One of the weaknesses in economic modelling is that we often significantly underestimate the cost of enforcement of things. This makes means-testing often a worthless, if not negative value, exercise. donmoynihan.substack.com/p/how-a-van-...

Is the large spend on genAI research motivated by potentially becoming an AI monopoly? That would match the paper of the recent Nobel Prize in economics from Aghion+Howitt? Can a firm even become an AI monopoly?

I would not think that this is a good policy mix from an economic and political perspective: - Increasing goods/food costs via tariffs; - Denying SNAP benefits; - Denying pay to government workers; - Cutting healthcare assistance. I wonder if this would also be called a ‘vibecession’….

The Economics Nobel was awarded to Mokyr, Aghion and Howitt for their research on technological and economic growth. I’ve written about the Aghion and Howitt research - if you want to find out how ‘simple’ economics can give us plenty of insights - have a read! www.nominalnews.com/p/aghion-how...

The dangers of genAI and economic policy discussion: Not sure if anyone discussed this, but because in economics there has been a lot written about every economic theory and mechanism, genAI appears to treat every one of them as equally applicable.

So if tariffs get voided by the Supreme Court, there’s a chance that the tariff revenue will have to be refunded to the tariff payers - i.e. firms. Since firms already passed some of the tariff cost to consumers, the de facto outcome would be a transfer from consumers to firms. No comment.

Why is there much criticism of the NK model on the other site? Am I missing something? I thought it explained the optimal response to the Covid inflation very well.

I see some that some polls have shown that work requirements are a "popular" policy. They sounds good theoretically, but are actually really bad: www.nominalnews.com/p/work-requi...

In an upside surprise, it appears tariffs have contributed more to inflation than models predicted. Consumer price index is about 0.7pp higher than without tariffs (basically the entire amount of excess inflation).

Increasing police is not the only solution. Research by Blattman, Duncan, Lessing and Tobon (2023) showed how civilian government interventions in higher trust areas can have significant impact on crime reduction and QoL improvements. www.nominalnews.com/p/community-...

If you, like me, are curious about economic and social questions, come join me at Nominal News. During my PhD, I read many economics papers, and I now share the latest findings in clear, approachable weekly posts on Substack.

- Taking 10% equity in Intel? - That’s a wealth tax. - Tariffs? - That’s a tax on imported goods. - Bus fare? - That’s a lump sum tax on bus users. - Government debt? - That’s a tax today with a defined transfer/negative tax in the future (that has to be paid for with taxes).

How taking equity stakes in companies, raising tariffs, and issuing government debt is all just tax. By viewing the different forms of government raising revenues as a form of tax, it's easier to study the distributional and efficiency impacts of these solutions www.nominalnews.com/p/intel-equi...

You may find it surprising, but in the free bus debate, some economic research would even argue for negative fares - you get paid to use transit! www.nominalnews.com/p/fare-free-...

Thinking of labor in terms of purely supply/demand curves is the reason why many think immigrants compete for jobs and reduce pay. But in reality, without immigrants, many of these jobs wouldn't exist. www.nominalnews.com/p/high-skill...

Instead of thinking in terms of ‘labor shortage’, we should be thinking in terms of a ‘shortage of preferences’. Immigrants have simply different preferences for types of jobs than locals do. Without the immigrant, the job stops existing.

The US continues to do everything besides normal taxes - is this the start of a universal healthcare program in the US?

From @stephensemler.bsky.social newsletter. That's why I was never a fan of the ‘vibecession' theory - things got worse for many when many programs like the child tax credit got cut.

You may have seen this chart making the rounds about whether people are less conscientious. But are the really? I took a deeper dive, asking three questions: 1. Why are we looking at this data? 2. Did the authors explain the data? 3. Is the data unexpected?

Research on immigration shows that immigrants bring significant economic value and are in many cases positive for the fiscal health of the government. The three articles below describe this research at length:

Proponents of immigration restrictions believe that these restrictions will lead to higher domestic hiring. Shouldn't we see this falling then?

How to destroy your competitive advantage in one quick swoop:

The interest rate cut did not impact the US government borrowing costs at all. As expected. Personally, I'd be surprised if we see any more cuts this year. I'd put higher probability on a rate hike (unless courts void tariffs, in which case no change to rates).

Economics often has too much jargon and gate keeping. I want to change that - which is why I write my newsletter.

We've been in a tight labor market for 3+ years In a tight labor market, workers have more bargaining power. This has been the paradigm over the past years With a loosening labor market (due to the Republican agenda), firms will see the paradigm has shifted and that they have the bargaining power

A chart that shows ‘native’ job employment up in the US while immigrant job employment is significantly down…maybe false! Why? Well it's based on surveys. What's the main problem with surveys? People don't have an incentive to tell the truth and… actually respond at all.

Hot Take: Companies would be better off developing algorithms that do 80% of a task close to perfectly, rather than incorporating genAI that can do 95% of the task but with 90% accuracy.

We keep seeing sensational headlines like these - but often they are incorrect or meaningless. I wrote a short guide on how to avoid such sensational headlines:

Media loves sensational economic stats headlines. If you want to filter out the noise, ask these 3 questions when reading any data headlines: 1. Why are we looking at this data? 2. Did the authors explain the data? 3. Is the data unexpected?

Every doctor would tell you not to switch the medicine if it is working. But the private health insurer says they no longer cover it, because there is a cheaper, bio-similar alternative. You switch - it no longer works. Switching back also might not work. Who pays for the damages?

We brought down 9% inflation with 4.5% interest rates. Because it took a year, it wasn't 'transitory' inflation. We now have 4% interest rates, and inflation is ticking up to 3% due to tariffs. This inflation is allegedly 'transitory'.

Inflation - transitory or permanent shock. Suppose you have a firm and one of your workers calls in sick and you have to pay your other workers over time. This would increase your costs, but once your worker is back, the shock disappears. 1/3

When discussions about ‘'national security” quickly turn to racism. It starts with NVIDIA chips and naturally progresses to this: www.bbc.com/news/article...

Different reasons have been suggested as to why people weren't happy with the economy under Biden - inflation, mortgage rates, vibes. Whatever you think it is, you need to grapple with the following two charts - real post tax/transfer income fell and many programs were cut.

Many say that the US healthcare system needs to be expensive to justify the research expenditures. The same people often criticize free public healthcare, as being wasteful since patients may do too many tests or procedures.

Huh... The Republican party is really pro-wealth tax. Who would have guessed.

The US will do everything before implementing better taxation.

Will AI lead to a significant productivity increase? I'm skeptical. We've already had several great technologies - like wells and piped water, which did boost productivity but not by that much. I’d be surprised if AI was different.

The US economy unfortunately looks like it is heading towards this outcome (in comparison to an economy with no new tariffs). And this is without taking into the anti-immigration policy.

The US is currently experiencing lower GDP growth, higher unemployment, rising inflation. Unfortunately real wages will follow shortly. The economic policy mix built by Bessent-Lutnick is really firing on all cylinders here.

Yup - survivorship bias in the WSJ article is the main issue of the idea of sacrificing work-life balance Unfortunately, even economists miss this - as I wrote about the experience of the PhD job market and how it's structure is often praised by 'survivors'. www.nominalnews.com/p/survivorsh...

The criticism of the Fed is unjustified. Here’s a chart that shows their work. Absent shelter (which is only rent - a very lagged variable), US inflation of all non-shelter goods/services has been at or below 2% for 2 years. Note the recent uptick…

If a government offers a tax credit or a subsidy to a company, why shouldn't it be given an equity stake? It could be a choice for the firm whether to accept the benefit. Any research/counterarguments to this?

Thought: to get tickets to “Shakespeare in the Park” - a free play in NYC - you have to line up (either at the show or for a lottery). Economists will quickly point out that we're paying with our time, which is a ‘waste’. If tickets were sold, many would benefit, including the theater.

The GDP measure does correlate well with welfare (first image). But it hides a lot of heterogeneity in how well countries convert GDP into welfare (second image). Figuring out what drives this 'conversion' is important. Think of it like TFP for happiness (Source: Jones and Klenow, 2016)

Programs like unemployment insurance, are rarely mentioned as positive-sum (unlike, say trade). But research by Casey McQuillan (@caseymcquillan.bsky.social) and Brendan Moore shows how UI generates value by allowing job-seekers to find better job matches nominalnews.substack.com/p/unemployme...

Update: based on the tariffs that were set at the end of June, here is how key economic variables for the US are expected to behave. Whether other countries retaliate or don’t, the adverse on impact on US workers will be large - a 4% fall in real wages.

I will be using this term - once you see how often outsiders think they can easily solve the problem, you see this approach in every domain.

Right on cue - another billionaire knows what it means to estimate data. He believes this - 159,309,000 to 159,669,000 - is not an accurate enough estimate of the number of jobs in the US.

Doesn't the behavior of the US housing market really vindicate the New Keynesian sticky price assumption?