Jefferson’s DOGE (that was then, this is now)
Jefferson swiftly undid twelve years of Federalism. He allowed the Sedition Act to expire and adopted a more catholic naturalization law. He reduced the federal bureaucracy — small even by today’s standards — particularly in the Treasury Department (a slap at Hamilton, who had been Secretary under Washington), slashing the number of employees by 40 percent and eliminating tax inspectors and collectors altogether. He cut the military budget in half, which was then 40 percent of the overall federal budget. He eliminated all federal excise taxes, purging the government of what he called Hamilton’s “contracted, English, half-lettered ideas.” Reluctantly he kept the First Bank of the United States, but paid off nearly half the national debt. “No government in history,” the historian Gordon S. Wood has observed, “had ever voluntarily cut back on its authority.”
That is from the new and very good book Martin van Buren: America’s First Politician, by James M. Bradley. Later things were different:
Martin van Buren went into office deermined to avoid Andrew Jackson’s fateful staffing mistakes. The backbiting and intrigue wasted two years of Jackson’s presidency. This van Buren could not afford.
And a wee bit later:
Then the voters had their say. The November elections in New York were an absolute bloodbath for the Democrats. There were 128 elections for assembly in 1837, and the Whigs won 101 of them.
The book is well-written.
*Goethe: A Faustian Life*
By A.N. Wilson, an excellent book and worthy of being addended to the year’s best non-fiction list. In addition to appreciating the work of Goethe, which one can never do enough of, Wilson argues (with reasonable evidence) that Goethe was bisexual, including with Jacobi (!). Goethe also had, at the very least, alcoholic tendencies, at times drinking three bottles a day for extended periods of time.
Of course there are the extensive Nicholas Boyle volumes (in the works) as well, fortunately you do not have to choose. Recommended, noting that many of Goethe’s best works make sense only in German. Here is a Henry Oliver podcast with Wilson.
Stephen Miran nominated to head the CEA
Here is Stephen on Twitter, Harvard PhD, mostly he has been in the private sector. The NYT has further information.
Via Jon Hartley.
Sunday assorted links
1. FT lunch with Abhijit Banerjee. And his new book.
2. It seems Niall Ferguson has converted to Christianity?
3. Irish video warning California about its housing policies.
4. “Rwanda, Ethiopia, Ivory Coast and Tanzania, for example, are projected to grow by at least 6%.”
5. All We Imagine as Light is an excellent movie.
One thing I have learned doing Emergent Ventures
As you likely know, we have sent money to quite a few different individuals in different countries around the world. And one thing I have learned is that there really are legitimate payments uses for crypto. Very often international payments simply do not work that well. We do not use crypto for this purpose, but matters would go more smoothly if we could. That would require everyone to be in crypto networks, similar to how most people today are in banking networks. I do understand there are possible trade-offs with money laundering and criminality and the like, but it is silly not to recognize the significant potential gains here.
Artificial Intelligence in the Knowledge Economy
The rise of Artificial Intelligence (AI) has the potential to fundamentally reshape the knowledge economy by solving problems at scale. This paper introduces a framework to study this transformation, incorporating AI into an economy where humans form hierarchical firms: Less knowledgeable individuals become “workers” solving routine problems, while more knowledgeable individuals become “solvers,” assisting workers with exceptional problems. We model AI as a technology that transforms computing power into “AI agents,” which can either operate autonomously (as co-workers or solvers/co-pilots) or non-autonomously (only as co-pilots). We show that basic autonomous AI displaces humans towards specialized problem solving, leading to smaller, less productive, and less decentralized firms. In contrast, advanced autonomous AI reallocates humans to routine work, resulting in larger, more productive, and more decentralized firms. While autonomous AI primarily benefits the most knowledgeable individuals, non-autonomous AI disproportionately benefits the least knowledgeable. However, autonomous AI achieves higher overall output. These findings reconcile seemingly contradictory empirical evidence and reveal key tradeoffs involved in regulating AI autonomy.
Important results, and largely in accord with my own intuitions. That is from a new paper by Enrique Ide and Eduard Talamas.
The show so far, DOGE edition
Round one is over, and so far no progress and indeed steps backwards:
President-elect Donald Trump’s last-minute demands for a congressional funding package were rejected by dozens of Republicans this week, foreshadowing the legislative challenges he could face next year — even with unified GOP control.
The Republicans also revealed they are not willing to shut down the government, and they do not have such a stable coalition in the House, and that is even before they lose some number of seats.
The package that passed the House includes more than $110 billion in disaster aid and a one-year farm bill extension but is stripped of Trump’s demand: a debt limit extension.
There was not an actual substantive win in the final outcome. Not surprisingly, the Democrats are touting it as a win for the Democrats.
And here Vivek concedes the loss.
I very much hope DOGE makes progress on its key issues — excess regulation and spending — but political change is tough and requires some highly unusual and idiosyncratic skills. Keep also in mind that while Trump has a mandate to attack Woke and secure the border, voters seem far less excited by cutting back on government spending and regulation (if anything the opposite?). Government spending is what “makes Washington go round,” and Reps love it, no matter what they may say in some of their more manufactured moments. So DOGE strategy will need to adjust accordingly.
Saturday assorted links
2. The impact of new products on ethical beliefs.
3. Speculative claims about the new economics of open source AI.
4. BBC interviews me about Milei.
5. Grok rates the top economists on X. This seems better than AGI, right? Four of the top tier are GMU-affiliated.
6. A lengthy Scott Sumner post on inflation dynamics. Here is commentary from o1 pro.
AI is Not Slowing Down, Except for Stop Lights
After 25.3 million fully autonomous miles a new study from Waymo and Swiss Re concludes:
[T]he Waymo ADS significantly outperformed both the overall driving population (88% reduction in property damage claims, 92% in bodily injury claims), and outperformed the more stringent latest-generation HDV benchmark (86% reduction in property damage claims and 90% in bodily injury claims). This substantial safety improvement over our previous 3.8-million-mile study not only validates ADS safety at scale but also provides a new approach for ongoing ADS evaluation.
As you may also have heard, o3 is solving 25% of Frontier Math challenges–these are not in the training set and are challenging for Fields medal winners. Here are some examples of the types of questions:
Thus, we are rapidly approaching super human driving and super human mathematics.
Stop looking to the sky for aliens, they are already here.
Incarceration sentences to ponder
My analysis reveals a significant change in political beliefs since being incarcerated. There is an increased effect of changing political beliefs for women and people of color incarcerated. The effect reveals that people of color are becoming, either for the first time or further aligned, with the Republican Party since being incarcerated.
That is from researcher Hope Martinez. And here is the explanation for the mechanism:
The experience of violence and abuse while incarcerated extends the tools of white supremacy in the prison system by influencing feelings of shame, hopelessness, and cultural inferiority, further aligning vulnerable groups to conservatism and whiteness.
Via tekl.
What is wrong with the NBA?
That is the topic of my latest Bloomberg column, here is one hypothesis:
The NBA has a salary cap, which prevents teams in major markets, such as the Los Angeles Lakers or New York Knicks, from snapping up all the talent.1 An unfortunate side effect it that is harder for all teams to bid for additional players, or to keep the ones they have. Even when the total amount of the cap goes up, adding more talent at the margin has become increasingly costly in terms of penalties. It is becoming more difficult to form and maintain durable great teams, which makes it harder to elevate new superstars, which is what many fans want.
Think about a casual fan’s impressions of the NBA. They have heard of Michael Jordan and LeBron James, and maybe watched them play or even seen their movies. They know they are two of the all-time greats. The 27th-best player over the that same time span — whoever it may be — is extremely accomplished, but does not attract anything close to the same attention. Superstars are what the game and its popularity are about, most of all with the marginal fans who do not know every player.
It is not surprising that one of the best-known players today, with more than 8 million Instagram followers, is Bronny James, son of LeBron. Bronny has barely played in the NBA and is far from a star; his popularity stems from his family story.
Jordan won six rings and LeBron four, but who is to follow in their footsteps and be the game’s marquee player? One candidate was Nikola Jokic, center for the Denver Nuggets and three-time MVP. Given his extraordinary statistics, he is in the running to be MVP again this year.
His team is another story. The Nuggets won an NBA title in 2023, but since then they have been in free fall. They let some of their key rotation players leave, most of all because of the salary cap. If they had kept those players around, or brought in star replacements, the Nuggets would have had to pay large fines to the league. Denver is a relatively small basketball market, so it made more sense to let the players walk. Jokic thus might retire with only one ring, when he could have three or four and become a truly iconic star.
And this is important:
Of course, there are also problems with the product itself. Regular-season games don’t mean very much, and the median outing is too often mediocre. Optimizing players no longer give their best in these settings. Due to basketball analytics, too many three-point shots are taken. What was originally a source of excitement has become routinized and predictable. And perhaps American fans don’t relate as well to the growing number of foreign players and stars.
Worth a ponder.
The new o3 model from OpenAI
Some more results. And this:
Yupsie-dupsie, delivery of this:
Happy holidays people, hope you are enjoying the presents!
Recreating the past isn’t easy (but is possible)
Hidden above the stone vaults of Notre-Dame de Paris, the 13th-century timber structure that once supported the cathedral’s steep lead roof was so extensive it was known as “the forest”. When the cathedral caught fire in 2019, the flames spread quickly through the lattice of oak beams, each one hewn from an individual tree by medieval carpenters. Around two-thirds of the roof was destroyed in the blaze.
By March 2024, the entire roof frame—la charpente in French—had been identically reconstructed by a small army of 21st-century carpenters trained in the traditional technique of working freshly harvested “green wood” by hand with an axe. (This time, however, the frame is protected against fire risks by an automatic misting system, thicker roof battens and fire-resistant trusses separating the spire from the nave and choir on either side of it.)
After generations of mechanisation, this ancient skill had almost disappeared in France when an association called Charpentiers Sans Frontières (Carpenters Without Borders) began promoting its revival in 1992. The movement’s workshops now attract volunteers from around the world. Among their members are father and son Rémy and Loïc Desmonts, whose specialist family business in Normandy shared the winning bid to restore Notre-Dame’s charpente with Ateliers Perrault, a large carpentry company near Angers with a track record of restoring historic monuments.
Friday assorted links
1. Andrew Batson reading from 2024.
2. On how to test more drugs (DOGE take note).
3. America is suddenly getting healthier. Very much an overlooked point. And: “Higher labor supply in the US accounts for 2 to 3 percentage points in extra health expenditure as a share of GDP and between 10% and one-third of the American health disadvantage.” Link here.
4. Only Oliver Williamson can stop James Bond (WSJ).
5. GMU’s youngest graduate ever has a 4.0 and plays cricket.
6. Security clearance only markets in everything, CIA gift shop edition (WSJ). I didn’t buy anything there, but yes there is CIA barbecue sauce.
From this post on chip export bans:
That seems to be the real Scott from the IP address and his knowledge of our conversation. Plus it sounds like Scott (apologies if it is not!).
I would say this: since I chatted with Scott I took a very instructive and positive trip to United Arab Emirates. I am very impressed by their plans to put serious energy power behind AI projects. If you think about it, they have a major presence in three significant energy sources: fossil fuels, solar (more to come), and nuclear (much more to come). They also are not so encumbered by NIMBY constraints, whereas some of the American nuclear efforts have in the meantime met with local and regional stumbling blocks. There really is plenty of empty desert there.
So I think America has a great chance to work with UAE on these issues. I do understand there are geopolitical and other risks to such a collaboration, but I think the risks from no collaboration are greater.
This short tale is a good example of the benefits of travel.
And if you can get to Abu Dhabi, I urge you to go. In addition to what I learned about AI, I very much enjoyed their branch of the Louvre, with its wonderful Greek statue and Kandinsky, among other works, not to mention the building itself. The Abrahamic Family House, on a plaza, has a lovely mix of mosque, church, and synagogue, the latter of course being politically brave and much needed in the Middle East. Here is Rasheed Griffith on Abu Dhabi.