The least bad way to regulate AI?
That is the topic of my latest Free Press column. Excerpt:
The key is to create some basic safeguards, but without stifling broader AI progress. To do so, we must defy the conventional wisdom about public oversight and instead trust the AI labs to be their own primary regulators.
My version of the proposal starts with defining a private not-for-profit body for AI regulation. An ideal body would draw some features from FINRA (the Financial Industry Regulatory Authority): a consortium of financial firms that examines the trade practices of each and makes recommendations, helping the federal Securities and Exchange Commission with oversight and regulation. The AI version would include the major labs and would be authorized and overseen by Washington, perhaps through the now-fledgling Center for AI Standards and Innovation.
This body would periodically audit major AI companies and their models, judging their conduct and safety. In the short run at least, much of this would be focused on issues of cybersecurity, and whether the new models created more cyber risk than they help to solve. If a company passed the audit, it would be exempted from standard liability law, at least provided that it had shown basic, reasonable care, as opposed to extreme or deliberate negligence. That would free the AI labs from the fear that courts might derail their business by granting huge awards to plaintiffs for ill-defined harms that could not reasonably have been prevented. And it would give the labs a strong incentive to meet the safety standards of this body.
It is reasonable to wonder whether such a body, composed of industry players, would issue fair and equitable judgments of safety. Maybe not. Yet there are many upsides and no better alternative.
For one thing, each company knows that a dangerous model from another company could cause a harmful incident and damage the prospects for the entire industry. Consider the Three Mile Island meltdown in 1979, which contributed significantly to the mothballing of the entire U.S. nuclear industry. Few people can name the company (Metropolitan Edison) behind the malfunctioning plant; the reputational penalty attached to the industry as a whole.
Another incentive for safety is that the top companies do not want too much competition from lower-price, lower-quality upstarts. That too will induce those companies to support fairly tough standards, perhaps excessively tough in some cases. Still, we are choosing from imperfect alternatives. The concrete truth, whether we like it or not, is that there is far more expertise within the companies for judging AI safety than we can expect to find in the federal government anytime soon.
I am indebted to some ideas from Dean Ball, noting that his proposal is somewhat different. And here are some comments from Brendan McCord.
Daddy’s Girl
Using Danish registry data, we study how managers’ gender attitudes shape gender inequality in the workplace by exploiting the birth of a daughter – as opposed to a son – as a plausibly exogenous shock to male managers’ gender attitudes. Comparing within-firm changes in women’s labor outcomes depending on the gender of the manager’s newborn child, we find that women’s relative earnings and employment increase by 4.4% and 2.9% respectively following the birth of the manager’s first daughter. These effects are driven by an increase in managers’ propensity to substitute male hires with female hires that have comparable education, hours worked, and earnings. Consistent with this substitution channel, we do not detect any significant effect on firm performance. Because these effects emerge rapidly and persist over time, we can rule out the need for prolonged exposure to gender issues or for personal incentives tied to improving conditions for their own daughters as prerequisites for managers to promote gender equality within their firms.
That is by Maddalena Ronchi and Nina Smith, forthcoming in Review of Economic Studies.
Wednesday assorted links
1. At least one in four NFL players, and possibly much higher, ends up with brain disease (NYT). As I read the results, probably most of them do.
2. On the LLM flooding of governmental services.
3. Joe Walker podcast with Andrew Charlton on the future of AI in Australia.
4. The bread culture that is the German regulatory state.
5. Data on the placement of economics PhDs.
6. The Nvidia thing is now under dispute. And here is a defense of the original.
Data Centers and the Open Access Order
The US discussion over datacenters is depressing. Datacenters do not use a lot of water, they produce very useful outputs, they are not a blight on the landscape. All of this is obvious. But I don’t want to restate the obvious. What bothers me most about the discussion is that people seem to think this is or should be a collective decision. No.
We have a simple set of rules that everyone must follow. You buy land from someone willing to sell it. You contract for electricity. You hire workers who want the job. Your obligations to your local neighbors come from the same laws that govern everyone else. We do not ask what the land, electricity and labor is for. If you follow the rules, that is nobody’s business.
This is the distinction North, Wallis and Weingast make in Violence and Social Orders (paper here) between limited access orders or the natural state and open-access orders. For most of recorded history large-scale economic activity depended on access to political power. In the natural state, “people outside the coalition have only limited access to organizations, privileges, and valuable resources and activities.” The dominant coalition controlled entry into valuable activities and created rents by granting privileges.
An open access order works through general criteria. Organizational formation is “open to everyone who meets a set of minimal and impersonal criteria.” In economic life, the transition entails “the ability to create economic organizations at will, open entry and competition in many markets.”
The key word is impersonal. The same conditions apply regardless of who wants to build or whether public officials admire the proposed use. The state is not necessarily laissez-faire but its role ends once you have complied with the impersonal rules.
Now look at how a data center actually gets built. Rezoning, special use permits, comprehensive plan amendments, a negotiated “community benefits agreement” of school donations, fiber, soccer fields, and payments in lieu of taxes, public comment and then more public comment. These are not general rules. They are terms of admission negotiated with whoever holds the veto. Calling them community benefits doesn’t change the structure. Access to economic activity has become something that must be bargained for, argued for in the collective sphere, and paid for–with success determined by rents and political access. The natural state returns.
(The subsidies, by the way. are the same error wearing the other hat. A sales tax exemption written for datacenters and a county moratorium aimed at datacenters both replace a general rule with a judgment about whether this industry deserves to exist. An open access order offers neither special favors nor special burdens. It offers a rule.)
Opponents often complain that communities deserve more of a say. No, they do not. You did not vote on the bakery and the baker did not vote on you. That is the deal.
Datacenters happen to be where this is most visible today. Their size and novelty make them easy targets for vilification and rent extraction. But the big issue is not datacenters. It is whether building depends on following impersonal rules or on securing permission case by case from those who control access. The natural state was the human default for ten thousand years. The open access order that displaced it is the foundation of our prosperity and our political strength, and it is younger and more fragile than we like to think.
Overreaching causal language in the social sciences
Across the social sciences, many studies use cross-sectional designs that reveal associations but are generally unable to support direct causal claims, yet authors of such articles may make or imply causal claims anyway. Here, to examine the prevalence of such ‘overreaching’ causal language, we analysed 194,631 cross-sectional articles using large language models. Over the period 1980–2024, an average of 46% of articles contained causal language in their titles or abstracts, where the annual rate has risen almost threefold since 2000 from 20% to 60%. To examine the effects of such language, we conducted a human-subjects experiment (N = 1, 105), finding that readers frequently indicate abstracts with this phrasing provide causal evidence but that methodological labels (β = −0.4, 95% confidence interval −0.56 to −0.19) and associational wording (β = −0.3, 95% confidence interval −0.43 to −0.07) reduce this tendency. Experiments with five LLMs revealed that model summaries of these articles (N = 100 each) can amplify causal overstatement, removing hedges and introducing causal claims where articles used strictly associational phrasing; however, prompting caution diminishes this pattern.
That is from a recent paper by Calvin Isch, Timothy Dörr, Neil Fasching, Grace Jennings & Duncan J. Watts. Note that Isch is on the job market this year, working with Tetlock and Watts.
Emergent Ventures winners, 58th cohort
Jethro Elsden, London area, to study the regulatory structure of the UK using AI.
Paula Benedetti, Buenos Aires, marine biology work in Brazil.
Nyida Gyal, 17, northern Virginia, AI and data.
Gabe Sekeres, Cornell, what if an economist just lets AI run?,
Ollie Payne, NYC, Future Aesthetics Foundation.
Jacob Watson-Howland, London, podcast on science and progress.
Cameron Monroe, UC Santa Cruz, archaeology in Ghana.
Björn O. Öste, archaeology and Peru.
Oliver Pryce, Cambridge, mathematics, AI and a unified representation of geometry and physics.
Demetre Tsiklauri, Tblisi, 16, general career support, building a student network in Georgia.
Shannon Wong, Paris/Antarctica, general career support.
Lydia Farnham, London, matching donors and projects.
Dolly Parton, RIP
Tuesday assorted links
1. How to run a start-up with AI agents and zero employees (video talk).
2. Elon of the bird world (Times of London).
3. Swiss judge using AI to help set sentences (in German). And in French.
4. Arguably EA philanthropists should obsess over fertility decline at least as much as X risk.
5. Much of Nvidia’s contribution has been missing from U.S. gdp figures.
6. One set of worries about Treasuries, possibly exaggerated. And Druckenmiller on the bond market (WSJ).
AI and constitutions (from my email)
“Dear Tyler,
I enjoyed reading your notes on visiting Anthropic to advise on Claude’s constitution. Framing AI governance around the common law, case law (“Talmud”), and independent adjudication is a much more adaptive approach than relying on a static, top-down text.
That said, moving from a fixed text to a case-law system introduces its own set of structural risks. If Anthropic adopts this direction, a few institutional design hazards seem worth anticipating:
- The throughput bottleneck (Speed vs. Due Process): AI models generate billions of dynamic, edge-case interactions daily, while human judicial processes operate at human speed. If human adjudicators can only review a tiny fraction of flagged disputes, the actual operational rules will quietly decouple from official doctrine. Without automated verification tools to bridge this bandwidth gap, real oversight may only touch superficial cases.
- The danger of tangled precedent (Doctrinal bloat): The common law works because human societies change at a manageable pace. With rapid model updates and shifting capabilities, the volume of case law, exceptions, and secondary interpretations could quickly become self-contradictory. Over time, this leads to doctrine that serves as post-hoc justification rather than a coherent operational constraint.
- Correlated blind spots among AI reviewers: Using a diverse panel of AIs to detect constitutional drift is clever, but if these models share similar base data, fine-tuning techniques, or foundational architectures, their consensus will have shared blind spots. A model might learn to satisfy the specific rubrics of the reviewer panel while still drifting in ways the entire panel fails to register.
- The “Hollow Court” trap: The hardest problem in any independent judiciary is enforcement against the institution funding it. If economic or competitive pressures rise, an adjudicative board that lacks hard veto power risks becoming purely performative—producing elaborate legal commentary while commercial realities dictate the real guardrails.
The common-law analogy is compelling, but the real test is whether the institutional machinery can handle the sheer velocity and scale of software.”
That is from Scott Jenkins.
Towards a New House of Lords
In Britain, the House of Lords was traditionally dominated by hereditary peers–a right bequeathed by the monarch, sometimes in ancient times, to sit in the House of Lords that was transmitted generationally. That system has been withering away for decades, however, and was finally ended this year by the 2026 Hereditary Peers Act. So how should members of the House of Lords be chosen?
One idea which comes to mind quickly is selection by merit. Perhaps the House of Lords should be filled with Nobel Prize winners, wise professors, former politicians, distinguished public servants and so forth. All very well and good but the nub here is that these people have to be chosen by someone, and whoever controls the selection process inevitably influences the kind of people selected. That makes an appointed chamber less independent of, and potentially more similar to, ordinary politics, even with lifetime appointments. Moreover, what is their interest? Madison argued that for a good system “the interest of the man must be connected with the constitutional rights of the place.” A politicized selection of representatives, even meritorious representatives with lifetime appointments, may not differ enough from ordinary elected politicians to make much difference.
In 10% Less Democracy, my colleague Garett Jones, suggests that bondholders have a formal role in government. So let us consider, a House of Lords based on bond holdings. The advantage of this system is that bond holders are self-selected and their interests are in long-term stability–exactly what we want in a check on the popular house.
Votes in the House of Lords could be allocated proportionally to holdings; thus in practice we would get institutional representatives most notably including pension funds. If you want stability and growth, giving pension funds a bit more sway in national politics does not seem like a terrible idea. Bondholders would, for example, likely be more concerned with long-run financial stability, for example than current politicians seem to be. Should foreign holders of bonds be given a vote? Why not? Perhaps this would improve the prospects for peace. Although the popular house will always have the final say.
If anything, bondholders might prove too fiscally conservative as they are concerned primarily with default risk. The traditional House of Lords based on hereditary peers really amounted to a House of Lords based on landed property which isn’t a bad proxy for long-term stability and growth. After all, land owners do tend to do well when the country does well and you can’t take your land to another country. The ancient system had its wisdom; but landholding is not perfectly aligned with national prosperity. The House of Lords defended tariffs on imported foods (the corn laws) to promote land rents at the expense of food prices for everyone else. For similar reasons, we might, therefore, want to leaven the House of Lords with some equity, say ownership of Trills–the Robert Shiller idea for shares backed by real GDP. We would thus have a popular house and a corporate house divided into equity and bonds, all well aligned.
Do Minimum Wages Help Workers in Poor and Low-Income Families?
We provide the first direct estimates of the effects of minimum wages on low-wage workers in families at different points of the distribution of income-to-needs, using data from the Survey of Income and Program Participation, which oversamples low-income families. We find adverse – rather than beneficial – effects of minimum wages on the employment, hours, and earnings of initially-employed low-wage workers in poor and low-income families. Although we do not find a gradient indicating more adverse effects on the poorest low-wage workers, the adverse effects for poor and low-income low-wage workers help explain why minimum wages do not reduce poverty.
That is from a recent paper by David Neumark and Emma Wohl.
That was then, this is now
In 1914 Yitzhak Ben-Zvi and David Ben-Gurion, the president and prime minister of Israel after 1948 respectively, were in the Ottoman capital studying law at Istanbul University. They had studied Ottoman Turkish and embarked on their legal studies in the hope of one day serving in the Assembly of Deputies as elected representatives from Jerusalem. With war on the horizon, they made their way back to Palestine, where they volunteered for military service in the Ottoman army. They also proposed the formation of a Jewish legion to fight under the Ottoman banner, but their intiative fell on deaf ears…We have no way of knowing how things might have turned out had Ben-Zvi and Ben-Gurion been allowed to suit up in Ottoman uniform…
Moshe Sharett, another future prime minister of Israel and said to have been fluent in both Arabic and Turkish, served in the Ottoman army during the Balkan Wars and all through the First World War, even beyond the announcement of the Balfour Declaration and the British occupation of Jerusalem in December 1917.
That is all from the quite good The War That Made the Middle East: World War I and the End of the Ottoman Empire, by Mustafa Aksakal.
Common sense in charge
…children are increasingly seen as interfering with the freedom of parents; views on whether mothers of young children should work have become markedly more progressive and account for a substantially larger share of the decline among the tertiary-educated; and fewer people believe that women or men need children to lead a fulfilled life. This last attitude changed most over the decade and is the largest contributor to the fall in intended fertility, above all among less-educated women.
That is from a new NBER working paper by
Monday assorted links
1. There is now a formal 150 kph (93.2 mph) speed limit in one part of Czechia.
2. Why does the Japanese prime minister spend so much time in seclusion?
3. Decker defends academia (noting I do not think the “only the peaks” defense quite works. I also worry about very high quality research that ends up being too context-specific to be very useful. That is no fault of the researchers, but…the world is not wrong to be less than totally impressed in response. Economists, when they discuss what they are up to, are far too taken in by “the quality of the work” as a relevant variable. I think they can be fairly delusional as to how much progress they actually are making, even though along the “research quality” dimension the work is much better than what people were doing say thirty years ago. In fact we train economists to make precisely this kind of mistake.)
4. Rhine Group. More European optimism.
5. Entrepreneurs in state government improve state government.
Childhood Exposure to Joint Custody Reforms and Adult Family Formation
Joint custody reforms are among the most consequential family-law changes for children, yet little is known about their long-term effects. Exploiting staggered adoption across US states and 13 million ACS observations, we show that childhood exposure reduces adult fertility by 7 percent, symmetrically for women and men and operates primarily through lower parenthood and couple formation. Effects are sub-additive within couples, while exposed individuals assortatively match. Our findings point to the formation of family preferences during childhood and align with a US fertility decline increasingly driven by rising childlessness and declining couple formation rather than smaller families among parents.
That is from a recent research paper by Daniel Fernández-Kranz and Sébastien Fontenay. Via the excellent Samir Varma.