against currency depreciation, shifting exchange rate risk to the government balance sheet. We provide a detailed account of this policy experiment and develop a theoretical model focusing on how KKM functions and creates vulnerabilities. Our model reveals that pressure to keep interest rates below inflation-targeting levels can lead to an interconnected destabilizing sequence. Low rates generate inflation, current account deficits, and exchange rate depreciation. KKM provides partial stabilization by effectively raising rates for savers while maintaining low rates for borrowers. However, this creates growing contingent fiscal burdens and vulnerability to self-fulfilling currency and sovereign debt crises. This explains additional policies adopted including capital flow management, financial repression, and return to orthodox monetary policy. As central banks worldwide face renewed pressure to set lower policy rates, Türkiye’s experience illustrates the consequences.
That is from a new NBER working paper by A. Hakan Kara and Alp Simsek.
Do LLMs favor outputs created by themselves?
Here is part of the abstract, I will not ask who or what wrote this:
We focus on the hiring context, where job applicants often rely on LLMs to refine resumes, while employers deploy them to screen those same resumes. Using a large-scale controlled resume correspondence experiment, we find that LLMs consistently prefer resumes generated by themselves over those written by humans or produced by alternative models, even when content quality is controlled. The bias against human-written resumes is particularly substantial, with self-preference bias ranging from 68% to 88% across major commercial and open-source models. To assess labor market impact, we simulate realistic hiring pipelines across 24 occupations. These simulations show that candidates using the same LLM as the evaluator are 23% to 60% more likely to be shortlisted than equally qualified applicants submitting human-written resumes, with the largest disadvantages observed in business-related fields such as sales and accounting. We further demonstrate that this bias can be reduced by more than 50% through simple interventions targeting LLMs’ self-recognition capabilities.
Here is the full paper by Jiannan Xu, Gujie Li, and Jane Yi Jiant, via the excellent Kevin Lewis.
Friday assorted links
1. How many legal moves can a reachable chess position have?
2. French guy with opinions visits the UC salaries website.
3. Sam H. on LDS.
4. The job market for economists is weakening.
5. Climate advocacy should focus more on the hard problems.
7. The AI productivity index, with Sunstein, Topol, Summers, and others.
Valuing free goods
There is a new AEJ Macro paper by Brynjolfsson, et.al. on how to value free goods. Here is one of the concrete measures:
Using this approach, we estimate the reservation price [for giving up Facebook] to be $2,152 in 2003 US dollars.
That is for the 2017 version of Facebook. Note this does not measure “whether Facebook is really good for you on net,” but it does indicate some fairly strong demand. And:
…the estimate contribution to welfare due to Facebook in the US over the period 2003-2017 is $231 billion (in 2017 dollars), which translates to $16 billion on average per year.
What I’ve been reading
Marcus Willaschek, Kant: A Revolution in Thinking. A very good book, perhaps the best introduction to Kant? Though for me it is mostly interior to my current knowledge set.
Matthew Bell, Goethe: A Life in Ideas. A beautiful book, now in English we have Nicholas Boyle’s work and also this. Bell is wise enough to understand and value Iphigenia auf Tauris, a good test for Goethe appeciation. Although I had a library copy out to read, I went ahead and bought a copy of this one to own.
Benjamin Wilson, Strange Stability: How Cold War Scientists Set Out to Control the Arms Race and Ended up Serving the Military-Industrial Complex is both interesting and has plenty of information on early Thomas Schelling and his precursors.
Very well researched is The Highest Exam: How the Gaokao Shapes China, by Ruixue Jia and Hongbin Li, with Claire Cousineau.
Peter Baxter, Rhodesia: A Complete History 1890-1980. The most complete history of the country I have been able to find. Many of the other books contain a few dominant, non-false narratives, but one gets tired of that? I say LLMs come especially in handy for learning this history.
Luka Ivan Jukic, Central Europe: The Death of a Civilization and the Life of an Idea. I took this sentence to encapsulate the main lesson of the book, namely that this does not usually work: “Central Europeans were, as ever, masterfully adept at rearranging polities into new configurations.”
I enjoyed Maxim Samson, Earth Shapers: How We Mapped and Mastered the World, From the Panama Canal to the Baltic Way.
On politics and gender
I also had other opportunities to meet with conservatives in DC. With a foot in both worlds, I noticed certain social differences that stood out to me. They center mainly around the ways in which individuals perform gender and are worth reflecting on.
When I talk about differences between conservatives and liberals here, I’m talking about people in politics who hang out in Washington. They may work as campaign managers or speech writers, or have jobs in think tanks, journalism, government, or sometimes academia. The following analysis doesn’t apply to San Francisco rationalists, or Brooklyn Hipsters, or rural church folk in Kentucky. And this doesn’t even apply to all conservatives and liberals in politics, but the ones I happened to spend some time with. So the scope of this analysis is limited, but readers will recognize some of what I’m talking about in other contexts.
The women at Abundance dress business casual. I don’t have the eye for these things to be Vanessa Friedman, so I can’t give a sophisticated analysis of what people wear, but the main difference is the degree to which dress accentuates secondary sexual characteristics. Among the MAGA crowd, cleavage lines are lower and skirts higher, with pants all but unthinkable. There is more makeup and the hair is longer. None of the women wear glasses; among liberals they all have very fancy frames. You don’t have to meet many conservatives or liberals to know this. Roger Ailes famously banned female talent on Fox from wearing pants until 2017. He also of course ended up being brought down for using the workplace as a harem, which he probably would not have been able to do running MSNBC.
In terms of behavior, left-wing women discuss their personal lives or ideas. If they flirt, it’s very subtle. Eye contact that lasts too long, a conversation that continues past the point at least one participant would have ended it under normal conditions, standing unusually close to the other party or looking for an innocent seeming pretext to see one another again. Conservative women, in contrast, flirt as their default style in loud, high-pitched voices. “Oh, you didn’t TEXT ME BACK, I’m so sad!!!” “Would you say I’m Low Human Capital? he he he he.” Of course, any particular signal shouldn’t be taken too seriously as an indicator of interest since they are like this with a lot of men.
You shake hands as a default when meeting liberal women, while with conservatives it would be strange to shake their hand instead of giving them a hug, which they will usually initiate. Liberals bring the norms of HR into social life. Anything too forward or that can be interpreted as showing sexual interest is potentially perilous. Meanwhile, with conservative women, men have the option of coming on to them, and then brushing off the rejection if they are shut down.
While not engaging in ostentatious displays of femininity, liberal women will sometimes drop these hints that subtly remind you they are still women. She might have a pixie haircut and thick glasses on, but will find a way to mention that she likes baking or the color pink. I’ve noticed that liberal women like to discuss how their sons are more aggressive than their daughters, which is the opposite of what must go on in the imaginations of many conservatives who probably picture them all bragging about their children being trans. I think that this stuff is a way to create a little room for gender expression in an environment in which feminist norms and HR culture push towards androgyny.
That is all from Richard Hanania. I too have noticed the hugging point.
Thursday assorted links
1. Lisa Cook stays in office at least through January.
2. “There are 19,000 private equity funds in the US. There are 14,000 McDonald’s in the US. How are there more private equity funds than McDonald’s? That’s actually crazy, right?” (Bloomberg link)
4. Is the stablecoin duopoly breaking down?
5. Worries about bank lending to shadow banks (FT).
7. “Prospect of life on Saturn’s moons rises after discovery of organic substances.“