Where has beauty gone in the modern world?
From David Perell and Cultural Tutor, a preview of a longer film to come:
Share repurchases do not discourage investment
Theory tells us that, and the empirics tell us that too:
Our study examines the claim that share repurchases lead to reductions in real investments. Repurchase opponents argue that managers forego valuable investments to conduct opportunistic repurchases, while proponents argue that repurchases return excess cash to shareholders. We compare repurchasing firms’ real investments in capital expenditures, R&D, and employment to public and private non-repurchasing firms—holding constant their growth (i.e., investment) opportunity sets. Our results provide no support for the claim that repurchases lead to lower real investments. Consistent with these findings, we also show that financial analysts do not revise downward their capital expenditure forecasts following repurchases.
That is from a recent paper by Paul Brockman, Hye Seung (Grace) Lee, and Jesus M. Salas. You see the opposing argument in the media all the time, but it is wrong, wrong, wrong. As in “not correct.”
Via the excellent Kevin Lewis.
Black Veterans and Civil Rights After World War I
Nearly 400,000 Black men were drafted into the National Army during World War I, where they toiled primarily as menial laborers in segregated units. Leveraging novel variation from the WWI draft lottery and millions of digitized military and NAACP records, we document the pioneering role these men played in the early civil rights movement. Relative to observably similar individuals from the same draft board, Black men randomly inducted into the Army were significantly more likely to join the nascent NAACP and to become prominent community leaders in the New Negro era. We find little evidence that these effects are explained by migration or improved socioeconomic status. Rather, corroborating historical accounts about the catalyzing influence of institutional racism in the military, we show that increased civic activism was driven by soldiers who experienced the most discriminatory treatment while serving their country.
That is from Desmond Ang and Sahil Chinoy, newly accepted into the QJE. Are we so sure the postulated mechanism is the correct interpretation for the results here? Being in the military can have other intellectual influences too. Via Alexander Berger.
Tuesday assorted links
1. For different states, where the main immigrant group comes from.
2. NBA rookies do worse when they end up on very good teams.
3. Yale Budget Lab study claims AI is not having much of an effect on labor markets.
4. Twenty-five questions university presidents, provosts, and deans need to be asking themselves.
5. Is there a college radio revival?
6. Data centers have a great ratio of tax revenue brought in to electricity price boost.
7. The revolution in New Hampshire electricity policy (WSJ).
Singapore fact of the day
For every Singaporean who has left Christianity, about three others have become Christians.
About 3.2 in fact, if you look at the exact numbers. Buddhism in Japan and South Korea is being depopulated, also. Here is the Pew piece on defections from religions.
MR Podcast: Our Favorite Models, Session 1
The Marginal Revolution Podcast is back and this time Tyler and I discuss some of our favorite models or ways of thinking about the world. We begin with Spence on Monopolies, Harberger on Incidence and Solow on Growth. Here’s one bit:
TABARROK: You have an increase in the corporate tax. What happens?
COWEN: One lesson of the Harberger model is actually anything can happen. Who bears the burden? Is it capital, is it labor, or is it consumers? In the simplest versions of the model, what you have is both a substitution, capital versus labor in the taxed sector, and you have substitutions across sectors. You have a whole series of different effects. One of the first and simplest lessons from Harberger, which is really neat, but people just hadn’t gotten it before, is if you tax the corporate sector under a lot of reasonably general assumptions, the rate of return on capital goes down equally in both sectors, which to us is standard fare.
What will happen is capital flows out of the corporate sector into the noncorporate sector, that lowers the marginal rate of return on capital in the nontaxed sector, and simply the notion of capital can suffer in both sectors. Again, a revelation, maybe self-evident to us having written this principles textbook, but it shocked people. The partial equilibrium models never show that.
TABARROK: When you tax the corporations, you’re also taxing the mom-and-pops.
COWEN: And the nonprofits and whatever, wherever else the capital might flow.
TABARROK: Yes. This was one of the first useful applications of general equilibrium.
COWEN: That’s right. On that, it’s really held up. International affairs, one of the lessons is if you turn the other sector or add another sector that’s international, basically small economies cannot afford to tax capital at very high rates because so much of the capital will flow elsewhere.
TABARROK: Instead of it flowing to the noncorporate sector, it just flows out of the country.
COWEN: That’s right, which is like the other sector not affected by this particular tax. In 1962, a lot of small economies treated their capital very badly. Many still do, but there’s been a real revolution where even fairly statist economies—like the Nordics over time shifted to treating capital income pretty generously. Singapore would be another example. Again, it’s simple once you know it, but the Harberger model taught us that.
TABARROK: What about the labor margin?
COWEN: The debate since then has been how much of the tax is borne by capital and how much is borne by labor? On one hand, the Harberger model teaches you anything can happen. That’s useful intuitively. In fact, when you investigate it empirically, it’s what you would expect to happen that mostly happens. That is, capital does bear more of the tax than labor.
TABARROK: Labor bears a chunk.
COWEN: Yes. A typical estimate might be a third. There’s no free lunch from the point of view of labor. Furthermore, a lot of the capital is owned by labor through pension funds. If you take that into account, I don’t have an exact number for you, but I think it’s plausible to think labor might bear half the burden of the corporate tax. Again, you can show that pretty simply. The estimates are not exact, but just a big advance for economics. If you ask me, what ideas do I use all the time, that’s one of them.
The Harberger basic model, it doesn’t have land, but there’s the issue of what if you have three factors in the model, you would start with the Harberger model. If you’re a NIMBY who thinks there’s this kind of land monopoly in a city or land rents are very high because we stifle building, the incidence of a lot of taxes, even in general equilibrium models, can fall on the land for a city.
TABARROK: Yes, because the land can’t escape.
COWEN: That’s right.
TABARROK: As we say in the textbook, elasticity is equal to escape, right?
Here’s the episode. Subscribe now to take a small step toward a much better world: Apple Podcasts | Spotify | YouTube.
Who exactly is rigid again?
In an adversarial collaboration, two preregistered U.S.-based studies (total N = 6181) tested three hypotheses regarding the relationship between political ideology and belief rigidity (operationalized as less evidence-based belief updating): rigidity-of-the-right, symmetry, and rigidity-of-extremes. Across both studies, general and social conservatism were weakly associated with rigidity (|b| ~ .05), and conservatives were more rigid than liberals (Cohen’s d ~ .05). Rigidity generally had null associations with economic conservatism, as well as social and economic political attitudes. Moreover, general extremism (but neither social nor economic extremism) predicted rigidity in Study 1, and all three extremism measures predicted rigidity in Study 2 (average |bs| ~ .07). Extreme rightists were more rigid than extreme leftists in 60% of the significant quadratic relationships. Given these very small and semi-consistent effects, broad claims about strong associations between ideology and belief updating are likely unwarranted. Rather, psychologists should turn their focus to examining the contexts where ideology strongly correlates with rigidity.
That is from a new piece by Shauna M. Bowes, Cory J. Clark, Lucian Gideon Conway III, Thomas Costello, Danny Osborne, Philip E. Tetlock, and Jan-Willem van Prooijen. Via the excellent Kevin Lewis.
Emergent Ventures winners, 47th cohort
Vivek Kommi, 16, London, Extend healthy human lifespan by hacking the neuroimmune axis.
Adam Essemaali, northern Italy, 16, a new platform.
Rushil Kukreja and co-workers, northern Virginia, high school, devices to see through walls.
Sheehan Quirke, also known as The Cultural Tutor, London, work with David Perell, on why beauty has disappeared in the modern world.
Sambhav Baid, Singapore, measuring when antibiotics have stopped working.
Skyler Lee, Cumming, Georgia, high school, better app for language teaching.
Santiago del Solar, Waterloo, Ontario, exoskeletons.
Daniel Remler, WDC, AI and diplomacy.
Jacob Neplokh, University of Chicago, political theory and the great books.
Kyle Redlinghuys, London, AI-enhanced pre-natal testing.
Paddy Corcoran and Sean Cahill, 16 and 17, Tipperary, app for TikTok and study.
Juan David Campolargo, Illinois, to write a book on universities and how to get the most out of them.
And here is Nabeel’s semantic search for previous EV winners.
Monday assorted links
1. Costco to sell GLP-1s at a significant discount.
2. What Frederick Douglass learned in Ireland.
3. How the early Standard Oil business model worked.
4. In praise of the Faroe Islands.
5. More Scott Sumner movie reviews. When I describe Scott as the best movie reviewer in the world today, what I mean is that if you follow his recommendations you get (should get?) higher consumer surplus than by following the recommendations of anyone else. An economist’s prize!
The Free Press is joining Paramount
Announcement here, congratulations!
And from the WSJ. And Katherine Boyle comments.
Sentences to ponder
To provide some sense of scale, that means the equivalent of about $1,800 per person in America will be invested this year on A.I.
Here is more from Natasha Sarin at the NYT.
Helen Andrews on the feminization of culture
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.