How weird will AI culture get?
That is the topic of my latest Bloomberg column. Here is one excerpt:
To the extent there is a lot of slack [with cost and energy], AIs themselves will create wild products of the imagination, especially as they improve in computing power and skill. AIs will sing to each other, write for each other, talk to each other — as they already do — trade with each other, and come up with further alternatives we humans have not yet pondered. Evolutionary pressures within AI’s cultural worlds will determine which of these practices spread.
If you own some rights flows to AI usage, you might just turn them on and let them “do their thing.” Many people may give their AIs initial instructions for their culture-building: “Take your inspiration from 1960s hippies,” for example, or “try some Victorian poetry.” But most of the work will be done by the AIs themselves. It is easy to imagine how these productions might quickly become far more numerous than human-directed ones.
With a lot of slack, expect more movies and video, which consume a lot of computational energy. With less slack, text and poetry will be relatively cheaper and thus more plentiful.
In other words: In the not-too-distant future, what kind of culture the world produces could depend on the price of electricity.
It remains to be seen how much humans will be interested in these AI cultural productions. Perhaps some of them will fascinate us, but most are likely to bore us, just as few people sit around listening to whale songs. But even if the AI culture skeptics are largely correct, the sheer volume will make an impact, especially when combined with evolutionary refinement and more human-directed efforts. Humans may even like some of these productions, which will then be sold for a profit. That money could then be used to finance more AI cultural production, pushing the evolutionary process in a more popular direction.
With high energy prices, AI production will more likely fit into popular culture modes, if only to pay the bills. With lower energy prices, there will be more room for the avant-garde, for better or worse. Perhaps we would learn a lot more about the possibilities for 12-tone rows in music.
A weirder scenario is that AIs bid for the cultural products of humans, perhaps paying with crypto. But will they be able to tolerate our incessant noodling and narcissism? There might even be a columnist or two who makes a living writing for AIs, if only to give them a better idea what we humans are thinking.
The possibilities are limitless, and we are just beginning to wrap our minds around them. The truth is, we are on the verge of one of the most significant cultural revolutions the world has ever seen.
I urge the skeptics to wait and see. Of course most of it is going to be junk!
Los Angeles area meet-up for CWT fans
Here is the link, hope to see you there! October 16, and you do need to pre-register.
Thursday assorted links
1. “I’d like to see an AI future that focuses on what makes a great teaching interface, what makes users pay attention, and will make more people better learners. Until then, UATX is the only startup I see putting the human interface first.” Link here.
2. Indian student builds the world’s smallest vacuum cleaner, using a pen.
3. Why can’t the U.S. still build ships? This one is by Brian Potter, but I hope Noah’s practice of “keep on going and always get better” is an example to you all! Noah, like many of us, started off as “just some guy,” and now he is one of the most influential economics commentators.
4. Even for Oasis, supply is elastic (and we hope that holds up). And here is some more supply elasticity, there is more of this than many people realize. No update on this one is required from me, but many should update quite a bit.
*Self-Help is Like a Vaccine*, by Bryan Caplan
This is one of the best and most correct self-help books. Bryan describes it as follows:
I’ve been writing economically-inspired self-help essays for almost two decades, Self-Help Is Like a Vaccine compiles the most helpful 5-7% of my advice.
Of Bryan’s recent string of books, this is the one I agree with the most. Bryan offers some further description:
Like my other books of essays, Self-Help Is Like a Vaccine is divided into four parts.
- The first, “Unilateral Action,” argues that despite popular nay-saying and “Can’t-Do” mentalities, you have a vast menu of unexplored choices. Where there’s a will, there’s a way. While most “minorities of one” are fools, cautious experimentation and appreciation of good track records, not conformism, is the wise response.
- The next section, “Life Hacks,” offers a bunch of specific suggestions for improving your life. Only one hack has to work out to instantly justify your purchase of the book.
- “Professor Homeschool” brings together all of my best pieces on teaching my own kids. I have over a decade’s experience: I taught the twins for grades 7-12, all four kids for Covid, and my 10th-grader is working one room away from me as I write. Except during Covid, homeschooling is a fair bit of extra work, but if you’re still curious, I’ve got a pile of time-tested advice.
- I close the book with “How to Dale Carnegie.” As you may know, I’m a huge fan of his classic How to Win Friends and Influence People. Not because I’m naturally a people-pleaser; I’m not. But with Dale’s help, I have managed to make thousands of friends all over the planet. Few skills are more useful, both emotionally and materially.
You can buy the book here.
Solving for optimum U.S. fertility
In this post, we show that under the median estimated elasticity the socially optimal fertility rate is 2.4 in the US, well above today’s 1.7, given that the US should place a value of 14.28x GDP per additional birth ($1.17mn per birth). Furthermore, to achieve this, the US should be willing to spend the equivalent of 3.8% of its GDP ($290K per birth) per birth. For context, the existing child tax credit is worth $2000/year, or $26K present value. We’d like to stress that these figures are highly uncertain, because of both the varying welfare gain from more births, and also varying estimates of how effective subsidising births are. Even still, in the main case, the US government should seriously consider greatly increasing its child tax credits, and explore more creative and ambitious solutions to address this looming demographic crisis.
Here is more from Duncan McClements and Jason Hausenloy. Obviously various assumptions can be debated here…
My excellent Conversation with Philip Ball
Here is the audio, video, and transcript. Here is part of the episode summary:
Tyler and Philip discuss how well scientists have stood up to power historically, the problematic pressures scientists feel within academia today, artificial wombs and the fertility crisis, the price of invisibility, the terrifying nature of outer space and Gothic cathedrals, the role Christianity played in the Scientific Revolution, what current myths may stick around forever, whether cells can be thought of as doing computation, the limitations of The Selfish Gene, whether the free energy principle can be usefully applied, the problem of microplastics gathering in testicles and other places, progress in science, his favorite science fiction, how to follow in his footsteps, and more.
Here is one excerpt, namely the opening bit:
TYLER COWEN: Hello, everyone, and welcome back to Conversations with Tyler. Today I’ll be chatting with Philip Ball. I think of Philip this way. We’ve had over 200 guests on Conversations with Tyler, and I think three of them, so far, have shown they are able to answer any question I might plausibly throw their way. Philip, I believe, is number four. He’s a scientist with degrees in chemistry and physics. He’s written about 30 books on different sciences. Both he and I have lost count.
He was an editor at Nature for about 20 years. His books cover such diverse topics as chemistry, physics, the history of experiments, social science, color, the elements, water, water in China, Chartres Cathedral, music, and more. But most notably, he has a new book out this year, a major work called How Life Works: A User’s Guide to the New Biology. Philip, welcome.
PHILIP BALL: Thank you, Tyler. Lovely to be here.
COWEN: What is the situation in history where scientists have most effectively stood up to power, not counting Jewish scientists, say, leaving Nazi Germany or the Soviet Union?
BALL: Gosh, now there’s a question to start with. Where they have most effectively stood up to power — this is a question that I looked at in a book (it must be about 10 years old now) which looked at the response of German physicists during the Nazi era to that regime. I’m afraid my conclusion was, the response was really not very impressive at all.
On the whole, the scientists acquiesced to what the regime wanted them to do. Very few of them were actively sympathetic to the Nazi party, but they mounted no real effective opposition whatsoever. I’m afraid that looking at that as a case study, really, made me realize that it’s actually very hard to find any time in history where scientists have actively mounted an effective opposition to that kind of imposition of some kind of ideology, or political power, or whatever. History doesn’t give us a very encouraging view of that.
That said, I think it’s fair to say, science is doing better these days. I think there’s a recognition that at an institutional level, science needs to be able to mobilize its resources when it’s threatened in this way. I think we’re starting to see that, certainly, with climate change. Scientists have come under fire a huge amount in that arena. I think there’s more institutional understanding of what to do about that. Scientists aren’t being so much left to their own devices to cope as best they can individually.
But I think that there’s this attitude that is still somewhat prevalent within science, that’s a bit like, “We’re above that.” This is exactly what some of the German physicists, particularly Werner Heisenberg, said during the Nazi regime, that science is somehow operating in a purer sphere, and that it’s removed from all the nastiness and the dirtiness that goes on in the political arena.
I think that that attitude hasn’t gone completely, but I think it needs to go. I think scientists need to get real, really, about the fact that they are working within a social and political context that they have to be able to work with, and to be able to — when the occasion demands it — take some control of, and not simply be pushed around by.
That, I think, is something that can only happen when there are institutional structures to allow it to happen, so that scientists are not left to their own individual devices and their own individual sense of morality to do something about it. I’m hoping that science will do better in the future than it’s done in the past.
COWEN: Which do you think are the power structures today that current scientists, say in the Anglo world, are most in thrall to?
Recommended, there are numerous topics of interest. I also asked GPT how much money it could earn if it had the powers of Wells’s Invisible Man.
Cosmos Institute
Announced today, here is the website: “A network of thinkers and builders advancing human flourishing in the AI era.”
Here is a tweet storm from Brendan McCord. Here is the video and Substack post.
Wednesday assorted links
1. Nabeel Qureshi on adapting to the AI revolution.
2. Patrick Wolff on San Francisco YIMBY.
4. Rothko Chapel in Houston to close indefinitely, and the Pergamon Museum in Berlin may not reopen until 2043. We are a bit asleep on some of these heritage issues. Low-quality institutions are not merely a cause of stasis, rather decline sets in at some point. I know the Rothko piece cites “climate change,” and while that is a real problem, isn’t that, in this context, simply a shorthand for “we ran out of money”?
More on taxing unrealized capital gains (from my email)
No double indent, from the excellent Matthew Lilley:
“Hi Tyler,
I thoroughly agree with both of you on taxing unrealised capital gains.
I am intrigued though by Furman’s rejoinder of “why are you guys opposed to broader and flatter taxes?” Except for loopholes like step-up basis (just fix those directly), how is taxing unrealised capital gains “broader”? It’s not like two different classes of consumption goods or income, with some being exempted, like taxing apples but leaving bananas tax-free. Every dollar of unrealised capital gains eventually either disappears or becomes a dollar of realised capital gains (and every dollar of realised presumably starts unrealised). Either it’s essentially no broader at all, or the increased breadth comes from transitory gains. And why should the latter ever be taxed? (Aside from being deeply unfair, in equilibrium, this penalises high-variance investments. Why should we desire to do that?) Additionally, it means taxing unrealised capital gains is mostly a way for governments to get their hands on tax revenue now rather than later (and thankfully governments are reliably good stewards with money windfalls), and perhaps create the vibe of sticking it to billionaires.
Furman’s response is as if you can just say “broader and flatter” as a self-evident argument, without it being clear remotely what this substantively means. Why not pay taxes on unrealised labor income – sounds broader to me? (If not, why not?) And when should you pay? At birth? When they give you your SAT results? When you receive the Harvard admission or tenured employment letter?
Of course this is sarcastic, but there is a grain of truth here. In an early stage startup, a huge proportion of the implicit value is uncompensated future labor value. (In fact, one argument given for taxing capital gains more like labour income is that a lot of capital gains is indeed just delayed founder labour income etc). The raw idea has value, sure, but most of the startup value disappears if everyone in the organisation quits for some reason and you try to just “sell the idea off”, and that person-specific labor value is sufficient to ensure people don’t randomly quit – which is why the value of future labor is priced in.
So why should we tax some forms of future labor income but not others? The argument ends at broader and flatter, right?
As for Dylan Matthews’ claims about not taxing unrealised gains being an interest-free loan from the government, this appears to be confused and relies on contradictory assumptions about rates of return. Here’s Matthews:
It effectively offers capital income an interest-free loan: if I get $1 billion in unrealized gains at a 2010 IPO and owe $250 million in taxes, I can wait a decade and still only pay $250 million, with no interest, if I just don’t sell in the interim.
This is only true if the asset doesn’t grow or earn interest in the interim. Suppose the asset grows at the rate R for n years. Then the government will get 250m * (1+R)^n tax revenue when the asset is sold n years later. The government hasn’t been cheated out of money – in expectation these should have the same net present value. (In expectation, such assets grow faster than the risk free rate, so the government comes out ahead in dollar terms by waiting because the tax revenue captures this risk premia too, but if it’s truly compensation for risk the taxman should be indifferent).
By comparison, Matthews assumes the asset owner has an expected return of zero over the intervening decade, but also that this distorts them not to sell. Why would they delay selling if it doesn’t make them any more money? Perhaps he means that the market interest rate is zero too, but then how is the government being cheated out of revenue?
Cheers,
Matt”
How much did land reform help Taiwan?
We study Taiwan’s landmark 1950s land reform, long seen as central to its growth miracle. Phase II of reform—which redistributed formerly Japanese public lands—reduced tenancy, boosted rice yields, and increased the share of labor in agriculture. By contrast, phase III— which reduced tenancy by breaking up larger estates—did not increase agricultural productivity and pushed labor (in particular, female labor) out of agriculture into manufacturing. Phase II likely increased yields by lifting crop choice constraints, while phase III may have created farms too small to be economically viable. However, phase II can still explain at most one-sixth of observed 1950s rice yield growth. These results challenge the longstanding view that land reform was a major factor behind Taiwan’s economic takeoff, and highlight the varying effects of different forms of land redistribution.
Here is the full paper by Oliver Kim and Jen-Kuan Wang. Here is Oliver’s very useful Twitter thread.
Claims about Ireland (from the comments)
The proximate cause of this problem is the housing crisis, but the underlying reason is that Ireland’s political spectrum is still broken due to being defined by its reactions to colonialism and Catholicism. Beneath the surface-level tides of imperialism, rebellion, theocracy, and liberalisation is a deep nationwide conformism and lack of agency. There is a ‘learned helplessness’ from this illiberal past that conditions the population into modes of subservience and rebellion, with nothing in between.
Because the reactions against colonialism were both left-wing in character (republican and social liberalism) the entire population thinks of themselves as superficially left wing. The result is that each generation grows up with the same abstract ideas that problems are caused by “greed” and “corporations” but no conception of how oligarchy and government actually work to maintain an oppressive class system that is truly brutal compared even to much of western Europe.
The wealthy and influential networks in society use moral-sounding concepts such as environmental protection and invoking famine-era evictions to establish legal frameworks that protect existing capital by preventing growth. They also use the civil service as a massive programme of sinecures for the less ambitious within the upper middle classes. To take a random example: Ireland still claims to have ‘free’ university (though there is a significant registration fee). But the cost of renting is so high that effectively only the wealthy can send their kids away to college. Superficially left wing, but de facto oligarchy. This is everywhere: health service (half the population have private), public transport (unusable if you actually need to be somewhere), and there are shakedowns at every financial touchpoint — bank duopoly, huge insurance fees, dysfunctional legal system.
You’ll read a story in the news about how evil foreign investors are bulk buying homes and letting them out. What that actually means is that large capital-efficient reliable finance is outcompeting inefficient amateur Irish landlords, to the benefit of renters. The media will never report the story that way, because the ‘left wing’ story is best at protecting Ordinary Decent Irish Millionaires. None of the major parties will fight the civil service unions because the strongest voices in society get a lot of easy money through civil service jobs and contracts, and they will frame the debate as an attack on teachers and nurses.
The worst thing is that the people who are most oppressed by this (young people and poorer people) are most inclined to favour policies that have a superficially “left wing” appearance but just boil down to things like “greedy corporations are bad”, and have the effect of preventing growth and protecting existing asset ownership. James Joyce really captured this brilliantly — other writers describe the specific ailments, but Joyce saw the spiritual sickness of Irish society as it exists independent of particular forms of oppression. Fly by those nets.
That is from luzh.
Does the current structure of capital gains taxes provide interest-free loans?
Dylan Matthews and a few others were saying this on Twitter, so I thought I should cover the question. Perhaps we are all understanding terms differently, but my answer is a simple “no.” At least not apart from the step-up basis being revalued at death, which I (like many others) would change. Even that is not a direct gain for you.
First, I define a zero interest loan as when you can increase your consumption today by “k,” and later pay back only k, rather than paying back the higher sum of k modified by the relevant exponential relationship.
Second, let us say you are a wealthy person who owns a start-up now worth $100 million, under the current tax regime. But you are illiquid, and also you do not want to sell for a number of reasons, one being to avoid an immediate capital gains tax liability.
So you borrow — let us say $50 million — collateralized by the stock. Of course that does help you consume more today.
But is it a zero-interest loan? No, you have to pay the real rate of borrowing to raise that $50 million. I do not see where the zero-interest loan is supposed to come from. (Of course, real interest rates might have been zero to begin with, but that is a matter aside from how the capital gains rate is structured.)
It is true you postpone paying the government. But the wealthy person, to consume more now, still equates impatience with the real rate of interest in standard fashion. And let’s say you don’t own any capital value at all. You still have the option of borrowing (if you can), consuming more today, and not paying the government anything extra! That is built into the nature of borrowing, and how it interacts with our current tax system, which tends not to tax consumption very much. Like that or not, don’t blame it on the ownership of capital assets. The main example people are citing is not much different than this example of the poor person borrowing and consuming more, except we gave the subject an extra $100 million in side holdings, so this somehow feels more outrageous.
If someone wants to limit or tax that borrowing, I would consider that suggestion, if only to avoid far worse policies. But what is going on in this scenario does not seem so sinister to me — “I borrowed more to become more liquid” is an age-old story, which surfaces in a wide variety of settings. So I would not myself limit or tax that borrowing.
Another relevant factor is that the capital gains rate is not indexed to inflation. So if you just hold the asset and borrow against it for say twenty years, the tax system treats your twenty years of nominal gains as if they were real gains, and taxes you accordingly. Ouch! That in my view is bad, and also unfair. It also limits the extent to which wealthy people, or for that matter poorer people, will pursue this strategy.
And again, the government could avoid these problems all the more by shifting its taxation focus from capital income to consumption, in progressive fashion if need be. And that is not utopian, it is in fact what so many of the wealthier countries in the world have done.
If you feel this part of the debate might be semantic, perhaps that is correct. But that judgment also means that the concept of “zero interest loan” is not some kind of extra argument for taxing unrealized capital gains. It is, however, an argument for shifting the tax system toward a greater taxation of consumption.
The new Jerusalem Demsas book
On the Housing Crisis: Land, Development, Democracy. I just heard it is out today, of course I ordered my copy immediately…
Tuesday assorted links
1. Durlauf reviews Koyama and Rubin, and Brad DeLong.
2. Some remarks on Norway and unrealized capital gains taxes. And Scott Sumner, on his new Substack, on how to manage taxation.
3. Chinese student views on AI risk.
4. The Pentium as Navajo weaving.
5. “I think hate is very much part of any complete system of sentiments and system of virtues. And Adam Smith certainly talked about it. It fits into schemes in his system.” Link here.
6. What is needed for AI to write decent novels.
9. Podcast with the guy who built the fusion reactor in his bedroom.
10. Behavioral economics guide, 2024.
Ireland fact of the day
Ireland ranks as the loneliest country in Europe, with almost a fifth of people lonely most or all of the time and nearly two-thirds of people suffer from anxiety or depression, according to EU data. One in seven children live in homes below the poverty line, defined as 60 per cent of the median disposable household income.
Here is more from the FT, with much of the piece about how Ireland should spend its budget surplus.