Does the United States Spend Enough on Public Schools?
I remain happy to provoke my readers:
The United States ranks low among peer countries on the ratio of teacher spending to per capita GDP. Is this (in)efficient? Using a spatial equilibrium model we show that spending on schools is efficient if an increase in school spending funded through local taxes would leave house prices unchanged. By exploiting plausibly exogenous shocks to both school spending and taxes, paired with 25 years of national data on local house prices, we find that an exogenous tax-funded increase in school spending would significantly raise house prices. These findings provide causal evidence that teacher spending in the U.S. is inefficiently low.
That is from a new paper by Patrick J. Bayer, Peter Q. Blair, and Kenneth Whaley. Via the excellent Kevin Lewis.
Strategic Wealth Accumulation Under Transformative AI Expectations
This paper analyzes how expectations of Transformative AI (TAI) affect current economic behavior by introducing a novel mechanism where automation redirects labor income from workers to those controlling AI systems, with the share of automated labor controlled by each household depending on their wealth at the time of invention. Using a modified neoclassical growth model calibrated to contemporary AI timeline forecasts, I find that even moderate assumptions about wealth-based allocation of AI labor generate substantial increases in pre-TAI interest rates. Under baseline scenarios with proportional wealth-based allocation, one-year interest rates rise to 10-16% compared to approximately 3% without strategic competition. The model reveals a notable divergence between interest rates and capital rental rates, as households accept lower productive returns in exchange for the strategic value of wealth accumulation. These findings suggest that evolving beliefs about TAI could create significant upward pressure on interest rates well before any technological breakthrough occurs, with important implications for monetary policy and financial stability.
Via Zach Mazlish.
My podcast with Curt Jaimungal
Available in twenty-six languages:
It is available on standard podcast sites as well.
Curt lists the following as topics we covered:
– Tariffs and US-Canada trade relations
– Canada becoming the 51st state
– Trump administration’s tactics with Canada
– Economic philosophy vs. pure economics
– University/academic life benefits
– Grant system problems and bureaucracy
– Mental health in graduate students
– Administrative burden growth
– Tenure’s impact on risk-taking and creativity
– Age and innovation across fields
– Problems with grant applications
– AI’s role in grant applications and academic review
– Deep research and O1Pro capabilities
– AI referee reports
– Public intellectual role
– Information absorption vs. contextualization
– Reading vs. active problem solving
– Free will and determinism
– Religious beliefs and probabilities
– UAP/UFO evidence and government files
– Emotional stability and stress response
– Personality traits and genetics
– Disagreeableness in successful people
– Identifying genuine vs. performative weirdness
– Nassim Taleb’s ideas and financial theories
– Academic debate formats
– Financial incentives and personal motivation
– New book project on mentoring
– Podcast preparation process
– Interviewing style and guest preparation
– Challenges with different academic fields
– Views on corporate innovation
– Current AI transformation of academic life
Curt has a very impressive YouTube site where he interviews people about their “Theories of Everything.” Here is the related Substack.
Friday assorted links
1. Can AI detect which are celebrity faces?
2. Lyman Stone on Greg Clark’s genetics claims.
3. Asteroid impact risk is way down.
4. RFK, Jr. plans shake-up of vaccine advisers.
5. How to do tech interviews in the age of AI?
7. “OK so I’ve been reading through the transcripts of the cases where the LLM apparently cheats and wins and, you’re not going to believe this, but I think that these findings are not being presented accurately. I can’t find a single example where it actually successfully cheats.” Link here.
Writing my biography/autobiography
Some while ago I decided never to write a memoir, insufficient reader interest being only one reason of several. That said, I have found a simple way of producing a biography of myself. Through MR, podcasts, columns, and other forms of output there is plenty of me out there. I think in two years or less the AIs will be able to write good biographies of me, with lengths and emphases of your choosing, without requiring additional effort on my part.
Yet some parts of my life I have never talked or written about, most of all childhood. So I am going to write a few blog posts to fill in those gaps, thus enabling a fairly complete biography. This will be like my earlier posts on my first jobs, so I hope some of you find them of interest. At least GPT-5 will get some kicks from them. And to be clear, I’m not going to write much about other people, due to a desire to respect their privacy. I might mention their names or relate some basic facts, but I won’t go much beyond that. My sister will have to write her own story!
My years in Fall River, Mass.
I lived there from ages 4 to 7, which spans 1966 to 1969. At that time, Fall River about forty years past its textiles manufacturing peak, as southern competition had deindustrialized the city. My father was invited to run the Chamber of Commerce there, with the hope that he could help revitalize things, and so the family moved.
I recall liking New England, and preferring it to my earlier Hudson County, NJ environs. All of a sudden we had a large yard and things felt nicer. The neighbors were chattier and less surly. The dog (Zero) could run around the neighborhood free, which I found both astonishing and good. I did not understand that the city had fantastic architecture. My father complained about it being provincial.
Whenever we would drive back and forth from NJ to Fall River, my sister and I would see a building in Providence, RI and for whatever reason we called it “the monkey squisher.” For trips to the shore, we would go to Cape Cod, and let the dog run on the beach.
Mr. and Mrs. Jennings were the immediate neighbors, and they treated us almost like their own kids. Their own boy was grown and in the service. Two other neighbors were Kathy and Carol Fata (sp?), who were slightly older than Holly and me, and again super-friendly. I believe they were either Lebanese or Syrian, which was common in Fall River at that time.
Most of all, I was into baseball and baseball cards in those years. I used them to learn some math and statistics, and of course to learn about the players. I watched baseball games on TV all the time, and to this day I remember some baseball stats from that era. I received an autographed baseball from Russ Gibon, Red Sox catcher at the time. Naturally I was a Red Sox fan. I had an allowance of a quarter a week, and on the way home from school would stop at a small newspaper store and buy baseball cards. The 1968 World Series was a huge thrill for me, and I was rooting for the Detroit Tigers and Mickey Lolich. I still remember the close call at the plate with Bill Freehan and Lou Brock.
Most of my reading was books on science and dinosaurs, or books on baseball. I was especially fond of a science book series called “Ask Me Why?”. I looked at maps plenty, and my favorite map was that of Italy, due to the shape of the country.
I recall watching the 1968 presidential election, and having my mother explain it to me. I also watched on TV the funeral procession for RFK, and I asked my grandmother, who then lived with us, why the police guards were not moving. “If they move an inch, they take them out and shoot them!” she snapped back loudly and decisively. In those days, people said things like that.
My kindgarten teacher we called “Mrs. Penguin,” though I doubt that was her real name. She would twist the ears of kids who made trouble, though that was not me. I had a letter box, but it bored me because my reading skills were ahead of those of my classmates. There was a girl named Stephanie in my class, and I thought she was cute. School simply did not seem like a very efficient way to learn.
In my hazy memories, I very much think of the Fall River days as good ones.
My podcast with Jack Roycroft
“AI, Philosophy, Climate Change & Bitcoin” Here are Jack’s other podcasts, mostly with economists.
Might we end up with a modest stagflation?
CPI inflation has come in at three percent, and there are signs of vulnerability in labor markets, as I discuss in my latest Bloomberg column:
What about unemployment? There is a general consensus that the labor market has stayed broadly stable, but hiring is slowing down and people are less likely to quit their jobs. The overall situation appears more vulnerable. Meanwhile, the global geopolitical order is fraying, and the current policy uncertainty may damage the prospects for domestic investment. While I am optimistic about the economic prospects for artificial intelligence, progress could be bumpy rather than smooth.
If you accept the notion that inflation is more likely to rise than fall, and that the labor market is more likely to worsen than improve, then the chances for a modest stagflation are reasonably high.
I believe also that the rate-cutting decision of December 2024 likely was a mistake.
Thursday assorted links
1. Ireland seems to be relaxing its regulations on modular homes.
2. AI assistance can enhance rather than hinder skills development.
3. The zero-electricity Indian restaurant. Here is their home page.
5. Donald Shoup obituary (NYT).
6. NYC congestion pricing may not be disappearing after all (NYT).
What should I ask Ezra Klein?
Yes I will be doing a podcast with him. And he has a new and very good book coming out with Derek Thompson, namely Abundance. So what should I ask him?
My excellent Conversation with Gregory Clark
Here is the audio, video, and transcript. Here is the episode summary:
How much of your life’s trajectory was set in motion centuries ago? Gregory Clark has spent decades studying social mobility, and his findings suggest that where you land in society is far more predictable than we like to think. Using historical data, surname analysis, and migration patterns, Clark argues that social mobility rates have remained largely unchanged for 300 years—even across radically different political and economic systems.
He and Tyler discuss why we should care about relative mobility vs growing the size of the pie, how physical mobility does and doesn’t matter, why England was a meritocracy by 1700, how assortative mating affects economic and social progress, why India industrialized so late, a new potential explanation why Britain’s economic performance has been lukewarm since WWI, Malthusian societies then and now, whether a “hereditarian” stance favors large-scale redistribution or a free-market approach, the dynamics of assimilation within Europe and the role of negative selection in certain migrations, the challenge of accurately measuring living standards, the neighborhood-versus-family debate over what drives mobility, whether we need datasets larger than humanity itself to decode the genetics of social outcomes, and much more.
Here is one of many interesting excerpts:
COWEN: How do you think about the social returns to more or less assortative mating? Say in the United States — do we have too much of it, too little of it? If we had more of it, you’d have, say, very smart or determined people marrying those like them, and you might end up with more innovation from their children and grandchildren. But you might also be messing with what you would call the epistemic quality of the median voter. There’s this trade-off. How do you think about that? What side of the margin are we at?
CLARK: Assortative mating turns out to be a fascinating phenomenon, and in this new book, we actually have records of 1.7 million marriages in England from 1837 until now. What is astonishing in England is the degree to which people end up assorting in marriage so that basically, they’re matching with people that are as close to them, essentially genetically, as their siblings in marriage. It’s really interesting because people could mate in any way.
You could think I want the tallest person, the handsomest person, the youngest person, but for some reason, consistently, people seem to want to match to people who are close in social status. Now that doesn’t affect anything about the average level of ability in a society, but if it’s consistently followed over generations, it will widen the distribution of ability.
COWEN: Yes, and are we doing too much of that or too little of it in the United States?
CLARK: It depends what your view is. If you think that the engine of high-tech society now, like the United States, is the top 1 percent or 5 percent of the ability distribution, then you would say the more assortative is mating, the more people will be in that extreme and the greater will be economic growth.
In the new book, I actually speculate about, was assortative mating in Northern Europe a discovery of the late Middle Ages that actually then helped propel things like the Scientific Revolution, the Enlightenment, the Industrial Revolution, because as I say, it’s a remarkably constant feature of British society.
We can only trace it back to about 1750, the actual degree of assortativeness. So, in that sense, you can’t have too much if that’s your view about how society operates.
COWEN: At least we could have more of it. There might be some margin where you’d have too much.
CLARK: But it does produce more inequality, so if you’re worried about inequality in society, you don’t want assortative mating. The one way to correct a lot of inequality would just be to have much more random matching.
One of the remarkable things about Denmark is, education is essentially free until you’re age 24. They give you subsidies for your living expenses, for childcare provision — it’s all available. They’ve compressed the income distribution quite sharply.
There is this periodic survey of how well students do, the PISA measures. Nordic countries have not reduced the inequality of PISA measures compared to much more unequal societies like the United States. Again, it’s just interesting that a high degree of inequality is still found within these societies. It turns out that in Nordic societies, people are mating again very strongly assortatively even now. That is the thing that you would worry more about, that there is going to be this trade-off between assortative mating and the degree of inequality in a society.
Stimulating throughout, with lots of debate.
Wednesday assorted links
1. Plane crashes are still on a downward trend.
2. 2015 Matt Yglesias on whether American democracy is doomed.
3. 3.1%.
4. Does technology do more to help submarine tracking or submarine autonomy?
6. The actual budget news: House Republicans reluctant to cut Medicaid. And does the bond market believe in DOGE?
7. It seems China has passed peak fuel consumption!? (Bloomberg)
8. Germany’s trains are less punctual than Britain’s (FT).
9. Are the independent agencies still independent? I agree with Matt: “My guess is that in the long run, bringing independent agencies more closely under presidential control is going to make policy outcomes more left-wing.”
50 Takes from Kevin Bryan
A very good list from Kevin Bryan. 49 out of 50 correct, excellent ratio.
1) Ukrainians are heroes who suffered a ton.
2) Putin obviously covets Georgia and the Baltics also.
3) EU not in talks because they basically have no hard power; France even lost the Sahel.
4) The far right European parties are bad.
5) Pretending parties that win state and EU elections, and are in govt in NL and AT and IT, aren’t legitimate will not end well.
6) And in fact EU & UK speech laws not on side of liberty.
7) (but EU food and kid culture is better!)
8) Europe’s demographic crisis is really severe; not sure what the solution is.
9) Engineer training esp in France, Italy, Switz is excellent.
10) That talent should produce better econ outcomes, so econ policy must be dreadful.
11) Trump clearly doesn’t value democracy.
12) Most of his actual actions are much milder than his words.
12) Would be a disaster if that changed.
13) Censorious right wing culture will cause backlash just like woke culture did (put another way, 90s civic culture was better!)
14) Decline in trust in universities, media, and public health was our own fault.
15) Broader ideological diversity would be a huge improvement.
16) “Smart people in private sector” are much more ideologically diverse.
16) Canada has resources and good demographics so future is strong.
17) But culture based on “we aren’t US” is a dead end.
18) CA attitude to US like Calif attitude towards Texas: many stereotypes, little knowledge, and getting crushed on growth.
19) Most Middle East problems easy to solve but populace even crazier than leaders.
20) With exception of Iran, who would be great ally of West based only on median “voter”.
21) Dubai isn’t somewhere I’d live, but economically it is most fascinating success of recent decades.
22) Future of India very bright – English, young, educated, democratic, globally focused, successful expats.
23) Bangladesh as well.
24) Pakistan has problems that are very hard to fix, though Hunza is prettiest place in the world.
25) China underrated: the growth is actually staggering and tech leapfrogging in many areas is clear.
26) Chinese universities getting very strong, many foreign students from dev world.
27) But society way more closed than when I worked there 20 yrs ago, HK stolen, Taiwan?
28) Korea and Japan are delightful, but what will happen to countries who lose 20% of population in a generation?
29) Vietnam and Indonesia are very interesting going forward, esp former, as important powers.
30) Australia as well: resources and culture.
31) The future is African: tautology based on demographics.
32) The Sahel can easily get much much worse.
33) As can Central Africa, largely because of Kagame.
34) Ethiopia, Kenya, Nigeria, Ghana, Bénin as growth miracles seems possible, though.
35) Latin America is joyous and way underappreciated for cultural interest.
36) But highly polarized Presidential systems make it so hard to improve.
37) And the educational underperformance is a real barrier to growth.
38) US is clearly economic engine of world, and more so now than 10 years ago, and you are deluded to think otherwise.
39) Why? Energy costs and tech sector, esp AI, plus growing pop of high grit immigrants. Have to get these right.
40) Avg US govt quality is not good but generally it doesn’t try to do very much, which makes it less of a problem.
41) But it isn’t filled with fraud – it is almost all old age transfers and military and interest.
42) More federalism, weaker courts would be better (this is Canada’s secret – federal courts don’t matter).
43) More transfers to young would be better: preK, service opps, parental leave, guaranteed vacation.
44) That said, US policy directionally right, and Germany has more to learn economically from Texas than vice versa (let people build, keep energy cheap).
45) Still, institutions matter, and hard to rebuild once destroyed.
46) EU = no war in W Eur for 80 years = it is good.
47) NATO, UN, World Bank have flaws, but they are so cheap and global stability so rare historically that they are good.
48) Greenland in CoFA, free labor movement with Canada and US: both good, made harder by DT rhetoric.
49) Shame is useful to keep public servants and regular Joes on straight and narrow path.
50) But at the end of day, success more important than words. Strong countries and societies and global orders are not build on words & soft power, but on growing liberty & prosperity.
Baudrillard on AI
If men create intelligent machines, or fantasize about them, it is either because they secretly despair of their own intelligence or because they are in danger of succumbing to the weight of a monstrous and useless intelligence which they seek to exorcize by transferring it to machines, where they can play with it and make fun of it. By entrusting this burdensome intelligence to machines we are released from any responsibility to knowledge, much as entrusting power to politicians allows us to disdain any aspiration of our own to power.
If men dream of machines that are unique, that are endowed with genius, it is because they despair of their own uniqueness, or because they prefer to do without it – to enjoy it by proxy, so to speak, thanks to machines. What such machines offer is the spectacle of thought, and in manipulating them people devote themselves more to the spectacle of thought than to thought itself.
Jean Baudrillard – The Transparency of Evil_ Essays on Extreme Phenomena (Radical Thinkers)-Verso.
For the pointer I thank Petr.
*Steven Weinberg: A Life in Physics*
A fun book, I enjoyed the read. Here is one bit:
There is another contribution to my productivity. While sitting at my desk at home doing physics or preparing classes, or doing some science writing, I picked up the habit of watching classic movies or the History Channel on television. My TV is always turned on in its corner of my desk. Doing the two things at once doubles the value of my time. And the movie keeps ne gnawing at a problem in physics when I might otherwise have knocked back my chair and decamped in frustration.
And:
At this time, Louise [his wife] literally saved my life. Through my friendship with Bernie Feld, I found myself welcome at, and attending, international meetings of various experts on the problems of the international order. Louise understood the situation better than I did. She advised me to have nothing further to do with Bernie’s world, if I wanted to get anything done in physics. She made me see that this was a world of disheartened older men giving themselves something important-looking to do, but that I was an optimistic young man with real work to do. I do not exaggerate when I confess that she saved my life.
You can order it here.