Can We Call This Anything But Piracy?: TUESDAY CHAOS-MONKEY TRUMPISM

Isn’t piracy against the law? When the president claims a royal right to tax global commerce over waterways half the world away from America, the rule of law walks the plank.

I mean: treaties are supposed to be binding, THE LAW OF THE LAND, generating rights, which are then, under the rule of law, enforceable, the same ways other LAWS OF THE LAND are enforceable:

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding…

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There is nothing in the constitution or laws of any state to the contrary except for unlawful Supreme Court declarations without textual or historical authority that the president is a king in anything touching “foreign policy”.

Executive-branch actions in violation of treaties are not “tak[ing] care that the laws be faithfully executed”. I suppose you could cavil over whether nulling them is the court’s business or the congress’s business through impeachment, but the whole Supreme Court power grab starting with John Marshall strongly suggests that it is the court’s business, doesn’t it?

And this is piracy. Which we have agreed to suppress, worldwide:

John Authers: Misunderstanding & Reflexivity <https://www.bloomberg.com/opinion/newsletters/2026-07-14/us-iran-check-the-oil-price-before-pushing-limits>: ‘Henceforward July 14 may also be known for the blocking of the Strait of Hormuz. The US has announced that it will hold up traffic through the crucial waterway starting Tuesday, and levy a 20% charge…. The move amps up uncertainty, and markedly adds to the upward pressure on materials prices. Last month’s Memorandum of Understanding to pause the war between the US and Iran, always ambiguous over exactly who could control the Strait and on what terms, appears now to be a dead letter. The failure has been immediately felt in oil prices, with Brent crude for December delivery now more expensive than when President Donald Trump signed the MOU…

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Markets themselves are… not simply responding to… facts… [but] creat[ing] them. Last month, an over-rapid decline in oil prices relieved… pressure… and increased… temptation to misbehave…. Marko Papic…. “The irony of this situation is that oil prices are an independent variable, not a dependent one. Both Iran and the US synchronize their kinetic activity with a particular sensitivity to oil prices themselves. When they are low, kinetic [military] activity ramps up. When oil prices rise, suddenly negotiations are back on the table…” Tina Fordham of Fordham Global Foresight said another period of sustained high oil prices might be needed to persuade the US that Iran can’t be bombed into capitulating, “so in that sense the absence of a major energy shock has provided space for this conflict to re-escalate markedly”…

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Brad DeLong here: If the piratical practice of presidents improvising piratical toll‑booth empires in strategic straits half the world away and courts retreating behind self‑execution technicalities is not a betrayal and a constructive repeal of the fundamental design principle of the American constitution that the president is a magistrate to faithfully execute congress-passed laws rather than a king with sovereign powers derived from Divine Right and salus populi suprema lex, it is not clear to me what it could be.

The market reaction is also very interesting. As I understand it, markets have concluded—rightly—that Donald Trump is simply a chaos-monkey, and there is no point in trying to forecast what the hell he will do. In that case, we are more than usually cast into the world Keynes foresaw back in 1936:

John Maynard Keynes (1936): The General Theory of Employment, Interest & Money <https://www.files.ethz.ch/isn/125515/1366_keynestheoryofemployment.pdf>: ‘Classes of investment are governed by the average expectation of those who deal on the Stock Exchange… rather than by the genuine expectations of the professional…. In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention… that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change. This does not mean that we really believe that the existing state of affairs will continue indefinitely. We know from extensive experience that this is most unlikely.… Nor can we rationalise our behaviour by arguing that to a man in a state of ignorance errors in either direction are equally probable… [as] our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation….

[This] convention… will be compatible with… continuity and stability… so long as we can rely on the… convention…. An investor can legitimately encourage himself with the idea that the only risk he runs is that of a genuine change… over the near future… which is unlikely to be very large…. He need not lose his sleep merely because he has not any notion what his investment will be worth ten years hence… if he can fairly rely on there being no breakdown in the convention….

It is not surprising that a convention, in an absolute view of things so arbitrary, should have its weak points…

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Thus, in the limit, it becomes hopeless to expect the market to in any sense discipline Trump by signaling that his disastrous policies are in fact causing disasters. The market is not going to signal that, since Trump’s announcements are not in any sense policies. Moreover, since there is a very strong and correct expectation that many of Trump’s announcements are intended to spook the market, so that he and his favored can benefit by insider trading on their reversal tomorrow, you would be a fool if you did react to anything Trump says he is going to do until things start blowing up on a large scale.

Words don’t fail me, clearly. But coherent thought definitely does. However, here are a few thiings to think about:

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(SEMI-)CROSSPOST: KELSEY PIPER: Yes, You Can Trick AI into Exonerating Someone

The story of Francesca Gino is unbelievable—not in the sense that is not true, but that she could think that this way of behaving was and is a good idea demonstrates an enormous gap between me and my ability to empathize and track her thinking. Yes, we are social network beings who stand by their friends—that is what being a friend is, and friendship is a good thing—but Larry Lessig’s place in this story is also something that I find unbelievable. Against that background, we should note and focus on the role of “AI “in this as a way not to improve your rationality, but rather to improve your rationalization of beliefs you hold for reasons that are profoundly irrational and contrary to reality…

The Gino case was already a story about academic fraud.

Larry Lessig has now turned it into a story about AI-enabled self-deception.

If you only ever give the robots your side of the story, don’t be surprised when they echo your outrage back to you, supercharging rationalization rather than rationality. The evidence with respect to Francesca Gino are damning: manipulated datasets, vanished files, and an investigative record that points squarely at intentional fraud. Lawrence Lessig has chosen to champion her anyway. Harvard’s investigation into Francesca Gino produced a 1,300‑page report, retractions, and a mountain of forensic detail pointing to data manipulation. Rather than grapple with that record, Lawrence Lessig built a long-form podcast that brackets away the ugliest facts and then turned to AI to bless his version of events, building a nine‑hour podcast that omits the most incriminating of the facts. He then fed only that podcast into ChatGPT, Claude, and Gemini and celebrated their summaries as “accurate” accounts.

And he believes it finding it “pull[ing] together the arguments in the case and presented them in a much more compelling and persuasive way than I…”

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(SEMI-)CROSSPOST: KELSEY PIPER: Yes, You Can Trick Ai into Exonerating Someone

<https://www.theargumentmag.com/p/yes-you-can-trick-ai-into-exonerating> <https://www.theargumentmag.com>

The Argument
Yes, you can trick AI into exonerating you
When Harvard Business School researcher Francesca Gino was fired from her tenured job over research misconduct, she promised to take the fight to court: She sued Harvard and the researchers who outed her for defamation and (in Harvard’s case) for failing to follow its process to investigate her…
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Kelsey Piper

Jul 08, 2026

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Harvard Business School has only revoked one professor’s tenure since its current rules were established in the 1940s: Francesca Gino. (Photo by Erica Denhoff/Icon Sportswire via Getty Images)

When Harvard Business School researcher Francesca Gino was fired from her tenured job over research misconduct, she promised to take the fight to court: She sued Harvard and the researchers who outed her for defamation and (in Harvard’s case) for failing to follow its process to investigate her.

That didn’t go particularly well.

Gino’s downfall has been one of the most scintillating pieces of academic drama in recent years. Gino was a star behavioral scientist at Harvard Business School whose work often focused on honesty and ethics. She often found strikingly large effect sizes for fairly minor interventions that, in many cases, did not replicate.

For example, in one study, she checked whether signing a “statement of integrity” at the top of the page or at the bottom changed the odds that participants would cheat in an exercise where they were paid based on how many puzzles they reported solving. The effect sizes claimed in this paper are staggering: “Signing at the top vs. the bottom lowered the share of people over-reporting their math puzzle performance from 79% to 37% (p = .0013), and lowered the average amount of over-reporting from 3.94 puzzles to 0.77 puzzles (p < .00001),” Data Colada wrote.

Big if true, as they say. But it wasn’t true.

The team of external researchers at Data Colada looked at the raw data in Excel and noticed that six participants had been moved to the wrong group: Three big cheaters were incorrectly moved to the “signed at bottom” group and three honest people were moved to the “signed at top” group. Not the typical p-hacking, then, but intentional data manipulation — and Gino was reportedly the only one of the paper authors involved in data collection and analysis.

Harvard, as part of its investigation, found the data file that was emailed to Gino by a research assistant and observed that it was quite different from the one Gino sent to her coauthors days later. Gino had added three participants (who seem to have been legitimate participants who really existed) and changed a bunch of cells (including the swaps that the Data Colada team found, as well as some other changes).

Let’s look at the timeline:

In fall 2021, three behavioral scientists on the Data Colada team flagged anomalies in four of Gino’s Harvard Business School papers (including the aforementioned honesty pledge paper). Harvard investigated with an outside firm and produced a nearly 1,300-page report concluding that she “committed research misconduct intentionally, knowingly, or recklessly.”

The fallout was massive. Gino lost her tenured job, four of her papers were retracted, and she has become an object of derision. But where any other scholar might slink away in embarrassment, Gino decided to double down. Her defamation claims, which the judge called “weak indeed,” were thrown out, but the litigation over the firing process is still proceeding.

Harvard filed a counterclaim against her, and in the course of litigation, Harvard’s original report that led to her firing came out. It contained some remarkably damning details, and more details have come out in the course of the litigation that are, if true, even more damning.

The single most incriminating detail is that investigators found an early data file on Gino’s computer whose numbers didn’t match what she had published. Mid-investigation, that file vanished, and a new one was in its place with the same name but different numbers that matched the published version. Whoever swapped it tampered with the file’s hidden date stamp to make it look over 10 years old.

Harvard wants to be allowed to investigate who deleted the original file, replaced it with a different file, and backdated the replacement.

I’m not a court of law, but I have a theory of who did it: probably the same person who did all of the other research fraud.

But AI told me I was right!

Gino has taken her case to the court of public opinion. By her side has been prominent legal scholar Lawrence Lessig, who clerked for Justice Antonin Scalia and has since developed a recurring habit of taking up contrarian cases that tend to backfire. For instance, he defended an MIT administrator’s decision to take money anonymously from Jeffrey Epstein and then sued The New York Times for “clickbait defamation” when it headlined a piece: “A Harvard Professor Doubles Down: If You Take Epstein’s Money, Do It in Secret.”

Over the last year, Gino and Lessig put together a long podcast making the case for her innocence. Lessig is a talented guy, and his long and meticulous case sounds quite convincing.

The problem is that it leaves out most of the actual evidence against Gino…

The Argument
Yes, you can trick AI into exonerating you
When Harvard Business School researcher Francesca Gino was fired from her tenured job over research misconduct, she promised to take the fight to court: She sued Harvard and the researchers who outed her for defamation and (in Harvard’s case) for failing to follow its process to investigate her…
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Brad DeLong here: The rest of what Kelsey Piper has to say is behind the paywall. But, first, Lessig:

Larry Lessig: Bested by a Machine <https://x.com/lessig/status/2058142101318099248>: ‘For almost a year now, I’ve been unpacking the story of Harvard’s decision to remove the tenure of HBS professor Francesca Gino…. We took the [podcast] transcripts… and fed them into an AI and had the AI produce its own summary or artifacts…. I was blown away by its output. Far better than I, it had pulled together the arguments in the case and presented them in a much more compelling and persuasive way than I had…. The most valuable resource that any of us has is time. There are plenty of sensible souls who might wonder about the story behind this case but who don’t have the time to listen to nine episodes of a podcast or read the thousands of pages…. Respecting that reality, these materials might provide a way in…

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Now, Piper: Highlights:

  • Lessig asked ChatGPT, Claude, and Gemini to write “summaries of the whole case” based only on his podcast, and claimed they were reliable if you wanted to learn but did not have a lot of time.

  • Lessig claims the summaries give “accurate understanding of the facts”.

  • The AI outputs faithfully mirrored Lessig’s spin: producing polished, indignant denunciations of Harvard and proclamations of Gino’s likely innocence.

  • The pieces of evidence Lessig does not answer simply drop out of the narrative

  • Because AI can generate confident, well‑written, authoritative-sounding text, a partisan can wrap their preferred story in a veneer of objectivity—“Claude, ChatGPT, and Gemini all agree with me”—even though the models were only given one side.

  • Lessig’s use case is a cautionary tale, not a model.

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CROSSPOST: CLAUDIA SAHM: What Will It Take for the Fed to Hike?

Three months ago, the FOMC—the Federal Reserve’s Federal Open Market Committee with its 19 participants—was split, with a 50% chance of a half-a-percentage-point cut and a 50% chance of standing pat over the rest of this year. Now it is split between a 50% chance of a half-a-percentage-point raise and a 50% chance of standing pat over the rest of this year. That is a substantial shift to see in three short months between March and June, when very little happened in terms of changes in the global economic and geopolitical situation…

It’s CROSSPOST/MONDAY MACRO time: Newly-confirmed Fed Chair Kevin Warsh does not like and says that Fed should not do “forward guidance”. His entire FOMC—Federal Open Market Committee—disagrees:

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In three months, the committee shifts from “we may well stand pat, but we may well cut short-term Treasury nominal interest rates by half a percentage point before next January” to “we may well stand pat, but we may well raise short-term Treasury nominal interest rates by half a percentage point before next January”.

And Ms. Financial Market has listened, and believed:

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Claudia Sahm hath the lesson today: The committee’s view is:

dense yet straightforward…. Scenario A: Inflation improves soon, then hold rates and maybe eventually cut. Scenario B: Sticky inflation and a stable labor market, then some hikes. Almost everyone agreed on what to do with the federal funds rate in each scenario; they disagreed on which scenario was more likely…


CROSSPOST: CLAUDIA SAHM: What Will It Take for the Fed to Hike?

<https://stayathomemacro.substack.com> <https://stayathomemacro.substack.com/p/what-will-it-take-for-the-fed-to>

Stay-At-Home Macro (SAHM)
What will it take for the Fed to hike?
The highlight of last week: I was wrong…
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The June FOMC minutes laid out two scenarios, and the committee is split right down the middle on the outlook for inflation.

Claudia Sahm
Jul 12, 2026

The highlight of last week: I was wrong!

On CNBC Wednesday morning, I predicted that the FOMC minutes would be “much shorter and with fewer details.” Steve Liesman pushed back, arguing that the minutes are a committee document. (So is the FOMC statement, and it still got hacked in half, even deleting “maximum employment.”) In the end, the minutes came in about a fifth shorter, so I was right on length, but the substance was preserved. Steve got that right, thankfully. There was as much information as usual on the debate among Fed officials at the meeting.

What’s the plan?

Most importantly, we learned why the Fed held rates steady in June, despite headline inflation twice its target, and what it would take for them to hike this year. Here is the key passage from the FOMC minutes; unpacking it will be today’s focus:

Most participants remarked on scenarios in which inflationary pressures would dissipate and inflation would soon begin to return to 2 percent. In such scenarios, almost all of these participants noted that it would likely be appropriate to maintain or eventually lower the target range for the federal funds rate. Most participants, however, also pointed to scenarios in which, in the context of stable labor market conditions, inflation would remain elevated due to strong AI-related demand, the conflict in the Middle East, or the effects of tariffs. In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted to return inflation to 2 percent.

It’s a dense yet straightforward paragraph:

  • Scenario A: Inflation improves soon, then hold rates and maybe eventually cut.

  • Scenario B: Sticky inflation and a stable labor market, then some hikes.

Almost everyone agreed on what to do with the federal funds rate in each scenario; they disagreed on which scenario was more likely.

Pictures can help bring these scenarios to life. Here are my illustrations. The minutes speak in words, not numbers, so the specifics—the inflation measure, the size and timing of “some firming”—are my translation of the Fedspeak. First, the inflation conditions in the two scenarios:

My scenarios use core PCE, even though the Fed’s target is total PCE inflation, and the text does not specify the measure. Fed officials will want to avoid being swayed by sharp moves in energy prices stemming from the conflict in the Middle East. The energy wedge is already visible: 4.1% headline versus 3.4% core in May. Core would still capture any broadening of the energy shock. Measures that exclude outliers, such as the trimmed mean, will receive attention, but they performed poorly during the pandemic, and this debate will be settled old-school.

The hike scenario comes with a laundry list of inflationary factors: energy supply disruptions, tariffs, and AI demand. Sticky inflation, regardless of the reason, will lead to firming. The patience the committee showed while tariffs passed through to consumers and earlier, while pandemic-strained supply chains healed, has worn thin. Core inflation improves soon, or there will be hikes. Expect less storytelling on the components as a reason to wait.

Soon is the most important detail in the hold scenario; without it, the scenario would sound very much like Team Transitory 2.0. Soon is not well-defined, but it does suggest that the core inflation data in the coming months need to improve. In June, Fed officials voted unanimously to hold, though a few argued for a hike in the meeting. Those few could act as soon as the July meeting, but the September or October meeting is a more likely deadline for the majority. That is not far away.

The hike scenario is about more than inflation. The qualifier “in the context of stable labor market conditions” is important. At its June meeting, the Fed sent a clear signal that it will deliver price stability. That was not a denial of its maximum employment mandate. It was a recognition that, with the unemployment rate stable in the low 4s and job growth up from last year, the problem now is inflation. If the labor market becomes a problem, the hike scenario is not so simple.

The scenarios suggest two different paths for rates this year.

The hike scenario calls for “some firming,” which I interpret loosely as 25-basis-point increases in September and December. The “some” is an important qualifier, indicating a modest increase in total rather than a full-blown tightening cycle. The current level of the funds rate is close to neutral, so even a half-percentage-point increase could add some restriction. Coming out of the pandemic, with rates near zero, the Fed had to cover a lot of ground with hikes to create any restriction. Some firming would be the Fed ensuring that current inflation excesses are temporary.

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What’s more likely?

That’s largely a question about what’s more likely to happen with inflation and employment in the coming months, and then a bit about building a majority around one interpretation on the FOMC. For this year, I would put a 60% chance on the hold scenario and a 40% chance on the hike scenario. In favor of the no-hike case: Recent months have seen less tariff pass-through into inflation, housing disinflation is ongoing, the effects of energy shocks on core tend to be modest, and the labor market shows no signs of overheating. In favor of a hike: supply shocks and shortages often take longer than you expect to work out. Plus, the arithmetic for getting core under 3% soon is demanding: to get there by December, monthly prints need to average 0.18%, versus about 0.29% over the past three months.

Fed officials are even closer to a coin flip than I am. The dot plot showed that nine officials judged that one or more rate hikes would be appropriate this year, eight favored holding rates, and one favored a cut. The Chair did not submit a dot. Note the timing: the dots came out right as the US and Iran signed their memorandum in June, so any relief on energy prices isn’t in them yet. The two scenarios also help us interpret the dot plot. Fed officials were divided in their outlook for inflation, not in how to react to inflation.

What I like about the scenarios is that the Fed is not keeping the financial markets guessing. They are fairly straightforward, and they explain what the Fed is looking for. We can all watch the economic data—CPI, PPI, and import prices for June—this week and continue to update the likely path for the federal funds rate.

In closing.

We had to wait three weeks, but the FOMC minutes really delivered. The two scenarios do not cover all possible outcomes, but they indicate what Fed officials are most concerned about and how they would respond. The rest is up to the data, and the data-driven Fed is alive and well. Knowing something about the Fed’s reaction function is more useful than knowing where they guess the funds rate will end up. Guesses go stale a lot faster than contingency plans.

<https://stayathomemacro.substack.com> <https://stayathomemacro.substack.com/p/what-will-it-take-for-the-fed-to>

Stay-At-Home Macro (SAHM)
What will it take for the Fed to hike?
The highlight of last week: I was wrong…
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Brad DeLong here: There is a third dimension to this story that the extremely sharp Claudia Sahm does not mention: Kevin Warsh has now been confirmed as Federal Reserve Chair. His stated opposition to forward guidance, his willingness to without evidence dismiss Phillips curve worries of cost shocks from a tight labor market as a potential inflation driver, and his long-standing attachment to the false and magical belief that unfinanced tax cuts for the rich somehow expand aggregate supply while shrinking all investment—all, to put it politely, point to a fundamentally different approach to monetary policy than what we have seen since at least the days of Arthur Burns back in the 1970s. If he leads his committee, rather than follows it.

Remember: In 2010, when the Fed was still grappling with the aftermath of the Great Recession, Warsh famously stated that he didn’t think we should be complacent about inflation risk—even as unemployment hovered near 10% and core inflation ran well below target. This misreading of macroeconomic conditions was symptomatic of a deeper problem: Warsh has consistently prioritized inflation fighting over employment stabilization, even when the data suggested otherwise, whenever a Democrat has been in the White House.

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CROSSPOST: ART GOLDHAMMER: The Unbearable Vacuity of the Moment

Over and over again I have been told on conferences of the rich and businessy and financial over the past year and a half that Scott Bessent is head and shoulders above everyone else associated with the Trump administration. But Scott Bessent is always the guy whose mental universe is such that it was a natural slip of the tongue for him to talk about Iran’s control over the “Straits of Vermouth” <https://braddelong.substack.com/p/scott-bessents-llm-system-prompt>. Donald Trump is not Louis-Napoleon or Andrew Jackson. And Donald Trump’s “Proud Boys” are not Louis Bonaparte’s “Society of December 10” or Andrew Jackson’s “Hunters of Kentucky” or his “Democracy”—but the family resemblance, and the institutional decay that makes him possible, should scare us…

Goldhammer asks how a constitutional order dense with veto points could be so quickly commandeered by a “madman president” and his Three Stooge-like supporters. But history does rhyme. Things like this have happened before.

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We have: Karl Marx in 1852:

Karl Marx (1852): The 18th Brumaire of Louis Bonaparte <https://www.marxists.org/archive/marx/works/1852/18th-brumaire/ch01.htm>: ‘The [French] February Revolution [of 1848] was a surprise attack, a seizing of the old society unaware, and the people proclaimed this unexpected stroke a deed of world importance, ushering in a new epoch.

On December 2 [1851] the February Revolution is conjured away as a cardsharp’s trick, and what seems overthrown is no longer the monarchy but the liberal concessions that had been wrung from it through centuries of struggle. Instead of society having conquered a new content for itself, it seems that the state has only returned to its oldest form, to a shamelessly simple rule by the sword and the monk’s cowl. This is the answer to the coup de main of February, 1848, given by the coup de tête of December, 1851. Easy come, easy go….

Every fair observer, even if he had not followed the course of French developments step by step, must have had a presentiment of the imminence of an unheard-of disgrace…. It was enough to hear the complacent yelps of victory with which the democrats congratulated each other on the expectedly gracious consequences of the second Sunday in May, 1852 [when Louis Bonaparte’s term as president would expire]… Weakness… lost all understanding of the present in an inactive glorification of the future that was in store for it and the deeds it had in mind but did not want to carry out yet…. [They] had tied up their bundles, collected their laurel wreaths in advance, and occupied themselves with discounting on the exchange market the republics in partibus [in name only] for which they had already providently organized the government personnel….

December 2 struck them like a thunderbolt from a clear sky….. The constitution, the National Assembly, the dynastic parties, the blue and red republicans, the heroes of Africa, the thunder from the platform, the sheet lightning of the daily press, the entire literature, the political names and the intellectual reputations, the civil law and the penal code, liberté, egalité, fraternité, and the second Sunday in May, 1852—all have vanished like a phantasmagoria before the spell of a man whom even his enemies do not make out to be a sorcerer…. It is not enough to say, as the French do, that their nation was taken unawares. Nations and women are not forgiven the unguarded hour in which the first adventurer who came along could violate them. Such turns of speech do not solve the riddle but only formulate it differently. It remains to be explained how a nation of thirty-six millions can be surprised and delivered without resistance into captivity by three chervaliers of card-sharping…

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And we have: Art Goldhammer in 2026:

Art Goldhammer:; <https://arthurgoldhammer356783.substack.com/p/the-unbearable-vacuity-of-the-moment>: ‘f we believe that this confidence in ultimate vindication explains our torpor in the face of such extraordinary events, we owe it to ourselves to explain why we seem able to shake off our somnolence long enough to protest vociferously the lapses of judgment on the part of the young activists who recruited a candidate as flawed as Graham Platner to run for the Senate in Maine. Of course, if we lose Maine, our chances of retaking the Senate plunge dramatically, and if we don’t retake the Senate, what chance have we of halting the “irresponsible imperial behavior by a madman president”?

Could an empire of this magnitude—”like nobody has ever seen before,” as the “mad” president likes to say—really have been brought this low by a handful of twenty- and thirty-somethings drunk on the notion that the way to the People’s heart is to find a candidate who can put on a flannel work shirt and swear like a sailor? Isn’t the more pertinent question to ask how a polity with a constitution like that of the United States, with its myriad veto points, and a central government structure designed to place numerous institutional hurdles in the way of any executive, no matter how mad or irresponsible, could have been so thoroughly and rapidly commandeered by this lamentable band of rogues? Were they exceptionally ruthless and cunning, or have the termites been eating away for decades now at barriers that once seemed as solid as the doors of the Capitol before January 6, 2021? I incline toward the latter theory; the rogues in question, with a few notable exceptions, resemble the Three Stooges, not Ocean’s Eleven.

If institutional decay has brought us to this pass, we need to know more about where the wormholes have developed…

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Similar sentiments, no?

Here is Art’s whole thing, well worth reading:


CROSSPOST: ART GOLDHAMMER: The Unbearable Vacuity of the Moment

<https://arthurgoldhammer356783.substack.com/p/the-unbearable-vacuity-of-the-moment>

The Sense of an Ending
The Unbearable Vacuity of the Moment
On the New York Times Opinion page today, an extraordinary moment occurs in a conversation between Michelle Cottle, David French, and David Wallace-Wells. With remarkable equanimity the three opinion writers readily agree that the United States has just…
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On the New York Times Opinion page today, an extraordinary moment occurs in a conversation between Michelle Cottle, David French, and David Wallace-Wells. With remarkable equanimity the three opinion writers readily agree that the United States has just lost a war with Iran: “We learned that Iran, with its cheap drones, could match the U. S. military. … We’ve learned something about the humbling of the American empire and what we can do in the world.” Fair enough. But then Wallace-Wells observes that the public—We the People, in other words, we sensitive arbiters of the res publica who so magisterially rose in righteous anger over the price of eggs under Biden and the bailout of bankers under Obama, empowering the populist revolt—remain strangely unmoved by this “humbling” wound to our imperial amour-propre: “It is not a Topic A conversation on the news,” Wallace-Wells rightly remarks. “It’s not the leading item in newspapers like ours. It is not dominating social media. And you see a sort of growing awareness that this is the kind of bad imperial behavior that the U.S. engages in without any real outrage about it.”

This is extraordinary, but it’s by no means the most extraordinary comment in this piece on our contemporary torpor. Wallace-Wells goes on to say this:

That alone is a kind of depressing, distressing development: that the public could come to hold those two thoughts in their head at once, to say, “We understand that this is irresponsible imperial behavior by a madman president, and we’re not even paying all that close attention to it” [emphasis added]…

To which Cottle responds: “Yeah, we just shrug. ‘Yeah, whatever.’”

Let me be clear. I’m not disagreeing at all with this view, shocking though it is. I agree that the United States has just lost a war with Iran. I agree that this loss was the result of “irresponsible imperial behavior.” And I agree that this irresponsible behavior was authorized and intermittently overseen by a president who, while he may not be a “madman” in any sense recognized by DSM-5, is nevertheless so feckless, corrupt, ignorant, and consumed by petty grudges and grandiose obsessions that a mad king might well be preferable to the concupiscent kingpin with whom we are currently saddled.

And yet, and yet … We the People remain strangely unmoved. We just shrug. Perhaps this is because we are convinced that retribution is just around the corner, that the democratic process that has brought us to this juncture will soon correct itself—doesn’t it always?—and reintroduce the vaunted checks and balances that have lately gone missing.

And yet if we believe that this confidence in ultimate vindication explains our torpor in the face of such extraordinary events, we owe it to ourselves to explain why we seem able to shake off our somnolence long enough to protest vociferously the lapses of judgment on the part of the young activists who recruited a candidate as flawed as Graham Platner to run for the Senate in Maine. Of course, if we lose Maine, our chances of retaking the Senate plunge dramatically, and if we don’t retake the Senate, what chance have we of halting the “irresponsible imperial behavior by a madman president”?

Could an empire of this magnitude—”like nobody has ever seen before,” as the “mad” president likes to say—really have been brought this low by a handful of twenty- and thirty-somethings drunk on the notion that the way to the People’s heart is to find a candidate who can put on a flannel work shirt and swear like a sailor? Isn’t the more pertinent question to ask how a polity with a constitution like that of the United States, with its myriad veto points, and a central government structure designed to place numerous institutional hurdles in the way of any executive, no matter how mad or irresponsible, could have been so thoroughly and rapidly commandeered by this lamentable band of rogues? Were they exceptionally ruthless and cunning, or have the termites been eating away for decades now at barriers that once seemed as solid as the doors of the Capitol before January 6, 2021? I incline toward the latter theory; the rogues in question, with a few notable exceptions, resemble the Three Stooges, not Ocean’s Eleven.

If institutional decay has brought us to this pass, we need to know more about where the wormholes have developed. This strikes me as a question in regard to which liberals and conservatives might find common ground. No one, right or left, has an interest in licensing irresponsible behavior by an unhinged executive. Everyone, right and left, has an interest in rousing the public from its dogmatic slumbers, its complacent belief that “democracy will provide,” as if We the People don’t from time to time need to hear words of wisdom whispered in our ears, even if the whisperer isn’t wearing a flannel shirt or sporting a pectoral tattoo. Perhaps the problem lies not with the judgment of the candidate recruiters but rather with widespread beliefs about what kind of candidate needs to be recruited. Donald Trump won the working-class vote despite, not because of, his sartorial choices and suspect grammar.

<https://arthurgoldhammer356783.substack.com/p/the-unbearable-vacuity-of-the-moment>

The Sense of an Ending
The Unbearable Vacuity of the Moment
On the New York Times Opinion page today, an extraordinary moment occurs in a conversation between Michelle Cottle, David French, and David Wallace-Wells. With remarkable equanimity the three opinion writers readily agree that the United States has just…
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Brad DeLong here: There have been a number of smart things said about Neofascist Trumpism today in the context of the mid-1800s National Populism of Louis-Napoleon Bonaparte and Andrew Jackson. Here are my favorites: ten of them:

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From 2003: The Wetware of the Digital Divide: HOISTED FROM THE ARCHIVES

A quarter-century ago back in the High Weblogosphere Summer, I thought the big story was that some of us—those with NYRB subscriptions, fast T‑1 lines, and a taste for “unassigned surfing”—were going to weaponize the internet for learning much faster than others. Boy was I wrong!…

The hardware curve seemed straightforward: Moore’s Law would do its work, the pipes would widen, and cheap devices would diffuse globally. The interesting action, I thought then, lay in the wetware: who knew how to search, how to classify, how to hop from Balkin to Varian to Bowerstock to Millar and back again. The Digital Divide problem was ging to be not “access versus no access,” but unequal command of the skills that turned access into understanding. Google and the NYRB archives would be force multipliers that would widen the gap between infovores and everyone else. The librarians would rule the world. Those of us who understood library systems would prosper. The rest would be locked outside, shivering virtually underdressed in the virtual infofimbulwinter outside of the virtual Lamont Library.

Boy! It has been a long, strange trip since then.

Here is the historical artifact from almost exactly 23 years ago:

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2003-07-08: The Wetware of the Digital Divide

<https://web.archive.org/web/20031019130907/http://www.j-bradford-delong.net/movable_type/2003_archives/001723.html> <http://www.j-bradford-delong.net/movable_type/2003_archives/001723.html>

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Eszter Hargittai worries not about the hardware or the software but about the… wetware, I guess, of the “digital divide”:

Eszter’s Blog Entry: “It is not Google but search savvy that may make the Web God, and only for some” (07/08/2003): …Results from a study I conducted on average users’ ability to find information on the Web suggest that there is great variance in whether people can locate different types of content online and their efficiency in doing so. These findings imply that simply offering an Internet connection to those without access will not alleviate differences or the so-called “digital divide”…. Referring to Google has become the high-culture status symbol of Web use. When presented with an information-seeking task, the supposed savvy searcher quickly suggests the use of Google. However, just like simply referring to the latest opera at the Met should not be equated with expertise in the genre, a throwaway comment about Google should not make us think that people know how to find information online…

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Others discuss the same issue, but from a different perspective:

Alcibiades: I would recommend, for that, Jack Balkin at Yale and taxpolicy.blogspot.com.

Thrasymachus: Amazing. What else useful is there on the internet that I do not know about?

Alcibiades: A great deal. This is why Hal Varian has been known to say that in the future the librarians will rule the world: in the future the answers to all questions will be on the internet–but nobody except librarians who understand search and classification will be able to find anything.

Thrasymachus: Google?

Alcibiades: The rewards to gaming Google are just too great, and it is just too small. Think of the Treasury Department lawyers in the Office of Tax Policy versus the collective private-sector tax bar of America.

Thrasymachus: Hmmm… I suspect the advantage to the well-connected, those in the intellectual “know”, is increasing rapidly. For instance, observe how useful the website for the New York Review of Books is for quickly getting an undergrad-level understanding of almost any field of academic inquiry in the humanities. The gap between (i) a bushy-tailed undergrad w/ a subscription to the New York Review website w/ archives and (ii) an average undergrad in section must be pretty darn large–significantly larger than in our day.

Alcibiades: But in our day the back issues of the NYRB were on the second level of Lamont, easy to consult if you wanted to spend time in the library. There is however, a big difference between slogging up to the library through the February snow and then laboriously searching through issue cover page after cover page in the hope of finding something useful on the one hand, and forty-five keystrokes from the comfort of one’s dorm room on the other.

Thrasymachus: There is indeed. Only sheer intellectual curiosity tuned to a fever pitch, or a more-than-undergraduate realization that you need to really impress at least three of your section leaders in order to get three superb letters of recommendation can drive one outside into the Cambridge winter to make the cold, wet trek to Lamont to do unassigned reading.

Alcibiades: And isn’t it the same for unassigned surfing?

Thrasymachus: No. It is not. Only the real weirdos–excuse me, I meant the future Ivy-class university professors–would trek to Lamont then. The barriers to information access are so much lower now. Back then the barriers to information access were so high that only the truly demented future academics made the library their friend. Now the barriers are low–and so you merely have to be clued-in and have a little extra cash.

Alcibiades: But is the difference really that great?

Thrasymachus: Yes, it is. The key is the ability to search. Remember, you do not know ahead of time if there is anything useful on The Roman Revolution in the New York Review of Books, or even in what decade it might have been published. How long would it have taken to go through every cover page since 1970? One hour? Two hours? And even then you might well miss it.

Alcibiades: That is a good point, Thrasymachus.

Thrasymachus: By contrast, the time elapsed just now in pulling up “The Emperor of Roman History” by G. W. Bowerstock from the March 6th 1980 edition of the New York Review of Books? 25 seconds! (Admittedly w/ a fast, well-maintained T-1 line.) It looks as though I could have read this review, quite thoroughly, in 10 to 15 minutes. Follow that with 30 to 40 minutes perusing the reserved reading in The Roman Revolution and I would have been far, far better prepared for my sophomore history tutorial than I ever was in reality–even when I had spent 4 or 5 hours going through the reading laboriously.

Alcibiades: And this is a good thing, no? People find it easier to learn. They become better educated.

Thrasymachus: Children sent to private school and children of infovore parents who get clued-in and well-connected to how to make the internet their friend find it easier to learn and become better educated.

Alcibiades: Hmmm…

Thrasymachus: If you go to public school and have non-infovore parents, it will never occur to you that the online archives of the NY Review of Books will make your humanities courses much easier.

Alcibiades: It’s a force multiplier. But a force multiplier that further stratifies our society. Is that what you are saying?

Thrasymachus: Yes. Exactly. And so it is obvious what we should do.

Alcibiades: Obvious?

Thrasymachus: Our children are still young. We have plenty time to teach them…

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Brad DeLong today back: What are the implications that this is how we—or at least I was—thinking nearly a quarter-century ago, in the High Classic Weblogosphere Age?

I thought I knew what the big story was going to be. The hardware curve seemed straightforward: Moore’s Law would do its work, the pipes would widen, and cheap devices would diffuse globally. The interesting action, I thought then, lay in the wetware: who knew how to search, how to classify, how to hop from Balkin to Varian to Bowerstock to Millar and back again. Hence my Alcibiades-and-Thrasymachus dialogue back in 2003, which is now merely an interesting historical artifact about how badly DeLong needed to think smarter and do more back then to mark his beliefs to what the information reality was already starting to become.

I made very wrong predictions about how things were going to go down—not because the wetware ceased to matter, but because I implicitly assumed something that has, perhaps, not held: a broad, stable floor of deep-reading plus fast-skimming capability on which these search skills would rest. But right now we fear that that has crumbled beneath us—sustained attention (and skimming a literature productively requires as much sustained attention as deep reading), comprehension, synthesis—on which any kind of digital enlightenment, egalitarian or aristocratic, would have had to have been built.


Thus I see three big, linked assumptions embedded in my 2003 dialogue.

First, that the key constraint was finding good text, not staying with it.

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(SEMI-)CROSSPOST: JOEY BROOKHART, CRYSTAL HUANG, & DYLAN PATEL: Anthropic 3Q26 Profit Over $1B: The Anthropic IPO Financials Sneak Peak

A lab that was burning cash on GPUs 18 months ago is now plausibly minting a billion dollars of quarterly profit by arbitraging three things: the collapse in the cost of “intelligence,” the stickiness of enterprise demand for agents that actually do work, and a balance‑sheet semi-shell game in which everyone else owns the iron and Anthropic takes the margin. Nevertheless, it is not primarily a playing fast-and-loose with non-GAAP numbers story here…

That Anthropic may well be seriously profitable in this current quarter is with respect to my visualization of the Cosmic All a real shock. By now not only xAI but FaceBook and Google are renting out GPUs that they had previously reserved for themselves for model training to Anthropic for inference. Plus I hear of Anthropic vacuuming up whatever datacenter capacity it can shake loose—Akamai, AWS, CoreWeave, and Fluidstack, among others—not on the grounds that this will attract sticky customers for the long run but rather that it will make financials look better in the run-up to the Anthropic IPO.

There is definitely thought to be some secret sauce in Anthropic’s model harnesses, and there may well be real secret sauce in Anthropic’s model harnesses, and I do not understand how this can be—but then, if I understood it, others smarter than me would have copied it by now, and it would not now exist.

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(SEMI-)CROSSPOST: JOEY BROOKHART, CRYSTAL HUANG, & DYLAN PATEL: Anthropic 3Q26 Profit Over $1B: The Anthropic IPO Financials Sneak Peak

SemiAnalysis
Anthropic 3Q26 Profit Over $1B: The Anthropic IPO Financials Sneak Peak
Introduction…
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Anthropic’s Opportunity is Theirs to Lose

Joey Brookhart, Crystal Huang, and Dylan Patel

Jul 07, 2026

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When Dario Amodei left OpenAI to start Anthropic in early 2021, the viral release of ChatGPT was over 18 months away and the commercialization of LLMs was practically zero. Just a few short years later, Anthropic and OpenAI combine for ~$100B of ARR and a clear winner emerged in the profitable monetization of AI models in 2026 as Claude Code took the software development world by storm.

Anthropic confidentially filed for IPO on June 1st. Over 1 month later, equity raises from hyperscalers loom, and a reported OpenAI push out of their own IPO until 2027 has led some to question the ability of the labs to raise. However, Anthropic is the clear clubhouse leader in capturing the B2B market today and is doing so in a profitable manner against an unfocused and money-burning competitor.

With this lead, we expect Anthropic to take advantage of their superior business model and margins to invest in further in new models that help extend their lead and monetization over closed and open source competitors. Anthropic has the ability to truly make OpenAI dance and we see Anthropic as the first $6T company as a base-case possibility if they continue to execute. Pricing power, gross margins, business model, and profitability are all reasons for Anthropic to IPO first and put the impetus on OpenAI to open their financials and raise the necessary capital to compete and fund the massive AI buildout still to come.

We’ve already seen 2 AI Labs IPO this year (Zhipu and Minimax from China), but Anthropic would be the first AI lab of this scale to do so. A confidential filing means there are no public numbers disclosed. Fortunately, the Tokenomics team at SemiAnalysis works to build the financials from the bottom-up by SKU, tier, and customer type. Recently, a WSJ article on Anthropic’s financials confirmed the accuracy of the work our Tokenomics team does across labs and hyperscalers to help investors, corporates, and other stakeholders understand the economics and financials of the AI Ecosystem.

In this article, we’ll dive deep into the work our team has done in the Tokenomics Model and walk you through the financial details of Anthropic, how that compares to OpenAI, where we see the market moving, and implications for the value chain and broader AI market. While other SemiAnalysis work focuses on the technical aspects of AI Labs, this piece will focus solely on the current and future financials, margin economics, and long-term outlook for Anthropic…

SemiAnalysis
Anthropic 3Q26 Profit Over $1B: The Anthropic IPO Financials Sneak Peak
Introduction…
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Brad DeLong back again: As I see it, Semianalysis gets to “>$1B profit in 3Q26” by stitching together three pillars:

  • very fast revenue growth,

  • sharply higher gross margins,

  • a cost structure that scales much more slowly than revenue.

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The underlying mechanics can be gleaned in their recent public pieces on Anthropic, Claude Code, and “AI value capture,” plus in the TokenBudgeting note that AI Weekly summarized. I’ll reconstruct their logic, as best I can.

(1) Anthropic’s annual run rate has gone from about $9B to over $44B in roughly a year, driven by “agentic” workloads: Claude Code, Cowork, etc.)​<⁠https://newsletter.semianalysis.com/p/ai-value-capture-the-shift-to-model>. Claude Code as killer app. High B2B mix and high per‑seat spend. Token consumption still in early S‑curve. The story is of Anthropic running a very large, mostly B2B ARR base anchored in coding and, increasingly, general “agentic” workflows, with top‑decile customers spending like this is core infrastructure, not a toy. A 10% operating margin on, say, $11–12B of quarterly revenue gets you to ~$1.1–1.2B of quarterly operating profit.

(2) Margin expansion. They think Anthropic’s inference gross margins rose from about 38% to over 70% within a year as both hardware and software got dramatically more efficient, even as they cut list prices on some SKUs. Blackwell GPUs and custom ASICs (TPUv7, Trainium 3) producing 17–30x more tokens per second per accelerator than prior‑generation H100s, with only ~70% higher TCO per GPU. ​⁠On the software side, wider execution pipelines, disaggregation, multi‑token prediction, etc.) give >10x inference throughput gains on the same hardware.

(3) Agentic workloads are even more margin‑friendly. They tend to have very high input:output token ratios and huge cache hit rates. Plus the mix is shifting toward higher-price models, from mid‑tier Sonnet to more expensive Opus and now to Opus Fast, Fable. The most AI‑entusiastic customers are price‑insensitive because they see productivity gains dominating, if not now, in the near future as their engineers gain metis at manipulating these new information technologies.

(4) Consider the structure of Anthropic’s deals with hyperscalers. When Anthropic’s models are sold through AWS and Bedrock on a “token‑as‑a‑service” basis, Anthropic is the seller of record and books the full token revenue, while AWS earns a combination of infrastructure fees and a distribution/revenue‑share fee. ​⁠<https://newsletter.semianalysis.com/p/anthropic-growth-and-bedrock-mix>. They get access to AWS’s customer base and massive GPU/Trainium capacity without having to sign huge, fixed “take‑or‑pay” contracts. Their own capital intensity and depreciation line is lower than if they were buying/renting all compute “wholesale.” A big chunk of capex and power/ops spend sits on AWS’s books, but Anthropic still books most of the token revenue. That makes the Anthropic P&L very levered to revenue growth.

Thus $1B+ of quarterly profit seems attainable.

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A natural objection is: “Won’t competition compress margins before you ever see that billion‑profit?” SemiAnalysis sees open‑source models as still noticeably worse for serious knowledge work, so not putting much pressure on premium-model pricing (yet). Their datacenter modeling insists that GPU/TPU/Trainium capacity and power are structurally scarce through at least 2027. If demand for tokens is racing ahead of supply, and if multiple labs are compute‑constrained, then anyone who can deliver frontier‑quality tokens can price off the perceived value of the work, not off marginal cost. That’s how they justify keeping that 70%+ gross margin assumption and then letting operating margins climb into the double digits by late 2026.

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The early external reaction I have seen is a mix of intrigue and skepticism. AI‑industry newsletters like AI Weekly are treating SemiAnalysis’s TokenBudgeting work as basically credible, while acknowledging it rests on vendor conversations and card‑spend data rather than audited statements

The intellectually serious questions, to me, are:

  1. Whether Anthropic can actually sustain that pace of ARR growth given emerging competition and enterprise procurement friction.

  2. Whether hyperscalers and Nvidia/TSMC reprice their contributions enough to claw back more of the value, compressing model‑lab margins.

  3. Whether enterprises, once past the “Claude Code honeymoon,” normalize around lower per‑employee AI budgets than SemiAnalysis’s 99th‑percentile anecdotes imply.

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CROSSPOST: ARIN DUBE: "Clever Hans" at Speed: Implications for "AI" Workflows & Spread

Agentic AI shines on verifiable, testable work—and quietly falls apart when the answer isn’t checkable. “Run and find out” only works when you can quickly and cheaply assess the answer. We don’t have thinking machines; we have very fast runners-who-find-out who we can wire into our workflows—if, that is, we can either (a) find out, or (b) are happy with slop for purposes of summarization, boilerplate, or ritual…

This this this this this:

Arin Dube: “AI” Take of the Day <https://x.com/arindube/status/2074620137106285007>: ‘Fundamentally, there is a world of difference in usefulness of agentic AI in doing tasks that are to a large extent verifiable, versus not. If you want to replicate something, or have verifiable targets the code needs to reproduce, it can be a highly effective tool. For example, the final product can be a software that “works” and passes some tests; or could be a figure that plots (known) data; etc. When there isn’t, it can be a mess, and whether it’s a mess is largely unknown (without incurring large time cost).

This is why many researchers I know have boatloads of Claude Coded (or Codex Coded) proto-findings that haven’t seen the light of day because … it would take a long time to actually have any confidence. We can try to come up with milestones, interim checks, etc., but frankly there are severe limits on what that can look like without incurring a large cost. This is why I think focusing AI tools to be more limited but effective at accomplishing verifiable tasks—and helping users actually find those limited spaces where it can be effective—would can be productivity enhancing than chasing a pipe dream of crossing some mystical AGI threshold…

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Consider Clever Hans. Clever-Hans-the-horse could not add. But Clever-Hans-the-system could. The system consisted of Clever Hans, the floor against which the horse stamped its hoof, the air through which the sound travelled, and the human who got excited when he had stamped his hoof the requisite number of times. The whole system could add because it had a test of accuracy: excitement on the part of the human component.

LLMs-in-harness are Clever Hans at speed, stamping their hooves much much faster than a human possibly could. So as long as there is a test of correctness (which implies tests of incorrectness), run-and-find-out will get you to a right answer, and get you to a right answer quickly.

Perhaps I should say not “Clever Hans” but ‘“Rikki-Tikki-Tavi”?

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And Peyman Shahidi chimes in:

Mert Demirer, John J. Horton, Nicole Immorlica, Brendan Lucier, & Payman Shahidi: Chaining Tasks, Redefining Work: A Theory of AI Automation <https://peymanshahidi.github.io/assets/pdf/chaining_tasks_ai_automation.pdf>: ‘Production is a sequence of steps that can be executed (1) manually, (2) augmented with AI, or (3) fully automated within contiguous AI-executed steps called “chains.” Firms optimally bundle steps into tasks and then jobs, trading off specialization gains against coordination costs. We characterize the optimal assignment of humans and AI to steps and the firm’s resulting job structure, showing that comparative advantage logic can fail with AI chaining. The model implies non-linear productivity gains from AI quality improvements and admits a CES representation at the macro level. Empirical evidence supports the model’s key predictions that (1) AI-executed steps co-occur in chains, (2) dispersion of AI-exposed steps lowers AI execution at the job level, and (3) adjacency to AI-executed steps increases the likelihood that a step is AI-executed…

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Perhaps the fundamental divide in AI usefulness is not between “narrow” and “general” intelligence, but between tasks where built-in very cheap and very quick tests of correctness—or close-enough-ness—can be easily added, and those without them. Today LLMs can race through verifiably-correct steps by running-and-finding-out, but without the “finding-out” part, they flail in the dark elsewhere. Dube has the prose diamond, Shahidi and his coauthors have a simulation framework.

And now my task is to try to see if this bears in any obvious and insightful way on exactly what the secret sauce of Anthropic’s harness is.

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Financial Markets See Core Inflation as the Problem Right Now: CHART OF THE DAY

A nice chart from Torsten Slok: Financial markets are treating the recent decoupling of oil prices and bond yields as evidence that the Fed’s problem has shifted from headline to core inflation, meaning cheaper oil alone no longer moves expectations about interest-rate cuts…

Financial markets have quietly changed the story they’re telling about inflation.

One thing I think Torsten Slok misses here: The price of oil on the high seas has a downward trend. The price of energy to American consumers definitely does not. The datacenter boom and tokenmaxxxing have entered the chat.

Plus: Trump’s war on Iran continues, with no real ceasefire, and with ships passing through the Strait of Hormuz depending on Iran getting enough cash week by week for it to feel that it is still getting the better of the deal by letting ships out:

Torsten Slok: The Decoupling: Energy Down, Yields Up <https://www.apollo.com/wealth/insights-news/insights/daily-spark/the-decoupling-energy-down-yields-up>: ‘When oil and yields stop moving together, it signals the Fed’s problem has shifted from headline to core, see chart below. With tariffs, a tight labor market and firm services prices still in play, the market expects core inflation to stay sticky even as energy costs fall. The bottom line is that cheaper oil alone won’t open the door to cuts, and the Fed is likely to stay on hold at its next meeting until it sees core inflation convincingly cooling…

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No. The Federal Reserve has no business thinking about cutting interest rates right now. Even with a chair for whom a 2.9%/year PCE-basis inflation target is as good as a 2.0%/year one. and that is a 3.4%/year CPI-basis inflation target. And someday, if things go on as they are, the fiscal theory of the price level really will crest the Kurosawa horizon line and enter the chat as well .

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HOISTED FROM THE ARCHIVES: JOHN HOLBO: Dead Right

Dead Right, Dark Wrong: John Holbo autopsies David Frum’s Dooner-Party conservatism, or Dark Satanic Millian liberalism…

Every so often, I encounter a piece of writing that doesn’t just make an argument, but provides an entire interpretive lens—a “rectification of names,” as it were—that makes the world suddenly appear more legible and significantly more alarming. John Holbo’s review of Dead Right is one of those pieces. Holbo coins a term that has since become a favorite in my own intellectual toolkit: “Dark Satanic Millian Liberalism.”

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On its face, the name sounds like a bit of high-octane academic trolling—and it was and is. Holbo isn’t talking about “liberalism” in the sense of equality or civil rights; he is describing a theory of social control. He argues that there exists a strain of thought—one that persists in surprising places—which views laissez-faire capitalism as “good” only if it manages to break the will of the masses. In this view, the “dark satanic mills” are not a failure of the system to be corrected, but a feature: a mechanism for grinding down the “pagan self-assertion” of the individual until they no longer have the spirit or the capacity to “jump across the big top.”

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Now underneath it all, there is a kernel of truth called the human capacity and capability to do difficult things in groups. It is one of our glories and our superpowers. And it is a very important part of any good education that people see, learn and gain practice at doing difficult things in groups. But.

If you want to understand why some modern political movements seem to crave material deprivation as a means of social cohesion, start here.

Read John Holbo’s classic:

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HOISTED FROM THE ARCHIVES: JOHN HOLBO: Dead Right

November 07, 2003

Dead Right

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A fortnight ago Josh Marshall recommended his ‘two best political books’: Michael Lind’s Up From Conservatism (1996) and David Frum’s Dead Right (1994). That David Frum? Off to library went I. (And checked out Lind, too. Pretty good.) I can see why Marshall finds Frum’s book … interesting. Its thesis is clearly stated in the final chapter’s final paragraph:

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“Conservatives suffer a very different political problem from liberals these days. Avowed liberals have a difficult time winning power in this country; avowed conservatives do not. You no longer get far in public life by preaching that the poor are poor because someone else is not poor, or that criminals can be rehabilitated, or that American troops should get their orders from the United Nations. There’s no liberal Rush Limbaugh. But exercising power – that is a very different business. When conservatism’s glittering generalities, “you are overtaxed,” turn into legislative specifics, “you must pay more to send your kid to the state university,” we run into as much trouble in midsession as the liberals do at election time. Twelve years of twisting and struggling to escape this snare have just entangled us ever more deeply in it, until we have arrived at the unhappy destination this book describes. Is there a way out? Only one: conservative intellectuals should learn to care a little less about the electoral prospects of the Republican Party, indulge less in policy cleverness and ethnic demagoguery, and do what intellectuals of all descriptions are obliged to do: practice honesty, and pay the price.” (p. 205)

Frum’s conception of liberals as unhappy until there’s a paroled murderer and UN bluehelmet on every corner – is subject to doubt. But we pass over in silence; the man, to his credit, does not mince words about the faults of his party. Chapter 2 is about the hideousness of Houston, 1992 (the Rep Nat. Conv.): “Wall to Wall Ugly”. Chapter 3 is “The Failure of the Reagan Gambit”, i.e. how Reagan cut taxes but failed to trim the budget, thereby generating deficits that became the business of Democrats to fix. Chapter 4: supply-side economics is not credible. Chapter 5: Bill Bennett is not credible. Chapter 6: Pat Buchanan is the antipodes of credible. Chapter 7, “the Pseudo-Menace of the Religious Right”, is a thoroughly unconvincing apologia, yes. But Chapter 8, “1996” concludes bluntly, as per above.

I read the book with considerable care, not just for the history lesson – indeed I learned a thing or two - but because I was genuinely curious what Frum thinks conservatism looks like in all its glorious and unalloyed philosophical ideal purity, scoured clean and purified of blemishes, flaws, errors, compromises, distortions due to human weakness, money, K Street, the usual suspects. This question interests me, as per recent posts.

Also, many months back I went on a multi-post tear into the NRO. (Goldberg and the Derb, specifically.) What impressed me then was the lack of discernable political philosophy. To adapt the great conservative Carlyle: seldom have I seen someone execute such a shallow dive into such deep water and emerge so muddy. Day in, day out.

I won’t rehearse my gripes of last year. Go read if you care to. The posts hold up OK, which is more than I can say for most of my political posts from last year. My compass is evidently twitchy and unreliable. Wouldn’t advise anyone else to use it. But I do find the following piece of simple woodcraft has its rugged employments: figure out which side of the trees the NRO is growing on. Then head dead-straight in the opposite direction until you hit civilization. (There are honorable exceptions to this rule.)

As I was saying, I read Frum to find out whether he could refute my generally bad impression of the philosophical state of the National Review’s specific brand of conservatism. On the strength of Marshall’s recommendation, and Frum’s evident willingness to take his colleagues to task, I was prepared to be impressed by the rigorous and principled quality of the man’s views, even if I did not share them. At least I was prepared to give the man a fair shake. And I have been mightily disappointed. And this would be a good point to announce and clearly label for what it is the rather heavy-handed rhetorical device I intend to employ throughout the rest of this post. I am going to attribute rather outrageous views to Frum, not because I actually think he holds them but because I think he does NOT. These outrageous views are the views he WOULD hold if, perchance, he upheld and investigated only the most immediate ramifications of the bits and snippets of philosophy he espouses. My accusation, then, is this: the man thinks he has a conservative philosophy; it seems to me he does not.

And this post is too damn long, I’m warning you. Just started typing and didn’t stop. It’s probably pretty approximate at points. Which is bad. Oh, well. Here goes. Carpe diem and caveat emptor.

Let’s start at the very beginning (a very good place to start):

“Since it’s formation in the early 1950’s, the intellectual movement known as American conservatism has stood for two overarching principles: anticommunism abroad and radical reduction in the size, cost, and bossiness of the federal government at home. Anticommunism has lost most of its zest, for the time being anyway. The bossiness of government might have seemed to be an issue with staying power, but conservatives have tiered of it all that same. The country’s leading conservative politicians and intellectuals may attack this or that ridiculous feature of overweening government, they may propose this or that more or less libertatian alternative to President Clinton’s plan to reorganize the American medical system, [remember in the olden days – 1993 -when we all seemed foredoomed to have national health care?] but radical criticism of the very idea that Washington should extract and redistribute one-quarter of the nation’s wealth has simply petered out. The single-parent family; tumbling educational standards; immigration; crime; ethnic balkanization – the conservative magazines and conservative conversation bubble with ferment over these. About morality and nationality, conservatives have a lot to say. But their fervor for eliminating the progressive income tax and the redistribution of wealth via Washington has cooled, when it has not disappeared altogether.” (p. 1)

What is your impression at this point? I’m thinking: economic libertarianism. The man thinks the social and cultural issues are tasty, yes, but incidental. Appearances can be deceiving, however.

“The new topics could well enhance conservatism’s appeal. Social conservatism is potentially more popular than economic conservatism. But severed from economic conservatism, social conservatism too easily degenerates into mere posturing. The force driving the social trends that offend conservatives, from family breakup to unassimilated immigration, is the welfare function of modern government. Attempting to solve these social problems while government continues to exacerbate them is like coping with a sewer main explosition by bolting all the manhole covers to the pavement. Overweening government may not be the sole cause of America’s maladies. But without overweening government, none would rage as fiercely as it now does. The nearly 1$ trillion the federal government spends each year on social services and income maintenance – and the additional hundreds of billions spent by the states – is a colossal lure tempting citizens to reckless. Remove those alluring heaps of money, and the risks of personal misconduct would again deter almost everyone, as they did before 1933 and even 1965.”

It’s a bit – um, ripe - to analogize immigrants and single-parent families directly to sewage. Nevertheless, this can still be read as more or less pure economic libertarianism (with just a layer of slime on top.) What ‘offends’ conservatives about the welfare state is that it is economically inefficient: it destroys value by systematically encouraging masses of people to behave in reckless, value-destroying ways, which ultimately hurts those masses themselves. The cost of maintaining the safety net eventually frays even the satefy net, and then you’ve got nothing. Of course, this is putting the thesis rather crudely and ignoring numerous variants. But never mind that. It turns out economic inefficiency isn’t what ‘offends’ conservatives after all, at least not Frum.

“The great, overwhelming fact of a capitalist economy is risk. Everyone is at constant risk of the loss of his job, or of the destruction of his business by a competitor, or of the crash of his investment portfolio. Risk makes people circumspect. It disciplines them and teaches them self-control. Without a safety net, people won’t try to vault across the big top. Social security, student loans, and other government programs make it far less catastrophic than it used to be for middle-class people to dissolve their families. Without welfare and food stamps, poor people would cling harder to working-class respectability than they do not.”

The thing that makes capitalism good, apparently, is not that it generates wealth more efficiently than other known economic engines. No, the thing that makes capitalism good is that, by forcing people to live precarious lives, it causes them to live in fear of losing everything and therefore to adopt – as fearful people will – a cowed and subservient posture: in a word, they behave ‘conservatively’. Of course, crouching to protect themselves and their loved ones from the eternal lash of risk precisely won’t preserve these workers from risk. But the point isn’t to induce a society-wide conformist crouch by way of making the workers safe and happy. The point is to induce a society-wide conformist crouch. Period. A solid foundaton is hereby laid for a desirable social order.

Let’s call this position (what would be an evocative name?) ‘dark satanic millian liberalism’: the ethico-political theory that says laissez faire capitalism is good if and only if under capitalism the masses are forced to work in environments that break their will to want to ‘jump across the big top’, i.e. behave in a self-assertive, celebratorily individualist manner. Ergo, a dark satanic millian liberal will tend to oppose capitalism to the degree that, say, Virginia Postrel turns out to be right about capitalism ushering in a bright new age of individual liberty, in which people try new things for the sheer joy of realizing themselves, etc., etc.

Let’s be even more explicit about this. Postrel (for example) is like (say) J.S. Mill, insofar as she thinks freedom is good because it is required by, and conduces to, ‘pagan self-assertion’. I quote a passage from Isaiah Berlin’s “Two Concepts of Liberty”:

“What made the protection of individual liberty so sacred to Mill? In his famous essay he declares that, unless the individual is left to live as he wishes in ‘the part [of his conduct] which merely concerns himself,’ civilization cannot advance; the truth will not, for lack of a free market of ideas, come to light; there will be no scope for spontaneity, originality, genius, for mental energy, for moral courage. Society will be crushed by the weight of ‘collective mediocrity’. Whatever is rich and diversified will be crushed by the weight of custom, by men’s constant tendency to conformity, which breeds only ‘withered’ capacities, ‘pinched and hidebound’, ‘cramped and dwarfed’ human beings. ‘Pagan self-assertion’ is as worthy as ‘Christian self-denial’. ‘All errors which [a man] is likely to commit against advice and warning, are far outweighed by the evil of allowing others to constrain him to what they deem his good.”

Of course, many thinkers have argued that the kind of ‘negative liberty’ characteristic of the operations laissez faire capitalism precisely does not produce ‘pagan self-assertion’. To the contrary, it produces – if not mass misery – then at least withered, pinched, hidebound dwarf personalities. The thing to note about Frum’s position is that it is, as it were, a lower synthesis of the standard defenses and criticisms of capitalism. It assumes the worst-case scenario predications about capitalism’s tendency to destroy individual spirit, and advocates capitalism on that basis. (As a great conservative once toasted: “Gentlemen! To Evil!”)

But isn’t this a horribly uncharitable reading I have just confabulated? Couldn’t Frum be saying, in the above passage, nothing more noxious than that the severe threat of punishment for risky behavior is just one cog of the mighty engine of economic efficiency – growth, wealth? He could be, but he isn’t. Here is the acid test: would he really be willing to go so far as to sacrifice economic prosperity expressly for the sake of breaking the spirit of ‘pagan self-assertion’ that causes one to wish ‘to leap across the big top’?

Why, yes – yes, he would. Because he believes 1) that big government devastates potential prosperity; and 2):

“For most conservatives [including, by implication, Frum], shrinking government has always been a political means rather than an end in itself. The end was the preservation of the American heritage, and beyond that, the heritage of the classical and Judeo-Christian (or Christian toute court) West. If that heritage could be preserved without fighting an ugly and probably doomed battle to shrink government, most conservatives would drop the size-of-government issue with hardly a pang.” (p. 13)

But is Frum really serious when he says this? And what exactly is he saying? Tolerating marginal economic inefficiency - if the voters bang on the ballot box, bawling for it – is not the same thing as advocating widespread economic misery (and the voters be damned). Surely Frum is at most guilty of insufficiently vigorous advocacy of prosperity. He can’t be expressly advocating the lack thereof. Oddly, there are various strong hints that he is. Example:

“Contemporary conservatives still value that old American character. William Bennett in his lectures reads admiringly from an account of the Donner party written by a survivor that tells the story in spare, stoic style. He puts the letter down and asks incredulously, “Where did those people go?” But if you believe that early Americans possessed a fortitude that present-day Americans lack, and if you think the loss is an important one, then you have to think hard about why that fortitude disappeared. Merely exhorting Americans to show more fortitude is going to have about as much effect on them as a lecture from the student council president on school spirit. Reorganizing the method by which they select and finance their schools won’t do it either, and neither will the line-item veto, or discharge petitions, or entrusting Congress with the power to deny individual NEA grants, or court decisions strinking down any and all acts of politically correct tyranny emanating from the offices of America’s deans of students – worthwhile though each and every one of those things may be. It is socials that form character, as another conservative hero, Alexis de Tocqueville, demonstrated, and if our characters are now less virtuous than formerly, we must identify in what way our social conditions have changed in order to understand why.

Of course there have been hundreds of such changes – never mind since the Donner party’s day, just since 1945 … But the expansion of government is the only one we can do anything about.

All of these changes have had the same effect: the emancipation of the individual appetite from restrictions imposed on it by limited resources, or religious dread, or community disapproval, or the risk of disease or personal catastophe.” (p. 202-3)

Words fail me; links not much better. The Donner party? Where did all these people go? Into each other, to a dismaying extent. A passage from one of those moving, stoical diary entries:

“...Mrs. Murphy said here yesterday that [she] thought she would commence on Milt and eat him. I don’t think she has done so yet, [but] it is distresing. The Donno[r]s told the California folks that they [would] commence to eat the dead people 4 days ago, if they did not succeed in finding their cattle then under ten or twelve feet of snow & did not know the spot or near it, I suppose they have [cannibalized] ...ere this time.”

The stoical endurance of the Donner party in the face of almost unimaginable suffering is indeed moving. The perseverance of the survivors is a lasting testament to the endurance of the human spirit. (On the other hand, the deaths of all who stoically refused to cannibalize their fellows might be deemed an equal, perhaps a greater testament.) But it is by no means obvious – some further demonstration would seem in order – that lawmakers and formulators of public policy should therefore make concerted efforts to emulate the Donner’s dire circumstances. What will the bumper-stickers say? “It’s the economy, stupid! We need to bury it under ten to twelve feet of snow so that we will be forced to cannibalize the dead and generally be objects of moral edification to future generations.”

I think we are beginning to see why Frum feels that his philosophy may be a loser come election time. I think the Donner party – who, be it noted, set out seeking economic prosperity in the West, not snow and starvation – would not vote Republican on the strength of William Bennett’s comfortable edification at the spectacle of their abject misery. (“Let’s start with the fat one over there in the corner, playing the slots. We can eat off him for a week. See how he likes it.”)

To put what is surely rather an obvious point yet another way: if the Donner party is really what you want, the policy riddle (how to reproduce these conditions, since the Donner party was not political, per se?) already has an answer: Stalinism. The Gulag Archipelago opens with a morally edifying tale of misery and starvation, like so:

“In 1949 some friends and I came upon a noteworthy news item in Nature, a magazine of the Academy of Sciences. It reported in tiny type that in the course of excavations on the Kolyma River a subterranean ice lens had been discovered which has actually a frozen stream – and in it were found frozen specimens of prehistoric fauna some tens of thousands of years old. Whether fish or salamander, these were preserved in so fresh a state, the scientific correspondent reported, that those present immediately broke open the ice encasing the specimens and devoured them with relish on the spot.”

As Solzhenitsyn observes, the publication of this tale was a bit of an official slip; for it opened a window on “the amazing country of Gulag”, inhabited by the freakish zek peoples.

“We understood because we ourselves were the same kind of people as those present at that event. We, too, were from that powerful tribe of zeks, unique on the face of the earth, the only people who could devour prehistoric salamander with relish.”

I think we can all agree that Solzhenitsyn’s book is among the most moving testament’s to the living human spirit ever committed to paper. I think we can all also agree that one shouldn’t inflict suffering in an attempt to replicate Solzhenitsyn. Why not is a nice question, but for the sake of abbreviating the present argument let’s just take as read: Stalinism bad. From this premise it follows that Frum’s (and Bennett’s) conservative point of view is somewhat confused; because their point of view implies that Stalinism will be good. It produced economic misery, yes; but by hypothesis we don’t care about economics; Stalinism produced a great deal of stoical, enduring good character in the form of resistance to itself. The goal of government, Frum says, is inculcating good character; and lectures won’t do it; you need to right social conditions. Ergo, the gulag is good public policy. And snow helps.

At this point let me step back and make quite clear: I don’t actually think Frum is a crypto-Stalinist, let alone a Stalinist. I don’t think he is actually advocating the intentional infliction of dire economic hardship and suffering – let alone cannibalism - on the American people for the sake of hardening them up, stiffening the national spine. I think if there were some Americans caught in the snowy mountains these days, he’d advocating sending in the helicopters and so forth – and he wouldn’t order them to stand off, just filming the poor schmucks eating each other for Frum’s subsequent viewing pleasure and moral edification.

Which is to say: Frum is not thinking about what he’s saying. Because what he is saying more or less instantaneously implies an indefinitely large cloud of things he really – really, really – doesn’t think.

We are at this point very near the heart of what Frum styles his ‘conservative philosophy’. But at the heart of it is a sort of proto-cognitive itch; a sensibility, or feeling, or subconscious reflex. Orwell talks about this in chapter 12 of The Road to Wigan Pier, incidentally: the naturalness of hostility to the softening that results from modern machine civilization. That’s the feeling, he explains. But, of course, next comes the thought.

“So long as the machine is there, one is under an obligation to use it. No one draws water from the well when he can turn on the tap … Deliberately to revert to primitive methods, to use archaic tools, to put silly difficulties in your own way, would be a piece of dilettantism, of pretty-pretty arty and craftiness. It would be like solemnly sitting down to eat your dinner with stone implements. Revert to handwork in a machine age, and you are back in Ye Old Tea Shoppe or the Tudor villa with the sham beams tacked to the wall.”

That’s Frum in a nutshell. Had the feeling. Stalled out before he got the thought, right in front of ‘Ye Old Conferfative Philofophie & Non-Load-Bearing Architectonic Façade’. (Indeed, this seems to me an appropriate shingle to hang outside the offices of the National Review. And the next time someone over there has the temerity to quote Orwell piously. Take it down: whack!)

Exactly how is this Frum? You don’t drive west through the snowy mountains in covered wagons, gee-yawing a hundred head of cattle. You rent a U-Haul and follow the interstate highway system (thank you, federal government!) Likewise, the welfare state is a machine. It exists. If it were abolished, it would still exist in potentia. It can be built. A number of versions of it exist around the world today. There are reasons not to use a great many of these, since they have a demonstrated tendency to guzzle economic efficiency. And a number of them are just disagreeably interfering, perhaps. On the other hand, it seems that the majority of the voters prefer some sort of safety net to none. They don’t want to shoulder 10-12 feet of snow worth of risk themselves. And a machine exists to shoulder that risk. Are we going to use the machine or not? Damn straight we will! So the argument is reduced to: cost-benefit analysis, and weighing of diverse preferences and degrees of risk-aversion, so forth. There are a lot of technical questions and doubts, and serious arguments about people’s values to be had and hammered away at and ultimately voted up or down. Meanwhile Frum is clean out in the cold. He doesn’t disapprove of the welfare state on economic grounds, so he will not be a participant in these rational debates about costs and benefits. He wants to abolish the welfare state on pretty-pretty arty crafty aesthetic grounds. (Stretching a point, these might be moral grounds. But they are largely aesthetic, I think.)

Note how Frum’s pretty-pretty - “aren’t the hungry strugglers picturesque!” - perspective is indeed that of an aesthetically-minded spectator. And a very asymmetric perspective it is. Just as a movie-goer may enjoy watching all the grunts struggle heroically forward through the mud on the silver screen – while he himself sinks into a soft seat, 64 oz. Bladder-Buster Coke and popcorn ready to hand - Frum would never dream of employing public policy as a means to the good end of hardship for himself. But if it is good for the poor and middle-class to suffer and toil, surely it would do the well-to-do some good as well. We could stiffen upper-classes spines quick by raising the top tax bracket to, say, 95%, while firing all the cops, letting all the criminals out of jail, giving them guns, and busing them to the richest neighborhoods before letting them go. Not a good idea, obviously, but a lot of rich people would learn a lot of important, genuinely meaningful life lessons. And if you sold tickets (or gave them away, financing it all with tax dollars) some folks would be sure to find it aesthetically beguiling. But no. Not a good idea. A very bad idea. Brutality against kulaks and the well-to-do. Not good public policy, however character-building and highly rated as reality TV.

J.S. Mill saw Frum coming a century and a half away. In his essay, “Coleridge”, he writes:

“Take for instance the question how far mankind have gained by civilization. One observer is forcibly struck by the multiplication of physical comforts; the advancement and diffusion of knowledge; the decay of superstition; the facilities of mutual intercourse; the softening of manners; the decline of war and personal conflict; the progressive limitation of the tyranny of the strong over the weak; the great works accomplished throughout the globe by the co-operation of multitudes; and he becomes that very common character, the worshipper of ‘our enlightened age’. Another fixes his attention, not upon the value of these advantages, but upon the high price which is paid for them; the relaxation of individual energy and courage; the loss of proud and self-relying independence; the slavery of so large a portion of mankind to artificial wants; their effeminate shrinking form even the shadow of pain; the dull unexciting monotony of their lives, and the passionless insipidity, and absence of any marked individuality, in their characters; the contrast between the narrow mechanical understanding, produced by a life spent in executing by fixed rules a fixed task, and the varied powers of the man of the woods, whose subsistence and safety depend at each instant upon his capacity of extemporarily adapting means to ends … One would attends to these things, and to these exclusively, will be apt to infer that savage life is preferable to civilized; that the work of civilization should as far as possible be undone, and from the premises of Rousseau, he will not improbably be led to the practical conclusions of Rousseau’s disciple, Robespierre.”

The thing that is in fact keeping Frum from turning into the moral equivalent of Robespierre – IS THAT HE DOESN’T ACTUALLY MEAN IT. I doubt he actually approves of staging Donner parties.

What Frum has got, to repeat, is just a feeling that the kids these days are getting a bit soft. Everyone feels this way sometimes, of course – since it’s true. But some people have thoughts as well as feelings about this attendant effect of civilization. And so it turns out Lionel Trilling was maybe not such a poor prophet after all, when he wrote way back in 1953: “in the United States at this time liberalism is not only the dominant but even the sole intellectual tradition;” for the anti-liberals do not, by and large, “express themselves in ideas but only in action or in irritable mental gestures which seek to resemble ideas.” Irritable mental gestures. Yep. Frum.

OK. Trilling too strong. I do concede there are serious conservative thinkers and intellectuals. I make a point of reading – and I quite enjoy reading - quite a number of quite conservative writers and thinkers, and I hope I am smart enough to learn from them when I should. But it is seriously easy to pretend you’ve got a conservative philosophy when really you’re armed with nothing but irritable gestures.

We all like watching movies about rugged tough guys (well, most of us: I do). But – write this on a 3 x 5 card and consult as necessary – it is absurd to advocate that the government intentionally impose hardship on the people, against their will, for the sake of toughening them up.

Now what would Frum say to all of this (after he calmed down and stopped just cursing my name)? It is important to pursue this question because – I have admitted this already – I have just spilled a lot of ink over what Frum implies but obviously doesn’t intend. So it sounds worse than it is: multiple adversions to Stalinism, so forth. To repeat: I am quite sure Frum is not a closet Stalinist. What is he?

Well, for starters he would strenuously object to the numerous hints dropped above that he advocates producing a broken-spirited society of cringing conformists. He would explain that he has an ideal not of child laborers toiling in dark, satanic mills. He has an ideal of rugged, self-reliant individualism which is, however, not exactly a ‘jump across the big top’ sort of individualism. (“I hate swingers!” said the man in the movie as he threw a lamp in the hot tub.) But, he would insist: that doesn’t make this ideal fawning lickspittlism and flinchophilia. (Monopoly Capitalist Boss twirling his handlebar moustaches and cracking the whip – Ha! Ha!) Frum would object that he talks about the Donner party not because he likes starvation and snow but because, as per the Mill passage, he likes crafty, stoically resourceful, lean and hardened woodsman-types.

It is perfectly fair to retort that the objection still stands: at best this is risably twee nonsense; faux-rusticated arty-woodcrafty tourist fantasy. At worst it is bonkers: blow up the cushy offices; blow up the factories. Drive the slackers and liberals back into the woods to eke out a living from roots and berries. That’s exceedingly asinine public policy, to put it mildly.

Nevertheless, there is something a bit more complicated at work. I’ve just been reading Empson’s fine and rather neglected literary critical masterpiece, .Some Versions of Pastoral. Fine book. The first chapter is “Proletarian Literature”. A relevant bit:

“As I write [1950], the government has just brought out a poster giving the numbers of men back at work, with a large photograph of a skilled worker using a chisel. He is a stringy but tough, vital but not over-strong, Cockney type, with a great deal of the genuine but odd refinement of the English lower middle class. This is very strong Tory propaganda: one feels it is fair to take him as a type of the English skilled worker, and it cuts out the communist feelings about the worker merely to look at him. To accept the picture is to feel that the skilled worker’s interests are bound up with his place in the class system and the success of British foreign policy in finding markets. There is an unfortunate lack of a word here. To call such a picture a ‘symbol’, like a sign in mathematics, is to ignore the sources of its power; to call it a ‘myth’ is to make an offensive suggestion that the author is superior to common feeling. I do not mean to say that such pictures are nonsense becaused they are myths; the facts of the life of a nation, for instance the way public opinion swings round, are very strange indeed, and probably a half-magical idea is the quickest way to the truth. People who consider that the Worker group of sentiments is misleading in contemporary politics tend to use the word ‘romantic’ as a missile; unless they merely mean ‘false’ this is quite off the point; what they ought to do is to produce a rival myth, like the poster. In calling it mythical I mean that complex feelings, involving all kinds of distant matters, are put into it as a symbol, with an implication ‘this is the right worker to select and keep in mind as the type,’ and that among them is an obscure magical feeling ‘while he is like this he is Natural and that will induce Nature to make us prosperous.’”

This strikes me as sharp cultural criticism; and I believe Empson hereby enables me to peg Frum’s (American) Toryism to the board. First, the stringy, hard-bitten-but-loyal-to-the-system ideal worker. None of those beefy, beaming, jut-jawed Soviet-style proles for us, thank you much.

Obviously our ideal worker may have trouble making his way today, armed only with chisel, but substitute some implement more suitable for the information age and you have Frum’s (and Bennett’s) ideal. When they say ‘Donner party’ they are thinking: hard-bitten and hard-nosed. Not starving, but made tough by a life lived right on the edge of failure. Inclined to stick it out in an unhappy marriage. Not a counter-culture type. Not asking anything from those above. Not having a lot of sympathy to spare for those beneath. Interests ultimately narrowly aligned with those of the upper-classes.

But that’s not the brilliant part. The brilliant part is Empson’s correct perception (I think it is correct, anyway) 1) that lots of thoroughly disparate matters are hereby artfully collected and crammed into one simple image; 2) an illicit feeling is generated that economics is, magically, a function not so much of social or cultural arrangements as aesthetic ones. There is a potent aesthetic to Empson’s ideal worker, and Frum and Bennett are in the grips of an analogous aesthetic. And the feeling is: if only we achieve aesthetic satisfaction here, economics will take care of itself.

That this sort of flagrantly cargo-cultic turn of proto-thought is possible - just build him, and the economy will come – is very striking.

I think both these tendencies of thought strongly at work in Frum’s book. First, the compulsive bundling and cramming:

“Neoconservatives may roll their eyes at conservatives’ fondness for sweeping moral assertions. Conservative rhetoric can sound a little overbroad, if not positively bats, to nonconservative ears. Conservatives, however, see the things they dislike in the contemporary world – abortion, the slippage of educational standards, foreign policy weakness, federal aid to handicapped schoolchildren – as all connected, as expressions of a single creed, a creed of which liberalism is just one manifestation.”

This passage cracked me up. (Belle was moved to inquire solicitiously: “Are you OK, honey?”) It is, of course, precisely because people know some conservatives see all these things as connected that some people think some conservatives are bats. (If it thinks like a moonbat, and it talks like a moonbat, and if it comes right out and says it’s a moonbat, it’s a moonbat.)

Seriously, here’s a cautionary lesson taught by the 1960’s (you’d think conservatives could learn such things): just because you feel that everything is, like, so connected in a mysterious way, doesn’t make it so. And for damn sure you don’t have the right to bother other people with constant reports of your weird but strong intuitions of, like, total interconnectedness.

It almost makes me feel sorry for neo-cons: trying to hold decent seminars on foreign-policy – US military posture in the Middle East, etc. ,etc.; always having to step on the conservative faithful to keep them from breaking in with ‘deeply-connected’ tirades against wheelchair-ramps in schools. Tinfoil hat stuff. Yeesh.

Far more interesting, actually, is the matter of feeling – not thinking, to be sure – that good social and cultural aesthetics will produce good economics. Just get the right sort of people – i.e. the people that appeal to conservative sensibilities – and somehow the economy will be fine. If you like it, call it natural. After all, if it wasn’t natural, why would you like it? As Empson says: ‘while he is like this he is Natural and that will induce Nature to make us prosperous.’

Frum on economics is a very strange business. I quoted him already to the effect that conservatives would be happy to drop the demand for smaller government – i.e. the demand for an efficient economy – if they got what they wanted socially and culturally. One might simply be suspicious that he doesn’t mean it. Conservatives may say they would be willing to be taxed in a good cause. But that’s just a polite way of saying, ‘no, I like my money fine where it is.’ (Insert dsquared’s favorite quote here.) But I actually think the truth is more like: Frum has the strong feeling that if somehow his social and cultural demands were met, the economics would (magically) take care of itself. I think he envisions, as it were, the ideal lower-class/middle-class worker – sort of like the worker Empson sees on the poster, but suitably updated – and he thinks: no way that guy’s going to be poor. He’s one hard, conservative bastard (no offense intended.)

This sentiment or intuition or feeling (whatever you call it) produces a strangely hypertrophic concern with what seem (to me anyway) like rather ornamental details:

“If I am bearded, and I notice that my boss and the last four men in my section to win promotion are clean-shaven, I will find myself slowly nudged toward the barbershop. If the owner of the gas station across the road from mine smiles a lot, and I don’t, I will find myself forcing a cheerful manner myself, no matter how snarly I may inwardly feel. People who do not have to work for a living, however, can indulge themselves in a hundred little peculiarities of behavior – one reason that the English upper class is so famously odd. Millions of Americans now live as free from the pressure to conform as any English lord, thanks either to the direct receipt of welfare or to civil service employment where promotion is by seniority and firing is unheard of. The fact, as much as any fashion change, explains the sudden flaunting of ethnic difference in manner and dress that so distresses Patrick Buchanan in his native city. Relatively few vice presidents at Proctor & Gamble would dare wear a kente cloth or keffiyeh; nobody who intends to earn very much of a living in the polymer business can hope to get away with not learning English; but city hall employees and welfare mothers can do both.

So the cultural conservatives are simply deluding themselves when they hope for escape from the unpleasant task of resisting every enlargement of the ambit of government action and trying, when opportunity presents itself, to reduce that ambit.” (p. 196)

This is supposed to sound sober and sensible. If cultural conditions are functions of economics, you can’t change the culture without altering the economics. So conservatives must keep up the titanic, colossal, epic, probably cosmically doomed and tragic economic struggle to keep government small … so people will not dress funny or wear their hair in hairy ways? Sort of wimpy, as ragnaroks go. Notable disproportion here between means and the wished-for end. Even if you are the sort of person who feels deeply offended by funny, ethnic clothes (we’re off the deep end) – even if you think it is anything like your business to dictate fashion sense to everyone around you (we’re so off the deep end) – how could you possibly think it was so important as all that? And yet immediately we are off and running about after the bourgeois virtues, all dying out: thrift, diligence, prudence, sobriety, fidelity, and orderliness. I won’t bother to quote. Why can I not exhibit all these virtues beneath and/or behind a beard, kente cloth and/or keffiyeh? Frum seems to find it too obvious to bear arguing that the trick is impossible. (Yet he can’t actually think that.) Does Frum seriously believe there are no shrewd, sober businessmen in those parts of the world where businessmen wear beards and keffiyehs and kente cloths? (Obviously he doesn’t. That’s crazy.) So what does he think? I think he just has a powerful feeling that: things ought to be a certain way. And if they are that way, everything will be all right.

Bearded Guy: I like my beard.

Frum: You should shave it.

BG: Why?

Frum: Because it should have been the case that you were too afraid to grow it.

BG: But I wasn’t.

Frum: But you should have been.

BG: Why?

Frum: Because you are wrecking the culture.

BG: Why?

Frum: Because the culture will decay and then the economy will fall apart and we’ll all be poor.

BG: Because of my beard?

Frum: Just think about it. Our economy depends on a healthy culture.

BG: But you don’t even care about the economy. You said you don’t.

Frum: I wish you hadn’t mentioned that.

BG: But I did.

Frum: Look, if you shave the beard, everything will be … better.

BG: You’re a moonbat.

Frum: It’s all related to … foreign policy and wheelchair access in public school, in ways that … would take a long time to explain.

BG: Get away from me!

Frum: Look. Just shave your beard!

Seinfeld had his Soup Nazi. Frum is sort of a Suit Nazi. (OK, that’s too mean.) A kente cloth-free zone. An advocate of radical (what shall we call it?) sartorauthoritarianism. Society and culture conservatively dictate everyone’s dress code down to a whisker.

And why?

Because otherwise you wouldn’t be (wait for it) FREE!

Let’s step back and take in the big picture. Near as I can figure:

Frum cleaves to a radically elitist conception according to which, ideally, a narrowly-conceived set of social and cultural ideals are imposed on a potentially recalcitrant and resistant population. Why? Because he has the philosophical clarity of mind to see that the alternative is unthinkably terrible: a radically elitist conception according to which, ideally, a narrowly-conceived set of social and cultural ideals are imposed on a potentially recalcitrant and resistant population. Nothing that fits that description could possibly be good, obviously.

This passage that underscores the general economic situation, while moving us on to the point about freedom

“… It was awareness of the social consequences of social services, not mere Gradgrind-like zeal for economic efficiency, that initially convinced conservatives to resist the expansion of the welfare functions of government. From its beginning, the American convservative movement has devoted itself to one supreme mission: to warn the country that it had embarked on the wrong path.”

Frum (and other conservatives, according to Frum) are motivated primarily by Gradgrind-like zeal for efficient eradication of social and cultural individualism. (Thank goodness the man isn’t working for our economic benefit! Whew.)

Some hemming and hawing about whether the trouble started in the 14th Century or more recently. Bring, blang, bling. Whenever. The evil decision was made:

“It was a decision in favor of moral arrogance, in favor of the radical reconstruction of the world along lines suggested by whatever reformist or revolutionary ideology happened to hold power at the moment. Moral arrogance inspired the French and Russian revolutions. The same moral arrogance, conservatives believed, lay at the very core of post-New Deal liberalism and of everything else that conservatives thought themselves to be defying when, in William F. Buckley’s memorable metaphor, they took their stand athwart history to shout “Stop!”” (p. 3-4)

Luckily, we have conservatives holding the line against moral arrogance with their (Frum’s own words) “sweeping moral claims” and deep convictions about how everything is interrelated – kente cloths, handicapped access, not enough British history in school, foreign policy - and only they hold the secret key of knowledge. It’s. All. Connected. (You may not be able to see it. But that’s just because you are benighted.)

“It is not new,” Whittaker Chambers observed of this creed in another seminal conservative book, Witness. “It is, in fact, man’s second oldest faith. Its promise was whispered in the first days of the Creation under the Tree of the Knowledge of Good and Evil: ‘Ye shall be as gods.””

Not conservatism – oh, no! liberalism! And what is it that makes liberals so authoritarian and arrogant? Well, Frum doesn’t quite out and say it, but it appears to have something to do with democracy and asking people what they want rather than deciding for them, forcing it down their throats (and making them like it):

“Viewers of the cable talk shows that proliferated in the 1980’s have seen this scene a hundred times: two pundits will be haranguing each other about some political point, and one will try to clinch his case by announcing triumphantly, “The American people don’t agree with you!” Strictly speaking, this shouldn’t be much of an argument – it begs the reply, “Well, then, the American people are wrong.” But it’s always felt to be deadly. In a democratic culture, feeling yourself at one with a crowd of people is a joy as intense as receiving the king’s soiled handkerchief was at Verseilles. Having tasted that joy in the early years of the Reagan presidency, conservatives have become addicted to it. Their message has adapted accordingly.

Conservatism has always been in danger of devolving from a philosophy of limited government to an ideology of middle-class self-interest.” (p. 8)

In short, conservatism, properly conceived, is not a philosophy whose practical implications are in the material interests of the middle-class. More of the same vein:

“What could be more tempting to a politician than to teach voters to blame taxes and regulations not on the requirements of the middle class but on the inordinate demands of the poor? What could be more reckless than to attack bloated education, highway, and farm budgets, which largely benefit the middle-class? Trouble is, the refusal to take that apparently reckless course dooms all other conservative hopes to futility. If you cannot say “no” to middle-class constituents, you cannot lighten the crushing load of government upon society. And it is that burden, in turn, that makes the social problems that conservatives fret about so intractable.” (p. 8)

Since things that are in the economic interest of the poor and middle-class can hardly constitute crushing economic burdens on them, I think it is fair to gloss ‘society’ in this context as follows: those earning more than $150,000 a year. A somewhat eccentric usage.

In short, Frum actually thinks that conservatism means forcing the poor and middle-class to sacrifice government programs whose existence is, or may be, in their economic interest. And why? Near as I can figure, for the sake of making over the poor and middle-class into more agreeable objects of aesthetic contemplation for (wealthy) conservatives, whose tastes run to: Donner party-like look-alike doughty leatherstocking hard-bitten frontier-type workers (respectful hats in hand.) And the word for this aesthetic transformation is: making people free. And somehow the economy is going to be OK.

Of course we could go around once again with Frum protesting that in fact these bloated government programs are not in the interests of the poor and middle-class because they are ultimately economically inefficient. The problem with this is that – even if it is true – it isn’t what Frum has been saying for 200 pages. I’ve got no problem with economic libertarianism. At any rate, I can reason with such folk. But Frum is a cultural and a social conservative. What’s his philosophy? I’ve had enough of this. I’m stopping.

The funny thing about this book is: it isn’t nearly as bad I just made it sound. I don’t think Frum is obsessed with beards or anything, actually. He sometimes seems like a pretty sharp guy. The middle chapters – full of history and policy detail, so forth – are quite cogent. Just the main chapters have problems. Frum has written a book about the need for a reflective, conservative philosophy. And: that’s the one thing he hasn’t got. He just has no clue why he is a conservative, or why being one might be a good idea – or even what ‘conservatism’ ought to mean. Whenever he starts trying to talk about that stuff, his mind just goes blank and he fantasizes about shaving beards and the Donner party.

Those folks at the NRO are often weird.

Posted by John Holbo at 10:36 PM in Books, Politics | Permalink

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» Holbo Vs. Frum from Matthew Yglesias
John Holbo really goes to town. For what it’s worth, I think conservatives (as opposed to libertarians) shouldn’t even try to philosophize since any general doctrine you could possibly come up with is going to wind up looking a lot... [Read More]

Tracked on November 8, 2003 02:46 AM

» David Frum Takedown from marginalia.org
Extraordinary (and long) hammering of David Frum’s Dead Right. The funny thing about this book is: it isn’t nearly as bad I just made it sound. I don’t think Frum is obsessed with beards or anything, actually. He sometimes seems like ... [Read More]

Tracked on November 8, 2003 03:26 AM

» Yea, though I walk from Electrolite
through the valley of the shadow of data disasters, business trips, World Fantasy Conventions, and exciting varieties of minor illness,... [Read More]

Tracked on November 8, 2003 05:36 AM

» It’s the economy, stupid! We need to cannibalize the dead! from Chrononautic Log
More interesting stuff from John of John & Belle, in this case a review of David Frum’s Dead Right. I fully sympathize with John’s curiosity as to what conservatism looks like in all its glorious and unalloyed philosophical ideal purity... [Read More]

Tracked on November 8, 2003 07:47 AM

» It’s the economy, stupid! We need to cannibalize the dead! from Chrononautic Log
More interesting stuff from John of John & Belle, in this case a review of David Frum’s Dead Right. I fully sympathize with John’s curiosity as to what conservatism looks like in all its glorious and unalloyed philosophical ideal purity... [Read More]

Tracked on November 8, 2003 07:49 AM

» John Holbo Deconstructs David Frum from Discourse.net
I don’t know if this essay by John Holbo [link corrected] deconstructing David Frum’s book is right, because I haven’t read the book it attacks. (And, if truth be told, I’m especially unwilling to jump to conclusions because I u... [Read More]

Tracked on November 8, 2003 10:55 AM

» Political Philosophers on Frum from Now That Everyone Else Has One
Speaking of David Frum, read this long rebuttal to his book if you’re really bored. I didn’t have the time... [Read More]

Tracked on November 9, 2003 04:29 AM

» More Assorted Reading from Three-Toed Sloth
Umberto Eco talks in Alexandria about the future of books. For something completely different, Dan Sperber on the future of writing. Peter Bergen tears apart the theories of Laurie Mylroie, who believes Saddam Hussein was responsible for both attacks o... [Read More]

Tracked on November 23, 2003 01:35 PM

» More Assorted Reading from Three-Toed Sloth
Umberto Eco talks in Alexandria about the future of books. For something completely different, Dan Sperber on the future of writing. Peter Bergen tears apart the theories of Laurie Mylroie, who believes Saddam Hussein was responsible for both attacks o... [Read More]

Tracked on November 24, 2003 09:18 AM

» Orwell and Moral Proportion from The Audhumlan Conspiracy
John Holbo from John and Belle Have a Blog has a sequel to his earlier post on David Frum. The best part is his section in the middle about Orwell’s sense of moral proportion: At any rate, the fact that... [Read More]

Tracked on December 8, 2003 04:03 AM

» Dead Right and An End To Evil from Matthew Yglesias
Just read David Frum’s Dead Right. It’s a really good book, very well-written account of the travails of ideological (as opposed to merely “pro-business”) conservatism in the post-Reagan era. It’s also interesting that it’s clear from The Right Man and... [Read More]

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CROSSPOST: NOAH SMITH: JD Vance's War on GDP Is Wrong & Bad

Why is JD Vance trying to make war on prosperity? Because the Vance-Trump policy agenda he has been one of the principal architects of is, as it was clear from the get-go, a miserable failure in terms of making a middle-class American lifestyle more affordable. It is about distracting people from the fact that nativism and protectionism make America smaller, poorer, meaner, and globally disrespected; and that Vance-Trump policies have other benefits, apparently because by removing creature comforts you remove the possibility that such creature comforts might somehow kill America’s soul. The New Right, Noah Smith correctly says, has mastered the denunciation of modernity—but has no idea of what might constitute a not-completely-unworkable destructive alternative…

If you want to understand what the “New Right” is really trying to do to American political economy, you could do much worse than to start with its surprisingly bitter little war on GDP it has launched.

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Noah Smith here is not just defending a statistical construct. He is X‑raying a reactionary project. That reactionary project wants to make Americans poorer, more closed, and less free, while pretending that this somehow serves “community” and “spiritual” values.

Noah does three useful things at once:

  • First, he reminds us what GDP actually is: a crude but indispensable way of keeping track of how much useful stuff an economy produces.

  • Second, he shows how JD Vance cherry‑picks all the familiar complaints about GDP’s blind spots—quality of life, unpaid care work, social connection—and then uses them to smuggle in a completely different agenda: protectionism, nativism, and a generalized hostility to economics as a discipline.

  • Third, he brings in history and cross‑country evidence to make the simple but oddly neglected point that richer societies are not, in practice, less communal or more spiritually empty; they are merely (“merely”!) modern, with all the ambiguities that entails.

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GDP doesn’t measure love, community, or the beauty of our poetry—as Noah Smith freely admits and emphasizes. But while wealth is not civilization, it creates the elbow room and the collective societal power necessary for even the possibility of civilization. Economists, far from being the Vancean enemies of civilization he calls them, are the guardians of civilization’s possibility.

The single most important takeaway, in one phrase: making America poorer is not a social‑conservative strategy for creating a better America:

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<www..blog/p/jd-vances-crusade-against-gdp-is> <https://www.noahpinion.blog/>

Noahpinion
JD Vance’s crusade against GDP is wrong and bad
“Her belly may be full, but her spirit will be empty.” — Captain Picard…
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CROSSPOST: NOAH SMITH: JD Vance’s War on GDP Is Wrong & Bad

Noah Smith

Jul 07, 2026

Ad by Proctor Silex via Wikimedia Commons

“Her belly may be full, but her spirit will be empty.” — Captain Picard


Usually, these “GDP is actually good” posts start with a big disclaimer — an acknowledgement of all the things GDP doesn’t measure, all the reasons that measuring GDP is an inexact science, and all the ways that we need to improve society other than just making the GDP line go up. If you want a standard wonky explanation of why GDP is a useful number, here’s one that I wrote four years ago:

Four reasons why GDP is a useful number

Four reasons why GDP is a useful number

Today I’m going to do something a little different. I’m going to tell you what I think the debate over GDP is really about.

Free trade usually raises GDP. Immigration, done right, raises GDP.1 Rightists in America want less free trade and less immigration. But every time they propose restricting trade and immigration, someone — either libertarian business/econ types on their own side, or moderate liberals on the other side — says “That will make America poorer!”. So they want some way to neutralize this objection, so they can do things that will, in fact, make America poorer.

So America’s right borrowed an argument from the European left. The European left favors degrowth, and another term for degrowth is “making GDP go down on purpose”. So naturally, they’re always trying to find reasons to denigrate GDP as a metric of human flourishing (see here, here, and here for examples). The American right is simply tweaking these arguments to make them more appealing to their own base.

JD Vance, who has emerged as the consensus leader of the New Right, makes a bunch of these anti-GDP arguments in his new book. For example, he uses the example of Japan to point out that unobserved quality differences in non-traded products can make it difficult to compare GDP across countries:

If you’re focused on GDP, a $6 pint of Japanese strawberries is no different from a $6 pint of American strawberries. If you’re focused on dollars and cents, each contributes equally to the economic indicators. But if everyone in Japan eats better strawberries than everyone in America, the economic indicators have failed to measure something meaningful…

This is actually a good argument, and I’ve made it myself many times in the past. I’m in Japan right now, and there actually are a lot of little things that make Japanese products and services a bit nicer than their American counterparts — clean tables at Starbucks, slightly better-tasting food, and so on. Economists who try to adjust for quality differences end up catching some of these things, but probably miss most of them. That ends up creating a problem for GDP comparisons between countries. And it’s only one of many such problems. Comparing lifestyles in countries where life is very different is just a difficult thing to do.

But instead of simply noting that economics is hard, JD Vance uses this good argument as a reason to bash the entire field of economics:

When I got back home, a friend asked me if I learned anything on my trip to Japan. “Yes,” I replied snidely. “Maybe economics is just fake”…

When you read some of Vance’s other arguments against GDP, his agenda becomes clearer:

[A]s the decline of Christianity has left us without a shared moral language, economics has stepped into the vacuum. We pretend there are scientific answers to questions of values. Take one of the major issues of the 2024 campaign and a significant focus of our time in the White House: Should our trade policy be oriented around protecting domestic industries and jobs or around ensuring a short-term supply of cheap consumer goods?…

This idea — that economists urge values of base consumerism on society, and ignore other moral considerations — is common in European leftist discourse. But instead of urging us to care more about inequality, power, and so on, as European leftists do, Vance wants us to care more about spiritual elevation, morality, community — i.e., things that the American right cares about. He goes on to write:

[W]e now live in a society almost blinded to considerations outside of the economic. This way of thinking is inherently opposed to the Christian way, which demands more focus on people…Take, for instance, the time we spend with our children…Domestic labor—that done by moms and dads—if unpaid, is uncounted in measures like GDP. When I leave work to spend time with my children, when I cook them dinner or argue with them about eating their carrots, I am engaged in economically unproductive work. No money changes hands, so it doesn’t show up in our national figures. By contrast, if I left for dinner at 6 p.m. and returned to work until midnight while paying a total stranger to look after my kid, my contribution to GDP would be much higher…

and:

If you step away from the glory of economic statistics, so much of American life has gone wrong. An influx of prescription opioids became a flood of synthetic opioids, which has led to tens of thousands of deaths each year and a declining life expectancy among a substantial portion of our society. We have made great progress on reducing infant mortality, but we send our children into a world—even in the physical security of their own homes—that bombards them with images and influences that have left them isolated, depressed, and increasingly at risk of self-harm. We are more disconnected, lonely, and isolated, even in the midst of historic levels of material comfort.

All this economic abundance coexists with intense spiritual misery. We orient people toward a life of consumption. We tell them to find meaning in the home they buy, the money they earn, the prestige of their job. We bombard them with all manner of creature comforts, and add their consumption—price club mega-size junk—to our national GDP. We use that GDP as a yardstick for our broader society, which is why it’s possible for false prophet economists to argue the American Dream is healthy even as suicide and addiction rates soar and the laughter of children fades from our streets…

Some of these arguments are — in my opinion — reasonable. A culture of overwork can boost GDP, at least in the short term, at the expense of quality time with family. This is actually a common argument of the center-left, which is why liberals have long fought — often successfully — for more paid family leave and other policies that reduce GDP slightly in exchange for more quality time with family. Whether this has increased birth rates isn’t clear — the evidence is very mixed — but it’s a very popular policy.

Other arguments are clearly mistaken. Over-prescription of opioids has clearly reduced GDP, by a massive amount. Yes, selling a bunch of opioid painkillers to Americans raises GDP by a few billion dollars, but this is vastly outweighed by the trillions of dollars of GDP that we lose from having a bunch more people addicted to painkillers, heroin, and fentanyl. Here’s the Philadelphia Fed in 2023:

There is growing evidence that the opioid epidemic has harmed many aspects of the real economy, including the labor market, consumer finance, and municipal finance. According to analyses from the Council of Economic Advisers’ 2019 report, the annual (nominal) economic cost of the opioid epidemic, including the cost of lives lost, is estimated at about $700 billion (roughly 3.4 percent of GDP) in 2018 alone, and over $2.5 trillion from 2015 to 2018. [emphasis mine]…

So if you care about GDP, you should view curbing opioid and opiate abuse as a huge priority! Vance is simply not thinking about this very clearly.

But Vance’s real problem is that he conflates correlation with causation. In words that could have come straight from the mouth of a European degrowther, he rails against “creature comforts”, “consumption”, and “price club mega-size junk”. But nowhere does he explain why depriving Americans of these creature comforts would give them closer-knit families, a stronger sense of morality, stronger communities, reduced loneliness, and so on.

Why would taking away Americans’ large houses, SUVs, big-screen TVs, or central air conditioning make them spiritually richer? Modern Europe — which JD Vance spends much of his time railing againstlacks most of these things. And yet America has higher fertility rates than Europe, we go to church much more, and we have a much more robust social conservative movement. Europe has also been far more restrictive of speech that criticizes Islam, as Vance repeatedly notes. Yes, America has been trending away from social conservatism and Christianity in recent decades, but so has Europe, and the gap remains. Other developed countries in East Asia — most of which are moderately poorer than the U.S. in GDP terms — are extremely secular.

What about America’s past? We were much poorer in the 1950s, yet we went to church a lot more, had larger families, and so on. If you took away the material gains we’ve made since then, would we go back to tradwives and bowling leagues and lawn parties and Sunday church and 4 kids per family?

Perhaps, but it’s doubtful. Remember that the 1950s and 1960s were the culmination of a long upswing of community, religiosity, and so on in American society — something the sociologist Robert Putnam has documented extensively. Church attendance rose:

Source: Pew

Fertility was on the upswing too:

Source: OWID

And if you believe Putnam’s numbers, social solidarity increased all throughout the early 20th century:

Source: Robert Putnam via Jefferson Educational Society

It’s important to remember that this all came during the most robust and rapid period of GDP growth that America has ever seen. Over the period in which our social solidarity was soaring, our GDP per capita nearly tripled:

Source: OWID

It was during this time that Americans got many of the “creature comforts” that Vance despises — the single-family homes, the cars, the televisions, the lawns, and so on. The image of that material prosperity, depicted in glossy ads and paintings from the time, is a powerful part of 1950s nostalgia.

In fact, many economists argue that one big cause of the Baby Boom was the fact that economic growth — bigger houses, better medical care, new labor-saving devices like washing machines, refrigerators, and vacuums, and so on — made it easier and cheaper to raise kids. This is from a relevant Works in Progress article by Anvar Sarygulov & Phoebe Arslanagic-Little:

Parenthood rapidly became much easier and safer between the 1930s and 1950s. The spread of labour-saving devices in the home such as washing machines and fridges made raising children easier; improvements in medicine making childbirth safer; and easier access to housing made it cheaper to house larger families…

[H]ousehold electrification paved the way for other technologies, including home refrigeration…By the 1940s, electric washing machines were becoming normal in middle class homes…Between 1936 and 1956, America’s maternal death rate fell by 94 percent, from 51 deaths per 10,000 live births to under 3…[M]edical advances, which were being made across the West, radically reduced the most serious potential cost faced by prospective mothers: life itself…

Alongside strides forward in household and medical technology…[I]t became easier to secure a home in which to raise children. The number of houses built soared across the West after World War Two…This house-building bonanza led to sharp rises in homeownership rates.

The golden thread linking the phenomena that comprise the triple mechanism we describe above – advances in household technology, progress in medical technology, and easier access to housing – is that they together sharply reduced the cost of having children. [emphasis mine]…

If you like the kind of society we had in 1960, you can’t ignore the story of how we got to 1960. The answer was “economic growth”. This, combined with the examples of Europe and Asia, is why there’s no reason to believe that forcing Americans to be poorer — taking away the “creature comforts” Vance despises — would lead us to suddenly rediscover the value of community, family, and religion.

Now it’s worth noting that if you were to decrease America’s GDP to poor-country levels — below $15,000 per person, as opposed to over $90,000 today — you might be able to raise fertility. That’s how low you have to go before most countries have fertility above replacement level:

Chart by Mikael Häggström via Wikimedia Commons

Countries with a basically pre-modern standard of living — where many women can’t read or write, and infant mortality is so high that families have to have many kids as a form of insurance — tend to have above-replacement fertility (though some don’t). But even this law is weakening, as fertility rates in Sub-Saharan Africa plunge, so even that extreme level of GDP reduction would probably fail to restore high fertility over the long run. Also, I kind of doubt that JD Vance wants to force Americans to live lives similar to those lived in Sub-Saharan Africa.

What about JD Vance’s preferred policies — trade protectionism and immigration reduction? Would those restore American community, family, and religion, at the expense of a bit of GDP? As I said earlier, that’s actually what I think this whole debate is really about.

On trade, you’ve seen Trump explicitly make the argument that Americans are going to need to suffer a bit of material deprivation in order to achieve the administration’s goals:

But how will doing this restore community, family, etc.? Presumably you could make an argument that protectionism will bring back good manufacturing jobs, which will then give men the confidence and social standing they need to get married and have kids. There’s just one big problem with this, though: Trump’s trade policy doesn’t actually increase the number of good manufacturing jobs. We’ve lost manufacturing jobs since Trump took office last year!

In fact, Trump’s tariffs are hurting the U.S. manufacturing sector, by raising the cost of intermediate goods. Economists understand this pretty well; JD Vance, who thinks “economics is just fake”, does not seem to understand it.

How about immigration? Rightists will endlessly cite Robert Putnam’s finding that diversity reduces social trust in American communities. But as Bryan Caplan and many others have pointed out, the effect size is tiny — in Putnam’s research, going from zero diversity to maximum diversity reduces social trust by the equivalent of 1 point on a 100-point scale. This suggests that all the mass deportations in the world won’t move the needle on American community and togetherness.

In other words, JD Vance’s crusade against GDP is a cargo cult. Sure, GDP doesn’t measure “the beauty of our poetry or the strength of our marriages,” to use Robert F. Kennedy’s famous words. But that doesn’t mean that making Americans poorer will make their poetry more beautiful or their marriages stronger. Nor does it mean that policies that also happen to make us a bit poorer, like immigration reduction or tariffs, are any more likely to strengthen our society.

In a famous episode of Star Trek: The Next Generation — my favorite TV show of all time — Captain Picard castigates an alien for turning his society into a fascist empire. When the alien responds that the fascist government’s forced modernization program raised his daughter out of poverty, Picard responds with the beautiful quote at the top of this post: “Her belly may be full, but her spirit will be empty.” But was Picard arguing that it was the full bellies themselves that emptied the people’s spirits? Was he merely arguing that the fascist empire ought to become a poorer fascist empire, in order to restore the virtue of the people? Only a fool would think so.

Look, I also want America to have a stronger society. I want us to have more kids. I want us to have more stable families. I want us to have closer-knit communities, better moral values, etc. But that doesn’t mean the New Right knows how to get us there. So far, the New Right has built nothing — no new community organizations or institutions, no religious revival, nothing that would knit our society together. It has merely thrashed and thrashed against modernity, with no plan for a replacement. JD Vance’s crusade against GDP is simply more of the same.

<https://www.noahpinion.blog/p/jd-vances-crusade-against-gdp-is> <https://www.noahpinion.blog/>

Noahpinion
JD Vance’s crusade against GDP is wrong and bad
“Her belly may be full, but her spirit will be empty.” — Captain Picard…
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Brad DeLong here, back again: Trade barriers and immigration restrictions

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Median Personal Income Growth in the US: CHART OF THE DAY

Why does a decade of real middle‑class gains feels like loss in our age of Instagram plutocracy, anyway?

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Noah Smith notes that America’s middle class has in fact been getting ahead—but that it does not feel that way to people who live, work, and now scroll in the shadow of the superrich. The moral? Economic truth is not the same as sociological truth here:

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And Noah Smith writes:

Noah Smith: <[twitter.com/Noahpinio...](https://twitter.com/Noahpinion/status/2074405332181209147)>: ‘The middle class actually isn't falling behind, they're getting ahead. But everyone thinks they're falling behind because they're constantly interacting with super-rich people online, and seeing rich people's lifestyles on Instagram…

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Not just online, Noah! In person, too. And, in fact, this has been building since the coming of television, if not of the movies. and it has been massively reinforced by the rise in income and wealth inequality since the coming of Ronald Reagan to national office. And this overshadows the fact that the American middle class still feels as though it is losing ground even as it has quietly booked a decade of very substantial real income growth.

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A world in which the average member of the top 0.01% has 0.05/0.0001 = 500 rather than merely (“merely”!) 100 times the average income is different.

No, I do not how much of the difference is that the superrich are more salient in relative terms in America today than they were fifty years ago, and how much of it is just that to the average person they seem more salient than they were fifty years ago. And no, I do not know how much of the zeitgeist today is still ruled by a culture that has absorbed the 1998-2014 income stagnation as the glasses through which it views the very different economy we have had since then. $37,000 to $45,000 in measured median real income in a decade is 2% per year. That is a very acceptable rate of real growth indeed, especially when one considers the amount of time devoted to and the improvement in entertainment and information and communications services that are essentially free that we have had over the past decade.

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CROSSPOST: David Pierce & Nilay Patel: SpaceX Is Building a Phone!

What telecom company has the most unusual and expensive marketing department? SpaceX, of course! Or should I call it StarLinkX? Its marketing department is an order of magnitude better and more impressive than other telecom companies’ marketing departments. On that we can agree. But launching rockets is several orders of magnitude more expensive than just making commercials…

There are, I think, moments when a spur-of-the-momewnt line on a podcast crystallizes a whole industrial strategy better than a dozen white papers and a shelf of McKinsey decks.

This is one of those moment: SpaceX is like, it’s Starlink, and then it’s a really expensive marketing department that launches rockets. It’s like functionally how that business works.

That is a small, sharp work of analytic genius. It is, as far as I can see, completely true and yet oddly original: true, because it captures the underlying economics; original, because almost nobody wants to look past the landing rockets.

The spectacle hypnotizes: The Falcon 9 descends from the heavens, flips, and perches on its barge like a smug, metallic pigeon; the crowds cheer; the slow-motion replay circulates on X; the myth of the heroic techno-entrepreneur is renewed for another news cycle.

But the underlying Mr. Money is the StarLink broadband service. A capital-intensive, regulated, margin-squeezed, utterly prosaic provider of bits from orbit to ground. Pipes with satellites instead of trenches. And as the podcasters David Pierce and Nilay Patel note, telecom in general is not—by the standards of modern capitalism—the road to world-historical rents. Telecom, after all, is the classic case of an industry that is structurally important but not, on the whole, fabulously profitable. You spend huge sums upfront on fixed capital, you are constrained by regulators and by the brute physics of spectrum or orbital slots, you fight price wars and bundle wars and churn.

And then, if you are very good and moderately lucky, you make a solid but unspectacular return on capital. T‑Mobile, not Nvidia. The economics of rockets do not change that. They only give you a more photogenic depreciation schedule.

This is why we have the story of SpaceX showing investors its not-phone AI device. If you are, in truth, a telecom firm, there are only so many knobs you can turn to goose growth. One obvious move is vertical integration down into the end-user device: building a phone to capture not just the monthly broadband fee, but also:

  • the handset margin,

  • the app store rake,

  • the payments float,

  • the everything-app dream.

You want to be Apple plus Verizon plus WeChat, riding on top of StarLink. But to say that you are building a phone would break the magic: hence you have to claim that you are building a not-phone. Yet everything that would make your device a not-phone is also something that makes your device unambiguously worse than a phone, wouldn’t it?


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CROSSPOST: David Pierce & Nilay Patel: SpaceX Is Building a Phone!

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World’s most effective telecom company marketing department.

David Pierce: I’m just going to read you a Wall Street Journal <https://www.wsj.com/tech/ai/spacex-showed-investors-prototype-of-elon-musks-new-ai-device-b445c57b> story that just dropped a few minutes ago: ‘Elon Musk, SpaceX, has developed a prototype for a handset-like device, designed to reshape how humans interact with artificial intelligence, that SpaceX has shown investors recently. The Rrcket and AI company showed the prototype, which features a sleek design that is slimmer than an iPhone, to some investors and other stakeholders ahead of the company’s mega IPO, according to people familiar with the matter.

Nilay Patel: SpaceX is building a phone.

David Pierce: Sure.

Nilay Patel: We’re doing AI phones.

David Pierce: Sure.

Nilay Patel: Okay.

David Pierce: The funniest part about this to me. I just want you to imagine a phone in which X is presumably a crucial part of the operating system. Grok is how you interact with everything. And presumably Starlink is how you get service.

Nilay Patel: This is the all-time worst idea about cell phones that I’ve ever heard. I love it so much. I think it’s very funny that there are rumors that SpaceX will buy T-Mobile.

David Pierce: I was going to ask you about this. I genuinely want to know what you think about this. And there’s another rumor, you know, Comcast is splitting itself into two that eventually the Comcast broadband business will be acquired by SpaceX as well.

Nilay Patel: They’re a telecom firm. At some point, we’re all just going to have to admit. They’re a telecom firm. At some point, we’re all just going to have to admit that SpaceX is a telecom firm with worse margins than T-Mobile.

David Pierce: Yeah.

Nilay Patel: TRight?

David Pierce: They have way higher costs, and they have to deliver competitive broadband prices. So you inherently have worse margins than T-Mobile.

Nilay Patel: I mean, SpaceX is like, it’s Starlink, and then it’s a really expensive marketing department that launches rockets. It’s like functionally how that business works.

David Pierce: It is, and it’s funny because Starlink is profitable in space, but they have to pay the launch costs to the other part of the company.

Nilay Patel: And like, it’s great that the rocket, every time you talk about SpaceX, you have to concede. It is very cool that the rockets land themselves. Absolutely. No one thought anyone could do it. Gwen Shottwell has been a great job running that company. And obviously, Elon Musk can just overpower the laws of physics through nothing but charisma and racism or whatever combination of traits that he has. Great. The reality of that business is that it’s a telecom provider. At the end of the day, that it is a broadband company. And we know the economics of broadband companies extraordinarily well. And for as uncompetitive as that market is, it’s not like the most lucrative market in the history of the world.

David Pierce: I also think it’s funny that they’re going to make a phone. Like, you’re going to have a Starlink phone that has AI in it.

Nilay Patel: You have to: this is the same bet we were talking about earlier. You’re going to rethink all of computers. You’re going to just going to talk to AI and it’s going to do stuff for you.

David Pierce: Are you going to have an Instagram app? Is it going to run TikTok? People like doing things on their phones. Is it going to have Candy Crush? Like, will it support Outlook? Like, I can just go down the list of things. X is the Everything app?

Nilay Patel: I don’t know if you know this. Sure phones can do. You don’t need anything else. You just run into some pretty obvious problems right away.

David Pierce: There’s xMoney now.

Nilay Patel: That’s true.

David Pierce: It’s not just one bank account. It’s a sweep across many bank accounts in order to…

Nilay Patel: It’s very good.

David Pierce: t’s like, oh, we’re doing financial engineering now as well.

Nilay Patel: I love this.

David Pierce: I’m very happy about it.

Nilay Patel: Yeah, it’s, it’s the whole thing. It’s just deeply, deeply silly.

David Pierce: By the way, it’s the same idea that Sam Altman has. To build a phone.

Nilay Patel: Yeah. Like, there’s no point in making this a Starlink phone. Most people are around places with cell service. The idea is that you will make a device that replaces your phone and you just talk to an AI model and the AI model runs around doing stuff for you.

David Pierce: And it’s like, that’s really hard. Yeah. No one has pulled it off yet.

Nilay Patel: And there’s no true application model for AI yet in that way.

David Pierce: Right. It’s worth saying, by the way, that Elon Musk has denied for a very long time that SpaceX is building a phone.

Nilay Patel: This rumor has been floating around for a long time. It also just makes a lot of sense, right?

David Pierce: Like, even for Starlink in particular, having a sort of Halo device kind of tracks.

Nilay Patel: He also has called it utterly false: a statement to which I put almost no stock.

David Pierce: But that’s what he said.

Nilay Patel: I think there’s going to be a very funny turn that a lot of these folks have to make where they’re going to have to convince you that the phone that they made isn’t a phone. Do you know what I mean?

David Pierce: Like, there is, there are a bunch of reasons that we have cataloged extensively on this show that the thing you should make is a phone, but you can’t because Google and Apple own that.

Nilay Patel: And there’s no winning that game anymore unless you are Google and Apple. So you have to build something else.

David Pierce: But if you like make the stack of things that people want, you end up making a phone. And this is the incredible challenge with all hardware right now. The only way to win is to build a phone that somehow isn’t in Google or Apple’s orbit, and that’s very hard to do.

Nilay Patel: And so what we’re going to see with all of these devices is them try very, very hard to explain to you why this isn’t a phone while shipping you a thing that looks and feels like a worse phone.

David Pierce: And all of it’s going to be input. All of it’s going to be, you just talk to it.

Nilay Patel: Yeah. I think it’s going to be fascinating.

David Pierce: And in a way, like these open AI headphones that keep floating around, like you can sort of understand why they would do that and what the case is there for, right? It’s like easy interaction with your AI assistant.

Nilay Patel: Like, great, well and good. the thing with a six-inch screen that goes in your pocket is a very different kind of game to play next to somebody’s phone.

David Pierce: But if you run a telecom provider and you want that fee on top of your Starlink broadband fee, you almost have to make a phone.

Nilay Patel: Yeah, absolutely. And it is certainly true that a phone made by SpaceX and Starlink and Elon Musk will sell. Like that thing will do numbers, whatever that thing is. It will. You shake your head of me all you want. It will sell. People will buy it. Whether it’s good or not.

David Pierce: How expensive will that thing be? And it will not have Instagram.

Nilay Patel: There’s this Wall Street Journal piece. So, well, I mean, who knows? The prototype was designed to run a proprietary operating system and integrate AI technology from SpaceX’s zAI, some of the people running a a Snapdragon chipset.

David Pierce: It’s a phone that Groks. It’s a Grok phone.

Nilay Patel: Cool. It’s going to run, it’s not going to run Android, right? That’s a proprietary operating system. It feels like a fork of Android.

David Pierce: Yeah. Now, you don’t have Instagram. And I’m keying on Instagram, but just think of any, any edge case app for any human being that’s on their iPhone. I think for most people, it’s Instagram. I think a phone without Instagram almost as a non-starter for like 90% of people.

Nilay Patel: Oh, yeah. And I think you make that list 10 apps long and you’ve captured everybody.

David Pierce: Like right it’s not super hard, but I do think the galaxy brain thesis of all of this puts together the idea of X being an everything app—look at what like WeChat is in China, where essentially that becomes the most important thing.

Nilay Patel: You could essentially build a phone that only ran WeChat and it would work.

David Pierce: Elon Musk could talk himself into: all we need is Grok and X and we can solve everything ,because X is the Everything app and Grok is this agent that accomplishes everything on your behalf. And that’s all we need.

Nilay Patel: It is utterly divorced from reality, but you can see why he might be very excited about the idea.

David Pierce: Right. You don’t need a bank app because you use X, the everything app for your bank.

Nilay Patel: Yes, exactly.

David Pierce: This is nonsense.

Nilay Patel: Is it going to run Outlook?

David Pierce: Do you know what most people need at work? They need Outlook.

Nilay Patel: It’s like I can ask you the dumbest questions. How many times have we covered a new phone platform? Yeah, it’s true.

David Pierce: Is it going to support RCS?

Nilay Patel: I mean, that’s a good one.

David Pierce: Yeah. No, I agree.

Nilay Patel: What version of Bluetooth does it run? I can do this to you all day long.

David Pierce: Yeah. Listen, I wanted the Trump phone to be real, and it kind of is, is.

Nilay Patel: Ish. It’s like real-ish.

David Pierce: No, I’m told that our review units have shipped.

Nilay Patel: Yeah, that’s still real-ish. Sure.

David Pierce: I’m sure there are some Trump phones. But at least the Trump phone runs Android.

Nilay Patel: Like, I know that that phone has gone through Play Store review. It does have Instagram.

David Pierce: Yeah. I first knew that the Trump phone was closer to real when, like, Google people told me it had gone through Play Store review.

Nilay Patel: Very true. Because, you know what that means? It has Instagram. It comes preloaded with TruthSocial, to be clear. But you can download Instagram on it.

David Pierce: Yeah.

Nilay Patel: By the way, that Trump phone supports RCS because Android supports RCS. I can answer the questions.

David Pierce: Is any of this good?

Nilay Patel: No. But it’s more fun.

David Pierce: Does it illegally mine crypto for Eric Trump in the background?

Nilay Patel: Probably. That’s what phones do. That’s Android, baby…

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Brad DeLong back again: Remember: The Falcon 9 landings are the spectacle; the Starlink balance sheet is the business. In that light, SpaceX’s rumored AI handset looks less like bold innovation and more like the familiar telecom gambit of vertical integration, wrapped in a haze of not‑phone branding and Everything‑App delusion. Telecom is structurally important but rarely fabulously profitable, and Starlink is unlikely to be any exception. The astonishing disjunction in our info-bio tech-attention economy between teh things that are tremendously valuable and important (to humans) and the things that are obscenely profitable (to managers and, they hope, investors) is one of the most striking things about this particularly mode-of-production that we are careening into.

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On-Device Local-Model "LLM Coherence": TABLE OF THE DAY

If human language is mostly formulaic stochastic parrotage, you’d expect a good parrot to be cheap wallpaper, not a working research assistant. Yet beneath my dining‑room sidetable a 26‑billion‑parameter open-source model from Google is becoming a disturbingly capable simulacrum of an external brain…

OK. For me at least, modern “AI” is now useful: SubTuringBradBot works—I can get good first-line answers in response to questions about courses or things I have written <https://web.telegram.org/k/#@SubTuringBradBot <https://braddelong.substack.com/p/subturingbradbot-is-finally-liveat>; Exegeticist-Bot works—I can figure out what I, or at least past I, thought about an issue when I have forgotten, because vector-embedding semantic search is a vast improvement over keywords.

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Thus I am now questioning what has been my standard line about “AI”, which is, you will recall, this: appearing to work by creating a convincing pantomime simulacrum of a Turing-class entity because much more of human language than we like to think is formulaic stochastic parrotage <https://braddelong.substack.com/p/stochastic-lobsters-token-tsunamis>. But I really do now need an explanation of what is going on, of what is, as Eugene Wigner might say, the unreasonable effectiveness of these systems for so many. The best road into this is to give it a serious chance. But I want to do so without paying a semi-fortune to Anthropic or OpenAI. What is the best road forward>

Well, the championship LLM in terms of “thought quality” of those I have downloaded and now have the capability of running on the on the Maxxxed-Out M5Max MacBookPro burbling under the dining room sidetable.turns out to be

  • not the 74GB Llama 3.3:70b (q8) from FaceBook,

  • or the 42GB Deepseek-R1:70b from High-Flyer,

  • or even the 35GB Qwen 3:32 (q8) from AliBaba,

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but rather the 18GB Gemma 4:31b from Google:

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With the 17GB Gemma 4:26b as a close second.

Gemma 4 is Google’s bid to own the “serious open‑weights” tier of the stack while still keeping Gemini for the premium, closed models. It is both a technical artifact and a piece of platform strategy. The core line landed March 31, 2026; multi‑token‑prediction (MTP) variants followed April 16; and the unified 12B multimodal model shipped June 3 ​⁠<https://ai.google.dev/gemma/docs/releases>.​⁠

  • The 31B dense model is meant to be the general workhorse that still fits on a single high‑end GPU (or maxed‑out Apple Silicon) with 256K context.

  • The 26B A4B MoE (Mixture‑of‑Experts) model that only activates ~4B parameters per token but keeps 26B in memory for routing; it’s tuned for high‑throughput reasoning and agents.

  • Google’s headline is: “byte‑for‑byte, the most capable open models to date,” purpose‑built for advanced reasoning and agent workflows <https://medium.com/google-cloud/getting-started-with-gemma-4-learning-resources-833ed68fcf2c>.

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And they seem, by my experience, to be right.


So now I have a question for any of you similarly trying to figure out this stuff, but wanting to do so on your own devices rather than compete with money for space in hyperscaler clouds: are you seeing anything similar?


More thoughts below the fold here:

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1854 Commentary on the Meaning of the Fourth of July

Lincoln’s Peoria Revolution: Re‑Adopting the Declaration in 1854 as it is “All Men Are Created Equal” vs. the sacred right to enslave who you can…

In 1854 Abraham Lincoln picked up the Declaration of Independence, dusted it off, and began the work of incorporating it into America’s fundamental Constitution.

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The Kansas–Nebraska Act, Stephen Douglas’s great gift to the Slave Power, had been wrapped in the doctrine of “popular sovereignty,” the right of white people in a territory to govern themselves. Douglas claimed it as an advance of democracy: freedom of westerners to rule themselves independent of the East Coast establishment. But, Lincoln said, democracy is more than the right of some men to decide whether other men shall be slaves. It is more than the “right” of the strong in each locality to do what they wish, and to make the weak of that locality suffer what they must, without interference from elsewhere.

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Lincoln refused cynicism, and refused self-congratulatory moral posturing as well. He granted that he does not know “what to do… as to the existing institution” of slavery. He acknowledgeed the weight of prejudice and the political difficulty of genuine equality. And yet he insisted that there is a bright line between self-government and despotism: when one man governs another without that other’s consent, that is not self-government, but its negation.

Read this speech, therefore, as an early, groping attempt to articulate a politics of non-domination in an actually existing, deeply compromised republic. Lincoln’s target is not just the expansion of slavery into Kansas and Nebraska, but the larger slide from the “Spirit of ’76” into a world in which exploitation clothes itself in the language of liberty. It is to recall that Americans are defined as a people who have fled the Old World and its society-of-domination mistakes in order to work together to create, in this New World, a prosperous and free society. That requires, in the words of Æneas’s father Anchises: “pacisque imponere morem,
parcere subiectis, et debellare superbos”—impose the ways of peace, be merciful to the subjected, and permanently subdue the haughty.

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Lincoln’s remedy is disarmingly simple and radically demanding: re-adopt the Declaration of Independence, and with it, the practices, and policy, which harmonize with it:

Abraham Lincoln (1854): Peoria Speech (October 16) <https://www.nps.gov/liho/learn/historyculture/peoriaspeech.htm>: ‘[Thomas] Jefferson… was, is, and perhaps will continue to be, the most distinguished politician of our history; a Virginian by birth and continued residence, and withal, a slave-holder; conceived the idea… to prevent slavery ever going into the north-western territory. He prevailed on the Virginia Legislature to adopt his views, and to cede the territory, making the prohibition of slavery therein, a condition of the deed. Congress accepted the cession, with the condition; and in the first Ordinance (which the acts of Congress were then called) for the government of the territory, provided that slavery should never be permitted therein.

This is the famed ordinance of ‘87 so often spoken of.…

Thus, with the author of the Declaration of Independence, the policy of prohibiting slavery in new territory originated. Thus, away back of the constitution, in the pure fresh, free breath of the revolution, the State of Virginia, and the National Congress put that policy in practice….

The repeal of the Missouri Compromise… is wrong; wrong in its direct effect, letting slavery into Kansas and Nebraska—and wrong in its prospective principle, allowing it to spread to every other part of the wide world, where men can be found inclined to take it. This declared indifference, but… covert real zeal for the spread of slavery, I can not but hate. I hate it because of the monstrous injustice of slavery itself. I hate it because it deprives our republican example of its just influence in the world—enables the enemies of free institutions, with plausibility, to taunt us as hypocrites—causes the real friends of freedom to doubt our sincerity, and especially because it forces so many really good men amongst ourselves into an open war with the very fundamental principles of civil liberty—criticising the Declaration of Independence, and insisting that there is no right principle of action but self-interest….

Let me say I think I have no prejudice against the Southern people. They are just what we would be in their situation. If slavery did not now exist amongst them, they would not introduce it. If it did now exist amongst us, we should not instantly give it up. This I believe of the masses north and south. Doubtless there are individuals, on both sides, who would not hold slaves under any circumstances; and others who would gladly introduce slavery anew, if it were out of existence. We know that some southern men do free their slaves, go north, and become tip-top abolitionists; while some northern ones go south, and become most cruel slave-masters.

When southern people tell us they are no more responsible for the origin of slavery, than we; I acknowledge the fact. When it is said that the institution exists; and that it is very difficult to get rid of it, in any satisfactory way, I can understand and appreciate the saying. I surely will not blame them for not doing what I should not know how to do myself. If all earthly power were given me, I should not know what to do, as to the existing institution.

My first impulse would be to free all the slaves, and send them to Liberia,—to their own native land. But a moment’s reflection would convince me, that whatever of high hope, (as I think there is) there may be in this, in the long run, its sudden execution is impossible…. What then?… I think I would not hold one in slavery, at any rate; yet the point is not clear enough for me to denounce people upon. What next? Free them, and make them politically and socially, our equals? My own feelings will not admit of this; and if mine would, we well know that those of the great mass of white people will not. Whether this feeling accords with justice and sound judgment, is not the sole question…. A universal feeling, whether well or ill-founded, can not be safely disregarded…. It does seem to me that systems of gradual emancipation might be adopted; but for their tardiness in this, I will not undertake to judge our brethren of the south….

I trust I understand, and truly estimate the right of self-government. My faith in the proposition that each man should do precisely as he pleases with all which is exclusively his own, lies at the foundation of the sense of justice there is in me. I extend the principles to communities of men, as well as to individuals. I so extend it, because it is politically wise, as well as naturally just…. The doctrine of self government is right—absolutely and eternally right—but… just application depends upon whether a negro is not or is a man…. If the negro is a man, is it not to that extent, a total destruction of self-government, to say that he too shall not govern himself? When the white man governs himself that is self-government; but when he governs himself, and also governs another man, that is more than self-government—that is despotism. If the negro is a man, why then my ancient faith teaches me that “all men are created equal;” and that there can be no moral right in connection with one man’s making a slave of another….

Our Declaration of Independence says: “We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, DERIVING THEIR JUST POWERS FROM THE CONSENT OF THE GOVERNED…”

The relation of masters and slaves is, PRO TANTO, a total violation of this principle. The master not only governs the slave without his consent; but he governs him by a set of rules altogether different from those which he prescribes for himself. Allow ALL the governed an equal voice in the government, and that, and that only is self government….

Slavery is founded in the selfishness of man’s nature—opposition to it, in his love of justice. These principles are an eternal antagonism; and when brought into collision so fiercely, as slavery extension brings them, shocks, and throes, and convulsions must ceaselessly follow. Repeal the Missouri compromise—repeal all compromises—repeal the Declaration of Independence—repeal all past history, you still can not repeal human nature. It still will be the abundance of man’s heart, that slavery extension is wrong; and out of the abundance of his heart, his mouth will continue to speak….

Near eighty years ago we began by declaring that all men are created equal; but now from that beginning we have run down to the other declaration, that for SOME men to enslave OTHERS is a “sacred right of self-government.” These principles can not stand together. They are as opposite as God and mammon; and whoever holds to the one, must despise the other. When Pettit, in connection with his support of the Nebraska bill, called the Declaration of Independence “a self-evident lie” he only did what consistency and candor require all other Nebraska [Bill-supporting] men to do. Of the forty odd Nebraska Senators who sat present and heard him, no one rebuked him. Nor am I apprized that any Nebraska newspaper, or any Nebraska orator, in the whole nation, has ever yet rebuked him….

Let no one be deceived. The spirit of seventy-six and the spirit of Nebraska, are utter antagonisms; and the former is being rapidly displaced by the latter. Fellow countrymen---Americans south, as well as north, shall we make no effort to arrest this? Already the liberal party throughout the world, express the apprehension “that the one retrograde institution in America, is undermining the principles of progress, and fatally violating the noblest political system the world ever saw.” This is not the taunt of enemies, but the warning of friends. Is it quite safe to disregard it—to despise it? Is there no danger to liberty itself, in discarding the earliest practice, and first precept of our ancient faith? In our greedy chase to make profit of the negro, let us beware, lest we “cancel and tear to pieces” even the white man’s charter of freedom.

Our republican robe is soiled, and trailed in the dust. Let us repurify it. Let us turn and wash it white, in the spirit, if not the blood, of the Revolution. Let us turn slavery from its claims of “moral right,” back upon its existing legal rights, and its arguments of “necessity.” Let us return it to the position our fathers gave it; and there let it rest in peace. Let us re-adopt the Declaration of Independence, and with it, the practices, and policy, which harmonize with it…

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The Unanimous Declaration of the Thirteen United States of America

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident,

  • that all men are created equal,

  • that they are endowed by their Creator with certain unalienable Rights,

  • that among these are Life, Liberty and the pursuit of Happiness.

--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

--That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.

To prove this, let Facts be submitted to a candid world.

  • He has refused his Assent to Laws, the most wholesome and necessary for the public good.

  • He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

  • He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

  • He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.

  • He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

  • He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

  • He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

  • He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.

  • He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.

  • He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

  • He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.

  • He has affected to render the Military independent of and superior to the Civil power.

  • He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

    • For Quartering large bodies of armed troops among us:

    • For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:

    • For cutting off our Trade with all parts of the world:

    • For imposing Taxes on us without our Consent:

    • For depriving us in many cases, of the benefits of Trial by Jury:

    • For transporting us beyond Seas to be tried for pretended offences:

    • For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:

    • For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

    • For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

  • He has abdicated Government here, by declaring us out of his Protection and waging War against us.

  • He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.

  • He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

  • He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

  • He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren.

We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the United States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare:

  • that these United Colonies are, and of Right ought to be Free and Independent States;

  • that they are Absolved from all Allegiance to the British Crown,

  • and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved;

  • and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do.

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

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Appendix: More from Lincoln’s Peoria Speech: His Anticipatory Rebuttal of Stephen Douglas:

At Springfield, twelve days ago… Judge Douglas replied to me—and as he is to reply to me here, I shall attempt to anticipate him, by noticing some of the points he made there.

He commenced by stating I had assumed… that the… Nebraska bill, would have the effect of extending slavery. He denied that this was INTENDED, or that this EFFECT would follow….

Next he says, congressional intervention never prevented slavery, any where—that it did not prevent it in the north west territory, nor in Illinois—that in fact, Illinois came into the Union as a slave State—that the principle of the Nebraska bill expelled it from Illinois, from several old States, from every where. Now this is mere quibbling all the way through. If the ordinance of ‘87 did not keep slavery out of the north west territory, how happens it that the north west shore of the Ohio river is entirely free from it; while the south east shore, less than a mile distant, along nearly the whole length of the river, is entirely covered with it? If that ordinance did not keep it out of Illinois, what was it that made the difference?…

In the course of my main argument [before], Judge Douglas interrupted me to say, that the principle [of] the Nebraska bill was very old; that it originated when God made man and placed good and evil before him, allowing him to choose for himself, being responsible for the choice he should make. At the time I thought this was merely playful; and I answered it accordingly. But in his reply to me he renewed it, as a serious argument.

In seriousness then, the facts of this proposition are not true as stated. God did not place good and evil before man, telling him to make his choice. On the contrary, he did tell him there was one tree, of the fruit of which, he should not eat, upon pain of certain death. I should scarcely wish so strong a prohibition against slavery in Nebraska. But this argument strikes me as not a little remarkable in another particular—in its strong resemblance to the old argument for the “Divine right of Kings.” By the latter, the King is to do just as he pleases with his white subjects, being responsible to God alone. By the former the white man is to do just as he pleases with his black slaves, being responsible to God alone. The two things are precisely alike; and it is but natural that they should find similar arguments to sustain them…

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#thomas-jefferson
#abraham-lincoln
#peoria-speech
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#slave-power
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Programmer "Productivity": CHART OF THE DAY

A possible paradox: “AI” really does seem to be helping programmers spit out code by the truckload. But we are not (yet?) seeing (many?) signs of that helping businesses ship better software or make their users happier. From my over‑eager VW microbus to Anthropic’s IPO roadshow, perhaps we are mistaking frenetic machine activity for genuine progress…

The brand-new VW ElectricMicroBus that replaces the 22-year-old Subaru has:

  • automatic following distance;

  • automatic lane-keeping;

  • speed-control settings that respond to speed-limit traffic signs (alarmingly, not just slowing the car if it is going faster than the limit);

  • anticipatory pre-curve and pre-intersection braking (if its route-finding is engaged).

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But turning on these systems makes driving an immensely more difficult cognitive process. I have to:

  • do all the normal mental processing to figure out how I would drive;

  • interrupt the largely non-conscious loop by which my brain decisions then move my feet and hands without much frontal-lobe attention;

  • assess the differences between what I would be doing and what the car is doing;

  • decide whether I would be right or whether the machine is right;

  • take over and react if I decide that the machine is wrong.

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as opposed to the normal, relatively boring effort of just driving along. I assure you, when I engage these systems, I AM NOT BORED. I AM THE FURTHEST THING FROM BORED.

Right now it feels to me like our bureaucracies with respect to their adoptions of MAMLM technology in its form of natural language interfaces and very big data, very high dimension, very flexible function classification analyses are in the same position relative to the world’s LLMs and such as I am with respect to the electric brain of the VW.

Now comes Anthropic with the hope of getting a higher price from the rather gullible, most optimistic buyers in the public market for the tranche of its equity it proposes to sell in its rapidly approaching IPO. not being happy with the mere claim that every instantiation of Claude may well be in some sense “conscious”, they are doubling down:

Anthropic <[twitter.com/Anthropic...](https://twitter.com/AnthropicAI/status/2062568862479208923)>: ‘Our internal data shows Claude is accelerating AI development—a possible path to recursive self-improvement, or AI autonomously building a more capable successor. It’s happening faster than we thought, and the implications deserve greater attention…

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Well, yes: Anthropic says (and I see no reason to disbelieve them) that its programmers are writing a lot more code.

But there is an old, possibly (probably?) apocryphal story about the IBM-Microsoft “relationship” back in the day. IBM argued that it was contributing much more to their joint projects. It measured contribution on the number of lines of programming its teams had written. Microsoft pointed out that it was much prouder of how much code they had refactored and simplified, or simply removed as useless. Programs with greater length but no greater functionality were more fragile and error-ridden. Microsoft seems to me to have had the better of this argument.

Do not get me wrong: Claude Code and Claude Cowork are economic engineering and intellectual marvels. As was GPT 3.0. And as was ChatGPT. But no version of the SINGULARITY is nigh.

Probably relevant:

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It is from Demirer & al. <https://www.nber.org/papers/w35275>. And it provoked comments:

John Burn-Murdoch: How Much Value Is AI Really Creating? <https://www.ft.com/content/8e9ae7a4-7209-4e2c-aa36-f3af77d6ce1f?syn-25a6b1a6=1>: ‘Coders created or edited almost 300 per cent more files… but… 150 per cent… [in] work submitted for review, and… 30 per cent…in the number of full software releases… [with no] increase in downloads…. Uber CEO Dara Khosrowshahi revealed the company had blown through its entire AI budget for 2026 in one quarter…

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And:

Noah Smith: Tokenmaxxxing <https://www.noahpinion.blog/p/roundup-83-i-told-you-so: ‘The things we really want a lot more of may not actually be the things that generative AI is yet equipped to provide…


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#cognitive-overload
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CROSSPOST/HOISTED (FROM 2018): HENRY FARRELL: "Neo-Marxism" in the Eyes of Andrew Sullivan & His Ilk

Here is a WayBack Machine link: <https://web.archive.org/web/20180616210438/http://crookedtimber.org/2018/05/23/neo-marxism/>…

The most important thing to register here is the large disjunction between social-network nepotist Andrew Sullivan’s and Ta-Nehisi Coates’s perceptions of their common intellectual life back in 2009.

Blogging — Crooked Timber

Think, and think hard, about how Ta-Nehisi Coates saw himself as obligated to greatly curb his tongue With respect to what he really thought about the mentally imbalanced, we started with the conclusion that it must be the case that the reason black people are relatively poor in America today is because they are genetically stupid, and then desperately hunted for rationalizations for this 100% rock-solid pre-commitment belief.

Think, and think hard, about people so cluekess to what is going on around them that they think that the big free-speech problem in America today is that, for the first time, the fundamental right of the white man to “speak their minds and voice their opinions in public without fear of being shamed or shunned” is under threat, and claim that this problem—this particular here-and-now problem—leads America to “face… the risk of political violence”:

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<https://web.archive.org/web/20180616210438/http://crookedtimber.org/2018/05/23/neo-marxism/>


CROSSPOST/HOISTED (FROM 2018): HENRY FARRELL: “Neo-Marxism” in the Eyes of Andrew Sullivan & His Ilk

<http://crookedtimber.org/2018/05/23/neo-marxism/>

by Henry on May 23, 2018

A couple of days ago, Andrew Sullivan delivered a blast against “neo-Marxism”:

The idea that African-Americans have some responsibility for their own advancement, that absent fatherhood and a cultural association of studying with “acting white” are part of the problem — themes Obama touched upon throughout his presidency — is now almost a definition of racism itself. And the animating goal of progressive politics is unvarnished race and gender warfare. What matters before anything else is what race and gender you are, and therefore what side you are on. And in this neo-Marxist worldview, fully embraced by a hefty majority of the next generation, the very idea of America as a liberating experiment, dissolving tribal loyalties in a common journey toward individual opportunity, is anathema.

There is no arc of history here, just an eternal grinding of the racist and sexist wheel. What matters is that nonwhites fight and defeat white supremacy, that women unite and defeat oppressive masculinity, and that the trans supplant and redefine the cis. What matters is equality of outcome, and it cannot be delayed. All the ideas that might complicate this — meritocracy, for example, or a color-blind vision of justice, or equality of opportunity rather than outcome — are to be mocked until they are dismantled. And the political goal is not a post-racial fusion, a unity of the red and the blue, but the rallying of the victims against the victimizers, animated by the core belief that a non-“white” and non-male majority will at some point come, after which the new hierarchies can be imposed by fiat.

Matthew Yglesias rightly complains about Sullivan’s suggestion that Marxism lurks behind the movements for gender and race recognition. Jonathan Chait has been making an even cruder version of this argument for a while, telling us that the “campus left” has borrowed its extremism from Marxism, and would likely drag us all off to the gulags if we ever got a chance. This theory marks a weird and unfortunate alignment that is taking place between a particular strain of center-to-center right opinionating and the “Intellectual Dark Web” crowd. Zack Beauchamp’s description of how Jordan Peterson

elevates battles over political correctness and free speech into existential struggles over Western society. He is very literally arguing that if the “postmodernists” win, if people start using others’ chosen pronouns, we’re one step closer to modern gulags.

could be applied just as aptly to [Jonathan] Chait, and likely, with modification, to Sullivan too, (the “hierarchies … imposed by fiat” bit sounds sinister but is notably weaker than gulag rhetoric; Sullivan is clearly angrier about race than he is about gender).

You could, I suppose, treat Sullivan’s, Chait’s and Peterson’s arguments as serious claims to be taken seriously, pointing to the specific situations where campus leftists have indeed behaved like arseholes, and extrapolating this into a general trend of angry, intolerant and indeed totalitarian illiberalism on the march towards possible victory. Frankly, I think that that would be granting unwarranted respect to nonsense. These claims seem to me to instead be rhetorical attacks which illegitimately treat reasonable claims for recognition as if they were steps on a journey towards dictatorship. Contrary to their framing, they are fundamentally illiberal, in the small ‘l’ sense of liberalism, intended to justify existing power relations against people who would reasonably challenge them.

Where this becomes most clear is in Sullivan’s previous post, which is particularly aimed at Ta-Nehisi Coates. Sullivan begins by praising Coates, sort of, before describing him as the exemplar of a “tribal” dynamic, where the “individual is always subordinate to the group,” leading to the social exclusion of Bari Weiss’s “Intellectual Dark Web,” a group of “non-tribal thinkers who have certainly not been silenced, but have definitely been morally anathematized, in the precincts of elite opinion.” Sullivan laments that something important has been lost:

But then I remember a different time — and it wasn’t so long ago. A friend reminded me of this bloggy exchange Ta-Nehisi and I had in 2009, on the very subject of identity politics and its claims. We clearly disagreed, deeply. But there was a civility about it, an actual generosity of spirit, that transcended the boundaries of race and background. We both come from extremely different places, countries, life experiences, loyalties. But a conversation in the same pages was still possible, writer to writer, human to human, as part of the same American idea. It was a debate in which I think we both listened to each other, in which I changed my mind a bit, and where neither of us denied each other’s good faith or human worth.

It’s only a decade ago, but it feels like aeons now. The Atlantic was crammed with ideological opposites then, jostling together in the same office, and our engagement with each other and our readerships was a crackling and productive one. There was much more of that back then, before Twitter swallowed blogging, before identity politics became completely nonnegotiable, before we degenerated into these tribal swarms of snark and loathing. I think of it now as a distant island, appearing now and then, as the waves go up and down. The riptide of tribalism can capture us all in the end, until we drown in it.

I grew up outside America – which means that many aspects of the American argument about race don’t come easily to me. I also don’t know anything first hand, obviously, about the personal relationship between Coates and Sullivan, which I suspect colors their interactions too. So take these caveats as a health warning regarding what follows. Still, I think it’s quite plain that Coates has a very different memory of his interactions with Sullivan than Sullivan’s depiction. A week before Sullivan’s piece, Huffington Post published a transcript of a conversation at the Atlantic about the hiring and rapid firing of Kevin Williamson. Coates says:

I got incredibly used to learning from people. And studying people. And feeling like certain people were even actually quite good at their craft, who I felt, and pardon my language, were fucking racist. And that was just the way the world was. I didn’t really have the luxury of having teachers who I necessarily felt, you know, saw me completely as a human being.

This extends not just from my early days as a journalist, but if I’m being honest here, from my early days at The Atlantic. You can go into The Atlantic archives right now, and you can see me arguing with Andrew Sullivan about whether black people are genetically disposed to be dumber than white people. I actually had to take this seriously, you understand? I couldn’t speak in a certain way to Andrew. I couldn’t speak to Andrew on the blog the way I would speak to my wife about what Andrew said on the blog in the morning when it was just us…. I learned how to blog from Andrew. That was who I actually learned from. That was who actually helped me craft my voice. Even recognizing who he was and what he was, you know, I learned from him.

I don’t have the privilege of being able to look into Sullivan’s head, but it is hard to imagine that his piece about Coates and tribalism was not an angry and hurt response to Coates’ claim that he, Sullivan, was a “fucking racist.”

In juxtaposition, Sullivan’s and Coates’ pieces provide a miniature history of how a certain variety of self-congratulatory openness to inquiry is in actual fact a barbed thicket of power relations. What Sullivan depicts as a “different time” when “neither of us denied each other’s good faith or human worth,” is, in Coates’ understanding, a time where he was required to “take seriously” the argument that “black people are genetically disposed to be dumber than white people” as a price of entry into the rarified heights of conversation at the Atlantic. The “civility” and “generosity of spirit” that supported “human to human” conversation is juxtaposed to Coates’ “teachers” who didn’t see him “completely as a human being.” What was open and free spirited debate in Sullivan’s depiction, was to Coates a loaded and poisonous dialogue where he could only participate if he shut up about what he actually believed.

Juxtaposing these two gives us a very different understanding of Sullivan’s claim that “identity politics [have become] completely nonnegotiable,” and we are all being pulled down by the “riptide of tribalism.” The imagined paradise of liberal discussion from which we are being torn was only a paradise for some; others were there on sufferance, or not allowed in at all. Sullivan’s hostility to “tribalism” reflects his unwillingness to confront the rather sordid politics of his own position, and his past and continuing history on race and intelligence.

Sullivan, Chait, and, I suspect many other soi-disant centrists and centrist liberals are now converging with Peterson and the whole sorry crew of white men on the Internet shouting out against the oppression of Social Justice Warriors. This allows them to delegitimize – and hence avoid having to seriously confront – hard criticisms of their own positions. If they want, it’s perfectly reasonable for them to push back against what they believe to be excesses. Gender activists and race activists are human too, which means that they surely may be wrong, and may certainly behave stupidly, or badly.

But claims that “neo-Marxists” and “campus leftists” are looking in general to build gulags, impose hierarchies by fiat and the like are themselves both bad and stupid rhetoric, which undermine rather than reinforce the commitment to open debate that they claim to hold so deeply.

<https://web.archive.org/web/20180616210438/http://crookedtimber.org/2018/05/23/neo-marxism/>


Brad, back again: By 2018, a curious convergence had taken place in The Atlantic commentariat and its ideological cousins. Andrew Sullivan was warning that the “animating goal of progressive politics is unvarnished race and gender warfare.”

Jonathan Chait was fretting that the “campus left,” intoxicated by Marxism, harbored gulag dreams.

Jordan Peterson was explaining, in his orotund way, that using people’s preferred pronouns put us on a slippery slope to totalitarianism.

Andrew Sullivan recalled bloggy exchanges with Ta-Nehisi Coates back around 2009 as if they were seminars of mutual respect, “writer to writer, human to human,” before Twitter, before “tribalism,” before the “riptide” of identity politics.

Different styles, same move: translate uncomfortable demands for recognition into an incipient police state.

Henry Farrell sees this not as liberal solicitude for free inquiry, but rather a strategy of delegitimation. Label your critics “tribal,” accuse them of subordinating the individual to the group, and you can avoid looking too closely at what they are complaining about.

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Trump Surrendered the Strait of Hormuz to Iran—& Emptied Shelves in America’s Arsenal: CHART OF THE DAY

The constraint is not money; it’s steel, people, throughput—and our own procurement theology; if we were semi-rational and truly serious, Ukrainian engineers would already be running shell plants in Scranton and Tucson…

Yes, Trump’s attack on and then surrender of the Strait of Hormuz to Iran has left the U.S. military is massively weaker in a good deal of the areas that are likely to be most relevant in future near-term conflicts:

Source: JPM <https://assets.jpmprivatebank.com/content/dam/jpm-pb-aem/global/en/documents/eotm/semiquincententacles.pdf>, via Adam Tooze <https://adamtooze.substack.com/p/top-links-1150-has-the-debasement>.

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Trump killed a lot of Iranian civilians. Trump destroyed a lot of Iranian military capabilities. But Trump lost the war, as Iran attritted the US military a lot more than the US attritted Iran. And other potential adversaries of the US military are now in much stronger positions.

My view? We need to start fixing this. And we need to start fixing it now. And we are going about it all wrong.

Think of it: Right now, Ukraine is scrambling to build a military-industrial production complex in a war zone, western defense contractors are debating whether to build up plants in Ukraine, and the pentagon is improvising “friend-shoring” arrangements and relaxing tech-transfer rules. Meanwhile, the U.S. defense-industrial base is still trying to climb out of the post–Cold War just‑in‑time, single‑source, boutique‑production trap it has dug for itself over thirty years. If we were sane, we would right now be spending money like water to build the Arsenal of Democracies on U.S. soil—with Ukrainian defense firms and their hard-won expertise as anchor tenants.

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The Centuries of Eric Hobsbawm II: THURSDAY HISTORIOGRAPHY

Eric Hobsbawm’s Marxist teleology made him both the greatest narrator of the 1776-1875 not-so-long nineteenth century and a spectacularly poor guide to the 1875-2010 genuinely long twentieth. His political-moral-ideological commitments powered The Age of Revolution and The Age of Capital, making them brilliant. But they became a crippling Procrustean Bed once the Belle Époque, Modern Economic Growth, mass prosperity, nationalist insanity, and stalled socialism made their entrance onto the stage of history.

Last week I read this piece: half Enzo Traverso, and half Emile Chabal, whose forthcoming Hobsbawm biography Traverso is reviewing.

Enzo Traverso: The Century of Eric Hobsbawm <https://www.theideasletter.org/essay/the-century-of-eric-hobsbawm/>:

(SEMI)-CROSSPOST: ENZO TRAVERSO: The Century of Eric Hobsbawm

Enzo Traverso

June 25, 2026 | The Ideas Letter 67….

Eric J. Hobsbawm… published critically acclaimed memoirs, and today—fourteen years after his death—is the subject of two biographies, the latest of which… by Emile Chabal…. Richard J. Evans knew Hobsbawm… and his book… stands as… official biography…. Evans carefully reconstituted a historian’s life and wrote with empathy, not without an apologetic touch. Chabal’s… acknowledged distance is beneficial… his gaze more analytical… a fascinating critical portrait. Hobsbawm is… the greatest historian of the twentieth century… if [that] means that he was the most important scholar to have written on the history of the past century…

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The forthcoming book being reviewed here is:

  • Chabal, Emile. 2026 (August 18). The Age of Hobsbawm: The Life of a Revolutionary Historian. Cambridge, MA: The Belknap Press of Harvard University Press.

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But in spite of not having read it, I talked about it, Chabel, Traverso—and Hobsbawm—all very favorably last week:

substackcdn.com/image/fet…}],"post_date":"2026-06-28T01:08:34.928Z","coverimage":"https://substackcdn.com/image/fetch/$s!Kyre!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F5dd56d1a-0cf7-44e3-8371-6539e146a210_2048x1375.jpeg","cover_image_alt":null,"canonical_url":"https://braddelong.substack.com/p/semi-crosspost-enzo-traverso-the","section_name":"Enlarging the Bounds of Human Empire","video_upload_id":null,"id":203738797,"type":"newsletter","reaction_count":30,"comment_count":4,"publication_id":47874,"publication_name":"DeLong’s Grasping Reality: Economy in the 2000s & Before","publication_logourl":"[substackcdn.com/image/fet…](https://substackcdn.com/image/fetch/$s!PgPl!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffde2453e-9c18-4560-82ca-8b77ae62ef5b_1280x1280.png","belowTheFold":false,"youtube_url":null,"show_links":null,"feed_url":null)}“>

But I ended it last week with a “But.” Here comes the “but”:

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It Is Bad for Your Mental Health to Learn About the American Right's Truly Believes: HORROR OF THE DAY

The key thing to understand about this is that for every one who says this, a hundred think it—but have the shame or the fear to not say it—and a thousand believe that it may be overstated, but they have a point. That is the lesson from watching who Red State Republicans vote for in primary after primary and, with only a few of them holding their noses, for office after office…

Over at Talking Points Memo <http://talkingpointsmemo.com>:

Kate Riga: Republican Meltdowns Over Birthright Citizenship Decision, Ranked in Order of Sanity <https://talkingpointsmemo.com/news/republican-meltdowns-birthright-citizenship-supreme-court>: ‘The right is incandescent with rage over the Supreme Court…. 6-3 ruling (but really 5-4 on constitutional grounds), the Court ruled that children born on American soil to undocumented immigrants or those temporarily present are citizens, despite a Trump executive order to the contrary…. [That] is cause for prolific online tantrums…

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She notes:

  • Troy Nehls (R-TX): <[twitter.com/MeidasTou...](https://twitter.com/MeidasTouch/status/2072082822941262138)>: ‘We gotta put a bedsheet―a big bedsheet ― over the Statue of Liberty. She’s gotta go to sleep for a while ’cause we’re not letting anybody in anymore…. Instead of having a torch, maybe it needs a stop sign…

  • Matt Walsh: ‘It turns out that Amy Coney Barrett is a DEI hire, little better than Kentanji Jackson. Terrible pick…

  • Andy Ogles (R-TN): <[twitter.com/RepOgles/...](https://twitter.com/RepOgles/status/2072014309614346549)>: ‘Under my bill, under my legislation, we fix that and go back to what our founders intended. So in short, what this bill does is if you are a pregnant woman, you can’t come into this country. You got to be a citizen, be here, you have to be a green card holder. So if you’re pregnant and you don’t have one of those statuses, no admittance allowed…

  • Lauren Boebert (R-CO): <[twitter.com/RepBoeber...](https://twitter.com/RepBoebert/status/2071997114222071920?s=20)>: ‘The State Department should IMMEDIATELY cease to give out visas to pregnant applicants. Sorry, Birth Tourism cannot continue…

  • Stephen Miller: ‘The idea that you could have a cruise ship filled with foreigners and they just dock at a port for an hour, and someone has a baby, Jesse, the baby’s an American citizen!” They can vote in every election for the rest of their lives! They could be living in a foreign country and be cashing welfare checks for American citizens!…

  • Sean Davis: ‘Deny entry to all pregnant foreigners…. Deny entry to all female foreigners…. Require sterilization of all foreign visitors prior to entry…

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Donald Trump does not understand—and nobody is willing to tell him—that birthright citizenship is a constitutional right, not something that can be undone by legislation (unless Jackson, Sotomayor, or Kagan were to be replaced by a Trump lackey, or Barrett or Roberts were to be replaced by a more complete Trump lackey):

Donald Trump: ‘The Supreme Court upheld Birthright Citizenship, which is too bad for our Country, but we can easily make it up in Congress through Legislation, with the support of the President, that has now been determined during this process. No long and unwieldy Constitutional Amendment is necessary! Congress should start TODAY to work on ending expensive and unfair to our Country, Birthright Citizenship. They will have my Complete and Total Support! President DONALD J. TRUMP…

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And Thomas, Alito, and Gorsuch are out-and-out liars about the legal history, or out of their minds, or both:

Katenji Brown Jackson: Concurrence <https://www.scotusblog.com/cases/trump-v-barbara/>: ‘Despite his longstanding endorsement of a “colorblind” Constitution, JUSTICE THOMAS now surprisingly suggests that the Citizenship Clause was a race-conscious remedial measure, relating only to “freed slaves such as Dred Scott,” and those who shared with them certain characteristics (“no other homeland”); (“called America home”). It is for this reason, he says, that “children who were born in the United States but [to parents] not domiciled here” are not entitled to claim birthright citizenship. But that narrow vision of the Fourteenth Amendment bears little relationship to the history of its ratification….

Consensus about the Fourteenth Amendment’s central motivation does not justify JUSTICE THOMAS’s myopic treatment of it. The Amendment caused a paradigm shift in the trajectory of our Nation; the teacher who scolds a student for bullying a classmate hopes the student learns the broader lesson of treating everyone with kindness, not just that one kid. In the aftermath of the Civil War, those who championed the Fourteenth Amendment—both within and beyond Congress—understood the assignment. Their work product used “language that transcended race and region,” and thereby “changed and broadened the meaning of freedom for all Americans.”2 Instead of the limited salve the principal dissent makes it out to be, the Citizenship Clause reflects this universalist approach….

Do note this: The citizenship thesis of the Colored Conventions was thus not that some new status should be created and conferred on freed Blacks. It was instead that freed Blacks already had a rightful claim to citizenship because they had been born on American soil…. Freed Blacks did not advocate for a unique set of rules that catered only to their situation. Nor did they seek to advance their own position relative to, or at the expense and exclusion of, other marginalized groups. Instead, those whose gatherings helped galvanize the push for full equality understood that “[a] diverse origin does not disprove a common nature, nor does it disprove a united destiny.” The firmest foundation for freedom would require an anticaste reset—“both for his sake and for ours”—and would benefit all….

Senator Trumbull, along with those colleagues who took up the same mantle… expressly rejected… [the] narrow framing…. Notably focusing his attention beyond freed former slaves, Senator Edgar Cowan, for example, argued that German immigrants’ children born in Pennsylvania should be citizens, but Chinese immigrants’ children should not…. Senator Trumbull emphasized that the law he had drafted drew no such distinctions…. Senator John Conness of California, where anti-Chinese sentiment was arguably most pronounced, responded that “the children begotten of Chinese parents in California . . . shall be citizens.” In fact, he said, the Civil Rights Act had already declared “that the children of all parentage whatever . . . should be regarded and treated as citizens of the United States.” No Senator rose to agree with Senator Cowan or dispute what Senator Conness had said. And no Senator said what the principal dissent says today: that the text at issue conferred citizenship only on freed Blacks and those in analogous situations….

The debates went similarly with respect to the Roma people, who were referred to at the time as “gypsies.” When asked whether native-born Romani children would be birthright citizens of the United States under the proposed Civil Rights Act, Senator Trumbull replied: “Undoubtedly.” President Andrew Johnson apparently agreed. In his message vetoing the Act, Johnson noted with disapproval that, under the law, “the Chinese of the Pacific States, Indians subject to taxation, the people called gypsies, as well as the entire race designated as blacks,” would be birthright citizens. Without making any changes to the bill or responding that Johnson was mistaken in his understanding of it (or otherwise capitulating to Johnson’s views in any respect), Congress overrode that presidential veto.

During the ratification debates, Senator Cowan took aim at the Roma people too, characterizing them as undeserving of birthright citizenship because they “wander[ed] in gangs,” “infest[ed] society,” and “impos[ed] upon the simple and weak everywhere.” And again, Senator Conness dismissed Senator Cowan’s prejudices: “The only invasion of Pennsylvania within my recollection was an invasion very much worse and more disastrous to the State, and more to be feared and more feared, than that of Gypsies. It was an invasion of rebels [at Gettysburg].” When ratified, the Citizenship Clause thus vindicated the universalist vision of the delegates at the Colored Conventions and their allies in Congress…

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What, Exactly, Is Sven Beckertian Capitalism?: WEDNESDAY HISTORIOGRAPHY

Not Marxian buying labor power in a competitive market for less than the value of labor capitalism; not Braudelian spheres of high finance, high commerce, and production monopolies; not even the interplay of metropolis, fleet, and periphery structured by unequal market exchange that I call thalassocracy. So what is it?

Economists, Marxists, and Braudelians can all recognize pieces of themselves in Beckert, yet none of them can quite recognize his capitalism as their own beast.

It is a puzzlement.

And here is a very nice review of the first half of Sven Beckert’s Capitalism: A Global History by the very sharp Angus Byelsma:

Angus Byelsma: Cut Adrift <https://unevenandcombinedthoughts.substack.com/p/cut-adrift>: ‘[Sven] Beckert’[s]… 1086-page tome Capitalism: A Global History… [got] a positive review in the New York Times, and… a prime position in every semi-serious bookstore…. At least one publisher out there believes in the existence of a sufficient public appetite for economic history doorstoppers…. Nonetheless… Beckert’s Capitalism has met a much colder reception amongst people who care about these things….

Beckert—and the ‘New History of Capitalism’ (NHC) school-of-thought, of which he is the most prominent representative—seem to have made the mistake of alienating perhaps the two largest groups of people who care that much about economic history: liberal economists and Marxists. The former are frustrated by the NHC’s neglect of the quantitative literature, in particular the claims made about American slavery and its contribution to the British industrial revolution. The latter dislike the NHC’s sidestepping of the literature on the so-called capitalist transition—and, by extension, all the debates over defining what is capitalism—by keeping the concept amorphous while insisting on finding capitalism nearly everywhere in space and time…. Beckert seems to style his work…on the most venerable ‘third-way’ ever navigated between those two camps: the midcentury ‘Annales School’ of French social history, and in particular its greatest son, Fernand Braudel….

Beckert fail[s] to seriously engage… whether the plantation economy caused the Industrial Revolution…. Invoking Barbara Solow, [he] simply says that ‘perhaps capitalism could have developed differently… but the reality is that it developed based on slavery’; a rather glib dismissal of a serious historical debate…

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I would point out that in Bobby Solow’s formulation, this was not an assertion that the counterfactual question did not matter. It was, rather, an assertion that the fact that the triangular trade and Caribbean slavery was not a necessary part of the road to rich modernity did not mean that we should or could ignore it. In Sven Beckert’s formulation, it seems to be a retreat to the bailey having failed to successfuly answer the questions raised when he was at the motte claiming: no Caribbean slavery, no modern capitalist prosperity.

And I would point out that the answer to the question “most associated with the NHC—whether (biological) agricultural technology or increasingly violent slave-driving explains cotton productivity growth in the American South” in not Sven Beckert’s ‘most likely it was both’, but rather that it was

  • better biotechnology on the one hand,

  • not increasingly violent slave-driving on the other,

  • but rather increasingly routinized and systematized “management”.

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It is, properly, not a capitalists-are-crueler point, but a dialectic-of-Enlightenment point.

Angus Byelsma: Cut Adrift <https://unevenandcombinedthoughts.substack.com/p/cut-adrift>: ‘The closest Beckert comes to presenting an overarching theory… is his insistence on the historical importance of the state. This is due to his desire to put the violence back into capitalism…. Beckert’s quintessential example is the early colonial period of 1450-1640; the era, he writes, in which ‘the capitalism that we know originated’… [as] early-modern European states, in concert with elite financiers and merchants, spread capitalism to the world at gunpoint…. But when Beckert moves beyond this era, his argument… becomes much less precise… something like ‘all development is connected to the state’, less a theory than a descriptive fact…. And even in the early colonial period… did it play a critical role in the development of capitalism within the colonial metropole, or did war capitalism mainly just create new ‘nodes of capital’ on the periphery?… ‘War capitalism’ is left stranded, a half-formed argument…

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Marxian capitalism—in its various flavors—is this: (1) Possession of wealth allows you to exploit workers who themselves have no access to the means of production. (2) You then use market exchange to turn that surplus value you hav appropriated into more wealth. (3) But you can repeat this only on pain of having to reinvest that wealth in expanding your scale of production. (4) Why? Because ncreasing returns to scale mean that wealth holders who are satisfied with their current scale of production will be out-competed into bankruptcy. (5) Thus the system has a flywheel effect: generating ever greater wealth for society on the one hand, and ever greater immiserization for the working class on the other.

Braudelian capitalism sits on top of “material life” and even on top of the economic life of relatively routinized local markets, trade, and exchange. Braudelian capitalism is a higher level on top of these: an an anti‑competitive market sphere of monopolistic, large‑scale, power‑wielding activity operating at the summit of the economy. It is the world of great merchants, financiers, and large firms, operating in long‑distance trade, high finance, and oligopolistic or monopolistic positions, where information is opaque, power is concentrated, and exceptional profits are made precisely by escaping the discipline of ordinary competition.

What I call Thalassocracy is the functioning of a society-of-domination in which the élite grabs one-third of total production not directly at the point of a spear, but rather by ensuring that property ownership and market terms-of trade-are such that the one-third it grabs flows to it through individual transactions that are voluntary but nonetheless “unequal exchange”. This usually requires a big fleet, and a substantial amount of long-distance waterborne trade in things other than preciosities—hence thalassocracy. This often requires bargains in which the élite of the metropolis offers élites at the periphery deals they find very attractive if they undertake the bulk of the dirty work of enslavement and enserfment, and of subsequent exploitation at the point of a spear. Think of the Early Iron Age Phoenicians, and of Classical Athens.

Sven Beckert’s definition of capitalism is certainly not Marxian capitalism. It is certainly not Braudelian capitalism. His category of “war capitalism” appears to be the peripheral part of Thalassocracy, but it is definitely not the whole of it. But capitalism-in-general? It seems to be something like “the ceaseless accumulation of privately controlled wealth as an open-ended process which reshapes economies and societies and is fueled by a tight alliance of private capitalists with state power which serves their interests”. But it remains elusive.

Thus I have a very hard time figuring out what I think of Beckertian capitalism, simply because I do not understand what he thinks capitalism is at any satisfactory level.

There is great narrative power here. But it is unbridled by any conceptual discipline. And that means that at the end of the book, there is no answer to the question: “And so…?”

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J. Bradford DeLong: Professor of Economics, Emeritus

“Retirement” & the great life simplification from simply dropping bureaucratic-administrative tasks—plus, on another dimension, stochastic-parrot AI-autocomplete—all promise great life improvement. But there is a danger: the sea-squirt problem…

UC Berkeley has one of the last surviving defined benefit pension plans in existence. That means it makes no financial or lifestyel sense for me not to “retire” today. In fact, it made no financial sense for me not to retire a year ago. And two years ago, it was in the balance. So perhaps this move is two years late. For now:

  • My net income goes up.

  • My administrative-bureaucratic workload goes down from something like 10 hours a week to as close to zero as I can possibly make it.

  • My teaching load goes down by about a third, for now.

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All-in-all, a win, no?

But there is a potential danger. Consider the sea squirt:

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The sea squirt starts out as a tadpole with a spinal cord and a brain. It swims around, looking for a good rock. It finds one. It cements itself in place.

And then it eats its brain.

Movement achieved, problem solved, brain surplus to requirements, lunch is served.

I do not want to become an adult sea squirt.

But without the load of administrative and bureaucratic work, a good deal of which needs to be done face-to-face and with less teaching. All of these getting me up to campus less often is not this a danger?

So that means that I have to, starting today:

  • Sign up and schedule myself to give more talks

  • Sign up and schedue myself to attend more talks and more conferences and more meetings—Bodega Bay July 8-10, here I come!

  • Find a coffee shop where lots of professors come by to caffeinate up—people who I want to talk to who I can run into there by accident and buttonhole.

  • Decide what to do with this SubStack.

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My instinct right now is that I should raise the time allocation I commit to it to more than the current one hour a day. (Okay: one hour a day, plus time spent procrastinating when I have something else to do, plus using it as an outlet for drafts and for dropped projects and tasks that I have been working on in the rest of my writing and calculating time.)

What should I do with an extra two hours a day (for now, starting now) devoted to this platform? Advice very much appreciated, and much more than welcome.

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CROSSPOST: BRIAN KLAAS: The Great Cognitive Divide

You need to learn how to use a gym before you can benefit from it.

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Brian Klaas’s central thesis here is that AI works like a cognitive gym. It amplifies the capable, motivated, and well-prepared in critical thinking, motivation, and ability to learn, while letting everyone else stagnate or regress. Mediocre work is trivial to produce, hence those who are satisfied producing it never exercise their cognition muscles. But AI has raised the ceiling for those who can genuinely leverage it. Those with critical thinking, curiosity, willingness to struggle with hard problems skills can use AI to displace “the boring, tedious tasks that add nothing to your intellectual experience of being alive”.

The “but” unmentioned here is that for many people producing mediocre work is boring and tedious—and that includes the work of trying to derive entertainment from reading books! Doing mediocre work with trivial effort leaves more time and energy to do the other things that are the core of your life. I am attracted to the argument that you are a more capable mind and a better person if you are trained to approach the world through the print-channel and the calculation-programming-channel rather than simply watching short-form videos. I strongly think that everyone needs to have an AI info-butler asking them every five minutes: is this really the best use of your time?

Even given all that, I still am on Brian Klaas’s side here: we need to construct systems to force people to become more book-learning focused and thus more literary then our technologies and their advertising-focused market harnesses are pushing them to be.

But there is a big problem: How?


CROSSPOST: BRIAN KLAAS: The Great Cognitive Divide

<https://www.forkingpaths.co/p/the-great-cognitive-divide>

How AI could ensure the smart get smarter while everyone else gets left behind

Brian Klaas

Jun 30, 2026


Much has been written about the potential and perils of artificial intelligence. Tech bros fawn over it as a get-rich-quick panacea of emancipatory potential, making grandiose plans to use their well-padded crypto accounts to upload their brains into the eternal ether. Billionaire CEOs salivate at productivity gains and soaring profit margins without those pesky corresponding payrolls.

By contrast, social scientists—and many concerned citizens—worry about its disruptive impact on mass employment and the existential risk it could introduce into an already fragile global system.

For many, the reaction to artificial intelligence is all-or-nothing; a disaster for humanity that hollows out the essence of our species, or an information revolution that will usher in the previously unimaginable with an exhilarating digital whoosh.

These contrasting reactions are missing a crucial, hidden dynamic that is already underway. If we are not careful, one of the most consequential impacts of artificial intelligence will be a great cognitive divide, a bifurcation of humanity’s intelligence, a new era of mental inequality with long-lasting consequences for our species.


I: The Cautionary Parable of Air France Flight 447

On June 1, 2009, the autopilot on Air France Flight 447 unexpectedly disengaged, roughly 300 miles northeast of Brazil’s coastline, en route to Paris. This was highly unusual; most commercial airliners fly almost exclusively on autopilot when at cruising altitude.

Suddenly, and without warning, the pilots were forced to perform manual skills that they had offloaded to a machine for most of their flying career. Sensors were giving incorrect, implausible readings. With warning lights blinking and alerts sounding in the cockpit, they struggled to make sense of what was happening. In a state of confusion, the pilot tried to sharply climb—at an angle that was far too steep.

Unable to understand what the sensors were telling him, one of the pilots shouted out in frustration: “I don’t have control of the aircraft at all!”

Four minutes after the autopilot disengaged, the now-stalled aircraft was descending at nearly 11,000 feet per second. The pilots, who were used to offloading much of the cognitive load of flying to their trusty autopilot, were unprepared when the machine failed.

Air France flight 447 hit the ocean at tremendous speed, disintegrating completely, and instantly killing 228 passengers and crew members onboard.

This is a particularly tragic example of cognitive offloading, in which skills withered over time because the pilots lost some of their self-sufficient abilities by relying on fallible digital devices. Similarly, research shows that London cab drivers tend to have an enlarged hippocampus from memorizing the full road map of London, whereas those who navigate based on Google Maps become worse than previous generations at spatial memory. Use it, or lose it.

I previously wrote about the perils of cognitive offloading I’ve experienced:

When I was a kid, I could rattle off telephone numbers. Landlines. Clunky, oversized cell phones, bricks in purses. I knew the digits by heart. I still do. My best friend down the street. My parents. I used to know street names, too. Grids and lines, meandering through my head, a 12 year-old human MapQuest. You could learn a place in those days with 1990s GPS technology: Go Play Somewhere.

Then, I got a cell phone. For digits and coordinates, that part of my brain was siphoned off into the little flip phone. It never recovered. I don’t know any new phone numbers. Street names are passé. What3Words is the future. It’s now easy to ignore the surrounding environment. After all, you can always just look it up. You got lost? How? Did you forget to charge it?…

Several research studies have already highlighted the risks of cognitive offloading with LLMs such as ChatGPT. A 2025 MIT study (with a small sample size) showed reduced brain connectivity in those who wrote an essay with some assistance from ChatGPT and an inability to remember what they had just written. And a worrying, albeit preliminary 2026 study shows evidence that when people use AI to help them with a tasks, they become less persistent, give up more quickly when learning something, and have reduced overall performance.

A 2026 study showing that, when tested on recent learning, AI-assisted people did worse and gave up on questions faster than “natural” learners.

Our world is about to undergo the largest natural experiment in the history of cognition: what if most tasks that previously demanded some level of intellectual processing can simply be handed off to a machine? And crucially, as that happens, who will be the winners and losers of that new reality when it threatens our collective ability to think effectively?


II: Cognitive Gyms & AI as an Amplifier

Imagine that a person comes up to you at the gym with some helpful advice while you’re lifting weights or running on the treadmill.

“A forklift could lift the same amount with way less effort,” they tell you. “And you’re not optimizing when you’re on that treadmill; you could cover five kilometers a lot faster on a bike, or better yet, in a car.”

You might, quite understandably, contemplate whether they are mentally ill.

That’s because even though their suggestions are obviously correct, they have made an egregious category error: the point of going to the gym isn’t to liberate the maximum possible amount of weight from the stubborn grip of gravity or to move the treadmill belt the maximum possible distance in the shortest period of time. If it were, we wouldn’t have gyms in the first place; machines can already do those tasks better than us.

However, gyms are not equally useful to all humans. If someone is bedridden or has no clue how to lift weights, the mere existence of a gym doesn’t help them get stronger or faster. Instead, it might actually increase the statistical gap between local people in terms of their physical health. That’s because for someone who’s already a physically fit specimen with exercise know-how, a gym being built nearby can unlock accelerated physical improvements. The least fit will stay unfit; those most fit will get fitter.

Now, let’s add a third kind of person into the mix: someone who never goes to the gym but uses anabolic steroids to appear stronger. They will likely put on some visible muscle. Glance at them walking down the street and you might wrongly assume they’re regularly going to the gym. But it’s all an illusion: if you tested them medically, they’re likely to be less healthy than before they took the steroids.1 Appearance, without the substance.

Artificial intelligence can provide a function that’s a bit like humanity’s cognitive gym. Rather than having equal, across-the-board effects, AI can act like an amplifier, further driving a decisive wedge between two groups of people: those who have an abundant supply of critical thinking skills and a willingness to learn—and those who do not.

Admittedly, it doesn’t appear that way at first glance. To the untrained eye, it looks like AI can be a great equalizer, allowing functionally illiterate people to magically cook up glittering sludge that passes as polished prose (but is bereft of original intellectual nutrients).

That’s because there has been a huge influx of people who are a bit like the lazy steroid user who may be tempted to use a forklift to lift weights. They seem more intelligent based on their outputs, even as they are getting less smart over time. As they offload more and more critical thinking to artificial intelligence tools, they are allowing their brains to atrophy from excessive cognitive offloading to a machine.

Artificial intelligence has already created a lower floor to what humans produce: mediocre outputs are now absurdly easy to create. Anyone can, with a few keystrokes, “write” a moderately compelling, cringe-laced LinkedIn post or a decent technical report. PowerPoints and spreadsheets are child’s play.

But artificial intelligence has also raised the ceiling of possibility for those who already have critical thinking skills, a willingness to learn, and are knowledge workers who can amplify their existing skills with powerful digital companion tools.

A mathematician might explore stubborn problems faster, sometimes with creative, unexpected results, allowing her to focus more time on the truly difficult mathematical frontiers of knowledge. A skilled researcher might be able to engage in AI-assisted intellectual brainstorming of possible avenues to explore before embarking on a major new scientific inquiry.

In the developing world, smart, intellectually curious people without access to formal education can unlock a cognitive future that would have previously been impossible through freely available AI-based teaching tools, (which is one reason why AI optimism is so prevalent in the world’s poorer nations).2

As the evolutionary biologist Stephen Jay Gould wrote in A Panda’s Thumb:

I am, somehow, less interested in the weight and convolutions of Einstein’s brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops…

The net social effect of AI may well be a world of more severe economic inequality, ushering in the Silicon Valley tech bro’s ultimate fantasy of a permanent underclass. In rich countries, millions may lose their jobs and billionaires may become trillionaires. And in poor countries, despite the optimism, there is no Silicon Valley in Madagascar or Myanmar, so many of the rich fruits of technological innovation will, yet again, be plucked in the global north.

Nonetheless, an ambitious, clever individual in a poor country can now come home from a menial job and, for free, use AI tools as a better tutor than they could ever hope to pay for previously. But that can only act as an amplifier for a certain kind of person: for someone illiterate, exhausted by sweat shop toil, or unable to break out of menial labor markets, they may spend endless hours on ChatGPT or Claude learning about mathematics and engineering, or conquering fresh fields of humanities knowledge through progressive tutoring, but it may not matter for anything beyond their own cognitive development.3

The most likely outcome is therefore a stark one: hardworking, intellectually curious critical thinkers who know how to use AI to enhance their intelligence will get smarter; meanwhile, everyone else falls cognitively behind, as they eagerly siphon off any mental toil to machines.

To understand why, we need to explore a useful economic framework that perfectly captures why AI will create a bifurcation in cognitive abilities, depending on who uses it and how they incorporate it into their lives.


III: Substitutes vs. Complements

Economists have highlighted a theoretical divide between substitutes and complements. Does a good replace another, or does it support it and make it better? A related term is displacement, in which a technological innovation makes a previous technology obsolete.

When ATMs were invented, many feared that bank tellers would be obliterated, hundreds of thousands out of work in an automated blink. Instead, even as ATMs spread from fringe futuristic technology to being ubiquitous features of daily life, the number of tellers actually rose modestly over that period.

David Autor (2015) wrote about the phenomenon, explaining how this freed up bank employees to engage in so-called relationship banking, selling products to clients rather than just fulfilling the menial job of distributing cash. It’s a clear example where something looked like it would displace employment, but ended up complementing it.

Now, if we apply those economic concepts to the surge in AI usage and offloading cognitive demands, we have a stark framework for understanding what I call the great cognitive divide that’s looming on the horizon.

For the mathematician who is using AI to push theoretical frontiers or the heart surgeon who is using AI to help invent new medical interventions with greater precision, artificial intelligence doesn’t offload their critical thinking; it amplifies their intellectual effectiveness while boosting the bandwidth of that person’s brain to focus on ever-greater innovations and creative solutions to longstanding problems that aren’t easily solvable with existing training data.

By contrast, if a person who previously had to engage their brain to fill out spreadsheets or write technical reports is now exclusively using AI tools to displace their critical thinking—while completing the same tasks—then those individual brains will atrophy over time without sufficient alternative effort to keep them cognitively engaged. (Similarly, passive social media scrolling often displaces, rather than complements, more enriching cognitive activities like reading books.)

However, many tasks currently done by humans are tedious busywork, yielding entire careers that David Graeber kindly called bullshit jobs. This is where the ATM example may offer cause for optimism. The ATM innovation was better for everyone—not least for the bank teller—who could now focus on activities that don’t just involve counting cash and handing it to someone but are instead more intellectually interesting.

Similarly, if AI can help streamline what Jamie Bartlett calls techno admin—the soul crushing digital tasks we all must do in modern life—then that displacement should be welcomed. (No brain cells are wasted on ticking digital boxes.)

That’s why these categories offer a powerful theoretical scaffolding to understand a new frontier of cognitive load: the goal of AI for humans should be to displace the boring, tedious tasks that add nothing to your intellectual experience of being alive and to complement the cognitive passions by amplifying one’s natural talents and existing abilities.


IV: Resist the Sirens of Cognitive Offloading

However, as my previous essay about “The Death of the Student Essay” argued, intelligence amplification can only happen after people already possess critical thinking skills and are willing to pursue critical thinking as an end in itself. If you never learn how to use the cognitive gym and aren’t willing to put in some demanding ideational work, your brain will never grow.

For young people who substitute or displace their education by using AI shortcuts that outsource the process of learning how to think, artificial intelligence will never complement their cognition. Instead, it will just turn education into a mental dead end, a hard limit on what could otherwise be a rich internal life of curiosity and knowledge.

Similarly, for people who mistakenly see “outputs” as the goal rather than merely the economically useful byproduct of switching on their brains, they will be increasingly tempted to offload everything to AI tools, putting them in the same boat as those who never develop critical thinking in the first place. Legions risk becoming akin to the parable of a lazy steroid user who never works out: churning out cringe-worthy AI-generated LinkedIn posts en masse, while their brain slowly becomes a useless squatter in their skull.

The problem for both groups is this: some people will get really good at using ChatGPT or Claude, producing some seemingly excellent outputs along the way, thereby lulling themselves into a false sense of comparative advantage.

But if they don’t learn how to think, then any AI-based skills they develop will have two pitfalls:

First, their skills will be tied only to a specific technology, not a flexible cognitive aptitude that can survive further technological advancement.

Second, those skills won’t be remotely unique. Right now, someone can get an edge professionally by being good at using AI tools, since some people are better than others at adopting the technology. But just as people used to proudly type “proficient in Word and Excel” on their CVs, over time, such skills became taken for granted. And in a world that will inevitably involve AI interlaced with the human experience, nobody will stand out for being good at writing AI prompts.

Therefore, as cognitive offloading seductively tempts a population obsessed with optimized efficiency, the edge will ultimately go to the diligent smart thinkers who complement their intelligence rather than swapping their mind with an LLM.

This, then, is my plea: resist the siren song of overzealous cognitive offloading. Next time you use ChatGPT, ask yourself: is this a substitute for my mind, or complementing my ability to use my brain more effectively? Am I streamlining a pointless task so I can focus on more interesting ideas, or depriving myself of interesting ideas because a shortcut beckons?

Human brains are the most complex and wonderful creations in the known universe, but they wither when left unused. I worry that we could already be sleepwalking toward that mental chasm, one mindless AI prompt at a time.


1 Steroid misuse can impact cholesterol, raise blood pressure, suppress testosterone, produce psychological effects, dampen fertility, and damage the heart.

2 Interestingly, AI optimism is strongest in developing nations and weakest in developed nations, which makes sense—job loss is likely to occur in rich economies whereas AI may present fresh economic opportunities to people who live in poor countries. Moreover, people are particularly worried about AI in the US, where the social safety net is so weak; after all, losing one’s job doesn’t mean just loss of income, but also uncertain unemployment benefits, potential loss of health insurance, child care, etc.

3 It’s worth noting that I believe cognitive development and exploring knowledge for its own sake is a worthy goal for literally every human being on the planet.

<https://www.forkingpaths.co/p/the-great-cognitive-divide>


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Republic of the Central Banker: HOISTED FROM THE ARCHIVES

2008-10-27: LinkRot at The American Prospect! Why, if I may ask, David Dayen, Robert Kuttner, & company? I mean, I am just one guy, without real staff, and I am working to get my weblog archives back up someplace else than at the WayBack Machine <http://wayback.archive.org/>…

Rescued by the WayBack Machine: <https://web.archive.org/web/20090705080705/http://www.prospect.org/cs/articles?article=republic_of_the_central_banker>. Support them! <https://archive.org/donate/>.

It is still true that an extraordinary amount of our macroeconomic fate runs through the heads of a few human beings sitting around a table in Washington. We do not live in the Republic of Plato, or even in the Republic of the Bond Market; we live, to a remarkable extent, in the Republic of the Central Banker.

When I wrote this in October 2008, the financial world was on fire and Ben Bernanke, an extremely earnest scholar of the Great Depression who had somehow found himself cast as philosopher‑prince, was manning the fire hose. The point of the essay was not just biographical color—“How did this nice Jewish boy from Dillon, South Carolina wind up running the world?”—but institutional: through a long series of historical accidents, improvisations, and panics, democratic polities had delegated the power to set the most important price in the economy, the short‑term interest rate, to a technocratic priesthood and then discovered that they could not easily take it back.

Seventeen years on, you will recognize the patterns. The specifics have changed—different shocks, different acronyms, different chairs—but the underlying structure is the same: an immense island of central planning in the middle of a market ocean; politicians who loudly declaim about “growth” and “jobs” while knowing that their room for maneuver is sharply circumscribed by what the central bank will tolerate; and a constant, uneasy argument about how much discretion we actually want our philosopher‑princes to have. This article is, I think, a snapshot from the acute phase of that realization: how we backed into the Republic of the Central Banker, and what it means to try to do democratic politics in its shadow:

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2008-10-27: Republic of the Central Banker

In the middle of our market economy sits an island of central planning, the Federal Reserve. No president or Congress dares challenge the power of its chairman, Ben Bernanke.

J. Bradford Delong | October 27, 2008

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Ben Bernanke is the closest thing to a central economic planner the United States has ever had. He bestrides our narrow economic world like a colossus. Unelected (he was appointed by President George W. Bush and confirmed by an overwhelming majority in the Senate) and unaccountable (unless the Congress decides that it wishes to amend the Federal Reserve Act and take the blame for whatever else goes wrong with the economy), he is responsible only to his conscience -- and his open-market committee of himself, the other six governors of the Federal Reserve Board, and the 12 presidents of the regional Federal Reserve banks.

The fate of the economy in the next administration depends far less on the president than on this moral-philosopher-prince to whose judgment we have entrusted a remarkable share of control over our destiny.

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How did an ivory-tower academic whose specialty is the details of the Great Depression get to this position? What does he do all day? How did so much power come to rest in a single institution, a single individual? The current system is the product of a century and a half of evolution in the role of a central bank, on both sides of the Atlantic, through a series of accidents and crises. For a generation, the idea of social democracy -- with government ownership, control, and regulation of at least the “commanding heights” of the economy -- has been in retreat. But in the middle of this market economy is an immense island of central planning: the Federal Reserve. In normal times, the Fed -- not the market -- decides what the short-term interest rate is. The interest rate is perhaps the key price in the economy. It is the price at which we trade wealth in the present for wealth in the future.

When the interest rate is low, our focus is on the future: Businesses and consumers borrow and invest. When the interest rate is high, our focus is on the present because distant-future promises of cash are not worth very much in today’s dollars. You might think that if there were ever a decision we would leave to the market and the aggregated preferences of millions of individuals, it would be the terms on which we trade present comfort off for future wealth. But we don’t. We leave that decision to the discretion of the philosopher-prince Bernanke and his committee. And in extraordinary moments like the September Wall Street crisis, when the flow of funds through financial markets dries up, we leave the decisions of which banks to nationalize, which to close down, which to forcibly merge, and which to rescue and on what terms to our financial overlords in the Eccles Building on the National Mall.

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***

Ben Shalom Bernanke is perhaps more aware of the complex history that placed him in this role than any of his predecessors were. The eldest child of a schoolteacher and of a druggist and part-time theater manager, he was born in Georgia and brought up in South Carolina before heading off to Harvard in 1971. “What was it like being a southerner at Harvard in the 1970s?” is reported to have been the thing that George W. Bush was most interested in when he first interviewed Bernanke for a slot as one of the Federal Reserve’s seven governors. Bernanke then went straight on to graduate school at the Massachusetts Institute of Technology and earned his Ph.D. in 1979, a student of Stanley Fischer’s during a near-decade when it seemed like all the excellent young macroeconomists were students of Stanley Fischer’s. His first job was as a Stanford Business School professor, where he became a star. After six years at Stanford and a year at New York University, Ben Bernanke settled at Princeton. His last six years at Princeton, 1996–2002, he was an extraordinarily successful economics department chair.

“I always thought I would be an academic lifer,” Ben Bernanke said at a conference in 2005. “The sum of my political experience consisted of two terms on the local school board, six grueling years during which my fellow board members and I were trashed alternately by angry parents and angry taxpayers.” In spite of this lack of experience, the consensus was and is that he is one of the very best people for his job. “[The choice of Ben Bernanke] as the next Fed Chairman is a very good one: he is extremely bright ... a first rate expert in macroeconomics and monetary policy ... he has a broad and sophisticated -- if somehow controversial -- understanding of international macroeconomic issues. ... While being a Republican, he is not a partisan hack or too closely associated with the White House. ... He is a wise and pragmatic policy maker” -- so said Nouriel Roubini, perhaps the fiercest critic of recent Federal Reserve policy, when Bernanke was nominated nearly three years ago.

When Bernanke was appointed, the concerns about what he would bring to the position were threefold: Would he be too much of an inflationist -- too willing to “drop money out of helicopters” to keep the economy going at a high-pressure pace when recession threatened? Would he be too rigid -- likely to confine the Federal Reserve to an “inflation targeting” straitjacket? Would his belief that America’s large trade deficit sprang from a “global savings glut” rather than U.S. policy mistakes lead him to neglect the problems created by those global imbalances? None of these have proved relevant to understanding his tenure so far. Instead, the most relevant thing has been his long interest in the Great Depression and his judgment that the Federal Reserve erred catastrophically in the Depression not just by failing to stem the decline in those bank deposits necessary to fuel consumer spending but also by allowing banks to fail. In so doing, the Fed destroyed the organization and knowledge base that made banks trusted intermediaries between the myriads of savers with no knowledge of business prospects and the thousands of businesses with no direct ability to draw on individual savers’ resources. Avoiding the mistakes made during the Great Depression is Bernanke’s highest priority. “As an official representative of the Federal Reserve,” he said at the 90th birthday party for Milton Friedman, who in a 1963 book co-authored with Anna J. Schwartz argues that the Federal Reserve’s monetary policy was to blame for the Depression, “I would like to say to Milton and Anna, You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

In 2002 he left Princeton for Washington, where he was one of the Fed’s governors for three years, then one of Bush’s White House economists for a year, and then named chair of the Federal Reserve on Feb. 1, 2006.

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***

Now go further back in history to 1844, and pick up the story that leads to Bernanke’s current power and eminence. The place is London. The occasion is the debate in Britain’s House of Commons over the terms on which the charter of the Bank of England -- the government’s bank -- is to be renewed. The British government was then the largest economic institution the world had ever seen, and Britain, the fastest-growing economy ever seen: It was the age of the original Industrial Revolution, with the first large-scale automated factories, the first steamships, the first net of railroads, and the first time that any national economy had developed the chronic disease that we call the industrial business cycle.

Before the 19th century the causes of times of economic distress were obvious: war, famine, or disease, or a state bankruptcy -- a government that decided that it was simply not going to pay its debts. You could see what was going wrong and what had caused it.

The industrial business cycle was different -- and mysterious. Factories would be shut but not because of a lack of raw materials or of workers who wanted the jobs or of people who needed the products. Construction workers would be idle but not because the country had enough railroads or buildings or ports. People would be much poorer than they had been a couple of years before but not because an invading army had burned their cities or a plague of locusts had eaten their crops.

What seemed to be happening was that the flow of funds of individuals’ savings into banks and then out to companies that wanted to expand or maintain operations somehow dried up. Sometimes the flow of money into the banks dried up first, and so the interest rate the banks had to pay to attract funds and deposits rose. As a result, the interest on the loans the banks had made was suddenly less than the interest they had to pay out on deposits. The banks then ran short of cash, couldn’t pay their obligations, and crashed. This further dried up the flow of funds from savers: Why deposit your money in a bank that might crash next week? Sometimes the confidence of entrepreneurs in expanding their enterprises flagged and faltered, and the value that they paid each other for shares of ownership of factories and railroads and office buildings fell. Then they could no longer sell shares in their properties to pay back the banks from which they had borrowed -- and the banks ran short of cash, couldn’t pay their obligations, and crashed. This too dried up the flow of funds from savers. Before the Industrial Revolution, these things didn’t happen. Ever since, they have happened roughly every five years, at varying levels of severity.

In reaction to these first contractions, the Bank of England developed a custom: In a panic, crash, or depression, when smaller banks were running short of cash, the Bank of England would print some up and lend it out to the other banks. Nobody thought that Bank of England notes were bad because nobody thought the Bank of England would crash: the British Empire would never let it fail. So the Bank of England lent to smaller banks that could not meet their obligations, expecting repayment only after the crisis had passed. This lending would keep smaller banks from crashing, lower interest rates, and raise asset prices. Indeed, the crises did pass. Savers reappeared, and the interest rates banks had to pay to attract deposits fell. Entrepreneurs returned from their rest cures, recovered their confidence, and asset prices rose again. And the Bank of England got repaid -- or at least got repaid enough of the time to keep the system going.

All of this was illegal. The notes the Bank of England printed were supposed to be backed by gold in its vaults. The 1844 parliamentary debate was about whether the Bank of England’s charter should be amended to make legal what the bank was already doing. Prime Minister Robert Peel said no: If the Bank of England had the legal power to print extra notes to rescue banks in a crisis, he said, then the banks would get into more crises, taking more risks because they knew that the Bank of England would rescue them. But, Peel said, if the governor of the Bank of England decided, in a panic, to rescue banks or lend them money to prevent the panic from snowballing into a crisis and then into a depression -- then the government would not prosecute its bank for violating its own charter. As Charles Kindleberger puts it in his book Manias, Panics, and Crashes, the principle was that the central bank should always show up when it was really needed, but beforehand, and in normal times, its appearance should always be in doubt.

As the 19th century passed, the Bank of England began to exercise its power to set the key price in the economy. There had always been a “bank rate” -- a rate at which other banks could borrow from the Bank of England. At the start, the Bank of England would periodically adjust the “bank rate” to follow the general price in the free money market in normal times, but it found that the other banks were waiting for it before they would change their own lending rates. By the end of the 19th century, the short-term interest rate in Britain was an administered rather than a market price all the time -- not just in the panics when the Bank of England lent money in emergency-rescue operations.

The United States in the 19th century did without a central bank and had the world’s severest panics and deepest depressions -- in 1857, 1873, 1884, 1893, 1896, and 1907. In 1907, the financier J.P. Morgan said “enough” and constituted himself as a pick-up central bank because nobody doubted that his and his partners’ fortunes were so large that their credit was good. In 1913 Congress created the Federal Reserve. The Federal Reserve did not acquit itself well during the Great Depression: Milton Friedman and Anna J. Schwartz always blamed that on the untimely death in 1928 -- just before the crash -- of the Fed’s leader, New York Federal Reserve Bank President Benjamin Strong, and the lack of competent replacements. Other central banks also did not acquit themselves well during the Great Depression: They all seem to have decided that maintaining the gold standard was more important than rescuing banks, which is why we no longer have a gold standard.

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After World War II, the Federal Reserve found its footing. Eight times a year, and in emergencies, the Federal Open Market Committee met to assess the levels of the federal funds rate and the Federal Reserve discount rate -- the American equivalents of Britain’s “bank rate.” The Reserve set its interest rates with an eye, first, to maintaining price stability (because inflation makes all other tasks much more difficult); second, to minimizing the danger of a future financial crisis; and, third, to keeping the economy’s level of growth as high and unemployment as low as possible given the other two objectives.

In the first decades after World War II, the Federal Reserve came under heavy political pressure: Members of Congress would denounce the Fed for keeping interest rates too low and thus triggering inflation; other members of Congress would denounce the Federal Reserve for keeping interest rates too high and thus creating high unemployment and low real wages; presidents prodded the Reserve to lower interest rates to produce an economic boom at re-election times. But the 1970s taught members of Congress that criticizing the Federal Reserve is likely to backfire: If it takes your advice, you cannot then blame it for what has gone wrong in the economy. The 1980s taught presidents and their staffs that getting into a fight with the Fed is likely to shake business confidence and risk either higher inflation or higher unemployment or both. The memory of the 1970s and the 1980s created a culture inside the Federal Reserve of resistance to political pressure. Many in the Fed believe that the root cause of our only post–World War II depression, in 1982, had been caused by then Federal Reserve Chair Arthur Burns’ willingness to bow to pressure from his political patron Richard Nixon to create a booming economy for Nixon’s re-election campaign in 1972.

The last even semiserious political effort to pressure the Federal Reserve came in 1991, when George H.W. Bush’s White House delayed Alan Greenspan’s reappointment as chair and threatened to find a replacement if Greenspan and his committee did not lower interest rates far and fast enough to suit the White House -- what then–White House counsel C. Boyden Gray told me were “counterproductive and pointless games.” Since Paul Volcker’s appointment as chair in 1979, the Reserve has been effectively independent from the rest of the government. And whenever it makes a decision, the word comes down to all executive-branch officials to stay on message, as we were told when I worked at the Treasury in the 1990s:

“Our role at the Treasury Department is to support the independent regulators. ... The Treasury Department supports the actions taken by the Federal Reserve Bank of New York and the Federal Reserve. We believe the actions taken were necessary and appropriate.”

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All this evolved not by design but by accident. The Bank of England did not start out thinking its job was to rescue the banking sector in crisis; it just found there was a crisis and thought it could do some good. Robert Peel did not set out to create a central bank, but prosecuting the Bank of England for charter violations seemed a mistake at the time. The Bank of England did not set out to supplant the market and turn the interest rate into a centrally planned and administered price, but monetary management in extraordinary times led to monetary management in unusual and then in ordinary times. The 1913 U.S. Congress did not set out to turn Ben Bernanke into a philosopher-prince, but the absence of an American central bank was blamed for the dire panics and depressions that struck between the Civil War and World War I. And post–World War II presidents and congresses did not set out to cede all effective powers of national macroeconomic management to the philosopher-princes of the Federal Reserve; it just seemed like the least-bad idea at the time.

But just because central banking is independent of politics does not mean that politics is independent of central banking. “You may not be interested in the dialectic,” Leon Trotsky once said, “but the dialectic is interested in you.” That we now have independent central banks run by technocratic philosopher-princes like Ben Bernanke, and that we have these central banks because elected legislators and executive politicians do not want to challenge their authority or change their charters, has powerful implications for the freedom of action and choices that presidents and elected governments can make. Let me give three examples:

At the start of the Clinton administration in 1993, Alan Greenspan as Federal Reserve chair was firmly and genuinely convinced that the federal budget deficit, at its level at the time, was inflationary. Deficits raise debt. One of the things governments do to get from under the burden of a high national debt is inflate the currency. Greenspan was firmly convinced that if he wanted to maintain price stability -- and he wanted to maintain price stability -- then he had to offset the upward pressure on inflation coming from expectations that someday the government would start printing money to ease its debt. To offset inflation, he raised interest rates and so created a supply imbalance in the labor market: You can’t have durable inflation without rising wages, and you can’t have rising wages with an excess supply of workers looking for jobs in the labor market.

Thus, the debate about the economic policy of the Clinton administration carried out in the fall and winter of 1992–1993 -- how to find the proper balance among middle-class tax cuts, public-investment expenditure increases, upper-class tax increases, and deficit reduction -- was brought to a sharp and immediate halt by the Federal Reserve. Because Alan Greenspan was committed to keeping inflation low, any Clinton administration economic policy of benign neglect applied to the deficit would be very likely to produce a substantial recession. Greenspan, of course, said that he was not an unelected technocrat imposing his policy preferences on the elected president but merely an informant about the reality of the bond market -- which generated James Carville’s crack about how he wanted to be reincarnated: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter, but now I want to come back as the bond market. You can intimidate everybody.”

A similar process had the opposite effect between 1995 and 2000. Greenspan’s belief -- over the objections of many if not most of the members of his committee -- in the “new economy” of the Internet revolution led the Fed chair to reduce interest rates below what standard Federal Reserve reactions found appropriate for the late-1990s levels of inflation and unemployment. This action generated the high-productivity, high-employment boom of the late 1990s that then turned into the dot-com bubble.

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The current financial crisis has its roots in Greenspan’s decision to keep interest rates very low in 2002 and 2003 to head off the danger of a deflation-induced double-dip recession, and his subsequent decision that the costs of cleaning up after a housing bubble were likely to be less than the costs of the high unemployment that would be generated by a preemptive attempt to pop a housing-speculation bubble. Two years ago, I would have said that Greenspan’s judgment here was correct. Six months ago, I would have said that his judgment was probably correct. Today -- in the middle of the largest nationalizations in history -- I can no longer state that Greenspan made the right calls with respect to the level of interest rates and the housing bubble in the 2000s.

In all three of these episodes, the president and the Congress -- neither of them wishing to erode confidence by a public disagreement with the Federal Reserve -- had about as much power to set or influence policy as the Queen of England does in Britain: They had the power to talk to the decider -- Greenspan then and Bernanke today -- and nothing more.

The great financial crisis of 2007–2008 does not weaken but strengthen the Federal Reserve’s independence in the short and medium run, no matter how one apportions blame among the Fed, the SEC, other regulatory agencies, and the overpaid princes of Wall Street. A strong economy is in the president’s policy interest: policy initiatives, especially expensive policy initiatives, cannot be enacted and implemented when the economy is weak. And a strong economy is in the president’s and the current Congress’ political interest: Weak economies lead to re-election defeats. The policy and political dangers of challenges to the Reserve’s authority, independent status, and leading role are thus now unusually high and likely to remain unusually high for the duration of the current financial crisis and for a year or two thereafter. The next administration will find itself advising, warning, privately admonishing, and publicly partnering with an independent Federal Reserve that will see itself as rightfully and legitimately taking the leading role in economic policy.

Cicero said that the problem with his political ally Cato was that he thought they lived in the Republic of Plato while they really lived in the Sewer of Romulus. It is either our curse or our blessing that we live in the Republic of the Central Banker.

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Is Kevin Warsh as Bad a Central Banker as He Seems? Perhaps...: TUESDAY MACRO

Standing on one’s Fifth Amendment right against self-incrimination is no way to create a stable standard of value. Removing any semblance of a signal about what the Fed might do next with interest rates leaves markets with no choice but to guess in the dark.

A Fed chair who refuses to show his work is taxing the economy with avoidable risk. By shredding forward guidance, Warsh isn’t restoring discipline – he’s deepening uncertainty.A communications strategy of not communicating definitely helps him balance Trump’s demands with Wall Street’s hopes, but it is not good monetary policy. Markets can try to deal with hawks and they can try to deal with doves. But how can they deal with and price in a Chair who will not say what game he is playing?

A well-functioning market economy requires a monetary standard: some set of rules and expectations for what the magical things that comprise liquid trust in the good faith and ability to pay of counterparties are, and how and how much of that liquid trust there is. As John Maynard Keynes wrote back in 1924, the market economy:

John Maynard Keynes: A Tract on Monetary Reform <https://www.gutenberg.org/files/65278/65278-h/65278-h.htm>: ‘cannot work properly if the money… is undependable. Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls to individuals, the speculator, the profiteer—all proceed, in large measure, from the instability of the standard of value…. The costs of production… the rewards of labour, enterprise, and accumulation… [and] a fourth cost, namely risk; and the reward of risk-bearing is one of the heaviest, and perhaps the most avoidable, burden on production. This element of risk is greatly aggravated by the instability of the standard of value….

I dedicate this book, humbly and without permission, to the Governors and Court of the Bank of England, who now and for the future have a much more difficult and anxious task entrusted to them than in former days…

In something like our current Age of the Central Banker, clarity as to the policy of the Federal Reserve is perhaps the most essential part of the creation of a stable standard of value: how will the Federal Reserve backstop liquid asset values in order to try to make Say’s Law work in practice, so that potential supply is matched by demand? People need to know the answer to this question if risk is to be diminished, and if the risk-bearing tax on enterprise and employment is to be lightened.

We are thus all eager to hear what brand-new Fed Chair Kevin Warsh has to say about what the policy of the Federal Reserve will be: his answers to questions of the form, if the economy does X, the Fed will do Y, and in economic situation Z, our reaction is likely to be W. To first order that Fed reaction function is likely to be something like a Taylor rule: an unemployment rate of u and an inflation rate of π induce the Fed to set a short-term Fed Funds interest rate of r, with the value of r calculated by some three-parameter linear function:

And then other circumstances lead the Fed to set its actual r above or below the Taylor-rule level. Hence one of the key jobs of the Federal Reserve is to communicate, clearly and unambiguously, its view as to the current values of α₀, α_u, and α_r; plus its current laundry list of other circumstances it is likely to respond to if they occur, and how much.

This is called the Federal Reserve’s “communications strategy” or its “forward guidance”.

What does Kevin Warsh has to say? What he has to say is: I am not going to say anything.

Daire MacFadden, Unhedged reporter, is rather unhinged as a result:

Daire MacFadden: No Dots, No Plots <https://ep.ft.com/permalink/emails/>: ‘New chair Kevin Warsh has, as expected, given up on forward guidance. Actually — as many are pointing out — he’s given up not just on guidance about the future but also guidance about the present and the past. Dario Perkins of TS Lombard summed it up nicely in the chart below. The emoji in the middle shows us where a legible (if imperfect) Fed dot plot used to be:

In short, Warsh’s turn towards the taciturn potentially increases uncertainty and the risk of policy surprises — a recipe for higher borrowing costs, if ever there was one. Warsh’s press conference… offered a preview of this new regime. In the 24 hours before and after the meeting, markets significantly repriced the likely path of Fed policy over the coming year. They went from expecting one rate rise to expecting two by June next year, with the first due in the fourth quarter…. Bank of America — not to be outdone by market consensus — thinks the number of rate increases could be higher and come sooner… [as] the labour market is showing no signs of slowing and inflation is above target and sticky….

Warsh barely mentioned the full employment side of the Fed’s mandate during the presser, which could be taken as a sign that he considers it met or less important now than price stability…. As if to underline the point about less communication sparking more confusion, investment house Amundi put out its own forecasts on Monday. It has concluded that the number of Fed rate rises this calendar year will be… zero…. Warsh has said a lot about speaking less. So far the proof of the new regime is June’s FOMC statement (cut to under half the typical length) and his refusal to plot a dot…

What Warsh has said is, roughly:

  1. The Federal Reserve will deliver price stability—i.e., not worry about other things like full employment and enabling productivity growth via reallocation to high-value sectors until that first is taken care of.

  2. He only cares about the left side of the decimal point when it comes to inflation—i.e., rather than attempt to make the PCE inflation rate average 2%/year over time, he will be satisfied as long as recent data records inflation as being 2.X%/year—which is an 0.50%-point increase in the Federal Reserve’s inflation target.

  3. He does not think that the Philips Curve is real—i.e., that interest-rate increases are not a reliable way of cooling off the economy and diminishing inflation when inflation is above target, and hence price stability is not being delivered.

No. Nobody can make sense of this. It doesn’t.

Janet Yellen once remarked to me that her experience at the Fed of the 1990s was the introduction of the Taylor rule framework—where the interest rate would normally be given current inflation and unemployment, what adjustments above or below that normal level we are making because of current circumstances, and how the interest rate will change as the economy evolves— was a very major policy win in terms of establishing a stable monetary standard in these modern days, and also a substantial win in terms of clarifying the Federal Reserve’s own thought in its internal discussions. That seems to be, as far as the Fed chairman is concerned, now gone.

My interpretation of what is going on is rather cynical: it is that Kevin Warsh has told an awful lot of lies to get to his position. Donald Trump and the Trumpists think that he is a convinced interest rate dove, and that the only reason right now he is not pushing for rapid interest rate decreases is that he wants to nudge the committee rather than begin his term with a confrontation. The financial market community thinks that he pulled the wool over Donald Trump’s eyes by pretending to be an interest rate dove. Well, actually, he is a normal central banker. Those two sets of beliefs are inconsistent. Anything Kevin Warsh says is likely to disrupt at least one of them, and that could cause him trouble.

Hence he is going to make it a matter of principle to shut up. The longer he can preserve ambiguity, the better for him personally in his place at the top of this particular greasy pole.

That this is lousy economic policy and lousy communications strategy does not seem to be a consideration.

Very cynical, yes. But is it wrong?

Claudia Sahm is much more polite than I am, but in her polite way she appears equally alarmed at the prospect of a Fifth-Amendment Fed:

Claudia Sahm: Where Is the Fed Headed? <https://stayathomemacro.substack.com/p/where-is-the-fed-headed>: ‘The Fed’s guiding principle in communication should be transparency in service of accountability. The Fed cannot guarantee that unemployment and inflation will be low, but it can guarantee it will pursue those goals diligently and show its work…. Last week on Bloomberg, I was asked…. “If you had free rein of the institution and could readjust — adjust the communication apparatus at the Federal Reserve — what would you change? What would you get rid of?” I fumbled a bit — 6:45 am, no coffee — but the themes came through…. “I watched a Fed become more transparent, more speaking to the public. I think it is very important for accountability’s sake that the public, the Congress understands what the Fed is doing, why they are doing it…. Show your work…. Accountability… is important…. Fine-tuning… how the Fed gives information so markets can understand it and help…. There is a lot of fine-tuning. The dot plot is not a perfect tool in any form, but the spirit has real merit…. It is very easy to delete things…. But that doesn’t necessarily move the ball forward in terms of improving the goal-setting, improving the transparency.”… I can list my preferred tweaks, but honestly, that’s a sideshow to getting the Fed to elevate transparency and accountability…


Cf: <https://www.milkenreview.org/articles/helicopter-money-when-zero-just-isnt-low-enough> <https://web.archive.org/web/20090705080705/http://www.prospect.org/cs/articles?article=republic_of_the_central_banker>

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