Marginal Revolution https://marginalrevolution.com/ Small Steps Toward A Much Better World Thu, 30 Jul 2026 12:25:01 +0000 en-US hourly 1 https://marginalrevolution.com/wp-content/uploads/2015/10/cropped-MR-logo-thumbnail-32x32.png Marginal REVOLUTION https://marginalrevolution.com/ 32 32 42693868 https://marginalrevolution.com/marginalrevolution/2026/07/the-anatomy-of-cyber-risk.html?utm_source=rss&utm_medium=rss&utm_campaign=the-anatomy-of-cyber-risk The Anatomy of Cyber Risk https://feeds.feedblitz.com/~/964653974/0/marginalrevolution~The-Anatomy-of-Cyber-Risk.html https://marginalrevolution.com/marginalrevolution/2026/07/the-anatomy-of-cyber-risk.html#comments Thu, 30 Jul 2026 18:06:08 +0000 https://marginalrevolution.com/?p=93511 This paper uses computational linguistics to introduce a novel measure of firm-level cyber risk exposure based on the quarterly earnings calls of listed firms. Our measure covers more than 14,000 firms from over 90 countries between 2003 and 2025. The measure is validated using human auditors and a large language model. We show that cyber […]

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This paper uses computational linguistics to introduce a novel measure of firm-level cyber risk exposure based on the quarterly earnings calls of listed firms. Our measure covers more than 14,000 firms from over 90 countries between 2003 and 2025. The measure is validated using human auditors and a large language model. We show that cyber risk exposure affects stock returns and profits, is priced in the options market, predicts actual cyberattacks, and propagates from firm to sector level. Back-of-the-envelope estimates suggest that the global cost of cyber risk exposure is around $1 trillion per year.

That is from a recent paper by Rustam Jamilov, Hélène Rey, and Ahmed Tahoun, forthcoming in the Journal of Finance.

That the market prices cyber risk is a point we should not so readily forget.  Is anyone arguing that recent market declines are due to higher perceived cyber risk?  Does the distribution of these declines match that hypothesis?  (Are we possibly seeing the opposite of what that hypothesis might predict, namely that those companies with the best potential defenses are suffering the most?)  If the cyber risk cost per year had been about $1 trillion a year, what do we think it is now?  Surely members of the rationality community will defer to the scientific methods of investigating these claims…

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/the-anatomy-of-cyber-risk.html/feed 4 93511 https://marginalrevolution.com/marginalrevolution/2026/07/thursday-assorted-links-563.html?utm_source=rss&utm_medium=rss&utm_campaign=thursday-assorted-links-563 Thursday assorted links https://feeds.feedblitz.com/~/964625936/0/marginalrevolution~Thursday-assorted-links.html https://marginalrevolution.com/marginalrevolution/2026/07/thursday-assorted-links-563.html#comments Thu, 30 Jul 2026 16:24:33 +0000 https://marginalrevolution.com/?p=93506 1. Joshua Rothman on lookism. 2. Young adults are using AI to manage their social media feeds (WSJ). 3. What predicts an NBA Achilles tear? 4. LLM data set on changing cultural trends over the centuries. 5. Xi’an Famous Foods is coming to Clarendon. 6. If a German expressionist movie director had filmed a silent […]

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]]> 1. Joshua Rothman on lookism.

2. Young adults are using AI to manage their social media feeds (WSJ).

3. What predicts an NBA Achilles tear?

4. LLM data set on changing cultural trends over the centuries.

5. Xi’an Famous Foods is coming to Clarendon.

6. If a German expressionist movie director had filmed a silent Odyssey in the 1920s.

7. Important NBER methods lecture at 3 p.m. eastern today.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/thursday-assorted-links-563.html/feed 36 93506 https://marginalrevolution.com/marginalrevolution/2026/07/the-endangered-species-act-reduces-housing.html?utm_source=rss&utm_medium=rss&utm_campaign=the-endangered-species-act-reduces-housing The Endangered Species Act Reduces Housing https://feeds.feedblitz.com/~/964535777/0/marginalrevolution~The-Endangered-Species-Act-Reduces-Housing.html https://marginalrevolution.com/marginalrevolution/2026/07/the-endangered-species-act-reduces-housing.html#comments Thu, 30 Jul 2026 11:16:05 +0000 https://marginalrevolution.com/?p=93502 Max Tabarrok’s paper on the Endangered Species Act and housing (WP) has just been published in the Journal of Public Economics! It’s a clever paper: Max observed that the moment an animal is put on the endangered species list, developers face enhanced compliance costs and liability risk. But what’s important for an empirical economist is […]

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]]> Max Tabarrok’s paper on the Endangered Species Act and housing (WP) has just been published in the Journal of Public Economics! It’s a clever paper: Max observed that the moment an animal is put on the endangered species list, developers face enhanced compliance costs and liability risk. But what’s important for an empirical economist is that this increased regulation isn’t national–it binds just where the species lives. Thus, the ESA creates many natural experiments, places where it binds and nearby places where it doesn’t and the list changes over time–there were 82 listings in 1970 and nearly 1500 today–and there are even some de-listings which reduce regulation.

Here, for example, is a picture of the habitat (red) and control areas (blue) for when the Northern Long Eared Bat was put on the endangered species list.

 

The bottom left panel measures annual housing permits per 1000 1980 pop in treatment (red) versus control (blue) areas. The bottom right is the event study coefficients. After the bat was put on the endangered species list, the number of new housing permits declined in areas where bats might live relative to control areas.

Here is what happened when the Peregrine falcon was delisted. Before the delisting, housing permits were lower in regions (red) where the falcon had habitat compared to controls areas but after the delisting the treatment areas caught up to the control areas.

Overall:

…this paper provides evidence that an additional endangered species listing reduces annual housing permit flows by 0.5 permits per thousand 1980 residents, about 10% of the average place’s permit flow. Accounting for spillovers and diminishing costs, my estimates suggest the aggregate effect of the ESA has been to reduce the national housing stock by…roughly 6.3 million missing units over 1980–2024, about 4% of the 2025 housing stock.

Now, you might say, ok this shows the ESA has costs. What about the benefits of the ESA? It’s hard to measure the benefits, of course, or even know if the ESA is effective. But Max shows using satellite data that there are quite a few places where the ESA binds on infill development.

…at the intensive margin of housing production, new developments are often replacing existing buildings or are filling in space in a highly developed area that could not host endangered species even if no new construction took place. On the intensive margin, the tradeoff with species protection does not bind, and may even be positive sum as it substitutes for less dense greenfield development. Therefore, whether and how much the ESA constrains development on the extensive vs intensive margin is relevant to the tradeoffs we face between housing production and species protection, and thus is relevant to the aggregate welfare effects of the law.

In this section I extend the main empirical specification of the paper to satellite data on land use from the National Land Cover Database (NLCD) (Multi-Resolution Land Characteristics Consortium, 2025) and to heterogeneity within the Building Permits Survey to assess where the effects of the Endangered Species Act are accruing.

The NLCD is a set of satellite images of the United States compiled and pre-classified by the U.S. Geological Survey. They classify 30-square-meter pixels into one of fifteen land use groups, including four levels of development, three types of forest, and two types of wetland. The NLCD has annual files going back to 1985. I overlap these pixels with the map of permit-issuing places in the BPS using constant 2024 borders, and track the changes to pixels within each place over time. The hazard rate of extensive margin or greenfield development is measured by the flow of non-developed pixels (e.g., forests or wetlands) into any of the four levels of developed land use, divided by the total area of greenfield land use.

He concludes:

The most urbanized 15% of places are responsible for 90% of total permit flows, while the highest-value endangered species habitat is well outside these developed areas. The Endangered Species Act seems to restrict infill development in these dense areas as much as it restricts greenfield development in exurban sprawl (Table 9, Table 10, Table 11). Relaxing the legal mechanism of the Endangered Species Act in already developed areas may increase permit flows in dense, energy- and land-efficient cities in California and on the East Coast at the expense of sprawling suburbs in the Sun Belt, increasing both housing supply and endangered species habitat.

The Trump administration is trying to limit the ESA, multiple lawsuits have already been filed. Max’s paper is thus timely and it points to a fix that might satisfy housing proponents and environmentalists: relax the ESA’s bite on infill and redevelopment in already-built-up areas, where the housing-versus-habitat tradeoff barely binds, rather than across the board.

Addendum: Obviously, I am pleased as punch to see this paper in print. Max began writing the paper before graduate school–he has only just finished his first year. He was fortunate to have had lots of great advice along the way, most notably from a superb pre-doc he did at Dartmouth under the auspices of Heidi Williams.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/the-endangered-species-act-reduces-housing.html/feed 35 93502 https://marginalrevolution.com/marginalrevolution/2026/07/an-experiment-for-our-schools.html?utm_source=rss&utm_medium=rss&utm_campaign=an-experiment-for-our-schools An experiment for our schools https://feeds.feedblitz.com/~/964481804/0/marginalrevolution~An-experiment-for-our-schools.html https://marginalrevolution.com/marginalrevolution/2026/07/an-experiment-for-our-schools.html#comments Thu, 30 Jul 2026 08:07:55 +0000 https://marginalrevolution.com/?p=93508 Schools in at least three states will be equipped with drones this year that can zoom through halls, smash windows and pepper-spray active shooters if teachers report a threat. At least nine schools — three in Florida, five in Georgia and one in Colorado — will have storage boxes that house the plastic, nonlethal aircraft […]

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Schools in at least three states will be equipped with drones this year that can zoom through halls, smash windows and pepper-spray active shooters if teachers report a threat.

At least nine schools — three in Florida, five in Georgia and one in Colorado — will have storage boxes that house the plastic, nonlethal aircraft made by Austin-based Mithril Defense. The drones, which can be activated by teachers, are capable of reaching a shooter within 15 seconds.

The aircraft are designed to distract their targets by flashing strobes, blaring sirens, spraying them with pepper gel, or ramming into them at 60 mph.

Here is the full piece.  As I have been saying, be long countries where local crime is a major problem.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/an-experiment-for-our-schools.html/feed 73 93508 https://marginalrevolution.com/marginalrevolution/2026/07/forty-interesting-facts-about-australia.html?utm_source=rss&utm_medium=rss&utm_campaign=forty-interesting-facts-about-australia Forty interesting facts about Australia https://feeds.feedblitz.com/~/964436759/0/marginalrevolution~Forty-interesting-facts-about-Australia.html https://marginalrevolution.com/marginalrevolution/2026/07/forty-interesting-facts-about-australia.html#comments Thu, 30 Jul 2026 05:22:54 +0000 https://marginalrevolution.com/?p=93500 Australia was the richest country on earth, per capita, for decades. After the 1850s gold rush, up until the 1890s depression, Australia had the highest per capita income in the world. In 1850, probably only the United Kingdom and the Netherlands sat above Australia, by about 20 per cent, with the United States 9 per cent […]

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Australia was the richest country on earth, per capita, for decades. After the 1850s gold rush, up until the 1890s depression, Australia had the highest per capita income in the world. In 1850, probably only the United Kingdom and the Netherlands sat above Australia, by about 20 per cent, with the United States 9 per cent below. After the gold rushes Australia passed both, and from 1860 to 1890 the gap over the United States ran at 25 or 30 per cent.

And:

A cow cost as much as £84 in 1796, about several years’ wages for an English labourer. Only government, or its military/civil officers, owned cattle and horses in 1796, which were extraordinarily hard to import in the first decade, having to survive the long distance from South Africa or India. In England, an ordinary cow would have cost around £10.

And:

John Stuart Mill and Harriet Taylor seriously discussed running off to Australia. Mill was an active supporter of the movement that founded South Australia, joining the South Australian Association. Harriet’s younger brother, Arthur Hardy, migrated to South Australia and became a pastoralist and politician there. Liberals hoped that South Australia would become a progressive leader in political and social equality. Indeed, South Australia became the first self-governing jurisdiction in the world to allow women to vote and stand for parliament, in 1895.

And:

Australia’s 1890s economic depression was worse than the 1930s Great Depression. Real GDP per capita fell by around 20 per cent over the 1890s, compared with a fall of only about 10 per cent over the 1930s. Unlike America, Australia’s banking system largely remained intact during the 1930s. In part, that is because Australian banks remembered the catastrophic banking collapse of the 1890s, fuelled by huge credit growth and lax standards, particularly in Victoria. Of the 64 deposit-taking institutions in Australia in 1891, 54 were closed by 1893. A severe drought made economic recover even more difficult.

All forty are interesting, by Andrew Kemp on his very good Australia Substack.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/forty-interesting-facts-about-australia.html/feed 20 93500 https://marginalrevolution.com/marginalrevolution/2026/07/reforms-to-the-phd.html?utm_source=rss&utm_medium=rss&utm_campaign=reforms-to-the-phd Reforms to the PhD? https://feeds.feedblitz.com/~/964340165/0/marginalrevolution~Reforms-to-the-PhD.html https://marginalrevolution.com/marginalrevolution/2026/07/reforms-to-the-phd.html#comments Wed, 29 Jul 2026 21:43:14 +0000 https://marginalrevolution.com/?p=93505 The Trump administration is pairing top universities with corporate giants in an effort to steer traditional PhD programs toward national scientific priorities. Today, the White House and National Science Foundation are announcing a $47 million pilot program to fund around 250 four-year doctorates in technical fields, starting this fall. Students in the pilot will be […]

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The Trump administration is pairing top universities with corporate giants in an effort to steer traditional PhD programs toward national scientific priorities.

Today, the White House and National Science Foundation are announcing a $47 million pilot program to fund around 250 four-year doctorates in technical fields, starting this fall. Students in the pilot will be placed at an industry partner, where they will spend at least one year doing “practical research” that can go towards their dissertation. NSF’s investment will fund three years of these PhDs, with 31 universities and 20-plus companies funding the rest.

“About the same amount of basic research is done today in academia as in the private sector,” Michael Kratsios, the director of the White House Office of Science and Technology Policy, told Pirate Wires. “Over time, while the ecosystem has changed and different players have emerged where important scientific work is being done, the institutions which train our next generation of scientists have not really been updated.”

…The pilot represents a small fraction of the more than 45,000 science and engineering doctorates awarded annually — but the administration says it’s a “scalable model” that can expand to more universities and companies.

Here is the full story, I will pass along more details as I learn them.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/reforms-to-the-phd.html/feed 37 93505 https://marginalrevolution.com/marginalrevolution/2026/07/what-should-i-ask-jared-diamond-2.html?utm_source=rss&utm_medium=rss&utm_campaign=what-should-i-ask-jared-diamond-2 What should I ask Jared Diamond? https://feeds.feedblitz.com/~/964306547/0/marginalrevolution~What-should-I-ask-Jared-Diamond.html https://marginalrevolution.com/marginalrevolution/2026/07/what-should-i-ask-jared-diamond-2.html#comments Wed, 29 Jul 2026 18:36:20 +0000 https://marginalrevolution.com/?p=93499 Yes, I will be doing a Conversation with him.  His whole career is fair game, though many of my questions will cover his forthcoming book Profits, Prophets, Coaches, and Kings (When) Do Leaders Matter? From the Amazon summary: “Now, in Profits, Prophets, Coaches and Kings, he studies leaders throughout time to answer the question: do the actions […]

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]]> Yes, I will be doing a Conversation with him.  His whole career is fair game, though many of my questions will cover his forthcoming book Profits, Prophets, Coaches, and Kings (When) Do Leaders Matter?

From the Amazon summary: “Now, in Profits, Prophets, Coaches and Kings, he studies leaders throughout time to answer the question: do the actions of individuals truly influence history? Or is humanity subject to larger historical, technological, cultural, geographical forces, far beyond the influence of individuals, no matter how powerful they may seem?”

So what should I ask him?

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/what-should-i-ask-jared-diamond-2.html/feed 82 93499 https://marginalrevolution.com/marginalrevolution/2026/07/wednesday-assorted-links-564.html?utm_source=rss&utm_medium=rss&utm_campaign=wednesday-assorted-links-564 Wednesday assorted links https://feeds.feedblitz.com/~/964276916/0/marginalrevolution~Wednesday-assorted-links.html https://marginalrevolution.com/marginalrevolution/2026/07/wednesday-assorted-links-564.html#comments Wed, 29 Jul 2026 16:16:02 +0000 https://marginalrevolution.com/?p=93495 1. Mark Zuckerberg on our AI future (WSJ). 2. Claims about beauty (recommended). 3. 26 charts of Australia in trouble. 4. Hans Moravec interview (right now ungated?). 5. Those new service sector therapist jobs end the fertility crisis too. 6. The Routledge Handbook of Classical Liberalism. 7. Profile of Reihan Salam (NYT).

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]]> 1. Mark Zuckerberg on our AI future (WSJ).

2. Claims about beauty (recommended).

3. 26 charts of Australia in trouble.

4. Hans Moravec interview (right now ungated?).

5. Those new service sector therapist jobs end the fertility crisis too.

6. The Routledge Handbook of Classical Liberalism.

7. Profile of Reihan Salam (NYT).

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/wednesday-assorted-links-564.html/feed 96 93495 https://marginalrevolution.com/marginalrevolution/2026/07/data-on-chinese-innovation.html?utm_source=rss&utm_medium=rss&utm_campaign=data-on-chinese-innovation Data on Chinese innovation https://feeds.feedblitz.com/~/964149182/0/marginalrevolution~Data-on-Chinese-innovation.html https://marginalrevolution.com/marginalrevolution/2026/07/data-on-chinese-innovation.html#comments Wed, 29 Jul 2026 06:57:55 +0000 https://marginalrevolution.com/?p=93493 China’s technological progress in recent decades has been viewed with admiration, alarm, and (in some cases) doubt. To better understand the Chinese innovation ecosystem, we compile a dataset of almost 14 million domestic Chinese patent publications. We focus on the subset of critical technologies identified by the U.S. Department of Defense. Several surprising patterns emerge […]

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China’s technological progress in recent decades has been viewed with admiration, alarm, and (in some cases) doubt. To better understand the Chinese innovation ecosystem, we compile a dataset of almost 14 million domestic Chinese patent publications. We focus on the subset of critical technologies identified by the U.S. Department of Defense. Several surprising patterns emerge from the data: Chinese patenting is strongly associated with other measures of innovative progress; patents are not concentrated in corporate giants such as Huawei; universities have played a key role in innovation, much greater than state-owned enterprises or government-owned facilities; and fewer than one in ten Chinese critical technology patents involves an inventor with U.S. experience or training. Finally, using four text-based measures of patent quality, we show that the rise of Chinese patenting in critical technologies has not been associated with a decline in quality relative to the U.S. awards.

That is from a recent paper by Josh Lerner, Namrate Narain, Dimitris Papanikolaou, Amit Seru, and Zunda Winston Xu.  Via the excellent Kevin Lewis.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/data-on-chinese-innovation.html/feed 17 93493 https://marginalrevolution.com/marginalrevolution/2026/07/you-will-learn-to-love-ai-writing.html?utm_source=rss&utm_medium=rss&utm_campaign=you-will-learn-to-love-ai-writing You will learn to love AI writing https://feeds.feedblitz.com/~/964126001/0/marginalrevolution~You-will-learn-to-love-AI-writing.html https://marginalrevolution.com/marginalrevolution/2026/07/you-will-learn-to-love-ai-writing.html#comments Wed, 29 Jul 2026 04:52:47 +0000 https://marginalrevolution.com/?p=93498 That is the theme of my latest Free Press article, excerpt: But do I wish to eschew AI writing for the rest of my life? Absolutely not. Most of all, I want AI writing to get better, so it does not irritate me with its clichés and all too obvious identifying marks. I want AI writing […]

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]]> That is the theme of my latest Free Press article, excerpt:

But do I wish to eschew AI writing for the rest of my life? Absolutely not. Most of all, I want AI writing to get better, so it does not irritate me with its clichés and all too obvious identifying marks. I want AI writing that can fool me, and maybe sometimes I am already getting it.

Do you know Paul Simon’s lovely song “American Tune”? It is one of my favorites. A small percentage of listeners know that one of the core melodies is taken from Johann Sebastian Bach, namely the Passion Chorale from “St. Matthew Passion.” You could say Paul Simon is a plagiarist, though I would prefer not to use this term. He borrowed creatively, as do many other popular music artists.

Do many listeners care? No, although a few might feel a pang of musical nerd pride at learning of the association with Bach.

But wait, it gets worse yet. That melody does not come originally from Bach, but rather he in turn plagiarized a 1601 secular love song by Hans Leo Hassler, namely “Mein G’müt ist mir verwirret” (My feelings are confused). So the lineage is not even the glamorous one you might have imagined. If anything, “American Tune” sounds closer to the Hassler melody than to Bach’s adaptation.

Are you upset yet? Probably not, and that is good.

Someday we will feel the same way about text generated with the assistance of AI. We won’t care much where it came from, and much of the time we will not even know.

Recommended, and I hope the AIs like it too.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/you-will-learn-to-love-ai-writing.html/feed 62 93498 https://marginalrevolution.com/marginalrevolution/2026/07/congratulations-to-ross-d-and-others.html?utm_source=rss&utm_medium=rss&utm_campaign=congratulations-to-ross-d-and-others Congratulations to Ross D. and others https://feeds.feedblitz.com/~/964035575/0/marginalrevolution~Congratulations-to-Ross-D-and-others.html https://marginalrevolution.com/marginalrevolution/2026/07/congratulations-to-ross-d-and-others.html#comments Tue, 28 Jul 2026 21:34:00 +0000 https://marginalrevolution.com/?p=93497 Ross Douthat, an opinion columnist at The New York Times, is leaving to join the CBS News program “60 Minutes” as a correspondent, the show’s executive producer said in a memo to staff on Tuesday. Mr. Douthat is among a group of journalists joining for the show’s 59th season, which will premiere on Sept. 13. […]

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Ross Douthat, an opinion columnist at The New York Times, is leaving to join the CBS News program “60 Minutes” as a correspondent, the show’s executive producer said in a memo to staff on Tuesday.

Mr. Douthat is among a group of journalists joining for the show’s 59th season, which will premiere on Sept. 13. The writer Sebastian Junger and Gianna Toboni, a former Vice News correspondent, will become contributors, along with Trevor Phillips, a British journalist who joined CBS last month. Norah O’Donnell, the former anchor of “CBS Evening News,” will be a correspondent as well.

They are the first significant hires at the long-running Sunday program since CBS’s new editor in chief, Bari Weiss, orchestrated a shake-up that led to the departure of three top correspondents this spring, including the veteran journalist Scott Pelley.

Here is the full NYT story.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/congratulations-to-ross-d-and-others.html/feed 63 93497 https://marginalrevolution.com/marginalrevolution/2026/07/tuesday-assorted-links-579.html?utm_source=rss&utm_medium=rss&utm_campaign=tuesday-assorted-links-579 Tuesday assorted links https://feeds.feedblitz.com/~/963969437/0/marginalrevolution~Tuesday-assorted-links.html https://marginalrevolution.com/marginalrevolution/2026/07/tuesday-assorted-links-579.html#comments Tue, 28 Jul 2026 16:27:44 +0000 https://marginalrevolution.com/?p=93489 1. The economics of personal holding companies, including in the Nordics. 2. Jongkuch Mach is a good name for a very tall basketball player. 3. Can AI predict who will be the most important philosopher in 2046?  For economics, the top pick of GPT Pro is Ludwig Straub, second choice is Stefanie Stantcheva.  I like […]

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]]> 1. The economics of personal holding companies, including in the Nordics.

2. Jongkuch Mach is a good name for a very tall basketball player.

3. Can AI predict who will be the most important philosopher in 2046?  For economics, the top pick of GPT Pro is Ludwig Straub, second choice is Stefanie Stantcheva.  I like those selections, but perhaps they are more 2036 than 2046?

4. “Pope Clement’s Cafe”?

5. Roon is a good writer.

6. Emily Wilson on Nolan.

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/tuesday-assorted-links-579.html/feed 74 93489 https://marginalrevolution.com/marginalrevolution/2026/07/the-apples-and-oranges-tribunal.html?utm_source=rss&utm_medium=rss&utm_campaign=the-apples-and-oranges-tribunal The Apples and Oranges Tribunal https://feeds.feedblitz.com/~/963888317/0/marginalrevolution~The-Apples-and-Oranges-Tribunal.html https://marginalrevolution.com/marginalrevolution/2026/07/the-apples-and-oranges-tribunal.html#comments Tue, 28 Jul 2026 11:13:43 +0000 https://marginalrevolution.com/?p=93438 Suppose that apples sell for more than oranges and Parliament in it’s wisdom decides that, at last, apples and oranges must be compared. Not by shoppers — shoppers are biased, they merely reveal what they are willing to pay — but by a tribunal, which will determine whether apples and oranges are of truly equal […]

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]]> Suppose that apples sell for more than oranges and Parliament in it’s wisdom decides that, at last, apples and oranges must be compared. Not by shoppers — shoppers are biased, they merely reveal what they are willing to pay — but by a tribunal, which will determine whether apples and oranges are of truly equal value and thus must sell at the same price.

What would the tribunal need to know?

Start with land. Orange groves sit on Florida real estate with one set of alternative uses; apple orchards occupy Washington hillsides with another. The opportunity cost of an orange includes the housing development, the solar farm, the tourist attraction not built on that grove. How is the tribunal to value what was never built? Perhaps you answer: look at land prices. Brilliant suggestion, I reply. Keep going.

Next, capital. Orchards take years to mature, so today’s fruit embodies investments made under yesterday’s expectations about today, financed at interest rates the tribunal must somehow incorporate. Then storage: apples keep, oranges rot, so an apple and an orange in April are different goods than the “same” fruits in October. Add transportation, refrigeration, frost, pests, crop insurance, the option to divert fruit into juice, cider, marmalade, or pie, substitution with every other item in the produce aisle, and the shifting preferences of millions of consumers, each of whom knows things about his own breakfast that he could not articulate to a tribunal. It all matters.

To determine the “just” price of apples and oranges, the tribunal would need the entire general-equilibrium system.

Market prices are necessary to compare alternative uses of resources, as Mises taught us in 1920. In 1945, Hayek added the knowledge problem: the relevant knowledge is dispersed, local, tacit, and fleeting. Free markets are the only institution that aggregates that knowledge, articulates it in prices and gives people a reason to listen and respond. A price is a signal wrapped up in an incentive. Apples and oranges can be compared but only by the incomparably complex operations of the price system. There is a reason we call it the super-market.

Britain is now running this experiment in the labor market–Is a retail worker equal to a warehouse worker? A canteen worker equal to a coal miner? A dinner lady equal to a gravedigger?

Under the Equality Act’s “equal value” provisions, tribunals compare jobs by scoring their intrinsic properties — effort, skill, responsibility, working conditions — the labor theory of value applied to labor. How is it going? The Tesco litigation began in 2018; the tribunal’s fact-finding hearing ran 36 days, its judgments run to more than 900 pages resting on some 19,000 pages of training manuals, and the independent experts have yet to begin the report that will actually say whether a shelf-stacker’s job equals a warehouse worker’s. Eight years, and the calculation has not started. Apples and oranges, adjudicated but not, as Orwell or Marx or Stafford Beer might have imagined, by a industrial bureaucracy or by an all-knowing artificial intelligence but by lawyers and commissions and tribunals. The worst of all worlds.

And having discovered that the tribunal cannot price two jobs in a decade, the government now proposes to add race and disability comparisons and an enforcement unit to publish official guidance on which reasons for a wage difference are permissible. A bureau of allowable scarcities.

Moreover, let us say that one day the tribunal reaches its conclusion and finds the truly just apple to orange price. At last, nirvana. The next day the public learns that vitamin C really does combat cancer–the demand for orange juice skyrockets. To encourage more orange juice production we need a higher price but wait…nothing about oranges or apples or the labor required to produce them has changed. We need to attract more labor to the orange juice industry but the effort, skill, responsibility and working conditions of orange juice workers has not changed. How can we justly pay them more than their apple juice brethren? Blank out.

The market compares apples and oranges every day. It is the only institution that can. But there is a deeper error here than computation. Suppose the tribunal succeeded. Suppose that after another decade it delivered the true and final score, shelf-stacker versus warehouseman. What would it have found? Not justice. A wage is not a grade on your character or a measure of your worth as a human being. A wage is a price — a report on how scarce your skills are relative to the desires of people you will never meet. Nurses are not morally less worthy than plumbers should they earn less than plumbers or vice-versa, and no one thinks otherwise except the tribunals.

Hayek nailed it in The Mirage of Social Justice: justice is about conduct — how one person treats another. An employer who defrauds his workers, an employee who steals from the till, a product sold under false pretenses — condemn them, take them to court. But the pattern of prices that emerges from millions of voluntary trades is nobody’s conduct. No one chose it, no one designed it, no one can be guilty of it. The constellation of prices is, in Ferguson’s phrase, the result of human action but not of human design. Demanding that prices be just is a category error, like suing the weather. Prices don’t grade our merit; they guide our actions. Ask them to do the first and they can no longer do the second.

Judge Anthony Kennedy said it well in the Ninth Circuit ruling that (mostly) killed comparable worth in the US: “neither law nor logic deems the free market system a suspect enterprise.”

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/the-apples-and-oranges-tribunal.html/feed 87 93438 https://marginalrevolution.com/marginalrevolution/2026/07/the-aea-presidential-election.html?utm_source=rss&utm_medium=rss&utm_campaign=the-aea-presidential-election The AEA presidential election https://feeds.feedblitz.com/~/963822743/0/marginalrevolution~The-AEA-presidential-election.html https://marginalrevolution.com/marginalrevolution/2026/07/the-aea-presidential-election.html#comments Tue, 28 Jul 2026 06:44:56 +0000 https://marginalrevolution.com/?p=93487 AEA is the American Economics Association, and a new president is needed, here is the candidate and likely winner: PINELOPI (PENNY) KOUJIANOU GOLDBERG, William Nordhaus Professor of Economics and Global Affairs, Yale University. Statement of Purpose: I am honored to stand for President of the American Economic Association. Economics has long contributed powerful tools to understand […]

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]]> AEA is the American Economics Association, and a new president is needed, here is the candidate and likely winner:

PINELOPI (PENNY) KOUJIANOU GOLDBERG, William Nordhaus Professor of Economics and Global Affairs, Yale University.

Statement of Purpose: I am honored to stand for President of the American Economic Association. Economics has long contributed powerful tools to understand human behavior, markets, institutions, and public policy, but the environment in which we conduct research, teach, and engage with society is evolving rapidly. New technologies, especially artificial intelligence, are reshaping research methods, classroom instruction, and the evaluation and dissemination of scholarship. These changes create exciting opportunities, but they also raise difficult questions about the future of peer review in our journals, transparency, incentives, and research and teaching standards more generally. The profession also faces broader challenges: maintaining rigorous, credible, and independent research, supporting young scholars in an increasingly uncertain academic environment, and ensuring that economics remains open to diverse perspectives, methods, and global talent. If elected, I hope to use my research, teaching, policy, and editorial experience to help address these challenges, while promoting the core values of our discipline.

Here is the link.  Hilarious as always that there is only one candidate allowed (which model predicts this as optimal?), but for the first time I have seen a meaningful statement of purpose that I also like.  That said, I would like to see her endorse my core proposal, namely turning over all submissions, referee reports, and revisions (anonymized is fine) to the major AI companies for use as training data.  After all, such an act would further the mission of the AEA, right?

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]]> https://marginalrevolution.com/marginalrevolution/2026/07/the-aea-presidential-election.html/feed 24 93487 https://marginalrevolution.com/marginalrevolution/2026/07/the-confucian-fertility-paradox.html?utm_source=rss&utm_medium=rss&utm_campaign=the-confucian-fertility-paradox The Confucian fertility paradox https://feeds.feedblitz.com/~/963801071/0/marginalrevolution~The-Confucian-fertility-paradox.html https://marginalrevolution.com/marginalrevolution/2026/07/the-confucian-fertility-paradox.html#comments Tue, 28 Jul 2026 04:56:44 +0000 https://marginalrevolution.com/?p=93488 Total fertility rates in East Asia have fallen to levels without historical precedent, even though the region’s Confucian heritage long placed extraordinary emphasis on family continuity and large families. We argue that this “Confucian Fertility Paradox” dissolves once we separate two strands of the tradition and recognize that modernization affected them very differently. The pro-natal […]

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Total fertility rates in East Asia have fallen to levels without historical precedent, even though the region’s Confucian heritage long placed extraordinary emphasis on family continuity and large families. We argue that this “Confucian Fertility Paradox” dissolves once we separate two strands of the tradition and recognize that modernization affected them very differently. The pro-natal strand, built on lineage continuity, ancestor worship, and reliance on sons for old-age support, was gradually switched off as child mortality fell, incomes rose, women entered the labor force, and state pensions replaced the family as the main source of security in old age. What survived was the second strand: the veneration of education and of status won through examination success, rooted in the imperial examination tradition. Under modern conditions this surviving strand reverses sign with respect to its effect on fertility. Where the historical examination system rewarded having many sons so that one might succeed, the modern single-ranking tournament rewards concentrating resources on one or two intensively educated children, and the quantity/quality tradeoff turns a once pro-natal culture into a powerful engine of low fertility. Drawing on recent empirical evidence from China and Korea, we show how education competition becomes the channel through which traditional values now suppress childbearing. We explain why standard pro-natalist policies, such as removing birth restrictions or offering cash subsidies, accomplish little when the underlying problem is a competitive equilibrium in parental investment, and we argue that policies aimed at the source of the distortion, such as structural reform of educational pathways, hold more promise.

Here is the paper by Hanming Fang and Chang Liu.  Usually I am suspicious of such explanations, as the low birth rates typically apply also to families who do not face such education/career considerations.  Thailand?  Indians in Singapore?  Ethnic minorities in China?  But I pass this along nonetheless, due to the importance of the topic.  Via Glenn Mercer.

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