Tag Archives: political economy

Yet Another Reason

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The European Union is moving toward passing legislation that would allow it to curb imports of heavily subsidized foreign products. The legislation doesn’t single out any particular nation; although, the Peoples’s Republic of China is infamous for such subsidies.

Those subsidies allow PRC businesses to sell their products at less than their cost of production in order to sell at lower prices than European businesses can due to their own, unsubsidized, costs of production. That allows the PRC to put those businesses out of business and to seize nearly all of the market share. In the aggregate, this cascades into steadily increasing PRC influence over European economies.

Naturally, the PRC wants to continue this domination, so it’s threatening countermeasures if Europe continues with the impudence of defending itself.

Chinese authorities could initiate anti-discrimination and supply-chain security investigations into the EU’s “overcapacity instrument,” a social media account run by China’s state broadcaster said Friday, citing unnamed sources.
If the EU advances the tool, China will take immediate action and deploy comprehensive countermeasures, it added.

Of course, that retaliation wouldn’t matter if Europe’s nations were doing no business with the PRC or with businesses domiciled there.

The PRC keeps providing reasons for discontinuing business with or within it. It’s time for the EU and for Europe’s nations individually to act on at least some of those reasons, for their own economic survival.

Throw Money at it

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The letter-writer seems to be writing from the Left. Opening with Praise for Ohio’s Republican candidate for Governor Vivek Ramaswamy’s proposal for attacking Medicaid fraud, he quickly pivoted.

States need more funds to address fraud….

How typical.

No, States do not need more funds to combat and drastically reduce, much less “address,” fraud. Were States actually to get serious about combatting and reducing Medicaid, they’d uncover 10s of millions, if not billions, of dollars of fraud, and they’d recover significant percentages of those dollars. Those dollars then could feed back into the program to help keep Medicaid fraud down to an absolute minimum.

To address the problem for long-term of vastly reduced fraud and commensurate reduced fraud recovery funds, States need only to reallocate existing spending. They most assuredly do not need more money blindly and blithely tossed over the transom at the problem.

What Error did she Acknowledge?

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In James Freeman’s Best of the Web Wednesday piece, he wrote of Seattle’s newly elected socialist mayor Katie Wilson’s supposed acknowledgment of her problem vis-à-vis her disdain for big business in a competitive market. In her series of victory laps shortly after her election, she crowed while at a barista union rally,

I am not buying Starbucks, and you should not either.

With the ensuing backlash, which includes an exodus of big businesses like Starbucks from Seattle, she then said,

Those comments were not productive in the sense that they caused more harm than good….

Freeman then quoted, without questioning, Danny Westneat, writing for the Seattle Times:

Admitting errors in public is hard…. Conventional political wisdom says it means you’re weak. In this case, I’d argue it’s a positive sign for the future of both the mayor and Seattle.
It means the mayor is at least more grounded in the real world than some of her blinkered progressive fans….
Maybe this is a chance to reset relations with businesses—at least ones other than Starbucks, where it may be too late.

But what “error” is Westneat claiming Wilson has admitted? In fact, it’s quite clear from Wilson’s own words, and Westneat has chosen to ignore it. Wilson admitted the error of her words, not the error of their intent, which is and always has been, her disdain for and assaults on free markets and the larger businesses that operate in them.

ARPA 2.0

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The Federal government has taken equity stakes in some rare earth development and production companies as supply chain control moves. Now the government is taking equity stakes in a few companies nascent and still doing basic research that’s becoming increasingly engineering-to-production in a critical industry—quantum computing.

The Trump administration is awarding $2 billion in grants to nine quantum-computing companies in deals that include US government equity stakes, the Commerce Department said.

In the middle of the last century, the Federal government started the Advanced Research Projects Agency in response to the USSR’s successful launch of a Sputnik satellite, soundly beating us into space. ARPA’s mission, ultimately, was centered on high risk, high gain R&D projects that were too expensive for private enterprise to start, but which private enterprise could develop into thriving businesses once that initial hurdle was overcome.

Quantum computing is a Critical Item industry which neither Russia nor the People’s Republic of China has beaten us at, but their progress threatens to gain critical leads in. The output of those ARPA projects, however, did not encompass the government taking equity stakes in the companies that ultimately went into production with those outputs. The government’s current moves are shades of that earlier ARPA approach, with government stakes thrown in.

And this:

[A] senior Commerce official said the agency did so many different deals to spread out its bets, acknowledging that it could take years for them to pan out.

This is a government version of a long-standing investment tactic, gorilla investing. The idea as implemented by private investors is to shotgun investments into a collection of companies in a new(er) industry, and then as they develop, or not, begin selling off the nots, while keeping those still promising or beginning to achieve success, repeating the process until the investor is left with the one or two that are actually taking off and the gains from which vastly outpace those prior losses. The technique often works.

Quantum computing, other nascent technologies, even the established areas like rare earths, though, may well benefit even more without the government ownership but with increased reduction in the regulatory environment within which those areas are being developed.

Experts Everywhere

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A couple of professors at the University of Pennsylvania’s Wharton School Department of Legal Studies and Business Ethics want a body of Experts to supervise risks from emergent AI, saying that such a body would be better than an FDA-like regulatory body, or Congress through statutorily enabled product-safety laws.

They’re right that having a government body of experts like the FDA do this sort of thing is determinedly suboptimal. They’re right, also, regarding Congress, although Congress is considerably more malleable than a department or agency of bureaucrats.

But another body of Experts?

Bank supervision, which emerged in the Civil War and took its current form out of the Great Depression, offers the best framework for overseeing the most advanced AI labs.

After all,

Frontier AI labs such as OpenAI, Anthropic, and Google DeepMind are different.

And there’s always an excuse for standing up yet another bureaucratic regulatory body. In the case of their bank supervision model, about which they’re so enthusiastic, they give their game away [emphasis added].

Banks are too complex to govern through legislated rules alone, too important to leave to market discipline, and too dynamic for one-time approval.
Bank examiners often sit inside the institutions they oversee.

That’s the problem with our economic system government overlords. With the Panic of 2008, the Federal government created out of whole cloth the myth of some (ultimately government favored) businesses are too big to fail and so must always be guaranteed a government bailout. That confidence in the Federal apparatchiks sitting inside the banks also is misplaced. It’s only necessary to see the failures of the Silvergate, Signature, and First Republic banks to see the intrinsic failure of this. Those banks didn’t only fail through their own mismanagement; they also failed because their regulators were incompetent enough or lazy enough or complacent enough to miss those bank managers’ basic economics error of borrowing short-term while lending long-term and letting those two get ‘way out of balance. That allowed their short-term debts to come due before they had the long-term debt income to cover.

But the good professors want a board of Expert Apparatchiks inside the OpenAIs, Anthropics, and DeepMinds to oversee how these handle risks of emergent AI.

And this:

Banks share information with supervisors that they could never safely disclose publicly.

AI software is too important, too critical to national security, to share with apparatchiks of government. Our Federal government is infamous for its inability to defend against PRC cyber espionage. It’s infamous, also, for its bureaucrat employees leaking confidential financial data about businesses and persons of which those bureaucrats personally disapprove.

And this:

An AI risk supervisor could be funded by industry fees. Its leaders should be Senate-confirmed and removable by the president, but its expert staff should be insulated from day-to-day political pressure.

No.

Experts have their uses, often very important uses. On the witness stand to explain this or that aspect of a crime, balanced by another expert on the witness stand with a differing explanation. In police department forensics sections. As teachers in environments where their expertise is more important to the teaching than their teaching style. In medical and mental health doctor offices.

But in government? Not so much. Experts are useful when they’re part of a range of experts advising, as employees, the government’s decision makers. But as government decision makers? Definitely not so much. For the lack of utility of that last role, it’s only necessary to look at the Fauci-Collins-led experts as bureaucrats, or at the experts of the John Brennan and James Clapper CIA and ODNI, respectively.

The Supreme Court was right when it greatly reduced Chevon Deference in its Loper Bright Enterprises v. Raimondo ruling, making clear that “experts” in government aren’t owed any particular deference on matters of government behaviors and decision-making.

So it is with emergent AI.