Where are interest rates headed? plus economics Links, 3/2/2025

Watch me debate Lee Bressler on substack live; Malcolm Kyeyune on the budget deficit; Lyman Stone vs. Greg Clark; Lorenzo Warby vs. economists on immigration; Charles C. Mann on progress

Lee Bressler and I will debate where interest rates are headed when we go on Substack Live on Monday, March 3 at 8 PM. Get the Substack app to tune in. Alan Blinder used to say that people don’t want to listen to economists about things that they know, but they are eager to ask economists where interest rates are headed, when we don’t really know. All I can promise is that you can hear how we wrestle with the question.

Malcolm Kyeyune writes,

Yes, it’s easy to mock USAID for schemes such as the $70,000 spent on a “DEI musical” in Ireland. Yet when placed next to the full size of the national budget, Musk is conducting the administrative equivalent of scrambling about for change behind the sofa.

…DOGE, in short, is a gimmick. … The legislature can nowadays barely pass the stop-gap, temporary funding measures it uses in lieu of actual budgets to prevent government shutdowns. The last time Congress passed all its required bills on time was in 1996, and over the last 40 years it has only managed to complete the appropriations process a grand total of four times…

future historians won’t remember the squabbles around USAID: that just isn’t the story of our age. What matters instead is a financial system in ruins, a political class out of ideas, and the inevitability of a 1789 moment sooner or later.

Have a nice day.

Interviewed by Tyler Cowen, Gregory Clark says,

If you think that the engine of high-tech society now, like the United States, is the top 1 percent or 5 percent of the ability distribution, then you would say the more assortative is mating, the more people will be in that extreme and the greater will be economic growth.

In the new book, I actually speculate about, was assortative mating in Northern Europe a discovery of the late Middle Ages that actually then helped propel things like the Scientific Revolution, the Enlightenment, the Industrial Revolution, because as I say, it’s a remarkably constant feature of British society.

So assortative mating raised IQ and propelled Britain to modernity. But Lyman Stone writes,

IQ only rose by about 1-3 points between the medieval and modern periods in Europe.

That’s quite damning to Clark’s hypothesis. These small changes cannot explain major social transformations; they simply cannot. This scale of variation is just totally irrelevant. Clark is patently wrong here.

Lorenzo Warby writes,

The overwhelming majority of the economic benefit of immigration goes to the migrants themselves. The overwhelming majority of the remaining fraction of economic benefit goes to the holders of capital—including the (credentialed) human capital and networked social capital of the professional-managerial class.

Workers get so little of any economic benefit from immigration that it takes very little for local providers of labour to lose from immigration. There are so many ways local providers of labour lose from immigration as it actually operates—particularly from low-skill immigration, especially Greater Middle Eastern immigration—that such immigration can only be supported as a form of economic, cultural and social warfare against local workers.

…Economists are, however, responsible for the view that to question the value of the immigration that folk were actually experiencing was a form of economic illiteracy. They are responsible for over-emphasizing efficiency and under-considering resilience. They are responsible for theories of human action and decision that pay little or no attention to the evolved structure of human cognition. They are responsible for not sufficiently considering cultural transaction costs. They are responsible for poorly considering the issues of managing each country’s institutional commons.

In my opinion, economics ought to be a branch of what sociology ought to be. Sociology ought to be the study of human interdependence. Actually-existing sociology is not that. It is the interpretation of all human behavior as oppressors vs. oppressed. And economics is on the road to becoming actually-existing sociology.

Charles C. Mann writes,

Jefferson was one of the richest men in the new United States. He had a 5,000-acre plantation worked by hundreds of slaves, a splendid mansion in Virginia that he had designed himself, one of the biggest wine collections in America, and one of the greatest private libraries in the world—it became the foundation of the Library of Congress. But despite his wealth and status, his home was so cold in winter that the ink in his pen sometimes froze, making it difficult for him to write to complain about the chill.

Jefferson was rich and sophisticated, but his life was closer to the lives of people in the Iron Age than it was to ours.

Twenty-five years ago, I made a similar point, using Frederick Douglass as an example of a rich man a century before.

High atop Anacostia Park, a rundown, working "poor" section of Washington, DC, sits the mansion of Frederick Douglass, the great nineteenth century orator and agitator for the rights of women and African Americans. Douglass, although born a slave, became a wealthy newspaper publisher. He came to Washington late in his life, as a U.S. Marshall in 1879. His 21-room mansion was on a 15-acre site and employed three servants. A reasonable guess is that he was in the top one or two percent of the wealth distribution at that time. …

Today's residents of Anacostia Park, although many would be considered poor by today's statistical measures, have all of the modern conveniences on the right hand side of the table. In addition, they can drive to work, while Frederick Douglass had to walk five miles to his job in the Capitol building. They have radios, televisions, and many other goods that the wealthy Douglass never possessed.

substacks referenced above:

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We Live Like Royalty and Don’t Know It

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The failure of economists...