The Politics of AI: Inside Anthropic’s Clash with the Pentagon

- Today is March 12th, 2026, and my guest is Dean Ball. Dean is a senior fellow at the Foundation for American Innovation, a policy fellow at Fathom, and author of the AI focused Newsletter, hyperdimensional, which you can find on substack. He works on technological change, institutional evolution, and the future Governance. Governance. And prior to this, he served as senior policy advisor for ai for artificial intelligence and emerging technology at the White House Office of Science and Technology Policy, where he was the primary staff drafter of America's AI action plan. Dean, welcome to EconTalk.

- Thank you so much for having me, Russ.

- Our topic for today is the relationship between private companies working on AI like Anthropic, which created the LLM, the large language model, known as Claude and, and the Department of War. In particular, we're gonna talk about the recent clash between the two over what will govern or constrain claw used by the military, which created whether you wanna call it a bruhaha, a dust up, or a very serious constitutional issue about the interaction between private entities and the federal government. And that's what we're going to talk about today. Our conversation is based on a superb article you wrote on your substack hyperdimensional, which we will link to that article is simply called Claude, C-L-A-W-E-D. Very clever. So let's start with what happened. What was the nature of this conflict and what are some of the issues that are involved?

- So I think to, to understand this conflict in fall, you need to go back about 18 months to the tail end of the Biden administration. In the summer of 2024, the Department of Defense, now Department of War approaches anthropic, and the they agree to a contract for the use of the large language model, Claude, in classified contexts, that's distinct from the unclassified uses, right? So department of Defense and many other government agencies have access to LLMs for all kinds of mundane uses, right? Contract review and procurement, navigating HR rules. And you know, government has lots and lots of complex internal rules that just affect the agency. And so you need, you know, an LLM to navigate that, right? Things like that. This is different. This is like intelligence analysis, potentially, you know, targeting in active combat zones, selecting, you know, or at least recommending targets for human reviewers to, you know, things of that sort. So that starts in the summer of 2024. And in that contract, the Biden administration agreed to usage restrictions, a wide variety of usage restrictions as I understand it. But two in particular were on domestic mass surveillance and the use of AI and autonomous lethal weapons. Autonomous lethal weapons being defined as weapons that can autonomously basically identify a target, track it, and kill it with no human intervention. So this would be machines killing humans on human instructions, but without human oversight. And so those two things were disallowed in this contract. The Department of Defense agreed to that in the summer of 2025, during the Trump administration, the Department of Defense still was not yet called the Department of War at that time. The Trump Department of Defense expanded this contract by a significant amount. This was publicly announced. And when they did that, it was up to $200 million contract with anthropic. And when they did that, they renewed the contract with the same, very similar, very similar contract, and it did have the same usage restrictions on domestic mass surveillance and autonomously the weapons. Then we get into the fall of 2025, and as I understand it, department of War at the now official named Damil Michael is confirmed by the Senate. He had not been confirmed when this contract was renewed in 2025 or in the summer of 2025. He's confirmed in the fall. He comes in, he reviews the contracts, he sees these usage restrictions and makes the decision to, he decides that Department of War cannot live with these restrictions and says we have to have all lawful use only. So he approaches anthropic, and it's worth noting Anthropic is the only LLM that is available to be used on classified systems. He approaches, anthropic says, we need to renegotiate for all lawful use. Anthropic agrees to drop many of their usage restrictions, but not those two. That ends up being a red line for anthropic. Department of War then says, if you don't, this, this goes on for months. And eventually this escalates to the point. And I think it gets, there's probably a lot of personal conflict and a lot of back and forth drama here that's mostly private. But we eventually get to the point where the Department of War says, if you don't agree to drop these red lines and allow us to use AI for all lawful uses, then we will designate your company anthropic a supply chain risk, which will mean that a, all of your Department of War contracts are canceled. But more importantly, so are all of your contracts with any Department of War contractors, right? So like for example, Microsoft is a Department of War contractor and they wouldn't be able to use anthropic AI services in their fulfillment of contracts that they do for the Department of War. And that, that gets announced at this point, about two weeks ago is when that initially gets threatened. And then the actual designation came down something like a week ago, something like that. The timeline is now fuzzy for me because it's been a very busy couple weeks. And now, you know, we're, we're essentially in court. Philanthropic has sued the government in the ninth dis ninth district of California and you know, are the northern District of California. My apologies and, you know, we'll that's, that's kinda where we are.

- Just to clarify one important legal slash verbal issue here. Many Americans would not be comfortable with the Department of War doing mass surveillance. There might be situations where that was accepted acceptable. What is the definition of mass surveillance? Would the, would the federal government have to get a court order to do certain kinds of surveillance? What the department board was asking for, if I understand it correctly, is mass surveillance. That's quote legal. They wanted quote all legal use, and that could include mass surveillance is defined by people in everyday language. It could include autonomous lethal weapons that had been approved in some legal fashion. But Anthropic wanted to draw, it seems to me a verbal distinction there. They wanted the freedom in their contract to say, this is a use of our technology that we don't approve of, even if it's legal. Is that a correct summary of, of their position?

- That is correct, yes. And so I think specifically when it comes to domestic mass surveillance, I think that's the very, that's the complex sticking point here. So just as an example, you know, when there are a very large number of commercially available data sets that would include information on Americans that could be private or sensitive, but that are commercially available. So things like smartphone location data, for example. Many people you might download like a third party weather app to your phone. A lot of ways, the, a lot of times the weather app needs to, to know the location all the time to give you the loca the weather in wherever you happen to be physically in the world. And so a lot of the ways that these, these weather apps make money is they, the users turn on location and then they have a location tracker and they sell the location data. This is very common, right? And so there's, there's tons of things like that. There is obviously also like commercial satellite data that you can buy. There's web usage data, just a a, a very, and you can not only can you buy these individual data sets, but you can combine them in all sorts of ways to generate quite rich insights on individual people. And the binding con, this has been true for a long time, right? This is, this is sort of the era of web scale data, right? The binding constraint though is that on, on the use of this data is simply that it's time intensive to actually analyze for any individual person. So you have to do this for like high value targets. It's not illegal, you know, in many ways, in, in, in, in many domains of national security law, what I have just described is not illegal to do, it's not considered surveillance. If it's purchased, if it's commercially available data, it's not considered surveillance. So once you have advanced AI systems, which can scale human expert like attention infinitely, essentially it is all of a sudden as though the intelligence community has instead of thousands of analysts, millions and tens of millions of analysts. And so you have a, you have a workforce of analysts larger than the government itself, larger than the human workforce of the government itself, I should say. And Anthropics position is essentially that, and, and, and i I I agree with them here that the law is not sufficient. The law has not been updated for this reality because this is the reality only of the last few years. And the law is not updated for it. And so yes, the id, the basically domestic mass surveillance as a legal term, as a, as a legal term of art does not correspond with what you and I might think of as the vernacular definition of the term domestic mass surveillance.

- Okay. So let's now turn to what's at stake here. And you know, again, we're taping this in mid-March of 2026. It'll come out in about a month or so. By that time, you know, maybe all humans will be eliminated by AI or the department or who knows. So listeners be aware that this is a rare econ talk conversation that's very fairly timely and things could change by the time this airs and keep that in mind as to when it was taped, recorded. So what's at stake here? You, you had a very strong reaction to this. Oh, there's a little footnote by the way. We, we should just mention after this disagreement between philanthropic and the Department of War, the department of War, if I understand it correctly, made an agreement with open AI with very similar terms without the constraints. Is that correct?

- Yeah. So they, they, there was an, at least there's an agreement in principle it seems for open AI to models to be used in classified settings that I would say don't contain the same red line protections that sought from the government, but do contain, o OpenAI is essentially hanging its hat on the notion of technical safeguards. So instead of putting these safeguards into the contract, you, their view is we can train a model and build a system. And if we control the deployment of the system to the Department of War, then that system could, for example, reason in real time about whether or not what it's asked to being do to, to, you know, it's, what it's being asked to do is domestic mass surveillance and say no to the government.

- Okay. That

- Would be the idea.

- Well, we'll see. So why is this how you found this alarming, this, this, this basically the actions of the Department of War? Why?

- Well, a a number of reasons. I think the first is the nature of the punishment. One thing I think that's worth being clear about is this, there's this, this whole notion of all lawful use is, I've talked to defense procurement and procurement law experts. It's, this is an abnormal notion in contracting, right? It, it, it's, it's sort of question begging, right? In maybe the vernaculars as opposed to the literal sense of that term. But it's, it's like, well, what is lawful? What does lawful mean? Who decides? And in this case, it's, well the Trump administration is saying, we decide what lawful is and we'll do it until courts stop us or someone stops us. And so it's a, it's a somewhat strange term of art. I get the principle, the principle sounds very intuitive and I'm actually just willing to concede for the purposes at least of this debate that like, it's perfectly reasonable to say we want all lawful use. I actually think it's kind of complicated and strange to say that, but there's like reasons that most, like a contract for a missile does not say you can use the missile for all lawful use. That's not what it says. And like the Department of War's position here is they're sort of pretending like that is what, you know, what, what the contracts are like, but it's really not. So, but, but setting that aside, the bigger issue here for me is the nature of the both threatened and realized punishments that have been doled out on anthropic. So first of all, secretary of War, Pete Hegseth threatened to issue regulations that would make it such that no DOD contract or Department of War contractor could do any business with anthropic, which is very different from saying no Department of War contractor can do business with, can use anthropic in the fulfillment of DOW contracts, right? Two very different things. One is profoundly broader than the other. So he threatened the, any commercial relations. And what they actually followed through with in terms of the, the regulation that's been issued so far is just, it's just barring Department of War contractors from using Claude in their fulfillment of Department of War contracts. So they can still use Claude for other things.

- That's the supply chain risk.

- Yes. This

- Is the

- Supply chain risk designation.

- So to be clear, Microsoft in, in Washington state in its offices can use cloud all they want except when they're working on a particular contract with the Department of Defense.

- Yes. Although department, excuse me. Yes, it is, it, it's a little bit complicated because the Department of War does, you know, one thing that's subject to a Department of War contract would be like Microsoft Windows, right? They buy lots of computers that run Windows, they buy lots of computers that run Microsoft Word. So yeah, it's

- A great, yeah, it's kind of great. And,

- And I mean, one way to think about this too, though, like even if it is the more narrow definition, actually Microsoft's a good example, let's say in the nineties, in the early 1990s that the Department of Defense had issued a supply chain risk designation against Microsoft for Microsoft Windows and said, we won't use it and none of our contractors can use it in their fulfillment of Department of Defense contracts. One wonders, would Microsoft be the sort of world be striding company that it is today? I, I don't know. So, so we are talking about something even in this narrower usage of the, of the regulatory authority. We're talking about a government intervention in an ER in a critical emerging technology that has the potential to really like radically reshape the trajectory of this industry and one company within it.

- And as a background, we, I don't really want to go into this 'cause it's not that interesting, but it should be mentioned that people have speculated that that anthropic having a, a an allegedly more safety oriented culture in its development of AI and possibly a training process that has certain processes that people have said is, is more, I hate to use the word woke than the other AI companies, and that there's something else going on here behind the scenes has nothing to do with red lines. And, and I, I just, you can comment on that if you want, but I want to, we should just mention that.

- Well, yeah, and, and no, I, I think that is worth, worth, worth mentioning. But like, I'll just say like stepping back a little, like this supply chain risk designation is only used, typically is only used against companies from foreign adversaries. This is about like adversary manipulation of milit American military systems. Yeah. It, so it's, it's really treating anthropic like enemies of the state, essentially. Yeah.

- And, and the, the broader designation, which would've been, you can't use it for that, any company that does anything with the Department of War can't use it at all. Anywhere would be kind of like a terrorist organization, or as you say, an a, a foreign enemy that you would say were embargoing or we're putting some kind of sanctions on.

- It's the equivalent of it would be, it would've been the equivalent of sanctions. And one other thing that I think is worth noting here is that this is clearly act one, scene one. Yeah. If the government, if, if the administration decides that they want to bring the entire federal regulatory apparatus to bear against anthropic, I imagine they will. And I also think, by the way, this doesn't have to be restricted to formal legible regulatory action, right? This can be jawboning. In fact, anthropic has alleged in their complaint against the government, they have alleged already that the government is calling Anthropic customers, government officials are calling Anthropic customers and encouraging them to cease doing business with Anthropic. So that is jawboning, you know, that is soft, that it's very hard to sue about. So all this is like, this is essentially, I mean, like, if I were to put it, if I were to summarize it in just a sentence, I would say the government is saying here that if you don't do business on terms on the terms we unilaterally set, we'll set out to destroy your company, which is a kind of usurpation of private property. And even more to your point, Russ, about, you know, some of the political, basically every time Trump, senior Trump administration officials have invoked philanthropic and talked about the supply chain risk designation, they have inevitably mentioned that Anthropic is liberal. That they're, they're supposedly woke. I think that's not exactly true actually, but that they're, they're supposedly woke and they don't share Trump administration political values. That part certainly is true. Anthropic is run by people who donate to Democrats. A lot of AI companies are, it's worth noting. But, so, and if that's the case, if, if that really does, you know, then, then this is also a form of political interference, which would be, you know, in addition to private properties, would also be a pretty serious abridgement of First Amendment rights.

- Yeah. So I think the question is, you know, it, you framed it in a particular way, it could be framed a different way. It could be framed as how, how can we allow a private company to interfere with the security of the citizens of the United States. I mean, the Department of War is responsible for keeping Americans safe with the, the argument would, would go and if we need to do certain things, we, the government of course, the a a particular private company shouldn't be able to dictate the national security scope of the actions of the Department of War. That would be the other side. We'll come to that. But before we do, I want, I want to go a little, a little, I wanna restate and make clear what, what you just said. You're basically saying that the Trump administration has, forget this thing about us know private property and First Amendment rights. That's, that sounds nice, but the more, let's make it starker. Do we really want the federal government punishing and rewarding particular companies for any reason? In this case it might be political antagonism that would be particularly horrific, but in general, in a free market, so-called capitalist system, how do you draw the line between private companies and government power? Yeah. And that is really what's at stake here, I think.

- Yes. And, and one thing that I think should be, should be really clearly said here is that one of the reasons that it's very hard, and this is not just true of American companies, it's true internationally, it's very hard to do business with the Chinese, with like large Chinese tech companies because it's sort of known that, you know, you, you in particular things like, you know, information technologies, there's a reason that Chinese companies don't make the operating systems that define computers all over the world. And it's because of, one of the reasons is that it's a lot of reasons, but one of them is that everyone knows that Chinese technology companies are assets of the military and are viewed that way by the government. And that's not the case in the US And that has aided American companies in doing business abroad. Because there is a trust, one of, one of the things I actually used to always say when I was in government to foreign governments who, you know, maybe they would have some concerns about doing business with America, right? Oh, you're an unreliable business partner. And I'd say, look, yeah, I can't deny to you that like the government changes every four years here in America. And like there are these wild swings in different directions, and I can't deny that to you. But the thing is, is that don't think of yourself as doing business with the US government. Think of yourself as doing business with Microsoft, which is like way more stable and has like totally legible incentives. The problem is that when you do things like this, you are eroding that distinction between public and private, which gives people faith in Microsoft, Microsoft has a higher credit rating than the US government, right? It gives people faith in the institution of Microsoft that is separate and apart from faith in the institutions of, of the federal government. And you erode that and, and all of a sudden everything becomes political. And that's a, that's a subsuming mentality that I think is, is, is is quite, quite toxic,

- But, but equally important. I mean, that's interesting and it's not irrelevant, but it seems to me it's much more important that, as you say, we're on the, we're in the very earliest days of this extraordinary technology and the government's picking winners and losers, not based on who has the best technology, but without any particular constraints. Not constitutional constraints. It could be political, I don't know who knows what's really the hearts of human beings, but it could be political. And if it's not political, it's arbitrary. It could be corrupt, it could be personal. It, there are thousands of motivations. And in general, we would want government to not be beholden to those kind of motives and to leave private companies to do what they do best. Having said that, and I, I'll let you respond to that too if you want, but this is a unique technology on the surface. On the surface it is probably gonna revolutionize the world. We don't know for sure. It's certainly revolutionized a few industries already in the last year. And we're kind of worried many people are about our ability to keep a lead in this technology relative to our potential enemies abroad. So there's a national security issue here that works in the opposite direction, which is we want, we Americans, Americans want anthropic open ai, Google the three big leaders right now. There may be others coming down the road to be able to be at the forefront of this. And if we're gonna punish them by saying, we don't like you, we don't like that you didn't play ball with us. We think this is really important and you didn't cooperate, you're gonna hamper the competition that's producing this extraordinary set of technologies.

- Well, first of all, I think it's worth noting, yes, there's a picking of winners and losers here and it is explicitly not merit based because Secretary Hegseth has said that the reason we use Claude, you know, I'm paraphrasing him here, but it's because it's the best and the reason that this is so important to us, the reason that this fight is so important to them, he said is because it's the best. And yet at the same time, his regulatory actions are trying to drive the company. At least hurt them, if not drive them out of business. And yeah, it's also worth observing here that this is an incredibly capital intensive industry and all of this regulatory risk is making it much harder for anthropic in particular and probably the industry in general to raise the capital that they need. And so, yeah, I mean you are, you are diminishing America's ability to maintain its lead in this technology, right? At a critical time. So, and and not to mention the fact that by all accounts Claude is exceptionally useful already in its still relatively nascent forms, is already exceptionally useful for certain kinds of military operations. And so I think it's unambiguous to say that if Claude disappeared from military systems tomorrow, it would be a American national security would be weaker.

- So what's the other side of this argument? Can you steal me on the other side? The people who think that anthropic was outta line. So here's the other side. I'm not gonna give the argument. I'll let you give the argument 'cause you know it better than I do. Yeah. Anthropics outta line here. This is a national security issue. They should have deferred to this application. They should have said to this contractual demand. They should have said, of course you can use it for anything that's legal. And we, we have our own, you know, feelings about surveillance and autonomous weapons, but we have to trust our government to do what's legal. So as long as it's legal Sure, go ahead. And how dare they, how dare they hamstring the national security interests of the United States because they have a different view of what's legal perhaps. Yes. What's the argument there?

- I think the argument is that yeah, that that, like this anthropic is essentially private using its private power to set what amounts to public policy unilaterally. And there is some truth to that I think. I don't think that's crazy. And my own view is that, look, on one level, we, we look at this now and it feels really restrictive. At the same time, the government purchases software, including software that's used in really important critical applications, purchases, software on commercial terms all the time and commercial terms of service are like the same ones that you purchased it under, right? Basically. And so commercial terms of service often have usage restrictions. The government, government software contracts have all kinds of usage restrictions.

- Restrictions. If you don't like it, don't buy it. That would be the argument. That's what they use. When I complain about some usage restriction on some product, you can't take the back off you void your warranty, whatever it is. And you say, well, if you don't like that, don't buy it. Yeah. Buy something else.

- Yeah. Right. And you know, a AI is in fact a competitive market. It's true that anthropic is the only model on classified systems right now, but that's not a fact of physics. Right. That can change. And so, but I mean I, you know, I think to to to, to make their argument for them, I think it would be no, like a pri we don't, it doesn't matter about competition if a, a private party can't do public policy through contracting.

- Yeah. - And you know, and, and it's just that simple. And like we, and, and also, you know, there are some allegations that the government has made that anthropic has, like, has done things like threaten to remove Claude, like basically to pull Claude services during active military operations if philanthropic doesn't like what the government is doing. I must be honest with you that I have some real questions about the veracity of those claims, but at the end of the day, I'm, because it, I will say it doesn't sound like a thing that you would say to the government. Yeah, it doesn't sound true, but it's what the government claims. I'll be interested to see if they claim these things under oath.

- Yeah, we'll see,

- That's the, that's the ultimate thing. Do the DOJ lawyers claim it under oath?

- So what's fascinating about this, it could be merely in a different world, the Department of world would be using Claude to, as you say in the beginning we were saying it maybe to streamline their hr Yes. To make their off back office work a little more efficiently. And this could have come up, they could have be unhappy about the way that works and they could have complained and they could have tried to redo their contract, they could have threatened them. There's a lot of things government can do if, if they, if they want, and we're, we'll talk in a minute about the other constraints besides what they want. But this is a very complicated piece of technology because it does have important military applications and it has immense number of non-military applications. Some people have likened it to a nuclear weapon. They've said if a private company developed a nuclear weapon and sold it to the government because it was better than the nuclear weapon, the government had an absurd but useful story, I think certainly they would not be free to withhold the weapons warhead because the company felt that the causes belly, whatever it was, the cause of war that was generating the use of the weapon, they didn't agree with it. And that that's a dramatic way to make your point about a private company doing public policy. So is that a legitimate analogy in this, in this situation?

- Well, I think that, I think the contractual analogy actually is fair. You know, and, and in fact you can imagine even a version of, you know, you, you could imagine philanthropic ha having a contractual term that says, we are only comfortable with our models being used in wars declared by Congress or something, right? Yeah,

- Exactly.

- And, and you know, of course there's, there's, you know, a long history of America engaging in basically wars that aren't technically wars. So I think, you know, I think the nuclear weapons to AI analogy is actually quite poor for reasons that I would be happy to explain. But that's not actually your point here. Your point is more about this contractual term and like, I think the government has a very fair point here. My observation is twofold. You can make that point without trying to destroy anthropics business, number one. Number two, you if you like, I, and, but I think, you know, on the anthropic side of things like this, you shouldn't try. If, if these protections matter so much to the leadership of anthropic, if they matter so much that they're willing to call these red lines against a government that is threatening to basically destroy their business. I think if they're that important, then you should have just said, we're not selling you anything until there's a law. And they should have said that in 2024. In fact, like if they're, if they were in such cahoots with the Biden administration and the Democrats, they should have said it in the summer of 2024, they should have said, no, you know, we we're not gonna do this until congress passes the law about domestic surveillance and autonom lethal weapons. And we want those protections written in statute.

- I just wanna make an observation here. I don't know how important it is, but United States is kind of weird about this. Generally it's weird in healthcare, right? In healthcare we have people, they sometimes claim we have a free market system in healthcare. And what they mean by that is you can, you can be a doctor if you want and have a private practice. We don't have a free market system in healthcare. We have an incredibly government tampering role in a healthcare market that is not anything like a free market. It's there, there's control the number of doctors through certification of medical schools, accreditation of medical schools, licensing of physicians. There's incredible subsidies through Medicare and Medicaid that basically run, determine what the prices are. They're not free market prices. So people get confused because the United States system is very different. And it, because of our culture and our heritage as a sort of free market comp country, we, we, we allow certain private activities to take place that give the illusion of, of a private market when it's not one at all, as opposed to say the National Health Service in, in Great Britain or the Canadian healthcare system where sure. Doctors generally, or employees of the government. Now we do the same thing in defense, right? We, we have private defense, we have public government defense activity like the Los Alamos project that was not a private company taking venture capital money to develop a nuclear weapon to fight World War ii. That was a government project. But there are many, many, many private companies that developed things for the government. There're nominally private, but their business is so dominated by federal contracting that there were this weird hybrid, like the healthcare market. So a company like Boeing or McDonald Douglas, they are private, they have private employees, they're not federal employees, but they have this weird relationship with the federal government. They're dependent on federal contracting and, and in, in a way that a foreign supplier work, that's a, that's a nationalized, effectively a nationalized industry is different. So, so here we have this technology that is not a military technology on the surface, it's a general technology, but it has this very strong and powerful military poss you know, potential. And so what we're seeing to some extent is the unusual nature of a company that is clearly private, but it has a very important role to play in public sector activity, in particular national security. And if it were only good for that, I think we'd be having a very different conversation. Part of the complication, this is, it's good for seemingly everything

- Your question gets, I think to one of the most interesting dynamics that we're going to face in the next decade, two decades maybe more, which is what is the relationship between this thing we know today of as the Frontier Lab and which is the AI companies and the US government and the, and the federal government. And it's a, it's an incredibly complicated question because number one, there are national security implications, right? These technologies are object level can be used for object level dangerous things, right? They can be used to engage in autonomous cyber attacks. So in other words, I don't need to have a military arsenal to make use of these models or an intelligence gathering apparatus. You can, anyone can launch a cyber attack, right? So there are these things, right? There are people who talk about things like bio weapons and, and whatnot. There's all sorts of like catastrophic, potential dangerous, misuses malicious uses of the technology. Obviously there is a government role in, in the sort of mitigation of those things, well, maybe not obviously, but I think that there's some government role in the mitigation of those things. But it's also an incredibly useful technology for national security like for government, you know, for militaries specifically and uniquely. And then it's also a technology that I think will be a profound part of how all of us exercise our individual liberty and express ourselves in the future. And, and even today it will be huge, hugely important sort of foundational tool in the acquisition of knowledge, which is first amendment right in and of itself, but also the self-expression for many people I think. And then on top of all that, I think that we're dealing with a technology that, like the printing press may well be so foundational to sort of the capability of organizations and institutions that it actually changes sort of the institutional complex that defines the technocratic nation state, such that like what we currently think of as the government will actually change in important ways. And, and so in that sense, you know, you you, you might think that the technology the Frontier labs are developing is in some ways a challenge to the institutional status quo in which sort of technocratic regulators are in charge of large swaths of the economy basically. That that in and of itself might be challenged in various ways. And so it's all of these things all at the same time. And so, you know, I can't say that I know exactly what the answers are going to be here because indeed, like I I approach these issues with a kind of classical liberal frame. But I'm also aware that the very notion of classical liberalism, some people would argue it's already anachronistic. And certainly you could say that if you look at the, if you think about the future that maybe all of our political concepts, all of our political theore concepts are, are going to be somewhat outdated because something new, there's something, some new type of institutional complex beyond the technocratic nation state is going to emerge. And so a new sorts, new sorts of political relationships will undergird that. And so I think it's a good, I think classical liberalism is a good starting point. And all I can say is I got, I changed my career from what I was doing before to, to be writing about this because basically this question in particular is one that I find infinitely fascinating and extremely important. And I don't have all the answers, but I don't have anything like all the answers. But I do think that, you know, it, this is, this is gonna keep coming back to us, I think many times.

- No, I think the, the point your pa your essay highlights government regulation historically is about either restraining the power of the private sector or enhancing it artificially through what economists call rent seeking. If you want to take a less charitable motive for government regulation, these two things, they're not mutually exclusive. There's a little of both often in all much of what government does, but that's the way it works. There's a political process. Government regulates some things, restricts some things sometimes that benefits the public at large. Sometimes it benefits individual players. That's a better way to say it on the, on the corporate side. And we're in a brand new brave new world right now where the idea of what ideal regulation is and what is the right role for the federal government in this nascent industry is unclear. It's like you, I start with the classical liberal framework, but it's not exactly clear how to apply it here. And you can hear that in some of our conversations so far in this, in our back and forth, which is, you know, what's it mean exactly it, it's an unusual, it's not the printing press, it's not electricity, it's not the steam engine. It is something that might underlie a total transformation of work and play, in which case government probably isn't prepared for that. I know most of us aren't either. And so the question of what should be the appropriate role in this brave new world for the government is up for a very crucial conversation. And you're, what I hear from you is you wanna be a part of that conversation and I applaud you for it. And the other thing I hear from you is that the heavy handed approach to the Department of War is taken in this early development of what is the appropriate relationship between the federal government and what is right now the private sector does not seem to be ideal and consistent with traditional American values of private property, freedom of expression. And, and I would also say responsibility and in the incentives and, and whatever restraints this technology, it, it probably shouldn't be the whims of a particular person in the Department of War. That's where I would put it.

- Yes, I think that's right. And the thing here that's like hard for people I think is, you know, there's this notion of like aligned super intelligence, right? That we're gonna make something that is smarter, vastly smarter than the best human at everything, right? And like at every cognitive task and like, I don't know if that's actually what we're going to build exactly. I don't know if that's quite the right way of thinking about it. Yeah. But like Grant for a moment that like I, it will be of foundational importance to like everything that an organization like the Department of Bore does or like a very large number of the activities that they engage in. And also that it may be capable in fact definitionally in order to be what is described as, or like what, what, what what the companies are trying to build. It will have to be able to act in the world as kind of its own. It's not a pure legal agent that does whatever you say it will have to be able to make decisions. Again, we have anthropomorphizing language is complicated here, but it, we, we'll have to, you know, we're, we're taking our hands off the wheel to a certain extent. And so I guess like what I would say is imagine a world in which we build something that is smarter than all the employees of the Department of War. And when we ask, you know, what is domestic master surveillance? It's like, well, and, and you know what, what, what will it do and what will it not do? And the answer is, well, the machine will decide, right? That's a, you know, that's obviously a caricatured world. I don't think it will be that simple, but probably that element of the machine deciding, like truly deciding something, that's probably something that mo a lot of people have not emotionally and intellectually factored into their models of the future that you like probably ought to

- Yeah.

- At this point.

- Yeah. I, I'll have to say one thing about that and then I wanna segue into this, the deeper questions that you raised at the beginning and end of your piece.

- Sure.

- That statement, it'll be smarter than any employee of the Department of War is a somewhat misleading statement because many of the things we care deeply about, or not a question of cognition. And I know that's not fashionable to say, so lemme try to make it clear what I mean. I can imagine the Secretary of the Department of War late at night frustrated that this company has failed to do what he wants, turns to Claude and says, you know, Claude, this really annoys me. What can I do to get my way? How can I get anthropic to bend to my will? And Claude dutifully would say perhaps, oh, we should threaten them with the supply chain risk. You could even do more than that designation of supply chain risk. You could make them essentially corporation non with anybody who deals with the Department of Defense and it could come up with some things that the secretary can't think of. And that's the sense in which its cognition is spectacularly great, but what it cannot do, and I believe we'll never be able to do, and I even think it's meaningless to, to, to say it this way, it will never be able to, to give the Secretary of the Department of War advice on whether it's the right thing to do. It's not a meaningful question. There's no answer to that question. There's no, it's not a question of coding, it's not a question of how many calculations you make per second. It's not a, it's not even a question of how many philosophers you've read in the history of your life. It's not that kind of question. And people I think assume that all questions will ultimately be questions you can answer. And I believe that is not true. I believe there are no solutions only trade offs and once true in the world of trade offs, that's not something a machine can decide. It can try, it can give us some sort of utilitarian calculation if you're a utilitarian, I'm not. So this idea that in theory we would, so I think the risk, one of the biggest risks of, of AI is people thinking it's good at answering the wrong kind of question and using it. You still use it, it will give you an answer if you ask it, should I do this? It will, unless it's been trained to, to say no, it will probably give you advice about whether you should do it. I've already done that with some of my strategic decision making here at the college of asked its opinion. I've asked it why it thinks that, why is it justify that? But that's an illusion and I don't worry about it making the wrong decision. I worry about people assuming that whatever it says is the right decision. And that, and they're, and giving it questions to answer it is not capable of answering.

- I I agree with you in part and disagree in other areas. So I think like, like the other day actually, I was using GPT 5.4, the newest model from open ai. And I was asking it about a very complex, a private issue, but related to some of the things we're talking about in some ways a very complex interpersonal and professional thing I'm dealing with. And I was kind of like, okay, like here's what I'm thinking about saying in this situation. Like what do you think? And it responded to me and it actually said what I should have said. It was like, no, you shouldn't say that. You should say this. And I was like, wow, that's, that's really like, 'cause it also because it knows enough about me to know what I should sound, what I want to sound like, right? Yeah. It knows what I sound like at my best in some sense. And so what I do think though, what what I think is, so I'm not sure that I agree with you that it won't be able to make to reason about trade offs and, and moral and ethical thing. In fact, I think Claude is a better, I I'd be willing to bet you that I would if, you know, if I had a moral and ethical question for Secretary Hegseth versus Claude Opus 4.6, I bet you nine times outta 10, I would prefer Claude's answer maybe more

- And no comment. Go ahead, carry on.

- And but that's

- Interesting other than to say that probably tells you more about what you think of Pete than what you think of Claude. But go ahead.

- Right, right, right. Well that's that's interesting because, because that's not true of you Russ. Maybe, you know, I don't think so. I don't think so. I bet you sometimes I like Claude more than than what you would say, but I bet you not every time. Yeah. And, and so What I do think is that like a, I agree with you that there's a risk to just assuming the AI's right. About everything. 'cause it's actually not, especially in things like this, but also where I think the value of where I think the human touch is going is really going to be on these things that are definitionally based on relationships, based on things like trust and integrity and charisma and, and persu persuasion, which, and, and politics to some extent, right? It's like, like the notion of automating politics doesn't really make sense to me. Yeah. It seems like that seems like a category error.

- Yeah.

- And the reason for that is not that AI can't do a better speech, that it can't perform the, the, I think AI can probably perform many of the, the sort of speech acts of politics better than the best. And I'm willing to submit one day the best, it'll be better than those things. And, and, and even like strategy and stuff. Better at strategy than Avon. Bismarck better at rhetoric than Abraham Lincoln better at writing rhetoric at least than than Abraham Lincoln. But there's this issue of like, politics is an inherently relational act.

- Yeah.

- And that seemed much harder to automate. And so that's my guess as to where we're going. That's where I think the human touch is going to be. That's a super different world than the one we currently live in. And I don't think our education system is preparing maybe yours, but, but not, not the US education system is preparing students to live in that world. That's a very different world than the one we're used to.

- Yeah. Fair enough. I wanna close, and I maybe should have opened with this, I hope listeners have found this interesting. I have about this. To me, what we're gonna talk about next is in some ways the most interesting part of your piece. It's also the least specific. So it's, I'm, I've saved it for last. And you start your piece, this piece quad with an a WED at the end. You start the piece with the discussion of your father. Talk about why you did that and why that's relevant for this moment in American history.

- So I have al I have come to a quite biological conception of institutions. I think institutions are made up of human beings. And I think that nature is filled with fractals. And so I think that while institutions aren't exactly like human beings, there are ways of observing and thinking about living things that can also be usefully and productively applied to institutions, both as an analytic matter matter and sort of for purposes of the, the poetry of it all. I don't think there's that much of a distinction between those two things actually. But like, so I, I open up the piece basically describing the experience of sitting at my father's deathbed about 11 years ago. I was 22 years old. I had just started my career and you know, I was, I i we was, it was no secret we were in hospice. It was me and my mother and, and a few other family members. And we knew that we were watching my father die. And I remember reflecting at the time, and I've reflected of course on that experience many times since that, you know, there's this, that death is this process. And that in some ways my father had become sick. He had, he had gotten heart surgery that went wrong six months prior to the date that he died, roughly. And it was immediately after that six months he was a changed man entirely. The life had kind of been sucked out of him. But, you know, and then it was just this gradual process of just him sort of becoming less and less there and fits and starts, you know, not, not even necessarily, but he would occasionally come back and have some life in him. And then the actual process of just watching him die, I realized that like, you know, I don't know, he seemed, he seemed dead to me well before the machine declared him dead. And so the machine making this declaration that his heart had stopped, you know, or the faint signal that it was getting from the heart was, had crossed a point of faintness that, you know, the machine made some arbitrary decision basically that, you know, that, that he had officially passed over. That is just one, I think one way of looking at, you know, where he was in the, in the process of death. And so I I I was reflecting on that and reflecting on, you know, why is this experience of, of writing about anthropic department of war? Like why is it so emotional for me? You know, why was, why is it so frustrating? Why do I feel such a deep melancholy about it? And what I realized is that it is this, it is because I just feel as though I've watched throughout my lifetime for 20 years, I've watched a lot of these bedrock principles of our republic get eroded and thing after thing. And it's just like, it's been the same sort of corrosiveness but worse sequentially every year it feels like. And I suddenly realized, it clicked for me that that process feels very much like death. It felt very much like the experience. I don't know what death feels like, but it felt very much like the experience of watching my father die. And, you know, and also the fact that, like, I think about this a lot privately, but I don't talk about it that much. And the reason I don't talk about it is that it feels quite painful to talk about. And I didn't, you know, when, when my father was going through, you know, his six months of dying, we talked about his health a lot, but we didn't talk about sort of the certainty of his death that much and where he was in the process and all these kinds of things. 'cause it was too painful. And we knew the answer, the answer we all knew. And so that's, yeah, that's kind of why I start. I mean, I will say that piece, I wrote that piece in about two hours, so it just kind of came out of me.

- Well the reason, the reason I think it's so profound. I'm older than you. I've been watching for more than you have. And it's been clear to me for a while. And listeners know this, 'cause this show's 20 years old as of next week and over that 20 years, listeners can hear my optimism about the American experiment. And then sometimes my pessimism, there's times I said, we're near a Civil War America's near a civil war. And five years ago I moved to Israel and I found myself watching America from afar. And it changed my perspective. It allowed me to be a little more of an observer and less of a participant in some dimension, still American citizen. But, and I've thought for a long time now something's wrong. In fact, something's wrong in the West. It's not an American problem. It's a western problem. And what your piece made me realize is that it's possible that this problem is not gonna get better. That's what's hard to face. That's the melancholy for me. And I think there's a tremendous blindness among some Americans that this is a Trump problem. Yeah. Trump is just the manifestation, the latest manifestation of a very, very long trend. It's probably, you could say it's, you could argue it's 80 years old, it goes back 90 years to, to Roosevelt. You could argue it goes back 60 years to Linda Johnson. But what is that trend? The trend is the end of the Constitution as an effective constraint on government power. The rise of discretionary action, the destruction of norms that put some things off limits are no longer off limits. Those arms are gone. And as a result, it's much more what's expedient. It's not what's constitutional, it's not what's principled, it's what can I get away with? And you could argue that the Department of War threatening a particular company is not that important. It's just a petty dispute between egotistical players about their own success and failure. And, but what I thought you struck at deeply, and maybe we're overreacting here, but I think not, is that you don't know what you got till it's gone. And we thought we had a republic, you know, there's this very famous line from the constitutional convention in I think 1789, where someone asks, I'm gonna get this wrong, so forgive me, you'll, you guys will all fix it for me. But I think somebody asked Benjamin Franklin, what kind of government do we have? And he responds a republic, if you can keep it. And America kept it for a very, very, very long time. It's had a tremendous run. But the increase in executive power, unconstrained by the constitution, unconstrained by norms is a long trend. Trump is just the one most comfortable ignoring the things that other people used to not ignore. They've all been ignoring it to some extent, the last eight presidents or whatever the number is. And, and I think this whole debate about whether it's we're heading toward fascism, I think that's the wrong way to think about it. I think totally what we're talking about here is the slow, inevitable erosion of institutions is we get farther and farther, further and further away from our founding and from the principles this sustained it. And now it's like other places, you know, if you get a good president, it turns out well if you get a bad one, it doesn't, it used to be it wasn't so important all of a sudden. It's really important. And the reason I think your piece is, is so insightful is that when you're in the middle of it, you don't notice that the, you know, it's like the frog getting boiled. Is it, is it warmer in here? I don't know. Is it a little warmer? But after a few decades it's like, boy, this water's boiling hot. It used to be cold. And you kind of start to notice and what you've done, I think in this piece, even though it's a particularly, it's a small corner, but maybe not, is to point out that the water's been boiling for a while. It keeps getting warmer and warmer and it's an illusion to think we can turn it down. It's just we're gonna have live in a new world. And, and I think you're right and it helps me, it's a very, and I'm sorry about your dad, it's a very powerful metaphor for thinking about change. Not so much about death, but it's, this is happens to be about death, but particular kind of cha any kind of change. Yeah. When you're in the middle of it, it feels like, well, I don't know. Is it really changing? Maybe it's just me. Maybe it's this one example. Maybe it's this particular Congress that doesn't wanna do quote its job. All of a sudden, you know, this goes back also to things you've all said on this program. Yes, everybody's performing. They're not Do what happened to a world where people did what they're obligated to do, what they're responsible for doing their duty. And then you think, well, we just need a president to come along. Who's gonna do that? Do you really think that the next president, Republican, or Democrat is gonna be any different? It's just gonna, I think it's just gonna be the same thing. So that's my rant. You can read your rants beautifully said. They can. Well, you know, you can go read your piece or, and you can, I'd like you to reprise it now if you want, but react to what I just said.

- Yeah. I mean, no, I, I think it is very, it's very well put in some ways, more precisely than I communicated it. And I think the way I, I, the way I think about this is you are definitely right that this is about change and not death. Because I also talk about the birth of my son, you know, briefly in that piece and how it is similar and how, you know, my experience thus far, quite brief, still only several months of being a father, is that, you know, I sort of just am watching my son progressively awaken. You know, he just becomes more and more aware of the world. And, and, you know, nature is like this, nature is filled with phase transitions. There's a great, there's a great graphic I saw on, on social media on, on Twitter the other day of sort of a heart beginning to beat and like, what that looks like. And it's all these cells that, these decentralized cells that begin to activate and then enough of them activate, and all of a sudden you have a heart beating. But it's not like there's ever one moment where, you know, it, it, it, it is. And, and by the way, I think that change from AI will be like this too, right? There will be phase transitions. There already have been phase transitions in the, in the progression of ai and there'll be in the adoption as well. So, very much yes. And part of the point I'm making is like, yeah, I'm not trying to make a point about fascism. And I think probably a lot of people on the left read my piece. And I, I took pains to say that this wasn't just about Trump, but I'm sure a lot of people, and I knew this would happen, a lot of people on the left, I think read my piece in sort of in self-satisfied fashion, said, ah, yes, but everything will be solved when we get Gavin Newsom in or whoever in a few years. And like, that's very much not my view. My view is like, you know, the most charitable thing I could say about the left would be that they would likely do everything, they would likely do all the same stuff in a somewhat more gentlemanly, technocratic fashion than the Trump administration, which has a tendency to be really explicit and stumble into things like this. But in some sense, I actually applaud the Trump administration for that, because at least it's out in the open, you know? Yeah. At least we can talk about it. Yeah. With, with the Trump administration. And the one other point I would make is, you know, I I, I spent more time debating whether or not I should publish this piece in a, in the form that I published it than I did writing it. Because, you know, there's a certain aspect of like, there's run on the bank dynamics that you don't want to contribute to with things like this. Where like, well, you know, we, we, we, the reason that republic's work is that we all believe in the common fiction of the republic. And that's always been true. Right? That's always been true. But, you know, some, and, and I, I certainly did get pushback from some people, including people that you and I both respect about, about, about that, about the decision to publish it. And one of the things, you know, that I, I, I heard is like, well, you know, d Democratic, like elections are still functioning, right? Like, we're still, we still do have elections and the results of them are observed. My view on that is that that is, that is, that's goalpost moving in my view, because

- Oh,

- Hundred

- Percent.

- Yeah. It's, it's really

- Easy. It's better than nothing. It's better than nothing, but

- It's, it's better than nothing. But it's really, and, and the thing is, it's really easy to observe. Like, it's really easy to observe, did I go to my polling place and vote and did the person who won get into power? And so it's very, very hard to erode that particular thing. And it's interesting to me that even the left has chosen to focus so much on this issue of like, the erosion of democracy, per se. 'cause that has always seemed to me like the thing that, you know, the Trump administration or anyone else is least likely to mess with because it's so verifiable. And instead, and indeed, like the, the founding fathers, if you told them that the one thing that persisted was the ability of the masses to vote would be app depressed, appalled,

- So depressed,

- They'd be like, that's the worst part of the whole system. Right?

- Yeah. I forget who said it, but, and maybe it's justto, some general bit of humor, but the joke used to be about Mexico, that, that they, you know, the, the same party won every election for forever. I, I forget the name of it. And the claim was that, you know, Mexico had a democracy 364 days a year. And the 365th day when they didn't have a democracy was election day because it was, it was rigged. Yeah. But the rest of the year, political forces did matter. The the people did have influence. So, but, but not on who won the election. I was, that was rigged.

- Yeah. I mean, 'cause it, yeah, it's tyranny of the masses, right? Democracy is just the tyranny. Like the idea that there's an omni powerful, an omnipotent executive who just like it shifted, ra we shift wildly between two different omnipotent executives that's based on a deme, a democratic vote that's like, not at all what a republic is. And so the fact that elections are being observed is like, not it, it doesn't feel it, it's called comfort, you know?

- Yeah. It's

- Called

- Comfort. So before October 7th here in Israel, there was a massive, incredibly controversial discussion about the proper role of the Supreme Court here in Israel and its relationship to the Knesset and the ruling coalition. And what the judicial reform issue was about here was, and it's interesting, both sides cast themselves as democratic. The coalition, the Netanyahu reforms, which were going to severely curtail the power of the Supreme Court. They were called Democratic because the coalition wins the election. What could be more democratic than that, which is what we're talking about. The defenders of the Supreme Court's power said democracy requires civil rights. And if the, if there's no constraint on the power, the majority, there'll be nothing left to retain democracy because the civil rights will disappear. And that's the same thing that's gonna happen in the United States. I'm gonna predict, and I'll let you react to that and take us home. There's been an enormous increase in power at the executive branch in the United States. The legislative branch is neutered spade. Pick your verb. They've self neutered them. They've neutered themselves. And the only thing that stands in the way of executive power is the court. It's a weird thing because the court's pointed by the president, but it's proof by Congress. So it's tricky. But we've already seen that the attempts by Trump, the Trump administration, to put in things that some people would say are overreach in terms of power. I'll pick tariffs as the obvious example. And this example that we're talking about right now, the courts have been very willing to try to restrain that executive power. So I'm gonna predict that that's going to intensify over the next few years. And I would be shocked if the courts did not rule in favor of anthropic in this case, simply because they see themselves, and this was true in Israel too, whether they're right or not, they see themselves as a bulwark against that executive discretion and unconstrained power. Now, when an executive gets into place that the court happens to, like, it's gonna be even a more complicated situation. And to some extent, well, the United States are more complicated than that, but I think we're gonna see in the west generally fights between the legal, the courts and the executive branch as, as to what democracies are gonna actually look like in the coming years.

- Yes. I think the, the one functioning branch remains the courts. And so they are the, they are this, this, this one lasting check on the sort of un unfettered power of the executive. And that's in a, that exists in a real tension. 'cause the courts can only do so much at the end of the day, who enforces the court's decisions. It's the executive. Yeah. And once you get, once you start asking that question, that's sort of my point is like, once you start asking that question, you're, you're in the law of the jungle at that point. Yeah, sure. And so, so, you know, I'm hopeful and I, I, part of the reason that I'm a very close observer of the courts on a wide variety of different issues, far beyond just AI related and tech related issues, is because I, I like to observe this chess match in detail. One thing that maybe is a note of optimism that I can give is that, like, if you think about the courts as the last umpire enforcing the rules of the game as written down, the laws that are written down, well then if you are a smart long range actor who wants to win in court, it's incentive compatible for you to pretend like those rules of the game actually do govern your actions. Because then when you go to court, you'll have a better case to be a case to be made. And so, like, I mean, you know, I, I'm a, I'm a big fan of a book called Homo Ludens, man at play by a, a, a guy named Johan Hega from, it's a sort of, it's old book but's a great book. And it sort of would make this point that like, you know, you should, you should model the institutions of classical liberalism as this kind of grand game. And you know it, if as long as we can, as long as there's one institution that enforces the rules of the game, then maybe it's incentive compatible for the actors to sort of like remain. But the problem is like the court authority gets eroded, and it's like not always clear, even today, it's not always clear that court, you know, court rulings get observed. Right. And we, Biden had this problem too, Biden Biden ignored aspect of court, aspects of court rulings, and so does Trump. And so even that is starting to break down, you know, a, a little bit and, you know, we could get into court packing. Yeah. There's, there's all kinds of things.

- Sure.

- Expanding

- It's very, the size of the Supreme Court is, is, you know, that's why I said you can go back 80 years if you want to Yes. 90 years to, to think about what this, this tension. Yeah.

- And so, so I just, you know, I I I, I, I'm definitely, you know, I, I I, I, I'm, I'm very grateful that the courts exist, but in, in the end, and this gets into, I, you know, this locus of control thing to bring us back to sort of the middle of the conversation about like, where is the proper locus of control and how should we be thinking of AI as this kind of new institutional technology? Well, one of the problems I have is that like, I'm trying to analyze this and think about the appropriate locus of control in a moment when I'm also just candidly acknowledging that our republic is in not very good health. And so there's a certain extent to which I have trouble trusting, you know, the unfettered executive to, to, to, to be the, you know, governing institution over ai. I have a lot of trouble with that in a way that maybe I wouldn't have if this were 1923, you know? Yeah, right. Or, or, or, you know, if Calvin Coolidge were president or something, like maybe we would be in a very different world, but, you know, we're in the world that we're in. And so I think that that should affect your, that well, I, I, I don't wanna be, it affects my view of the accumulation of private power versus the accumulation of public power. Because the thing about private corporations is they don't have the monopoly on legitimate violence. And so maybe, maybe we build new checks and balances in this way somehow. But I think whatever we're doing, like, I suspect that we are in a kind of new founding moment, which is not novel for this country, but it's, you know, certainly we're in uncharted territory.

- My guest today has been Dean Ball. Dean, thanks for being part of EconTalk.

- Thank you, Russ.