Sunday assorted links
What the financial regulators are saying and feeling
1. “Yes, we know stablecoins will have one hundred percent reserves, but we are not sure we can regulate that system into a position of safety.”
2. “Well, the rest of the financial system has nothing like one hundred percent reserves, but don’t worry we have everything there under control.”
The hole is large enough to drive a truck through. Keep this contrast in mind, because you will be hearing it, expressed in other terms of course, hundreds of times over the next year or so.
The business of birding
You cannot really trust economic impact studies, but still they give a rough sense of orders of magnitude:
Birding is a growing hobby nationwide, especially since the pandemic—and as in Ohio, U.S. birders are an impressive economic force, according to the latest federal data.
A November 2024 report from the U.S. Fish and Wildlife Service (FWS) reflects staggering numbers: There are an estimated 96 million birders in the United States—more than a third of U.S. adults—who together spent more than $107 billion in 2022. In total, that’s more money than the 2022 gross domestic product of New Hampshire (and 10 other U.S. states). Those dollars purchased equipment such as binoculars, feeders, and cameras, funded hobby-related trips, and covered other costs large and small, such as plant purchases, subscriptions, field guides, and campers. They also supported 1.4 million jobs and generated billions more in local, state, and federal tax revenue.
…“I was expecting to see expenditures in the billions, but did not expect it to amount to more than $100 billion,” says Tobias Schwoerer, an applied economist at the University of Alaska Fairbanks. In a separate study, he and his coauthor, former Audubon Alaska executive director Natalie Dawson, found that birders spent nearly $400 million a year and supported thousands of jobs in Alaska alone.
Here is the full piece. Via Holly Cowen.
Three accounts of modern liberalism
I have a review essay on that topic in the latest TLS. Excerpt, on Philip Pilkington:
Pilkington’s sense of numbers, history and magnitude is sometimes off. He writes that “liberalism is forming broken, atomized people who are unable to pass on their genes to a future generation”, apparently oblivious to the fact that fertility rates are falling in many non- liberal countries as well – in Russia, for example – where they are lower than in the US. In China, fertility is lower still. Is the liberal goal really to “replac[e] the family with the state”? That sounds more like the non-liberal visions we find in western thought, running from Plato to the more extreme forms of communism in which children are encouraged to report on the supposed crimes of their parents.
We are told that “deindustrialization eviscerated American industry”, yet US manufacturing output is now barely below its pre-financial crisis peak, and service sector jobs tend to pay more on average today than do manufacturing jobs. Pilkington also promotes strange theories of trade imbalances, as presented by the non-economists Oren Cass and Michael Pettis but rejected by virtually all serious researchers in the area. Their view is that a huge economic restructuring is needed because China and Germany keep running trade surpluses while the US is in perpetual trade deficit. But in reality this arrangement seems as stable as any other macroeconomic state of affairs could be. It is Pilkington’s prerogative to disagree with the consensus, but we are never told why everyone else might be wrong. Overall, there is too much sloppiness here in service of the agenda of carping about liberal societies.
And on Robert Kagan:
An alternative and less neat vision of American history shows how liberalism has often relied on illiberalism, and not just accidentally. Lincoln was a significant abuser of civil rights, including on habeas corpus. The North’s campaigns in the Civil War killed many thousands of innocent civilians, not all of them in the service of legitimate military ends. You can argue that this may have been necessary, but liberal it was not. As for FDR, he tried to pack the Supreme Court and sought a significant expansion of executive power, making his administrations a methodological precursor of Trump. He did fight the Second World War on the side of liberalism, but he did not always use liberal means (eg the firebombing of Tokyo), and indeed a full respect for the laws of warfare might not have secured victory.
Once we see American history as a union of liberal and illiberal forces, we can relax a little about the current situation. Certainly, we are returning to some bad and illiberal behaviours of the past, and it is right to be concerned. Yet this seems to be more a feature of the ebb and flow of American politics than a decisive turn away from liberalism. Illiberalism has been prominent in the mix most of the time, and that is both the good news and the bad.
Interesting throughout, recommended, I believe it is the Sept.1 issue.
Saturday assorted links
1. Hungarian political evolution?
2. John Horton simulates referee reviews.
3. San Francisco pays squatters to move out, but many do not accept the offer.
4. Emily Linge sings Queen. She is only seventeen, quite a marvel. And doing For No One.
5. The current state of arts funding under Trump.
6. The Metropolitan Opera will raise money by doing Saudi tours (NYT).
Moving on Up
James Heckman and Sadegh Eshaghnia have launched a broadside in the WSJ against the Chetty-Hendren paper The Impacts of Neighborhoods on Intergenerational Mobility I: Childhood Exposure Effects. It’s a little odd to see this in the WSJ but since the Chetty-Hendren paper has been widely reported in the media, I suppose this is fair game. Recall the basic upshot of Chetty-Hendren is that neighborhoods matter and in particular
…the outcomes of children whose families move to a better neighborhood—as measured by the outcomes of children already living there—improve linearly in proportion to the amount of time they spend growing up in that area, at a rate of approximately 4% per year of exposure.
I am not going to referee this dispute but I did enjoy the audacity of one placebo test run by Eshaghnia. Eshaghnia runs the same statistical models as Chetty-Hendren but substitutes birth length (“the distance between a newborn’s head and heels”) instead of adult earnings and college attendance rates. Now, obviously, moving cannot affect birth length! Yet, Eshaghnia finds, in essence*, that children of parents who move to taller neighborhoods have taller children, in parallel with CH who find that children of parents who move to higher income neighborhoods have higher income children. Moreover, the covariance is stronger the earlier parents move. Since birth length is correlated with cognitive abilities and other later life outcomes this is highly suggestive that CH are not finding (pure) causal effects.
* I have simplified slightly for intuition. Technically, Eshaghnia shows that children’s birth‑length ranks align with the destination–origin permanent‑resident birth‑length difference, and that alignment is ≈0.044 stronger for each year earlier the move.
Addendum: Chetty et al. do not find similar results in California (see in particular Figure 2).
A few remarks on Fed independence
Trump has made various sallies against the idea of an independent Fed, including lots of rhetoric, firing Lisa Cook, aiming to have a CEA chair on the Fed board, and more. Probably the list is longer than I realize.
To be clear, I see no upside to these moves and I do not favor them. That said, I am not surprised that markets are not freaking out.
People, the Fed was never that independent to begin with!
Come 2008, the Fed, Treasury, and other parties sat down and worked out a strategy for dealing with the financial crisis. The Fed has a big voice in those decisions, but ultimately has to go along with the general agreement.
Circa, 2020-2021, with the pandemic, the same kind of procedure applied.
You may or may not like the particular decisions that were made (too little inflation the first time, too much inflation the second time), but I don’t think there is a very different way to proceed in those situations.
And given recent budgeting decisions, fiscal dominance may lie in our future in any case. The Fed is not immune from those pressures.
The Fed is most “independent” when the stakes are low and most people are happy with (more or less) two percent inflation. That is also when the independence matters least.
The real problem comes when the quality of governance is low. Then encroaching on central bank independence simply raises the level of stupidity. Some of that is happening right now.
A non-independent central bank can work just fine when the quality of government is sufficiently high. New Zealand has had a non-independent central bank since the Reserve Bank Act of 1989 (before that it had a non-independent central bank in a different and worse way). There is operational independence, but an inflation target is set in conjunction with the government. You may or may not favor this approach, but it has not been a disaster and it helped to lower Kiwi inflation rates significantly and with political cover.
Way back when, Milton Friedman used to argue periodically that Congress should set the rate of price inflation and take responsibility for it. I think that is a bad idea, especially today, but it should cure you of the notion that “independence” is sacrosanct. Every system has some means of accountability built in, and indeed has to.
I know all those scatter plot graphs that correlate central bank independence with lower inflation rates. In my view, if you could insert a true “quality of government” extra variable, the correlation mostly vanishes. Plus I do not trust the measures of independence that are used.
As Gandhi once said — “Central bank independence, it would be a good idea!”
Addendum: I also find it a little strange that many critics of the Trump actions earlier had been calling for higher inflation targets, say three or even four percent. That is maybe not an outright contradiction, but…the Fed isn’t just going to move to that on its own, right? Central bank independence for thee but not for me?
*Take a Girl Like You*, by Kingsley Amis
This excellent and neglected novel deserves a new look in our time. As Christian Lorentzen points out in his useful introduction, if you are interested in (non-Submission) Houellebecq, this is the next place to go. How exactly did we get on the Houellebecq sexual emptiness path to begin with? This novel was published in 1960, and it shows the first steps toward the sexual revolution and the rise of more open sexual competition, with a nod in the direction of what the final results are going to be.
In the novel the old sexual world is still there, and largely in control. There is a distinction between “good girls” and “bad girls,” for instance, or if you are traveling with an opposite sex companion there needs to be talk of “separate bedrooms.” But the characters discuss birth control, and one asks the other why don’t they just…do it? The novel shows how the older world started to break down and morph into what was to come later.
I will not spoil the ending for you.
Interesting and insigthful passages abound. For instance:
“He’s got a sensual face. But he doesn’t know much about women, I think. He talks all the time, and this isn’t necessary, as we women soon learn.”
Or:
He kissed her very thoroughly, without trying to do anything else, and indeed without any of the toiling and moiling, let alone the moaning and groaning, gone in for by the too-serious ones, and/or the ones who put up a show of being serious.
pp.169-171 have the best analysis of “lookism” I have seen.
Amis understands the slippery slope phenomenon very well. He even suggests that greater promiscuity is bound to lead to regularly bisexual women.
Recommended, an easy and fun read, and if it helps you norm my evaluation I did not love Lucky Jim by him.
Tariff sentences to ponder
Trump’s tariff policy is an agenda for pushing American output down the value chain, away from advanced manufacturing and toward making cheaper simpler goods and supplying raw materials to China.
That is from Matt Yglesias.
Friday assorted links
1. An alternate model for training economists?
2. RIP Luis Fernando Verissimo. Borges and the Eternal Orangutans is a very fun book for me.
3. Chinese guy builds Cat World, Department of Why Not?
4. “Walking Tall?” (NYT). The husband did it.
5. AI progressed more quickly than superforecasters had expected. Green energy did not.
They solved for the Kansas City Chiefs enforcement equilibrium
We examine how financial pressure influences rule enforcement by leveraging a novel setting: NFL officiating. Unlike traditional regulatory environments, NFL officiating decisions are immediate, transparent, and publicly scrutinized, providing a unique empirical lens to test whether a worsening financial climate shapes enforcement behavior. Analyzing 13,136 defensive penalties from 2015 to 2023, we find that postseason officiating disproportionately favors the Mahomes-era Kansas City Chiefs, coinciding with the team’s emergence as a key driver of TV viewership/ratings and, thereby, revenue. Our study suggests that financial reliance on dominant entities can alter enforcement dynamics, a concern with implications far beyond sports governance.
That is from a new piece by Spencer Barnes, Ted Dischman, and Brandon Mendez. Via the excellent Kevin Lewis.
Sentences to ponder
By ordering the U.S. military to summarily kill a group of people aboard what he said was a drug-smuggling boat, President Trump used the military in a way that had no clear legal precedent or basis, according to specialists in the laws of war and executive power.
Mr. Trump is claiming the power to shift maritime counterdrug efforts from law enforcement rules to wartime rules. The police arrest criminal suspects for prosecution and cannot instead simply gun suspects down, except in rare circumstances where they pose an imminent threat to someone.
Here is more from the NYT.
“Existence is evidence of immortality”
From philosopher Michael Huemer:
Do persons continue to exist after the destruction of their bodies? Many believe so. This might occur either because we have immaterial souls that persist in another, non-physical realm; or because our bodies will be somehow reanimated after we die; or because we will live on in new bodies in the physical realm.1 I shall suggest herein that the third alternative, “reincarnation,” is surprisingly plausible. More specifically, I shall argue (i) that your present existence constitutes significant evidence that you will be reincarnated, and (ii) that if the history of the universe is infinite, then you will be reincarnated.
My argument is entirely secular and philosophical. The basic line of thought is something like this. The universe has an infinite future. Given unlimited time, every qualitative state that has ever occurred will occur again, infinitely many times. This includes the qualitative states that in fact brought about your current life. A sufficiently precise repetition of the right conditions will qualify as literally creating another incarnation of you. Some theories about the nature of persons rule this out; however, these theories also imply that, given an infinite past, your present existence is a probability-zero event. Hence, your present existence is evidence against such theories of persons. Given an infinite past, it is conclusive evidence.
Here is the rest of the paper. Via Nabeel. So you do not need to read this paper just right now?
Thursday assorted links
1. Milei having some problems right now (FT).
2. Caplan and Hendren back and forth on the value of Medicaid.
3. How to influence chatbots. Cialdini still applies.
4. Seeing Wizard of Oz at The Sphere (NYT).
5. Patrick Collison on George Berkeley as development economist.
6. Ross Douthat interviews Dan Wang, who by the way is now on the bestseller lists (NYT).
It would take more than one paper to establish these claims
Nonetheless these are interesting results, worthy of further examination:
The measurement of intelligence should identify and measure an individual’s subjective confidence that a response to a test question is correct. Existing measures do not do that, nor do they use extrinsic financial incentive for truthful responses. We rectify both issues, and show that each matters for the measurement of intelligence, particularly for women. Our results on gender and confidence in the face of risk have wider applications in terms of the measurement of “competitiveness” and financial literacy. Contrary to received literature, women are more intelligent than men, compete when they should in risky settings, and are more literate.
That is from the September JPE, by Glenn W. Harrison, Don Ross, and J. Todd Swarthout. Here are ungated versions of the paper. Here is Bryan Caplan on the limitations of any single paper.