Economics Links, 5/19/2025

Michael Rubin would de-fund the IMF; Ben Glasner on manufacturing jobs; Jack Kieffaber and Garrett Maxwell on limits to growth; Matt Yglesias on the economics of subsidizing children

Michael Rubin writes,

On Friday, the IMF agreed to release $1 billion to Pakistan, one of the world’s most corrupt countries. Its move came after Pakistan-based terrorists infiltrated India and executed non-Muslims in front of their families. India retaliated against the terrorist training camps. Rather than say good riddance and deny ties, Pakistani military officers attended the terrorists’ funerals while in uniform

…By saving more than $100 billion in one fell swoop, Trump could silence those who argue he continues to sell an illusion rather than trim spending. He can also call the bluff of those at the IMF, and by extension World Bank and United Nations, who think they are immune to the consequences of corruption and terrorist finance.

There are economists who will argue that the IMF has not had a legitimate purpose since the 1970s, when we adopted flexible exchange rates. Before that, the IMF was supposed to provide a stabilization fund to maintain the Bretton Woods system of fixed exchange rates.

Ben Glasner writes,

Today’s production roles often require technical proficiency — such as programming, equipment calibration, and quality-control analytics — rather than traditional assembly-line work.

…not only are fewer people working in manufacturing relative to the total labor force, but those who do are increasingly less likely to be workers without a college degree. (We are using non-college workers as a proxy for blue collar workers.)

Tariffs are unlikely to turn unskilled high school graduates into well-employed manufacturing workers. The “good jobs” in manufacturing go to workers with skills. Of course, that does not mean that we need to send everyone to university. Apprenticeships might be more effective.

Jack Kieffaber and Garrett Maxwell write,

There is no such thing as creativity; there’s only recombination of what already exists. And the number of possible recombinations, though vast, is not infinite.

They claim that AI will be able to search through the entire space of ideas. At that point, there will be no more growth opportunities, and the battle will be over ownership of what exists.

They do not seem familiar with the combinatorics done by Paul Romer.

here is for more such discoveries, we can calculate as follows. The periodic table contains about a hundred different types of atoms. If a recipe is simply an indication of whether an element is included or not, there will be 100 x 99 recipes like the one for bronze or steel that involve only two elements. For recipes that can have four elements, there are 100 x 99 x 98 x 97 recipes, which is more 94 million. With up to 5 elements, more than 9 billion. Mathematicians call this increase in the number of combinations “combinatorial explosion.”

Once you get to 10 elements, there are more recipes than seconds since the big bang created the universe.

To me, this says that either AI will not be able to work through all the possibilities within our lifetime or else it will lead to so much spectacular abundance that we will not need to fight over who owns what.

Matt Yglesias writes

It makes a big difference to many people whether this is described as a paid parental leave subsidy for new parents or a baby bonus to encourage people to have more children.

These are, however, essentially the same policy.

We have all sorts of tax and subsidy programs that affect the incentive to have children. But nobody tries to make them coherent. Moreover, as Matt points out, the political appeal of a particular approach seems uncorrelated with its economic incentive effect.

substacks referenced above:

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Can we be normal about family policy?

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The Last Gold Rush: AI and the New Mercantilism

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Tariffs and Manufacturing Jobs: Three Big Problems