Imagine two companies which are secretly controlled by the same people. If company A imported some phones, then sold them to company B, it charged VAT on the deal. If company B then exported the phones, it reclaimed — from the government — the VAT it had paid to company A. the integrity of the VAT system depends on the two totals balancing out. The money that A pays in is equl to the money that B takes back. The scam lay in A disappearing and not handing over the money it owed, but B till claiming it. The hidden owners of the two firms therefore earned for themselves 17.5 per cent (the rate at which VAT was then charged) of the value of the shipment of the phones. The more phones you sold to yourself, the more money you made.

That is John Lanchester in the LRB, citing Oliver Bullough’s Everybody Loves Our Dollars: How Money Laundering Won.

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Jolie Gan, Calgary/SF, a publication on science and meta-science.

Hudson Mitchell-Pullman, 16, San Diego, how users interact with LLMs to learn.

Adnan Manna, 17, Amman, Jordan, finding exoplanets.

Heloise Hoffman, Stanford, biomedical research to cure her own rare disease.

M.F. Libano-Monteiro, Portugal/LSE, economics education through video.

Scott Ellis, Mississauga, Ontario, making movies with AI.

Adrian Martinez, 17, Mission Viejo, CA, math, education.

Aadil Ali, San Francisco, biographies of young achievers.

Chandler Reilly, Denver, Substack on Denver and its economics.

Jeremy Kingsley, London, AI, podcasting and Substack.

Michelle Lin, 15, Mclean, VA, curved-surface stitching on deformable materials, and algorithms.

Brunella Tipismana, general career support, writing, Peru/New Haven/NYC.

Theo Cross-Zamirski, Cambridge, UK, platform to power math education.

Beatrice Erkers, Stockholm, progress ideas in Sweden.

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2. Profile of Camille Paglia at age 79 (London Times, gated).

3. Olivier Blanchard: ” I certainly worry about the evolution of US public debt and the size of primary deficits. But, while there is a lot of discussion/worry about the increase in nominal interest rates, the 10-year inflation indexed rate, which is the relevant one for debt dynamics, has remained surprisingly stable.”

4. Revana Sharfuddin: “Uncertainty around immigration policy may have downstream effects on fertility decisions. We probably underestimate how much family formation responds to policy instability.”

6. Nagel on Scanlon.

7. “No child deaths have been definitively linked to Covid vaccines, according to a report from the FDA that was quietly made public.”  Article here.

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Yes, the United States has the most progressive tax system in the world. The top 1% pay 40% of taxes, the bottom 50% pay 3% of taxes. We can make it even more progressive by zeroing out taxes on the bottom half. It’s a small amount of the total tax revenue but very meaningful to people in this group.

Strangely, a chorus of liberal economists rushed to attack Bezos. Gabriel Zucman replied:

Contrary to what you claim, working-class people contribute significantly to funding American society today. Payroll taxes and consumption taxes absorb a high fraction of their income.

Justin Wolfers piled on:

If you only count the progressive taxes the U.S. levies, then the U.S. system is quite progressive. But if you also count regressive taxes (payroll taxes, sales taxes, etc), it’s not very progressive.

Bezos called for cutting taxes on the bottom half to make the tax system more progressive and the redistributionists came out swinging–to argue he was wrong about how progressive the current system already is. Own goal. Heretics are worse than unbelievers.

But there’s a second, more interesting thing going on. To make the regressivity case, Zucman and Wolfers have to count payroll payments as taxes. That cuts directly against eighty years of liberal doctrine. Beginning with FDR, the argument on the liberal side has always been that payroll taxes are not taxes but contributions or premiums entitling the payer to benefits as an “earned right.” Here’s FDR to Luther Gulick in 1941:

We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.

That framing isn’t a historical curiosity. It runs straight through liberal social security stalwarts like Arthur Altmeyer, Wilbur Cohen, and Robert Ball, and it’s alive today in Nancy Altman and Eric Kingson’s Social Security Works!, which attacks billionaires and insists Social Security benefits are “earned compensation.” The whole political durability of the program–the third rail–rests on this framing.

So the modern left wants it both ways. When the question is whether to cut Social Security, FICA is a premium and benefits are earned compensation. When the question is whether the tax system is progressive, FICA is suddenly a regressive tax. Pick a lane.

Is there a principled way to resolve this? Yes, and it follows Jim Buchanan (see my earlier post here) and Larry Summers who laid out the economics in his classic paper Some Simple Economics of Mandated Benefits. The principled test is whether a payment reduces labor supply. The wedge between marginal product and the worker’s reservation wage isn’t the statutory rate–it’s the gap between the mandated payment and the worker’s marginal benefit. Sylvain Catherine made exactly this point in reply to Wolfers:

Payroll taxes are not regressive! They are mandatory contributions to a retirement system that offers higher rates of returns at the bottom than at the top.

Consider a forced savings program: everyone must pay 12.4% of income into a 401(k). Is this a tax? For someone who was going to save 15% anyway, not at all. For someone who was going to save 10%, only the extra 2.4% bites. Mandatory does not mean tax. The marginal valuation of the mandated benefit is the key.

Now apply this to the two payroll taxes.

Medicare (HI): Every marginal dollar buys zero marginal benefit. Thus, it’s a tax. Part A eligibility is binary–40 quarters gets you in–and once in, your benefit is whatever Medicare spends on your care. No relationship on the margin. (Moreover, the raw HI schedule is unambiguously progressive: 2.9% flat, rising to 3.8% above $200K/$250K thresholds, plus the NIIT.)

Social Security (OASDI): The 90/32/15 Primary Insurance Amount bend points mean a low earner gets a much better return than a high earner. So the gross statutory rate is flat-then-regressive; but the net rate is progressive. In short, OASDI isn’t a tax for low earners but it is a tax for higher earners, thus the tax is progressive.

So: HI is a progressive tax. OASDI is a contribution at the bottom and a tax at the top. Either way, the Zucman-Wolfers framing—payroll payments as straightforward regressive taxes—is wrong and rhetorically it abandons the framing the left has spent eighty years building to protect these programs.

Personally, I’d prefer a system truer to the old rhetoric–a forced savings program with a closer connection between marginal payments and benefits. But if the left wants to reframe Social Security contributions as taxes, and thus make Social Security all about redistribution to the poor, rather than a wise savings program, roll the dice. Just remember that Altmeyer, Cohen, and Ball spent decades building the “earned right” framing precisely because they understood it was the program’s structural defense against means-testing and privatization. Drop the framing and you drop the defense. I suspect the privatizers at AEI and Cato will happily take that trade but the left may come to regret making it for them.

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In the first chapter, Wright summarizes four of his perspectives, these are my paraphrases of his pp.5-6:

1. When it comes to AI, we should be somewhere on the awe spectrum.

2. We can create a future where the upside of AI far outweights the downside, though that involves steering human understanding toward the better side of the awe spectrum.

3. A major reorientation of human thought is required, and right now few people seem inclined to do that.

4. The worldviews of the current AI acclerationists and also doomers are not cosmic enough.

It is a good time for this book to be published, and I agree with much more of it than I disagree with.  My main difference is that I am more focused on very small things — such as Rainier cherries and the forthcoming three to four hour Apichatpong movie — than on cosmic awe per se.  For better or worse, I was not born with those genes, and unlike Wright I am far from Buddhism.  I do think there will be a transformation of “observed awe,” and I am somewhat worried that it will not go well.  Will we be good at building a fairly new world, if not from scratch, on the basis of some new premises about what is possible and what is not?  I will in any case interpret the pending transformation through a Straussian lens, namely thinking that a lot of the observed transformation of awe will be about something other than what people are claiming.  It will be about people arguing over relative status, but under different guises.  Not as tasty as a good Rainier cherry, but interesting to follow as well.

But are we still good at steering and evolving grand visions?  Christianity and the Enlightenment are a hard act to follow.

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2. SGA does seem to flop more.

3. Marc Andreessen on AI.

4. Thomas Sargent lectures on YouTube.

5. Why Japanese companies do so many different things.

6. Fresh Knausgård.

7. ““The Boys of Dungeon Lane” is absolutely the best album ever recorded and released by a rock star in his 80s.“

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This was a great failure of the most recent philanthropic era. At its best, the infrastructure established by figures like Gates delivered effective efforts to reduce poverty and fight disease; at its worst, it threw money after fashionable political causes and education fads. But there was no real legacy when it came to physical infrastructure — no great beautification campaigns, no beloved architectural landmarks, no equivalent of the Gilded Age’s expansions of museums and libraries and concert halls, and few personal expressions of extravagance (like the Newport mansions or Hearst Castle) for future tourists to admire.

At the beginning of the 20th century, philanthropic dollars had already helped build the Metropolitan Museum of Art and Carnegie Hall, the campuses of Vanderbilt, Stanford and the University of Chicago, a network of urban parks, various impressive churches and an array of private homes that would themselves become public spaces within a few generations. Tastes vary, but I do not think that the monuments raised by today’s superrich are in any way comparable.

Here is the full NYT piece.

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Ten notable facts from India’s new SRS Statistical Report 2024 published two days ago:

1) India’s total fertility rate (TFR) has dropped to 1.88 (rounded up to 1.9 in the figures) in 2024 from 1.92 in 2023.

2) This drop is roughly the historical speed of the last few decades. India’s TFR was 4.3 in 1985 and it has been falling around 0.06 per year since then.

3) For those who think “smartphones are the reason for the fall of TFR,” there is not much change in India’s TFR after their introduction. Of course, this might only apply to India.

4) India’s sex ratio at birth continues moving toward natural levels. It has grown from 907 girls per 1000 boys in 2018-2020 to 918 in 2022-2024. Without sex selection (e.g., selective abortions), it should be around 952.

5) Nonetheless, this bias still means that India’s replacement rate is around 2.15, not 2.1 as in other advanced economies.

6) Hence, India is already 0.27 children below the replacement rate and the gap continues growing.

7) However, this figure hides large regional differences. Kerala is at 1.3, well below the U.S. and approaching Italian and Spanish levels (Delhi is even lower, at 1.2, but it is a peculiar case), while Bihar remains at 2.9.

8) In terms of the rural/urban divide, rural India is at 2.1 and urban India at 1.5.

9) From everything I can see, India’s TFR will continue to fall, and it should reach 1.57 (the current level of the U.S.) around 2031 unless something significant changes.

10) Having said that, India’s data has a non-trivial margin of error, and a new Census might change our reading of the situation. In summary, India is following the same path as everyone else. No Indian fertility Sonderweg!

That is all from Jesús Fernández-Villaverde.

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As Mark Lilla, a recovering Straussian, once remarked, they [the Straussians] were like craftsmen building a house brick by brick on a foundation that Leo Strauss had laid.  But they would never become architects of that house, or decide that the house was too small for them to comfortably live in.  Moreoever, Strauss disparaged social science and what he considered naive forms of positivism prevalent in American universities.  This led some of his followers to disdain merely empirical accounts of current events.  If you are more of a Hegelian, you need to pay attention to actual history if you are to give an account of how ideas play out in the real world.

That is from Frank Fukuyama’s forthcoming memoir, recommended of course.

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2. “For the first time in decades, new and recent graduates with at least a bachelor’s degree have consistently higher unemployment rates than the overall American workforce, according to data on 22-to-27-year-olds compiled by the Federal Reserve Bank of New York.” Link here.

3. Redux of my 2021 Bloomberg column on the ideal university.

4. 15-minute weird Brazilian album.

5. History of social science funding at the NSF.

6. Furman and Laibson on Harvard grade inflation (NYT).

7. Who gets laid off first?  The measurers?

8. Work from home may be the problem for young workers, not AI.

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Again, I am very grateful to Yonatan Ben Shimon for making this support possible.  And there remains a modest amount of money left in the fund.

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The third type of weapons are invasion ships – this is the classic science fiction trope, however actual invasion ships have one fundamental weakness – they need to slow down at the destination galaxy. This has two effects. Firstly, energetically getting invasion ships to the opponents galaxy is substantially less efficient than sending RKVs there. This is because of the tyranny of the rocket equation. While the invasion ships can be accelerated to relativistic velocities at origin galaxy, to slow down, it cannot be assumed there is an equivalent infrastructure at the destination. Instead, the invasion ships must carry their own braking fuel with them, which must then also be accelerated and so on.

The second fundamental problem is lack of stealth. When accelerating your exhaust points away from your target, when decellerating your exhaust points towards it. Essentially your are deliberately dissipating all your kinetic energy as a gigantic beacon screaming ‘I am here come kill me’. The decelleration burns of large-scale invasion fleet would both likely last thousands of years and also be immensely noticeable to any reasonable civilization in the target galaxy let alone a paranoid K3. Even if you don’t try to decellerate by rockets but instead by e.g. drag on magnetic sails, this drag causes friction which then radiates uniformly in all directions, again serving as a beacon.

That is from a very interesting and much longer 2025 piece by Beren’s Blog.  Via S.

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