Markets in everything?
BREAKING: Secretary of State, Marco Rubio, overseeing Greenland acquisition — $500-$700 billion offer being prepared.
Wednesday assorted links
1. Did Tudor mercantilism succeed?
2. Why are intelligent people more liberal?
3. Maybe U.S. law enforcement is taking too much testosterone, steroids, etc.?
4. The political culture that is Malawi (WSJ).
5. On Kant, Mercor, and poetry aesthetics.
6. Ai, RIP. Deserving.
7. Vanderbilt is expanding to San Francisco (WSJ).
Forward markets in everything, lunar edition
A company called GRU Space publicly announced its intent to construct a series of increasingly sophisticated habitats on the Moon, culminating in a hotel inspired by the Palace of the Fine Arts in San Francisco.
On Monday, the company invited those interested in a berth to plunk down a deposit between $250,000 and $1 million, qualifying them for a spot on one of its early lunar surface missions in as little as six years from now.
Here is the full story, via the excellent Samir Varma.
Negative political externalities from migration to Britain?
Following up on my recent post, which suggested less skilled immigration into the UK has not been a disaster, the question has been raised about long-term negative political externalities. Will not migrants enter the country and make electoral outcomes worse? I would offer a few points in response:
1. If this is the argument, one needs to admit that immigration has gone well enough in the UK to date. This argument is about the future, not the past.
2. The UK has indeed had a variety of poor leaders as of late. It is very difficult to hold immigrants responsible for them, mostly it is the native white Brits who have been at fault. You might not like how UK Muslims have shaped some of the Middle Eastern statements of Labour, but that is hardly a relevant factor behind the slowdown of the British economy, or of British gridlock.
3. There is a very real risk that Reform will win the next election and then implement bad economics policies, above and beyond whatever you think of their approach to immigration. But if that is the real fear, it would be good to limit their popularity by talking up the positive side of immigration. I am not suggesting that any of us should tell anything less than the full truth, but obviously there are many positive aspects of migration that even professional economists can get wrong. Does immigration mean “higher home prices” or “capital gains for domestic homeowners”? Well, both, but you hear much more about the former than the latter (even Gemini got that one wrong). Let’s redress the balance, and lower the risk of future bad economic policy while we are at it.
4. Sometimes immigration weakens the demand for welfare state transfers, since the immigrants are viewed as outsiders. In Britain, that would currently be a positive at current margins. I recognize that is by no means the only political effect, but in any case do not assume that all of the political externalities are negative.
Above all else, it is difficult to paint immigrants as major villains for Britain’s troubles so far. Just read through the original analysis again. It has not been seriously countermanded, and do most of their problems are indeed the fault of the white people.
That all said, I would readily admit, and indeed stress, that a better set of migration policies could have put Britain in a much better position than it is today.
A new economic model of AI and automation
Here is but one part of the results:
Given complementarity between the two sectors, the marginal returns to intelligence saturate, no matter how fast AI scales. Because the price of AI capital is falling much faster than that of physical capital, intelligence tasks are automated first, pushing human labor toward the physical sector. The impact of automation on wages is theoretically ambiguous and can be non-monotonic in the degree of automation. A necessary condition for automation to decrease wages is that the share of employment in the intelligence sector decreases; this condition is not sufficient because automation can raise output enough to offset negative reallocation effects. In our baseline simulation, wages increase and then decrease with automation.
That is from Konrad Kording and Ioana Elena Marinescu of the University of Pennsylvania. I am very glad to see ongoing progress in this area. Via the excellent Kevin Lewis.
They are solving for the (electoral) equilibrium
Social Security also got quietly more generous during this period. Each year, the Social Security Administration compares the C.P.I.-W (the Consumer Price Index for Urban Wage Earners) for the third quarter to the third quarter of the previous year and, if needed, adjusts benefits upward to compensate for inflation. There happen to have been three years during Obama’s presidency — 2009, 2010, and 2015 — when the mathematically correct cost-of-living adjustment would have been negative. What actually happens in this case is that seniors get zero cost-of-living adjustment, which means that, in real terms, benefits ratcheted upward.
Then during the Biden administration, Congress ended up passing the Social Security Fairness Act, which increased Social Security benefits for a disproportionately affluent set of retirees with access to other pensions with very little fanfare. This happened via a hugely bipartisan vote, so even organizations that were critical of the idea when it was first proposed were mostly silent as it actually happened. Then during the 2024 presidential campaign, Donald Trump proposed “no tax on Social Security,” which is really just a way of making Social Security benefits mildly more generous for high-income seniors.
That is from Matt Yglesias. It would be amazing if we got away with all of this!
Tuesday assorted links
1. Pre-history of progress studies and links.
2. Do institutional investors raise housing prices?
3. Alex Sarr leads the NBA in blocks.
4. History LLMs.
5. The new Middle Eastern Cold War. Likely to be one of the better and most important of essays from this year.
My Win-Win podcast with Liv Boeree
Liv is great at this, here is the Spotify link. Note this was recorded in May 2025, and its release postponed due to technical difficulties. So if a few parts seem “behind the times,” that is why. ” Tyler also shares his views on economic growth, UBI, automation, persuasion, state capacity, why fears of mass unemployment and civilizational collapse are often overstated.”
Grade inflation sentences to ponder
Next, we consider the effects of grade inflation on future outcomes. Passing grade inflation reduces the likelihood of being held back, increases high school graduation, and increases initial enrollment in two-year colleges. Mean grade inflation reduces future test scores, reduces the likelihood of graduating from high school, reduces college enrollment, and ultimately reduces earnings.
Here is the full paper by Jeffrey T. Denning, Rachel Nesbit, Nolan Pope, and Merrill Warnick. Via Kris Gulati.
Claims about AI productivity improvements
This paper derives “Scaling Laws for Economic Impacts”- empirical relationships between the training compute of Large Language Models (LLMs) and professional productivity. In a preregistered experiment, over 500 consultants, data analysts, and managers completed professional tasks using one of 13 LLMs. We find that each year of model progress reduced task time by 8%, with 56% of gains driven by increased compute and 44% by algorithmic progress. However, productivity gains were significantly larger for non-agentic analytical tasks compared to agentic workflows requiring tool use. These findings suggest continued model scaling could boost U.S. productivity by approximately 20% over the next decade.
That is from Ali Merali of Yale University.
Venezuela stablecoin fact of the day
By one estimate, almost 80% of Venezuela’s oil revenue is collected in stablecoins like tether, a local economist, Asdrúbal Oliveros, said on a recent podcast.
Here is the full WSJ piece.
The downside of NAFTA?
We study how NAFTA changed the geography of violence in Mexico. We propose that this open border policy increased trafficking profits of Mexican cartels, resulting in violent competition among them. We test this hypothesis by comparing changes in drug-related homicides after NAFTA’s introduction in 1994 across municipalities with and without drug-trafficking routes. Routes are predicted least cost paths connecting municipalities with a recent history of detected drug trafficking with U.S. land ports of entry. On these routes, homicides increase by 2.1 per 100,000 inhabitants, which is equivalent to 26% of the pre-NAFTA mean. These results cannot be explained by changes in worker’s opportunity costs of using violence resulting from the trade shock.
That is from a new JDE paper by Eduardo Hidalgo, Erik Horning, and Pablo Selaya. Via the excellent Kevin Lewis.
Monday assorted links
1. The (strong) case for beans (WSJ).
2. Education is correlated with liberal and pro-market views in most countries.
3. Puffin photos.
4. Do GLP-1 drugs pay for themselves?
6. New Statesman recommends non-fiction for 2026.
7. David Deming on learning with generative AI.
9. Weird LLM generalizations. With a good Terminator example.
Chairman Powell’s Statement
Whether an independent Fed is desirable is beside the point. The core issue is lawfare: the strategic use of legal processes to intimidate, constrain, and punish institutional actors for political ends. Lawfare is the hallmark of a failing state because it erodes not just political independence, but the capacity for independent judgment.
What sort of people will work at the whim of another? The inevitable result is toadies and ideological loyalists heading complex institutions, rather than people chosen for their knowledge and experience.
What should I ask Joe Studwell?
He has a new and excellent book coming out, namely How Africa Works: Success and Failure on the World’s Last Developmental Frontier, which I consumed eagerly. You probably know his earlier book How Asia Works. So what should I ask him?
For additional context, here is the opening of his home page (no Wikipedia page?):
Hello. I am an author, journalist, public speaker and occasional university teacher. I am based much of the time in Cambridge. In the 2000s I restored and lived in a home in a still unspoiled area of central Italy (the photo at the top of the page is a view from the house).
So what should I ask him?