Thursday assorted links
2. Does AI mean the demands on labor go up?
3. This obituary has plenty of interesting information about South Africa’s nuclear program (NYT).
4. Mercatus 1991 fellowship on state-level Indian economic policy.
5. Legal framework for crypto is hitting some snags (NYT).
6. “I find that parental transfers account for 13 percentage points (27%) of young households’ homeownership…Finally, I show that children of wealthy parents strategically use the illiquidity of housing as a commitment device to encourage transfers, resulting in a preference for illiquidity.” Link here.
China’s supply chain problems
They exist in manufacturing too, and perhaps this should help you feel a little better about American problems:
A January 2024 report on China’s wind power sector by researchers at Tsinghua University found that it remained heavily dependent on imports for crucial parts — including 60 per cent of the bearings that support their rotors, 70 per cent of the transistor modules used to convert power into grid-compliant electric current, and 100 per cent of logic modules used to control turbines in real time…
Consider lithium, cobalt, and manganese, three minerals used heavily in electric car btteries. The Chinese shares of global refining for these materials is overwhelming…But far smaller amounts of the raw materials come from mines in China – just 22 per cent, 3 percent and 4 per cent, respectively.
That is from Simon Mundy at the FT.
AI Physicians At Last
In 2004 (!) I wrote:
Many people complain that medicine is too impersonal. I think it is not impersonal enough. I have nothing against my physician (a local magazine says he is one of the best in the area) but I would prefer to be diagnosed by a computer. A typical physician spends most of the day playing twenty questions. Where does it hurt? Do you have a cough? How high is the patient’s blood pressure? But an expert system can play twenty questions better than most people. An expert system can use the best knowledge in the field, it can stay current with the journals, and it never forgets.
It took longer than it should have, but we are finally here. Today, most people already use AI to help diagnose and manage medical conditions, and now:
Utah is letting artificial intelligence — not a doctor — renew certain medical prescriptions. No human involved.
It’s a pilot program for routine renewals but a welcome start. The AMA, of course, is not pleased.
In a statement, Dr. John Whyte, CEO and executive vice president at the American Medical Association, said: “While AI has limitless opportunity to transform medicine for the better, without physician input it also poses serious risks to patients and physicians alike.”
One concern is misuse or abuse, including the possibility that people struggling with addiction could try to game automated systems to obtain drugs inappropriately. Another concern is missing subtle clinical red flags or drug interactions that a doctor would catch.
It’s amazing that anyone can say these things with a straight face. As far as I know, AI has never run a pill mill, unlike human physicians. And the AI
“missing subtle clinical red flags or drug interactions that a doctor would catch.” Is this a joke?
Not as good as Cowen-Tabarrok
Russia is preparing a new economics textbook for university students that aims to challenge what its authors call a “myth” that democracy drives economic growth and to revive the socialist economic theories of Soviet leader Josef Stalin, the head of a Kremlin-linked advisory body said.
Moscow has ramped up efforts to enforce its view of history and global politics in schools since launching its full-scale invasion of Ukraine in 2022, introducing mandatory patriotic classes and rewriting history curricula to align with the Kremlin’s wartime narratives.
Valery Fadeyev, chairman of Russia’s presidential human rights council, told the RBC news website that he is leading work on the textbook, which could be introduced as early as the next academic year for students of sociology, political science and history.
The 350-400-page book, tentatively titled “Essays on Economics and Economic Science,” is intended to present a broader view of economic development than mainstream liberal theory, Fadeyev said.
Here is the full story, via Frank W. The Kyiv School of Economics it ain’t…
Thomas Sargent is a wise man
The protests began on December 28, initially led by traders and business owners who took to the streets against the rapidly weakening economy, soaring inflation, and the sharp fall in the rial’s value. The currency’s decline has been dramatic: against the Indian rupee, the rial is now valued at just 0.000091 paise, while against the US dollar it has fallen to around 0.0000010 cents.
Most strikingly, the rial’s value against the euro has dropped to zero, meaning it is no longer accepted or exchangeable in any of the 27 European Union countries.
Five Key Drivers Behind the Rial’s Freefall
- US and International Sanctions: Restricting access to dollars from exports, especially oil, has intensified pressure on the rial.
- Hyperinflation: Consumer prices rose by 42.5% in December 2025, forcing citizens to seek foreign currencies, gold, or essentials instead of holding cash.
- Weak Economic Growth: Iran’s GDP contracted by 1.7% in 2025, with further shrinkage projected in 2026, limiting government revenue and fiscal stability.
- Policy Changes: Recent reforms requiring importers to purchase foreign currency at open-market rates increased demand for dollars overnight.
- Political Unrest: Ongoing protests against clerical leadership and economic mismanagement have added a “risk premium,” accelerating currency depreciation.
Here is the full story. And that was before what appears to be, as I am writing this post earlier in the evening, the air attack on Iran [now called off, for the time being at least].
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.