Editor’s Note: Slightly abridged from Noahpinion’s “At least five interesting things: Smart Ideas edition (#71)”.
1. Are we wrong on antitrust?
In the 2000s–2010s the U.S. saw slow growth, low business investment, low dynamism, and rising national-level corporate concentration. Many economists linked concentration to weaker growth, helping fuel a renewed antitrust push. Recently, however, new research complicates that view.
Albrecht and Decker (2025) find no industry-level correlation between price markups (a proxy for monopoly power) and business dynamism; higher markups even modestly correlate with more new firm entry. Creanza (2025) studies the Great Merger Wave (1895–1904) and finds consolidation boosted corporate innovation by enabling big firms to create industrial R&D labs; the GMW increased major breakthroughs by 13% (30% in science-based fields). These results echo long-standing theories (Galbraith, Schumpeter, Baumol) that market power can fund costly R&D and spur innovation so long as some competition remains.
Modern AI offers a present-day example: Google, Meta, and Microsoft — large firms with strong network effects and high profits — have driven many foundational AI advances from their labs. That power has made them targets of the neo-Brandeisian antitrust movement, but it’s plausible that without such concentrated resources the current AI boom, which is a major economic engine, would be smaller. The antitrust push of the last decade may have overlooked these tradeoffs.
2. An interesting idea about passive investing
Passive investing displaced active management because index funds cheaply deliver market returns. But if everyone indexes, who does the stock research? Longstanding concerns include governance risks and reduced competition when a few asset managers own large stakes.
Kontz and Hanson (2025) add another concern: passive investing raises stock correlations, which increases systematic risk (beta). Higher perceived risk lowers valuations, making equity financing more costly and potentially reducing real corporate investment. Empirically, passive investing grew from about 1995, yet corporate borrowing costs fell through 2021 — likely due to interest rates and new capital — suggesting passive investing isn’t the dominant driver of recent investment weakness. Still, the theoretical channel between indexing, correlation, and underinvestment is worth monitoring.
3. Export controls on China are working
Talks around sales of Nvidia’s Blackwell chips to China were high-profile, but the U.S. refused such exports, citing national security concerns. A common critique of export controls argues they accelerate China’s push for self-sufficiency: if denied Western tech, China will build its own supply chain and remove U.S. leverage. That critique underestimates how export controls actually slow progress.
Evidence suggests controls are hindering China’s near-term advance in chips and AI. China struggles to replicate ASML’s lithography equipment; attempts to reverse-engineer older machines reportedly failed and caused damage. SMIC’s progress on advanced nodes appears stalled, and Huawei and other Chinese firms have faced yield problems, prompting some to downplay the immediate need for certain nodes. Chinese AI engineers and executives admit export restrictions limit their capabilities.
Export controls are not meant to permanently destroy China’s tech sectors but to slow them, preserving a U.S. lead for longer and reducing short-term strategic risks. The author’s view: keep and tighten export controls where needed.
4. The obvious solution for Japan’s overtourism problem
Japan faces rising tourist numbers that strain infrastructure in hotspots like Kyoto and Tokyo. Tourism brings revenue but overcrowding causes congestion and social friction. Cutting tourism outright would hurt the economy and cities that want more visitors.
Kyoto’s recent move to levy an accommodation tax up to 10,000 yen per person per night on expensive hotel stays is a straightforward Pigouvian response: tax the congestion externality. Several practical tweaks make sense: exempt domestic business travelers (e.g., apply the full levy only to foreign-card reservations) and coordinate fees regionally so tourists shift to less-crowded areas (Osaka, Nagoya) that welcome visitors. Region-specific lodging fees can reduce congestion, raise city revenue, and redistribute tourists toward places that need the income.
5. Selective immigration is powerful
A new paper by Ru, Kaushal, and Muchomba finds that narrowing Black–White earnings gaps in recent years largely reflects highly selective immigration from Africa. First-generation Black immigrants earn similarly to native Black Americans, but second-generation Black children of immigrants achieve parity with White Americans, driven by high educational attainment.
Implications: selective immigration matters — immigrants who value education can raise group outcomes and help reduce racial gaps. Fears that immigrant groups will “assimilate down” appear overstated for this population. The results also suggest that policy aimed at addressing long-standing disadvantage should focus on descendants of slavery (ADOS), who remain furthest behind; broadly defined race-based programs risk disproportionately benefiting children of highly selected immigrants rather than those most in need.
This article first appeared on Noah Smith’s Noahpinion Substack and is republished with permission.
