Category: Law
Private ownership sentences to ponder
Anyone keen to understand how should look at Brookfield Renewable Partners’ recent investment of up to $2 billion in Scout Clean Energy and Standard Solar. B.R.P. is a vehicle of Brookfield Asset Management, a leading global asset management firm, with around $800 billion of assets under management, and it purchased two American developers and owner-operators of wind and solar power-generating facilities. This took place six weeks after President Biden signed the I.R.A. into law.
The I.R.A. will help accelerate the growing private ownership of U.S. infrastructure and, in particular, its concentration among a handful of global asset managers like Brookfield. This is taking the United States into risky territory. The consequences for the public at large, whose well-being depends on the quality and cost of a host of infrastructure-based services, from energy to transportation, are unlikely to be positive.
A common belief about both the I.R.A. and 2021’s Infrastructure Investment and Jobs Act, President Biden’s other key legislation for infrastructure investment, is that they represent a renewal of President Franklin Roosevelt’s New Deal infrastructure programs of the 1930s. This is wrong. The signature feature of the New Deal was public ownership: Even as private firms carried out many of the tens of thousands of construction projects, almost all of the new infrastructure was funded and owned publicly. These were public works. Public ownership of major infrastructure has been an American mainstay ever since…
So it would be truer to say that in political-economic terms, Mr. Biden, far from assuming Roosevelt’s mantle, has actually been dismantling the Rooseveltian legacy. The upshot will be a wholesale transformation of the national landscape of infrastructure ownership and associated service delivery.
That is from Brett Christophers (NYT), who is disapproving. For an alternative view, see this WSJ Op-Ed by Katherine Boyle and David Ulevitch.
Lessons from the COVID War
In preparation for a National Covid Commission a group of scholars directed by Philip Zelikow (director of the 9/11 Commission) began interviewing people and organizing task forces (I was an interviewee). The Covid Commission didn’t happen, a fact that illustrates part of the problem:
The policy agenda of both major American political parties appear mostly undisturbed by this pandemic. There is no momentum to fix the system….The Covid war revealed a collective national incompetence in governance….One common denominator stands out to us that spans the political spectrum. Leaders have drifted into treating this pandemic as if it were an unavoidable national catastrophe.
The results of this early investigation, however, are summarized in Lessons from the COVID WAR. Overall, a good book, not as pointed or data driven as I might have liked (see my talk for a more pointed overview), but I am in large agreement with the conclusions and it does contain some clarifying tidbits such as this one on the Obama playbook.
Innumerable speeches, books, and articles have stated that the Obama administration gave the incoming Trump administration a “playbook” on how to confront a pandemic and that this playbook was ignored. The Obama administration did indeed prepare and leave behind the “Playbook for Early Response to High-Consequence Emerging Infectious Disease Threats and Biological Incidents.”
But this playbook did not actually diagram any plays. There was no “how.” It did not explain what to do…when it came to the job of how to contain a pandemic that was headed for the United States in January 2020, the playbook was a blank page.
I also appreciated that Lessons has some some unheralded success stories from the state and local level. You may recall Tyler and I blogging repeatedly in 2020 about the advantages of pooled tests. Eventually pooled testing was approved but I haven’t seen data on how widely pooling was adopted or the effective increase in testing capacity that was produced. Lessons, however, offers an anecdote:
In San Antonio, a local charitable foundation paired with a blood bank to create a central Covid PCR testing lab (antigen tests were not yet readily available) that could combine samples (pooling) for efficiency and cost reduction, but also determine which individual in a pool was positive. Importantly, results were available within about twelve hours. That meant results were available before the start of school the new day.
The program helped San Antonio get kids back into the schools.
More generally, it’s striking that US schools were closed for far longer than French, German or Italian schools. See data at right on the number of weeks that “schools were closed, or party closed, to in-person instruction because of the pandemic (from Feb. 2020-March 2022)”. (South Korea, it should be noted, had some of the most advanced online education systems in the world.)
One general point made in Lessons that I wholeheartedly agree with this is that the school closures and many of the other controversial aspects of the pandemic response such as the lockdowns and mask mandates “were really symptoms of the deep problem. Without a more surgical toolkit, only blunt instruments were left.” With better testing, biomedical surveillance of the virus and honest communication we could have done better with much less intrusive and costly policies.
Addendum: See my previous reviews of Gottlieb’s Uncontrolled Spread, Michael Lewis’s The Premonition, Slavitt’s Preventable and Abutaleb and Paletta’s Nightmare Scenario.
Addendum 2: A typo in Lessons had France closing schools for 2 weeks instead of 12 weeks. Corrected.
Smile markets in everything, Japanese demasking edition
Thirty-seven people, including the elderly, took a smiling lesson to prepare for taking off their masks in public following three years of the COVID-19 pandemic.
The instruction was held in the Akabane district in Tokyo’s Kita Ward on May 7, the day before the reclassification of COVID-19 to a less-severe category that includes the seasonal flu.
“With mask wearing having become the norm, people have had fewer opportunities to smile, and more and more people have developed a complex about it,” said Keiko Kawano, 49, the smile trainer who served as the instructor for the lesson.
“Moving and relaxing the facial muscles is the key to making a good smile,” she said.
Participants used hand mirrors to check their smiles.
Here is the full story, via John McLennan. Note that the Japanese mask requirement was dropped only in March.
Should we limit capital flows from America to China?
I am not thrilled with these policy proposals:
President Joe Biden is expected to issue an executive order next month restricting US investment in China, in part over concerns about US national security. Those concerns are valid, but the move would cede far too much arbitrary power to the federal government over capital flows and economic activity.
The policy will reportedly cover semiconductors, AI and quantum computing, and on the supply side it applies to venture capital, private equity and some technology transfers and joint ventures. It’s reminiscent of the proposed ban on TikTok. You can debate whether a bill that said “Ban TikTok” — and little else — would be a good idea. In reality, what was proposed would potentially criminalize a broad swath of internet activity in America.
Restrictions on capital flows to China would run into similar problems. On the surface, they would be addressing commonsensical national-security issues. Underneath, they would give the executive branch carte blanche to both punish foreign nations economically and to restrict domestic investors.
And this:
All said, it would be better for the US to devote resources to limiting Chinese espionage, or upgrading US supply chains and weapons systems. When it comes to relations with China, blocking its access to key weapons systems should be the priority.
Here is the full Bloomberg column.
Catawba Digital Economic Zone Passes Banking Code
The Catawba Digital Economic Zone (CDEZ), a project of the Catawba Indian Nation (I am an advisor), has passed a banking and financial services regulatory code. The code allows financial services companies and banks to receive charters to operate a bank similar to that offered by US states.
…The goal of the code is to create a “best-of-all-worlds” set of laws that will provide the Nation with: 1) a comprehensive legal code for the regulation of traditional and emerging digital financial activities; 2) legal terms that are already recognized and accepted by the federal government for access to the U.S. and global financial systems; and 3) provisions that enhance the Nation’s sovereignty and create competitive advantages for the Nation’s economic development.
To achieve these objectives, the foundation of the code synthesizes terms from the existing financial codes of three states: South Dakota, North Dakota, and Wyoming. These state codes were selected as a starting point based on their commitment to regulating innovative financial activity to protect consumers and encourage responsible innovation.
The One-Child Policy and Intergenerational Mobility in China
We examine whether and how the world’s largest population planning program, the One-Child Policy, has shaped intergenerational mobility in China. Using a dataset with 2,096,798 childparent(s) pairs combined from various rounds of ten separate national household surveys, we leverage exogenous variation in fine rates imposed for One-Child Policy violations across provinces to study causal impacts of the One-Child Policy on intergenerational persistence. Using a continuous difference-in-differences approach, we find that for cohorts born between 1980 and 1996, the One-Child Policy reduced persistence in intergenerational income, education, and social class, comparing to those born prior to 1979. We estimate that the overall effect of the One-Child Policy fines was to reduce persistence in intergenerational income, education, and social class by 28.1%, 48.7%, and 24.8%, respectively. Analyzing mechanisms, we find that the One-Child Policy boosted China’s intergenerational mobility by diminishing elite family heirship, concentrating resources for lower-income families, and decreasing returns to education. The One-Child Policy has brought about a significant socioeconomic reshuffle that has reshaped the role of China’s longstanding class solidification.
That is from a recent paper by Shanthi Manian, Qi Zhang, and Bin Zhao. Via Linghui Han. Might some similar results be true for any other low-fertility societies? Or are the environments too disparate?
The link between economic concentration and political power?
Our findings do not support the political antitrust movement’s central hypothesis that there is an association between economic concentration and the concentration of lobbying power. We do not find a strong relationship between economic concentration and the concentration of lobbying expenditure at the industry level. Nor do we find a significant difference between top firms’ and other firms’ allocation of additional revenues to lobbying. And we find no evidence that increasing economic concentration has appreciably restricted the ability of smaller players to seek political influence through lobbying. Ultimately, our findings show that the political antitrust movement’s claims do not rest on a solid empirical foundation in the lobbying context. Our findings do not allay all concerns about transformation of economic power into political power, but they show that such transformation is not straightforward, and they counsel caution about reshaping antitrust law in the name of protecting democracy.
Here is the recent paper by Sepehr Shahshahani and Nolan McCarthy. Via the excellent Kevin Lewis. And yes, yes I know there is much more here than just lobbying expenditures, but that it doesn’t show up in that area…isn’t supportive.
AI and economic liability
I’ve seen a number of calls lately to place significant liability on the major LLM models and their corporate owners, and so I cover that topic in my latest Bloomberg column. There are numerous complications, and I cover a mere smidgen of them, but still more analytics are needed here. Excerpt:
Imagine a bank robbery that is organized through emails and texts. Would the email providers or phone manufacturers be held responsible? Of course not. Any punishment or penalties would be meted out to the criminals…
In the case of the bank robbery, the providers of the communications medium or general-purpose technology (i.e., the email account or mobile device) are not the lowest-cost avoiders and have no control over the harm. And since general-purpose technologies — such as mobile devices or, more to the point, AI large language models — have so many practical uses, the law shouldn’t discourage their production with an additional liability burden.
Of course there are many more complications, and I am not saying zero corporate liability is always correct. But we do need to start with the analytics, and a simple fear of AI-related consequences does settle the matter. There is this:
On a more practical level, liability assignment to the AI service just isn’t going to work in a lot of areas. The US legal system, even when functioning well, is not always able to determine which information is sufficiently harmful. A lot of good and productive information — such as teaching people how to generate and manipulate energy — can also be used for bad purposes.
Placing full liability on AI providers for all their different kinds of output, and the consequences of those outputs, would probably bankrupt them. Current LLMs can produce a near-infinite variety of content across many languages, including coding and mathematics. If bankruptcy is indeed the goal, it would be better for proponents of greater liability to say so.
Here is a case where partial corporate liability may well make sense:
It could be that there is a simple fix to LLMs that will prevent them from generating some kinds of harmful information, in which case partial or joint liability might make sense to induce the additional safety. If we decide to go this route, we should adopt a much more positive attitude toward AI — the goal, and the language, should be more about supporting AI than regulating it or slowing it down. In this scenario, the companies might even voluntarily adopt the beneficial fixes to their output, to improve their market position and protect against further regulatory reprisals.
Again, not the final answers but I am imploring people to explore the real analytics on these questions.
The pro-immigration argument that everyone hates
Fortunately people hate it because it is wrong, otherwise they would have to hate it for less intellectually honest reasons. The basic context of course is that native rates of fertility are in irreversible decline. Here goes:
Immigration is not going so well today in terms of assimilation. Yet in the future it will go worse yet, because the native-borns will be smaller in number and also older and less energetic. Nonetheless we need to take in a lot of immigrants today, as a kind of practice, so we can get used to the much greater number of immigrants we will need to take in a generation or two from now. It is better to be a crummy country than a country of 33,000 people. And so we must become crummier now, so that later on our rise in crumminess is modestly tempered, though it still will happen. Open the gates!
See?
Ideas for regulating AI safety
Noting these come from Luke Muelhhauser, and he is not speaking for Open Philanthropy in any official capacity:
- Software export controls. Control the export (to anyone) of “frontier AI models,” i.e. models with highly general capabilities over some threshold, or (more simply) models trained with a compute budget over some threshold (e.g. as much compute as $1 billion can buy today). This will help limit the proliferation of the models which probably pose the greatest risk. Also restrict API access in some ways, as API access can potentially be used to generate an optimized dataset sufficient to train a smaller model to reach performance similar to that of the larger model.
- Require hardware security features on cutting-edge chips. Security features on chips can be leveraged for many useful compute governance purposes, e.g. to verify compliance with export controls and domestic regulations, monitor chip activity without leaking sensitive IP, limit usage (e.g. via interconnect limits), or even intervene in an emergency (e.g. remote shutdown). These functions can be achieved via firmware updates to already-deployed chips, though some features would be more tamper-resistant if implemented on the silicon itself in future chips.
- Track stocks and flows of cutting-edge chips, and license big clusters. Chips over a certain capability threshold (e.g. the one used for the October 2022 export controls) should be tracked, and a license should be required to bring together large masses of them (as required to cost-effectively train frontier models). This would improve government visibility into potentially dangerous clusters of compute. And without this, other aspects of an effective compute governance regime can be rendered moot via the use of undeclared compute.
- Track and require a license to develop frontier AI models. This would improve government visibility into potentially dangerous AI model development, and allow more control over their proliferation. Without this, other policies like the information security requirements below are hard to implement.
- Information security requirements. Require that frontier AI models be subject to extra-stringent information security protections (including cyber, physical, and personnel security), including during model training, to limit unintended proliferation of dangerous models.
- Testing and evaluation requirements. Require that frontier AI models be subject to extra-stringent safety testing and evaluation, including some evaluation by an independent auditor meeting certain criteria. [footnote in the original]
- Fund specific genres of alignment, interpretability, and model evaluation R&D. Note that if the genres are not specified well enough, such funding can effectively widen (rather than shrink) the gap between cutting-edge AI capabilities and available methods for alignment, interpretability, and evaluation. See e.g. here for one possible model.
- Fund defensive information security R&D, again to help limit unintended proliferation of dangerous models. Even the broadest funding strategy would help, but there are many ways to target this funding to the development and deployment pipeline for frontier AI models.
- Create a narrow antitrust safe harbor for AI safety & security collaboration. Frontier-model developers would be more likely to collaborate usefully on AI safety and security work if such collaboration were more clearly allowed under antitrust rules. Careful scoping of the policy would be needed to retain the basic goals of antitrust policy.
- Require certain kinds of AI incident reporting, similar to incident reporting requirements in other industries (e.g. aviation) or to data breach reporting requirements, and similar to some vulnerability disclosure regimes. Many incidents wouldn’t need to be reported publicly, but could be kept confidential within a regulatory body. The goal of this is to allow regulators and perhaps others to track certain kinds of harms and close-calls from AI systems, to keep track of where the dangers are and rapidly evolve mitigation mechanisms.
- Clarify the liability of AI developers for concrete AI harms, especially clear physical or financial harms, including those resulting from negligent security practices. A new framework for AI liability should in particular address the risks from frontier models carrying out actions. The goal of clear liability is to incentivize greater investment in safety, security, etc. by AI developers.
- Create means for rapid shutdown of large compute clusters and training runs. One kind of “off switch” that may be useful in an emergency is a non-networked power cutoff switch for large compute clusters. As far as I know, most datacenters don’t have this.[6] Remote shutdown mechanisms on chips (mentioned above) could also help, though they are vulnerable to interruption by cyberattack. Various additional options could be required for compute clusters and training runs beyond particular thresholds.
I am OK with some of these, provided they are applied liberally — for instance, new editions of the iPhone require regulatory consent, but that hasn’t thwarted progress much. That may or may not be the case for #3 through #6, I don’t know how strict a standard is intended or who exactly is to make the call. Perhaps I do not understand #2, but it strikes me as a proposal for a complete surveillance society, at least as far as computers are concerned — I am opposed! And furthermore it will drive a lot of activity underground, and in the meantime the proposal itself will hurt the EA brand. I hope the country rises up against such ideas, or perhaps more likely that they die stillborn. (And to think they are based on fears that have never even been modeled. And I guess I can’t bring in a computer from Mexico to use?) I am not sure what “restrict API access” means in practice (to whom? to everyone who might be a Chinese spy? and does Luke favor banning all open source? do we really want to drive all that underground?), but probably I am opposed to it. I am opposed to placing liability for a General Purpose Technology on the technology supplier (#11), and I hope to write more on this soon.
Finally, is Luke a closet accelerationist? The status quo does plenty to boost AI progress, often through the military and government R&D and public universities, but there is no talk of eliminating those programs. Why so many regulations but the government subsidies get off scot-free!? How about, while we are at it, banning additional Canadians from coming to the United States? (Canadians are renowned for their AI contributions.) After all, the security of our nation and indeed the world is at stake. Canada is a very nice country, and since 1949 it even contains Newfoundland, so this seems like less of an imposition than monitoring all our computer activity, right? It might be easier yet to shut down all high-skilled immigration. Any takers for that one?
The return of American immigration
Over the past two and a half years, immigration into the American labour market has increased by 4mn workers, and the working age immigrant population has now finally reached its pre-pandemic trend level.
More than 900,000 immigrants became US citizens during 2022 — the third highest level on record and the most in any fiscal year since 2008, according to Pew. The largest numbers came from Mexico, India, the Philippines and Cuba, and the highest growth in flows were from Cuba, Jamaica, the Philippines, India and Vietnam.
Bottom line — the US seems to be returning to pre-Trump, pre-pandemic rates of immigration.
Here is more from Rana Foroohart at the FT.
Misdemeanor Bail
In my comments at Brookings on bail I pointed out that:
In New York City (2008-2013) most of the people arrested had prior interactions with the criminal justice system. On average, each arrested person had 3.2 prior felony arrests and 5 prior misdemeanor arrests—convictions were considerably fewer than arrests, which suggests to me that the system isn’t convicting enough people. Interpretations may differ, but, in any case, the typical arrested person has been arrested multiple times previously.
…I think most Americans would be surprised and upset to learn that by far the majority of the arrestees are released prior to trial, 74% in total in NYC.
Moreover, the people who do not make bail are obviously not a random sample of arrestees—the people who do not make bail are on average more dangerous—they have twice as many arrests and twice as many convictions on average as those who are released. For example, the average defendant who doesn’t make bail has 6 previous felony arrests and 4 previous failures to appear.
These numbers are by no means unique to New York City. Across 34 states for which data could be collected, for example, the Bureau of Justice Statistics found that the average person sent to state prison in 2014 had 10.3 previous arrests (median 8) and 4.3 previous convictions (median 3)!
(These are not including the arrest and conviction that sent them to jail so add one to get to the figures in Table 6.)
At Brookings I continued with the obvious, yet controversial:
What is going on here seems pretty obvious to me. There is a group of people whose job is a crime. Thus, being arrested is simply part of their job and so after being arrested and released these people go back to work—it’s almost laudatory—they keep working until finally an arrest results in a conviction and they spend some time behind bars.
As Tyler noted yesterday, The NYTimes has a piece on some of the extreme versions of this basic fact.
Nearly a third of all shoplifting arrests in New York City last year involved just 327 people, the police said. Collectively, they were arrested and rearrested more than 6,000 times, Police Commissioner Keechant Sewell said. Some engage in shoplifting as a trade, while others are driven by addiction or mental illness; the police did not identify the 327 people in the analysis.
These, by the way, are just criminals who are repeatedly caught. The problem is much bigger:
…By the end of 2022, the theft of items valued at less than $1,000 had increased 53 percent since 2019 at major commercial locations, according to a new analysis of police data by researchers at the John Jay College of Criminal Justice…..Only about 34 percent resulted in arrests last year, compared with 60 percent in 2017.
The way bail reformers like to frame the issue of eliminating cash bail is to point to a misdemeanor case and say ‘look this ordinary person was denied bail because of a misdemeanor!’ In fact, what is going on is that judges are dealing with serial offenders–they are setting high bail rates for those who have already failed to appear on multiple previous misdemeanor charges. Eliminating cash bail for misdemeanors is one of those policies which sounds reasonable on its face but in practice it leads to shoplifters who have already been arrested 20 times being arrested and released again. The issue of “unaffordable bail” is also misleading. Judges set high bail amounts for a reason!
I am not against reform. As I wrote in 2018 in We Cannot Avoid the Ugly Tradeoffs of Bail Reform:
Sometimes poor people are unfairly held until trial. Eliminating money bail, however, is a crude and dangerous approach to this problem. Instead we should deal with it directly by flagging and reevaluating jailed, non-violent offenders with low bail amounts, use alternative release measures such as ankle bracelets and most importantly, we should look to the constitution. The founders understood the ugly tradeoffs which is why the constitution guarantees the right to a “speedy trial.” Unfortunately, that right today is widely ignored. My route to reform would begin by putting teeth back into the constitutional right to a speedy trial.
New York City fact of the day
Nearly a third of all shoplifting arrests in New York City last year involved just 327 people, the police said. Collectively, they were arrested and rearrested more than 6,000 times, Police Commissioner Keechant Sewell said. Some engage in shoplifting as a trade, while others are driven by addiction or mental illness; the police did not identify the 327 people in the analysis.
The victims are also concentrated: 18 department stores and seven chain pharmacy locations accounted for 20 percent of all complaints, the police said.
Here is more from the NYT, via Anecdotal. Perhaps policy is slightly suboptimal here…?
Anarchy in South Africa
Public services such as police, fire, and traffic control in South Africa are breaking down. Private firms are stepping in to take some of the burden. Twenty two percent of Johannesburg’s fire engines are owned and operated by private firms.
Fire Ops employs more than 60 firefighters across seven fire stations in Johannesburg and owns two fire engines—including one now sporting the same shade of blue Discovery uses for its logo and much of its branding—as well as six smaller high-pressure-pump response vehicles.
Discovery says the blue firetruck responded to 172 building fires between Fire Force’s launch through the end of January.
Mr. Ossip said the Discovery-branded truck promotes the insurer’s brand and lowers damages, including to multimillion-dollar homes in some of Johannesburg’s toniest areas. “You need to just save one or two of those a year and it is substantial savings,” he said.
The service helps alleviate a shortage of operational fire engines in Johannesburg, a spread-out city of more than 5.5 million residents, in situations where minutes can make the difference between a blaze limited to a couple of rooms and one that destroys an entire house or spreads to neighboring homes.
Robert Mulaudzi, a spokesman for the City of Johannesburg Emergency Management Services, said the city currently has about seven operational fire engines across 30 fire stations.
…Fire Ops, which invoices buildings’ owners for fire services, says that while it responds to all calls, it will give priority to clients, including Discovery policyholders, when simultaneous fires break out. Other insurers usually pick up the bill when the company puts out a fire in a home not insured by Discovery, said De Wet Engelbrecht, Fire Ops’s chief executive.
In 19th century Great Britain prosecution assocations and insurance firms were responsible for much of the policing (see Stephen Davies in The Voluntary City.) In Lessons from Gurgaon, India’s Private City (working paper) Shruti Rajagopolan and I discuss private police and fire services in modern day Gurgaon. In general, the private firms provide excellent service relative to their public counterparts but, as in Gurgaon, there are limits to how much the private firms can do without large economies of scale:
…Fire Ops also has to navigate public infrastructure that doesn’t always work, including traffic lights, fire hydrants and municipal water supplies….In September, both Fire Ops and the city’s fire department responded to a blaze at Little Forest Centre, a private special-needs school in Johannesburg, but a water shortage in the area meant all fire hydrants were empty, said Kate More, the school’s owner and principal, who isn’t a Discovery policyholder.
Despite Fire Ops sourcing water from a neighbor’s pool, the school burned down.
Addendum: In unrelated news, just one year after its grand opening Whole Foods is closing its downtown San Francisco store because they can’t ensure the safety of their employees.
The case for nurse practitioners
Many states have recently changed their scope of practice laws and granted full practice authority to nurse practitioners, allowing them to practice without oversight from physicians. Physician groups have argued against this change, citing patient safety concerns. In this paper, we use a ratio-in-ratio approach to evaluate whether the transition to full practice authority results in harm to patients as proxied by rates of malpractice payouts and adverse action reports against nurse practitioners. We find no evidence of such harm, and instead find that physicians may benefit from the law change in terms of reduced malpractice payouts against them.
That is from a new NBER working paper by Sara Markowitz and Andrew J.D. Smith.