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An interesting post. Canada's been very active on climate policy in the last few years, and economists have played a major role. We seem to have settled on a carbon tax as the backbone of climate policy, despite the high political cost. There's complementary measures, like phasing out coal-fired power by 2030, and some provinces have put a zero-emissions-vehicle mandate in place, but the national carbon price floor - currently C$40/t, rising to $170/t by 2030 - is the centerpiece of the plan. (It's a "price floor" because each province can either set up carbon pricing itself, in which case none of the money leaves the province, or the federal government will do it for them via a federal carbon tax backstop, with the revenue divided up and returned directly to households in the province as a dividend.)

Mark Jaccard, a veteran of the battles over BC's carbon tax, argues that flexible regulations aimed at the power and transport sectors would arouse far less political resistance, while still being reasonably cost-effective. Like you, he thinks that economists who say that a carbon tax is the optimal policy are ignoring political reality. https://www.cambridge.org/core/books/citizens-guide-to-climate-success/we-must-price-carbon-emissions/66AEBB8BE9A7F7760DC1BCE3A9C50748/core-reader

In the Canadian context, a big challenge is that Alberta and Saskatchewan are responsible for a very large share of emissions. One of the advantages of the national carbon price floor is that it lets us coordinate action across provinces, without having to sit down and work out a distribution of Canada's total carbon budget. (That would be a recipe for endless bitter wrangling, since it's zero-sum.) https://twitter.com/andrew_leach/status/1381823072181776385?s=20

I expect that the Biden and Trudeau governments will be working together on climate policy, likely on a sector-by-sector basis - power, transport, etc. Maybe some kind of carbon tariff (given tensions with China, and China's relatively new fleet of coal-burning power plants). I'm curious to see how this will play out.

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Breaking news - Canada's Conservative opposition appears to have been listening to Mark Jaccard. They've dropped their opposition to a carbon tax, but they'd like to track individual payments and return them as a green rebate, cap the tax at $50/t, and add flexible regulations to hit Canada's 2030 target. https://twitter.com/andrew_leach/status/1382719686987554819

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Yeah. I think they're basically attacking the messenger. As climate change worsens, the Canadian oil sands are going to face more and more external pressure - they're just too big to hide from the spotlight. (Canada has the world's third largest oil reserves, after Venezuela and Saudi Arabia.) We can either deal with it by cutting emissions ourselves - and economists tell us that carbon pricing is the most cost-effective way to do so - or we can pretend it's not happening and end up facing crude measures from the rest of the world, like Keystone XL getting blocked (costing Alberta $1.5 billion in cash). https://twitter.com/russilwvong/status/1358811443169095680?s=20

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By the way, the Alberta NDP's climate plan was carefully designed to prevent carbon leakage, using OBAs rather than a carbon tariff. (It's similar to the way the federal carbon tax divides up revenue equally and returns it to households.) The federal climate plan basically picked up that part of the Alberta policy as is. https://www.policyschool.ca/wp-content/uploads/2017/06/Effective-OBAs-Dobson-Fellows-Tombe-Winter.pdf

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I really liked Notley as well. (I'm in Vancouver - I'm a federal Liberal.) I'm glad she's still leading the Alberta NDP, and I hope she gets another shot in 2023.

Personally I'm inclined to put the blame on Horgan. When BC's obstructionism caused Kinder Morgan to get cold feet, Trudeau brought down the biggest hammer he had by buying the project outright. The August 2018 FCA decision halting the project was a big setback, but Ottawa redid the consultations, re-approved the project, and the approval stood up in court. Construction has been underway for more than a year now. https://www.reddit.com/r/canada/comments/aep2uy/what_are_some_of_your_thoughts_on_the/edrl893/

That said, I totally understand Albertans being frustrated with the cooperative approach and deciding to go for Kenney's "no more Mr. Nice Guy." But as Don Breakenridge observes, it hasn't really worked out. https://calgaryherald.com/opinion/columnists/breakenridge-all-this-fighting-and-alberta-has-nothing-to-show-for-it

It doesn't seem like there's enough shipper demand to support Energy East. It'd be expensive to send it all the way to the East Coast: Andrew Leach estimates $10/barrel with a long-term contract, $16/barrel without. http://andrewleach.ca/uncategorized/to-whom-is-jason-kenney-selling-a-bill-of-goods-on-energy-east/

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Apr 13, 2021Liked by Noah Smith

Happy Birthday!!! Thanks for the consistently thought-provoking newsletter!

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Thanks!!

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Hilarious that politicians don't trust economists, as if they listened to us before. Deregulate housing, occupational licensing, and listen to Alex Tabarrok on Covid and THEN come talk about how economic advice don't work. Don't confuse your inability to act with economists' inability to offer advice.

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You're stomping in my playground. And I pretty much agree with you on all points, and why have change my focus of research to renewable energy integration. From what I can tell so far, it's very doable at very low cost, with obstacles mainly being things that climate economists don't study.

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Apr 13, 2021Liked by Noah Smith

Thank you for again writing such an excellent piece.

Looking forward to your input on what should be the economists proposal on what to do (yes I read the previous ones, I would love an update looking at what has being picked up by the current administration and what has not been :-) ).

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Apr 13, 2021Liked by Noah Smith

Nordhaus was (unsurprisingly) aware of tail risks, so I am not sure why his academic work did not make more of them. His book for the general reader was "The Climate Casino" and here is what Sachs said in blurb on back: "Nordhaus repeatedly and rightly reminds the reader of the risks of catastrophic tipping points and the huge unknowns concerning the ability of societies and ecosystems to adapt to the changes ahead".

I'd really like to see Nordhaus respond to the point that DICE ignores solar power etc.

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That point has been circulating for a few years now!

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W. Nordhaus and M. Weitzman had a dialectic (or debate) about the fat tailed risks and what to do about these risks. My view is that this issue is a distraction because the deeper question is whether costs and risks represent two independent objectives, or whether they are interchangeable. Virtually all well-known economists (and certainly all of the economists in the Pigou Club) assume or believe that costs and risks are interchangeable, because they presume that carbon taxes can be used to manage both. If costs and risks are biophysically and fundamentally different, then the standard model for carbon pricing fails. Why? Because of the Tinbergen rule. Some economists tend to view this rule as optional. Tinbergen was trained in physics, which says something quite deep and important about the Tinbergen rule: it is a natural law and not a social construct.

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Apr 13, 2021Liked by Noah Smith

Hi, thanks for this post. I'm currently entering the grad research life and it helped me to rethink on the variety of good puzzles that is still there to rethink.

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Apr 13, 2021Liked by Noah Smith

Are there any economists still working who have been exceptionally good on climate? Other than Nordhaus, dubiously.

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Yes. Many of the less famous people. It's the top folks who feel stuck in the past.

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Noah, think you should really look at this edition of the European Economic Review. I think you, Cameron, Stern, and Stiglitz are all operating on the same wavelength.

Hepburn, Cameron, Nicholas Stern, and Joseph E. Stiglitz. 2020. “‘Carbon Pricing’ special issue in the European economic review.” European Economic Review. Vol. 127.

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Can you name a few of the less famous economists doing good work on climate change?

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This is a more extended version of your critique of Nordhaus and others https://www.tandfonline.com/doi/full/10.1080/14747731.2020.1807856

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You make a compelling argument. I continue to believe though that the elephant in the room is alternative voting methods that can make climate change politically tractable. Approval voting is probably the most practical.

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I'm skeptical that electoral reform would help. Australia scrapped its carbon tax after changing governments, and Australia has mandatory voting and instant-runoff voting.

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And has no carbon tax as such. (It does have an emissions trading scheme, but that isn't quite the same thing. And the scheme covers only half of NZ's relevant emissions: see https://environment.govt.nz/what-government-is-doing/key-initiatives/ets/coverage-of-the-nz-ets/.)

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I know that it's always fun to dunk on economists, but doesn't the silo-ing criticism apply equally the other way around (i.e. that climate scientist have also failed to reach out to economists to better understand the broader impacts of climate change)?

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I don't know!

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Why are economists the way they are? Much more status-driven than comparable scientists in other fields, extremely confident that they have all the tools anyone could need, and not interested in learning from other disciplines. This is of course an overgeneralization but it's one with some truth in it.

My best guess is that as a field, economists have to deal with opinionated cranks harassing them a lot more than most fields, and this drives them to defensively close off to outsiders and overvalue symbols of authority.

But I don't know for sure, it would be nice to get an insider perspective on this.

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I'm not an insider, but still want to reply! As I understand it, economists/econometricians tend to be among the most methodologically advanced social scientists. The tools that they use answer a broader range of questions and work with more varied types of data than the tools used by people working in most other fields. This is especially the case for people working in fields that deal with lots of observational data.

This doesn't explain why they're more status driven than comparable scientists, but it does address both of the other critiques. They're confident that they have all the tools anyone could need because they *are* among the scientists most likely to have the right tool to answer a given question. They're not particularly good at remembering the fact that statistical techniques become useless if you aren't familiar with the data that you're working with. There are probably a number of reasons that this is the case, but I'm pretty sure that the placement of Econ departments in business schools instead of arts & sciences colleges plays at least some role. Academic economists should view psychologists and ecologists and epidemiologists as their colleagues, not accountants and marketing professors.

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"As I understand it, economists/econometricians tend to be among the most methodologically advanced social scientists"

Not my experience, I ventured into complex variable studies and went through Multi-factor Analysis early on, so was able to see tools developed by Inferential Statistics quite more developed and applicable to study varying relations of those variables in creative ways. Nowadays those fields have taken form of Machine Learning and AI.

Whereas Econometrics (and Finance) have mostly remained fine tuning their measuring models.

I would risk saying that Economists have better tools now to know comparatively "smaller" fields of study than other social sciences.

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I love the parts of this post that nail climate economists for not publishing enough research, putting out simplistic models of climate change damages, and ignoring tail risks. I don’t love the part that takes climate economists to task for “their carbon tax fetish.”

Smith argues that voters grasp (but economists have ignored) that “the people who pay the costs of a carbon tax don’t reap the benefits.” That’s because “carbon taxes are enacted locally, but climate change is a global phenomenon.”

Well, sure. But Smith himself appears to ignore that the costs of carbon taxes are themselves benefits. They’re revenues! Governments can use those revenues to mitigate or even offset the costs of the higher energy prices from the carbon tax. His account of why WA state voters rejected a carbon tax in 2016 and 2018 fetishizes that point but overlooks the accompanying sales tax cut that, in the 2016 referendum, would have offset the costs. He also underplays the electoral damage from social justice forces’ opposition to the referendum. (I wrote about that opposition here: https://www.carbontax.org/u-s-states/washingtons-2016-carbon-tax-defeat/.)

Still, I highly recommend this post. It’s informed, thoughtful, graceful, and lively. But Noah, please, next time, mention the revenue!

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Hear hear. And also, just because carbon tax needs to be practically global to be effective doesn't mean it's hopeless. We're working toward a global corporate tax agreement after all, which I would say is of far less urgency.

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I have a theory that there's a type of economist stupid that is a pretty common failure mode for economists. It's like asking a physicist to fix a car. The physicist will be able to tell what the most thermodynamically efficient engine, but if you want to get your car fixed to take it to a mechanic, and if you want to build a better car you find an engineer, not Brian Cox.

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Many of the problems mentioned here don't seem specific to climate, but also present whenever there's economists trying to analyse relatively complex phenomena. While there's been way more work done on, for instance, trade or fin svcs, there too the streetlight effect and oddly parametrised (both too much and too little) models abound. Are there other areas where despite these limitations we've come to a point of better common understanding?

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Since you start with the premise that global warming is terrifically costly, you deride the work that economists do. In our current political climate, could it be that good economic research would continue to show that warmer temperatures don't hurt much, or even help, and that anyone who publishes in that area is treading in a minefield and would get cancelled? Going against the religiously held principles of the Establishment is something professors are reluctant to do. This very essay of yours shows why economists are reluctant to write articles on whether the US would be better off if Chicago's climate were more like Atlanta's.

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How about Atlanta then

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"Since you start with the premise that global warming is terrifically costly, you deride the work that economists do."

Seems fine to me, since global warming is in fact terrifically costly. It imposed billions of dollars in costs on humanity just last year (https://reliefweb.int/report/world/counting-cost-2020-year-climate-breakdown-december-2020).

"In our current political climate, could it be that good economic research would continue to show that warmer temperatures don't hurt much, or even help, and that anyone who publishes in that area is treading in a minefield and would get cancelled?"

Could be. It equally "could" be that "anyone" publishing good economic research in the "area" of warmer temperatures being intensely damaging gets cancelled.

"Going against the religiously held principles of the Establishment is something professors are reluctant to do."

We're talking about the Establishment that's yet to institute a carbon tax, yes? The same Establishment that threw out (https://www.nytimes.com/2020/11/09/climate/michael-kuperberg-climate-assessment.html) the scientist who led the National Climate Assessment that reported that climate change was a dire threat to the US? That sought to carry out Soviet-style disappearances of references to climate change on federal websites (https://www.independent.co.uk/climate-change/news/trump-climate-change-government-websites-global-warming-a9020461.html)?

"This very essay of yours shows why economists are reluctant to write articles on whether the US would be better off if Chicago's climate were more like Atlanta's."

I don't see how Noah's essay shows that, but of course I might just be ignorant. Explain?

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"Seems fine to me, since global warming is in fact terrifically costly. It imposed billions of dollars in costs on humanity just last year" - So every natural disaster that happened in 2020 was caused by "climate change"? Weather has been chaotic since the beginning of civilization, but all adverse weather events in 2020 were caused by "climate change"?

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I didn't, and don't, claim that climate change caused all natural disasters in 2020 or all adverse weather events in 2020.

I claim that it contributed to enough of last year's extreme weather to have caused billions of dollars worth of damage. If you follow my link and read the relevant report, it gives rationales for blaming climate change as a cause of individual extreme-weather incidents.

For example, the report mentions last year's Atlantic hurricane season having "a combined cost of $41 billion" (and gives a citation), with at least 9 of its storms being exacerbated by global warming (and then another citation). If global warming explains a mere 5% of the storms' and hurricanes' costs, climate change is immediately on the hook for over $2 billion in damage — which alone would justify my "billions of dollars in costs" statement.

That's just one event discussed in the report, and arguably the one hardest to link to climate change. Most of the other events in the report are fires and floods, which have more direct and intuitive connections to global warming and its accompanying sea-level rises.

The best way to rebut me is to rebut what I actually wrote.

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Thanks for clarifying your thoughts Splainer. I did click on your link and saw the cost of $41bn, but didn't know what you were referring to when you said "billions" (I think we can all agree that magnitude matters). I took it that you meant most of the damage was due to climate change, a faulty assumption on my part.

My main point is that it is impossible to say weather a hurricane, storm, flood, etc. is worse than it otherwise would have been in some alternative reality where "global warming" (which doesn't even happen uniformly across the earth) didn't exist. It's hilarious that people make this claim that we can rewind / undo many years of factors in a complex (and chaotic) system like weather and then magically forecast what it would look like with any precision (meanwhile, 10-day weather forecasts are only right about 50% of the time). I remember in the 1990s everyone said we were going to have an ice age, then the goalposts moved to "global warming" (which was going to destroy us all in ~10 years), now the goalposts have been moved again to "climate change." If the people pushing the cause have to keep changing euphemisms, its usually a sign of thesis drift (i.e. changing the thesis / narrative, because the original thesis / narrative isn't playing out as forecasted).

Also, while I appreciate that you are likely not trying to be exact / precise and are swagging the 5% figure, lets explore that a bit. If a real scientist was measuring absolute temperature, he would use an absolute measure such as kelvin. The % change in surface temperature (in kelvin) over time has been and is projected to continue being astronomically small (like increasing to 289 kelvin from 288.5 kelvin over 40 years, a 0.17% increase). While I don't disagree that a variable can be non-linear, you're talking about several orders of magnitude to get to a 5% effect out of such a small change in temperature.

Finally, lets hypothetically assume a swag of a 5% effect is directionally correct (just for kicks, not saying that you think that is the right number). So that would mean there was $2bn more in damage last year than there otherwise would have been. U.S. GDP is what $21.5T? And what is the opportunity cost? (this is an economics blog after all) - Do we derive more benefit from our status quo activities than the $2bn cost? I think it is pretty hard to make the case that we do not. Maybe the best "climate economics" policy is to do nothing after all.

Overall, I think it's hard to objectively make the case that the blog post isn't conclusory. "Climate economics failed" - Alternatively, maybe the rest of the field has it right and the author doesn't.

Just my two cents (and maybe its not worth two cents) - I'm always open to changing my mind.

Respectfully,

-John

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Thanks for taking on board what I actually wrote. To run through the points in your response...

> My main point is that it is impossible to say weather a hurricane, storm, flood, etc. is worse than it otherwise would have been in some alternative reality where "global warming" (which doesn't even happen uniformly across the earth) didn't exist.

It isn't impossible to make probabilistic statements about the relative (un)likelihood of extreme weather without climate change. The National Academies Press put out an entire book about this in 2016, and it's free to read at https://www.nap.edu/read/21852/chapter/1.

> It's hilarious that people make this claim that we can rewind / undo many years of factors in a complex (and chaotic) system like weather and then magically forecast what it would look like with any precision (meanwhile, 10-day weather forecasts are only right about 50% of the time).

Red herring. Even in complex and chaotic systems, we can record the probability distribution of observable variables, see whether they change over time, and estimate the likelihood of specific realizations of those variables.

> I remember in the 1990s everyone said we were going to have an ice age,

No, not "everyone" was forecasting an ice age in the 1990s. Maybe that's what you heard from columnists or pundits, but the IPCC's Second Assessment Report, Climate Change 1995, documented an increase in global mean surface temperature and expected the increase to continue. From page 5 of the SAR synthesis report (https://www.ipcc.ch/site/assets/uploads/2018/05/2nd-assessment-en-1.pdf):

• §2.4: "Global mean surface temperature has increased by between about 0.3 and 0.6°C since the late 19th century, a change that is unlikely to be entirely natural in origin."

• §2.6: "The IPCC has developed a range of scenarios, IS92a-f, of future greenhouse gas and aerosol precursor emissions [...] In all cases, the atmospheric concentrations of greenhouse gases and total radiative forcing continue to increase throughout the simulation period of 1990 to 2100."

• §2.7: "In all cases the average rate of warming would probably be greater than any seen in the last 10,000 years, [...] only 50-90% of the eventual equilibrium temperature change would have been realized by 2100 and temperature would continue to increase beyond 2100, even if concentrations of greenhouse gases were stabilized by that time."

• §2.8: "Average sea level is expected to rise as a result of thermalexpansion of the oceans and melting of glaciers and ice-sheets."

> then the goalposts moved to "global warming" (which was going to destroy us all in ~10 years), now the goalposts have been moved again to "climate change." If the people pushing the cause have to keep changing euphemisms, its usually a sign of thesis drift

Nope, a count of ngrams in Google Books shows the phrase "global warming" first becoming popular at the same time as "climate change": the late 1980s (https://books.google.com/ngrams/graph?content=global+warming%2Cclimate+change&year_start=1800&year_end=2019&corpus=26&smoothing=1). It also documents "climate change" being the MORE popular phrase since the 1980s.

The available data show your claim that "the people pushing the cause have to keep changing euphemisms" to be false.

In fact, the only person of note whom I know to have pushed a rephrasing for PR purposes is the Republican strategist Frank Luntz (see the first paragraph of https://en.wikipedia.org/wiki/Frank_Luntz), who did so NOT to fight global warming but to discourage concern about global warming!

> If a real scientist was measuring absolute temperature, he would use an absolute measure such as kelvin.

It's unclear why this is relevant; I didn't mention absolute temperature in the first place.

> The % change in surface temperature (in kelvin) over time has been and is projected to continue being astronomically small (like increasing to 289 kelvin from 288.5 kelvin over 40 years, a 0.17% increase). While I don't disagree that a variable can be non-linear, you're talking about several orders of magnitude to get to a 5% effect out of such a small change in temperature.

You're confusing the nonlinearity of a relationship with its gradient. Also, it's perfectly possible for small relative changes to have big impacts. If I gargle a mouthful of cyanide, it's still going to kill me even if it makes up only 0.17% of the fluid in my body.

Then you talk for a paragraph about balancing costs against benefits as if no one in this conversation is aware that costs should be compared against benefits, never mind that Noah's original post up top talked about research that sought to do that comparison. You're free to disagree with the conclusion of Noah's post, but such disagreement is of little interest without an accompanying counterargument.

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Minimizing the $ and human damage of obvious increasing damaging climate events can only encourage inaction. This is the antitheses of acting to find solutions.

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First establishing what the exact problem is (if there is, in fact a problem) is typically the first step of the problem solving process. Pretty important to first do that if you want to actually find "solutions."

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But...I like carbon taxes...

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Carbon taxes are good, I just don't think they're the main policy that will beat climate change.

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deletedApr 13, 2021Liked by Noah Smith
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I do.

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