1. Melanotan 2

In The New Madness of Crowds I argued that SVB failed because Greater transparency and lower transaction costs have intensified the madness of the masses and expanded their reach. A piece by Miao, Zuckerman and Eisen in the WSJ now adds to to the other side of the problem. Depositors were working on twitter time, the regulatory apparatus was not.

Depositors were draining their accounts via smartphone apps and telling their startup networks to do the same. But inside Silicon Valley Bank, executives were trying to navigate the U.S. banking systems creaky apparatus for emergency lending and to persuade its custodian bank to stay open late to handle a multibillion-dollar transfer.

As Matt Levine summarizes:

Instead of hearing a rumor at the coffee shop and running down to the bank branch to wait on line to withdraw your money, now you can hear a rumor on Twitter or the group chat and use an app to withdraw money instantly. A tech-friendly bank with a highly digitally connected set of depositors can lose 25% of its deposits in hours, which did not seem conceivable in previous eras of bank runs.

But the other part of the problem is that, while depositors can panic faster and banks can give them their money faster, the lender-of-last-resort system on which all of this relies is still stuck in a slower, more leisurely era. When the user interface improves faster than the core system, it means customers can act faster than the bank can react, wrote Byrne Hobart. You can panic in an instant and withdraw your money with an app, but the bank cant get more money without a series of phone calls and test trades that can only happen during regular business hours.

Its not obvious whether the right thing to do is slow down depositors, at least in some circumstances, or speed up regulators but the two systems cant work well at different speeds.

The post The Great Digital Divide: Panic at Twitter Speed, Respond at AOL Speed appeared first on...

Upon arrival, Spinozas morning routine had been:

1. Ask to go outside to pee.

2. Come back in and eat his kibble.

3. Possible option of belly scratching.

In that order.

His current routine, upon my waking, is:

1. Demand to have belly scratched.

2. Pretend to go outside, but return immediately for his kibble.

2b. Eat his kibble.

3. Go outside to pee.

4. Demand slice of cheese (cheddar).

5. Return and demand, through the medium of whining, that I pull on the rag doll-like play toy in his mouth.

Given GPT models, social scientists should be working intently on theories of what I call two-way training.  Are they?

Here is my previous post on canine Coasianism.

The post The evolution of my canine custodianship appeared first on Marginal REVOLUTION.

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Here is the transcript, audio, and video.  Here is part of the summary:

Historian Tom Holland joined Tyler to discuss in what ways his Christianity is influenced by Lord Byron, how the Book of Revelation precipitated a revolutionary tradition, which book of the Bible is most foundational for Western liberalism, the political differences between Paul and Jesus, why America is more pro-technology than Europe, why Herodotus is his favorite writer, why the Greeks and Persians didnt industrialize despite having advanced technology, how he feels about devolution in the United Kingdom and the potential of Irish unification, what existential problem the Church of England faces, how the music of Ennio Morricone helps him write for a popular audience, why Jurassic Park is his favorite movie, and more.

Here is one excerpt:

COWEN: Which Gospel do you view as most foundational for Western liberalism and why?

HOLLAND: I think that that is a treacherous question to ask because it implies that there would be a coherent line of descent from any one text that can be traced like that. I think that the line of descent that leads from the Gospels and from the New Testament and from the Bible and, indeed, from the entire corpus of early Christian texts to modern liberalism is too confused, too much of a swirl of influences for us to trace it back to a particular text.

If I had to choose any one book from the Bible, it wouldnt be a Gospel. It would probably be Pauls Letter to the Galatians because Pauls Letter to the Galatians contains the famous verse that there is no Jew or Greek, there is no slave or free, the...

Large language models (LLMs) have demonstrated remarkable capabilities in natural language understanding and generation across various domains, including medicine. We present a comprehensive evaluation of GPT-4, a state-of-the-art LLM, on medical competency examinations and benchmark datasets. GPT-4 is a general-purpose model that is not specialized for medical problems through training or engineered to solve clinical tasks. Our analysis covers two sets of official practice materials for the United States Medical Licensing Examination (USMLE), a three-step examination program used to assess clinical competency and grant licensure in the United States. We also evaluate performance on the MultiMedQA suite of benchmark datasets. Beyond measuring model performance, experiments were conducted to investigate the influence of test questions containing both text and images on model performance, probe for memorization of content during training, and study calibration of the probabilities, which is of critical importance in high-stakes applications like medicine. Our results show that GPT-4, without any specialized prompt crafting, exceeds the passing score on USMLE by over 20 points and outperforms earlier general-purpose models (GPT-3.5) as well as models specifically fine-tuned on medical knowledge (Med-PaLM, a significantly better calibrated than GPT-3.5, demonstrating a much-improved ability to predict the likelihood that its answers are correct. We also explore the behavior of the model qualitatively by presenting a case study that shows the ability of GPT-4 to explain medical reasoning, personalize explanations to students, and interactively craft new counterfactual scenarios around a medical case. Implications of the findings are discussed for potential uses of GPT-4 in medical education, assessment, and clinical practice, with appropriate attention to challenges of accuracy and safety.

Here is the full paper by Harsha Nori, Nicholas King, Scott Mayer McKinney, Dean Carignan, and Eric Horvita.  Ho hum, people, ho hum!

Via Ethan Mollick.

The post Capabilities of GPT-4 on Medical Challenge Problems appeared first on Marginal REVOLUTION.

Many people are upset at my rather anodyne remarks from earlier in the week.  Thus I have a simple question: what are the best cost-benefit studies of urban investments in bicycle lanes and other bicycle-friendly policies?  They have to take into account the opportunity cost of the land for bike lanes, the cost of cycling deaths and injuries, and the costs of slower vehicular traffic.  Counting those variables in addition to the rather considerable benefits of cycling is hardly a genius-level move, right?

Funny that, I cant seem to find such a study!  But I am not an expert.  I am sure there are many such studies, so I am opening comments to all of you, so that I may pull in the appropriate references.  I will then read the best study or studies, and report back.

And if by some freak chance of nature no such studies can be found, what should we infer from that?

Addendum: And people (commentators), I dont need the blah blah blah.  Dont need the mood affiliation.  Dont need the abstract citation of individual gross benefits.  Just the cost-benefit studies, please.  I am sure you will oblige.

The post What is the best cost-benefit analysis of cycling investments? appeared first on Marginal REVOLUTION.

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1. We propose the nose as central to faces and their perception.

2. Musa al-Gharbi on why conservatives are happier.

3. Some observations on Chinese management.

4. Bryan Caplan revalued GPT.  And EleutherAI open source stuff.  And Prismer open source stuff (every day, people!).  And Adobes Firefly AI now in beta.  And @getlindy.  And Little gods for older people, how AI will transform being old.

5. Infovores interview with Hollis Robbins.

6. The Feds new treatment of collateral.

7. Hokusai sells for $2.8 million.

The post Wednesday assorted links app...

When interest rates go up, the price of bonds goes down. As Tyler and I discuss in Modern Principles, the inverse relationship between interest rates and prices holds for any asset that pays out over time. In particular, as Patrick McKenzie points out, when interest rates go up, the value of a loan goes down. McKenzie suggests that you can use this fact to buy back your mortgage from a bank when interest rates rise.

For example, suppose you get a 500k 30-year fixed rate mortgage when interest rates are 3%that loan obligates you to pay $2108 per month for 30 years. Now suppose that interest rates go to 6%, now that same stream of payments is only worth, in present value, about $358k. Thus, the bank should be willing to let you buy your mortgage for $358kthat is, after all, what the market would pay for such a stream of payments if your mortgage was securitized.

I am skeptical that I could find the right person at the right bank to actually authorize a deal like this but it turns out that the Danish mortgage system is built to allow this relatively easily. The Danish mortgage system is built on the match principle:

JYSKE Bank: The match-funding principle entails that for every loan made by the mortgage bank, a new bond is issued with matching cash-flow properties. This eliminates mismatches in cash-flows and refinancing risk for the mortgage bank, which also secures payments for the bondholder. In the Danish mortgage system the mortgage bank functions as an intermediary between the investor and borrower. Mortgage banks fund loans on a current basis, meaning that the bond must be sold before the loan can be given. This also entails that the market price of the bond determines the loan rate. The loan is therefore equal to the investment, which passes through the mortgage bank.

In essence, in the Danish system, mortgage banks are more like a futures clearinghouse or a platform (ala Airbnb) than a lenderthey take on some credit risk but not interest rate risk.

Thus, if a Danish borrower takes out a 500k mortgage at 3% interest and then rates rise to 6%, the value of that mortgage falls to $358k and the borrower could go to the market, buy their own mortgage, deliver it to the bank, and...

Good Morning from Germany, where China is losing importance as export destination. In Feb, exports to China slumped by 12.4%, while exports to US rose 19%. This means that US is by far the most important export market, France is also establishing itself as #2, far ahead of China. pic.twitter.com/S2pSqeRTO9

Holger Zschaepitz (@Schuldensuehner) March 21, 2023

The post Germany fact of the day appeared first on Marginal REVOLUTION.

       

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Here is my latest Bloomberg column, penned on Sunday, these days the VIXes are back down to normal ranges.  Here is one excerpt:

One reason for (relative) optimism is simply that the world, and policymakers, have been preparing for this scenario for some time. Not only do memories of 2008-2009 remain fresh, but we are coming out of a pandemic that in macroeconomic terms induced unprecedented policy reactions in most countries. Before 2008, in contrast, macroeconomic peace had reigned and there was common talk of  the great moderation, meaning that the business cycle might be a thing of the past. We now know that view is absurdly wrong.

Circa 2023, we can plausibly expect further disruptions and macroeconomic problems. But this time around the element of surprise is going to be missing, and that should limit the potential for a true financial sector explosion.

The kinds of bank financial problems we are facing also lend themselves to relatively direct solutions. Higher interest rates do mean that the bonds and other assets that many banks hold have lower values, which in turn could imply liquidity and solvency problems. But those underlying financial assets usually are set to pay off their nominal values as expected, as with the government securities held by Silicon Valley Bank. That makes it easier for the Federal Reserve or government to arrange purchases of a failed institution, or to offer discount window borrowing. The losses are relatively transparent and easy to manage, at least compared to 2008-2009, and in most cases repayment is assured, even if those cash flows have lower expected values today, due to higher discount rates.

And:

The various bailouts we have been engaging in are not costless. For instance, they may induce greater moral hazard problems the next time around. But that does not mean we should expect a spectacular financial crash right now. More likely, we will see...

Titled Bank runs, crypto scams, and world-transforming AI, plus a round of overrated vs. underrated, among other topics, including inflation.

Lots of fun, I feel Bari and I always have very good energy together

The post My podcast with Bari Weiss, she interviews me appeared first on Marginal REVOLUTION.

       

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As framed from China:

Fang said the rise of generative AI tools like ChatGPT, developed by Microsoft-backed OpenAI and now released as the more powerful ChatGPT-4 version, pose a big challenge to governments around the world, according to an interview published on Thursday by Red Star News, a media affiliate to state-backed Chengdu Economic Daily.

The post Yes, the Chinese Great Firewall will be collapsing appeared first on Marginal REVOLUTION.

1. Is the human brain just a matter of scale?  For a while now, Ive thought that whales might be smarter than we are.  And how do sperm whales talk to each other?

2. North Korean missile silo developments.

3. Gavin Leech surveys the insane who have blogged a lot and for a long time.

4. Robin Hanson isnt afraid (with Richard Hanania).

5. Can we improve how we identify and develop mathematical talent among youth? With generous support from @AgencyFund, were excited to launch a new one-year dissertation fellowship for up to four PhD students in economics or economics-adjacent fields on this topic.  From Heidi Williams.

6. A report on Prspera, by Prspera.

7. Group of very smart (but largely non-elite) economists write an open letter to Jeffrey Sachs.  #contrast

The post Tuesday assorted links appeared first on Marginal REVOLUTION.

Heres an interesting idea it wouldnt have occured to me to ask. What is the length of time described in the average 250 words of narration and how has this changed over time? Most famously James Joyces Ulysses is a long novel about single day with many pages describing brief experiences in minute detail. In contrast, Olaf Stapledons Last and First Men covers 2 billion years in fewer words than Joyce uses to cover a single day.

Using human readers grading 1000 passages, Underwood et al. (2018) finds that the average length of time described in a typical passage has declined substantially since the 1700s, from a day to about an hour so a decline by a factor of 24. Writers have become much more focused on describing individual experiences than events.

In a blog post, Underwood revisits his earlier work but this time comparing human readers with various statistical techniques and also GPT. To use GPT he prompts

Read the following passage of fiction. Then do five things. 1: Briefly summarize the passage. 2: Reason step by step to decide how much time is described in the passage. If the passage doesnt include any explicit reference to time, you can guess how much time the events described would have taken. Even description can imply the passage of time by describing the earlier history of people or buildings. But characters references to the past or future in spoken dialogue should not count as time that passed in the scene. Report the time using units of years, weeks, days, hours, or minutes. Do not say zero or N/A. 3: If you described a range of possible times in step 2 take the midpoint of the range. Then multiply to convert the units into minutes. 4: Report only the number of minutes elapsed, which should match the number in step 3. Do not reply N/A. 5: Given the amount of speculation required in step 2, describe your certainty about the estimateeither high, moderate, or low. The passage follows: <omitting this to save space>

Heres an example of the analysis:

ABRIDGED PASSAGE FROM Jane Eyre: And signs, for aught we know, may be but the sympathies of Nature with man. When I was a little...

We provide experimental evidence that core intertemporal choice anomalies including extreme short-run impatience, structural estimates of present bias, hyperbolicity and transitivity violations are driven by complexity rather than time or risk preferences. First, all anomalies also arise in structurally similar atemporal decision problems involving valuation of iteratively discounted (but immediately paid) rewards. These computational errors are strongly predictive of intertemporal decisions. Second, intertemporal choice anomalies are highly correlated with indices of complexity responses including cognitive uncertainty and choice inconsistency. We show that model misspecification resulting from ignoring behavioral responses to complexity severely inflates structural estimates of present bias.

That is from a new NBER working paper by Benjamin Enke, Thomas Graeber, and Ryan Oprea.

The post Complexity and time appeared first on Marginal REVOLUTION.

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Overall, Portland bicycle traffic in 2022 dropped more than a third compared to 2019, to levels not seen since approximately 2005-2006 (Table 1). This is based on a comparison of people counted at the 184 locations that were counted in both 2022 and 2019. Volunteers recorded 17,579 people biking at those 184 locations in 2022, a 37% drop from the 27,782 counted at the same locations in 2019.  This bicycle commute data, as well as for driving, walking, and using transit to commute. (Tables 5-6)  Looking at data from 2013-2019 we see that bicycling remained relatively flat between 2013 and 2016. However, bicycle counts dropped significantly between 2016 and 2019. This drop is also reflected in census commute data.

And it wasnt all Covid:

While 2022 data is anomalously low, it is also a continuation of a trend of declining bicycle use in Portland. Both annual count data and Census data demonstrates that bicycle use in Portland peaked in the 2013-2015 period and has been declining since.

Here is the report, here is one abbreviated source.  Via Glenn Mercer.

Call me contrarian, but I have never been convinced that bicycles have a promising economic future in a truly Pigouvian city.  And as a side point, how popular would bicycles be if they were embedded with software, requiring each bicycle to respect the law, stop at red lights, and so on?

The post Bike riding is falling in Portland appeared first on Marginal REVOLUTION.

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These are from Khalil Manaf Hagerty:

Im half Indonesian by ethnicity (one-quarter Bugis, one-quarter Minangkabau, half bule, what we refer to as blasteran or mixed race) and have worked on and off there for the past 15 years. Here are some observations:

The internal market is enormous. Unlike many SE Asian countries Indonesia really isnt dependent upon exports. Domestic demand is massive and the middle class is growing. Combined with a cultural life social structure that allows for upward mobility (more than, say, India), many Indonesians have seen and experienced significant improvements in the quality of life over the past 25 years, post-Suharto. They have a lot of democracy and increasing wealth.

So, adding to this: There are 17,000 islands and if someone wants to make it, they can quite easily go to Jakarta, a city of around 15 million people, depending on whose estimate you are using. Even within the less urbanised islands, there have still been significant rural agricultural opportunities for smallholder farmers operating on 10ha or so to meet domestic demand for food. So these are big improvements for many people and the success or changes in wealth are all relative.

Think of the narrative of President Jokowi: born and raised in a slum, now President.

On emigration: Im sorry, but the West still tends to treat Indonesians as though they are Muslim terrorists. The immigration and visa requirements for Indonesians entering Australia for example are (informally) tougher than those entering from Malaysia, the Philippines, Thailand and Singapore (obviously), e.g. there is no easy-to-obtain 30-day holiday visa for Indonesians.

With foreign education, Indonesians are likely to go to Australia for higher ed, its cheaper and closer, and the objective is generally an English-language education. Theres a small number of wealthy folks that can afford the US system. Theres a generation of folks who were educated in the US system under the Colombo Plan and its successors, but that has thinned out. You will occasionally meet a guy who went to Purdue for this Masters.

Following on from this, why do Indonesians go home after their degree? Most folks will have very, very strong ties to their community in Jakarta, rural Indonesia or both. This often expresses itself in Islam but is present in Javanese/Sumatran/Malay culture more broadly.

On the entrepreneurial spirit, it very much exists in the country, but as noted above the growth is higher and the cultural barriers to entry are lower domestically. The Chinese community is arguably the best at this, but they see bigger or as many opportunities across the region particularly through informal Chinese diaspora networks across Asia. Ethnic Chinese are much less persecuted now across the region than they were 25 years ago.

Finally, Indonesia is a big...

1. Dont fear the Terminator (2019).

2. Claims about the future evolution of programming.

3. Balaji responds on inflation.

4. Based on selfies, which are the happiest colleges in America?  NB: Texas Christian University comes in first.

5. A new paper on the labor market impact of LLMs.

6. Fed futures seem to be pricing in rate cuts?

The post Monday assorted links appeared first on Marginal REVOLUTION.

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