Conversable Economist

Over at NPR Marketplace, Sarah Leeson got to wondering about what economists mean by a “widget.” This curiousity led her to my post about three years ago, “A Brief History of Widgets” (August 15, 2022). In turn, this led to a four-minute report on “How do `widgets’ fit into our services-based economy?” (NPR Marketplace, December 25, 2025). If you would like to listen me and others giggling about widgets–with some actual information mixed in–I commend the episode to your attention.

There’s a sort of parlor game that the economically-minded sometimes play around the Christmas holiday, related to A Christmas Carol, by Charles Dickens. Was Dickens writing his story as an attack on economics, capitalism, and selfishness? After all, his depiction of Ebenezer Scrooge, along with his use of phrases like “decrease the surplus population” and the sarcastic use of “a good man of business” would suggest as much, and a classic example of such an interpretation is here. Or was Dickens just telling a good story with distinct characters? After all, Scrooge is portrayed as an outlier in the business community. The warm portrayal of Mr. Fezziwig certainly opens the possibility that one can be a successful man of business as well as a good employer and a decent human being. And if Scrooge hadn’t saved money, would he have been able to save Tiny Tim?

It’s all a good “talker,” as they say about the topics that get kicked around on radio shows every day. As part of my own holiday break, I republish this essay each year near or on Christmas day.

I went looking for some other perspectives on how Charles Dickens perceived capitalism that were not embedded in a fictional setting. In particular, I checked the weekly journal Household Words, which Dickens edited from 1850 to 1859. Articles in Household Words do not have authors provided. However, Anne Lohrli went through the business and financial records of the publication, which identified the authors and showed who had been paid for each article. The internal records of the journal show that Dickens was the author of this piece from the issue of February 11, 1854, called “On Strike.” (Lohrli’s book is called Household Words: A Weekly Journal 1850-59, conducted by Charles Dickens, University of Toronto Press, 1973. Household Words is freely available on-line at a site hosted by the University of Buckingham, with support from the Leverhulme Trust and other donors.)

The article does not seem especially well-known today, but it is the source of a couple of the most common quotations from Charles Dickens about “political economy,” as the study of economics was usually called at the time. Early in the piece, Dickens wrote: “Political Economy was a great and useful science in its own way and its own place; but … I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods.” Later in the article, Dickens wrote: “[P]olitical economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it.”

But more broadly, the article is of interest because Dickens, telling the story in the first person, takes the position that in thinking about a strike taking place in the town of Preston, one need not take the side either of management or labor. Instead, Dickens writes, one may “be a friend to both,” and feel that the strike is “to be deplored on all accounts.” Of course, the problem with a middle-of-the-road position is that you can end up being hit by ideological traffic going in both directions. But the ability of Dickens to sympathize with people in a wide range of positions is surely part what gives his novels and his world-view such lasting power. The article goes into a fair amount of detail, and can be read on-line, so I will content myself here with a substantial excerpt.

Here’s a portion of the 1854 essay by Dickens:

“ON STRIKE”

Travelling down to Preston a week from this date, I chanced to sit opposite to a very acute, very determined, very emphatic personage, with a stout railway rug so drawn over his chest that he looked as if he were sitting up in bed with his great coat, hat, and gloves on, severely contemplating your humble servant from behind a large blue and grey checked counterpane. In calling him emphatic, I do
not mean that he was warm; he was coldly and bitingly emphatic as a frosty wind is.

“You are going through to Preston, sir?” says he, as soon as we were clear of the
CharPrimrose Hill tunnel.

The receipt of this question was like the receipt of a jerk of the nose; he was so short and sharp.

“Yes.”

“This Preston strike is a nice piece of business!” said the gentleman. “A pretty piece of business!”

“It is very much to be deplored,” said I, “on all accounts.”

“They want to be ground. That’s what they want to bring ’em to their senses,” said the gentleman; whom I had already began to call in my own mind Mr. Snapper, and whom I may as well call by that name here as by any other. *

I deferentially enquired, who wanted to be ground?

“The hands,” said Mr. Snapper. ” The hands on strike, and the hands who help ’em.”

I remarked that if that was all they wanted, they must be a very unreasonable people, for surely they had had a little grinding, one way and another, already. Mr. Snapper eyed me with sternness, and after opening and shutting his leathern-gloved hands several times outside his counterpane, asked me
abruptly, ” Was I a delegate?”

I set Mr. Snapper right on that point, and told him I was no delegate.

“I am glad to hear it,” said Mr. Snapper. “But a friend to the Strike, I believe?”

“Not at all,” said I.

“A friend to the Lock-out?” pursued Mr. Snapper.

“Not in the least,” said I,

Mr. Snapper’s rising opinion of me fell again, and he gave me to understand that a man must either be a friend to the Masters or a friend to the Hands.

“He may be a friend to both,” said I.

Mr. Snapper didn’t see that; there was no medium in the Political Economy of the subject. I retorted on Mr. Snapper, that Political Economy was a great and useful science in its own way and its own place; but that I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods. Mr. Snapper tucked himself up as if to keep me off, folded his arms on the top of his counterpane, leaned back and looked out of the window.

“Pray what would you have, sir,” enquire Mr. Snapper, suddenly withdrawing his eyes from the prospect to me, “in the relations between Capital and Labour, but Political Economy?”

I always avoid the stereotyped terms in these discussions as much as I can, for I have observed, in my little way, that they often supply the place of sense and moderation. I therefore took my gentleman up with the words employers and employed, in preference to Capital and Labour.

“I believe,” said I, “that into the relations between employers and employed, as into all the relations of this life, there must enter something of feeling and sentiment; something of mutual explanation, forbearance, and consideration; something which is not to be found in Mr. M’CulIoch’s dictionary, and is not exactly stateable in figures; otherwise those relations are wrong and rotten at the core and will never bear sound fruit.”

Mr. Snapper laughed at me. As I thought I had just as good reason to laugh at Mr. Snapper, I did so, and we were both contented. …

Mr. Snapper had no doubt, after this, that I thought the hands had a right to combine?

“Surely,” said I. ” A perfect right to combine in any lawful manner. The fact of their being able to combine and accustomed to combine may, I can easily conceive, be a protection to them. The blame even of this business is not all on one side. I think the associated Lock-out was a grave error. And
when you Preston masters—”

“I am not a Preston master,” interrupted Mr. Snapper.

“When the respectable combined body of Preston masters,” said I, ” in the beginning of this unhappy difference, laid down the principle that no man should be employed henceforth who belonged to any combination—such as their own—they attempted to carry with a high hand a partial and unfair impossibility, and were obliged to abandon it. This was an unwise proceeding, and the first defeat.”

Mr. Snapper had known, all along, that I was no friend to the masters.

“Pardon me,” said I; ” I am unfeignedly a friend to the masters, and have many friends among them.”

“Yet you think these hands in the right?” quoth Mr. Snapper.

“By no means,” said I; ” I fear they are at present engaged in an unreasonable struggle, wherein they began ill and cannot end well.”

Mr. Snapper, evidently regarding me as neither fish, flesh, nor fowl, begged to know after a pause if he might enquire whether I was going to Preston on business?

Indeed I was going there, in my unbusinesslike manner, I confessed, to look at the strike.

“To look at the strike!” echoed Mr. Snapper fixing his hat on firmly with both hands. “To look at it! Might I ask you now, with what object you are going to look at it?”

“Certainly,” said I. ” I read, even in liberal pages, the hardest Political Economy—of an extraordinary description too sometimes, and certainly not to be found in the books—as the only touchstone of this strike. I see, this very day in a to-morrow’s liberal paper, some astonishing novelties in the politico-economical way, showing how profits and wages have no connexion whatever; coupled with such references to these hands as might be made by a very irascible General to rebels and brigands in arms. Now, if it be the case that some of the highest virtues of the working people still shine through them brighter than ever in their conduct of this mistake of theirs, perhaps the fact may reasonably suggest to me—and to others besides me—that there is some little things wanting in the relations between them and their employers, which neither political economy nor Drum-head proclamation writing will altogether supply, and which we cannot too soon or too temperately unite in trying to
find out.”

Mr. Snapper, after again opening and shutting his gloved hands several times, drew the counterpane higher over his chest, and went to bed in disgust. He got up at Rugby, took himself and counterpane into another carriage, and left me to pursue my journey alone. …

In any aspect in which it can be viewed, this strike and lock-out is a deplorable calamity. In its waste of time, in its waste of a great people’s energy, in its waste of wages, in its waste of wealth that seeks to be employed, in its encroachment on the means of many thousands who are labouring from day to day, in the gulf of separation it hourly deepens between those whose interests must be understood to be identical or must be destroyed, it is a great national affliction. But, at this pass, anger is of no use, starving out is of no use—for what will that do, five years hence, but overshadow all the mills in England with the growth of a bitter remembrance? —political economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it. Gentlemen are found, in great manufacturing towns, ready enough to extol imbecile mediation with dangerous madmen abroad; can none of them be brought to think of authorised mediation and explanation at home? I do not suppose that such a knotted difficulty as this, is to be at all untangled by a morning-party in the Adelphi; but I would entreat both sides now so miserably opposed, to consider whether there are no men in England above suspicion, to whom they might refer the matters in dispute, with a perfect confidence above all things in the desire of those men to act justly, and in their sincere attachment to their countrymen of every rank and to their country.

Masters right, or men right; masters wrong, or men wrong; both right, or both wrong; there is certain ruin to both in the continuance or frequent revival of this breach. And from the ever-widening circle of their decay, what drop in the social ocean shall be free!

Charles Dickens wrote what has become one of the iconic stories of Christmas day and Christmas spirit in A Christmas Carol. But of course, the experiences of Ebenezer Scrooge are a story, not a piece of reporting. Here’s a piece by Dickens written for the weekly journal Household Words that he edited from 1850 to 1859. It’s from the issue of January 26, 1856, with his first-person reporting on “A Nightly Scene in London.” Poverty in high-income countries is no longer as ghastly as in Victorian England, but for those who take the time to see it in our own time and place, surely it is ghastly enough. Thus, I repeat this post each year on Christmas Day.

Economists might also wince just a bit at how Dickens describes the reaction of some economists to poverty, those who Dickens calls “the unreasonable disciples of a reasonable school.” In the following passage, Dickens writes: “I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity …” 

Here’s a fuller passage from Dickens:

A NIGHTLY SCENE IN LONDON

On the fifth of last November, I, the Conductor of this journal, accompanied by a friend well-known to the public, accidentally strayed into Whitechapel. It was a miserable evening; very dark, very muddy, and raining hard.

There are many woful sights in that part of London, and it has been well-known to me in most of its aspects for many years. We had forgotten the mud and rain in slowly walking along and looking about us, when we found ourselves, at eight o’clock, before the Workhouse.

Crouched against the wall of the Workhouse, in the dark street, on the muddy pavement-stones, with the rain raining upon them, were five bundles of rags. They were motionless, and had no resemblance to the human form. Five great beehives, covered with rags— five dead bodies taken out of graves, tied neck and heels, and covered with rags— would have looked like those five bundles upon which the rain rained down in the public street.

“What is this! ” said my companion. “What is this!”

“Some miserable people shut out of the Casual Ward, I think,” said I.

We had stopped before the five ragged mounds, and were quite rooted to the spot by their horrible appearance. Five awful Sphinxes by the wayside, crying to every passer-by, ” Stop and guess! What is to be the end of a state of society that leaves us here!”

As we stood looking at them, a decent working-man, having the appearance of a stone-mason, touched me on the shoulder.

“This is an awful sight, sir,” said he, “in a Christian country!”

“GOD knows it is, my friend,” said I.

“I have often seen it much worse than this, as I have been going home from my work. I have counted fifteen, twenty, five-and-twenty, many a time. It’s a shocking thing to see.”

“A shocking thing, indeed,” said I and my companion together. The man lingered near
us a little while, wished us good-night, and went on.

We should have felt it brutal in us who had a better chance of being heard than the working-man, to leave the thing as it was, so we knocked at the Workhouse Gate. I undertook to be spokesman. The moment the gate was opened by an old pauper, I went in, followed close by my companion. I lost no
time in passing the old porter, for I saw in his watery eye a disposition to shut us out.

“Be so good as to give that card to the master of the Workhouse, and say I shall be glad to speak to him for a moment.”

We were in a kind of covered gateway, and the old porter went across it with the card. Before he had got to a door on our left, a man in a cloak and hat bounced out of it very sharply, as if he were in the nightly habit of being bullied and of returning the compliment.

“Now, gentlemen,” said he in a loud voice, “what do you want here?”

“First,” said I, ” will you do me the favor to look at that card in your hand. Perhaps you may know my name.”

“Yes,” says he, looking at it. ” I know this name.”

“Good. I only want to ask you a plain question in a civil manner, and there is not the least occasion for either of us to be angry. It would be very foolish in me to blame you, and I don’t blame you. I may find fault with the system you administer, but pray understand that I know you are here to do a duty pointed out to you, and that I have no doubt you do it. Now, I hope you won’t object to tell me what I want to know.”

“No,” said he, quite mollified, and very reasonable, ” not at all. What is it?”

“Do you know that there are five wretched creatures outside?”

“I haven’t seen them, but I dare say there are.”

“Do you doubt that there are?”

“No, not at all. There might be many more.”

”Are they men? Or women?”

“Women, I suppose. Very likely one or two of them were there last night, and the night before last.”

“There all night, do you mean?”

“Very likely.”

My companion and I looked at one another, and the master of the Workhouse added quickly, “Why, Lord bless my soul, what am I to do? What can I do ? The place is full. The place is always full—every night. I must give the preference to women with children, mustn’t I? You wouldn’t have me not do that?”

“Surely not,” said I. “It is a very humane principle, and quite right; and I am glad to hear of it. Don’t forget that I don’t blame you.”

“Well!” said he. And subdued himself again. …

“Just so. I wanted to know no more. You have answered my question civilly and readily, and I am much obliged to you. I have nothing to say against you, but quite the contrary. Good night!”

“Good night, gentlemen!” And out we came again.

We went to the ragged bundle nearest to the Workhouse-door, and I touched it. No movement replying, I gently shook it. The rags began to be slowly stirred within, and by little and little a head was unshrouded. The head of a young woman of three or four and twenty, as I should judge; gaunt with want, and foul with dirt; but not naturally ugly.

“Tell us,” said I, stooping down. “Why are you lying here?”

“Because I can’t get into the Workhouse.”

She spoke in a faint dull way, and had no curiosity or interest left. She looked dreamily at the black sky and the falling rain, but never looked at me or my companion.

“Were you here last night?”

“Yes, All last night. And the night afore too.”

“Do you know any of these others?”

“I know her next but one. She was here last night, and she told me she come out of Essex. I don’t know no more of her.”

“You were here all last night, but you have not been here all day?”

“No. Not all day.”

“Where have you been all day?”

“About the streets.”

”What have you had to eat?”

“Nothing.”

“Come!” said I. “Think a little. You are tired and have been asleep, and don’t quite consider what you are saying to us. You have had something to eat to-day. Come! Think of it!”

“No I haven’t. Nothing but such bits as I could pick up about the market. Why, look at me!”

She bared her neck, and I covered it up again.

“If you had a shilling to get some supper and a lodging, should you know where to get it?”

“Yes. I could do that.”

“For GOD’S sake get it then!”

I put the money into her hand, and she feebly rose up and went away. She never thanked me, never looked at me— melted away into the miserable night, in the strangest manner I ever saw. I have seen many strange things, but not one that has left a deeper impression on my memory than the dull impassive way in which that worn-out heap of misery took that piece of money, and was lost.

One by one I spoke to all the five. In every one, interest and curiosity were as extinct as in the first. They were all dull and languid. No one made any sort of profession or complaint; no one cared to look at me; no one thanked me. When I came to the third, I suppose she saw that my companion and I glanced, with a new horror upon us, at the two last, who had dropped against each other in their sleep, and were lying like broken images. She said, she believed they were young sisters. These were the only words that were originated among the five.

And now let me close this terrible account with a redeeming and beautiful trait of the poorest of the poor. When we came out of the Workhouse, we had gone across the road to a public house, finding ourselves without silver, to get change for a sovereign. I held the money in my hand while I was speaking to the five apparitions. Our being so engaged, attracted the attention of many people of the very poor sort usual to that place; as we leaned over the mounds of rags, they eagerly leaned over us to see and hear; what I had in my hand, and what I said, and what I did, must have been plain to nearly all the concourse. When the last of the five had got up and faded away, the spectators opened to let us pass; and not one of them, by word, or look, or gesture, begged of us.

Many of the observant faces were quick enough to know that it would have been a relief to us to have got rid of the rest of the money with any hope of doing good with it. But, there was a feeling among them all, that their necessities were not to be placed by the side of such a spectacle; and they opened a way for us in profound silence, and let us go.

My companion wrote to me, next day, that the five ragged bundles had been upon his bed all night. I debated how to add our testimony to that of many other persons who from time to time are impelled to write to the newspapers, by having come upon some shameful and shocking sight of this description. I resolved to write in these pages an exact account of what we had seen, but to wait until after Christmas, in order that there might be no heat or haste. I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity; and I address people with a respect for the spirit of the New Testament, who do mind such things, and who think them infamous in our streets.

It’s become commonplace to observe that the modern economy is clearly about more than land, raw materials, and hours of labor. It’s about attention, intention, and motivation–and economic forces will seek to value and monetize these traits just as much as they will value steel or pizza.

Back in 1971, for example, Herbert Simon (Nobel ’78) was writing: “Hence, a wealth of information creates a poverty of attention and a  need to allocate that attention efficiently among the overabundance of information resources that might consume it.” More recently, economists are suggesting the possibility that artificial intelligence technologies may lead from a shift from an “information economy,” based on collecting and selling information, to a “intention economy,” based on using that information to influence what people intend. There’s a saying that encapsulates the idea that your information and attention are being marketed, perhaps in a way that will be used to influence your decisions: “If you’re not paying for it, you’re the product.”

In “The Economics of Attention,” George Loewenstein and Zachary Wojtowicz pull together the existing economic research on this topic (Journal of Economic Literature, September 2025, 63: 3, 1038–89, or you can also download ungated versions from several places, like here). In the abstract, they write:

Attention is an important resource in the modern economy and plays an increasingly prominent role in economic analysis. We summarize research on attention from both psychology and economics with a particular emphasis on its capacity to explain documented violations of classical economic theory. We also identify promising new directions for research, including attention-based utility, the recent proliferation of attentional externalities introduced by digital technology, the potential impact of artificial intelligence on the economics of attention, and the significant role that boredom, curiosity, and other motivational states play in determining how people allocate attention.

The review is comprehensive, and I make no effort to do justice to it here. But I was struck by how much of the focus of the existing economic reseach is focused on the attention of possible and actual consumers–that is, in shaping what people are willling to buy and willing to pay. For example, the authors write:

Globally, the average person now spends about six and a half hours on the internet each day, and one-third of US adults report that they are online “almost constantly.” Many of today’s most profitable businesses, such as internet search and social media, generate revenue through “user engagement,” which effectively means attracting and redirecting individuals’ attention. Increasingly, attention has become a commodity that can be bought, sold, and even “fracked” or “stolen” …

Of course, one way of dealing with information and attention constraints is to use social media, like this blog, to make first contact with ideas in a more time-efficient way.

Attention manifests itself not just as a matter of consumption choices, but also in the actions of employees. The authors do discuss this topic as well (did I mention that this is a comprehensive review?). For example, they write (citations omitted):

[M]aintaining focus can engender motivational states, such as boredom, curiosity, flow, and mental effort. The hedonic impact of attentional motivation forms a significant portion of the overall utility people derive from many productive activities. Thus, the joys and sorrows of work are, in many instances, the pleasures and pains of maintaining attentional focus.

Workplace boredom, in particular, is an extremely common challenge, especially for repetitive tasks that nevertheless require high levels of sustained vigilance over time, such as tumor detection in mammography and baggage screening for air travel. … [B]oredom generates psychic disutility that increases the extrinsic rewards required to incentivize people to maintain focus, thus driving wages above the economic opportunity cost of time …

In education, a parallel insight has spawned a literature on educational achievement that distinguishes between intelligence and “cognitive endurance”—the ability to sustain attention to difficult tasks over time. … [T]he limited resource of cognitive control plays a key role in determining why and when maintaining attention to a task is aversive. Limited cognitive endurance has been linked to declining performance over time in fields ranging from medicine to school examinations. Individual differences in cognitive endurance predict wages and educational outcomes such as college attendance, college quality, and college graduation, even after controlling for a fatigue-free measure of ability. There is some evidence, however, that cognitive endurance can be improved through practice, with benefits for educational outcomes.

We all know that we live in an economy focused on services and information. For many of us, our jobs are about absorbing information, paying attention, and the responding in a way that shapes and alters the original information. In that world, an stronger powers of cognitive endurance seems like an increasingly important skill for many jobs–including many of those conventionally listed as low-skill, as well as medium- and high-skill.

Hovering over discussions of high levels of US government debt is a question: How does Japan do it? The ratio of gross debt/GDP by Japan’s government is remarkably high. Here’s a figure using data from the OECD:

Sure, there are some other countries on this figure with high debt/GDP figures, like Greece and Italy, but they have had well-publicized debt crises, where it became hard for the government to issue additional debt without promising to pay very high interest rates. Moreover, when debt from Greece and Italy looked riskier, then all the Greek and Italian banks holding that government debt as an asset also looked riskier, which was one way that the risks of government debt propagated into the rest of the economy. But there’s Japan with a gross debt/GDP ratio of about 230%, and no especially visible debt crisis.

Yili Chien, Wenxin Du, and Hanno Lustig offer an answer to this puzzle in “Japan’s Debt Puzzle: Sovereign Wealth Fund from Borrowed Money” (Journal of Economic Perspectives, Fall 2025, 39:4, 3–26). (For the record, I work at the JEP as Managing Editor.)

A starting point of their explanation is that there is a difference between “gross” and “net” government debt–and how the difference matters. In a US context, for example, the Social Security Trust Fund, which is part of the US government, by law holds US Treasury debt. Thus, in a US context it is common to distinguish between “debt held by the public”–not including this debt held by the Social Security Trust Fund and certain other government trust funds–and gross or total US debt. The logic here is that if the government was only lending money to itself, there wouldn’t be much to worry about; it’s when government debt is drawing on savings from the public (including both domestic and foreign investors) that issues can arise. Here’s a figure contrasting gross federal debt with debt held by the public for the US economy.

Chien, Du, and Lustig take this basic insight and run with it. What if instead of just looking at gross debt, as in the OECD bar graph above, we were to look at the “consolidated” debt of Japan, including gross government borrowing, but also various government funds including pension funds and also funds held through the Bank of Japan?

Short answer: When you take all of this into account, the consolidated debt across all of Japan’s government is only 77% of GDP, even though the gross debt is by the adjusted measure Chien, Du, and Lustig calculation ios more like 270% of GDP. When the authors do a parallel calculation for the US economy, they find that the US has consolidated debt of about 83% of GDP. In other words, what looks like Japanese gross debt far above US levels is actually the same as consolidated Japanese governemtn debt below US levels.

You can read the Chien, Du, Lustig paper for a full explanation of how this happened, but here’s a basic version. For three decades or more, Japan has been able to borrow for its government debt at very low interest rates. In particular, the Bank of Japan buys a large share of Japanese government bonds, pays Japan’s government only a low interest rate for that lending, and then in turn pays Japanese banks a low interest rate on their bank reserves. This cheap borrowing for Japan’s government is supported and favored by an array of regulations, including rules that cause Japanese households to accept putting much of their money in low-interest accounts. Indeed, the authors write: “Japanese households hold half of their wealth in low-return demand deposits, providing the government with an abundant and inexpensive funding source. In contrast, the US household allocates a much larger share of its wealth to stocks, bonds, and other long- duration assets rather than deposits. For Japanese households, a much higher share in deposits is mirrored in a much lower financial market participation rate (around 23 percent own stocks, bonds, or mutual funds), compared to US households (well over 60 percent).”

Japan’s government then takes the funds that it has borrowed at low interest rates and invests in stocks. Thus, by 2024, Japan’s government owned Japanese stock equal in value to about 42% of Japan’s GDP, and in addition owned foreign investment (much of it US stock) equal in value to 62% of Japan’s GDP.

In short, Japan’s government has been borrowing at low interest rates and running up a huge gross government debt, but then investing much of that money in the stock market, building up financial assets that make its consolidated debt much lower. For a rough US analogy, imagine that the US govenment had made a decision to invest the $1 trillion that was in the Social Security Trust Fund back around 2001 in the US stock market, instead of holding Treasury debt. The total return in the US stock market since 2001 (price and dividends) is more than 600%, so that original $1 trillion would have climbed to $7 trillion. Or imagine that the US government had run even larger budget deficits during last 15 years or so, when interest rates were low, and invested that money in the US stock market.

So has Japan found both the solution to government debt and a magic money machine, all in one? Not quite. Japan’s fiscal strategy has relied on using financial and banking rules to assure that it could finance its debt cheaply, through the Bank of Japan, which meant that Japan’s households have received much lower returns on their saving. In addition, borrowing money in shorter-term to purchase stock market assets that are only expected to pay off in the longer term has “duration risk.” And for Japan’s government, borrowing in Japanese yen and then using the funds to purchase US dollar assets comes with the “exchange rate risk” that movement in exchange rates could wipe out gains.

In contrast, when the US government issues debt, it borrows at market-level interest rates determined by global financial markets–not interest rates set artificially low by the Federal Reserve. Unlike Japan, the US economy does not have a high level of domestic savings, and relies instead on net inflows of financial capital from the rest of the world. If the US government tried to follow a policy of borrowing even more, and then investing the additional funds in the US stock market, US debt would appear riskier to the rest of the world, driving up borrowing costs for the US economy. In addition, while the US stock market has been an excellent investment over the long run of the last few decades, there have been some notable downs along with the ups–and linking the riskiness of US government debt to the volatility of the stock market would be a risky financial strategy with some severe downside risks.

In short, the government of Japan imposed substantial costs on its citizens and took relatively high financial risks–but at least up through 2024, the risks have worked out for them! (And no, Japan’s government was not hedging against its duration and exchange rate risks.) Similarly, if the US government had been willing to take the risk of putting some share of the Social Security Trust Fund into the US stock market at the start of the 21st century, it would gave moderately reduced (by about one-quarter) the projected shortfall of US Social Security revenues compared to promised benefits over the next 75 years. But because Japan’s high-risk strategy has worked in the past few decades doesn’t mean that a similarly high-risk strategy is a sensible choice for other countries–and especially not for the US government–in the future.

The world economy has been in the midst of a second age of globalization for the last few decades–although, at present, it is not altogether clear whether the globalization trendline is up, flat, or down. However, Marc-William Palen takes a look back at the end of the first age of globalization that ran from the closing decades of the 19th century up through World War I in “When Free Trade First Faltered” (Finance & Development, September 2025). This short article covers some of the themes in Palen’s recent book about the same time period in Pax Economica: Left-Wing Visions of a Free-Trade World. Here are a couple of themes that jumped out at me:

The first era of globalization happened at a time of tariff wars and geopolitical conflict. Palen writes:

The “first age” of globalization was beset by contradictions. In the 60 years or so before World War I, global trade grew rapidly despite the ever-higher tariff walls built by the rising protectionist empires of the United States, Germany, Russia, France, and Japan. Geopolitical conflicts and trade wars grew more common even as markets became more integrated. These contradictions were at the heart of heated debates over free trade and economic nationalism that dominated the industrializing world at the time.

So how is it possible that global trade was rising dramatically at a time when trade barriers were also very high? President Trump is seeking to move US tariff levels back to where they were in the 1920s, or even the 1890s–but the 1890s were actually a heyday of globalization. The answer, worth remembering today, is that international trade is affected by govenment policies but perhaps even more affected by economic underpinnings. And the late 19th century saw technological shifts that dramatically increased the potential for international trade. Palen writes:

Transoceanic steamship lines drastically lowered transportation costs and travel times. The transatlantic cable, successfully laid in 1866, meant that messages between Wall Street and the City of London took mere minutes. The opening of the Suez Canal in Egypt and the completion of the US transcontinental railway in 1869 shrank the world even further. …

But globalization’s unprecedented interdependence soon landed the industrializing world in an unpredictable boom-bust economic cycle. Low transportation costs, mass industrialization, and trade liberalization cut costs for consumers, but the steep fall in prices also meant tighter profit margins, or even losses, for many of the world’s exporters. … The first age of globalization was facing the first Great Depression (1873–96), and protectionism and colonialism were the policies of choice of the industrializing world. Globalization’s protesters grew louder. As is common during economic crisis, cries for national self-sufficiency drowned out calls for cosmopolitan comity. Free trade fell out of fashion among Britain’s imperial rivals …

In our own time, technologies of transportation and communication have of course also developed rapidly around the world: container shipping, giant tankers, air freight, extended rail lines and ports, along with the ability to manage and oversee production and shipping of international trade in real time over the internet. Moreover, the ratio of value-to-weight has been rising for many technology goods, so the costs of shipping them become relatively lower. The share of services trade that can be done in one place and shipped online to another country keeps rising.

In short, one lesson from the first wave of globalization is that when the economic forces are expanding the potential for gains from trade, pushback from political forces is likely–but the pushback may have to be quite extreme if it is to reshape the economic trend toward additional flows of goods, services, and information across national borders.

Another main theme of Palen is that the forces of globalization are often regarded as synonymous with the forces of market capitalism. But back in the late 19th century, the political support for free trade came mainly from the political left. Palen emphasizes the pro-protectionism writings of Friedrich List, whose philosophy was that countries should close their borders to imports, build up their own industries, and then sell to the expanding but captive markets of their own colonies. As Palen writes:

Imperial-minded economic nationalists across the globe began to revere List’s national system as economic divination. Free trade was seen as part of a vast British conspiracy to thwart the industrialization projects of rivals—a self-serving trick to undermine emerging industries elsewhere. List-inspired economic nationalists saw geopolitics as a zero-sum game in which only the fittest would survive.

The technological tools of globalization that not so long ago promised to tie the world together in benign universalism now seemed better suited for binding colonies to imperial metropoles. Tariff walls grew ever higher, turning infant industries into monopolies, cartels, and trusts. Monopoly-induced market inefficiencies at home soon sparked an interimperial search for new markets to export surplus capital and acquire raw materials. Trade wars, military interventions, and the scramble for colonies in Africa and Asia picked up pace.

By 1880, economic nationalists had the upper hand. Their imperial protectionist politics moved ever more to the right. In the US, the Republican Party rebranded itself as the party of protectionism and big business, reversing the freer trade trend of the preceding decades. The 1890 McKinley Tariff, which imposed an unprecedented average rate of about 50 percent, plunged the country into trade wars with European trading partners.

An intriguing parallel with modern times is that, once again, the forces of high tariffs and trade protectionism are often discussed (as in the late 19th century) as if they were the embodiment of hard-headed national toughness. Palen argues that back in the late 19th century, it was the liberal radicals, socialists, internationalists, feminists, and Christians who advocated for free trade as part of their overall critique of imperialism and militarism. In modern US politics, it’s hard to identify a mainstream popular movement that openly contests President Trump’s vision that national prosperity can and should be built behind tariff walls. But it does seem as if people are noticing that the tariffs (as predicted) are helping to keep prices higher, while not triggering the promised renaissance in US manufacturing jobs or solving the US trade deficit.

During the last half-century or so, one of the biggest changes in how humans live is the greater share of people around the world who live in cities. The UN Department of Economic and Social Affairs describes some pattern in its report on World Urbanization Prospects 2025: Summary of Results (November 2025).

The report defines terms in this way: Cities “are areas with a high density (at least
1,500 inhabitants per km²) and a large population (at least 50,000 inhabitants).” Towns “are urban clusters outside of cities with a moderate density (at least 300 inhabitants per km²) and a population of at least 5,000 inhabitants.” Rural areas have density of less than 300 inhabitants per square kilometer. With these definitions in mind:

Close to 500 million people lived in cities in 1950, equivalent to just one fifth of the world’s 2.5 billion total population. The remaining four fifths were evenly split between towns and rural areas (figure 1.1). In the decades that followed, the number of people living in cities and towns grew rapidly, while the rural population increased only slowly. By the mid-1970s, city dwellers outnumbered those in rural areas, but towns remained the most common living environment globally. The balance tipped again some twenty years later, in 1996, when the collective population of cities overtook that of towns. Since then, both the number of city dwellers and their share of the global population have continued to grow. In 2025, 45 per cent of the world’s 8.2 billion people lived in cities, 36 per cent lived in towns, and the remaining 19
per cent lived in rural areas. Most of the future growth of the world’s population will occur in cities. Cities are expected to account for two thirds of the projected growth of the world’s population by 2050, with most of the remaining one third of growth concentrated in towns. The global rural population is expected to peak sometime during the 2040s and then begin to gradually decline.

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Around the world, a large share of the growth in city-dwellers over these 75 years has come in Latin America, east, south, and west, Asia, and Northern Africa. But some high-income countries continue to have relatively low densities: “In several major high-income countries, including Germany, Italy and the United States of America, towns remain the predominant settlement type as of 2025. Approximately 40 per cent of the total population of these three countries resides in towns, compared to about one third living in cities. … Notably, rural areas have been the most common place of residence in France over the past half-century, a trend that is projected to continue through 2050. A similar pattern is observed in several countries across Central and Eastern Europe, including Austria, Bulgaria, Croatia, Poland and Romania, where rural living remains prevalent.”

The definition of “city” used here is not based on legal boundaries of a city, but on actual population patterns: thus, if a “city” extends beyond its legal boundaries with a high enough population density, it is all counted as a single “city” in these metrics. Here are the 10 highest-population cities around the world in 2000, 2025, and projected for 2050.

This report is about counting population, density, and looking at trends and patterns around the world, not in a direct way about policy implications. But the report does take care to note and emphasize that lower-density towns and rural areas play important social, economic, and development roles along with high-density cities.

In addition, cities are always a tradeoff (in economic term) between benefits and disadvantages of agglomeration. Benefits include having expertise, workers, and consumers clustered together in a way that generates productivity and new ideas. However, that same clustering can also create costs of congestion and networks of crime. Environmental and health effects of cities can be dramatically different depending on how they are organized, what infrastructure is built, and how regulations and geography factors shape their growth. For 4 billion people, the day-to-day facts of their standard of living, broadly understood, are powerfully shaped by the realities of the urban area in which they live.

Tim Sablik interviews Anton Korinek “On how rapid advances in AI might reshape the nature of work and how economists can help society prepare” (Econ Focus: Federal Reserve Bank of Richmond, Fourth Quarter 2025).

How AI can be used in economic research:

I use it essentially at all stages of the research process. It starts with ideation, the brainstorming part. I use it to help me with background research. I use it a lot as a writing assistant, giving it bullet points to steer it in a direction and letting it write a few paragraphs based on the points that I provide. I use it to derive economic models because, by methodology, I’m an applied theorist. More recently, since around fall 2024, the latest generation of reasoning models have become very powerful at doing formal math, and that has saved me a lot of time in performing derivations and proving results in economic models.

I use AI quite a bit for coding as well. I’m not currently working on any computational project, but I’m using it to code AI tools to perform text analysis, for example. In some sense, the line between making the AI do work and coding is blurring because I ask AI systems to perform all kinds of tasks, and in some cases, the AI writes code and then executes it. Since I’ve been a programmer for more than three decades now, it’s nice to let the AI do the lower-level stuff and for me to direct where it is going at a higher level in natural language — what people call “vibe coding.” …

Almost all economists I talk to have come to appreciate that these tools can be very helpful. Economics is a very instrumentalist discipline. When economists realize that something is economically useful, they won’t put up a lot of barriers against it. That said, it’s important to acknowledge that we need to be careful with these tools because they do sometimes produce mistakes. They need to be overseen. It’s kind of like working with a research assistant. We would not take everything that research assistants produce for us without checking it, and it’s the same with our AI systems.

How AI may shape the future of taxation:

 [I}f we get AI systems that transform society at the same scale as the Industrial Revolution, the economy is going to be a big part of that transformation. Economists are well positioned to provide insights into how our economy might be reshaped.

One thing to consider is that we may have to redesign our systems of taxation. Right now, roughly two-thirds of all income derives from labor, and probably more than two-thirds of all tax revenue comes from taxing that labor income. If the value of labor suddenly falls dramatically because of transformative AI, then we’re going to have to tax differently. I prepared a paper for an NBER meeting on public finance in the age of AI in September where my co-author and I argue that if labor becomes a less important part of the economy, we may want to switch to more consumption taxation. And then if human consumption becomes a less important part of the economy, we may ultimately have to switch to taxing the capital behind the AI systems themselves.

On teaching students about AI:

I would certainly say that we want everyone to be fluent in AI, no matter which level of education we’re speaking about. I’m currently teaching this to Ph.D. students, but it’s also true for undergraduates, high school students, and younger students. We want everybody to know how to use AI because it is such a force multiplier. … I have two kids, they’re 8 and 10. Together with another dad, I’m going to teach an AI course at our kids’ primary school starting in mid-October because we want them to be exposed to this technology. We want them to understand how it works and how to use it responsibly.

If AI advances very rapidly, it may turn out that we are spending a lot of time right now educating the next generation of proverbial spinners and weavers at the beginning of the Industrial Revolution. 

Imagine for a moment that you are the sort of American who would like to know facts about the the US economy, population, employment and unemployment, energy, crime and criminal justice, health, education, transportation, agriculture, science and engineering, income, consumption, wealth, foreign trade, and stuff like that. As I see it, have several options.

You can generalize wildly from personal experience. You can repeat assertions from your preferred social media. You assume that what your preferred politician tells you is correct. You can assume that what your preferred publications tell you is correct. You can assume that the information given to the public by business is correct.

Or, along with these tried-and-true methods, you can turn to government statistical agencies. They are imperfect, of course, as are all human organizations. But the methods they use to collected and to calculate statistics are publicly described, so that they can be questioned and more deeply understood. Also, they try to collect data in the same way over time, making changes only gradually and after public consideration, so that when a government statistic changes, you can understand why. Those who produce the statistics are paid salaries, so they are not selling you something, they not get paid for clicks, and they are not asking for your vote.

Yes, government statistical agencies are imperfect. But consider the alternatives! If you have an imperfect flashlight, it doesn’t mean you will see better in the dark; if you have imperfect data, it doesn’t mean that less data would be an improvement. At a bare minimum, having government statistics as a cross-check on those other oh-so-reliable sources of information seems valuable.

As I have noted some years ago, the arguments for the value of government statistics are old and well-known; indeed, they date back to the legislation involved in the first Census, back in 1790. Section 2 of the just-adopted US Constitution called for an enumeration of people to determine the number of members each state would have in the House of Representatives: But when the bill to enact the first Census came before Congress in 1790, James Madison (then a member of the House of Representatives) argued that there was a great opportunity here to do more than just counting heads, and that it would be useful to gather more information. Our records of Congressional debates from that time do not quote exactly verbatim, but instead are paraphrased. Here are some highlights of what Madison had to say when the topic of just-count-the-people or gather-more information was debated on January 25 and then on  February 2, 1790 (emphasis added):

This kind of information, he observed, all Legislatures had wished for; but this kind of information had never been obtained in any country. …If gentlemen have any doubts with respect to its utility, I cannot satisfy them in a better manner, than by referring them to the debates which took place upon the bills, intend, collaterally, to benefit the agricultural, commercial, and manufacturing parts of the community. Did they not wish then to know the relative proportion of each, and the exact number of every division, in order that they might rest their arguments on facts, instead of assertions and conjectures?

But the level of support for government statistics has been diminishing over time. The American Statistical Association had just published “Nation’s Data at Risk” (December 10, 2025). The report has a number of sensible recommendations for funding and independence of statistical agencies. Here, I just want to point out that budgets for the main statistical agencies have been declining over time in real dollars, and give a sense of what “government statistical agencies” actually means.

These figures show budgets for three main government statistical agencies since 2009: the Bureau of Labor Statistics (which does the surveys and calculations behind official unemployment and inflation rates), the National Agricultural Statistics Service, and the National Center for Health Statistics. Adjusted for inflation, their budgets are down about 14% since 2009.

For broader perspective, here are the 13 main federal statistical agencies. It’s worth emphasizing that the people running the statistical agencies do not make policy. They report the results of data collection.

Finally, I’ll add that US government spending in fiscal year 2025 is about $7 trillion. Add up all 13 of the federal statistical programs, and it’s under $4 billion in a typical year, going up to maybe $8 billion total in a year where the decennial Census is conducted. Thus, total government statistical spending is roughly one one-thousandth of federal spending. Paying for government data is considerably less expensive for the US economy than the costs of not having government data.

Most discussions of antitrust enforcement focus on the US and the European Union, but laws about enforcing competition have been spreading around the world. The October 2025 issue of the Review of Industrial Organization includes articles on the history and experience of the enforcement of competition policy in Brazil, China, Egypt, India, and five countries of Central and Eastern Europe. Russell Pittman offers some broader perspective in his “Editor’s Introduction to the Special Issue on Competition Law Enforcement in Developing Countries.” Pittman writes (citations omitted):

There are at least 125 countries and jurisdictions in the world with competition laws—
perhaps more. Some readers may not be aware of the relatively recent nature of this
state of affairs: There were only 12 competition law regimes worldwide in 1970, and
two of these—the Japanese and German—were forced upon the losers by the victors
in World War II. Countries with market economies gradually adopted competition
laws in the post-war period, to the point that there were about 40 competition laws
by the time of the fall of the Berlin Wall (1989). Over the 20 years that followed, the number exploded, to at least 110 by 2010; and, according to one authoritative source,
there are 135 today: 129 countries and 6 regional organizations.

What accounts for this explosion? In the most economically advanced of the Central and Eastern European (CEE) countries, reformers had included competition laws
in their legal and regulatory agendas from the beginning. In other CEE countries, the desire for an invitation to membership in the European Community clearly played more of a role … More broadly, many developing countries found that loans from the World Bank or the International Monetary Fund, as well as bilateral and multilateral trade agreements with wealthier countries, were conditioned on the writing and implementation of competition laws.

On the side of carrots—as opposed to sticks—developing countries around the
world have received technical assistance in writing and enforcing competition laws
and training agency staffs from sources as diverse as the U.S. Department of Justice,
Antitrust Division, and U.S. Federal Trade Commission, the European Commission,
OECD, UNCTAD, the World Bank, and successful younger competition agencies
such as the Hungarian Competition Authority, the Japanese Fair Trade Commission, and the Korea Fair Trade Commission.

The experience of competition law varies widely across countries. In Brazil, the laws don’t seem to have had much effect. In China, when antitrust authories took action against big platform firms like Alibaba, there were strong effect on the stock prices of firms in the same industry–that is, investors in Chinese stocks saw government antitrust as having considerable power. In India, the enforcement authorities have sometimes imposed fines for improper pre-merger notification, but have almost never blocked an actual merger. In my own reading, the evidence suggests that antitrust authorities in these countries do not seem to have much independent power. They rarely confront powerful incumbent firms, although in some cases (China), competition authority can be used as a club by the central government.