The Software Upgrade in Chinese Civic Behaviour
I have not been to China recently enough to judge these claims:
Behaviour is notoriously harder to engineer than buildings. A recent trip to the Fragrant Hills in western Beijing on a newly constructed metro line, had me marveling at the improved crowd-management. Despite massive groups of domestic tourists from around the country thronging the area, in what would not-so-long-ago have been a scenario for a potential stampede, the crowds moved in relative order. The park environs were spick and span with no litter in sight; not a single old codger sneaking a cigarette.
There was some amount of strident rule-announcing on loudspeakers: stay on the designated tracks, no smoking etc., but overall, it was possible to enjoy the natural beauty, notwithstanding the hordes of day-trippers. The toilets were not fragrant, despite the nomenclature of the spot itself, but they were clean, and the seats were free of the tell-tale footprints that indicate squatting rather than sitting. Barely anyone gave me, an obvious foreigner, a second glance. In contrast, there was a time in 2002 when a cyclist fell off his bike in his shock at having spotted dark-skinned me walking along a road in the outskirts of Beijing.
So how had the Chinese been pacified/disciplined/habituated to ways of behaviour that went so against their until-very-recent, loophole-finding, chaos-shuffling, phlegm-expectorating deportment in public spaces?
The answer, as answers to sociological questions invariably are, is multipronged.
Some of it is more money.
Here is more by Pallavi Aiyar. Via Malinga Fernando.
Monday assorted links
1. “Nigeria’s industrialization fails to gather steam after 65 years.”
2. Did Eastern Europe produce that many slaves?
3. Vitalik on AI and governance.
4. Does AI put women at a disadvantage? (FT)
6. I wonder what their portfolios look like. Maybe they just bought a lot of Nvidia and consider themselves prophets. Here is an economics-motivated response, though it has some problems too, such as underrating Say’s Law, which is not always false. It is not in reality that complicated, but over the years we have talked ourselves into a lot of dubious macro mechanisms.
7. More on the new “kingpin” warfare strategies.
8. From a week ago: “Derrotar a Cártel Jalisco sin incendiar el país.“
Peru’s new President taps Hernando de Soto to be prime minister
Here is the Bloomberg article. Here is previous MR coverage of de Soto. Here is Wikipedia on de Soto.
Daniel Litt on AI and Math
Daniel Litt is a professor of mathematics at the University of Toronto. He has been active in evaluating AI models for many years and is generally seen as a skeptic pushing back at hype. He has a very interesting statement updating his thoughts:
In March 2025 I made a bet with Tamay Besiroglu, cofounder of RL environment company Mechanize, that AI tools would not be able to autonomously produce papers I judge to be at a level comparable to that of the best few papers published in 2025, at comparable cost to human experts, by 2030. I gave him 3:1 odds at the time; I now expect to lose this bet.
Much of what I’ll say here is not factually very different from what I’ve written before. I’ve slowly updated my timelines over the past year, but if one wants to speculate about the long-term future of math research, a difference of a few years is not so important. My trigger for writing this post is that, despite all of the above, I think I was not correctly calibrated as to the capabilities of existing models, let alone near-future models. This was more apparent in the mood of my comments than their content, which was largely cautious.
To be sure, the models are not yet as original or creative as the very best human mathematicians (who is?) but:
Can an LLM invent the notion of a scheme, or of a perfectoid space, or whatever your favorite mathematical object is? (Could I? Could you? Obviously this is a high bar, and not necessary for usefulness.) Can it come up with a new technique? Execute an argument that isn’t “routine for the right expert”? Make an interesting new definition? Ask the right question?
…I am skeptical that there is any mystical aspect of mathematics research intrinsically inaccessible to models, but it is true that human mathematics research relies on discovering analogies and philosophies, and performing other non-rigorous tasks where model performance is as yet unclear.
Podcast with Jake Sullivan and Jon Finer
Mostly about geopolitics, plenty of fresh content. And here is the transcript. Excerpt:
Jon Finer:
Should the United States be willing to take military action to defend Taiwan? It’s a thorny question for politicians to answer, but we’d be interested in your view.
Tyler Cowen:
Well, this is what economists would call a mixed strategy. Ex-ante, we should have strategic ambiguity, and not just say, we’re not going to defend Taiwan. And when Joe Biden said, “Well, we are going to defend Taiwan,” I was quite happy.
Jon Finer:
Four times. Four times.
Tyler Cowen:
Four times, yes. I know there’s different versions of how it was talked back and the like, but it should be unclear. That said, when push comes to shove, if China has made its move, you have to look at what are the terms of the deal? What are they going to do with TSMC to our best knowledge? What’s the domestic quality chip production in the United States? How do we feel about Japan and maybe South Korea getting nuclear weapons? Can South Korea remain an autonomous nation? Those are a lot of balls to juggle and they’re all hard to judge at this moment. But I think ex-ante, we should definitely create some risk that we will go to war over Taiwan, but then make the best decision ex-post. But China knows that too, right? They’re not fools. They’ve studied game theory.
Jake Sullivan:
Tyler, I’m going to put you down as that being Tyler Cowen’s version of strategic ambiguity.
Tyler Cowen:
It may not be that different from your version.
Jake Sullivan:
Exactly.
Recommended, and I also talk about my secret, unpublished China book, still pending at Tsinghua, almost certainly forever. And we cover UAPs and curling as well.
I guess Mexico is solving for the equilibrium?
For some while I have wondered what would happen if the U.S. military sought to assist Mexico in taking out one of the top drug lords. I suppose now we are finding out. A few points:
1. There is a good chance a few more drug lords will be hit. It makes no sense to get involved just to take out one guy (supply is elastic!). Sheinbaum is doing this, so it is not just the oddities of Trumpland at work here. Presumaby the goal is to shift the entire equilibrium.
2. The cartels would do better to lay low for a while, rather than making this a big public issue. The virulence of their response indicates they are probably pretty scared. Of course the actual decisions here are being taken by (threatened) individuals, not by the (persisting) “cartels.”
3. “Cartels” is an overused word here. They are more like loose syndicates, and by no means are they always colluding with each other.
4. Perhaps there is a new “Trump doctrine,” namely to focus on going after lead individuals, rather than governments or institutional structures. We already did that in Venezuela, and there is talk of that being the approach in Iran. If so, that is a change in the nature of warfare, and of course others may copy it too, including against us. Is there a chance they have tried already?
5. With this action, which seems to have U.S: involvement at least on the intelligence side (possibly more), we are also sending a message to Iran.
6. I believe my post from this morning is holding up pretty well. What the U.S. is supplying here is “more decisive action,” rather than some new, detailed understanding of the Mexican dilemma. See also my Free Press Latin America column from October.
7. In its most extreme instantiation, today’s action represents a willingness of the U.S. to get involved in a Mexican civil war of sorts. I do not expect matters to take that path, as the last time U.S. troops had direct involvement in Mexico was 1916-1919. “Convergence to some warning shots” is a more likely equilibrium outcome here. Nonetheless such an escalatory scenario is not off the table, do note that American foreign policy has been returning to much earlier eras in a number of regards.
8. This story is not over.
Sunday assorted links
How to make sense of the U.S. Iran strategy
I am not saying it is a good strategy, I genuinely do not know. But the people behind the scenes, what are they thinking? Did we not just, not too long ago, take out or at least disable some big chunk of the Iranian nuclear assets? So what are we going after this time? Can we really affect regime change without large numbers of troops on the ground? Is there a “Venezuela version” of an Iranian intervention?
My simple model is as follows. The Trump people believe that previous administration, along many dimensions, simply never tried hard enough. They were too bound by previous conventions, too captive to polite society, and also they did not exercise executive power enough. When it comes to foreign policy, they did not threaten other nations enough to achieve American ends. When it comes to military action, they did not summon enough forces backed by enough executive will.
This time around, the goal is to make big threats backed by big, serious forces. Which indeed America is doing. The rest of the details will be filled in later.
If you think the binding constraint in the past was “not enough threats backed by serious enough executive will,” that constraint (it seems?) is being relaxed now.
Of course if the binding constraints lie along other dimensions, or along other dimensions as well, the current strategy could fail badly. The plan is simply not complete enough.
I suppose we are likely to find out.
Gaurav Ahuja interviews me
I very much enjoyed this exchange, print only, here is the link. Excerpt:
Gaurav: Going back to Iceland for a moment. I’ve never truly appreciated how old that parliament is. A thousand years is extraordinary. What is it about Iceland that has allowed that kind of continuity?
Tyler: Iceland was taken over by Denmark for quite a while. But the Icelanders persisted as an autonomous culture with their own language, not simply becoming Danish. They had this tradition of individualism, which you can read in the Icelandic sagas. Their own kind of common law, a good system of incentives built into the legal code, traditions of autonomy based on food supply and how you deal with the cold and the weather. For a long time, they just played defense. Then after World War II, they had a chance to transform it into what I think is one of the world’s most successful countries.
Their total population is around four hundred thousand. To do that with such numbers in a place that is not always hospitable is remarkable. They have almost entirely green energy. They’re super resourceful, very highly educated. Book sales per capita are through the ceiling. There’s something about their interest in poetry, legal codes, reading, what they do with those long winter nights, that has been quite persistent. That’s an informal institution, and it’s been very durable.
Is there anything in US policy that you see drawing us toward a short-term siren call that makes it harder to create a lasting democracy?
Our government fiscal policy is irresponsible. I hope we can survive it. I’m not a doom-and-gloomer, but thirty-eight trillion dollars in debt is not ideal. I don’t think we should try to run a balanced budget. T-bills play a key role in the world economy, and some amount of debt and deficit is good for us, good for the world. But we’re pushing it too far. We underinvest in our young people, underinvest in parts of our education. But look, we’re a pretty successful country.
There’s this interesting tension between wanting a stable environment to build something that lasts and needing to ride a new wave for something to emerge in the first place.
I was recently thinking about how much the bad weather in the United States is functional for some larger purpose. You learn early that you have to deal with things. You need a certain kind of independence, planning, and preparation.
British weather is quite benevolent. Maybe it’s too gray, but it’s not going to kill you. American weather, hurricanes, blizzards, flooding, is very volatile. We don’t always feel it because we’ve become wealthy, but maybe in part we had to become wealthy to deal with that volatility. That might be a blessing in disguise. It’s related to the earlier point about Iceland. It’s tough there. You’d better be pretty adaptive. A perfectly stable environment is not ideal either.
Interesting throughout, and plenty of fresh material. The weather point I owe to conversations with Henry Oliver and Rebecca Lowe.
Saturday assorted links
Why the “Lesser Included Action” Argument for IEEPA Tariffs Fails
The Supreme Court yesterday struck down Trump’s IEEPA tariffs, holding that the statute’s authorization to “regulate… importation” doesn’t include the power to impose tariffs. The majority’s strongest argument is simple: every time Congress actually delegates tariff authority, it uses the word “duty,” caps the rate, sets a time limit, and requires procedural prerequisites. IEEPA has none of these.
The dissent pushes back with an intuitively appealing argument: IEEPA authorizes the President to prohibit imports entirely, so surely it authorizes the lesser action of merely taxing them. If Congress handed over the nuclear option, why would it withhold the conventional weapon? Indeed in his press conference Trump, in his rambling manner, made exactly this argument:
“I am allowed to cut off any and all trade…I can destroy the trade, I can destroy the country, I’m even allowed to impose a foreign country destroying embargo…I can do anything I want to do to them…I’m allowed to destroy the country, but I can’t charge a little fee.”
The argument is superficially appealing but it fails due to a standard result in principal-agent theory.
Congress wants the President to move fast in a real emergency, but it doesn’t want to hand over routine control of trade policy. The right delegation design is therefore a screening device: give the President authority he will exercise only when the situation is truly an emergency.
An import ban works as a screening device precisely because it is very disruptive. A ban creates immediate and substantial harm. It is a “costly signal.” A President who invokes it is credibly saying: this is serious enough that I am willing to absorb a large cost. Tariffs, in contrast, are cheaper–especially to the President. Tariffs raise revenue, which offsets political pain. Tariff incidence is diffuse and easy to misattribute—prices creep, intermediaries take blame, consumers don’t observe the policy lever directly. Most importantly tariffs are adjustable, which makes them a weapon useful for bargaining, exemptions, and targeted favors. Tariffs under executive authority implicitly carry the message–I am the king; give me a gold bar and I will reduce your tariffs. Tariff flexibility is more politically appealing than a ban and thus a less credible signal of an emergency. The “lesser-included” argument gets the logic backwards. The asymmetry is the point.
Not surprisingly, the same structure appears in real emergency services. A fire chief may have the authority to close roads during an emergency but that doesn’t imply that the fire chief has the authority to impose road tolls. Road closure is costly and self-limiting — it disrupts traffic, generates immediate complaints, and the chief has every incentive to lift it as soon as possible. Tolls are cheap, adjustable, and once in place tend to persist; they generate revenue that can fund the agency and create constituencies for their continuation. Nobody thinks granting a fire chief emergency closure authority implicitly grants them taxing authority, even if the latter is a lesser authority. The closure and toll instruments have completely different political economy properties despite operating on the same roads.
The majority reaches the right conclusion by noting that tariffs are a tax over which Congress, not the President, has authority. That is constitutionally correct but the deeper question is why the Framers lodged the taxing power in Congress — and the answer is political economy. Revenue instruments are especially easy for an executive to exploit because they can be targeted. The constitutional rule exists to solve that incentive problem.
Once you see that, the dissent’s “greater includes the lesser” inference collapses on its own terms. A principal can rationally authorize an agent to take a dramatic emergency action while withholding the cheaper, revenue-lever not despite the fact that it seems milder, but because of it. The blunt instrument is self-limiting. The revenue instrument is not. That asymmetry is what the Constitution’s categorical division of powers preserves — and what an open-ended emergency delegation would destroy.
A Republic, if you can keep it
The conclusion of Justice Gorsuch’s concurrence in the tariff case:
For those who think it important for the Nation to impose more tariffs, I understand that today’s decision will be disappointing. All I can offer them is that most major decisions affecting the rights and responsibilities of the American people (including the duty to pay taxes and tariffs) are funneled through the legislative process for a reason. Yes, legislating can be hard and take time. And, yes, it can be tempting to bypass Congress when some pressing problem
arises. But the deliberative nature of the legislative process was the whole point of its design. Through that process, the Nation can tap the combined wisdom of the people’s elected representatives, not just that of one faction or man. There, deliberation tempers impulse, and compromise hammers
disagreements into workable solutions. And because laws must earn such broad support to survive the legislative process, they tend to endure, allowing ordinary people to plan their lives in ways they cannot when the rules shift from day to day. In all, the legislative process helps ensure each of us has a stake in the laws that govern us and in the Nation’s future. For some today, the weight of those virtues is apparent. For others, it may not seem so obvious. But if history is any guide, the tables will turn and the day will come when those disappointed by today’s result will appreciate the legislative process for the bulwark of liberty it is.
South Africa facts of the day
With the lights back on and freight beginning to move again, in November South Africa won its first credit upgrade in two decades after S&P Global Ratings lifted the sovereign rating by one notch to double B.
Investor confidence is also up. According to Nedbank, private sector investment announcements tripled last year to more than R382bn ($23.6bn). Since the end of 2023, the South African rand has been the world’s best performing major currency on a spot basis reflecting immediate exchange rates, up nearly 15 per cent against the dollar. Over the past 12 months, the JSE all-share index is up 37 per cent in rand terms.
Growth reached 1.2 per cent in 2025, hardly transformative, but double the rate of the previous year. For the first time in a long time, economists are talking enthusiastically about “green shoots” and forecasting year-on-year expansion.
Here is more from David Pilling, Joseph Cotterill, and Monica Mark at the FT.
I podcast on Spain and Latin America
With Rasheed Griffith and Diego Sanchez de la Cruz. Here is one excerpt:
Rasheed: Tyler, if El Salvador were to become a success story, what would it likely be a success at first? Manufacturing, migratory investment, investment tourism, or something more unusual? Because those typical answers feel like maybe they have missed the boat.
Tyler: I think El Salvador has turned itself into a very safe country which is great news. I think you and I both saw that when we were there. I think under all scenarios they have a very hard time becoming much richer. So I don’t think it’s manufacturing through no fault of their own. But most of the world is de-industrializing. So manufacturing is not a source of growing employment due to automation. But there’s other issues for Central America such as scale and the cost of electricity. El Salvador is not the best in Latin America for either of those compared say to Northern Mexico. So I don’t see what its relative advantage is. And it’s just a small place.
I checked with ChatGPT. one estimate places about third of the population, living in the United States on average. That’s probably the more ambitious one third. So there’s considerable brain drain. I do think in terms of levels they can do much more with tourism. They have an entire Pacific Coast which is quite underdeveloped, and could be developed very fruitfully. Sell condominiums, have people do more surfing. Try to have something a bit more like the next Acapulco, but even there you’re competing against Cancun among other locations and it will boost their level but it won’t be a permanently higher rate of growth.
And that’s the case with many touristic developments. They don’t self compound forever and give you many other productivity improvements. So I expect El Salvador to do much better but I know a lot of people who read Bukele on social media and they think it’s about to be the next Singapore or something and I just don’t know how they’re gonna do that under really any scenario. I do think it will improve and they’ll get more foreign investment and more tourism.
Rasheed: How much is “much better”? That’s doing a lot of work there.
Tyler: When you look at the Pacific Coast and you and I sat right next to the water [it could develop much more]. So that could create quite a few jobs. But in the longer term steady state I think they’ll have a hard time averaging more than 2% growth. So they can attach themselves more closely to the US economy. They use the dollar and let’s just assume their governance does not go crazy. That’s another risk right? So Bukele or whoever succeeds them could overreach. The checks and balances the constitutional protections there seem quite weak. Another possible risk there that even despite his best efforts the country becomes dangerous again. You look at Costa Rica which had been quite safe and did all the right things, and is larger and has many more resources and that’s now becoming a more dangerous place because it was targeted by external, in some cases Mexican drug traffickers. And that could happen to El Salvador as well. So even if think the current campaign is gonna work forever it doesn’t mean the country stays safe forever. It’s not really in a very safe region. So that’s a side risk which will also keep down foreign investment. I don’t know, I’m I am definitely seeing the upside but not super duper optimistic there.
Plenty of fresh material, with transcript, recommended.
The Great Forgetting, a continuing series
On Thursday, the Center for American Progress, a prominent left-leaning think tank that often cultivates policy ideas later adopted by the Democratic Party, proposed a two-year freeze on the prices of 24 food items, such as strawberries and ground beef.
Grocers would voluntarily agree to capping the cost of food in exchange for paying lower fees on credit card transactions, according to the proposal, which was written by a group led by Jared Bernstein, who chaired the White House Council of Economic Advisers during Joe Biden’s presidency.
That, in effect, would force credit card companies to absorb the cost of subsidizing food purchases, a highly unusual arrangement. A draft of the proposal said the Federal Reserve could force credit card companies to do so via its regulatory oversight, though that provision was removed after questions from The Washington Post.
It is not clear how else the government might persuade credit card companies to foot the bill, nor how many grocers would agree.
Here is more from The Washington Post. Elsewhere in The Great Forgetting, three Supreme Court Justices seem to have forgotten what the Constitution says.