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Read it and weep

1. Bad monetary policy produces inflation and/or recessions. But the greatest cost of bad monetary policy is that it leads to bad policies in other areas, including wasteful fiscal stimulus, protectionism, bank bailouts and price controls. In China, an overly restrictive monetary policy has led the government into a project involving the purchase of large quantities of homes. Here’s Bloomberg:

China is considering a proposal to have local governments across the country buy millions of unsold homes, people familiar with the matter said, in what would be one of its most ambitious attempts yet to salvage the beleaguered property market.

2. Freedom to travel is under threat:

Conservative legal groups are already drafting model legislation to prevent pregnant women from traveling for abortions by legally penalizing anyone who helps them, a strategy used by the state of Texas in one of its abortion bans, which allows anyone in the U.S. to sue those who assist women with abortions—and be rewarded with a bounty paid by the state.

3. Dani Rodrik has an interesting article on China’s program of subsidies for green technology:

China’s green industrial policies have been responsible for some of the most important wins to date against climate change. As Chinese producers expanded capacity and reaped the benefits of scale, the costs of renewable energy plummeted. In the space of a decade, prices fell by 80% for solar, 73% for offshore wind, 57% for onshore wind, and 80% for electric batteries. These gains underpin the creeping optimism in climate circles that we might just be able to keep global warming within reasonable bounds. Government incentives, private investment, and learning curves proved to be a very powerful combination indeed.

With the IRA, America already has its own version of China’s green industrial policies. The law provides hundreds of billions of dollars in subsidies to facilitate the transition to renewables and green industries. 

Who could possibly object to a highly successful program that is now being copied by the US government? You guessed it–the Biden administration:

On a recent trip to China, US Secretary of the Treasury Janet Yellen warned China directly that the US would not stand by in the face of China’s “large-scale government support” for industries such as solar, electric vehicles, and batteries.

4. Taiwan understands China far better than does the US government. It also has more to fear from the Chinese government. And yet, even Taiwan understands the futility of banning TikTok.

About 80 miles from China’s coast, Taiwan is particularly exposed to the possibility of TikTok’s being used as a source of geopolitical propaganda. Taiwan has been bombarded with digital disinformation for decades, much of it traced back to China.

But unlike Congress, the government in Taiwan is not contemplating legislation that could end in a ban of TikTok.

AFAIK, Russia does not own any major social media used in the US. And yet I see pro-Russian propaganda all over the internet. Tiktok is not the issue.

5. The Libertarian Party seems to have pulled back from the brink by choosing a respectable candidate over the sort of hard right figure preferred by the Mises Caucus. Here’s Reason:

Oliver, a 38-year-old gay man from Atlanta with socially tolerant and pro-immigration views, delivered a passionate response after Trump’s speech to the convention on Saturday. Now, he will get to spend the next six months competing directly against Trump and President Joe Biden, two men more than twice his age. After winning on Sunday, Oliver promised to keep pressing a message that neither major-party candidate is likely to offer.

“I will continue to bring a hopeful and positive message of liberty to both those who consider themselves libertarian and those who don’t know they are libertarian yet,” Oliver promised in his victory speech. . . .

Oliver’s victory on Sunday night was a blow to the Mises Caucus, the right-leaning faction that took control of the Libertarian Party at the 2022 convention and that had orchestrated Trump’s appearance at the convention. That faction’s preferred candidate was Rectenwald.

6. I’ve focused on arguments against Trump, but Matt Yglesias points out that it’s possible to construct some pretty creative pro-Trump arguments:

7. Martin Wolf has an excellent piece on the rising threat of nationalism. He concludes as follows:

In 1939, the poet WH Auden wrote of what he judged “a low dishonest decade”. How will ours look in 2029?

8. There’s no such thing as public opinion, example #329:

9. Back in the summer of 2021, I predicted that the public’s mood would sour even as the economy improved:

There’s always a price to pay for unsustainable good times, and thus I expect the public’s mood to turn sour in the fall and winter, even as employment recovers—indeed because employment recovers.  Someone has to do all those crappy jobs.

Now it’s becoming conventional wisdom:

Never forget that you heard it here first.

10. I am currently reading an old novel by Melville, entitled Omoo. This comment at the end of chapter 6 caught my eye:

But it is a curious fact, that the more ignorant and degraded men are, the more contemptuously they look upon those who they deem their inferiors.

Suppose you brought Melville to the year 2024, showed him each candidate’s speeches, and asked him who he thought would win the votes of “white trash”. What would he predict?

11. The funniest thing about this Youtube clip is that Trump forgot to lie. Normally he’d just lie, like when they asked him if he would release his taxes. In this case he was so freaked out by the name “Epstein” that he forgot to lie.

12. When Biden makes a patriotic speech on D-day extolling the virtues of democracy, Trumpistas whine that he’s being “political”. I guess that’s because in their view “everyone knows” that Trump hates democracy, so any discussion of its virtues is, ipso facto, a slap at Trump.

I’m going to have so much fun blogging during Trump’s second term!!

Melancholia

During my recent trip to the Bay Area, I met lots of people who are involved in the field of AI. My general impression is that this region has more smart people than anywhere else, at least per capita. And not just fairly smart, I’m talking about extremely high IQ individuals. I don’t claim to have met a representative cross section of AI people, however, so take the following with a grain of salt.

If you spend a fair bit of time surrounded by people in this sector, you begin to think that San Francisco is the only city that matters; everywhere else is just a backwater. There’s a sense that the world we live in today will soon come to an end, replaced by either a better world or human extinction. It’s the Bay Area’s world, we just live in it.

In other words, I don’t know if the world is going to end, but it seems as though this world is coming to an end.

Some people I spoke with worried that AIs would soon take all of the jobs—and wondered about the impact on the economy. As far as existential risk, it often seemed as if the optimists were the pessimists, and vice versa. As if humanity’s best hope is that the AI enthusiasts are overestimating the potential for AGI.

One guy asked me if I were interested in cryonics. Not whether I was interested in it as a concept; was I interested in the sense of ready to sign a contract if he drew one up? He pointed out (half joking) that due to the rapid advance of AI, I wouldn’t have to spend much time being dead before I was revived.

I’m probably giving you the idea that the Bay Area tech people are a bunch of weirdos. Nothing could be further from the truth. In general, I found them to be smarter, more rational, and even nicer than the average human being. If everyone in the world were like these people, even communism might have worked.

There’s a weird disconnect between the AI world and the normal world. If the AI people are correct, then I don’t think the public has any idea what’s about to hit them. Consider a recent survey that discussed public attitudes toward AI. The public thought it might produce benefits in some areas, and then listed a few downsides:

There’s broad concern about the loss of the human element due to emerging AI technologies, especially in settings like the workplace and health care. Many Americans who would not want to apply for a job that uses AI in the hiring process cite a lack of the “human factor” in hiring as the reason why. In health and medicine, a majority of Americans think relying more on AI would hurt patients’ relationships with their providers.

The potential for negative impacts on jobs is another common concern with AI. Among those who say they’re more concerned than excited about AI, the risk of people losing their job is cited most often as the reason why. We also see this concern with some specific examples of AI. For example, 83% of Americans think driverless cars would lead to job loss for ride-share and delivery drivers.

Surveillance and data privacy are also concerns when discussing AI. Large majorities of Americans who are aware of AI think that as companies use AI, personal information will be used in unintended ways and ways people are not comfortable with.  

Note that there is no question about existential risk, despite the fact that some of the smartest people on the planet think the “P(doom)” risk is uncomfortably high. I’m not saying they are right, but does the public even know about these concerns?

Leopold Aschenbrenner recently pointed out that even the federal government seems completely oblivious to the fact that AI research might have national security implications. Again, I don’t know how seriously we should take those concerns, but it shows the disconnect between the AI world and the normal world.

Overall, I felt there was both excitement about the progress in AI and a sort of melancholy about the fact that we might not know how to control the technology. I was often reminded of Lars von Trier’s underrated 2011 film entitled Melancholia, where a few experts understood that the end of the world was near (due to an asteroid strike), but the broader public was partying like there was a tomorrow. BTW, that film nicely captured the feeling of dread when you can see the end and cannot do anything about it.

Again, I’m not saying AI will be the end of the world. But spend enough time in the Bay Area and you begin to see the public’s fears as the optimistic case. All jobs are replaced by machines and we’re living on UBI? That’s great news! It means the world hasn’t been destroyed.

Of course this is easy for me to say, as I’m retired and will soon be dead. One younger guy told me that he was having trouble deciding what field to study, as he could not think of a single white collar job that wasn’t going to be replaced by AIs. Ironically, it’s the manual jobs that will be the last to be replaced, as computers are good at what we are bad at, and vice versa.

How seriously should we take the views of all these geniuses? I’m reminded of the observation that when playing the game of poker, if you cannot spot the “mark” at your poker table then you are the mark. I spent a few days among geniuses at the LessOnline meetup, and wasn’t able to spot the guy that was clueless about AI.

¯\_(ツ)_/¯.

All kidding aside, do you think the average person living near Oak Ridge or Alamogordo back in 1945 had any idea what the nearby eggheads were about to cook up?

Toward the end of his long essay, Aschenbrenner has this to say about the need to take AI more seriously:

But the scariest realization is that there is no crack team coming to handle this. As a kid you have this glorified view of the world, that when things get real there are the heroic scientists, the uber-competent military men, the calm leaders who are on it, who will save the day. It is not so. The world is incredibly small; when the facade comes off, it’s usually just a few folks behind the scenes who are the live players, who are desperately trying to keep things from falling apart.

Right now, there’s perhaps a few hundred people in the world who realize what’s about to hit us, who understand just how crazy things are about to get, who have situational awareness. I probably either personally know or am one degree of separation from everyone who could plausibly run The Project. The few folks behind the scenes who are desperately trying to keep things from falling apart are you and your buddies and their buddies. That’s it. That’s all there is.

He’s still pretty young, but getting disillusioned at a fast rate. It’s worth noting that this isn’t just about him becoming less naive. The quality of our political establishment really is declining at an alarming rate. In the 1950s, we had people like Dwight Eisenhower. Now we have leaders like Trump.

For me, the wake-up call occurred much later in life, back in 2008. I suddenly realized that monetary policy at our major central banks was not being run by “Princeton School” economists, even though a Princeton economist chaired the Fed. The stock market had a similar wake-up call, and promptly crashed in the fall of 2008.

PS. If you have 4 1/2 hours to spare, this is the most interesting podcast I’ve ever listened to. Aschenbrenner graduated from Columbia at the top of his class, at age 19.

PPS. Is Durer’s Melencholia I the greatest print ever made?

A glimmer of hope?

I’ve had very low expectations for the Fed’s upcoming review of its operating regime. I had thought that the previous review (back in 2020) had hit the nail on the head, until I learned that “average inflation targeting” had nothing to do with stabilizing the average inflation rate. A new paper by Federal Reserve economist Michael T. Kiley suggests they may be about to fix the “asymmetry” problem with FAIT. Here’s the abstract:

I assess monetary policy strategies to foster price stability and labor market strength. The assessment incorporates a range of challenges, including uncertainty regarding the equilibrium real interest rate, mismeasurement of economic potential, and balancing the costs and benefits associated with employment shortfalls and labor market strength. I find that the ELB remains a significant constraint, hindering achievement of the inflation objective and worsening employment shortfalls. Symmetric policy reaction functions mitigate the most adverse effects of employment shortfalls by contributing to economic stability. Make-up strategies address ELB risks. These strategies call for policy to accommodate some period of inflation above its long-run objective following an ELB episode. I also consider an asymmetric shortfalls approach to policy. This approach provides accommodation in response to weak activity while foregoing tightening in response to strong activity. While the approach can, in principle, address ELB risks by raising inflation, it performs poorly. The shortfalls approach exacerbates economic volatility, worsens employment shortfalls, and creates excess inflationary pressures. Mismeasurement is not sufficient to limit the importance of strong responses to measured slack. Overall, monetary policy can promote price stability and labor market strength by focusing on economic stability, with a strategy targeted to address ELB risks.

The Fed’s big mistake in 2020 was adopting an asymmetric policy approach, which involved make-up policies for undershoots but not overheating. Policy must be symmetric.

Double vision: When then was now

I recently attended a blogging conference in Berkeley. From the perspective of interesting conversation, it was probably the best weekend of my life. Lots of super smart people.

As I get older (I’m 68), I notice that most other people in the blogging/twitter world are one or even two generations younger than me. Most of the ones I follow are also smarter than me. At times, I wonder whether I have anything of value to offer.

Consider these claims:

1. With age comes wisdom.
2. As people age, they lose a few IQ points each decade.

Which view do I hold? Both. I believe I’m getting dumber but wiser. When I read some of the better posts I wrote 15 years ago, I cringe at the thought that they were written by someone smarter than the current me. How did I write that? But when I read some of my lamer posts from the early days, I cringe at their lack of wisdom. What was I thinking?

Just as the past is another country, our past selves are another person.

In this post, I’ll try to explain one of the few areas where old people do have an advantage. It’s something I never really realized until I got to be older. Old people have a sort of double vision about the past—an ability to see the past from the perspective of today, and also from the perspective of the people who lived through those times. When then was now.

Of course this only applies to periods that we ourselves have lived through. I have no feel at all for the 1890s. I know that it was a disgrace for respectable women to show their legs in public, or to go out on the town without an escort, but I don’t actually have much of a feel for why. I understand that men in the early 1800s felt they had to respond to insults with a duel, but don’t understand why. I understand that thoughtful people like Thomas Jefferson owned slaves, but don’t understand why.

To be clear, I could write an essay explaining all these social practices and many more. I am capable of putting the words down on paper. When I say I don’t understand something like women’s fashions, I’m saying that I don’t intuitively find it shameful if a woman shows her ankle in public. Today, I think it’s obvious that slavery is evil, and wonder how brilliant people would have missed that fact.

More and more often, I see younger commentators pointing out some quaint or bizarre or offensive aspect of life from back when I was young. “Can you believe that back in the 1960s it was considered OK to . . . ” I find these observations to be a bit jarring. Not because they are wrong, rather because they force me to examine my past with a sort of double vision—how it seemed at the time, and how it seems today. Unlike the 1890s, I do understand why people of the 1960s (and 1970s) behaved in the way that they did. I was there. But I also understand why some of that behavior now seems quaint or bizarre or offensive. To quote a 60s pop star, I see “both sides now”.

It wasn’t until I got old that I realized that history doesn’t seem weird to the people that live through it. It seems normal. You often hear people say, “You can’t even believe the horrible conditions that people had to live through in such and such a country or time period.” But in most cases, the conditions didn’t seem horrible at all, just normal life. (The exception being temporary conditions that were horrible even by the standards of the day—say Europe during WWII.)

It wasn’t until recently that I realized that the world of the 1960s was filthy. There was dog poop everywhere, as no one picked up after their pets. People spat on the sidewalk. People smoked almost everywhere. Lead concentrations were high. Pollution was bad. Etc., etc. But the world I lived in during the 1960s didn’t seem filthy at all, it seemed perfectly normal.

On the other hand, when as a child I read that in the 1890s there was horse manure all over the streets of NYC, or that there were spittoons in office buildings, or that most people had crude outhouses, that seemed disgusting. At the time, I assumed that people of the 1890s understood they lived in a dirty world. Now I know that it must has seemed perfectly fine, or at least normal.

Some of the most fascinating (but hard to explain) differences are in the moral realm. I recall when it was OK to tell ethnic jokes, or gay jokes. Maybe not completely OK, but much less offensive than today. Indeed, there are subtle distinctions that are hard to explain to a contemporary audience. Drunk driving wasn’t exactly OK, but it was much less frowned on than today, unless you were falling down drunk. A 20-year old guy dating a 15-year old girl wasn’t exactly OK, but it was less frowned on than today (and not generally called “pedophilia”, a term then reserved for situations with even younger victims.) Ditto for professors dating students. It wasn’t completely OK for pregnant women to drink or smoke, but much less frowned on than today.

If I tried to explain how people felt at the time, I’d probably give the wrong impression, as if trying to justify the unjustifiable. I know that because I have “double vision”, I also see how we see these things today. I’m not just a creature of the past, I’m both a creature of the past and a creature of the present. This is perhaps the only consolation of old age (which generally sucks.)

Nonetheless, I’ll offer a few observations. We know that people are living longer and healthier lives. We know that in the old days everything used to occur at younger ages. Children used to work in factories. People used to marry and have kids at a young age. When I was young, life expectancy for men was 67. In that sort of world, things like safety and the protection of children seemed a bit less urgent. And as you go further and further back into history, the world was more and more brutal by today’s standards. That caused people to be less caring by today’s standards, less “woke”. In addition, the rules of the 1960s were often made by old people who were born into a world where life expectancy was below 50.

I recently traveled to the southwest on vacation, and came across a crude log cabin in Utah that was occupied back in 1905 by a pioneer family of six—all in one room. Obviously no indoor plumbing or electricity or furnace, and just a dirt floor. Recall that this is 40 years after slavery was abolished—so I imagine these people understood that slavery was evil. But I bet they didn’t think it was as evil as we think slavery was, because their living standards were so low that the conditions of slaves would have seemed less appalling to them than it does to us today.

The Holocaust is another good example. Back in the 1960s, the vast majority of films about the WWII-era were about American troops fighting the Germans (or Japanese.) As each decade went by, the proportion shifted, until films about the Holocaust became more common than those about battles between opposing armies.

It’s as if society had a delayed reaction to the whole situation. Almost everyone suffered during the war. Perhaps that made people less aware of the suffering of others. It took the perspective of time for most people to understand that the Holocaust was a extraordinary event, not just a run-of-the-mill war crime. Even though 1965 was just 20 years after WWII, I feel the Holocaust looms larger in our minds today than it did back then.

[But it cuts both ways. Voters of the 1960s had more immunity to raging demagogic nationalists who continually spouted the big lie, losers who complained of being stabbed in the back. They remembered.]

Double vision also helps me to understand the reactionary impulse in the old. My father was a Roosevelt liberal, and remained basically liberal his entire life (he died in 1990.) But late in his life he’d occasionally say things that sounded a bit reactionary, in response to society getting softer and more “woke”. You’ve probably heard similar things from parents or grandparents. You might have some condescending thoughts when you hear old people talk this way. But never forget than the next generation will eventually look at you this way. Perhaps your grandchildren will say, “Can you believe that grandpa used to eat farm animals cruelly confined to tiny cages. What was he thinking?” Or maybe it will be some other social change that we cannot even anticipate today. (For me, gay marriage was the one that came out of the blue.)

I have no interest in pontificating about how much we should or should not condemn the retrograde attitudes of people of the past. Rather I’m trying to understand how they felt. I’ll never understand how it felt to live in the 1890s, but by the process of analogy I can see that it probably felt much more normal and acceptable than it seems to us today. When I see young people today who cannot imagine some of the practices of the 1960s or 1970s, practices which at the time seemed perfectly normal to me, it helps me to be more generous to people who lived even further in the past.

PS. There’s much more that could be said on this general topic–including aesthetics. For instance, I can recall when the guitar based rock of the late 1960s and early 1970s was powerful and exciting. But I can also see it from the perspective of today, when most of it seems kind of bland and boring. Over at Econlog, I have a post on modernism, a style which seems very different today than it did in the mid-1960s

PPS. Because I’m almost 2 generations out of date, I’ve probably missed some good examples. For instance, by 1995 gay jokes were frowned on, but trans jokes were still OK. Now both are frowned on. Society is always changing, and will always continue to change.

PPPS. Things that make me cringe: Being 68 years old and reading a tweet by a 48-year old explaining to 28-year olds how things used to be in the “old days” of the 1990s. I grew up when novels with titles like “1984” and “2001” sounding very futuristic.

PPPPS. This post mostly focused on areas where things used to be worse. But there are lots of examples in the other direction. The news media consumed by the average American during the 1960s was far better than today (even if the peak levels were lower.) Politics was smarter. The world had a lot less annoying bureaucracy than it does today. You could jump on an airplane like getting on a bus. Customer service over the phone was 10 times better. Things were less crowded—far fewer “reservations” were needed for restaurants and other events. You just showed up. In the mid-1970s, music was played on systems with better sound quality (but TVs sucked.)

BTW, The Utah family of 6 lived in this:

Not guilty

The New York case against Trump was one of those all too frequent examples of prosecutorial overreach. It was a bullshit charge based on a highly creative definition of election law. If I had been a juror, Trump would have gotten off due to a hung jury.

Having said that, Trump is a criminal many times over, and deserves long prison sentences for what he did in Georgia and elsewhere. So I won’t shed any tears. But this particular case was ridiculous. One more example of a legal system that is out of control.

I expect the Supreme Court to protect him from the more serious charges, until he’s safely in office. His campaign is nothing more than an attempt to avoid prison. If he loses, he goes to jail.