Every morning I receive an email from the Wall Street Journal summarizing the articles it wants to bring to my attention. This morning the teaser for their article on the mass slaughter of Iranians demonstrating against the government, thousands in just a few days, as “unprecedented”. I pushed back on that idea in comments to the article and I want to repeat that here.

The Iranian mullahocracy murdering its own citizens in large numbers is not unprecedented; it is an instrument of its rule. When the present regime consolidated its power in 1979 by most accounts 8,000-9,000 Iranians were executed. Some of those executed were college classmates of mine. Again in 1988 the regime demonstrated its willingness to exterminate is own population, killing an estimated 30,000 political prisoners.

For this regime murdering its own citizens is a small price to pay for what they see as a divinely-mandated right to rule, immune to consent, law, or human cost.

Why do Western institutions keep treating predictable behavior as shocking?

Update

The Financial Times is also describing the mullahs’ response as “unprecedented”.

The editors of the Washington Post disagree with President Trump:

“Inflation is defeated,” President Donald Trump declared at the Detroit Economic Club. His Tuesday remarks came hours after the Bureau of Labor Statistics announced that annualized inflation remained 2.7 percent in December, 35 percent higher than the Federal Reserve’s target.

Two things can be true at once: the pressures that took the inflation rate to a staggering 8 percent in 2022 have largely subsided. This is presumably what the president is trying to tout. But prices are still rising, particularly in areas that consumers really feel, such as food and drink costs.

I’m with the editors on this one. Inflation has not been defeated. It has merely been slowed from the excessive levels it reached when policy rates were held too low for too long. Inflation is not an enemy that can be “defeated” once and for all. It is a rate of change. As long as it is positive, the price level continues to ratchet upward. What has happened is not victory, but deceleration.

We can also say with some confidence as to why President Trump is making this claim. Not only does he want to take credit for it but he wants interest rates to be lower. He has said as much on more than one occasion. Under the Taylor Rule, given current inflation and output gap estimates, rates would be modestly higher, not lower.

The editors then touch on something that deserves additional comment:

Consecutive administrations have adopted this bad habit of talking about “falling” prices, when they really mean increases are slowing.

I think they are taking their cue from the Federal Reserve itself. The Fed routinely conflates predictably rising prices with price stability. This is a redefinition, not a discovery.

The 1977 amendment to the Federal Reserve’s 1913 empowering statute conferred on the Fed the so-called “dual mandate” of stable prices and low unemployment.

The dictionary definition of stable is unvarying not rising predictably.

I’m not entirely sure why the Fed adopted this. I think the most charitable explanation is that the Federal Reserve governors had a pretty good idea of how they could induce prices to rise slowly and predictably but didn’t know how to keep them stable. They defined success as what they were capable of producing.

Make no mistake: I oppose President Trump’s attempts to oust Jerome Powell as Federal Reserve Chairman as well as his insistence on lower interest rates.

That said I don’t think we should lose sight of something. Mr. Powell has been a terrible chairman. Compare his record with that of his two predecessors. Under his tenure inflation was at its highest level in 40 years and longer still if we calculated CPI as it was prior to 1990. And that could have been prevented had the FOMC responded in 2020–2021 to clear monetary expansion signals instead of clinging to a politically fashionable view of “transitory” inflation.F5h34p4ofie3w

Furthermore, he gives “technocracy” a bad name. He is a lawyer by training not an economist or a banker. He worked for an investment bank which is quite a different creature despite the name. That provides him with an entirely different conceptual underpinning and habits of thought. That shows in the way he defers to consensus narratives rather than leading with analysis. He should never have been appointed as Federal Reserve Chairman. That was one of President Trump’s mistakes in his first term.

He behaves more like an ordinary politician than a technocrat, calibrating decisions to institutional optics and elite approval rather than to empirical rigor.

The Fed needs structural reform not to politicize it but to make it more empirical and less narrative-driven. It is now a late 19th century structure in a 21st century economy, radically different from the one for which it was devised.

What should happen at this point is that the White House should leave Mr. Powell where he is and let him serve out the balance of his term.

In prior installments in this series of posts I have reflected on the Industrial Revolution and the Digital Revolution which were alike in many ways but differed in some significant ways as well. In this installment I will consider the ongoing Artificial Intelligence Revolution. As we will see, it is different in some basic ways from its predecessors.

The Industrial Revolution mechanized human muscle. The Digital Revolution mechanized human memory and communication. The AI Revolution mechanizes human judgment itself.

A good starting point is this post by Emily Chamlee-Wright at Persuasion:

Given the nature of my work, I’m in coalitions—and a lot of conversations—focused on fortifying American democracy. And like everyone, the promises and threats associated with the rapid advancement of AI technology are top of mind for me.

When it comes to scientific discovery, optimism abounds. The promise that AI tools like AlphaFold will accelerate biomedical discovery—from new antibiotics to deeper insights into the proteins driving Alzheimer’s and cancer—sparks excitement. But there’s also a pessimism that lingers in these conversations, especially when it comes to what the future holds for workers who are not at the frontiers of science. If you write code or oversee routine managerial processes, the thinking goes, your days of productive employment are numbered. And a jobless citizenry does not bode well for democracy.

Dr. Chamlee-Wright’s central argument is the human imagination will always come up with new “needs” and that every newly perceived human need will continue to clear through human labor markets. She assumes, without either theoretical or empirical support, that newly imagined human needs will remain monetizable in a labor sense once cognitive scarcity disappears.

Dr. Chamlee-Wright is ignoring a crucial difference between the AI Revolution and the Industrial and Digital Revolutions before it. Cognition not being scarce has never occurred before. There is no historical analogy, because in every prior revolution, the scarce factor remained human. This time, it does not. Not only is there no empirical evidence from current AI diffusion that points in that direction, in fact the early evidence points the other way.

Consider this example. The Indian Ministry of Statistics and Program Implementation produces a report called the “Periodic Labour Force Survey” (PLFS) annually. Here are the results for low-level IT support workers for the last five years:

In human terms that reflect a decline in 2019-2020, a post-pandemic spike, a steep subsequent drop, and continuing slow decline. One could argue that this volatility merely reflects pandemic distortion. But that interpretation fails to explain the lack of rebound once demand normalized. That is precisely the pattern seen in prior waves of clerical automation.

Not only does the 2021-2022 spike not refute the notion of the erosion of jobs by AI, it actually confirms it. That was the same phenomenon that was observed among secretaries, typists, and travel agents before their jobs were automated. Organizations routinely overhire during system transitions to handle data cleaning, exception processing, and customer education. Those roles disappear once automation stabilizes. This is not cyclical recovery; it is terminal transition.

The 2022-2023 spike reflects the adoption of self-service portals, AI-driven chat, and internal copilots. As the graph reflects that process is continuing. There is no cyclic recovery. Furthermore, due to factors characteristic of the Indian economy including labor surplus, wage compression, and strong substitution effects, in India headcount may remain stable while task content is hollowed out which is exactly what my analysis has suggested. If even in a labor-surplus, low-wage economy like India we see hollowing out, the effect in high-wage Western economies will be more severe, not less. India is not an outlier here; it is a leading indicator.

India is not an arbitrary example. I chose it precisely because it is a labor-surplus, low-wage economy with relatively credible national statistics and deep integration into global IT services. If cognitive automation were merely a rich-country phenomenon, India should be resilient. If anything, it should absorb displaced work. The fact that we instead observe hollowing out even here makes the pattern more, not less, concerning. It’s not cherry-picking. I chose it before I knew the results, confident in what it would demonstrate which it did.

Contrary to Dr. Chamlee-Wright’s expressed view of the resilience of democracy despite job loss, that reflects a misunderstanding of the challenge. The problem is not that democracy will survive despite job loss. The problem is that democracy was architected around a laboring citizenry. Remove labor, and you remove one of its structural pillars.

The Challenge of Artificial Intelligence: Part I—the Industrial Revolution
The Challenge of Artificial Intelligence: Part II—the Digital Revolution

I recently read the credible claim that the most viral posts on Facebook were now AI-generated “slop”. To my eye that has some serious implications for Facebook, the World Wide Web, AI, the world, and human cognition itself.

For Facebook, when the dominant content in a major social space is no longer human expression amplified by machines, but machine expression optimized for machines that drastically diminishes its value proposition.

The World Wide Web in its original form consisted of content generated by humans, links, and discoverability. A multi-billion dollar business, Google (now Alphabet) was built on that. Google and its emerging reliance on AI, replacing links with unattributed or pseudo-attributed AI-generated content, is already subverting that. Social media’s replacement of links with feeds had already eroded that. Now the replacement of human-created posts with AI-generated content i.e. “slop” further dilutes the value proposition. Feeds killed navigation; AI is killing authorship.

AI content generation has many advantages for the companies. It is cheap, scalable, easily tested in realtime, and can be quickly tailored for different demographics, moods, and trends. It is not equally advantageous for those who are notionally its customers.

In my earlier discussion of the Digital Revolution I held back from exploring a specific aspect of that revolution that is relevant here. One of the results of the Digital Revolution was the emergence of a large, globally distributed pool of workers who are digitally literate, technically competent, capable of speaking English content creators. Large segments of these roles as transcribers, customer support staff, content moderators, search engine optimizers, and coders are being automated or commoditized. Needing alternative sources of revenue they are turning to prompt farming, clickbait generation, fake personae synthetic virality, and scam-adjacent content to replace that income. It is the application of 19th century urbanization to the 21st century Internet.

Different from Marx’s predictions they are not politically dangerous. They are civilizationally dangerous.

In previous eras writing, printing, and distribution were all expensive. Now with a laptop, electricity, and an Internet connection someone with the knowledge to do it can create practically infinite output. That reduces the marginal cost of persuasion to something approaching zero. Where persuasion once required institutions, reputations, and capital, it now requires only throughput and targeting. The net result is a global factory for cognitive junk food.

These workers are not producing historically grounded argument, culturally embedded nuance, or philosophically coherent positions. They are producing memes, emotional triggers, visual hooks, and slogans.

I have also previously mentioned the weak Sapir-Whorf hypothesis. It is a robust finding among knowledgeable scholars, confirmed by empirical evidence. The cognitive effects of the flood of “slop” with which people are being inundated will be considerable. These are the effects of increasing “visualcy” including a diminishing in abstract reasoning, increasingly emotional expression, and reduced tolerance for ambiguity among others.

This is the cycle. AI displaces workers; displace workers produce AI-assisted junk; platforms reward it; AI trains on it; cognition degrades; demand for nuance collapses; displacement accelerates.

I just read a very encouraging post about the protests in Iran by Iranian journalist Roohola Ramezani at Persuasion. Here’s a telling snippet, its conclusion:

Iranians want neither a better version of the Islamic Republic nor a utopian revolution. They want the extraordinary era of Iranian history to end. They want to return to being a normal nation state that prioritizes its borders over ideological “frontiers,” its citizens over “martyrs,” and its future over seventh-century grievances.

A fierce, secular realism is emerging. The protest movement is redefining Iranian identity not through the lens of a “Global South” struggle against the West, but as a struggle to rejoin the West’s political and economic orbit. It’s a movement that does not fit neatly into the categories of anti-imperialism or identity politics; but it is, nevertheless, perhaps the most authentic democratic project of our time.

My problem with it is that I don’t see an evidentiary basis for that level of specificity. Quite to the contrary another alternative is that Iranians are reacting to the incompetence of the mullahocracy. What Iranians want in aggregate or whether they have common goals other than escape from their present misery I have no idea.

I have little doubt that some Iranians want precisely what the author suggests. Whether that’s all Iranians, a majority, or just a few I have no idea and I see no indication that anyone has the data required to make that determination. Shared opposition to a regime does not, by itself, imply shared agreement on what should replace it. The historical record suggests that one faction will succeed in applying its own preferred solution and that faction will not necessarily be the most numerous or even the most popular one.

Here’s my question. How would we arrive at an empirically-based understanding of what Iranians want right now? That’s not a rhetorical question. I genuinely want to know because I think that policies should be based on facts not wishful thinking, however heartfelt.

I’ll trust claims about national political aims only when they’re supported by (1) survey evidence with methods described, plus (2) at least one independent corroborating stream. That could be behavioral indicators, slogan analysis, turnout or legitimacy signals, or multiple polling efforts. Otherwise, I will treat them as hopeful interpretation.

In an op-ed in the New York Times Elizabeth Dickinson describes the situation on Venezuela’s border. The Chavista Maduro regime had delegated control of the border to the Colombian National Liberation Army (ELN), a guerrilla group founded to mount a leftist insurgency. Here’s the meat of the op-ed:

Now the E.L.N. stands emboldened to challenge the authority of the Colombian state — and U.S. ambitions in Venezuela. The borderlands are webbed with lucrative corridors where the E.L.N. and other armed groups move seamlessly and often exercise more control than the government. With profits flowing from illegal mining, drug trafficking and human smuggling, both the Colombian guerrillas and complicit members of Venezuela’s security forces have deep interests in maintaining the status quo in Caracas and resisting attempts to bring rule of law to these territories.

In advance of Mr. Maduro’s capture, the E.L.N. was taking steps to ensure its interests in the borderlands were safe, regardless of what happened in Caracas. Since mid-December, it has gone on the offensive in the Colombian region of Catatumbo, displacing thousands of civilians in the process. It has also clashed with a local criminal group known as the 33rd Front, a dissident faction of the Revolutionary Armed Forces of Colombia, or FARC, which has repeatedly angered the E.L.N. with attempts to control key rivers used for trafficking in and out of Venezuela. President Gustavo Petro’s announced deployment of some 30,000 troops to the border has done little to stop the fighting.

But rather than anchoring the region with America’s longtime partner in Bogotá, President Trump turned on Mr. Petro, threatening direct attacks on Colombia the day after Mr. Maduro’s capture on Jan. 3. Although a phone call last Wednesday between the leaders lowered tensions, the détente is fragile.

Removing (literally) Maduro from Venezuela may have the unforeseen effect of destabilizing not just Venezuela but Colombia as well.

Aristotle said it more than two millennia ago: nature abhors a vacuum. Already, clashes between armed groups have forced thousands of civilians from their homes, and a vacuum on the Venezuelan side could intensify competition among criminal and insurgent networks. If the Chavista regime, having never established effective control of the border, does not stabilize the situation, and the United States which lacks both capacity and strategy does not either, the ELN, FARC dissidents, cartels, paramilitaries, or others will. The U.S. lacks a coherent stabilization strategy, and its recent actions risk exacerbating instability unless paired with a credible regional security plan. Failing that neither the Venezuelan people, the Colombian people, or we may like the result.

At Reuters David Lawder reports:

WASHINGTON, Jan 13 (Reuters) – The U.S. government posted a $145 billion budget deficit for December, up 67% or $58 billion from a year earlier due to record outlays that were inflated by calendar shifts in benefit payments and receipts, the Treasury Department said on Tuesday.

The report showed that revenue growth from President Donald Trump’s tariffs may have plateaued, as December net customs receipts totaled $27.9 billion, down from the low $30 billion range in recent months but far above ?the $6.8 billion recorded in December 2024.

Net customs receipts for the first three months of fiscal ?2026, which started October 1, totaled $90 billion compared to $20.8 billion in the prior-year period.
The Trump administration implemented some tariff-cutting trade deals in November, including 10 percentage-point reductions in duties on imports from China and South Korea. The Supreme Court also ?could soon rule on legal challenges to Trump’s tariffs under an emergency sanctions law. A ruling against those duties would further cut customs receipts.

The Treasury said that after making adjustments to December budget results in both 2024 and 2025, the December deficit would have been $112 ?billion, a decrease of $14 billion or 11% from the December 2024 budget gap.

Not to belabor the point but large deficits are a foreseeable consequence of cutting taxes without politically or structurally credible mechanisms for trimming expenditures. With entitlements on demographic autopilot, interest expense rising, and defense spending politically insulated, the notion that tax cuts would be offset by spending restraint was always fanciful. The pre-existing debt overhang already impedes economic growth by crowding out private investment and increasing the sensitivity of the budget to interest-rate shocks so you can’t expect to grow your way out of the issue. That is an empirical finding by economists that remains robust in mainstream literature.

These fiscal realities are not an abstraction. They are directly related to what Democrats frame as their “killer issue” in the 2026 and, possibly, 2028 elections: affordability.

When deficits are effectively monetized, i.e. financed through central bank balance sheet expansion rather than real resource growth, the result is inflation. When goods and services inflation outpaces wage inflation you have an affordability problem. It is always regressive: it hits renters, younger households, and fixed-income retirees first and hardest.

This is not a pathology unique to one party; it is the product of decades of bipartisan normalization of deficit finance in the service of short-term political objectives.

It has been a week since Maduro was apprehended and taken to the U. S. for trial. President Trump said the U. S. would “run Venezuela”.

Who’s running Venezuela? It appears to be the same regime that did a week ago with all of the same problems and failures.

I have seen some reports that some political prisoners have been released.

Everything seems to be proceeding much as I predicted.