Regulating Transformative Technologies
That is a very new paper by Daron Acemoglu and MIT grad student Todd Lensman, here is the abstract:
Transformative technologies like generative artificial intelligence promise to accelerate productivity growth across many sectors, but they also present new risks from potential misuse. We develop a multi-sector technology adoption model to study the optimal regulation of transformative technologies when society can learn about these risks over time. Socially optimal adoption is gradual and convex. If social damages are proportional to the productivity gains from the new technology, a higher growth rate leads to slower optimal adoption. Equilibrium adoption is inefficient when firms do not internalize all social damages, and sector-independent regulation is helpful but generally not sufficient to restore optimality.
Maybe that’s not a great abstract for non-economists, but the paper itself is pretty clear if you read through it. It is very good to see someone finally start working this out. Basically they lay out which assumptions might be needed to make a case for slowing down the progress of AI.
The case for accelerationism becomes stronger if you consider:
1. Early adoption of a technology, especially if done selectively, may facilitate learning.
2. The existence of a rival nation(s) with “less aligned” values and also with less reliable safety procedures.
3. The risk that a centralized regulator might make the technology more rather than less risky. For instance, you might push the development of the technology into harder to monitor open source forms, and inefficiently so.
Of course a key goal is to endogenize the risk of serious social damages from AI in a decentralized system, rather than taking that risk as given. I don’t expect the authors to have done that in this paper, in any case this literature is now up and running.
Teaching GPT to send bitcoin payments
Artificial intelligence programs like ChatGPT have learned how to send bitcoin payments.
To put this in other words…
Machines can pay other machines.pic.twitter.com/j9VtLxpJc8
— Documenting ₿itcoin 📄 (@DocumentingBTC) July 7, 2023
Friday assorted links
Alexey summarizes the advice he hears me give people
- You can always do better.
- Don’t do a big project if the conversations you have w/ your future colleagues are not the most exciting ones you have.
- Prepare to live in times of change.
- What great people work on is overdetermined because it’s clear what the greatest thing to do is at any point in history.
- Always keep improving your mentors and always keep asking yourself who are the young people you want to be talking to.
- Recursive self-improvement requires a closed system.
- Find a partner.
How will artificial intelligence affect real interest rates?
In standard models, a big dose of AI boosts productivity, which in turn boosts the return on capital, which then raises real interest rates.
I am less convinced. For one thing, I believe most of the gains from truly fundamental innovations are not captured by capital. Was Gutenberg a billionaire? The more fundamental the innovation, the more the import of the core idea can spread to many things and to many sectors.
Furthermore, over the centuries real rates of return seem to be falling, even though there are some high productivity eras, such as the 1920s, during that time. The long-run secular trend might overwhelm the temporary productivity blips, I simply do not know.
I do think AI is likely to increase the variance of relative prices. Observers disagree where the major impacts will be felt, but possibly some prices will fall a great deal — tutoring and medical diagnosis? — and other prices will not. Furthermore, only some individuals will enjoy those relative price declines, as many may remain skittish about AI for quite a few years, possibly an entire generation.
That heterogeneity and lack of stasis will make it harder to infer real interest rates from observed nominal interest rates. Converting nominal to real variables is easiest under conditions of relative stasis, but that is exactly what AI is likely to disrupt. Furthermore, real inflation rates, and thus real interest rates, across different individuals, are likely to increase in their variance.
Overall, that blurring of nominal and real will make the Fed’s job harder. And it will be harder for Treasury to forecast what will be “forthcoming real interest rates.”
Thursday assorted links
1. A critical history of the AI safety movement.
2. Richard Hanania on class-based affirmative action.
3. James J. Lee comment on the new Greg Clark results.
4. Emily Wilson on different Iliad translations, and her new one (NYT).
5. What happened to the global corporate tax rate deal?
6. People who make money running YouTube channels showing how much they lose by playing slot machines (WSJ).
Stephen King on inflation targets
Inflation targets are not supposed to be mere fair weather friends. They serve at all times to reduce arbitrary and undemocratic redistributions of income and wealth and stealthy forms of “hidden” taxation, all of which monarchs, despots, autocrats and, yes, democratically elected governments have, via the printing press, exploited. While there’s nothing wrong with debating the correct target “number”, choosing to raise targets when inflation has persistently surprised on the upside smacks of no more than short-run political opportunism — precisely what central bank independence was supposed to avoid.
There is more, here is the full FT link.
Louisiana federal judge says “hands off”
One day after a Louisiana federal judge set limits on the Biden administration’s communications with tech firms, the State Department canceled its regular meeting Wednesday with Facebook officials to discuss 2024 election preparations and hacking threats, according to a person at the company. The move came hours before Biden’s Department of Justice filed a notice that it will appeal the ruling.
Here is the longer story. It seems unlikely the Louisiana decision will stand, but I would apply some game theory and look at this from a different angle. Let’s assume the Louisiana judge could prevent the federal government from communicating with the major social media companies. The social media companies still would have to work very hard to please the federal government, given the seriousness of the regulatory stakes. In fact, lack of communication could make the social media companies try all that much harder, since they would not know if they were meeting the standards of the federal government.
The actual solution here is not to alter the degree of communication, but rather to have the federal government surrender so many of its arbitrary regulatory powers over American business, most of all with the major tech companies.
*Regime Change*
That is the new Patrick J. Deneen book, with the subtitle Toward a Postliberal Future. I would say that reading and trying to review this book most of all raises the question of what a review is for. As you might expect from Deneen, the book is well-written and comes across as highly intelligent. The question is what one should make of the actual claims and content.
The opening chapter tells us what a failure America is, but not much in the way of concrete evidence is cited (what again would an American passport auction for?). Deneen writes “A growing chorus of voices reflects on the likelihood and even desirability of civil war…”, but that I think means he simply faced some publication lags with the book. America still seems to be gaining on most of the world.
By the end of the next chapter, we are told “Unfortunately, the current ruling class is uniquely ill equipped for reform, having become one of the worst of its kind produced in history…”
C’mon, people…C’mon, Patrick! I don’t even have to invoke Godwin’s Law to refute that one. I can think of a few historical elites who were slightly worse than those who go to Harvard and Yale.
The quick segment on Mill on slavery (p.82) is both wrong and deeply unfair.
Burke is closer to Mill than Deneen might wish to think, especially if one studies Burke on Ireland.
The chapter “The Wisdom of the People” is rather under-argued in a post-Bryan Caplan, post-Garett Jones intellectual era. You don’t have to agree with Caplan or Jones to recognize they offer orders of magnitude more evidence than Deneen does. One of the bigger lessons here is that you can no longer write such a book without seriously engaging with social science.
All this talk about creating a “mixed constitution,” but what exactly does he want to see happen? Is “Machiavellian means to achieve Aristotelian ends” really what we need? (Might some rather mundane changes in policy get us further?) What exactly are we supposed to do to increase the status, influence, and reputation of the populace, as Deneen repeatedly suggests? Where is the evidence any of that is going to work, whatever “work” might mean in this context? This book will not tell you.
National service, tariffs, and immigration restrictions are all endorsed, but with no consideration of the rather extensive empirical literatures on these topics, mostly not supporting Deneen’s hastily presented conclusions.
Is liberalism really (p.229) “premised on the complete liberation of the individual from any limiting claims of an objective good…”? Mill certainly didn’t think so, nor did most other classical liberals.
I would start by distinguishing the social consequences of birth control — which isn’t going to be reversed and shouldn’t be — with the social consequences of classical liberal ideas. Is Deneen in fact willing to endorse birth control? Inquiring minds wish to know.
If Western liberalism is “exhausted,” is he short the market?
Overall, I leave this book with the impression that it is no accident classical liberal ideals have endured as much as they have.
Threads, from Meta
So what do you all think? My Instagram account is tylercowenfairfax, with a photo of Spinoza the dog as my icon. Is that the information you need to follow me on Threads?
Addendum: Don’t forget the fediverse!
The order of spousal names on tax returns
Married couples filing a joint return put the male name first 88.1% of the time in tax year 2020, down from 97.3% in 1996. The man’s name is more likely to go first the larger is the fraction of the couple’s allocable income that goes to him, and the older is the couple. Based on state averages, putting the man’s name first is strongly associated with conservative political attitudes, religiosity, and a survey-based measure of sexist attitudes. Risk-taking and tax noncompliance are both associated with the man’s name going first.
Here is the full NBER working paper by Emily Y. Lin, Joel Slemrod, Evelyn A. Smith, and Alexander Yuskavage.
Wednesday assorted links
1. “…in contrast to funding agencies—scientists systematically prefer to fund projects with more reviewer dissensus. Rather than purely focusing on the first moment of the distribution of reviewer scores, they also value the second moment. Further, scientists with the greatest domain expertise on a proposal are more enthusiastic about dissensus, and while appetite for dissensus shrinks as budgets become tighter, it does not disappear completely.” Link here.
2. Will AI change our memories?
3. Second-order effects of higher interest rates.
4. Wesley Clair Mitchell predicting the future of economic research.
5. Is it true that those who accuse other the most of “mercantilism” are in fact the most mercantilist themselves? (not a link)
6. More Scott Sumner movie reviews.
7. “They promised us 140 characters, and what we got was flying cars.”
Los Alamos From Below
A hilarious Richard Feynman talk about his time at Los Alamos, like a physicist-genius Larry David. Good prep for Oppenheimer.
*Germany in the World*
The author is David Blackbourn, and the subtitle is A Global History 1500-2000. The focus is on Germany’s global influence abroad and no I don’t mean the Battle of Stalingrad, though that era is covered. Here is one excerpt:
There was global demand for German scientists of every kind. The Southern Hemisphere offers two striking examples. One is Latin america, thanks partly to Humboldt’s legacy. There were hundreds of Germans scientists in Argentina alone by the early twentieth century, and many others in Chile, Peru, and elsewhere. German scientists also played an equally outsized role in Australia. We have already seen the impact made by the botanist Richard Schomburgk and his circle of ’49ers in South Australia. Among the many German scientists who arrived after midcentury and shaped Australia’s scientific landscape were several who were well connected internationally. The geophysicist Georg von Neumayer is a perfect specimen of the type. Neumayer enjoyed support in British scientific circles and was a disciple of the American astronomer and oceanographer Matthew Maury, who had himself been inspired by Humboldt. In Australia Neumayer established an observatory in Melbourne, before returning to Germany, where he chaired the International Polar Commission in 1879.
Neumayer is a reminder that German remained, as they had been in the era of Forster and Pallas, inveterate scientific travelers.
Recommended, this is quite a good book.
The new Austrian business cycle theory
Of course that is not what they call it:
We study the relationship between credit expansions, macroeconomic fluctuations, and financial crises using a novel database on the sectoral distribution of private credit for 117 countries since 1940. We document that, during credit booms, credit flows disproportionately to the non-tradable sector. Credit expansions to the non-tradable sector, in turn, systematically predict subsequent growth slowdowns and financial crises. In contrast, credit expansions to the tradable sector are associated with sustained output and productivity growth without a higher risk of a financial crisis. To understand these patterns, we show that firms in the non-tradable sector tend to be smaller, more reliant on loans secured by real estate, and more likely to default during crises. Our findings are consistent with models in which credit booms to the non-tradable sector are driven by easy financing conditions and amplified by collateral feedbacks, contributing to increased financial fragility and a boom-bust cycle.
That is from a new NBER working paper by Karsten Müller and Emil Verner.