For someone like me, economics is everywhere, if only you know where and how to look. Where is “economics” when it comes to Valentine’s Day? Here are some of the less romantic suggestions: Some economists have tried to model “marriage” as joint production functions, implicitly modeling a marriage as a “firm” that “produces” things like “household services.”  For example, in our household, I mow the grass because I am physically larger and can push the lawnmower up the hill. My wife, because she is a surgeon and has standards for cleanliness far beyond my own, cleans and organizes a large swath of the house. But is it accurate to say that we “trade” these “services” with one another? If so, I’m sure both of us would like to revisit the terms of this agreement we never struck. Other economists (including Lloyd Shapely, co-recipient of the 2012 Nobel Prize in Economics) have modeled marriage as a matching game. With some caveats and assumptions, they proved that there will always exist a stable set of marriages. This work serves as the basis of the algorithms that popular dating apps have been using for years. Though, as anyone in a relationship will attest, the work of finding a match and keeping one are two very different tasks. These models aren’t wrong, exactly, but they feel somewhat… incomplete. “Hey baby, what do you say you and I… specialize in certain aspects of household production and trade services with one another?” That probably won’t win you many dates. Despite my best efforts, I have yet to win an argument with my wife by appealing to comparative advantage. Instead, what I want to offer here are insights from economics that might help everyone, regardless of their relationship status, in some way, shape, or form today. To do so, I’m going to explain the economic concepts of signaling and thinking at the margin. Signaling 101 Suppose that there is someone that you fancy. You want to convey this to them, and you are an economist. Since you are an economist, the obvious answer is cash, right? Wrong. Cash is impersonal. It reveals nothing about your feelings to the other person because anyone could give them cash. To demonstrate your commitment, what you need is something that is costly for you in a way that money alone isn’t. The cost has to be personal and demonstrate that you have invested time, attention, and effort that can’t be faked.  High school students use clever and endearing prom proposals, and pop culture is replete with examples of boombox serenades and flash mob dance performances. These are tremendously costly, requiring hours of practice and coordination, and they are not guaranteed to work.  Herein lies the rub: the signal cannot just be costly for the sender to send, it must also be valuable for the recipient to receive. (I promise you that if I tried to tell my wife how much I love her with a public dance and song routine, she would absolutely walk away from me.) This is why giving someone their favorite flowers (especially if they’re difficult to find) is a better gift than just any flowers or, worse, cash. With each increase of commitment and personalization, the gift says things like, “I was paying attention, so I know what you like,” or, “I went out of my way to get it for you!” These signals are almost impossible to fake, which is exactly what makes them valuable. People reveal what they want all the time. But it takes effort to listen and pick up on the cues that they give. The best romantic gestures aren’t necessarily expensive. They’re attentive. Thinking at the Margin What exactly is “the margin?” For all its emphasis, economics is remarkably unclear on this. To my knowledge, all we’ve ever really said on the matter is that “the margin” is basically just “the next unit” or, if we’re being really thorough, “the next decision.” Let’s start with a simple thought experiment. Suppose there are two people that you would like to go on dates with and who would like to go on dates with you. Let’s call them Pat and Devin. Your expected marginal utility for dates with them is as follows: (Remember, this hypothetical is about dates, not relationships.) Based on the utility amounts in the table, if you are utility maximizing, you should make your decision only based on the next available date. So, go on three dates with Pat, then go on two dates with Devin, then back to Pat for two dates… you get the idea. If we think at “the margin,” and assume that Pat and Devin are also utility maximizing, we can quickly see how someone might “date around.” When you’re casually dating, the margin is “the next date,” which could be a single evening. But when you find the right person, something shifts. The margins stops being “the next date,” the time horizon gets longer. Eventually, the margin becomes “the rest of your life.” You’re no longer asking, “should I go on one more date with this person,” but “Do I want to build a life with them?” Looking at the table again through the lens of a potential “life partner,” it’s clear that Pat is the better choice. The total utility of a life with Pat exceeds that of a life with Devin. But you’d never see that if you only ever thought of one date at a time. Being Lovely Economics gets a bad rap as “the dismal science.” Based on the first, simplest examples I offered above, you might think some of this is deserved. Phrases like “joint production function” and “expected marginal utility” aren’t doing us any favors on Valentine’s Day. But the economist who started it all had something to say about love. Before he wrote Wealth of Nations, Adam Smith was already well known for his book on moral philosophy, The Theory of Moral Sentiments. In that first book, Smith argued that we don’t just want to be loved, we want to be lovely. What’s more, we want to be worthy of being loved. The distinction here matters. Being loved is something that happens to you. Being lovely is something that you do. It requires effort, attention, and a genuine concern for the well-being of others, which is exactly the kind of costly, hard-to-fake investment that makes a signal credible. This Valentine’s Day, whether you’re in a relationship, hoping to start one, or just showing care to the people in your life that matter to you, the economics is simple. Pay attention to the people you love, not in the abstract sense but specifically. Show them, through effort and attention, that you were listening. And commit not just to loving someone but to being worthy of their love in return. In short: love, and be lovely. Happy Valentine’s Day. (0 COMMENTS)

In recent years, the Arctic has returned to the center of public attention: the renewed interest in Greenland, the progressive opening of maritime routes due to ice melt, and the claims over areas like the Svalbard archipelago are clear signals that Arctic policy will remain in the public eye. Regarding the Svalbard archipelago, located in northern Norway, Eivind Vad Petersson, Norwegian Deputy Foreign Minister, summed it up to The New York Times1: “For too long Svalbard has been seen by other nations as a kind of Wild West, and anyone who wants can come and do pretty much whatever they want. That’s not the case. This is sovereign Norwegian territory. So, we are making it a little bit clearer.” Recently, Norway has restricted land sales to foreigners and claimed hundreds of miles of sea around the archipelago, concrete signs of a will to clarify rights and boundaries. These profound developments in the Arctic, evident in the renewed scramble for resources and strategic positioning, are naturally subject to a plurality of interpretations. Analysts might foreground military superpower competition, climate security, international legal disputes, or economic opportunity. I propose applying a theoretical lens often overlooked in public debate: Harold Demsetz’s theory of property rights. According to Demsetz, property rights are not immutable elements, but institutions that emerge, become defined, and strengthen when the value of resources grows enough to make the benefits of exclusivity exceed the costs of definition and enforcement. Where a resource has little value or the costs of exclusion are prohibitive, an open-access regime may be more efficient. When, however, the expected value increases—for technological, market, or environmental reasons—the incentive arises to invest in rules, monitoring, and sanctions to manage the resource in an orderly way and capture its returns. The historical case Demsetz uses to illustrate this dynamic is eloquent and convincing. Some Indigenous peoples in North America practiced beaver hunting under an open-access regime. With the arrival of external traders, the demand for furs increased and the price rose, spurring intensive hunting that threatened to deplete the species. To avoid the collapse of the resource, some communities introduced exclusive territorial rights: property became the tool to internalize the benefits of conservation. Those who could exclude others had the incentive to count and monitor the animals and to limit hunting when their numbers fell excessively. As further evidence in support of the theory, where the terrain made it difficult to demarcate and enforce rights or where the commercial value was low, private property did not take hold. “Demsetz’s logic is not bound to the absence or weakness of formal institutions. It provides a logic of incentives—the trade-off between value and exclusion costs—that remains valid whenever benefits and costs change…” Clearly, Demsetz’s empirical case concerns societies with informal institutions, whereas the contemporary Arctic is not an undifferentiated “commons.” Sovereignty over land is largely defined, and the legal framework governing exclusive economic zones,2 continental shelves, and maritime routes is well-articulated. However, Demsetz’s logic is not bound to the absence or weakness of formal institutions. It provides a logic of incentives—the trade-off between value and exclusion costs—that remains valid whenever benefits and costs change: states, companies, and communities react even in highly institutionalized contexts. Demsetz’s central insight—that the emergence or strengthening of property rights responds to changes in the benefits and costs of exclusivity—is also applicable to international regimes, mineral rights, fishing rights, and territorial disputes. Concrete examples include the introduction of transferable quotas in fishing; the technological breakthrough of hydraulic fracturing (‘fracking’), unlocking new oil and gas reserves; the renegotiation of mining concessions; and the extension of continental shelves. These are all institutional responses to an increase in resource value and a greater technical capacity to exclude and monitor. The point of contact with the historical case, to be taken cum grano salis,3 is that an external change (such as global warming or the arrival of new economic actors) increases the value of previously marginal resources, generating pressure on existing rights and incentivizing actors to strengthen, extend, or reinterpret their claims. In this sense, in the Arctic, we are not witnessing the birth of entirely new rights, but rather their reformulation accompanied by stricter enforcement. This institutional intensification, however, raises issues of legitimacy, justice, and sustainability that cannot be ignored. The first knot is political and distributive: who sets the rules and who benefits from the new opportunities? In the case of Greenland, rights derive from a complex interplay of international norms, Danish law, and protections for the Inuit. If decision-making processes marginalize local communities, the redefinition of rights risks translating into the expropriation of wealth and social conflicts. The second risk, perhaps even more serious, is environmental: the Arctic is a fragile ecosystem crucial for global climate balance; the increase in extraction and maritime traffic entails concrete dangers of pollution, habitat loss, and overexploitation, with effects difficult or impossible to reverse. The bitter irony is hard to miss: the Arctic’s melting, driven by global warming, creates new opportunities for the very actors who dispute its causes. Demsetz’s framework remains illuminating, as it sharpens our understanding of the circumstances under which property rights yield peaceful stewardship rather than conflict. The theory posits that well‑defined ownership can promote sustainable management, but only if two stringent conditions are met: Rights holders must operate with a long-term horizon, prioritizing preservation over short‑term gains; and Strong, transparent institutions must exist to enforce rules impartially and constrain predatory conduct. In the Arctic context, this translates to a critical need for governance mechanisms that are legible, legitimate, and equipped with credible monitoring and response capabilities. Without such a robust regulatory scaffold—one founded on scientific monitoring, clear lines of accountability, and equitable benefit-sharing with Indigenous and local communities—the surge in resource value may simply accelerate a race to claim and exploit. The result would be the externalization of massive costs onto the fragile Arctic environment and its inhabitants, through pollution, habitat destruction, and the erosion of traditional ways of life. There is another irony at play: the very mechanisms designed to bring order (the establishment of exclusive rights) risk enabling a tragedy of the commons in reverse, where enclosure leads not to care, but to careless extraction. “To serve peace and sustainability, they must be constructed justly, through inclusive processes that prioritize environmental resilience and uphold the rights of those most directly affected.” Thus, while the old adage that “good fences make good neighbors” holds geopolitical truth—clear boundaries and rules can reduce interstate friction—the nature of these institutional ‘fences’ is paramount. To serve peace and sustainability, they must be constructed justly, through inclusive processes that prioritize environmental resilience and uphold the rights of those most directly affected. Otherwise, they risk becoming instruments of exclusion and geopolitical predation, cementing inequalities and securitizing disputes. In the worst-case scenario, they become the legal and territorial fault lines along which conflicts ignite. Viewed through this lens, the heightened rhetoric and hegemonic posturing of major powers in the Arctic are not harmless theatrics but portents of a system drifting toward instability or bad equilibria. They expose a geopolitical landscape in which the soaring valuations of once‑inaccessible resources have outstripped the development of trustworthy, shared institutions. Plans to address these challenges not through existing institutions and negotiations, but through a transfer of cash for territorial sovereignty to a single decision maker, represent the expression of a worldview that treats territory, alliances, and even security as commercial commodities. In Demsetzian terms, such plans to address the challenge by treating the right to make such decisions as available for sale reflect an attempt to redefine rights unilaterally—through valuation and power rather than through the social coordination that makes property regimes legitimate. This mentality extends into a broader system of geopolitical patronage, where the message to allies becomes: security must be bought, whether through political loyalty, tariffs, basing rights, or strategic concessions. Such behavior collapses the cooperative conditions that Demsetz saw as essential for rights to evolve efficiently, replacing them with coercive reallocations that raise transaction costs and erode trust. This approach subverts multilateral frameworks, reducing them to bargaining chips in zero‑sum negotiations and accelerating the erosion of shared governance. It incentivizes a scramble in which power—not law, not ecology—becomes the decisive currency. For more on these topics, see “Why Did Armen Alchian Have to Teach Economists About Property Rights?” by Peter J. Boettke. Econlib, February 3, 2020. Colonialism, Slavery, and Foreign Aid (with William Easterly). EconTalk. “Biography: Harold Demsetz,” by David R. Henderson. The Concise Encyclopedia of Economics. The rising nationalism around Arctic claims is therefore not just a symptom of instability but the product of a great‑power ethos that treats rules as disposable. Without a collective recommitment to equitable, ecologically grounded governance, the logic of property rights—distorted by a transactional, might‑makes‑right philosophy—will not merely risk conflict but steer the region toward sustained confrontation. Footnotes [1] Jeffrey Gettleman, Sarah Hurtes, and Louise Krüger (January 11, 2026). “The Tug of War at the Top of the World.” The New York Times. [2] Exclusive Economic Zones, or EEZs, are defined in the United Nations Convention on the Law of the Sea (pdf). [3] Cum grano salis: with a grain of salt. *Maurizio Bovi is a senior scientist at the Italian National Institute of Statistics and an adjunct professor of economics at Sapienza University of Rome. He publishes further on connections between property rights and trade in his 2022 book, Why and How Humans Trade, Predict, Aggregate, and Innovate, published by Springer. Read more by Maurizio Bovi. (0 COMMENTS)

If you wanted to bet on the Super Bowl this past weekend, you had options. You may have bet with a friend. If you live in a state where it’s legal, you could have gone to a casino or used a casino’s app.  Or, starting last year, you could have entered into an event contract using a Designated Contract Market regulated by the Commodity Futures Trading Commission (CFTC). This is the same legal structure you would use to buy derivatives on the prices of traditional commodities like wheat, coffee, or pork bellies, now applied to trades like whether the Patriots will beat the Seahawks and what song will be played first at halftime. This legal strategy was pioneered by Kalshi in January 2025 and is being used by a rapidly growing number of exchanges. The CFTC had previously proposed a rule to shut down markets it considered “gaming”, such as bets on politics and sports. More recently they gave up and withdrew the proposed rule—perhaps because they found comments from economists like me convincing, perhaps because of new leadership at the CFTC, and perhaps because the exchanges have poured resources into influencing regulation, for example by hiring very expensive lawyers and former CFTC leaders. For these exchanges, the benefit for offering Commodity Sports markets is obvious: they get to enter a lucrative market that was previously restricted to a handful of companies with gaming licenses in states with legal sports betting. Users, to the extent we ever benefit from sports betting, see a number of advantages to trading on these exchanges as opposed to casinos. Fees tend to be lower; contracts can be sold before the end of games; exchanges don’t limit successful traders the way casinos limit successful bettors; and the exchanges can operate in the 11 states that don’t currently allow sports betting through casinos. The winners of Commodity Sports are clear, but so are the losers: losing bettors who may go into debt; casinos facing new competition; state governments that thought they had banned sports betting and don’t like this commodity loophole; and state governments that put big taxes on legalized sports betting and feel they are now missing out on the cut of sports bets they expect. These groups have challenged the exchanges in court, with mixed success so far. I have mixed feelings about Commodity Sports myself. The libertarian part of me is excited to see the government getting out of the way of voluntary exchanges between consenting adults. As a bettor, I’m happy to see alternatives to the high-fee monopoly casino. As an economist, though, I worry.  I love that CFTC-regulated exchanges like Kalshi and Polymarket are bringing prediction markets to the mainstream. The true value of prediction markets is to aggregate information dispersed across the world into a single number that represents the most accurate forecast of the future. Those who trade in prediction markets aren’t the real winners, because betting is a zero-sum game—every dollar one trader wins comes at the expense of another. The real winners are the rest of us, the ones who can get access to more accurate forecasts without having to risk a dime. In a virtuous cycle, the more accurate forecasters win and accumulate bigger bankrolls that they use to move markets in more accurate directions, while the bad predictors lose out and learn to stay away. (As former EconLog author Bryan Caplan put it, “a bet is a tax on false ideas.”) This is the dream that led economists like Robin Hanson to argue for prediction markets long before the latest wave of CFTC-regulated exchanges sprang up. Scott Sumner argued here for markets on future NGDP in order to better inform Fed policy. Arguments like this directly inspired prediction market founders like Polymarket’s Shayne Coplan. “I remember reading Robin Hanson’s literature on prediction markets and thinking – man, this is too good of an idea to just exist in whitepapers. There were a million reasons why it shouldn’t work, countless arguments of why not to do it, and the odds were against us, but we had to try.” -Polymarket founder Shayne Coplan And so, although I see huge value in prediction markets when they are offering more accurate forecasts on important issues that help policymakers, businesses, and individuals make more informed plans for our future (e.g., Which world leaders will leave office this year?, or Which countries will have a recession?), in addition to the social costs of sports betting, I see much less value in having a more accurate forecast of how many receptions Jaxon Smith-Njigba will have. Like Robin Hanson, I worry that the legal battles against Commodity Sports and the brewing cultural backlash against sports betting risk taking the most informative prediction markets down along with it. I hope I’m wrong, and that the revenue from sports betting helps the exchanges support a wider range of valuable markets than ever. Certainly, their founders seem to have benefited from pushing the envelope so far (FBI raid aside). At least for now, you are free to trade derivatives contracts regarding the achievements that the participants complete before expiration—that is, bet on sports through prediction markets. (0 COMMENTS)

What does war look like when fought under the harshest scrutiny? Veteran soldier and military researcher Andrew Fox talks about his first-hand experience in Gaza with EconTalk’s Russ Roberts. He and Roberts explore the challenges of reporting and understanding the war amid the challenges of disinformation, and why Fox believes that the IDF had few […] The post A Military Analysis of Israel’s War in Gaza (with Andrew Fox) appeared first on Econlib.

In my recent post on US manufacturing jobs and tariffs, I mentioned a Wall Street Journal article that pointed toward American tariffs having little impact on Chinese exports; the exports are simply being shifted to other countries.  In the earlier post, I discussed what that fact meant for US manufacturing jobs.  Here, I discuss what that shift means for who bears the burden of the tax. Economists argue that the burden of a tariff falls primarily on the importing country.  In fact, the model we teach our Intro students shows that the burden falls exclusively on the importing nation.  In op-eds, that same model is what we generally present.  However, as readers of this blog know, it’s not completely correct to state that a tariff will always fall entirely upon the importing country.  Our Intro students also learn that who bears the burden of a tax depends on the relative elasticities of supply and demand.  Whoever is least sensitive to a change in price will bear a greater burden of the tax.  Consequently, whoever is the most sensitive to a change in price will bear the lower burden.  In the simple model of international trade, we economists typically show a perfectly elastic supply of the imported good.  In other words, foreign producers are highly sensitive to a change in price; foreign producers have many other consumers beyond the importing country and will simply shift their business elsewhere.  Consequently, the importing nation must face the entire burden of the tax.  This is called the small-country tariff model; the importing country is simply too small to influence the world price of the tariffed good. But what if that condition does not hold?  What if the importing country is sufficiently large that it can influence the world price of the imported good?  This is called the large-country model.  When a nation is such a large importer of a particular good that their behavior can influence the world price, the global supply curve is relatively inelastic (upward sloping).  When the nation imports a lot, the world price rises and global producers produce more.  Likewise, when the importing nation purchases less, the global price falls and world producers supply less of the good. The large-country model has an interesting implication.  With a sufficiently small tariff, the large country can actually improve its terms of trade and, consequently, the trading partner’s terms of trade will fall.  The terms of trade for a country is: Terms of Trade = Export Price Index/Import Price Index In other words, the terms of trade is how much it costs (exports) for a country to consume (import) foreign goods.  Imposing a tariff reduces the quantity demanded of the imported good. Under the large country model, the importing nation is sufficiently large that if the quantity demanded of the good falls, the world price falls, and the exporting nation must absorb some of the tariff, otherwise the transaction ceases to be profitable.  Domestic imports fall but the domestic price of the good does not rise by the full amount of the tariff.  In sum: if a country is sufficiently large, the relative elasticities are known, and the exporting nations’ behavior does not change other than to reduce prices on the tariffed goods (i.e., no retaliation and no reduction of their own imports or investment into the domestic country), a sufficiently small tariff can improve the economic welfare of the importing country.  Yes, there is a loss from a reduction in imports (recall that imports are the benefit of international trade), but there is a gain due to the lower price of imports.  If the gain from the lower price outweighs the loss from the reduction of imports, then the country will marginally increase their welfare.  (This tradeoff is why the tariff must be sufficiently small; one wouldn’t want to reduce imports too much!).  The tariff that achieves this result is called an optimal tariff; it is a tariff that optimizes total economic welfare in a country.   Any International Trade textbook will discuss these models.  I recommend International Economics by Robert Carbaugh.  The book is written on the assumption that the reader has no more than a principles of economics understanding. Some argue that the US is sufficiently large that the tariffs imposed will increase welfare in the US.  We saw almost immediately that the argument for an optimal tariff was violated; shortly after tariffs were imposed in 2025, other countries retaliated with their own tariffs. Various studies indicate Americans are bearing almost all of the tariff.   A recent WSJ piece points to another issue: at least as far as China is concerned, the US is not a sufficiently large country.  According to data from the US Census Bureau, US imports from China are down some 45.6% from last year, but China’s exports are up.  Rather than reducing prices, China simply found other buyers for their goods.  Consequently, these data imply that US consumers and individuals are likely bearing most, if not all, of the tariff on Chinese goods.  The tariffs reduced imports, increased prices for Americans, but the global price did not change. China simply found other buyers.  The supply curve was, for all intents and purposes, perfectly elastic. The usefulness of a model derives from its ability to make sense of the real world and give us the ability to make predictions.  The “realism” or complexity of a model is not necessarily a feature.  In many ways, the large-country model is more realistic than the small-country model.  It’s quite unlikely that any country, let alone the United States, is so small that they cannot influence world prices at all.  Ultimately, all trade is done by individuals and not nations, so it’s reasonable to assume there will be some influence on a case-by-case basis.  However, the large-country model is not particularly helpful in explaining real-world outcomes.  The small-country model, despite its lack of realism, provides far clearer analysis, at least as a first approximation of effects.   (0 COMMENTS)

This is the latest in our series of posts in our series on price theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed. Share your proposed solutions in the comments. Professor Cutsinger will be present in the comments for the next couple of weeks, and we’ll post his proposed solution shortly thereafter. May the graphs be ever in your favor, and long live price theory!   Question: The U.S. Federal Reserve differs from most government agencies in two important ways: The Federal Reserve determines its own operating budget and remits any remaining revenue to the U.S. Treasury. The Federal Reserve has some control over its revenue, since it earns income from issuing money and holding interest-bearing assets. Issuing more money than is consistent with price stability can increase this revenue in the short run. Unlike a private firm, however, no individual or group owns the Federal Reserve’s residual income. (a) Explain how the absence of a residual claimant affects the Federal Reserve’s incentives when choosing the size of its operating budget. In particular, discuss whether this institutional arrangement encourages the least-cost method of production. (b) Explain how the Federal Reserve’s ability to generate revenue through money creation could create an inflationary bias, even if price stability is an official policy objective. (c) Why might remitting excess revenue to the Treasury fail to fully eliminate these incentive problems? Explain using basic economic reasoning. (0 COMMENTS)

Author Daniel Coyle talks with EconTalk’s Russ Roberts on the art of flourishing: why it’s a natural phenomenon rather than mechanical; how taking life’s “yellow doors”–or detours from a straight, expected path–is often the key to a flourishing life; and why true flourishing can only occur in the context of relationships. They also discuss how […] The post How to Flourish (with Daniel Coyle) appeared first on Econlib.

Sam works on innovation policy at Progress Ireland, an independent policy think tank in Dublin, and runs a publication called The Fitzwilliam. Most relevant to us, on his personal blog, he writes a popular link roundup; what follows is an abridged version of his Links for December.  Blogs and short links 1. I’ve finished my Notes on Taiwan. I have been pleased with the response. It made it to Marginal Revolution, The Browser, and Conor Friedersdorf’s Best of Journalism list.  2. I appeared on Matt Teichman’s podcast.  3. What should middle powers do for compute strategy? 4. The scientific contributions of the Carlsberg beer company. Danish Guinness?! 5. We finally have Goodreads for academic papers.1 Predictably, Gavin Leech has already joined and makes up a significant fraction of all content on the website. 6. Pitches are now welcome for In Development, a new Works in Progress-inspired magazine focused on the developing world. 7. From The Fitzwilliam: our essay about why most foreign aid never leaves the country, but weirdly, this is fine (for now).  8. The Guardian on the life of Saul Kripke. Can’t a man army crawl in front of a group of undergraduates without it making it into his obituary? During a seminar in a lecture room he had recently taught in, [Kripke] was seen crawling along the central table, reaching down to grab an umbrella, and crawling back again. He had wanted to be inconspicuous, he said, when questioned about that method of retrieval. I also note that Kripke was an exception to the general rule that philosophy doesn’t have prodigies: He had taught himself ancient Hebrew by the age of 6, had finished reading Shakespeare’s complete works by 9 and published his first completeness theorem in modal logic when he was 18. By pure coincidence, I first learned about Kripke’s causal theory of reference in a philosophy of language class on the day that he died. Later that week, I suffered the greatest burn of my philosophical career, when a tutor told me that, if Saul Kripke had heard the argument I had just made, “he would come back to life, just to die again”.2 9. The beauty of giving things sustained attention. 10. Best of Wikipedia: The Glasgow ice cream wars. 11. Harry Law’s introduction to the history of AI and overview of the legacy of the Dartmouth Conference. It’s so funny that Marvin Minsky was the scientific advisor for HAL in 2001: A Space Odyssey. Music and podcasts 1. Today in non-sequiturs: Why the War on Drugs is responsible for the wide availability of blueberries. 2. Hiromi, Sonicwonderland. Found via her appearance on NPR Tiny Desk Concert. My favourite song is Up. I haven’t had a chance to watch the interview with Rick Beatto yet, but Hiromi’s playing is electrifying. You can also listen to the duet with Chick Corea, whom (if Wikipedia is to be believed) she met by chance aged 17 and was invited to perform with on stage later that day. 3. The Marginal Revolutionaries on their favourite economic models. Listen for a good explanation of why monopoly, a priori, does not imply a lower quality of goods than would be socially efficient. I also wonder how many people in Ireland could correctly explain Harberger’s general equilibrium capital taxation result, despite it basically being the intellectual cornerstone of our economy. 4. Ulkar Aghayeva, Fugue Chahargah. My first time listening to Azerbaijani music. This is a piano fugue inspired by mugham, the traditional microtonal music of Azerbaijan. Ulkar also has a suite for cello and piano and a string trio. She is insanely talented, and I hope to make it to one of her concerts someday soon. 5. Dan Wang on what you should do if you want to become the leader of China. I found this most interesting for Sam Bowman and Pieter Garicano’s discussion of what ails European economies. The extent to which the US has much greater competition in banking is remarkable. I recently tried to open a new bank account, but there were literally only three banks in the country I could choose from. I found the experience so complicated and unpleasant that I eventually gave up. Meanwhile, around 80% of financing for European companies happens via bank lending, compared to around 30% in America – the quality of financial services really matters! 6. Soham Sankaran on building a vaccine company in India. This reminds me of many conversations I have had with Akash Kulgod about his experience scaling Dognosis from Bangalore. Akash would be a great guest for this podcast.   Books and Papers 1. John McCarthy, Marvin Minsky, Nathaniel Rochester, Claude Shannon, A Proposal for the Dartmouth Summer Research Project on Artificial Intelligence. This document is the first official usage of the term ‘artificial intelligence’, laying out the research agenda that would become the 1956 Dartmouth workshop.3 Is the significance of the Dartmouth conference overrated in the history of AI? Probably yes. Are we privileged to be alive in an era when we can read the original proposal, and ask questions of it using magic boxes that largely solved all the problems outlined in the proposal within a single human lifetime? Also yes. 2. Jonathan Swift, Gulliver’s Travels. Unless you count graphic novels, plays, poetry, or autofiction, this is the only novel I read in 2025. One of my New Year’s resolutions is to read more fiction. In short, Gulliver’s Travels is A++, and possibly the greatest novel I’ve ever read. For more thoughts, you’ll have to wait for my Irish Enlightenment post. Liberty Fund is hosting a virtual reading group on Gulliver’s Travels on March 4, 11, 18, and 25 from 4:00–5:00 p.m. EST. You can find more information here.   Films and video 1. Greg Kohs, The Thinking Game. A documentary about Demis Hassabis and the story of Google DeepMind. You can watch the full thing for free on YouTube. The main new thing I learned about was Demis’s role in developing the 1994 video game Theme Park. This made for strange viewing. OpenAI, Anthropic, and ChatGPT are never mentioned. You could watch this entire film, and be under the impression that AlphaGo-era reinforcement learning is still the dominant paradigm. Significant sections of it could equally have appeared in the 2017 documentary about AlphaGo, which is one of the greatest documentaries of all time. I was also disappointed that Demis’s side gig as the world’s fourth-highest-rated player in the world of the board game Diplomacy wasn’t mentioned. 2. Edward Yang, Yi Yi (一一). My first Taiwanese film, found by asking Claude Opus 4.5 “What is the greatest Taiwanese film of all time?” This was Yang’s last film, and is a major part of the Taiwanese New Wave. The title means ‘one by one’, and, when written vertically, looks like the Chinese character for the number 2. I think this is one of the best films I have ever seen. It captured the ‘relentlessness’ of mundane family life better than any other visual media I can think of. I later learned this is one of the few times Scott Sumner has given a perfect score to a film: At one point a character says something to the effect that movies triple the size of our lives. We experience far more than otherwise. This film is certainly a good example. Like almost all of the greatest films of the 21st century, it came out at the beginning of the millennium. Not a good sign. I loved how wide an age distribution the main characters have. The scene toward the end of the father and daughter going on parallel, stilted dates is a masterpiece. You can read the full version of Sam’s December links here. [1] Thanks to Anuja Uppuluri. [2] No, I can’t remember what my argument actually was. [3] I also learned that the Dartmouth conference was funded by the Rockefeller Foundation. (0 COMMENTS)

Question: Is the following true or false? Explain your reasoning.  If the quantity of higher education services supplied does not rise with the price of those services, i.e., if supply is perfectly inelastic, then subsidizing the demand for higher education services will primarily benefit universities and their employees. Solution: I use this question in my microeconomic principles class to get my students to think about the actual beneficiaries of a real-world policy that many of them likely believe is intended to benefit students. Whether the subsidy does benefit students, however, depends on how responsive the supply of higher education services is. In other words, the key issue is not the purpose of the subsidy, but what happens in the market when additional purchasing power is introduced. The question asks us to assume that the supply of higher education services is perfectly inelastic—that is, colleges and universities offer a fixed number of seats or credit-hours no matter how high or low tuition is. A subsidy makes students willing and able to pay more, but because the quantity of education cannot increase, competition among students for a fixed number of spots drives tuition up rather than expanding enrollment. In this case, the price of higher education services rises by the amount of the subsidy. Since the quantity is fixed and the price rises by the amount of the subsidy, universities capture the full benefit of the subsidy. The additional revenue accrues to universities rather than students and may show up as higher salaries and benefits for existing faculty and staff, expanded administrative spending, or other forms of institutional surplus. By contrast, students receive none of the benefit from the subsidy, since the price of higher education services rises without any increase in the amount of education provided. Hence, the statement is true. Of course, in reality, the supply of higher education services is not perfectly inelastic, especially in the long run. Colleges and universities can eventually expand enrollment by adding facilities or hiring additional faculty, but how quickly they do so depends on how easily key inputs can be expanded—some adjust relatively quickly, while others do not. As a result, supply is likely to be much less responsive in the short run than in the long run. Several of the comments on the posted question raise these real-world considerations, but they do so by moving away from the assumption built into the question. The question explicitly asks us to assume that supply is perfectly inelastic. Once that assumption is taken seriously, the outcome is no longer ambiguous: when quantity is fixed, a subsidy that increases students’ willingness or ability to pay shows up as a higher price, not a larger quantity. Comments that appeal to capacity expansion, quality changes, or wage adjustments are therefore answering a different question—one in which supply is allowed to respond. Likewise, questions about how additional revenue is distributed within universities do not affect the central result. Even if internal wages or employment do not change at all, the subsidy is still captured by universities in the form of higher tuition revenue rather than by students. And it is important to distinguish demand-side subsidies from policies that directly hold tuition below market levels. Only the former is relevant here: with a fixed number of seats, increasing students’ purchasing power simply bids up tuition. (0 COMMENTS)

New York City Mayor Zohran Mamdani recently caused something of an uproar when he contrasted the “the frigidity of rugged individualism” with the “warmth of collectivism.” This framing echoes the familiar criticism that capitalism forces people to go it alone as “atomistic individuals.” The thought goes like this: markets do real damage to the social fabric and our relationships because they organize our economic lives around competition and self-interest. Organizing our lives around competition encourages people to see each other as rivals rather than partners. In brief, capitalism pits us against each other, while socialism brings us together. Setting aside the fact that collectivist regimes haven’t exactly been warm to those living under them, this view gets capitalism backward. Start with a simple observation about your own economic life under capitalism. Think about this week: how many cooperative interactions have you had, and how many competitive ones? You probably didn’t compete with anyone when you bought coffee at Starbucks this morning. You didn’t enter a zero-sum struggle when you paid your phone bill, purchased groceries and gas, or caught a movie. Instead, you took part in a series of mutually beneficial, voluntary transactions. You gave someone money and they gave you something you wanted more than the money. Everyone walked away better off. In the words of Adam Smith, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” Competition, by contrast, rarely pops up in your day-to-day economic life. A business competes with other businesses for customers and you’ve probably competed with others for a job at some point. But you cooperate far more often than you compete. And notice what market competitions really are—they’re competitions to see who’s best at serving others. You might say that they’re competitions to discover the best ways to cooperate and who the best cooperators are (more on this below). Unsurprisingly, Smith understood the cooperative nature of markets well. He writes that a wool coat  “is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country!  How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world!” Smith goes on, but I’ve got a word limit here—the point is that markets don’t atomize us. On the contrary, they lead strangers all over the world to cooperate. Think back to the last time you bought a coffee. Starbucks has to coordinate with bean farmers, shipping companies, truck drivers, warehouse workers, roasters, equipment manufacturers, electricians, plumbers, accountants, and baristas. None of these people know you, and yet they manage, every day, to cooperate in ways that reliably get caffeine in your hand at 7:43 a.m. And this isn’t accidental—the prices provided by markets give people the information they need to figure out what others want, and they provide the incentive to give it to them. There’s no denying that markets involve competition. You can go to the business section of a bookstore and find titles like Business Warfare and The Warfare of Business. But businesses are competing with each other to see who can best serve consumers. Netflix beat Blockbuster by figuring out a better way to give viewers what they wanted: convenience, selection, no late fees, and eventually streaming. In brief, Netflix won because consumers preferred cooperating with Netflix over Blockbuster.  A similar point applies to competition in the job market. Maybe you don’t merely want to buy coffee from Starbucks, you want to work there, too. But this means you’ll have to compete with other applicants who also want the job. Here again, let’s look at what it takes for an applicant to win this competition. They need to demonstrate that they’ll do the best job of making customers better off—say, by being more punctual, more efficient at making mochas, or more likely to serve drinks with a smile. Market competition is competition to see who can cooperate most effectively with others. In any case, democratic socialists can’t be opposed to all competition. After all, democracy requires competition, and democratic socialists want democracy in the workplace as well as in politics. If competing for dollars is frigid, it’s hard to see why competing for votes would be any warmer. Market competition enables millions of people with different values, plans, and priorities to work together without agreeing on much of anything by helping them to coordinate many different choices. You and your barista don’t need to agree on the principles of justice to cooperate and make each other better off. Far from being atomizing or frigid, the free market is a system of interdependence that brings strangers together to cooperate for their mutual benefit. (0 COMMENTS)