UK fact of the day
UK panel data, 1991-2019. Couples who support different parties separate more often. The effect is as strong as some other mismatches, like education. Disagreement over Brexit mattered even more than party preference.
Here is a longer Nikolaus Haufler thread on European fertility, with a variety of interesting observations about other countries.
Spying makes a comeback
That is the theme of my latest Free Press article, here is one excerpt:
It may look like merely the latest story of a wealthy, powerful man making an irresponsible decision. But below the surface, it is also a harbinger of the erosion of privacy today, as well as the acceleration of espionage and the increasing value of secrets. More time and resources are going to be devoted to uncovering secrets, with honeypotting only one part of a larger picture: more spying, more attempted honeypotting, more private surveillance, more attempts to record (and search, using AI) conversations, more hacks of phones and computers, and more attempts to use AI to figure out the details of people’s lives and plans. Life is going to feel much more cloak-and-dagger, especially for the wealthy and influential…
The wealthy and influential are likely to take ever-greater care to minimize public scrutiny, protect their digital privacy, prevent journalists from going through their trash, and travel incognito, and their language in (supposedly) private conversations will have to be more guarded as well. We now live in an era where NDAs for hookups and even dinner dates are a thing.
Worth a ponder, as in the pending world secrets will be more valuable than before. The super-wealthy and their companies can be decisive actors, there are more prediction markets than before, and AI is equalizing the value of high-quality but publicly available information.
Are RCTs underpowered?
Maybe so:
We study the statistical credibility of randomized controlled trials (RCTs) in development economics and the optimal allocation of resources to replication. Using 745 principal-hypothesis tests from 190 articles in leading economics journals, we find that actual t-statistics peak well below the theoretical benchmark of 2.8 expected under 80 percent power, though above values associated with p-hacking. This suggests many RCTs are underpowered. Estimating an empirical Bayes mixture model that accounts for selective publication, we find that approximately 30 percent of published rejections are false discoveries, with average directional power at only 40 percent. At conventional significance thresholds, the posterior probability of a false discovery reaches 66 percent. Doubling original sample sizes lowers the average false discovery rate by five percentage points, whereas tightening the significance threshold to 0.005 yields a larger reduction at the cost of total discoveries. Finally, we characterize a funder’s optimal replication policy under a fixed budget and an evidence standard. Under standard regularity conditions, replications concentrate in an intermediate interval of original test statistics, and the optimal replication sample size is single-peaked in the original t-statistic. Illustrative calibrations show that successful replications reduce aggregate false discovery rates to 1.8–7.8 percent, depending on the evidence standard.
That is from a new paper by
Tuesday assorted links
2. Hayek for our time, by Cass Sunstein, free download for two weeks.
3. Works in Progress is looking for business and finance writers.
4. Matthew Lilley on Harvard grad students. I believe they teach the permanent income hypothesis there?
5. Ethan Mollick on Fable 5.2.
Checking the AI audit of Saez and Zucman’s research.
We checked the anonymous AI audit of Emmanuel Saez and Gabriel Zucman’s research that Marginal Revolution featured on 28 Oct: all 147 problems it calls serious enough to change a headline number, against the papers, their sources and the authors’ own data. The audit’s facts hold up: for 131 of the 147, every fact we could check was right, and none had its core facts wrong. 21 of the 147 change a headline number; 98 depend on a disputed choice of method; 20 change no number; 8 we could not check on that question. A second pass graded the 99 flags we first counted as depending on a disputed choice of method: 11 standard, 70 defensible, 11 questionable, 6 we could not grade, and 1 contested. It found one, No. 54, that does change a headline number, which is why the counts are now 21 and 98. Saez and Zucman were sent our findings on 29 Oct and did not reply by 6 Nov.
Here is the audit of the audit, open code and data, kudos to the authors. Here was the original AI audit. Here is the October 30 revision of that audit.
Addendum: And a revised version with less jargon.
*Godzilla: Minus Zero* (no spoilers)
This is a morally serious movie (really). And Ghidorah stars! The whole thing is about twenty minutes too long, but mostly very good. And like many in the Godzilla series, it offers extended and instructive commentary on American-Japanese relations, and how the Japanese view them. Not for everyone, but I am glad I went.
*Unbeatable: The Brutally Honest Case for Free Markets*
That is the new and forthcoming book from Bryan Caplan, University of Chicago Press. Excerpt:
Real-world free markets deliver one broad benefit that flies under the radar of economic theory: They shield humanity from its own Social Desirability Bias. Markets do the good things that sounds bad. Good things like driving incompetent, unresponsive, and obsolete businesses into bankruptcy. Producing “shameful” products people secretly love. Refusing to produce “admirable” products they secretly loathe. Keeping costly products out of the hands of pe ople who barely appreciate them. Putting convenience above safety. Firing superfluous workers so they search for constructive ways to spend their lives. Charging people to drive. Charging extra during rush hour. Inducing teens to abandon their childish dreams. Persuading grown-ups to volunteer for the uninspiring dirty jobs that someone has to do.
Bryan of course is very much on target here, as he is in the broader text. Here is the Table of Contents:
Introduction: When good sounds bad and bad sounds good
1. What economists really think about markets and government
2. Why economists tragically underrate free markets
3. Why economists absurdly overrate government
4. Irrationality is the best case for and against government
5. What we ought to do but probably won’t
Conclusion: A Plea to the Free-Marketeers of the Future
I am delighted to see another book by Bryan, the title says it all.
Monday assorted links
End the State Veto on Power Lines
It’s one of the peculiarities of American regulatory history that a natural gas pipeline can cross state lines with a single federal permit, but oil and electricity must run a gauntlet of state approvals. When a power line crosses one state to reach another, for example, the intervening state often imposes exorbitant tolls or, worse, vetoes the project entirely. It’s the holdout problem played out among the states.
In a new paper, Liscow, Shapiro and Williams show that after Congress ended the states’ veto over interstate gas pipelines in 1947, miles built per year rose nearly sixfold. Oil pipelines, which still had to run the state gauntlet, held steady. Lower transaction costs let natural gas flow to where it was most valued, creating a national market.
Today, as Liscow and Shapiro write in the Washington Post, the issue is electricity:
An interstate power line, however, typically needs approval from every state it crosses. That gives each state a veto over projects in which the benefits often flow mostly to its neighbors.
New England has experienced the consequences. In 2016, Massachusetts attempted to import Canadian hydropower. New Hampshire, which would have hosted the power lines without getting the same influx of cheap energy, rejected it. A second route through Maine was blocked in a referendum and didn’t deliver power until January. Meanwhile, Massachusetts households paid some of the highest electricity prices in the country.
As with natural gas, electricity is cheapest to produce far from where it is most valued, so to get the most from our national resources we need to transmit electricity across the country.
The Bipartisan American Affordability and Jobs Act, which faces a Senate cloture vote on Monday, would let FERC approve an interstate line that a state has blocked or stalled for a year, a big step toward a national market in electricity.
Let the power flow!
The economics of honeypots
Of course as an economist I am always wondering what the equilibrium is. And, in this case, what is the scarce factor?
It seems that in the case under current consideration, the returns to honeypotting are very high for somebody. Maybe for China, maybe for the shorts, or maybe for parts of the Deep State that seek to shape domestic politics (and they possibly drove the timing of the leak?).
So why are not three potential honeypots sent every day to the most prominent men? If the guy says no, you do not have to pay them for very long, right? Or you can just have them try another, different guy.
I can think of a few hypotheses:
1. The number of attractive women with sufficient spy training is actually pretty low. Furthermore the spy agency has to trust the woman to some degree.
2. The number of attractive women willing to do this is pretty low. But at what wage? And in some countries threats to the family, or benefits to the family, can be added to the transaction.
3. It is difficult to access the most prominent men, and that limits the number of honeypots that can be sent. Furthermore, at some point the honeypot woman has to find time alone with the man, and that is not always easy.
4. In fact three potential honeypots are sent every day to the most prominent men.
5. Competition from the non-honeypot women is so strong the honeypots do not have such a great chance, thus limiting their supply. The non-honeypot temptresses will sometimes have stronger vetting as well.
6. Some of the most prominent men “go the Epstein route” instead, hoping for delegated vetting and a kind of mutual “hostage-taking,” noting that proved extremely risky as well.
What else?
Seb Krier, Ricardian?
Here is the initial post. In the comments Michael Wiebe notes: “So progress per R&D dollar fell by 63%, even while progress per year doubled.” File under: David Ricardo, underrated.
The Paraguayan bank story
Despite its weaknesses, Paraguay’s young democracy was still able to deliver under stress. Its free, boisterous press was the first to sound the alarm about Peña’s shenanigans. The Central Bank’s supervision chief did his job: he examined ueno’s numbers and recommended blocking the sale of its bad loans to a related company (Peña had appointed him to a different agency four days earlier). Legislators, including most of Peña’s fellow Colorados, moved swiftly to investigate and impeach the president. Prosecutors, who belong to a Public Ministry not always independent of the executive, ordered the arrest of ueno’s top directors the day the Central Bank took over the bank. They ordered Peña’s arrest the minute Congress impeached him—all within less than a week.
One of Paraguayan democracy’s greatest accomplishments has been earning an investment-grade rating for its sovereign debt, from Moody’s in 2024 and S&P in 2025. The macroeconomic and financial management behind it, through the finance ministry and the Central Bank, has brought low inflation and overall stability. As a result, Paraguayans can save, invest, and run their households and businesses like never before, and per capita GDP has grown steadily for three decades. That same framework is now repaying ueno’s small depositors through a deposit guarantee of up to $38,000 per person and, so far, has kept the panic from spreading to other banks. Whether it can also make whole the pension fund and the state agencies with hundreds of millions of dollars at stake is the next test.
Last but not least, there’s a big dog that hasn’t barked in this crisis. Unlike almost all of Paraguay’s previous political crises, the military has been a non-entity. No military leader has stepped forward to offer a solution, the press doesn’t even mention the military, and nobody on the streets expects or wishes a military solution. That’s a major democratic win.
Here is much more from Tomas Mandl, who also has an excellent book on Paraguay.
Sunday assorted links
2. Does AI instead commodify jobs?
3. The digital world is making Islam more diverse (The Economist).
4. “An affair with an economist exposed the calculus of modern dating.” (New Yorker)
5. “How Much Economic Value Do AI Systems Produce per Unit of Energy?”
6. John Gray will be writing a column for Unherd.
7. How France took over basketball (New Yorker).
8. “If existing AI capabilities are widely adopted, they could double research output in some fields.”
The Pope probably knows this song
What I’ve been reading
1. Fredrik deBoer, All in Your Head: Illness as Identity, Trauma as Fashion, and the Desire to be Disordered. A good book, I am happy to see positions laid out so clearly and starkly. Is this a radical view, or the mainstream view these days? Excerpt: “For all of Szasz’s rhetorical flair and provocation, he never offered a plausible account of how a society should treat someone in the throes of severe psychosis, someone who is experiencing visual and auditory hallucinations, operating under intense paranoia, unable to care for themselves, and potentially at risk to themselves or others.” Here is a good NYT review. The book is best on mental illness, worst on autism, as the author tries to apply the same hammer all too quickly.
2. Colm Toibin, Homage to Barcelona. Dates from the early 1990s, but stilll one of the best “single city” books I have read, with Maximum City: Bombay Lost and Found being the defining winner of this genre. The book also has aged very well, with the excesses of tourism being added as a local concern. A separate point (not mainly at the book, though the book hints at it) is that I had not realized how much Catalonia was one of the very wealthiest parts of Europe circa 1300.
3. Missouri Williams, The Vivisectors. In the direction of J.G. Ballard and Shirley Jackson, with some Gothic, Hesse, and Hard-Boiled Wonderland tossed in. There is a weird “The University” in a strange city, and the puzzles multiply. I found it compelling (good review here) though other reviews are mixed. It definitely held my attention.
4. Michael Rey and Oriana Zill de Granados, The Havana Syndrome: Secret Weapons, A Government Cover-Up, and the Greatest Spy Mystery of Our Time. It does seem it is true, it was Russia, and likely it was pulsed microwave weapons.
5. M. John Harrison, The End of Everything. On the Booker Short List, this broadly resembles science fiction but (again) in the J.G. Ballard direction. Something has gone wrong in England, aliens of some sort have arrived through what is possibly another dimension, and the infrastructure is starting to crumble…and yet the story remains in the realm of the metaphysical, rather than devolving into science fiction proper.
6. Mathias Énard, Perfecting the Shot. Inside the mind of a killer assassin, short enough to work and not exhaust the reader with tedium.
And there is Jan Dutkiewicz and Gabriel N. Rosenberg, Feed the People! Why Industrial Food is Good and How to Make it Even Better. The book expresses some much-needed sentiments.
Do not forget Deirdre Nansen McCloskey, Equality of Permission: The Politics of Feasible Liberalism.
Fabio Rojas and David de La Torre, Two Visions of the Art World: Competition, Community, and Creative Work, provide a revisionist, anti-Bourdieu account of the art world, stressing its cooperation and community-building as a “dual layer.”