What explains variation in humor? Are there any good theoretical or empirical papers on this.

MARKET POWER IS POWER New working paper with @bartonelee2 Thread below! 1/5 gratton.org/papers/MarketPow…

Making a list of a hundred papers in economics which fill me with wonder, joy, and excitement. Your suggestions are urgently solicited, my memory is not infallible and I'd like to make this really good. docs.google.com/document/d/1…

94% of Britain's MPs are on Twitter - I've made a website so you can explore who they follow. 🔍Search for any username and see which MPs follow them. 🏅There's also a leaderboard so you can see who has the ear of Westminster Link here: site.mpfollowers.workers.dev…

Hey @grok, what are my worst takes ?

bit.ly/substackrec This is very cool

Who cares vibecoding is fun (link below)

Over the years, I have actively participated in the economic policy debate in Spanish and written a fair amount on the topic (including many papers and several books!). Some of these issues go beyond purely local interest and are relevant, with only minor changes, for other countries in Western Europe and Latin America. I have always wanted to translate some of this work into English (if only to reach a wider audience), but until recently the cost was prohibitive. Thanks to AI, that cost has now fallen by roughly two orders of magnitude. Yesterday, I circulated a short policy paper I wrote over the Winter Break in Spanish arguing that it is far more useful to think about the sustainability of pay-as-you-go social security systems in terms of their internal rate of return (IRR) than to focus on cash flows, as much of the debate tends to do. The paper went viral, and several non-Spanish economists expressed interest. This morning, I translated it into English with the help of AI and made some light adaptations. I did not spend a great deal of time polishing every detail, but I think it is still well worth reading: sas.upenn.edu/~jesusfv/Pensi… The punchline will not be new to anyone who has read Samuelson’s (1958) classic paper, but it bears repeating. The key to the sustainability of a pay-as-you-go social security system is that the IRR received by participants must equal the growth rate of the system’s revenues. Once you think in these terms, almost everything else becomes secondary. Lower fertility simply implies a lower growth rate of revenues. Along the same lines, higher wages do not necessarily help the system if the IRR is already too high. In fact, they can make things worse, because an excessive IRR is then paid over a larger base. Somewhat surprisingly, when I explained this point to several excellent economists, many told me they had never thought about it this way. What actually helps a pay-as-you-go system is faster wage growth, because it raises the growth rate of revenues. It is all about the derivative, not the level. The effects of immigration are also much more nuanced than is often assumed. If the IRR is too high, bringing in additional immigrants may worsen the system’s present discounted balance, even if it improves the current cash-flow position. As always, comments are welcome. I may write something longer in the future, and I would welcome any suggestions. P.S. I write differently in Spanish than in English. Do not be surprised if the paper reads somewhat differently from my work originally written in English. Personally, I think I write much better in Spanish, but that style does not always translate cleanly.

Over the holiday break, I finished a first draft of a paper that has been on my mind for a long time: “How Globalization Unravels: A Ricardian Model of Endogenous Trade Policy.” I have just posted it on my webpage: sas.upenn.edu/~jesusfv/How_G… I wrote it with two terrific coauthors, Tomohide Mineyama and Dongho Song. The idea is simple. Trade generates large aggregate gains but does not distribute them evenly. In the U.S., import competition has hit some places and workers hard. Over the same decades, the politics of trade have shifted. Support for openness has eroded, and tariffs have returned. The question is not whether trade raises total income; it does. The question is how uneven gains from globalization translate into a political demand for protection in equilibrium. The evidence we compile points to two channels. First, voters. People in regions more exposed to import competition are more likely to oppose globalization. The effect is strongest among households with little financial wealth. Labor income falls when a sector is under pressure. If you also have few assets, you cannot cushion the import shock. Second, firms. Companies in trade-exposed industries respond to import shocks by sharply increasing lobbying expenditures. These outlays dwarf campaign contributions. We build a dynamic general equilibrium model that integrates these facts. The framework is Ricardian. Two countries: the U.S. and China. Many sectors are linked through input–output networks. Households differ in income and wealth. Trade policy responds endogenously to voting and lobbying. Households vote on openness versus protection based on their own gains from trade, with losses potentially weighted more heavily than gains. Sectors lobby for tariffs even when trade raises aggregate welfare. The key is that production is a network (see the pic in this post with several simple examples). A tariff in one sector changes costs in others and shifts incentives elsewhere. One tariff makes the next more attractive. Lobbying becomes mutually reinforcing. Protection can sustain itself as an equilibrium outcome. Differences matter in two ways. Across sectors, factor incomes respond to import competition, as in classical trade theory. Within sectors, wealth differences shape how the same price and wage shifts translate into welfare. Financial wealth sits in global assets that allow households to smooth consumption over time. When returns move, political support moves with them. And because the world is integrated, shocks abroad feed back into asset returns at home. We calibrate the model using sectoral data for the U.S. and China from 1991 to 2019. It matches key aggregate trends in consumption and trade, as well as the rise in inequality. The model predicts broad support for globalization in the U.S. during the 1990s, but much thinner support by 2019, as China becomes more productive and captures a large share of sales across many sectors. Although the U.S. continues to gain from trade in the aggregate, the distribution of gains becomes highly dispersed, even bimodal, with a small group experiencing large losses. These losses extend beyond tradable sectors, as shocks propagate through the input–output network to nontradables. As a result, protection rises endogenously in the model, without appealing to ideology, through the interaction of incomes, wealth, and production networks. Or, as someone else put it, “The mode of production of material life conditions the general process of social, political, and intellectual life.” Robustness checks do not overturn the finding. Cross-sector counter-lobbying largely offsets it, leaving the results similar. Allowing for factor mobility across sectors changes little for voting outcomes. In the end, politics follows the distribution. And the distribution follows the network.

Can AI "learn" economic states, addressing the Lucas Critique? With @alexolegimas we simulated data from an NK model, fit a transformer, and tested out of sample fit It generalizes surprisingly well. We hope this stimulates discussion and future agendas arpitrage.substack.com/p/can…

has anyone written down an endogenous growth model with an auction for attention?

I disagree. We are poor judges of what is "politically feasible." If we never say what the promised land looks like -- consumption taxes, say -- and content ourselves with fiddling with what we think is "politically feasible," then we shall surely never get there. The 8 hour day, nationalized health, social security, were "infeasible" dreams of the left in the 1900s. Look how far they got by ignoring "feasible." Gay marriage was "infeasible" until the day it happened. Who would ever dream that Argentina would elect a libertarian president? No, economists should at least occasionally advocate what is actually right, what advances the goals that in fact we all share, widespread prosperity and opportunity, whether "feasible" or consistent with today's parties' electoral programs or not.

I want to answer this, because the dark abundance stuff leaves me cold even though I agree with some of the policy prescriptions. Our prisons are terrible, terrible places where there is immense and unnecessary human suffering. In prison people are subject to random violence and the constant threat of violence, including gang violence and racial violence. They are subject to sexual assault. They often don't get adequate healthcare. They are often badly mistreated and have few avenues of recourse. Some of them are innocent; most of them are guilty, and still, they did not deserve to spend decades under the constant threat of violence and sexual assault because no human being deserves that. When you sentence someone to prison, by some estimates you take away from them twice as many years as prison sentenced them to, because that's how much incarceration decreases life expectancy. The system is capricious. The system is remarkably dumb. A lot of judges openly ignore laws they don't like and they often get away with it. A lot of the people in our prisons are to varying degrees intellectually disabled or severely mentally ill and do not even understand all of the things that our system is implacably doing to them because they broke rules they didn't actually understand how to follow. And institutionalization! Christ, people on here call for institutionalization as if it's where they cure you rather than where, with even less due process than is offered by the justice system, a differently chaotic and sometimes well-meaning and always incomprehensible system can force people to take medications that change their bodies and minds often in ways that make life a living hell (and of course prevent anyone from killing themselves over it). People are also constantly subject to violence and rape in mental institutions. They may be less bad than the alternatives, sometimes, but they are an awful awful solution and whenever I propose that anyone be sent there I remember that I have heard friends who know what it's like testify they would rather be dead. I think that we should have more police, solve more crimes, and send people who repeatedly commit crimes to prison for much longer. But I believe this while believing that all of this suffering is real, and horrifying, and destroying an enormous number of lives. I don't feel cool and based about saying we should send some people to prison for longer. I feel sick. I do not believe that we can have any of the other goods of a free, safe society if we repeatedly release people who cannot safely participate in society and have been duly convicted of acts of severe violence onto our streets. But I am not proud of this system. I do not think it is cool or good. I find the mindset of the prison abolitionists basically comprehensible - it is a refusal to participate in any state-sanctioned decades of torture, hang the consequences - and the mindset of the people who meme about how many jails we should build is one which I have not the slightest interest in cultivating. Of course I see why people cultivate it. If it must be done, then it is much easier to believe it's not that bad, and if the people standing in the way are weepy scolds, then one can differentiate oneself from the weepy scolds by being based. But I guess I think it's a road to Hell. We have to do hard things, but we don't have to hide from our eyes what they really are, or pretend they're all right, and it's not actually a virtue not to blink at them. I want to build a ton of prisons. My understanding of the research is that small prisons where inmates know each other by name are less violent than large prisoners where they go off visual identifiers (predominantly race), and that prisons close to peoples' homes make their families more likely to visit and help with reintegration. I want cash transfers for newly-released prisoners to help them get on their feet and get a job and have a real shot at not breaking a parole condition and ending up right where they started. I want it to be possible to order anything on a large whitelist from Amazon and Walmart to prison at cost, instead of commissaries that can charge much higher rates. I want prisoners to have internet access and lots of contact with their loved ones. I want prisoners to have xboxes, honestly, because it'll reduce violence in prison if they're less miserably bored. I want to hire more cops. I want to solve more crimes. I want to hold people without bail if they are a safety risk or a flight risk. And I want to send people who have repeatedly committing crimes to prison for much much longer, because I think the alternatives are even worse. But God help me I am never going to think this is cool, or funny, or anything other than awful. Dark abundance? No. This is the aching absence of abundance, this is the horrifically painful triage of a society that does not have enough resources to do what is good and can only scrape by blundering towards what is least bad. May our children do better, and struggle to comprehend us.

dsausa.org/dsa-political-pla… What the actual fuck. Like. What???

…abolishing USAID is in the DSA platform

I have a very simple heuristic for technology-based social change explanations. They are wrong unless they can give account of why similar divergences happened before in the absence of the same technology.