Economist. See my MIT webpage to verify that this is me. Evidence-based economics and finance and humor. I do not endorse any cryptocurrency investment.
Joined November 2012
- Tweets11.1K
- Following303
- Followers11.7K
- Likes9.1K
Jonathan A. Parker retweeted
Today: California billionaire wealth tax prop 40.
Throwback: One of the papers I most enjoyed writing some 15 years ago (with Farhi and later Sleet, Yeltekin) was on Wealth taxation, nonlinear in a political economy with no commitment.
Let me explain what we did. I am not trying to take political sides really or advocate one thing or another. Enough of that and it is good to think of the economic logic in a basic way. As you see, the paper is more subtle.
The paper modeled a situation where you (e.g., voters, on average) want to do a "one time" wealth tax and promise never to do it again. The incentive to do so is increasing in the amount of wealth inequality. You have nonlinear taxes on wealth and income, so you have rich tools. However, you can't bind future politics or policies. Every now and then you reevaluate (vote).
Sounds familiar? Indeed, various basics of the real world tradeoffs are present.
Obvious: this is a time-consistency problem that leads to a 3rd best (third world?) outcome (not your standard optimal tax one, where you assume you can commit). Well known and studied. At its most basic, the temptation is confiscation (slogans: robin hood, socialism), but the expectation of this happening in future is of course a problem (slogans: capitalism, property rights).
Less obvious: what it is the best you can do today if you with your tax tools, given the situation and constraints. AGAIN: you are not allowed to say "I promise never to tax again". ALSO NOTE: the options are also not necessarily just a choice between taxing wealth now or never doing so. (As the debate on this oversimplify.) Logically: taxing never may just not be feasible/credible. Equally important: you may come up with a different more intermediate plan. Let's see...
Indeed, the model spits out something subtle. You actually declare a more moderate but progressive nonlinear tax on wealth that will be in place permanently. It is progressive with rising marginal tax rates: indeed, you subsidize savings for the poor (!) but tax the rich. In fact, you want to promise this tax today for the future, even if inequality is zero today. Why?
The credibility problem depends on the amount of wealth inequality. That is what affects the incentive to renege on promises and tax away wealth. The solution tries to deal with this by creating an environment that will lower or keep inequality in check, to avoid a temptation to fall into the time inconsistency revision. A progressive tax goes in that direction both mechanically and in terms of saving incentives.
(BTW, the fact that the tax comes out progressive is very clean and surprising, given that the optimal tax literature rarely obtains such results.)
Insight: By keeping inequality in check, it makes policy more credible, avoiding falling into a much worse 3rd best.
At the time, we called it a "compassionate conservative" solution: even if you want zero taxes, you compromise and do some progressive taxation, to avoid more radical taxes later. Metaphorically, the best way to deal with a tide is not by ignoring it, denying it or swimming frantically, you may have to float with it, adapt and swim moderately finding the right moves.
Links: (older ungated): crei.cat/wp-content/uploads/…
published: academic.oup.com/restud/arti…
Footnote: We titled it capital taxation, but in reality it is more exactly about wealth taxation, e.g. it holds even in a world without capital, where people hold assets against each other etc.
Jonathan A. Parker retweeted
Turns out that if everyone was paid the same, saved the same amount, made the same on their investments, and worked & lived the same amount of time…
… people 65+ would have 74% of the wealth.
Surprised? Welcome to Equal Land.
adamnash.blog/2026/10/25/why…
Jonathan A. Parker retweeted
Remember that asinine "It's time to shut down business" NY Times op-ed. It was so stupid that I didn't even want to engage with it, but @aedmans has written an excellent response.
alexedmans.com/in-defence-of…
Jonathan A. Parker retweeted
Was about to write this but Ben beat me to it. Econ is unique among the sciences in that it is several pretty different fields living under one umbrella.
Empirical econ is the biggest subfield and its closest to biology or chemistry: it’s about designing or—even better—finding a natural experiment, or documenting interesting and important patterns in data. Most of the arguments in that field are about methods, eg do you have identification. More and more are starting to study AI now but obviously this won’t be transformative AI because, well, there is no data on transformative AI.
Then there are macro economists. They work with a set of pretty standard models and mainly expand them by slowly adding/subtracting different sectors or micro founding factors of production in different ways. Many of the arguments are on the parameter values that we should assume when simulating the economy. Early research on transformative AI started there—as demonstrated recently by Chad, Anton et al, the different levels of transformation are due to different assumptions on parameters rather than some new type of economics. The same model can predict basically no impact of AI vs huge transformation, it’s all about assumptions on parameters.
Finally there is micro theory. This is where decision theory, game theory, mech design, org econ (sort of) live. This field works by setting out a set of assumptions and then *deriving* the expected results; alternatively one could start with a result and work backwards to derive the necessary and sufficient assumptions. There is a ton of potential here to do work on transformative AI: start with assumptions on how AI differs than human agents (eg relax basic assumptions on constraints, on scarcity, introduce completely different objective functions), then derive implications. But this is where there is the least amount of work, and it’s important for that to change (and I believe that it already is).
I think we can make a ton of progress from these three subfields on better understanding the potential AGI and post AGI transformation.
But there is another scenario, post strong ASI, where I don’t think economics has much to say about. Here I agree with @Jabaluck that the economy (if you can even call it that) and the agents in it will be so vastly different and beyond our imagination that I wouldn’t know where to start modeling it. Not to discourage others, but post singularity seems like pure epistemic uncertainty to me.
A lot of the critiques I hear about AI and economics come from people who don’t quite get what economists do. They look around at different results and if they don’t like some of them, they say “oh economics isn’t “pilled” or something. But economists don’t debate results, they *derive* results from assumptions. Thats where the debate is. Saying “but you don’t understand a world with 15 billion AI agents”. What does that mean for the economy? What are those agents doing, who is buying what they are producing, what do property rights look like? Depending on those assumptions you’ll get vastly different economic scenarios, from 2% growth and high human labor share to completely alien centralized systems with no prices or markets.
Where do they even find people to write silly stuff like this?
Fact: take the things that typical consumers buy. Track increases in prices adjust for quality changes and inflation, BY DEFINITION, they cost exactly the same as they used to!
nytimes.com/interactive/2026… via @NYTimes
Jonathan A. Parker retweeted
Like every other econ reporter, I've spent much of the past couple years trying to understand what A.I. will mean for the economy and for workers. But it's been frustratingly hard to reach any firm conclusions, because so much is uncertain -- how the technology will evolve, how quickly it will be adopted, how policymakers will respond.
Jonathan A. Parker retweeted
The game is to take some 4,000-page omnibus bill from years ago with 10,000 separate provisions. If the opponent voted yes, find 1 tiny provision that can be shamelessly twisted into something terrible (and if they voted no, find one popular provision) - and then carpet bomb viewers with ads portraying the opponent as a monster who led the fight on that provision.
If that doesn't work, just tie your opponent to something some party-member once did. And if that doesn't work, make up some nefarious hidden agenda. It's all a BS game of deception. None of it is real.
I have not read @joshrauh analysis, but this Substack has the right economics. The @gabriel_zucman Twitter thread reads like a campaign commercial (complete w/ sketchy economic logic).
The numbers? I’d like to see a range. The baseline & dynamics of beliefs are hard-to-quantify.
Just want to point out that if this were crypto accounts, your money would be gone forever. But for bank accounts, that take several days to clear payments, this is probably a huge pain for the IT and back-end teams, but for depositors it’s likely a shrug.
🚨 BREAKING: IT JUST KEEPS GETTING WORSE. NOW PYTHON IS FACING A MASSIVE SECURITY EMERGENCY.
Python's security team has issued an URGENT warning after a certificate authority compromise put Python's HTTPS security at risk.
→ 8 CERTIFICATE AUTHORITY KEYS COMPROMISED. Some were so weak they could be cracked almost INSTANTLY.
→ FAKE TRUSTED WEBSITES: Attackers could potentially impersonate Python.org, PyPI and other websites during intercepted connections.
→ MALICIOUS DOWNLOADS: Vulnerable environments could be tricked into downloading software from attacker-controlled servers.
→ YOUR OS PATCH MAY NOT PROTECT YOU: Older versions of pip can STILL trust compromised certificates even after system updates.
→ EMERGENCY UPDATES: Python developers are being told to immediately update pip, certifi, uv and other affected tools.
→ DOCKER USERS AT RISK: Existing container images may retain vulnerable certificate stores and need rebuilding.
First PHP. Then Node.js. Then GitLab. Then LiteLLM.
NOW PYTHON.
The very systems developers rely on to establish TRUST online are becoming the attack surface.
If you use Python, PATCH NOW.
Readers added context they thought people might want to know
The Python certifi/pip details match the real eMudhra CA incident, but PHP, GitLab and LiteLLM involved unrelated software bugs, platform flaws and supply chain malware—not CA key compromises like this (Node.js patched concurrently for the same CA issue).
discuss.python.org/t/information-…
emudhra.we-have-a-problem.com
github.com/advisories/GHS…
docs.litellm.ai/blog/security-…
snyk.io/blog/php-patch…
Jonathan A. Parker retweeted
Consumer credit is an important source of insurance against events like income loss and medical bills. When *social* insurance (like Medicaid) expands, it can *crowd in* the supply of credit by making consumers more financially resilient. Majorly revised draft with @GidiBo 👇
Expanding Medicaid increased credit-card borrowing by improving access to credit. The credit-supply channel generated 30 percent of the policy’s net welfare gains, from Gideon Bornstein and @sashaindarte nber.org/papers/w35908
Cite? Isnt this just that research scientists have grown like crazy and they use support staff just like faculty researchers? Lab research seems like a good thing. So, think
“Higher research” not “higher ed”
On the debate on the CA ballot proposal to tax the wealth of high-wealth residents:
If the vote is close, the negative effects of the initiative for CA revenue and jobs will be felt whether or not it passes.
Jonathan A. Parker retweeted
This is the standard way to score tax policy. You score the law as written (in this case a one-time wealth tax) and the behavioral consequences from that law (people worried it will last moving).
There are arguments against that approach. But is not “highly inappropriate” or “dishonest” to do what JCT or any other neutral body would do.
Let’s be clear: this is a highly inappropriate way to model the effect of Prop 40 on taxpayer behavior.
For one, it’s a basic violation of rational expectations, a cornerstone of modern economics.
In Jaros and @joshrauh world, the billionaires act irrationally: they respond to a policy that does not exist and will never exist.
Economics students around the world are taught this is not an appropriate way to model behavior — but apparently in this context (fighting Prop 40) it’s OK.
There are economists like me posting jokes and economic research and policy one-liners. Then Miles posts a complete philosophy of the meaning of existence.
I often say that I believe in God as much as a Nonsupernaturalist can. I define nonsupernaturalism as making physicists the arbiters of what is. There are many nonsupernatural gods. First, there is the miracle of the existence of the universe itself, including the existence of consciousness. In my belief, this is the one miracle for all time. (I imagine the one miracle as impersonal. I am not a deist about the existence of the universe.) Because the laws of physics are within the universe, the existence of the universe itself cannot violate the laws of physics and so counts as nonsupernatural. The laws of physics are one of the nonsupernatural gods. I personify the laws of physics as "Father Physics" to complement the traditional personification of "Mother Nature." In my view, Father Physics, through the vastness of the universe created by eternal inflation, with inflation biased toward patches with low entropy, gives rise to life. Abiogenesis, in my view, is so unlikely that life has arisen only once in the entire visible universe, but by the vastness of the universe has arisen innumerable times elsewhere in unreachable parts of the universe. (I believe the speed of light is a genuine limit. No faster-than-light travel or time travel.) Given the extraordinary abiogenesis in our bit of the universe, Mother Nature has created us through evolution. Mother Nature is in many ways a cruel goddess. But through her relentless culling, she has honed many extraordinary species, of which we are not the least. Here is something to put your faith in: you are an extraordinary creature who is the product of a lineage that for billions of years, on all your ancestral lines, had every creature bear progeny. Though chance had a role every step along the way, that success was only in part due to transitory luck. Luck has also given durable capabilities aplenty, including depths that most of us have hardly begun to plumb. Father Physics and Mother Nature are the gods we're from. The god within is the potential for wisdom you have in your own brain and the rest of your body. I call this god within your Sage, following Shirzad Chamine. Then there are the gods between: our love, human creativity, the judgments of women and men that hold our society together and hone the next generations. Father Physics and Mother Nature are amoral. The god within and gods between that I mentioned so far are primarily good, but there are also evil gods and devils within. "... the line dividing good and evil cuts through the heart of every human being," as Aleksandr Solzhenitsyn wrote in the Gulag Archipelago. Following Shirzad Chamine, I call the everyday bad gods within "saboteurs." And fascism, totalitarian socialism, and many forms of populism are evil gods between. Finally, there are the gods to come: each persons vision of the good—the good society, the good human being. In our culture, an important part of our collective picture of the good is encoded in images of heaven and in the virtues we attribute to Jesus and other revered figures. "What would Jesus do?" is very meaningful far beyond what the historical Jesus would do, because of this projection of the good onto Jesus. Similar projections occur for the Buddha, Lincoln, etc., more or less disciplined by historical facts depending on how many historical facts there are. That is many nonsupernatural gods. Some of the nonsupernatural gods deserve worship more than others. Though I'm not sure I understand "worship" in this context, I'm open to the possibility.
Overall, I see as an extremely important project the construction of powerful nonsupernatural religion. I am a Unitarian-Universalist, because that is a functioning agnostic religion that readily provides a home for nonsupernatural religion along with other religious beliefs. However, I do not consider it to have achieved *powerful* nonsupernatural religion.
One of the great contributors to developing nonsupernatural religion is Jordan Peterson. Though his X feed is, in my opinion, generally low quality and derivative, his books are excellent and a great start toward nonsupernatural religion. I honor him for contributing so much toward powerful nonsupernatural religion. Note that he resolutely refuses to say he believes in God, though often pressed on that point. He says that he "acts as if there were a God", which is entirely consistent with supernatural religion of the sort I am describing.
Jonathan A. Parker retweeted
🧵WSJ: “Elon Musk ordered the slowdown of a military-grade version of Starlink relied on by Ukraine, a decision that sparked panic in Kyiv and confusion inside the Trump administration, U.S. officials and people familiar with the matter said. …
via @StevenJ1279
Jonathan A. Parker retweeted
The fatal challenge to heterodox economics is that there isn't actually orthodox economics.
Just take a few recent Nobels: behavioral, information failure, institutions, bubbles, financial fragility, labor monopsony (sort of), Schumpeterian creative destruction, etc.
Not to mention RCTs which are emblematic of how much economic research is empirical and only lightly if at all structural.
The real difference is methods. Heterodox economics is an avowedly political project not a social scientific effort to better understand the world. And I have nothing against political projects just shouldn't confuse the two.
Jonathan A. Parker retweeted
I wrote a new blog post for MIT's Golub Center for Finance and Policy @MITcfp @MITSloan
The title is "𝐏𝐨𝐥𝐢𝐭𝐢𝐜𝐢𝐚𝐧𝐬 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐅𝐞𝐝: 𝐀 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐑𝐞𝐥𝐚𝐭𝐢𝐨𝐧𝐬𝐡𝐢𝐩"
mitsloan.mit.edu/centers-ini…
