How much is childlessness the fertility problem?
The average decline in fertility among these recent cohorts relative to the cohorts preceding them by 20 years was 0.25 births. Of this decline, 0.09 births, or 37 percent of the gap, is statistically accounted for by increased childlessness in the later cohort. The remaining 0.16 births, or 63 percent of the gap, is accounted for by declines in fertility among the parous.
A similar analysis can be used to decompose differences across districts in India, where the difference to be decomposed is across districts for women born in the same set of years, with two groups of districts defined by having the lowest and highest cohort fertility rates. Unsurprisingly, given panel B of Figure 5, almost all of this difference—94 percent—is accounted for by the difference in fertility among the parous. Differing patterns of childlessness account for only 6 percent of the gap between high-fertility and low-fertility districts.
That is from a new and useful JEP survey article by Michael Geruso and Dean Spears. The main concern of the authors is whether we can ever expect a fertility rebound.
Friday assorted links
1. A good tweet about art collections.
2. Banknote bouquets could land you in jail, Kenya’s central bank warns.
3. Cass Sunstein on the aesthetics of liberalism. And Becca Rothfeld on similar issues.
4. How will low fertility rates affect economies? One estimate given has U.S. per capita consumption falling by over eight percent, which I consider “large,” though it seems the author (David N. Weil) does not?
5. Survey on the economics of noncompete clauses.
6. Is Bluey the most conservative show on TV? (WSJ)
7. Someone likes the new Wuthering Heights movie.
8. Covid has now become what some people claimed it was all along.
The polity that is Bolivia?
Bolivia’s new president is planning major reforms to unleash a mining and oil exploration boom, burying nearly 20 years of socialism in the Andean nation with a new policy — “capitalism for all”.
Rodrigo Paz, a pragmatic centrist former senator, said his team was working on a package of laws to boost foreign investment in natural resources that would be presented to congress for approval “in the coming days or months”.
“We need a new oil and gas law,” Paz told the Financial Times in an interview while attending an economic forum in Panama.
“Bolivia should go for 50-50 [risk-sharing with foreign investors]. I give you the space. You come in with technology and investment . . . I think it’s the basis for business in future.”
Bolivia has a fifth of the world’s reserves of lithium, according to the US Geological Survey, but with its state-owned company YLB lacking technical expertise and investment, it has struggled for years to produce commercial quantities of the battery metal and exports are currently dominated by neighbouring Chile.
Bolivia also has big reserves of silver, tin and antimony. Paz said the Bolivian people, who have a history of protesting against mining, would support fresh investment if they were shown they would benefit financially. He compared his country to its neighbours: “Peru last year had mining revenues of around $50bn. Chile had revenues with state and private companies of $65bn. And we . . . had just $6bn,” he said.
Here is more from Michael Stott at the FT. We will see, as they say. I am cautiously hopeful.
Poverty and Dependency in the United States, 1939–2023
We compare trends in absolute poverty before (1939–1963) and after (1963–2023) the War on Poverty was declared. Our primary methodological contribution is to create a post-tax post-transfer income measure using the 1940, 1950 and 1960 Decennial Censuses through imputations of taxes and transfers as well as certain forms of market income including perquisites (Collins and Wanamaker 2022), consistent with the full income measures developed by Burkhauser et al. (2024) for subsequent years. From 1939–1963, poverty fell by 29 percentage points, with even larger declines for Black people and all children. While absolute poverty continued to fall following the War on Poverty’s declaration, the pace was no faster, even when evaluating the trends relative to a consistent initial poverty rate. Furthermore, the pre-1964 decline in poverty among working age adults and children was achieved almost completely through increases in market income, during which time only 2–3 percent of working age adults were dependent on the government for at least half of their income, compared to dependency rates of 7–15 percent from 1972–2023. In contrast to progress on absolute poverty, reductions in relative poverty were more modest from 1939–1963 and even less so since then.
That is from a new NBER working paper by Richard K. Burkhauser and Kevin Corinth.
Argentina dollar facts of the day
From greenbacks stuffed into children’s teddy bears to fortunes tucked away in the ceiling, Argentines have more than $250 billion in dollars stashed at home, along with offshore accounts and safe-deposit boxes—some six times the reserves of the central bank.
But two years into Milei’s government, Argentines are easing their grip on their precious dollars.
Dollars held in the country’s banks by private-sector investors hit a record at the end of last year of nearly $37 billion, up 160% since Milei took office in December 2023, according to central-bank data.
Here is more from the WSJ.
Hanno Lustig and Romain Wacziarg now have a Substack
Self-recommending, here goes.
Thursday assorted China links
Trump’s Pharmaceutical Plan
Pharmaceuticals have high fixed costs of R&D and low marginal costs. The first pill costs a billion dollars; the second costs 50 cents. That cost structure makes price discrimination—charging different customers different prices based on willingness to pay—common.
Price discrimination is why poorer countries get lower prices. Not because firms are charitable, but because a high price means poorer countries buy nothing, while any price above marginal cost is still profit. This type of price discrimination is good for poorer countries, good for pharma, and (indirectly) good for the United States: more profits mean more R&D and, over time, more drugs.
The political problem, however, is that Americans look abroad, see lower prices for branded drugs, and conclude that they’re being ripped off. Riding that grievance, Trump has demanded that U.S. prices be no higher than the lowest level paid in other developed countries.
One immediate effect is to help pharma in negotiations abroad: they can now credibly say, “We can’t sell to you at that discount, because you’ll export your price back into the U.S.” But two big issues follow.
First, this won’t lower U.S. prices on current drugs. Firms are already profit-maximizing in the U.S. If they manage to raise prices in France, they don’t then announce, “Great news—now we’ll charge less in America.” The potential upside of the Trump plan isn’t lower prices but higher pharma profits, which strengthens incentives to invest in R&D. If profits rise, we may get more drugs in the long run. But try telling the American voter that higher pharma profits are good.
The second issue is that the plan can backfire.
In our textbook, Modern Principles, Tyler and I discuss almost exactly this scenario: suppose policy effectively forces a single price across countries. Which price do firms choose—the low one abroad or the high one in the U.S.? Since a large share of profits comes from the U.S., they’re likely to choose the high price:
Pfizer CEO Albert Bourla was even more direct, saying it is time for countries such as France to pay more or go without new drugs. If forced to choose between reducing U.S. prices to France’s level or stopping supply to France, Pfizer would choose the latter, Bourla told reporters at a pharma-industry conference.
So the real question is: will other countries pay?
If France tried to force Americans to pay more to subsidize French price controls, U.S. voters would explode. Yet that’s essentially what other countries are being told but in reverse: “You must pay more so Americans can pay less.” Other countries are already stingier than the U.S., and they already bear costs for it—new drugs arrive more slowly abroad than here. Some governments may decide—foolishly, but understandably—that paying U.S.-level prices is politically impossible. If so, they won’t “harmonize upward.” They’ll follow the European way: ration, delay and go without.
In that case, nobody wins. Pharma profits fall, R&D declines, U.S. prices don’t magically drop, and patients abroad get fewer new drugs and worse care. Lose-lose-lose.
We don’t know the equilibrium, but lose-lose-lose is entirely plausible. Switzerland, for example, does not seem willing to pay more:
Yet Switzerland has shown little political willingness to pay more—threatening both the availability of medications in the country and its role as a global leader in developing therapies. Drug prices are the primary driver of the increasing cost of mandatory health coverage, and the topic generates heated debate during the annual reappraisal of insurance rates. “The Swiss cannot and must not pay for price reductions in the USA with their health insurance premiums,” says Elisabeth Baume-Schneider, Switzerland’s home affairs minister.
If many countries respond like Switzerland—and Trump’s unpopularity abroad doesn’t help—the sector ends up less profitable and innovation slows. Voters may feel less “ripped off,” but they’ll be buying that feeling with fewer drugs and sicker bodies.
Plug me back in!
AIs can now rent human labor.
My Conversation with Andrew Ross Sorkin
This was great fun for me, here is the audio, video, and transcript. Here is part of the episode summary:
Tyler and Andrew debate whether those 1929 stock prices were justified, what Fed and policy choices might have prevented the Depression, whether Glass-Steagall was built on a flawed premises, what surprised Andrew most about the 1920s beyond the crash itself, how business leaders then would compare to today’s CEOs, whether US banks should consolidate, how Andrew would reform US banking regulation, what to make of narrow banking proposals and stablecoins, whether retail investors should get access to private equity and venture capital, why sports gambling and new financial regulations won’t make us much safer, how Andrew broke into the New York Times at age 18, how he manages his information diet, what he learned co-creating Billions, what he plans on learning about next, and more.
Excerpt:
COWEN: I have a few general questions about the 1920s. Obviously, you did an enormous amount of work for this book. Putting aside the great crash and the focus of your book, what is it you learned about the 1920s more generally that most surprised you? Because you learn all this collateral information when you write a book like this, right?
SORKIN: So many things. The book turned into a bit of a love letter to New York in terms of the architecture of New York. I don’t think I appreciated just how many buildings went up in New York and how they were constructed and what happened. That fascinated me. I think the story of John Raskob, actually, who was, to me, the Elon Musk of his time, somebody who ran General Motors, became a super influential investor. He was a philosopher king that everybody listened to at every given moment.
He ultimately constructs the Empire State Building, which was probably the equivalent of SpaceX at that time. He had written a paper about creating a five-day workweek back in 1929, November, as all of this is happening. Not because he wanted people to work less and be nice to them, but because he thought there was an economic argument that if people didn’t have to work on Saturdays, more people would buy cars and gardening equipment, and do all sorts of things on the weekends, and buy different outfits and clothing. There were so many little things.
Then, I would argue, actually, his role in taking his fortune — he got involved in politics. He was a Republican turned Democrat. He spent an extraordinary amount of money to secretly try to undermine the reputation of Hoover. I would say to you, today, I actually think that part of the reason that Hoover’s reputation is so dim, even today, is a result of this very influential, wealthy individual in America who spent two years paying off journalists and running this secret campaign to do such a thing. You go back and really read the press and try to understand why some of these views were espoused.
By the way, this was before the crash. He started this campaign effectively in May of 1929, just three months after Hoover took office.
COWEN: It’s striking to me how forgotten Raskob is today. There’s a lesson in there about people who think they’re doing something today that will be remembered in a hundred years’ time. It probably won’t be, even if you’re a big, big deal.
SORKIN: It’s remarkable. He was a very big deal. He famously used to tell everybody, “Everybody ought to be rich.” He was trying to develop, back then, what would have been something akin to one of the first mutual funds, levered mutual funds, in fact, because he also wanted to democratize finance.
COWEN: Let’s say you’re back in New York. It’s the 1920s; you’re you. Other than walking around and looking at buildings, what else would you do back then? I would go to jazz concerts. What would you do?
SORKIN: Oh my goodness. You know what I would do? But I’m a journalista, so you’ll appreciate this.
COWEN: Yes.
SORKIN: I would have been obsessed with magazines. This was really the first real era of magazines and newspapers and the transmission of media, the sort of mass media in this way. I would have been fascinated by radio. I think those things, for me, would have been super exciting.
The truth is, I imagine I would have gotten caught up in the pastime of stock trading. It is true that all these brokerage houses are just emerging everywhere, and people are going to play them as if it’s a pastime. I always wonder whether prohibition played a role in why so many people were speculating because instead of drinking, what did they do? They traded.
Some of the time he spent interviewing me…
Kazuhito Yamashita, RIP
Here is an appreciation, via Tyler McGraw. He was a true great of the guitar.
Regulating a Monopolist without Subsidy
We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. When intervention is desired, we provide simple sufficient conditions under which the optimal policy is a progressive price cap: prices below a benchmark face no tax, while higher prices are taxed at increasing and potentially prohibitive rates. This policy combines delegation at low prices with taxation at high prices, balancing access, affordability, and profitability. Our results clarify when taxes act as complements to subsidies and when they serve only as imperfect substitutes, illuminating how feasible policy instruments shape optimal regulatory design.
That is from a new paper by Jiaming Wei and Dihan Zou. Via the excellent Samir Varma.
Wednesday assorted links
Now we are getting serious…
It is about time:
US tech stocks fell sharply on Tuesday as fresh concerns about the impact of AI on software businesses swept across Wall Street.
The tech-heavy Nasdaq Composite fell 1.4 per cent, while the broader S&P 500 was down 0.8 per cent. Markets were dragged lower by large declines for a host of analytics groups following AI company Anthropic’s launch of productivity tools for its Claude Cowork platform that can help automate legal work.
Analytics groups Gartner and S&P Global fell 21 per cent and 11 per cent, respectively, while Intuit and Equifax both declined more than 10 per cent. Moody’s fell 9 per cent and FactSet lost 11 per cent.
A JPMorgan index tracking US software stocks fell 7 per cent, taking its loss this year to 18 per cent.
Here is more from the FT.
The economics of hip hop
In a TED Talk released on Monday, I describe a decadelong effort to measure hip hop’s impact. My research team and I assembled a data set tracking the genre’s diffusion from the late 1980s onward. We compiled exposure measures from virtually every U.S. radio station between 1985 and 2002 and from the Billboard Hot 100 from 2000 through 2024, then digitized station playlists using custom AI tools. The result is a detailed record of what different parts of the country heard in a given year. Using modern text analysis, we examined hundreds of thousands of songs and every word they contained.
We classify hip hop into four broad categories: street, conscious, mainstream and experimental…
Radio data also let us look inside the music. Over the past 40 years, hip-hop lyrics have grown substantially more explicit: profanity, violence and misogynistic language each increased roughly fivefold in our text-based measures, while references to drugs rose by approximately half as much. That growth in lyrical intensity helps explain why hip hop continues to provoke anxiety. But it also sharpens the question that matters most, at least to an economist: Does exposure to these lyrics have measurable effects on people’s lives?
To answer that, we looked at locations with varied hip-hop exposure—some places where it arrived early, others where it arrived later. Hip hop initially reached mass audiences through a subset of black radio stations, often those formatted as “urban contemporary.” Some cities gained early access through those stations. Others didn’t for reasons as mundane as geography, signal reach and local radio history.
That uneven rollout created natural variation in exposure.
Using radio data and decades of census records, we estimated how much hip hop was played on the radio in each county in the U.S. over time. We then tested whether increases in hip-hop penetration were linked to changes in crime—and whether people exposed to more hip hop in their formative years experienced worse outcomes in education, employment, earnings, teen births and single parenthood.
The answer was striking. In our estimates, the effects hovered around zero, sometimes even slightly positive. Places with heavier rap exposure didn’t experience higher crime, lower educational attainment or weaker labor-market outcomes relative to trends elsewhere.
Here is more from Roland Fryer, from the WSJ. Here is the TED talk.