Consumers vs. mates as a source of selection pressure
Tyler Cowen
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.The post Consumers vs. mates as a source of selection pressure appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
via Marginal Revolution https://bit.ly/40HES6E
Tyler Cowen
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.The post Consumers vs. mates as a source of selection pressure appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
via Marginal Revolution https://bit.ly/40HES6E
South African safari photo by Holly Cowen
Tyler Cowen
MediaThe post South African safari photo by Holly Cowen appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesRich Elliott on Cape Town (from my email)South Africa fact of the dayThe alternate book universe that is South Africa
via Marginal Revolution https://bit.ly/4t1Uq1c
Tyler Cowen
MediaThe post South African safari photo by Holly Cowen appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesRich Elliott on Cape Town (from my email)South Africa fact of the dayThe alternate book universe that is South Africa
via Marginal Revolution https://bit.ly/4t1Uq1c
A Danish Fix for U.S. Mortgage Lock-in
Alex Tabarrok
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. The post A Danish Fix for U.S. Mortgage Lock-in appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesIs AI currently helping economic research?University of Chicago fact of the day*Recession*, by Tyler Goodspeed
via Marginal Revolution https://bit.ly/47WU8Ah
Alex Tabarrok
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. The post A Danish Fix for U.S. Mortgage Lock-in appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesIs AI currently helping economic research?University of Chicago fact of the day*Recession*, by Tyler Goodspeed
via Marginal Revolution https://bit.ly/47WU8Ah
Chuck Norris, RIP
Tyler Cowen
The post Chuck Norris, RIP appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesOn the meaning of Sirāt (with plenty of spoilers)*Sirāt*
via Marginal Revolution https://bit.ly/4uWj3hw
Tyler Cowen
The post Chuck Norris, RIP appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesOn the meaning of Sirāt (with plenty of spoilers)*Sirāt*
via Marginal Revolution https://bit.ly/4uWj3hw
Friday assorted links
Tyler Cowen
1. Using LLMs to study deregulation.2. New edition of On Liberty now lists Harriet Taylor as co-author.3. The popularity of AI writing (NYT).4. St Nicholas Cabasilas Institute For Orthodoxy & Liberty.5. Is proportional representation working in the Netherlands?6. Africa’s growth euphoria?7. Did Canadian happiness plummet?The post Friday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media Comments1. Shocker: positive shocks to deregulation maximize profits. by Anti-economist
via Marginal Revolution https://bit.ly/4sXPN8a
Tyler Cowen
1. Using LLMs to study deregulation.2. New edition of On Liberty now lists Harriet Taylor as co-author.3. The popularity of AI writing (NYT).4. St Nicholas Cabasilas Institute For Orthodoxy & Liberty.5. Is proportional representation working in the Netherlands?6. Africa’s growth euphoria?7. Did Canadian happiness plummet?The post Friday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media Comments1. Shocker: positive shocks to deregulation maximize profits. by Anti-economist
via Marginal Revolution https://bit.ly/4sXPN8a
Those new service sector jobs?
Tyler Cowen
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.The post Those new service sector jobs? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsLest we gain a distorted view of the service sector, please ... by BenHell, yes. I already do this for free. by BHThis is your thirty-fifth attempt to elicit an emotional ... by MikePRelated StoriesIs AI currently helping economic research?Some simple economics of AI?The AI arms race
via Marginal Revolution https://bit.ly/4rQfre5
Tyler Cowen
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.The post Those new service sector jobs? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsLest we gain a distorted view of the service sector, please ... by BenHell, yes. I already do this for free. by BHThis is your thirty-fifth attempt to elicit an emotional ... by MikePRelated StoriesIs AI currently helping economic research?Some simple economics of AI?The AI arms race
via Marginal Revolution https://bit.ly/4rQfre5
Canada facts of the decade
Tyler Cowen
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.The post Canada facts of the decade appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsThe linked piece is not bad. Voting by the feet! Nobody is ... by Dismalist
via Marginal Revolution https://bit.ly/4rLJPGm
Tyler Cowen
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.The post Canada facts of the decade appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsThe linked piece is not bad. Voting by the feet! Nobody is ... by Dismalist
via Marginal Revolution https://bit.ly/4rLJPGm
More on the David Lang opera version of Wealth of Nations
Tyler Cowen
In 18 parts, Lang explores some of Smith’s central themes, including one of the book’s most famous passages, where Smith uses a wool coat worn by a very poor Scottish worker as a way to examine trade. “He asks, ‘Did you ever think of how many people need to be employed in order to make that coat?’” says Lang, whose movement “the woolen coat” names all the artisans and laborers who contributed to the garment in song:the shepherd
the sorter of the wool
the wool-comber or carder
the dyer
the spinner
the weaver
the fullerThere are also the workers on the ship that brought in the dye and all the people who built the ship. An ordinary coat is revealed to be a kind of miracle of skilled labor and global collaboration, the product of “many thousands” of workers coming together in (selfish) harmony. Part of me wanted to run out of the theater right then and buy something … perhaps a coat… for America.Here is more from Bloomberg, via John De Palma. The opera seems to be ultimately a rather gloomy view of the book?The post More on the David Lang opera version of Wealth of Nations appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesA Danish Fix for U.S. Mortgage Lock-inIs AI currently helping economic research?University of Chicago fact of the day
via Marginal Revolution https://bit.ly/4dzUwIA
Tyler Cowen
In 18 parts, Lang explores some of Smith’s central themes, including one of the book’s most famous passages, where Smith uses a wool coat worn by a very poor Scottish worker as a way to examine trade. “He asks, ‘Did you ever think of how many people need to be employed in order to make that coat?’” says Lang, whose movement “the woolen coat” names all the artisans and laborers who contributed to the garment in song:the shepherd
the sorter of the wool
the wool-comber or carder
the dyer
the spinner
the weaver
the fullerThere are also the workers on the ship that brought in the dye and all the people who built the ship. An ordinary coat is revealed to be a kind of miracle of skilled labor and global collaboration, the product of “many thousands” of workers coming together in (selfish) harmony. Part of me wanted to run out of the theater right then and buy something … perhaps a coat… for America.Here is more from Bloomberg, via John De Palma. The opera seems to be ultimately a rather gloomy view of the book?The post More on the David Lang opera version of Wealth of Nations appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesA Danish Fix for U.S. Mortgage Lock-inIs AI currently helping economic research?University of Chicago fact of the day
via Marginal Revolution https://bit.ly/4dzUwIA
Saturday assorted links
Tyler Cowen
1. Canada [Sikh] fact of the day.2. Is the world entering a new “missile age”?3. Karp tells the story of Habermas rejecting Karp.4. David Botstein, RIP (NYT).5. Appreciation of Trivers.6. Seb Krier.7. Shruti on RefineInk.The post Saturday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsThe drones are scaring the hell out of me. Doesn't seem it ... by RussellIn reply to Naveen_K. walk in Punjab* by NKYou cannot go in Punjab, or even many parts of rural Punjab, ... by Naveen_K#3 If Habermas understood Karp more, he'd have rejected him ... by Bob
via Marginal Revolution https://bit.ly/4bWiT1T
Tyler Cowen
1. Canada [Sikh] fact of the day.2. Is the world entering a new “missile age”?3. Karp tells the story of Habermas rejecting Karp.4. David Botstein, RIP (NYT).5. Appreciation of Trivers.6. Seb Krier.7. Shruti on RefineInk.The post Saturday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsThe drones are scaring the hell out of me. Doesn't seem it ... by RussellIn reply to Naveen_K. walk in Punjab* by NKYou cannot go in Punjab, or even many parts of rural Punjab, ... by Naveen_K#3 If Habermas understood Karp more, he'd have rejected him ... by Bob
via Marginal Revolution https://bit.ly/4bWiT1T
Little Darlin’
Tyler Cowen
By The Diamonds. The video is not what I was expecting.The post Little Darlin’ appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesMore on the David Lang opera version of Wealth of NationsRecent recordings of “big symphonies”Country Joe McDonald, RIP
via Marginal Revolution https://bit.ly/4uJPKP0
Tyler Cowen
By The Diamonds. The video is not what I was expecting.The post Little Darlin’ appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesMore on the David Lang opera version of Wealth of NationsRecent recordings of “big symphonies”Country Joe McDonald, RIP
via Marginal Revolution https://bit.ly/4uJPKP0
How much more will oil prices have to go up?
Tyler Cowen
[Robin] Brooks: So let me give you two ways of thinking about what’s going on, both of them are really about trying to think about what kind of risk premia need to be priced in oil, given all the massive uncertainty that we have. The first way that I’ve been thinking about this is—I spent a lot of time working on Ukraine and Russia and sanctions after the invasion four years ago. Russia produces about 10 million barrels of oil per day. It exports, of that, about 7 million barrels of oil per day. The Strait of Hormuz has transit of about 20 million barrels of oil per day. So the Strait of Hormuz is roughly 3 times what Russia could have been. And remember, in the days right after the invasion, markets were really worried about Russian oil being embargoed. There was a whole discussion about that. So the rise in Brent, which is the global benchmark oil price, is about 70% from two weeks before the outbreak of war in the Gulf to now. On a similar time horizon back in ‘22, it was 20%. So we have roughly a 3X in terms of the rise in oil prices. So when people come to me and say “$150 or $200 for oil prices” and we’re currently at $115, roughly, then I think, “why, what’s the rationale?”The second perspective is on the supply shortfall that we have and using price elasticity of demand to think about: “how much does the price need to rise if demand has to do all the adjusting in the short term,” which it does. And “what kind of numbers do we come up with if we make reasonable assumptions?” So I put out a Substack note today—thank you so much for reading my Substack, I’m incredibly flattered and stressed as a result— if you assume that the Strait of Hormuz goes from 20 million barrels of oil per day to 10, it’s basically oil from the Gulf is running at half of its normal capacity, and you assume a price elasticity sort of in the middle of the range that the academic literature has, which is about 0.15, then you get that this would generate a rise in oil prices of between 60 and 70%. So again, if I think about what we’re pricing in markets now versus what basic back-of-the-envelope-calculations tell you, then I think we’re roughly in the right ballpark.That is from his interview with Paul Krugman. Via Luis Garicano.The post How much more will oil prices have to go up? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesMore on the David Lang opera version of Wealth of NationsA Danish Fix for U.S. Mortgage Lock-inIs AI currently helping economic research?
via Marginal Revolution https://bit.ly/4bUVlup
Tyler Cowen
[Robin] Brooks: So let me give you two ways of thinking about what’s going on, both of them are really about trying to think about what kind of risk premia need to be priced in oil, given all the massive uncertainty that we have. The first way that I’ve been thinking about this is—I spent a lot of time working on Ukraine and Russia and sanctions after the invasion four years ago. Russia produces about 10 million barrels of oil per day. It exports, of that, about 7 million barrels of oil per day. The Strait of Hormuz has transit of about 20 million barrels of oil per day. So the Strait of Hormuz is roughly 3 times what Russia could have been. And remember, in the days right after the invasion, markets were really worried about Russian oil being embargoed. There was a whole discussion about that. So the rise in Brent, which is the global benchmark oil price, is about 70% from two weeks before the outbreak of war in the Gulf to now. On a similar time horizon back in ‘22, it was 20%. So we have roughly a 3X in terms of the rise in oil prices. So when people come to me and say “$150 or $200 for oil prices” and we’re currently at $115, roughly, then I think, “why, what’s the rationale?”The second perspective is on the supply shortfall that we have and using price elasticity of demand to think about: “how much does the price need to rise if demand has to do all the adjusting in the short term,” which it does. And “what kind of numbers do we come up with if we make reasonable assumptions?” So I put out a Substack note today—thank you so much for reading my Substack, I’m incredibly flattered and stressed as a result— if you assume that the Strait of Hormuz goes from 20 million barrels of oil per day to 10, it’s basically oil from the Gulf is running at half of its normal capacity, and you assume a price elasticity sort of in the middle of the range that the academic literature has, which is about 0.15, then you get that this would generate a rise in oil prices of between 60 and 70%. So again, if I think about what we’re pricing in markets now versus what basic back-of-the-envelope-calculations tell you, then I think we’re roughly in the right ballpark.That is from his interview with Paul Krugman. Via Luis Garicano.The post How much more will oil prices have to go up? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesMore on the David Lang opera version of Wealth of NationsA Danish Fix for U.S. Mortgage Lock-inIs AI currently helping economic research?
via Marginal Revolution https://bit.ly/4bUVlup
Some more slow take-off, driven by start-ups
Tyler Cowen
So far, however, the predictions that the mass automation of coding will leave outsourcing firms obsolete seem overblown. Their clients often hope AI will create huge productivity gains by, for example, using the technology to quickly and cheaply build a new internal HR tool. But such improvements in productivity are only possible in “greenfield” environments with “clean architecture”, argues Atul Soneja, chief operating officer at Tech Mahindra, an IT firm. Deploying AI in “brownfield” environments—with legacy code, a lack of documentation and multiple systems that must all continue to operate in real time—is far trickier. In the end, clients often realise that their AI dreams were too ambitious and end up hiring as many outsourced coders as before, say executives.What is more, the AI boom may present an opportunity for the consultancy arms of India’s outsourcers. They argue that they can now fulfil more of a strategic role for their clients: getting the most out of AI requires understanding all of the context around the problem, something that consultants with experience across businesses can offer. Nandan Nilekani, one of the founders of Infosys, reckons that such services related to AI could be worth $300bn-400bn by 2030.Here is more from The Economist.The post Some more slow take-off, driven by start-ups appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesThose new service sector jobs?Is AI currently helping economic research?Some simple economics of AI?
via Marginal Revolution https://bit.ly/4t6ftjc
Tyler Cowen
So far, however, the predictions that the mass automation of coding will leave outsourcing firms obsolete seem overblown. Their clients often hope AI will create huge productivity gains by, for example, using the technology to quickly and cheaply build a new internal HR tool. But such improvements in productivity are only possible in “greenfield” environments with “clean architecture”, argues Atul Soneja, chief operating officer at Tech Mahindra, an IT firm. Deploying AI in “brownfield” environments—with legacy code, a lack of documentation and multiple systems that must all continue to operate in real time—is far trickier. In the end, clients often realise that their AI dreams were too ambitious and end up hiring as many outsourced coders as before, say executives.What is more, the AI boom may present an opportunity for the consultancy arms of India’s outsourcers. They argue that they can now fulfil more of a strategic role for their clients: getting the most out of AI requires understanding all of the context around the problem, something that consultants with experience across businesses can offer. Nandan Nilekani, one of the founders of Infosys, reckons that such services related to AI could be worth $300bn-400bn by 2030.Here is more from The Economist.The post Some more slow take-off, driven by start-ups appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesThose new service sector jobs?Is AI currently helping economic research?Some simple economics of AI?
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Sunday assorted links
Tyler Cowen
1. Quantum headaches, cubed.2. A 43-year coffee study.3. “Project Lazarus is an initiative to acquire and permanently preserve the full, unfiltered operational history of defunct or inactive companies at scale.”4. China and science.5. “Karpathy’s Autoresearch pushed my vibecoded Rust chess engine AI from “expert” to a top 50 grandmaster, a #311 chess engine.”6. Shin Hyun Song to run the Bank of Korea.The post Sunday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
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Tyler Cowen
1. Quantum headaches, cubed.2. A 43-year coffee study.3. “Project Lazarus is an initiative to acquire and permanently preserve the full, unfiltered operational history of defunct or inactive companies at scale.”4. China and science.5. “Karpathy’s Autoresearch pushed my vibecoded Rust chess engine AI from “expert” to a top 50 grandmaster, a #311 chess engine.”6. Shin Hyun Song to run the Bank of Korea.The post Sunday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
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Dwarkesh chats with Terence Tao
Tyler Cowen
The post Dwarkesh chats with Terence Tao appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesIs AI currently helping economic research?The AI arms raceSome more slow take-off, driven by start-ups
via Marginal Revolution https://bit.ly/4t7t8qd
Tyler Cowen
The post Dwarkesh chats with Terence Tao appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesIs AI currently helping economic research?The AI arms raceSome more slow take-off, driven by start-ups
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Paraguay trend of the day
Tyler Cowen
Lured by low taxes, entrepreneurs from across Latin America are plowing in money and taking up residence, with applications surging more than 60% in 2025. Sleek towers and luxury car dealerships now dot Asunción, a city where infrastructure is still struggling to catch up. And Wall Street investors are snapping up Paraguay’s bonds as its conservative president, Santiago Peña, aligns his government with the Trump administration.Though roughly the size of California, Paraguay’s $47 billion economy is about 1% of the Golden State’s. But rapid growth and economic reforms in recent years helped the country win investment-grade credit status from Moody’s Ratings in 2024 and from S&P Global last year.…Paraguay’s embrace of sound fiscal and monetary policies after its 2003 financial crisis is now paying off, with single-digit inflation and annual growth averaging around 4% over the past two decades.Here is more from Bloomberg, growth last year was six percent. Southern Cone remains underrated.The post Paraguay trend of the day appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesHow much more will oil prices have to go up?My excellent Conversation with Harvey MansfieldThe 21st Century ROAD to Housing Act
via Marginal Revolution https://bit.ly/3Nn9xTI
Tyler Cowen
Lured by low taxes, entrepreneurs from across Latin America are plowing in money and taking up residence, with applications surging more than 60% in 2025. Sleek towers and luxury car dealerships now dot Asunción, a city where infrastructure is still struggling to catch up. And Wall Street investors are snapping up Paraguay’s bonds as its conservative president, Santiago Peña, aligns his government with the Trump administration.Though roughly the size of California, Paraguay’s $47 billion economy is about 1% of the Golden State’s. But rapid growth and economic reforms in recent years helped the country win investment-grade credit status from Moody’s Ratings in 2024 and from S&P Global last year.…Paraguay’s embrace of sound fiscal and monetary policies after its 2003 financial crisis is now paying off, with single-digit inflation and annual growth averaging around 4% over the past two decades.Here is more from Bloomberg, growth last year was six percent. Southern Cone remains underrated.The post Paraguay trend of the day appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesHow much more will oil prices have to go up?My excellent Conversation with Harvey MansfieldThe 21st Century ROAD to Housing Act
via Marginal Revolution https://bit.ly/3Nn9xTI
When will “the research paper” disappear in economics?
Tyler Cowen
Soon enough you will be able to take any published research paper and tweak it, or improve it, any way you want. Just apply a dose of AI.Using Refine, you already can judge the quality of all past papers, once you get them in uploadable form. We now can rewrite the entire history of modern economics with the mere investment of tokens. Which papers in the 1993 AER were really the good ones? Which are simply false and do not replicate?Refine, or some service like it, will only get better, and cheaper.Do we even need the AER any more to certify which are the best papers? Just ask the AIs, including about influence not just quality.Why not write a program, or have an AI write it for you, that will take your favorite papers and improve them, and change their evaluations over time, as new results come in? Of course people will do this, at least to the extent they care. These papers will keep on morphing.Will economics become a branch of software engineering? There are important papers in software engineering, but very often the most important advances are embodied in actual software, AI included.Will the future advances in economics come from producing evaluative systems and producing systems, rather than papers?What if you submit to a journal a data set and some code? Who needs “the paper” per se? Just issue some commands to the “data set plus code” and get the paper you want. How about “I am Tyler Cowen, what is it you think I will find interesting in this data set?”Or publish a method for simulating human behavior, to run AI-simulated experimental economics, a’la Horton and Manning? Publish “the box,” and do not worry so much about the individual paper.Will highly productive researchers, who publish a lot of papers, become far less valuable? The individual paper no longer seems scarce, or will not be in another year or two.Give tenure to people who build capabilities and who build “boxes”?How about an economics Nobel Prize for Anthropic and Open AI?I thank Alex T. for useful discussions on this point.The post When will “the research paper” disappear in economics? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
via Marginal Revolution https://bit.ly/3NUWo4j
Tyler Cowen
Soon enough you will be able to take any published research paper and tweak it, or improve it, any way you want. Just apply a dose of AI.Using Refine, you already can judge the quality of all past papers, once you get them in uploadable form. We now can rewrite the entire history of modern economics with the mere investment of tokens. Which papers in the 1993 AER were really the good ones? Which are simply false and do not replicate?Refine, or some service like it, will only get better, and cheaper.Do we even need the AER any more to certify which are the best papers? Just ask the AIs, including about influence not just quality.Why not write a program, or have an AI write it for you, that will take your favorite papers and improve them, and change their evaluations over time, as new results come in? Of course people will do this, at least to the extent they care. These papers will keep on morphing.Will economics become a branch of software engineering? There are important papers in software engineering, but very often the most important advances are embodied in actual software, AI included.Will the future advances in economics come from producing evaluative systems and producing systems, rather than papers?What if you submit to a journal a data set and some code? Who needs “the paper” per se? Just issue some commands to the “data set plus code” and get the paper you want. How about “I am Tyler Cowen, what is it you think I will find interesting in this data set?”Or publish a method for simulating human behavior, to run AI-simulated experimental economics, a’la Horton and Manning? Publish “the box,” and do not worry so much about the individual paper.Will highly productive researchers, who publish a lot of papers, become far less valuable? The individual paper no longer seems scarce, or will not be in another year or two.Give tenure to people who build capabilities and who build “boxes”?How about an economics Nobel Prize for Anthropic and Open AI?I thank Alex T. for useful discussions on this point.The post When will “the research paper” disappear in economics? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media
via Marginal Revolution https://bit.ly/3NUWo4j
Monday assorted links
Tyler Cowen
1. Arbitrage?2. On Christopher Sims.3. Minimum wage hikes boost restaurant food prices.4. “These findings suggest that new work serves as a countervailing force to automation-driven job displacement not merely by creating additional employment, but also by generating new domains of human expertise that command market premiums.”5. Martin Heidegger clip. Not impressive to me.6. Canvas unrolls AI teaching agent.7. “This essay has tried to frame what we need to build around AI.“The post Monday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media Comments#3. Minimum wage hikes boost restaurant food prices. News not ... by MikeP
via Marginal Revolution https://bit.ly/4stN86b
Tyler Cowen
1. Arbitrage?2. On Christopher Sims.3. Minimum wage hikes boost restaurant food prices.4. “These findings suggest that new work serves as a countervailing force to automation-driven job displacement not merely by creating additional employment, but also by generating new domains of human expertise that command market premiums.”5. Martin Heidegger clip. Not impressive to me.6. Canvas unrolls AI teaching agent.7. “This essay has tried to frame what we need to build around AI.“The post Monday assorted links appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media Comments#3. Minimum wage hikes boost restaurant food prices. News not ... by MikeP
via Marginal Revolution https://bit.ly/4stN86b
What should I ask David Baszucki?
Tyler Cowen
Yes I will be doing a Conversation with him. From Wikipedia:David Brent Baszucki (/bəˈzuːki/ buh-ZOO-ki; born January 20, 1963) is a Canadian-born American entrepreneur, engineer, and software developer. He is best known as the co-founder and CEO of Roblox Corporation. He co-founded and was the CEO of Knowledge Revolution, which was acquired by MSC Software in December 1998.On Roblox:Roblox (/ˈroʊ.blɒks/ ⓘ, ROH-bloks) is an online game platform and game creation system developed by Roblox Corporation that allows users to program and play games created by themselves or other users. It was created by David Baszucki and Erik Cassel in 2004, and released to the public in 2006. As of February 2025, the platform has reported an average of 85.3 million daily active users. According to the company, their monthly player base includes half of all American children under the age of 16.So what should I ask him?The post What should I ask David Baszucki? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsAsk him about his Office. by stasiRelated StoriesDwarkesh chats with Terence TaoSome more slow take-off, driven by start-upsThose new service sector jobs?
via Marginal Revolution https://bit.ly/3PtUPL8
Tyler Cowen
Yes I will be doing a Conversation with him. From Wikipedia:David Brent Baszucki (/bəˈzuːki/ buh-ZOO-ki; born January 20, 1963) is a Canadian-born American entrepreneur, engineer, and software developer. He is best known as the co-founder and CEO of Roblox Corporation. He co-founded and was the CEO of Knowledge Revolution, which was acquired by MSC Software in December 1998.On Roblox:Roblox (/ˈroʊ.blɒks/ ⓘ, ROH-bloks) is an online game platform and game creation system developed by Roblox Corporation that allows users to program and play games created by themselves or other users. It was created by David Baszucki and Erik Cassel in 2004, and released to the public in 2006. As of February 2025, the platform has reported an average of 85.3 million daily active users. According to the company, their monthly player base includes half of all American children under the age of 16.So what should I ask him?The post What should I ask David Baszucki? appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media Media CommentsAsk him about his Office. by stasiRelated StoriesDwarkesh chats with Terence TaoSome more slow take-off, driven by start-upsThose new service sector jobs?
via Marginal Revolution https://bit.ly/3PtUPL8
The rise of China as a global innovator in pharma (incentives matter)
Tyler Cowen
This paper examines China’s transition from pharmaceutical “free rider” to global innovator over the last decade. In 2010, China accounted for less than 8% of global clinical trials; by 2020, it had surpassed the US in annual registered clinical trial volume. To study this transformation, we compile a comprehensive, synchronized database spanning the pharmaceutical drug development supply chain, covering scientific publications, clinical trials, drug development milestones for China, the U.S., and Europe, alongside drug sales and government policies over the same period. We provide strong evidence that China’s rise was primarily driven by the National Reimbursement Drug List (NRDL) reform, which dramatically expanded the effective market size for innovative drugs. We document a sharp rise in both the quantity (86% increase) and novelty of drug trials post reform, with growth concentrated in reform-exposed disease categories, first- or best-in-class drugs, and among domestic firms. A decomposition exercise reveals that the NRDL reform accounts for 43% of the growth in oncology trial activity, nearly doubling the combined contribution of upstream knowledge accumulation and talent flows (24%), while other government policies play a minor role. Finally, dynamic gains from induced innovation exceed the reform’s static gains in consumer access to innovative drugs by threefold, underscoring the importance of accounting for the reform’s long-run effects on innovation incentives in addition to near-term improvements in drug affordability.That is from a new NBER working paper by Panle Jia Barwick, Hongyuan Xia & Tianli Xia. That said, by one metric all ten of the most influential science papers of the last decade came from the United States.The post The rise of China as a global innovator in pharma (incentives matter) appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesDwarkesh chats with Terence TaoIs AI currently helping economic research?My excellent Conversation with Harvey Mansfield
via Marginal Revolution https://bit.ly/40PI6Fe
Tyler Cowen
This paper examines China’s transition from pharmaceutical “free rider” to global innovator over the last decade. In 2010, China accounted for less than 8% of global clinical trials; by 2020, it had surpassed the US in annual registered clinical trial volume. To study this transformation, we compile a comprehensive, synchronized database spanning the pharmaceutical drug development supply chain, covering scientific publications, clinical trials, drug development milestones for China, the U.S., and Europe, alongside drug sales and government policies over the same period. We provide strong evidence that China’s rise was primarily driven by the National Reimbursement Drug List (NRDL) reform, which dramatically expanded the effective market size for innovative drugs. We document a sharp rise in both the quantity (86% increase) and novelty of drug trials post reform, with growth concentrated in reform-exposed disease categories, first- or best-in-class drugs, and among domestic firms. A decomposition exercise reveals that the NRDL reform accounts for 43% of the growth in oncology trial activity, nearly doubling the combined contribution of upstream knowledge accumulation and talent flows (24%), while other government policies play a minor role. Finally, dynamic gains from induced innovation exceed the reform’s static gains in consumer access to innovative drugs by threefold, underscoring the importance of accounting for the reform’s long-run effects on innovation incentives in addition to near-term improvements in drug affordability.That is from a new NBER working paper by Panle Jia Barwick, Hongyuan Xia & Tianli Xia. That said, by one metric all ten of the most influential science papers of the last decade came from the United States.The post The rise of China as a global innovator in pharma (incentives matter) appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesDwarkesh chats with Terence TaoIs AI currently helping economic research?My excellent Conversation with Harvey Mansfield
via Marginal Revolution https://bit.ly/40PI6Fe
On the Giving Pledge
Tyler Cowen
From my latest piece from The Free Press:A lot of America’s most effective giving was done by the early “robber barons,” such as Carnegie, Mellon, and Rockefeller. Andrew Carnegie, for instance, helped to create what is now Carnegie-Mellon University, and Carnegie libraries to this day dot the country and encourage literacy and reading. The Mellon and Rockefeller art collections seeded some of America’s highest quality museums.None of this was done with any kind of pledge. Those great 19th-century industrialists pursued high-quality philanthropic opportunities when they saw them, unencumbered by today’s massive foundation staffs. If a town wanted to set up a Carnegie library, they had to meet some standard criteria, and they started by sending a letter to Carnegie’s private secretary, James Bertram. The Carnegie Corporation, which in later years led much of the philanthropy, had mainly clerical staff and did not have a full-time salaried president until after Carnegie’s death. It remains to be seen whether today’s philanthropists, including the ones who signed the Giving Pledge, will do as well.There is much more at the link.The post On the Giving Pledge appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesOil versus Ice CreamParaguay trend of the dayHow much more will oil prices have to go up?
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Tyler Cowen
From my latest piece from The Free Press:A lot of America’s most effective giving was done by the early “robber barons,” such as Carnegie, Mellon, and Rockefeller. Andrew Carnegie, for instance, helped to create what is now Carnegie-Mellon University, and Carnegie libraries to this day dot the country and encourage literacy and reading. The Mellon and Rockefeller art collections seeded some of America’s highest quality museums.None of this was done with any kind of pledge. Those great 19th-century industrialists pursued high-quality philanthropic opportunities when they saw them, unencumbered by today’s massive foundation staffs. If a town wanted to set up a Carnegie library, they had to meet some standard criteria, and they started by sending a letter to Carnegie’s private secretary, James Bertram. The Carnegie Corporation, which in later years led much of the philanthropy, had mainly clerical staff and did not have a full-time salaried president until after Carnegie’s death. It remains to be seen whether today’s philanthropists, including the ones who signed the Giving Pledge, will do as well.There is much more at the link.The post On the Giving Pledge appeared first on Marginal REVOLUTION.MediaMedia Media Media Media Media Media MediaRelated StoriesOil versus Ice CreamParaguay trend of the dayHow much more will oil prices have to go up?
via Marginal Revolution https://bit.ly/4sWSxmi