Month: February 2024
Daniel Gross on the printing press and GPT
In a way, everyone’s been wondering, trying to analogize ChatGPT with the printing press, but in reality it’s almost the opposite.
The entire thing is happening in the inverse of that, where the printing press was a technology to disseminate information through a book basically and convince people to do things, and the kind of anti-book is the LLM agent, which summarizes things very succinctly. If anything, it awakens people to the fact that they have been complicit in a religion for a very long time, because it very neatly summarizes these things for you and puts everything in latent space and suddenly you realize, “Wait a minute, this veganism concept is very connected to this other concept.” It’s a kind of Reformation in reverse, in a way, where everyone has suddenly woken up to the fact that there’s a lot of things that are wrong…
So yeah, it takes away all the subtlety from any kind of ideology and just puts it right on your face and yeah, people are having a reaction to it.
That is from the Ben Thompson (gated) interview with Daniel and Nat Friedman, self-recommending.
Thursday assorted links
1. Why South Koreans don’t have more children. And a Twitter thread on the same topic.
2. Pete Boettke on why we should still read Adam Smith.
3. When cars hit pedestrians, who is blamed more?
4. Ghost donors. Important. But will this become a big story somewhere?
5. Interview with Orley Ashenfelter, who is retiring after fifty years of teaching.
7. “Disney adults” are a thing.
8. “Biden Calls Chinese Electric Vehicles a Security Threat.” (NYT)
This kind of macro theory is underrated
Demand shocks as technology shocks:
We provide a macroeconomic theory where demand for goods has a productive role. A search friction prevents perfect matching between producers and potential customers. Larger demand induces more search, which in turn increases GDP and measured TFP. We embed the product-market friction in a standard neoclassical model and estimate it using Bayesian techniques. Business cycles are driven by preference shocks, true technology shocks, and investment-specific shocks. Preference shocks have qualitatively similar effects as true productivity shocks. These shocks account for a large share of the fluctuations in consumption, GDP, and measured TFP and can be identified using shopping time data.
That is from a new NBER working paper by Yan Bai, José-Víctor Ríos-Rull, and Kjetil Storesletten. Aggregate demand matters, but in a context-specific way. And demand and productivity shocks are part of one general integrated theory.
*How Life Works*
The author is Philip Ball, and the subtitle is A User’s Guide to the New Biology. I thought this book was wonderful, one of the best popular science books I’ve read in a long time. I’m sure its contents are familiar to many MR readers, but for me it was a very good introduction to debunking Richard Dawkins-like “primacy of the gene” stories, rather seeing genes as part of a broader, fairly flexible biological ecosystem.
It is also a very good book for explaining just how much computation goes on in biological systems.
I learned the word “gastrulation.”
Have you ever wondered how the salamander grows its tail back in exactly the right way? It turns out we are not sure why:
These creatures maintain a reserve of pluripotent stem cells for such repair jobs. But making the missing part seems to entail an ability of the regenerating cells to “read” the overall body plan: to take a peek at the whole, ask what’s missing, and adapt accordingly to preserve morphological integrity. Levin believes that this information is delivered to the growing cells via bioelectric signaling. But there are other possibilities. To account for the ability of the zebrafish to regrow a truncated tail to exactly the shape it had oringlaly — stripe markings and all — cell biologist Stefano Di Talia believes that a memory of the target shape is somehow encoded within the cells throughout the tail. In effect, he suggests, the different cell growth rates needed to recapitatulate the missing part are recorded along the edge of the wound.
And I learned about “xenobots“, a new kind of living creature, sort of:
Levin and colleagues discovered xenobots from a “what if” experiment: they wondered what might happen if embryonic frog cells were “liberated” from the constraints imposed by making an embryonic frog body. “If we give them the opportunity to re-envision multicellularity,” he asked, “what is it they will build.”
I found much of interest in this book, definitely recommended. Here is one good review of the book.
Dynamic surge pricing for Wendy’s
“Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and daypart offerings, along with AI-enabled menu changes and suggestive selling,” he said. “As we continue to show the benefit of this technology in our company-operated restaurants, franchisee interest in digital menu boards should increase, further supporting sales and profit growth across the system.”
Here is one story of many, remember USA Today? (Should they not be the go-to source for a Wendy’s story?)
I predict this will fail. For one thing, “we will have discounts for Tuesdays at 3 p.m.” would have been better marketing. Furthermore, many Wendy’s buyers are not wealthy, and they care a good deal about predictable prices. Perhaps the higher prices will stick in their memories more? The pitch: “I know I can go to Wendy’s and get my favorite meal there for xxxx” is a powerful meme. I don’t even know what those numbers for “xxxx” should be! Which I guess is part of the point.
Update from Ryan Bourne: Wendy’s already has backed down.
Wednesday assorted links
1. One view of how foreign students are reshaping U.S. universities.
2. Some Milei reforms may be overturned (Bloomberg).
3. Russian thresholds for using tactical nuclear weapons?
4. RLHF is the problem and the solution.
5. Are new technologies harming liberalism? Short tweet version here.
6. How to raise the demand for bread. Addendum: There is a grandfather clause that more or less restricts this to Pandera.
Economics graduate school bleg
What percentage of individuals attending economics graduate school — at the higher levels — have an undergraduate economics major? What is the best source on this question? And other than mathematics, what other undergraduate backgrounds are common?
The Black-Scholes-Merton Options Pricing Equation
A superb video on the history and mathematics of options pricing from Veritasium.
Your friendly AI assistant (it’s happening)
Klarnas AI assistant, powered by @OpenAI, has in its first 4 weeks handled 2.3 m customer service chats and the data and insights are staggering: – Handles 2/3 rd of our customer service enquires – On par with humans on customer satisfaction – Higher accuracy leading to a 25% reduction in repeat inquiries – Customer resolves their errands in 2 min vs 11 min – Live 24/7 in over 23 markets, communicating in over 35 languages It performs the equivalent job of 700 full time agents…
Link here.
19th century British economic thought (another outline for my class)
1760-1830, typically considered peak of Industrial Revolution
Malthus, first decade of the 19th century
Ricardo’s Principles, 1817
Theory of rent
Theory of comparative advantage
The machinery question
Ricardo, The High Price of Bullion, 1810
Bullionist debates, Napoleonic wars, Ricardo and Malthus and Thornton
Ricardian equivalence, thinking in terms of systems and models
The Ricardians: James Mill and James Ramsey McCullough
The reign of classical economics, Nassau Senior
Poor Law debates
Unions and working hours
Ricardian socialists
John Stuart Mill: 1806-1873
Synthesis with French and Germans
Karl Marx
It’s happening
Is DNA all you need?
In new work, we report Evo, a genomic foundation model that learns across the fundamental languages of biology: DNA, RNA, and proteins. Evo is capable of both prediction tasks and generative design, from molecular to whole genome scale. pic.twitter.com/BPo9ggHhmp
— Patrick Hsu (@pdhsu) February 27, 2024
Tuesday assorted links
1. Dan Klein responds to my Casablanca review. Of course my view is that what Dan sees in the movie is also there.
2. Do standard error corrections exacerbate publication bias?
3. Mr. Beast as talent evaluator (short video).
4. My Bloomberg column on the very high value of open source software.
5. “What is Éire accelerationism and why does it matter?” A new podcast episode from David McWilliams.
Genetic Insurance
Genetic testing identifies disease risk, enabling individuals to dodge environmental triggers, optimize treatments, and improve planning. Yet, the fear of increased insurance premiums deters many from undergoing tests. Genetic testing offers societal benefits but also presents significant distributional challenges. To address this, my 1994 paper proposed the idea of genetic insurance.
For a small fee genetic insurance would insure against the possibility of a positive test result. If the test came back positive the customer would be paid a large sum of money, enough to cover the expected costs of his disease or equivalently enough to allow him to purchase health insurance at the new risk premium. If the test turns out negative the customer would lose his genetic insurance fee but would gain the results of the test and also lower health insurance premiums. Those who have positive tests results would be paid enough money to pay their health care costs and would also benefit from being able to plan in accord with the test results. Under this proposal average insurance rates will fall and everyone will be made better off.\
Genetic insurance is insurance against changes in the cost of health insurance due to genetic information. John Cochrane would later generalize this idea to show that it’s possible to insure against changes in the cost of health insurance due to any new information. Cochrane called this time-consistent health insurance or health-status insurance; it’s a way of creating long-term health insurance contracts without binding an individual to a firm.
In an interesting paper, Helene Schernberg extends my 1994 paper. Schernberg shows that even if an individual has full-health insurance that can’t be taken away, there are other reasons to want genetic insurance. She focuses on the planning aspect. Genetic insurance could be used to shift consumption earlier, to better health states and thus improve life-time allocation.
Genetic testing could soon be a routine part of your medical journey. It offers insights into inherited disorders or susceptibility to various conditions. For example, if you are a woman with a BRCA mutation, you have a 55 to 72% lifetime risk of breast cancer.
… This suggests that genetic information is valuable while providing a theoretical argument in favor of genetic insurance. The mechanism is described in Tabarrok (1994): Individuals purchase genetic insurance before taking a genetic test, thus receiving a compensation upon being identified as a high-risk. Tabarrok (1994) relates this genetic insurance payment to the need to cover expensive health insurance premia. I show that it also relates to the fact that a temporally risk-averse individual wishes to insure against the lifetime utility losses she may experience when her health prospects deteriorate after taking a genetic test.
Monopolized organ collection
The nation’s 56 organ procurement organizations collect organs — mainly kidneys — from deceased donors at hospitals and arrange for them to be transported to surgeons at the 250 U.S. medical centers that perform transplants. Each procurement group holds a government-guaranteed monopoly over a swath of U.S. territory where it operates.
Some have failed for years to collect enough organs to meet demand, according to government records. But the Centers for Medicare and Medicaid Services, the part of HHS that licenses the nonprofits to operate, has never decertified one. In response to critiques, the CMS issued new benchmarks that will allow the agency to weed out poor performers beginning in 2026.
Now many of these organ collection groups are under investigation for fraud and overbilling the government.
Do high interest rates get people down?
Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This has confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which have grown at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, are at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that consumer sentiment gaps across countries are also strongly correlated with changes in interest rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.
That is from a new NBER working paper by Marijn A. Bolhuis, Judd N.L. Cramer, Karl Oskar Schulz, and Lawrence H. Summers.