Category: Uncategorized

Stripe economics of AI fellowship

by  Tyler Cowen in

The economics of AI remains surprisingly understudied, even as technical progress in artificial intelligence continues rapidly. The Stripe Economics of AI Fellowship aims to help fill that gap by supporting foundational academic research in the area.

We invite graduate students and early-career researchers who are interested in studying the economics of AI to apply, regardless of prior experience. Fellows receive a grant of at least $10k, participate in conferences with leading economists and technologists, and have the potential to access unique data via Stripe and its customers. Our initial cohort will include 15-20 fellows, and will form the foundation of a community at the bleeding edge of economic research.

The link has further information, here is the tweet thread from the excellent Basil Halperin.

Is a VAT an export subsidy?

by  Tyler Cowen in

Here is a good post by Brian Albrecht, he works through the logic.  A VAT, properly understood, does not favor say European producers over American producers.  Work through his example if you don’t see this right away.  In this sense the pro-tariff “fairness” arguments are quite wrong.  Yet I am not entirely convinced by the rebuttals.  If you compare “the European expoter market position” to “the American exporter market position” it is correct that parity of treatment holds.

But there is another way to pose the question and that is “should the resources in the EU be allocated toward export, or not?”  And then exports are VAT-free, and within-EU sales generally are not VAT-free.  So there is an encouragement to exports here.  America has sales taxes, but VAT rates usually are higher.  Thus you can say that Europe does more to encourage exporters than does the United States.  Of course you can say the same about many other European government interventions.  Germany’s notorious Sunday closing laws also encourage more exports.  Send it to the US, and let it be sold on a Sunday, bitte!  (Just not in Paramus, NJ.)

From an American point of view, I don’t think anything is wrong with this kind of “export subsidy” (and that is not how I would describe it in a first-order sense, but we are steelmanning here).  We get more German goods because they keep their shops closed on Sundays.  Good for us, Alex nails the bottom line.  Note that every time we liberalize and improve some part of the American economy, the “net European subsidy to exports” goes up.  We want to keep on doing that, not its opposite.

It perhaps would be helpful if the people on the free trade side of the debate recognized this point a little more explicitly.

Where do stock market returns come from?

by  Tyler Cowen in

Here is a new and sure to be controversial piece from the JPE:

Why does the stock market rise and fall? From 1989 to 2017, the real per capita value of corporate equity increased at a 7.2% annual rate. We estimate that 40% of this increase was attributable to a reallocation of rewards to shareholders in a decelerating economy, primarily at the expense of labor compensation. Economic growth accounted for just 25% of the increase, followed by a lower risk price (21%) and lower interest rates (14%). The period 1952–88 experienced only one-third as much growth in market equity, but economic growth accounted for more than 100% of it.

That is by Daniel L. Greenwald, Martin Leftau, and Sydney C. Ludvigson.  Of course in more recent times it is tech stocks that have done very well, and they also tend to elevate pay standards.

Dean Ball on “how it will be”

by  Tyler Cowen in

Your daily life will feel more controllable and legible than it does now. Nearly everything will feel more personalized to you, ready for you whenever you need it, in just the way you like it. This won’t be because of one big thing, but because of unfathomable numbers of intelligent actions taken by computers that have learned how to use computers. Every product you buy, every device you use, every service you employ, will be brought to you by trillions of computers talking to themselves and to one another, making decisions, exercising judgments, pursuing goals.

At the same time, the world at large may feel more disordered and less legible. It is hard enough to predict how agents will transform individual firms. But when you start to think about what happens when every person, firm, and government has access to this technology, the possibilities boggle the mind.

You may feel as though you personally, and “society” in general, has less control over events than before. You may feel dwarfed by forces new and colossal. I suspect we have little choice but to embrace them. Americans’ sense that they have lost control will only be worsened if other countries embrace the transformation and we lag behind.

Here is the full post.

That was then, this is now

by  Tyler Cowen in

This year is likely to be remembered for the Covid-19 pandemic and for a significant presidential election, but there is a new contender for the most spectacularly newsworthy happening of 2020: the unveiling of GPT-3. As a very rough description, think of GPT-3 as giving computers a facility with words that they have had with numbers for a long time, and with images since about 2012…

The eventual uses of GPT-3 are hard to predict, but it is easy to see the potential. GPT-3 can converse at a conceptual level, translate language, answer email, perform (some) programming tasks, help with medical diagnoses and, perhaps someday, serve as a therapist. It can write poetry, dialogue and stories with a surprising degree of sophistication, and it is generally good at common sense — a typical failing for many automated response systems. You can even ask it questions about God.

…It also has the potential to outperform Google for many search queries, which could give rise to a highly profitable company.

…It is not difficult to imagine a wide variety of GPT-3 spinoffs, or companies built around auxiliary services, or industry task forces to improve the less accurate aspects of GPT-3. Unlike some innovations, it could conceivably generate an entire ecosystem.

That was the opening paragraph of my 2020 Bloomberg column on GPT-3.

Thursday assorted links

by  Tyler Cowen

1. The people who still use typewriters.

2. “Vaccine skeptic hired to head federal study of immunizations and autism.”

3. David Perell on AI and writing.

4. Paralysed man stands again after receiving ‘reprogrammed’ stem cells.

5. Modeling how the military and the media interact.  An underdiscussed topic.

6. How baseball analytics are keeping pitchers from true greatness (NYT).

Why LLMs are so good at economics

by  Tyler Cowen in

I can think of a few reasons:

At least for the time being, even very good LLMs cannot be counted on for originality.  And at least for the time being, good economic reasoning does not require originality, quite the contrary.

Good chains of reasoning in economics are not too long and complicated.  If they run on for very long, there is probably something wrong with the argument.  The length of these effective reasoning chains is well within the abilities of the top LLMs today.

Plenty of good economics requires a synthesis of theoretical and empirical considerations.  LLMs are especially good at synthesis.

In economic arguments and explanations, there are very often multiple factors.  LLMs are very good at listing multiple factors, sometimes they are “too good” at it, “aargh! not another list, bitte…”

Economics journal articles are fairly high in quality and they are generally consistent with each other, being based on some common ideas such as demand curves, opportunity costs, gains from trade, and so on.  Odds are that a good LLM has been trained “on the right stuff.”

A lot of core economics ideas are “hard to see from scratch,” but “easy to grasp once you see them.”  This too plays to the strength of the models as strong digesters of content.

And so quality LLMs will be better at economics than many other fields of investigation.

Rethinking regulatory fragmentation

by  Tyler Cowen in

Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government’s official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. Fragmentation increases the firm’s costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry and increases the propensity of small firms to exit. These effects arise from redundancy and, more prominently, from inconsistencies between government agencies. Our results uncover a new source of regulatory burden, and we show that agency costs among regulators contribute to this burden.

That is from a new paper by Joseph Kalmenovitz, Michelle Lowry, and Ekaterina Volkova, forthcoming in Journal of Finance.  Via the excellent Kevin Lewis.

China fact of the day

by  Tyler Cowen in

Buried in China’s latest government budget were some numbers that add up to an alarming trend. Tax revenue is dropping.

The decline means that China’s national government has less money to address the country’s serious economic challenges, including a housing market crash and the near bankruptcy of hundreds of local governments…

Tax revenue fell further last year than ever before…Overall tax revenue fell 3.4 percent last year.

…Fitch Ratings calculates that overall revenue for the national and local governments — including taxes and land sales — totaled 29 percent of the economy’s output as recently as 2018. But this year’s budget indicates that overall revenue will be just 21.1 percent of the economy in 2025.

Roughly half of the decline comes from plummeting revenue from land sales, a well-documented problem related to the housing-market crash, but the rest comes from weakness in tax revenue, a new problem.

That adds up to a huge sum of money. If overall revenue had kept up with the economy over the past seven years, the Chinese government would have another $1.5 trillion to spend in 2025.

China announced this month that it would allow its official target for the budget deficit to increase to 4 percent this year, after trying to keep it near 3 percent ever since the global financial crisis in 2009. But analysts say the true deficit is already much larger, because China is quietly counting a lot of long-term borrowing as though it were tax revenue.

Comparing spending only with actual revenue, without the borrowing, the Finance Ministry’s budget shows a deficit equal to almost 9 percent of the economy. In 2018, it was only 3.2 percent…

Income taxes collected from individuals were 7.5 percent below expectations last year, the Finance Ministry said in its budget.

Good thing they still are growing at five percent!  Here is more from Keith Bradsher at the NYT.

Monday assorted links

by  Tyler Cowen

1. Is YouTube why Herbie Hancock has not made an album in so long?

2. Often you need only one person with the AI.  And the demand for translators is falling.

3. Willingness to be paid.

4. Speculative claims about AI tutoring.

5. The peso in Argentina is now quite overvalued, and this is a dangerous situation.  And more from the FT.

6. In which areas are young people getting better, or not?

7. The economics of healthcare fraud.