Tyler Cowen - Hayek, Keynes, & Smith on AI, Animal Spirits, Anarchy, & Growth

43:04Not necessarily the older companies are actually getting better Possibly but it does seem the older companies are often getting better right like in Denmark So you know take China is Pretty much entirely new firms because of communism Japan in particular seems to have a lot of very old firms. I don't know if they're getting better But I don't think you can write that office of possibility Hmm This is Hayak in competition as a discovery process and it seems like he predicted an imbi -ism So he says in a democratic society it would be completely impossible Using commands that could not be regarded as just to bring about those changes that are undoubtedly necessary But the necessity of which could not be strictly demonstrated in a particular case So it seems like he's kind of talking about what we today called an imbi -ism I'm sure and there's plenty of imbi -ism in earlier times So I mean you look at the 19th century debates over restructuring Paris Houseman and putting in the broader boulevards and the like That met with very strong opposition.

44:04It's a kind of miracle that it happened. Yeah Is this is this thing that's inherent to the democratic system? I would recently I interviewed dominant Cummings and obviously planning is a big issue in the UK It seems like every country has every democratic country has this kind of problem and most autocratic countries have it too Now China is an exception They will probably slide into some kind of an imbi -ism even if they stay autocratic um Just people resist change interest groups always matter public opinion a lot of David Cumm always matters And uh It's easy to not do anything on a given day right and that just keeps on sliding into the future Hmm So but not in the I guess India has had a lot of imbi -ism.

44:44It's fallen away greatly under Modi and especially what the state governments have done But it can be very hard to build things in India still Hmm. Oh, it is a democracy. I guess the China example. We'll see what happens there That's right uh, but it would be very surprising Because the Chinese government is highly responsive to public opinion on most but not all issues So why wouldn't they become more imbi especially with the shrinking population? They're way overbilled right so the pressure to build will be weak And in cases where they ought to build I would think quite soon they won't Mm -hmm How how much of economics is a study of the uh the systems that human beings use to allocate Resources and how much is is just something you'd expect to be true of aliens AI's It's interesting when you read the history of economic thought how often they make uh They make mention of human nature specifically like Keynes is talking about the people have high discount rates right um Yeah, but what are your thoughts here?

45:44My former colleague Gordon Tullich wrote a very interesting book On the economics of ant societies and animal societies And very often they obey human -like principles or more accurately humans obey non -human animal -like principles So I suspect it's fairly universal and depends less on quote -unquote human nature Then we sometimes like to suggest maybe that is a bit of a knock on some behavioral economics The logic of the system Arman L. Sheen wrote on this Gary Becker wrote on this There's some debates on this in the early 1960s And that the automatic principles of profit and loss and selection at a firm firm wide level Really matters and it's responsible for a lot of economics being true.

46:28I think that's correct actually that raises an interesting question of Within firms they the sort of input they're getting from the outside world the ground truth data is profit loss bankruptcy It's like a very Very condensed information and from this data make the determination of who to fire who to hire who to promote to what project to pursue uh You know how do you make sense of how firms disaggregate this this very condensed information? I would like to see a very good estimate if how much of productivity gains is just from selection And how much is from while smart humans figure out better ways of doing things And there's some related pieces on this in the international trade literature So when you have free or trade a shockingly high percentage of the productivity gains Come from your worst firms being bankrupted by the free trade And Alex Taberock has some MR posts on this.

47:20I don't recall the exact numbers But it was higher than almost anyone thought and that to me suggests the alchian Becker mechanisms of evolution at the level of the firm Enterprise or even sector They're just a lot more important than human ingenuity And that's a pretty high -eccion point Hi, it presumably read those pieces in the 60s. I don't think he ever commented on them Interesting um, let's talk about uh mill Uh, dr. Meeley not James mill, but he was in too So his arguments about uh the law force against uh woman and how basically throughout history the the the state of Women in in his society is not natural or the wisdom of the ages But just the result of the fact that men are stronger and have codified that Can we apply that argument in today's society against children and the way we treat them Yes, I think we should treat children much better.

48:12We've made quite a few steps in that direction It's interesting to think of mill's argument as it relates to Hayek So mill is arguing you can see more than just the local information. So keep in mind when mill wrote Every society that he knew of at least treated women very poorly oppressed women Women because they were physically weaker or at a big disadvantage If you think there's some matrilineal exceptions mill didn't know about them So it appeared universal and mill's chief argument is to say you're making a big mistake if you overly aggregate information from this one observation that behind it is a lot of structure And a lot of the structure is contingent and that if i mill unpack the contingency for you You will see behind the signals So mill is much more rationalist than Hayek.

48:58It's one reason why Hayek hated mill But clearly on the issue of women Mill was completely correct that women can do much better. We'll do much better It's not clear what the end of this process will be it will just continue for a long time Uh, women achieving in excellent ways And it's mill's greatest work I think it's one of the greatest pieces of social social science and it is anti -Haiyakian It's anti -small -sea conservatism Uh, his other book on liberty is very Hayekian though right in the sense that the free speech is needed because Information is is it contained in many different people's minds That's right and i think mill integrated Sort of you could call it Hayek An anti -Haiyak better than Hayek ever did That's why i think mill is the greater thinker of the two But on the topic of children What would mill say specifically?

49:49I guess you could have talked about it if you wanted to but I don't know if you was in today's world We sent into school they're there for eight hours a day most of the time is probably wasted And we just like use a lot of coercion on them that we don't need to how would we think how would he think about this issue There's mill zone upbringing which was quite strict and by current standards oppressive But it apparently extremely effective in making mill smart So i think mill very much thought that kids Should be induced to learn the classics But he also stressed they needed replay of the imagination In a way that he drew from German and also British romanticism And he wanted some kind of synthesis of the two Uh, but by current standards mill I think still would be seen as a meanie toward kids But he was progressive by the standards of his own day Do you buy the arguments about aristocratic tutoring for people like mill and um there's many other cases like this But that you know with since the work kids are taught in the top by one -on -one tutors and that's that explains part of their greatness I believe in one -on -one tutors But i don't know how much of those examples is selection right So i'm not sure how important it is But just as a matter of fact if i were a wealthy person and just had a new kid I would absolutely invest in one -on -one tutors You're talking about how mill is very concerned about the quality and the character development of the population Uh But when we think about the fact that somebody like him was elected to the parliament at the time The greatest thinker who's alive is elected to To to government and it's hard to imagine that could be true in it with Today's world it does you have a does he have a point with the regards to the quality of the population Well mill as with women he thought a lot of improvement was possible Yeah, and we shouldn't overly generalize from seeing all the dunces around us.

51:37Yeah, so to speak Maybe the book is still out on that one But it's an encouraging belief and i think it's more right than wrong There's been a lot of moral progress since mill's time right in everything But certainly how people treat children And or their their why how men treat their wives And uh Even when you see negative reversals Stephen Pinker so far seems to be right on that one But you do see places you know like Iran how women were treated Seems to have been much better in the 1970s than it is today So there are definitely reversals But on the specific reversal of somebody of mill's quality probably wouldn't get elected to congress than the US or a parliament of the UK Is it how how big a deal is that advice may get through the cracks due to all the local statesmen who wisely advise Their representatives in the house right so I don't know how much that process is better or worse compared to say the 1960s I know plenty of smart people who think it's worse.

52:39I'm not convinced that's true. Mm Let's talk about Smith Adam Smith yeah um um Okay, so one of the things I find really remarkable about him is he so publishes in 1776 the wealth of nations and basically around that time Gibbon publishes the decline in fall of the Roman Empire yep So publishes the decline in fall of the Roman Empire and one of his lines in there is if if you were asked to It's a period of time and man's condition was what is his best it was you know during the reign of communist to dimension Uh, and that's like two thousand years before that right so there's basically been at least it's like plausible to somebody really smart That there's basically been no growth since four two thousand years Uh, and in that context to be making the case or markets and mechanization and division of labor I think it's like even more impressive when you when you put it in the context that he has like basically been seeing all You know point five percent or less growth strongly agree and this is an away Smith being like mill Yeah, Smith is seeing the local information of very small growth And the world barely being better than the Roman Empire And inferring from that with increasing returns division of labor how much is possible So Smith is a bit more of a rationalist than hiic makes him out to be right Now I wonder if we use the same sort of Extrapulative thinking that Smith uses of we haven't seen that much growth yet But if you apply these sorts of principles uh, this is what you would expect to see What would he make of the potential AI economy where we see two percent growth uh, you're now But you have you know billions of potential more agents or something it would he say well actually you might have ten percent growth Because of this like this is a you would need more economic principles to explain this or that just adding that to our list of existing principles would imply big gains It's hard to say what Smith would predict for AI My suspicion is that the notion of 10 percent growth was simply not conceivable to him So he wouldn't have predicted it because he never saw anything like it that to him with three percent growth would be a bit like 10 percent growth.

54:35It would just shock him and and bold him over But Smith does also emphasize different human bottlenecks and constraints of the law So it's quite possible Smith would see those bottlenecks as mattering and checking AI growth and its speed Hmm, but as a principle given the change we saw pre Uh, pre -industrial revolution in after 1870 Um does does does does to you it seemed plausible that you could go from the current regime to a regime where you have 10 percent growth for decades on end Uh, that does not seem plausible to me, but I would stress the point That high rates of growth decades on end the numbers cease to have meaning Because the numbers make the most sense when the economy is broadly similar Like oh everyone eats apples and each year there's 10 percent more apples and a roughly constant price As the basket changes the numbers become meaningless.

55:28It's not to deny there's a lot of growth Uh, but you can think about it better by discarding the number And presumably AI will change the composition of various bundles quite a bit over time So when you hear these estimates about what the GDP per capita was in the Roman Empire do you just disregard that and think in terms of qualitative changes from that time Depends what they're being compared to So there's pieces in economic history that are looking at say 17th 18th century Europe comparing it to the Roman Empire Most of GDP's agriculture, which is pretty comparable right Especially in Europe.

56:03It's not wheat versus corn. It's wheat and wheat And I've seen estimates that oh say by 1730 Some parts of Western Europe are clearly better off than the Roman Empire at its peak but like within range That those are the best estimates I know and I trust those they're not perfect But I don't think there's an index number problem so much And so when people say we're 50 percent richer than an average Roman at the peak of the empire You but this this kind of thinking doesn't make sense to you. It doesn't make sense to me And a simple way to show that let's say you could buy From the Sears robot catalog of today.

56:39Yeah, or from 1905 and you have 50 ,000 dollars to spend Which catalog would you rather buy from You have to think about it, right now if you just look at changes in the CPI It should be obvious you would prefer the catalog from 1905 everything so much cheaper that white shirt costs almost nothing Right at the same time you don't want that stuff. It's not mostly part of the modern bundle So even if you ended up preferring the earlier catalog the fact that you have to think about it reflect the ambiguities Uh when you read the contemporaries of Smith other economists were writing at the time Uh where his arguments just uh clearly given the evidence of the time much better than everybody around or was it just that ex -post used clearly right But given the arguments of the time it could have gone any one of different ways Well, there aren't that many economists at the time of Smith so it depends what you're counting I mean the two fellow scots you could compare Smith to or Sir James Stewart Who published a major work I think in 1767 On some matters Stewart was ahead of Smith not most clearly Smith was far greater But Stewart was no slouch and the other point of comparison is David Hume Smith's best friend of course Uh per page you could argue Hume was better than Smith certainly on monetary theory Hume was better than Smith Now he's not a goat contender.

58:01He just didn't do enough But I wouldn't say Smith was ahead of Hume He had more and more important insights But Hume was pretty impressive Now if you're talking about oh like the 18th century German camera lists Uh Well they were bad mercantilists, but there's people say writing in Sweden in the 1760s analyzing exchange rates who had better understandings of exchange rates than Smith ever did So it's not that he just dominated everyone Um let me offer some other potential nominees that were not in the book for goat and I want your opinions of them Um Henry George in terms of explaining how land is fundamentally different from labor and capital when we're thinking about the economy Well first I'm not sure land is that fundamentally different from labor and capital a lot of the value of land Comes from improvements and much of improvement can be quite subtle It doesn't just have to be you know putting a plow to the land So I would put George in the top 25 very important thinker But he's a bit of a Not a one note Johnny his book on protectionism is still one of the best books on free trade But he circumscribed in a way say Smith and Mill were not Uh Today is he Does it satisfy us?

59:18We see your rents and big cities status is way out of this reason right because of yimb and mb And I think that's correct. He was undervalued He's worth reading very carefully a few years ago. We're recording here at merquetis. We had a Like 12 person two -day session with Peter teal just on reading Henry George. It's all we did And people came away very impressed I think um I mean for people who are interested they might enjoy the episode I did with Lars Tussette uh who oh, I don't know about this He's a georgist. Oh, yeah, he's uh He's he's a really smart guy. He wrote Uh, basically he he wrote a book review of Henry George that once caught Alexander's book review contest Oh, I know what this is and then he's just turned it into a whole book of his own which is that you're really good uh And I think there's something truly humane and George when you read him that can be a bit infectious.

1:00:07That's positive Mm Um, and It's something say there was something same turnout for his funeral right like he was very popular at the time That's right. Yeah, and that was deserved. Yeah Uh, I guess you already answered this question Ronald coast In terms of helping us think about firms and you know property rights and transaction costs Well, even though I think the 1937 pieces wrong it did create one of the most important genres He gets a lot of credit for that. He gets a lot of credit for the cost theorem The FCC property rights piece is superb the light has pieces very good again. He's in the top 25 But in terms of you like his quantity its own quality It's just not quite enough.

1:00:47There's no macro Oh, but of course you rate him very very highly. How about your former advisor Thomas Shelling He is a top tier noble laureate, but I don't think he's a serious contender for greatest economist of all time He gets the most credit for making game theory intuitive and empirical and workable and that's worth a lot Uh economics of self command he was a pioneer, but in a way that's just going back to the Greeks and Smith He's not a serious contender for go, but it topped your noble laureate for sure You have you have a fun code in uh in the book on arrow where you say his work was uh a noble prize winning important but not important important Well, some parts of it were important important like how to price securities So I think I underrated arrow a bit in the book if you ask like what regrets do I have about the book I say very very nice things about arrow, but I think I should have pushed him even more What would he or she would predict your markets?

1:01:45Well, he was really the pioneer of theoretically understanding how they work. Yeah, so uh He was around until quite recently. I'm sure he had things to say about prediction markets probably positive Um Uh, so what what are the points you're making the book is economics at the time was really a way of carrying forward big ideas about the world What discipline today is where that happens? Well internet writing it's not a discipline, but it's a sphere and plenty of it happens more than ever before But it's segregated from what counts as original theorizing in the academic sense of that word Is that a good or bad segregation?

1:02:23I'm not sure But it's really a very sharp radical break from how things had been and it's why I don't think there'll be a new goat contender Probably not ever or if there is it will be something AI related Hmm. Yeah, that's that's what's about right to me But within the context of internet writing obviously there's many disciplines there economics being a prominent one. Yeah When you split it up it is there a discipline in terms of I don't know people writing in terms of computer science concepts or people writing in terms of economic concepts Who is today? I know the discipline ceased to matter that really good internet writing is multi -disciplinary When I meet someone like a Scott aronson who's doing like computer science AI type internet writing on his blog I've way more in common with him than with a typical research economist say at Boston University and it's not because I know enough about computer science like I may or may not know a certain amount But it's because our two enterprises are so similar or Scott Alexander he writes about mental illness also That just feels so similar and we really have to rethink what the disciplines are It may be that method of writing is the key differentiator for this particular sphere.

1:03:35Yeah Scott everything. Scott aronson was my professor in college. Oh, that's great. Yeah. Yeah That's where I decided I'm not gonna go to grad school because you don't see because you see like two standard deviations above you easily You know, you might as well just use a different game But his method of thinking and writing is infectious like that of Scott Alexander and the rest of us. Yeah So I think in the book you say you were raised as much by Economic thought or the history of economic thought as you are by your graduate training more much more Not even close Today people would say I was talking to basil hopper and who's a young economist and he said he was raised on Revolution on the in the same way that you were raised on the history of economic talk thought how do you Does this seem like a good trade?

1:04:22Are you happy that people today are raised on Scott Alexander and Marshall revolution? At the margin I would like to see more people raised on marginal revolution I don't just mean that in a selfish way. Yeah, but the internet writing mode of thinking I would like to see more economists and research scientists raised on it But the number may be higher than we think like if I hadn't run emerged adventures I wouldn't know about basil per se maybe wouldn't not have met him And it's infectious so it might always be a minority But it will be the people most likely to have new ideas And it's a very powerful new mode of thought which I'll call internet way of writing and thinking And it's not sufficiently recognized as something like a new field or discipline, but that's what it is I wonder if you're doing enough of that when it comes to AI where I think you have really interesting thoughts about GPD5 level stuff But is somebody with your sort of polymathic understanding or different feel it's I If you just like extrapolate out these trends I feel like you might have a lot of interesting thoughts about when you think just in terms of what might be possible with something much further down the line Well, I have a whole book with AI predictions averages over and I have about 30 Bloomberg columns And probably 30 or 40 marginal revolution posts.

1:05:31I can just say I'll do more But the idea at which ideas arrive at me is the binding constraint. I'm not holding them back Speaking of basil he had an interesting question should should should society Or government subsidize savings so that we're in effect having It leads to basically a zero social discount rate. So this is people on average I probably have you know Did they they're prioritizing their own lives they have discount rates based on their own lives If we're long -term issue the government's upset be subsidizing savings. I'll come close to saying yes first we tax savings right now So we should stop taxing savings Absolutely, I think it's hard to come up with workable ways of subsidizing savings that don't give rich people a lot of free stuff In a way that's politically unacceptable and also unfair So I'm not sure we have a good way of subsidizing savings But in principle I would be for it if we could do it in the proper targeted manner Although you had a good argument against this in stubborn attachments right that over the long term if the if economic growth is high enough Then the savings of the rich will just be Disappointed to everybody below Well, I'm not sure to whom it's dissipated.

1:06:47It does get dissipated the rate fortunes of the past or mostly gone But they may not go to people below And the idea of writing into a tax system subsidies on that scale in essence subsidies to wealth Not not GDP, but wealth is say six to eight times GDP I just think the practical problems are quite significant. It's not an idea I'm pushing But there may at margins be ways you can do it That say only benefit people who are poor ways you can improve like the workings of local credit unions through better Either regulation deregulation that are a kind of de facto subsidy without having to subsidize All of the saved wealth There's got to be a lot of ways you can do that and we should look for that more Relatedly I think a couple years ago a polished lemon had an interesting paper that if you look from 1311 to now Interest rates have been declining that there's been hundreds of years of interest rate declines What what is the big picture explanation of this trend?

1:07:46I'm not sure we have one you may know cow and third law all propositions The pet real interest rates are wrong But simply lower risk better information higher buffers of wealth Would be what you'd call the intuitive Economistic explanations. There's probably something to them But how much of that trend do they actually explain as like a percent of the variance? I don't know Let's talk about anarchy VVapers about this I hadn't read the last time we talked and they're really interesting So Maybe you can restate your arguments as you answer this question But how much of your arguments about how network industries lead to these cartel like dynamics?

1:08:23How much of that can help explain what happened to social media web 2 .0? I don't view that as such a cartel. I think there's a cartel at one level which is small but significant This is maybe more true three four years ago than today with Elon owning twitter and other changes But if someone got kicked off social media platforms Three four years ago they would tend to get kicked off all or most of them It wasn't like a consciously Collusive decision, but it's a bit like oh well. I know the guy who runs that platform And he's pretty smart and if he's worried I should be worried And that was very bad I don't think it was otherwise such a collusive equilibrium maybe some dimensions on hiring Social You know people software engineers.

1:09:11There was some collusion Not enough bidding But it was mostly competing for attention So I think the real risk protection agencies aside of network -based collusion is through banking systems Where you have clearing houses and payments networks And to be part of it the clearinghouse in the absence of leadal constraint can indeed Help everyone collude and if you don't go along with the collusion you're kicked out of the payment system That strikes me as a real issue Do your arguments against anarchy? Do they apply it all to web 3 .0 crypto like stuff Do I think it will evolve into collusion? I don't see why it would I'm open to hearing the argument that it could though.

1:09:54What would that argument go like? Well, I guess we did see with crypto that you have In order to just have workable settlement you need at these centralize institutions And from there you can get kicked off those and the government is involved with those and you can You can maybe affect the government away and say that they will need to collude in some sense in order to facilitate transactions And the exchanges have ended up quite centralized right? Yeah And that's an example of clearing houses and exchanges in the vulnerable node But I don't know how much web 3 .0 is ever gonna rely on that It seems you can create new crypto assets more or less at will.

1:10:31There's the locality of getting them started But if there's a real problem with the pre -existing crypto assets I would think you could overcome that So I would expect something more like a two and frau Waves of centralization decentralization And natural checks embedded in the system. That's my intuition at least Does your argument against anarchy prove too much in the sense that globally Different nations have anarchic relations with each other and they can't They can enforce course and monopoly on each other But they can coordinate to punish bad actors and the way you want protection agencies to do right like big incanation North Korea together or something I think that's a very good point and very good question But I would rephrase my argument you could say it's my argument against anarchy and it is an argument against anarchy But it's also an argument that says anarchy is everywhere so within government Well, the fed state governments all the different layers of federalism.

1:11:23There's a kind of anarchy There's not quite a final layer of adjudication the way you might think we pretend there is I'm not sure how strong it is internationally, of course You know how much gets enforced by hegemon how much is spontaneous order Even the different parts of the federal government. They're in a kind of anarchy with respect to each other So you need a fair degree of collusion For things to work and you ought to accept that but maybe in a strousey and way where you don't trumpet it too loudly But the point that anarchy itself will evolve enough collusion to enable it to persist if it persists at all Is my central point my point is like well anarchy isn't that different Now given we've put a lot of social political capital into our current institutions I don't see why you would press the anarchy button But if I'm North Korea and I can press the anarchy button for North Korea I get that it might just evolve into Haiti But I probably would press the anarchy button for North Korea if at least someone would come in and control the loose nukes Yeah, I this is related to one of those classic arguments against anarchy that Andrea and arki anything is allowed so the government is allowed Careful we're in a state of anarchy in some sense In a funny way that arguments correct We would revolve something like government And Haiti has done this but in very bad ways where it's our gangs and killings It doesn't have to be that bad.

1:12:50There's medieval Iceland, medieval Ireland They had various forms of anarchy Clearly limited in their destructiveness by low population ineffective weapons But they had a kind of stability you can't just dismiss them And you can debate how governmental were they But the ambiguity of those debates is part of the point that every system has a lot of anarchy And anarchy's have a fair degree of collusion if they survive Oh actually so I want to go back to Much earlier in the conversation where you're saying listen over It seems like intelligence is is a net good So just that being your heuristic you should call for the AI Well not uncritically you need more argument but just as a starting point Yeah, it's like if more intelligence isn't going to help you you have some really big problems anyway But I don't know if you still have the view that we're we have like 800 year timeline for human civilization But that that sort of timeline implies that Intelligence actually is going to be the because the thing the reason we have an 800 year timeline presumably is like some product of intelligence right My worry is that energy becomes too cheap and people at very low cost can destroy things rather easily So say if a nuclear if destroying a city with a nuclear weapon cost $50 ,000 What would the world look like?

1:14:09I'm just not sure it might be more stable than we think But I'm greatly worried and I could readily imagine it falling apart. Yeah, but I guess the bigger point I'm making is that In this case the reason the new god so cheap was Because of intelligence now that that doesn't mean we should stop intelligence But it just that in if that's like the end result of intelligence over 100 years That doesn't seem like intelligence is always A net good. Well, we're doing better than the other great apes I would say even though we face these really big risks And in the meantime, we did incredible things. So that's a gamble.

1:14:42I would take But I believe we should view it more self -consciously as a sort of gamble And it's too late to turn back the fundamental choice was one of decentralization And that may have happened hundreds of millions or billions of years ago And once you opt for decentralization Intelligence is going to have advantages And you're not going to be able to turn the clock back on it So you're walking this tightrope And by goodness you'd better do a good job I mean we should frame our broader history more like that And it has implications for how you think about ex -risk Again, I think if the ex -risk people a bit of them it's like well, I've been living in Berkeley a long time and It's really not that different my life's a bit better And we can't risk all of this But that's not how you should view broader history I feel like you're an ex -risk person you have a yeah I mean even they don't think we're like a 100 % guaranteed to go out by 800 years or something They have some problems We're guaranteed at all, it's up to us I just think the risk not that everyone dies I think that's quite low But that we retreat to some kind of pretty chaotic form of like medieval Balkans existence With a much lower population That seems to me quite a high risk With or without AI It's probably the default setting Given that you think that's a default setting Why is that not a big part of your when you're thinking about How new technologies are coming about Why not consciously think in terms of is this getting us to the outcome where we avoid this sort of free industrial state that would result from the $50 ,000 newcs Well, if you think the risk is cheap energy more than AI per se Admittedly AI could speed the path to cheap energy It seems very hard to control The strategy that's worked best so far is to have relatively benevolent nations Become hegemon and established dominance So it does influence me.

1:16:37I want the US, UK Some other subset of nations to establish dominance in AI It may not work forever But in a decentralized world it sure beats the alternative So a lot of the AI types, they're too rationalist And they don't start with the premise that we chose a decentralized world A very, very long time ago even way before humans And I think you made an interesting point when you were talking about Keynes in the book Where you said one of his faults was that he assumed that people like him would always be in charge And I do see that also in the the alignment discourse Like alignment is you know if it's just getting over with the government and just assuming the government does what you're expected to do And I worry about this from my own point of view So even if you think US is pretty benevolent today Which is a highly contested and mixed proposition And I'm an American citizen pretty patriotic But I'm fully aware of the long history of my government in killing and slaving Doing other terrible things to people And then you have to rethink that over a long period of time Maybe the worst time period that affects the final outcome Even if the average is pretty good And then if power corrupts And if government even indirectly controls AI systems So US government could become worse Because it's a leader in AI right But again, I've got to still take that over China Or Russia or wherever else it might be I just don't really understand When people talk about national security I've never seen the AI dooms say anything that made sense And I recall those early days remember China issued that edict Where they said we're only going to put AI's that are safe And they can't criticize the CCP How many super smart people And I mean super smart like Zvi Just jump on that and say see China's not going to compete with us We can shut AI down They just seem to have zero understanding Of some properties of decentralized worlds Or LE's or tweet was it from yesterday I didn't think it was a joke But oh there's a problem that AI can read all the legal code And threaten us with all these penalties It's like he has no idea Has screwed up the legal system is It would just need courtroom weights of like 70 or 700 years It wouldn't become a thing people are afraid of It would be a social problem in some way What's your sense of how the government reacts when the labs are doing Regardless of how they should react How they will react when the labs are doing like I don't know Tell them 10 billion dollar training runs And if under the premise that these are powerful models Not human level per se But they can do all kinds of crazy stuff How do you think the government are going to nationalize the labs Or how do you get staying in Washington?

1:19:14What's your sense I think our national security people are amongst the smartest people And our government They're mostly well -intentioned in a good way They're paying careful attention to many things But what will be the political will to do what they don't control And my guess is until there's sort of an SBF -like incident Which might even not be significant But a headlines incident Which SBF was Even if it doesn't affect the future evolution of crypto Which I guess is my view It won't Until there's that we won't do much of anything And then we'll have an SBF -like incident and we'll overreact That seems a very common pattern in American history And the fact that it's AI The stakes might be higher whatever I doubt if it will change the recurrence of that pattern How would Robert Nosek think about different AI utopias?

1:20:05Well, I think he did think about different AI utopias Right? So uh I believe he Whether he wrote or talked about it But the notion of humans much smarter Than they are Or the notion of aliens coming down Who are like in some way morally intellectually way beyond us He did write about that And he was worried about how they would treat us So he was sensitive To what you would call AI risk Viewed a bit more broadly very early on Hmm. What was this? What was his take? Well, Nosek is not a thinker of takes He was a thinker of speculations and multiple possibilities So I liked about him He was worried about it this I know And I talked to him about it But I couldn't boil it down to a simple take They made him a vegetarian I should add Wait, that made him Oh because we want to be treating the entities that are to us as AI's The aliens from outer space might treat us We are like that two animals May not be a perfect analogy But it's still an interesting point And therefore we should be vegetarians That was his argument At least he felt he should be I wonder if we should honor past generations more Or at least like respect to our wishes more If we think of the alignment problem As similar to how we react to our previous generations Do you know If we do we want the ICTree to say we treat people thousands of years ago Yeah, it's a good question And uh I've never met anyone who's consistent with how they view wishes of the dead Yeah I don't think there is a consistent philosophically grounded point of view on that one Hmm I guess the sort of Thomas Payne you don't regard them at all Is that not self -consistent?

1:21:43It's consistent but I've never met anyone who actually lives according to it Oh and why since are they contradicting themselves? Well say you know there Their spouse were to die and the spouse gave them instructions Sure They would put weight on those instructions Somewhere out there there's probably someone who wouldn't But I've never met such a person Hmm And how about the Birkview that you take them very seriously It why is that not self -consistent? The Birkview what do you mean? Birk Birkview Oh Well it's time inconsistent to take those preferences seriously And Birk himself understood that he was a very deep thinker So well you take them seriously now But as time passes Other ancestors come along they have somewhat different views You have to keep on changing course What you should do now Should it be what the ancestors behind us want Or your best estimate of what the 30 or 40 years of ancestors to come Will want once they have become ancestors So it's time inconsistent There's not again there's not going to be a strictly philosophical resolution There will be practical attempts To find something sustainable And that which survives will be that which we do And then we'll somewhat rationalize it exposed Yeah yeah There's an interesting book about The ancient ancient Greeks What was it called?

1:22:58I forgot the name but it's talks about the hearts that they have for the For their families where the dead become gods But then over time if you keep this hard going for hundreds of years There's like thousands of ancestors that like you don't even remember their names right? Who are you praying to? And then it's like the arrow and possibility theorem for all the gods What do they all mean to? You can't even ask them Yeah Okay we're talking before we started recording about Argentina And the reforms they're trying there And they're trying to dollarize because the dollar is more stable than their currency But this raises the question of why is it dollar so stable?

1:23:31So we're also democracy right? But like the dollar that seems pretty well managed What is the large explanation of why The monetary policy seems well managed in the US Well US voters hate inflation mostly for good reasons And we have enough wealth that we can pay our bills Without having to inflate very much And 2 % has been stable now for quite a while Now it's an interesting question which I cannot answer And I have looked into this and I have asked smart people from Argentina Why does Argentina in particular have recurring waves of hyperinflation Is there something about the structure of their interest groups That inevitably recurrently leads them to demand too much I suppose But there's plenty of poor badly -run countries that don't have hyperinflation African countries historically have not had high rates of hyperinflation Haven't had high rates of inflation Why is that?

1:24:26Well maybe they don't capture enough through senior age For some reason currency holdings aren't large enough There's some kind of financial repression I don't know But it's very hard to explain why some of these countries but not others Don't crazy with the printing press And this is a broader question about different institutions in the government Where I don't understand enough to evaluate their like object level decisions But if you look at the Supreme Court or the Federal Reserve or something Just in my distance it seems like they're really well -run competent organizations with highly technocratic non -partisan people running them They're not non -partisan but they're still well -run Yeah and what's the theory of why these institutions in particular are so much better run Is it just that they are there one step back from direct elections Is it that they have traditions of knowledge within them Well how do we think about this?

1:25:17I think both of those I don't think the elections point to sufficient Because there's plenty of unelected bodies that are totally corrupt Yeah Around the world most of them are perhaps Some sense of American civic virtue that gets communicated And then the incentives are such say you're on the Fed for a while What you can do afterward can be rewarding But you want a reputation for having done a good job So your sense of morality in your private self -interest coincide And that's pretty strong And we're still in that loop I don't really see signs of that loop breaking It's also striking to me how many times I'll read an interesting article or paper And the person who wrote it's like the former head of the Federal Reserve in New York or something It just seems like a this is strong indication of these institutions that The standards are very high And if you speak with any of those people like who've been on Fed boards Ask them questions they're super smart super involved curious Really for the most part do want the best thing for their country Going back to these economists you at the end you talk about how you're kind of Disappointed in this sort of turned that economics has taken maybe I just want to surprise right it's division of labor Adam Smith who said it would make people a bit feeble minded and incurious was completely correct Wait Adam Smith said what would make people incursion of life?

1:26:33I see right. Yeah, not stupid You know current economic researchers probably have never been smarter But the way less broad and less curious Um Patrick Lawson put it an interesting way where he said in the past maybe thinkers were more interested in Delving into the biggest questions, but if they they couldn't do it rigorously in a tractable way They would just they would make the trade -off in favor of the big question and today we make the opposite trade -off I did that seem like a fair comparison I think that's correct and I would add that saying the time of Smith there was nothing you could do rigorously So there was no other option Oh, I'm in a specialized and you know memorizing all the grain prices and run some great econometrics on that and that'll be rigorous It's really William Stanley Jevons Who to the Anglo world introduce this notion there's something else you can do that's rigorous It was not yet rigorous, but he opened the door and showed people the alternative of the of the Jevons paradox I would say his work in statistics originally on the value of money right But his statistical work on coal also had some rigor so you're not wrong to sit down And Jevons just showed that rigorous statistical work and economics could be the same thing And that was his greater innovation than just marginalism So he's an underrated figure Maybe he should be in the book in a way But it had some unfortunate secondary consequences too many people crowd into specialization Crowd is a funny word to use because they're each sitting in their separate notes, but it's a kind of crowding Is there some sort of Hayekian solution here where In markets the effect of having the sort of decentralized processes the the the sum is greater than the parts Whereas in academic disciplines the sum is just a bunch of differences to school aggregates The additional grand theory that comes together as a result of all this micro work Is there some Hayekian solution here?

1:28:29Well, yes, you and I are the Hayekian solution that a specialist proliferate we can be Quote and quote parasitic on them and take what they do and turn it into interesting larger bundles that they have in dreamt of And make some kind of living doing that and we're much smaller in number But I'm not sure how numerous we should be and there's a bunch of us, right? I you're just ever category Tyler I'm running a podcast here I run a podcast It's ever category. You're exactly in the same category is my point And what do you see as a future of the sort of the kind of sort of thinking you do are you do to see yourself as the last of the literary economist or is there a future of this kind of Is it just gonna be the Slays our codex's are they're gonna take care of it or Well, this sort of lineage of thinking well the next me won't be like me.

1:29:18Yeah In that sense, I'm the last, but I don't think it will disappear. It will take new forms It may have a lot more to do with AI And I don't think it's gonna go away. There's just a demand for it There's a real demand for our products. We have a lot of readers listeners people interested whatever and there'll be ways to monetize that The challenge might be competing against AI and it doesn't have to be that AI does it better than you or I do without what might But simply that people prefer to read what the AI is generate for 10 or 20 years and it's harder to get an audience Because playing with the AI is there's a lot of fun.

1:29:55So that will be a real challenge I think some of us will be up to it. You'll be faced with it more than I will be Uh, but it's gonna change a lot. Yeah. Okay What are the final things I want to do is I want to go into political philosophy a little bit. Okay, and Ask you haven't been doing it already. Yes Okay, so I want to ask you about sort of certain potential weaknesses of the democratic capitalist model that we live in and in terms of Both in terms of whether you think they're object level law wrong. Sorry object level right and second How regardless of how right they are how how persuasive and how powerful Of force they will be against our you know our system of government and functioning okay Okay, so there's a libertarian critique that basically democracy is sort of a random walk with a drift toward socialism And there's also a rash of effect where government programs don't go away And so it just ends up towards socialism at the end It ends up with having government that is too large.

1:30:55Yeah, but I Don't see the evidence that it's road to surf them France weeden have had pretty big governments way too large in my opinion But they haven't threatened to turn autocratic or totalitarian certainly not And you've seen reforms in many of those countries Sweden moved away from Government approaching 70 % of GDP and now it's quite manageable Government there should be smaller yet I don't think the trend is that negative. It's more of a problem with regulation and the administrative state But we've shown an ability to create new sectors like big parts of tech They're not unregulated laws apply to them, but they're way less regulated and it's a kind of race That race doesn't look too bad to me at the moment like we could lose it But so far so good So it's the critique should be taken seriously, but it's yet to be validated How about the egalitarian critique from the left that you can't have The inequality the market creates with the political and moral equality that you know humans deserve in demand They just say that US has high degree of income inequality So does Brazil a much less well -functioning society Brazil continues on average it will probably grow one or two percent That's not a great record But Brazil has to go up in a puff of smoke.

1:32:17I don't see it And how about the niche and critique and in the The end of history book. Yeah, I said this is more powerful This is the one he's more worried about than the more so than the leftist critique and over time Basically what you end up with is the last man and you can't defend the civilization You know the story. It's a lot of words. I mean Is he short the market? I've asked Fukuyama this He's not this is a long time ago, but he wasn't short the market then Again, it's it's a real issue. It seems to me the problems of today for the most part Are more manageable than the problems of any previous era We still you know might all go poof Return to medieval Balkan style existence in a millennia or whatever But it's a fight and we're totally in the fight and we have a lot of resources and talent.

1:33:04So like let's do it Okay, I don't see why that particular worry It's a lot of words And I like to get very concrete like even if you're not short the market if that were the main relevant worry Where would that show up in asset prices as a cut worse? It's a very concrete question I think it's very useful to ask and when people don't have a clear answer I get worried where does your prediction that Eight of 100 years down the line will have the $50 ,000 nukes where does that show up in the asset prices? I think at some point vicks, you know in index of volatility will go up Ah probably not soon nuclear proliferation has not gone crazy, which is wonderful But I think at some point it's hard to imagine it not getting out of control Oh last I read vicks is surprisingly low and stable.

1:33:52That's right. I think I was 24 is on On the path to be a pretty good year Yeah, or do you think the market is just wrong in terms of thinking about both geopolitical risks from you know israel or whatever The markets wrong at all. I think that war will converge I'm not saying the humanitarian outcome is a good one But in terms of the global economy I think markets are thinking rationally about it though the rational forecast of course is off and wrong What's your sense on the scaling stuff when you look at the arguments In the terms of what's coming. How do you react to that? Well your piece on that was great I don't feel I have the expertise to judge that as a technical matter It does seem to me intuitively It would be weird on the technical side if scaling just stopped working But on the knowledge side I think people underestimate possible barriers and what I have in mind is Quite a bit of reality the universe might in some very fundamental way simply not be legible And that there's no easy and fruitful way to just quote -unquote apply more intelligence to the problem Like oh, you want to integrate general relativity and quantum mechanics It may just be we've hit the frontier and there's not a final layer of oh years how it fits together So there's no way to train in AI or other thing To make it smarter to solve that and maybe a lot of the world is like that And that to me people are not taking seriously enough So I'm not sure what the net returns will be to Bigger and better and smarter AI That seems possible for you know p versus np type of reasons it just like harder to make uh for further discoveries But I feel like we have pretty good estimates in terms of like the declining Researcher productivity because of low hanging fruit being gone in this sort of sense We're reaching the frontier and whatever percent it is a year If you can just keep the AI population growing faster than that if you just want to be crude about it That seems enough to if not get to the ultimate physical synthesis at least much for other than we're human civilization would get in the same span of time That seems to be very plausible I think we'll get further.

1:35:52I expect big productivity gains As a side note, I'm less convinced by the declining researcher productivity argument than I used to be So the best way to measure productivity for an economist is wages and wages of researchers haven't gone down Period in fact, they've gone up now. They may not be producing new ideas You might be paying them to be functionaries or to manage PR or does this manage other researchers But I think that's a worry that we have a lot more researchers With generally rising researcher wages and that hasn't boosted productivity growth China India South Korea brought into the world economy scientific talent It's better than if we hadn't done it But it hasn't in absolute terms boosted productivity growth and maybe that's a worry some sign Uh on on the metric of researcher wages It seems like it could just be a fact that even the The less marginally useful improvements are worth the extra cost in terms of if you think of a company Like Google is probably paying as engineers a lot more than it was paying in the early days even though they're doing less now Because you know I have changing a pixel in the new Google page is gonna affect billions of users The similar thing could be happening in the economy, right?

1:37:06That might hold for Google researchers, but take people and farm a biomedicine There's a lot of private sector Financed research or indirectly financed by buying up smaller companies And it only makes sense if you get something out of it that really works Like a good vaccine or good medication ozampic super profitable So wages for biomedical researchers in general haven't gone down Now finally it's paying off But I'm not sure AI will be as revolutionary as the other AI optimists believe I do think it will raise productivity growth in ways which are visible To what extent uh In the conventional growth or you think in terms of population size right and then so you just increase the population size You get much more research at the end to what extent doesn't make sense to think about well if you have these billions of AI copies That we can think of that in terms of as a proxy of how much progress they could uh produce is that a not a sensible way to think about that At some point having billions of copies probably won't matter It will matter much more how good is the best thing we have and how well integrated is it into our other systems Which have bottlenecks of their own And the principles governing the growth of that are much harder to discern It's probably a much slower growth than just juicing up oh, we've got a lot of these things and they're trained on more and more GPUs But precisely because the top seems to matter so much is why we might expect bigger gains right so if you think about Jews in the 20th century You know two percent of the population are less than that and 20 percent of the noble prizes It does seem like you can have a much bigger impact than um if you're on the very tail if you just have a Just a few hundred John Monoim and copies Maybe that's a good analogy that the impact of AI will be like in the 20th century the impact of Jews right Which would be excellent right yeah, but it's not extraordinary.

1:38:58It's not a science fiction novel It is I mean you read the early 20th century stuff as you have you know It's like a slow takeoff right there of like you know go from V2 rockets to the moon and a couple of decades It's a good is it's kind of a crazy pace of change Yeah, that's what I think it will be like again great stagnations over We'll go back to those earlier rates of change transform a lot of the world Uh, mostly a big positive a lot of chaos disrupted institutions along the way That's my prediction But no one writes a science fiction novel about the 20th century. It feels a bit ordinary still Hmm yeah, even though it wasn't I forget the name of the philosopher you asked this to but the the feminist philosopher you asked the question of me a screen of yes Uh, you asked the question what would have to be different for you to be a social conservative right What would have to be different for you to not be a doomer per se but just one of these people who like This is the main thing to be thinking about during the spirit of history or something like that Well, I think it is one of the main things we should be thinking about But I would say if I thought international cooperation Were very possible I would at least Possibly have very different views than I do now Or if I thought no other country could make progress on AI those seem unlikely to me But they're not logically impossible So The fundamental premise where I differ from a lot of the doomers Is my understanding of a decentralized world and its principles being primary Their understanding is some kind of comparison like here's the little people And here's the big monster and the big monster gets bigger and even if the big monster does a lot of good things It's just getting bigger and hear the little people That's a possible framework But if you start with decentralization and competition and well how are we going to manage this In some ways my perspective might be more pessimistic But you you don't just think you can wake up in the morning and like legislate safety You You look at the history of relative safety having come from hegemon's and you hope your hegemon stays good enough Which is a deeply fraught proposition.

1:41:02I recognize that What's the next book I'm already writing it Part of it is on jevans, but the title is the marginal revolution But not about the blog about the actual marginal yeah, but it's maybe a monograph like 40 ,000 words But I don't think book length should matter anymore I want to be more radical on that. I think 40 ,000 words is perfect because it actually fit in context So when you do the cheap before Now context may be bigger by then yeah, but I want to have it in GPT in some way okay, okay Those are all the questions I had tell her this is a lot of fun and keep up the great work and Delighted you're at it.

1:41:47Thank you. Thank you. Yeah, thanks are coming on the podcast the third time now So a lot of fun. Okay. Bye everyone Hey, everybody. I hope you enjoyed that episode As always the most helpful thing you can do is just share the podcast then did to people you think might enjoy it Put it in Twitter your group chats, etc. Just blitz the world Appreciate your listening. I'll see you next time cheers You