Carlos (@bluecirclehead) header
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I like coffee. A lot. Economist. DC has the worst restaurants in the world

Washington, DC
Joined March 2008
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An announcement: Under the leadership of Mario Draghi and @patrickc we have set up the Rhine Group: policymakers, economists, entrepreneurs and business people pushing European reforms and the Draghi agenda. rhinegroup.eu/
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The case for open source, beautifully put. Great essay, no slop.
Over the last two weeks, both the U.S. Government and Anthropic took significant actions that demonstrated their power to control access to AI by restricting what others can do with frontier models. This has been one of those moments that, once seen, will be hard to unsee, and it is significantly accelerating many businesses’ and nation states’ efforts to ensure reliable access to AI that no one else can terminate. Anthropic first released Claude Fable 5, a version of its Mythos model with additional guardrails, including some restrictions that seem well justified on safety grounds (such as limitations on applying it to hacking, bioweapons, and so forth). However, it also restricted developers’ ability to use it to build competing LLM technology. This move was concerning, given that the whole AI community, including Anthropic, has benefitted tremendously from open research — indeed, the AI revolution was kicked off by my former team (Google Brain) freely publishing the Transformers paper! Imagine if Microsoft’s terms of use barred anyone from using their tools to build competitive software, or if Google barred using it to search for information to work on competing search engines. Anthropic’s argument that it was unsafe for others to be able to make advances in AI also rang hollow. Initially, Anthropic silently degraded Fable 5’s performance for users detected to be working on LLM research through invisible interventions that weakened the model’s outputs without notifying the user. After significant backlash, it walked back this decision and decided to be transparent when it did this, but it still refuses to use its latest capabilities to help AI researchers. This move represents a raw demonstration of power by Anthropic. It has used “safety” arguments to hinder potential competitors. Platforms succeed when they are viewed as stable, reliable partners that one can build on. The sudden rule changes by Anthropic (including a mandatory 30 day data retention policy for Fable usage) have made developers wonder about the stability of building on any one proprietary LLM provider, not just Anthropic. The U.S. Government then shortly followed with an even greater demonstration of power. It used the Commerce Department’s authority to regulate technologies that may be national security threats to restrict exports of Mythos and Fable, requiring a license for use by any foreign national, whether inside or outside of the U.S., including employees of Anthropic. This led Anthropic to disable access to Fable to all users worldwide. Sam Altman pointed out, referring to Anthropic, “It is clearly incredible marketing to say, ‘We have built a bomb, we are about to drop it on your head. We will sell you a bomb shelter for $100 million.’” But when one engages in this type of fear-based marketing, it increases the odds that the U.S. Government will agree with you and slap export controls on the bomb you say you have built. To be clear, I don't think Anthropic has built anything like a bomb, and I don't think export controls on Fable are appropriate. However, following the U.S. Government making this move, many nations, including U.S. allies, saw how the U.S. can suddenly yank their access to AI models. In many capitals around the world, this has spurred discussions on AI sovereignty and how others can ensure uninterrupted access to this critical technology. For decades, many nations were comfortable having many parts of their supply chain rely on the U.S., China, and other major producers. Once a nation issues a threat, or takes action, to limit other nations’ access, other nations will rationally try to secure alternatives. For decades, semiconductor manufacturing in China made slow progress; once the U.S. moved to limit China’s access, China’s efforts kicked into high gear. Similarly, once China threatened U.S. access to rare earth minerals, U.S. efforts to secure alternatives accelerated. Now that it has become crystal clear that private U.S. companies and the U.S. government can limit, in short order, other nations’ access to frontier AI models, the incentive of others to invest more in alternatives like open source grows significantly. Of course, training frontier models is not easy, so it remains to be seen how successful they are, but we have crossed the rubicon. Satya Nadella wrote an essay about the importance of building a healthy ecosystem on top of frontier AI technology. I heartily agree with him, and hope this week’s events will ultimately prove to be constructive steps toward this. I hope we can build a more free, more open world, where research is freely shared, and laws and societal norms shape a level playing field that allows everyone to make progress. A silver lining of the events of these past two weeks is now that everyone better realizes key points of instability of the current system, we can all work to create a more stable foundation. [Original text: The Batch newsletter]
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A point that is sometimes overlooked is that PDEs in physics and economics have a subtle but important difference. When a physicist solves the Schrödinger equation (see my slide below), the potential is given. The coefficients of the equation are part of the problem statement. You pick your grid, refine your mesh, and the equation never changes on you. Better numerics give a better approximation to a fixed target. In economics, this is not the case. Look at the Hamilton-Jacobi-Bellman equation for the neoclassical growth model (also slide below). The drift of capital depends on a derivative of the value function, the very object you are trying to solve for. The “coefficients” of the PDE are endogenous to the optimal choices of the agents. This is what @UncertainLars and Sargent referred to as the cross-equation restrictions implied by optimizing behavior. This is what @MahdiKahou and I call the “equilibrium loop”: improving your approximation changes the policy, which changes the dynamics, which changes where in the state space the economy spends its time, which changes where your approximation needs to be accurate. You are not chasing a fixed target with a better net. Moving the net moves the target. This has serious consequences for computation. You cannot just borrow neural network architectures from deep learning in the natural sciences. The loss function comes from equilibrium conditions, not from labeled data. The evaluation points are not given. Instead, they are regenerated each epoch from the current approximation. Ignoring it is why you often get solutions that look good on a training set but fall apart in simulation.
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If you support Trump now, history will remember you as a deeply evil person, part of a deeply evil failed attempt to destroy America. And yes, you will fail.
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🎓 Today I delivered the final lecture of @Penn_Exchange’s Foundations of Economic Thought summer course by focusing on the evolution of macroeconomics from 1970 to 2000: 🔗 sites.google.com/view/founda… 🧠 Unsurprisingly, @UMN_Econ features prominently in the story (although @penneconomics also shows up quite a few times). 📑 You can find the slide deck here: sas.upenn.edu/~jesusfv/ET_5_…
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Why didn’t electrical engineers forecast the Iberian electricity crisis?
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Noah is right here.
If the world decides they've had enough of the idiot in the White House, and pulls their money out of America, we'll see a recession, followed by the collapse of the U.S.-led global financial system. But that might not even be the worst of it. noahpinion.blog/p/this-is-ca…
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A PhD is a valuable qualification, signalling to future employers your ability to work hard while mentally unwell
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Defunding NSF and other government support for research would be an unusually large self-own
Founders who were PhD or post-doc in my lab at Berkeley, **largely funded by NSF / DoD grants**, start-up, market cap (collected by OpenAI Deep Research)
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Bouillon is just expensive MSG 🙂
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Every time I see someone praising Elon as the most important or smartest person in history I want to vomit. Guy is 1 standard deviation above midwit (at best) and >5 standard deviations in the cunning ruthlessness & manipulative categories.
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In order to fight back against Trump, Democrats need to recapture the spirit of 1992 -- low inflation, deficit reduction, defending freedom and democracy, and abandoning silly language policing and activism. noahpinion.blog/p/how-the-de…
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Trump’s attack on US institutions, even if fully expected, is dispiriting, discombobulating and dangerous. In this very difficult time, we have to remember one thing: This is not normal, and it should not be normalized. If, as I hope, the US democracy survives and (somehow) recovers, then history books will judge those working with Trump and Republican lawmakers in the Senate and Congress enabling him harshly (and so should we). If US democracy does not survive, I don’t know what history books will be like.
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He’s good in many ways, but Sir Alex Younger is also very good at explaining the fundamentals of the strategic situation at this point in time.
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This is the moment where - if you voted Trump - you are sorry … if not for the Ukrainians (I know, I know, Americans first), for how you fuvked up American geopolitical prospects …. and when you are sorry you should say it loudly in the hope that the idiot in top understands PS you fuvked up your hopes to clean up the gov’t because the malignant narcisisism of the other guy is getting in the way of that as well
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I write this tweet not as an economist, but as a citizen (of the US, but also of the world). It is one thing to be against immigration. It is another to forget that immigrants are human beings, worthy of respect. It is one thing to be against foreign aid. It is another to stop the dozens of USAID programs which are saving lives around the world.
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So I guess Chef Boyardee is pretty much a lock for the Council of Economic Advisers at this point, right?
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Good night. Tomorrow will be worse.
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It's only a real department if it comes from the Département region in France
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One of my favorite bits of trivia is that Trump doesn’t grasp the concept of “time zones.”
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