Peter Coy on DOGE
The federal government doesn’t have the people it needs to adequately monitor and vet its enormous streams of payments to defense contractors, hospitals and individuals. For example, administrative expenses account for only half a percent of the budget of the Social Security Administration. Trying to squeeze down that half percent by cutting personnel could lead to misspending of the other 99.5 percent of the budget.
Here is more from the NYT, interesting throughout. Here is another bit:
To fix such problems, [Brian] Riedl said, “you need G.A.O. and other government experts and others who have done auditing to do most of the legwork.” There is no single easily repeatable fix: “Every program, every program failure and example of mismanagement has its own story.”
You may recall that private health insurance companies have fairly high “overhead,” perhaps a misleading term but nonetheless relevant for these debates. There are hundreds of billions of “lost” funds at DOD and in Medicare. Does the plan to improve on that performance involve more staff or less staff?
“The Misery of Diversity”
I am surprised this paper made it through, but I am pleased to see the intellectual diversity it represents:
Evolutionary accounts assert that while diversity may lower subjective well-being (SWB) by creating an evolutionary mismatch between evolved psychological tendencies and the current social environment, human societies can adapt to diversity via intergroup contact under appropriate conditions. Exploiting a novel natural experiment in history, we examine the impact of the social environment, captured by population diversity, on SWB. We find that diversity lowers cognitive and hedonic measures of SWB. Diversity-induced deteriorations in the quality of the macrosocial environment, captured by reduced social cohesion, retarded state capacity, and increased inequality in economic opportunities, emerge as mechanisms explaining our findings. The analysis of first- and second-generation immigrants in Europe and the USA reveals that the misery of home country diversity persists even after neutralizing the role of the social environment. However, these effects diminish among the second generation, suggesting that long-term improvements in the social environment can alleviate the burden of diversity. Finally, in exploring whether human societies can adapt to diversity, we show evidence that diversity causes adopting cultural traits (such as establishing stronger family ties, assigning greater importance to friendships, and adopting a positive attitude towards competition) that can mitigate the misery of diversity. These results survive an exhaustive set of robustness checks.
That is from the NBER series, authored by
*Is Inequality the Problem?*
Lane Kenworthy has a book coming out next year, I have read it, and it is superb (rooftops) and also very important. Here is a brief excerpt:
Rich democratic nations with higher levels of income inequality or larger increases in income inequality haven’t tended to have slower economic growth, lower or slower-growing household income, or worse household balance sheets…
The notion that income inequality is harmful for health has recieved substantial attention from researchers, and some now take it for granted that inequality reduces longevity. But the country evidence offers very little support for this conclusion.
I will let you know when a pre-order is possible. In the meantime, it shouldn’t matter, but I can also report that Kenworthy is very much a left-leaning thinker, as you can adduce from his policy recommendations toward the end of the book.
Monday assorted links
1. Getting AI data centres in the UK.
2. Those new pillowfighting service sector jobs.
3. Exchange rates really matter (Sarah Gertler).
4. Ben Affleck on AI and the movies.
5. New predictions from John Gray.
6. Human in a bear suit used to defraud insurance companies (NYT).
Broad tariffs can be worse than targeted tariffs
From a new and excellent post by the essential Noah Smith:
There are actually two reasons that broad tariffs, like the ones Trump is proposing, have difficulty reducing trade deficits.
The first reason is exchange rate adjustment.
When you trade stuff internationally, you have to swap currencies. As anyone who has traveled overseas knows, to buy Chinese goods, you need yuan.² So if you’re an American, you need to swap your dollars for yuan in order to buy stuff from China. The price at which dollars and yuan get swapped for each other is called the exchange rate.
When the U.S. puts tariffs on China, that reduces U.S. demand for Chinese goods. And that reduces U.S. demand for Chinese yuan, because when Americans don’t need to buy as much Chinese stuff, they don’t need as much yuan.
And when demand for yuan goes down, the price of yuan, in terms of dollars, goes down. This is just basic Econ 101, supply-and-demand stuff. The dollar appreciates in value and the yuan depreciates in value. This is called “exchange rate adjustment”.
Exchange rate adjustment partially cancels out the effect of the tariffs. When tariffs make the yuan get cheaper for Americans, that makes Chinese goods cheaper for American customers. And when tariffs make the dollar get more expensive for Chinese people, that makes American goods get more expensive for Chinese customers.
This doesn’t completely cancel out the effect of tariffs, but it partially cancels it out. It’s like if the government put taxes on pizza, pizza restaurants would cut their prices in response, in order to reduce the number of people who stop eating pizza.
Of course in the real world, there are more than just two currencies, and more than just two countries trading with each other. But if you look at the data, it’s not hard to see the impact of Trump’s tariffs on China in his first term…
And this is not even the only reason broad tariffs struggle to reduce trade imbalances! There’s at least one more. Broad tariffs also raise costs for American manufacturers, without increasing costs for Chinese manufacturers.
Here is the full post.
How badly do humans misjudge AIs?
We study how humans form expectations about the performance of artificial intelligence (AI) and consequences for AI adoption. Our main hypothesis is that people project human-relevant problem features onto AI. People then over-infer from AI failures on human-easy tasks, and from AI successes on human-difficult tasks. Lab experiments provide strong evidence for projection of human difficulty onto AI, predictably distorting subjects’ expectations. Resulting adoption can be sub-optimal, as failing human-easy tasks need not imply poor overall performance in the case of AI. A field experiment with an AI giving parenting advice shows evidence for projection of human textual similarity. Users strongly infer from answers that are equally uninformative but less humanly-similar to expected answers, significantly reducing trust and engagement. Results suggest AI “anthropomorphism” can backfire by increasing projection and de-aligning human expectations and AI performance.
That is from a new paper by Raphael Raux, job market candidate from Harvard. The piece is co-authored with Bnaya Dreyfuss.
*Science of Science*
By Alexander Kraus, economist at LSE, the Oxford University Press book is now open access on-line. Here is the chapter on the economics of science.
Sunday assorted links
AI-generated poetry is indistinguishable from human-written poetry and is rated more favorably
That is the title of a new paper in Nature, here is part of the abstract:
We conducted two experiments with non-expert poetry readers and found that participants performed below chance levels in identifying AI-generated poems (46.6% accuracy, χ2(1, N = 16,340) = 75.13, p < 0.0001). Notably, participants were more likely to judge AI-generated poems as human-authored than actual human-authored poems (χ2(2, N = 16,340) = 247.04, p < 0.0001). We found that AI-generated poems were rated more favorably in qualities such as rhythm and beauty, and that this contributed to their mistaken identification as human-authored. Our findings suggest that participants employed shared yet flawed heuristics to differentiate AI from human poetry: the simplicity of AI-generated poems may be easier for non-experts to understand, leading them to prefer AI-generated poetry and misinterpret the complexity of human poems as incoherence generated by AI.
By Brian Porter and Edouard Machery. I do not think that pointing out the poor quality of human taste much dents the import of this result.
How to make DOGE work
That is the topic of my latest Bloomberg column, here is one excerpt:
Another priority should be to deregulate medical trials. America is now in a golden age of medical discovery, with mRNA vaccines, anti-malaria vaccines, GLP-1 weight loss drugs and new treatments against cancer all showing great promise. AI may bring about still more advances.
Unfortunately, the US system of clinical trials remains a major obstacle to turning all this science into medicine. There are regulations concerning hospital protocols, the design of the trials, FDA requirements, the procedures of universities and institutional review boards, and the handling of data, among other barriers. America can have better and speedier approval procedures without lowering its standards.
Of all the tasks I’ve outlined, this is by far the most difficult, because it involves changes in so many different kinds of institutions. Yet it has one of the highest possible payoffs, because more treatments might be developed and made available if the clinical trial process weren’t so onerous. Reforming clinical trials should also appeal to older Americans, who are especially likely to vote and who think the most about their medical care. The goal should be an America where most people live to 90.
Many Republicans are very excited about DOGE. But its governance structure is undefined and untested. It does not have a natural home or an enduring constituency. It cannot engage in much favor-trading. Its ability to keep Trump’s attention and loyalty may prove limited. And it’s not clear that deregulation is a priority for many voters.
The more I read about DOGE from Vivek and Musk, the more I feel it needs a greater sense of prioritization.
Further Saturday assorted links
Saturday assorted links
1. Criminals are targeting luxury cheeses.
2. twodw: “Harris lost all seven swing states, but in five of them – Georgia, Michigan, Nevada, North Carolina, Wisconsin – she’s ending up with more raw votes than Biden got in 2020. If you still think all those swing state mail votes in 2020 were fake, idk what to tell you.”
3. Evo, for biology.
USA fact of the day
The total payroll of the federal government is about $110 billion a year buff.ly/3CnrMCx
Federal government spending was $6.1 trillion buff.ly/3YLb0Vf
You cannot meaningfully shrink the federal government by firing “unelected bureaucrats”
That is from Jason Abaluck.
The new Roger Penrose biography
The author is Patchen Barss, and the title is The Impossible Man: Roger Penrose and the Cost of Genius. I liked this book very much, and feel there should be more works like this. It was made with the full cooperation of Penrose himself, though he had no veto over the final work. Here is one bit:
Many relativists had a powerful feel for formal math: errors in calculations leapt out at them the way off-key notes rankle a musician’s ear. Not Roger. Equations required too much mental labour and restricted his creativity. His “magic” came from the shape of things. He preferred to run his fingers along the curves and twists of space and time and find in those graceful lines the story of how every particle, force, and phenomenon acquired its properties.
The book covers Penrose’s personal life as well:
Judith encouraged him to sort out his relationship with Joan independently of his feelings for her. He wasn’t sure that made sense. In a deterministic universe, could he really take ownership of his unhappy marriage? The idea felt strange to him.
Returning to physics:
Roger’s curiosity about consciousness came from many places — the extreme mental feats of his father and brothers, the speed of decision making in racquet sports, the human ability to transcend Kurt Gödel’s incompleteness theorem, and his own capacity to discover new mathematical insights.
Then again, one might return to matters of his personal life:
…he [Penrose] offhandedly observed how many scientists — not just him — seem to have “troubled marriages.” He implied that a solitary life might be an inevitable consequence, a necessary price, for his kind of success. True, Wolfgang and Ted [friends] had long, happy marriages. Then again, neither of them had won a Nobel Prize.
His tone was one of justification rather than regret. He didn’t see how it could be any other way.
Recommended. Here is a good NYT review.
Friday assorted links
1. Michael Magoon has “progress” recommendations for the second Trump administration.
2. Update on LLMs and chess. And a further update on that.
3. Podcast on speaking to whales.
4. Bitcoin for the sovereign, by Matt Huang.
6. Berlin techno clubs are closing in large numbers (Times of London).
7. Stripe: “Adding payments to your LLM agentic workflows“