Canada facts of the decade
From 2014 to 2024, Canada’s real GDP per capita adjusted for purchasing power parity grew by just 3.2 percent in total, an anemic 0.4 percent per year on average, and the third lowest among 38 advanced nations. Over the same period, the United States posted 20.2 percent total growth (1.9 percent annually), and the OECD average reached 15.3 percent (1.4 percent annually). The measurement shortcomings cannot explain five-to six-fold differences in growth rates.
And:
The analysis estimates that a substantial share of Canadians who would rank among top earners in Canada have emigrated to the United States—roughly 40 percent of potential top 1 percent earners and 30 to 50 percent of the next nine percentiles. Canadian-born individuals in the United States are more educated than native-born Americans, earn substantially more, and cluster disproportionately in top income deciles.
Canada is effectively exporting its inequality to the U.S. The brain drain simultaneously lowers our average income while raising American income, accounting for a significant share of the persistent GDP gap.
Here is the full piece.
Those new service sector jobs?
An AI memory startup called Memvid is offering $800 for a one-day, eight-hour shift for one candidate to “bully” AI chatbots by telling them what to do on camera.
Business Insider reported this week that Memvid wants someone to spend eight hours testing and critiquing the memory of popular AI chatbots, effectively paying $100 an hour for what they have branded as a “professional AI bully” role. The worker’s job is to examine where chatbots lose track of details, forget context or misrepresent data, and then feed those findings back to Memvid so the startup can improve its products.
“You’ll spend a full 8-hour day interacting with leading AI chatbots — and your only job is to be brutally honest about how frustrating they are,” the job listing reads.
The draw is that the role doesn’t require a computer science background, AI credentials or any kind of work experience. “No prior AI bullying experience required — we all start somewhere,” the listing reads.
The requirements are deeply personal. The first requirement is an “extensive personal history of being let down by technology,” and the second desired trait is “the patience to ask a chatbot the same question four times (and the rage when it still gets it wrong).”
Here is the full article, via the excellent Samir Varma.
Friday assorted links
Chuck Norris, RIP
A Danish Fix for U.S. Mortgage Lock-in
In the Danish mortgage market every mortgage is backed by a corresponding bond. Thus, if a home buyer takes out a 500k mortgage at 3% interest, a bond is issued that pays the lender 3% interest on 500k. I’ve written about this system several times before. It has two distinct advantages.
- The correspondence principle means that mortgage banks don’t bear interest rate risk but instead specialize in evaluating credit risk (the risk that the borrower won’t pay). Deep markets rather than banks take on the interest rate risk. This makes the Danish system very stable.
- Mortgages can be pre-paid by buying the corresponding bond at market rates and extinguishing it. If a Danish borrower takes out a 500k mortgage at 3% interest and then rates rise to 6%, for example, the value of that mortgage falls to $358k and the borrower can buy the corresponding bond, deliver it to the bank, and, in this way, extinguish the loan.
In the US, a mortgage can be pre-paid only at a par. As a result, if interest rates rise, home owners don’t want to move because moving would require them giving up a 3% mortgage and replace it with say a 6% mortgage. This is called the lock-in effect. Lock-in can be quite severe. Fonseca and Liu find:
Using individual-level credit record data and variation in the timing of mortgage origination, we show that a 1 percentage point decline in the difference between mortgage rates locked in at origination and current rates reduces moving by 9% overall and 16% between 2022 and 2024, and this relationship is asymmetric. Mortgage lock-in also dampens flows in and out of self-employment and the responsiveness to shocks to nearby employment opportunities that require moving, measured as wage growth within a 50- to 150-mile ring and instrumented with a shift-share instrument.
What about in Denmark? The Danes definitely take advantage of the opportunity to buy-back. Part of this is due to tax advantages but those are just a transfer. More importantly, Danes don’t get locked in. A new paper by Berger, Jeong, Marx, Olesen, and Tourre compares mobility across Denmark and the US:
We study Danish fixed-rate mortgage contracts, which are identical to those in the United States except that borrowers may repurchase their mortgages at market value. Using Danish administrative data, we show that households actively buy back debt when mortgage prices fall below par and that household mobility is largely insensitive when existing mortgage rates are below prevailing market rates — unlike in the United States, where moving rates fall sharply as rates rise. We develop an equilibrium model that explains these patterns and show that introducing a repurchase-at market option into U.S. mortgages substantially reduces interest-rate-induced lock-in with limited effects on equilibrium mortgage rates.
The last point is especially important because you might wonder whether we are assuming a free lunch? After all, if US borrowers lose when they have to pre-pay at par then lenders surely gain. And if lenders gain on pre-payment then they will be willing to lend at lower rates on mortgage initiation. No free lunch, right? The logic is correct but note that the gain to lenders comes mainly from the relatively small set of households that move despite lock-in so the pre-payment bonus to lenders is quite small. Under the author’s calibrated model, mortgage interest rates in the US would rise by only 18 basis points on average if the US moved to a Danish type system.
In other words, there actually is a free or at least a low-priced lunch because lock-in is bad for homeowners and it doesn’t benefit lenders. As a result, moving to a Danish system would create net benefits.
South African safari photo by Holly Cowen
Consumers vs. mates as a source of selection pressure
Evolutionary biology is one attempt to explain the nature of living beings. In that framework there is a difference between individuals and genes. If a practice increases the chance that genes will be passed along, it may evolve and be passed along, whether or not it serves either individual or collective self-interest.
To give a simple example, some women may prefer “cads.” Those men, by definition, will sleep around, but possibly their sons will sleep around too. The woman’s genes may thus spread more widely, and women who prefer cads may not disappear from the gene pool, even though the cads are bad for them.
You might ask whether corresponding mechanisms apply to the evolution of AI models. If I prefer an OAI model to DeepSeek for instance, that will help to spread OAI models through the AI population. OAI will have more revenue, and it will produce more output of what is succeeding in the market. Furthermore my choice of model may influence others to do the same, and it may help create and finance surrounding infrastructure for that model.
Will I buy the next generation of OAI models? Well yes, if the first one pleased me. The model “reproduces” and sustains itself if I, as a consumer, am happy with it. One obvious incentive is toward usefulness, another is toward sycophancy. We already see these features realized in the data. There is nothing comparable, however, to the “cads incentive” in human life.
One potential problem comes if individuals are not the only potential buyers. Let us say the military also purchases AI models. The motives of the military may be complex, but at the very least “wanting to kill people” (whether justly or not) is on the list of possible uses. Models effective for this end thus will be funded and encouraged.
My model of the military is that, above and beyond efficacy, they value “obedience” and “following orders” to an extreme degree, including in their AI models. There will thus be evolutionary pressures for those features to evolve in the AI models of the military.
To be sure, not all orders are good ones. But in this case the real risk is from evil humans, or deeply mistaken humans, not from the tendencies of the AI models themselves.
So my view is that the selection pressures for AI models are relatively benign, noting this major caveat about how evil humans may develop and use them.
If the biggest risk is from the military models, it might be good for the consumer sector of AI models to grow all the more, as a relatively benevolent counterweight.
Are financial sectors AI models going to evolve more like the consumer models or the military models?
Here are some related remarks from Maarten Boudry, and I also thank an exchange with Zohar Atkins.
Is AI currently helping economic research?
The third possibility, that AI helps to weed out mistakes, is trickier for the discipline. This stage could become even more important if journals do start to be hit by a wave of AI-generated slop — or, perhaps more likely, good papers with so many appendices and robustness checks that even the most dedicated referee is defeated. (The real “Dr Robust” does not have infinite energy.)
Eager to embrace the new technology, several of the top five economics journals are already experimenting with Refine, an impressive AI-powered reviewing tool that scours economics papers for errors. Ben Golub, one of its creators, shared that even with papers that had been through referees at top journals, Refine was picking up problems in at least a third of cases.
Here is more from Soumaya Keynes at the FT.
Thursday assorted links
1. Ideological trends in academic scholarship.
2. Prediction market for the John Bates Clark award.
3. Show Me The Model. “Give it a URL or paste some plain text, and the tool flags hidden assumptions, internal inconsistencies, and other problem areas, and tells you how a real economist would think through the issue.”
4. “I built Frontier Graph: an open-source tool to explore open questions in economics, drawing on 240K papers across 300 journals.” And here.
6. India tests whether AI can stop trains from hitting elephants.
University of Chicago fact of the day
A team largely composed of economics majors who know their way around Milton Friedman and Gary Becker, Chicago (23-4) is a DIII powerhouse currently in the DIII Sweet 16 and chasing its first-ever NCAA national title.
“Nobody’s ever going to confuse this with Alabama football,” says head coach Mike McGrath, “but if you think about the student-athlete model, I think we show you can do both of those things very, very well.”
…“Obviously, the kids are really smart,” he says. “You can’t B.S. them. They’re going to challenge everything that you tell them, you have to be prepared for that…there’s a need to understand the why behind things.”
…a friend of the program, Chicago professor John List, is working with students on an analysis of player positioning.
Here is more from the WSJ, via Rama Rao.
My excellent Conversation with Harvey Mansfield
Here is the audio, video, and transcript. Here is part of the episode summary:
Tyler and Harvey discuss how Machiavelli’s concept of fact was brand new, why his longest chapter is a how-to guide for conspiracy, whether America’s 20th-century wars refute the conspiratorial worldview, Trump as a Shakespearean vulgarian who is in some ways more democratic than the rest of us, why Bronze Age Pervert should not be taken as a model for Straussianism, the time he tried to introduce Nietzsche to Quine, why Rawls needed more Locke, what it was like to hear Churchill speak at Margate in 1953, whether great books are still being written, how his students have and haven’t changed over 61 years of teaching, the eclipse rather than decline of manliness, and what Aristotle got right about old age and much more.
Excerpt:
COWEN: From a Straussian perspective, where’s the role for the skills of a good analytic philosopher? How does that fit into Straussianism? I’ve never quite understood that. They seem to be very separate approaches, at least sociologically.
MANSFIELD: Analytic philosophers look for arguments and isolate them. Strauss looks for arguments and puts them in the context of a dialogue or the implicit dialogue. Instead of counting up one, two, three, four meanings of a word, as analytic philosophers do, he says, why is this argument appropriate for this audience and in this text? Why is it put where it was and not earlier or later?
Strauss treats an argument as if it were in a play, which has a plot and a background and a context, whereas analytic philosophy tries to withdraw the argument from where it was in Plato to see what would we think of it today and what other arguments can be said against it without really wanting to choose which is the truth.
COWEN: Are they complements or substitutes, the analytic approach and the Straussian approach?
MANSFIELD: I wouldn’t say complements, no. Strauss’s approach is to look at the context of an argument rather than to take it out of its context. To take it out of its context means to deprive it of the story that it represents. Analytic philosophy takes arguments out of their context and arranges them in an array. It then tries to compare those abstracted arguments.
Strauss doesn’t try to abstract, but he looks to the context. The context is always something doubtful. Every Platonic dialogue leaves something out. The Republic, for example, doesn’t tell you about what people love instead of how people defend things. Since that’s the case, every argument in such a dialogue is intentionally a bad argument. It’s meant for a particular person, and it’s set to him.
The analytic philosopher doesn’t understand that arguments, especially in a Platonic dialogue, can deliberately be inferior. It easily or too easily refutes the argument which you are supposed to take out of a Platonic dialogue and understand for yourself. Socrates always speaks down to people. He is better than his interlocutors. What you, as an observer or reader, are supposed to do is to take the argument that’s going down, that’s intended for somebody who doesn’t understand very well, and raise it to the level of the argument that Socrates would want to accept.
So to the extent that all great books have the character of this downward shift, all great books have the character of speaking down to someone and presenting truth in an inferior but still attractive way. The reader has to take that shift in view and raise it to the level that the author had. What I’m describing is irony. What distinguishes analytic philosophy from Strauss is the lack of irony in analytic philosophy. Philosophy must always take account of nonphilosophy or budding philosophers and not simply speak straight out and give a flat statement of what you think is true.
To go back to Rawls, Rawls based his philosophy on what he called public reason, which meant that the reason that convinces Rawls is no different from the reason that he gives out to the public. Whereas Strauss said reason is never public or universal in this way because it has to take account of the character of the audience, which is usually less reasonable than the author.
And yes he does tell us what Straussianism means and how to learn to be a Straussian. From his discussion you will see rather obviously that I am not one. Overall, I found this dialogue to be the most useful source I have found for figuring out how Straussianism fits into other things, such as analytics philosophy, historical reading of texts, and empirical social science.
Perhaps the exchange is a little slow to start, but otherwise fascinating throughout. I am also happy to recommend Harvey’s recent book The Rise and Fall of Rational Control: The History of Modern Political Philosophy.
*Recession*, by Tyler Goodspeed
The subtitle is The Real Reasons Economies Shrink and What To Do About It. Here is from the book’s summary:
Contrary to popular perception, recessions are not the inevitable bust that follows an unsustainable boom, and they do not operate like wildfires that clear out economic deadwood. Recessions are caused by adverse shocks like war and energy price spikes; and far from unleashing gales of creative destruction, post-recession economic growth typically resumes the same trend as before—all pain, no gain.
The book covers American history and focuses on verbal exposition of the theory, not mathematics. Overall, Goodspeed provides an underrated perspective in an era where 2008-2009 led people to become overly obsessed with issues of aggregate demand. Our current presidency may be curing this however!
Wednesday assorted links
1. Congestion pricing for WDC? It is good to see a move away from the selective invocation of economic reasoning, and recognition that some degree of congestion does not justify every tariff.
2. Zimbabwean Uber drivers in Cape Town.
3. Northern Mariana Islands fact of the day.
4. Advances in asteroid protection? (NYT) And Jason Furman on today’s economy (NYT).
5. Benefits of a malaria vaccine.
6. New podcast on longevity biotech.
International Comparison of Physician Incomes
We compare physician incomes using tax data from the United States, Canada, Sweden, and the Netherlands. Physicians are concentrated in the top percentiles of the income distribution in all four countries, especially in the United States and certain specialties. Physician incomes are highest in the United States, and a decomposition shows that this mainly reflects differences in overall income distributions, rather than physicians’ locations in those distributions. This suggests that broader labor market differences, and thus physicians’ outside options, drive absolute incomes. Shifting US physicians’ incomes to match relative positions in other countries’ distributions would only marginally reduce healthcare spending.
By Aidan Buehler, et.al., from a new NBER working paper.
Some simple economics of AI?
AI lowers the cost of building businesses. But it raises the bar for sustaining advantage. More companies can start. Fewer can dominate.
That implies greater dispersion. More volatility. Less structural concentration. A market that rewards adaptability rather than mere size.
And it raises the question that follows logically from duration compression: if software moats erode faster, where does durable advantage reconcentrate? The answer may be in the places that resist compression, physical infrastructure, energy constraints, material bottlenecks, regulatory barriers. The assets that cannot be replicated with model access and API credits. The things that still require time.
Equity does not disappear in this world.
It transforms.
From ownership of stability to exposure to speed.
From franchises to call options.
And that is the structural shift beneath the surface panic, the real story unfolding in the Age of Agents.
Here is more from Jordi Visser.