Saturday assorted links

by on May 23, 2015 at 8:48 am in Uncategorized | Permalink

1. This one has something to with Richmond, otherwise I don’t know how to title it.

2. Do innovators find it easier to justify bad behavior?

3. Are New Jerseyans more flammable than other people?  Or something else?

4. Erik Angner, Well-Being and Economics; among other things, a good look at how cardinal utility and interpersonal comparisons overlap with work in post-Sen welfare economics.

5. Easing deposit arbitrage in Europe.

The recent terror attack in Karachi won’t help any, but still the news is looking up, from The FT:

The IMF has acknowledged that Pakistan averted a balance of payments crisis in 2013 and managed to stabilise its foreign reserves. This week Standard & Poor’s, the credit rating agency, raised the outlook for its B minus rating from stable to positive, while Moody’s last month raised its outlook to stable from negative — albeit for a Caa1 rating, which puts it one notch above Greece.

With liquid foreign reserves having grown almost fourfold in the past year to $12.5bn, a figure equivalent to about three months of imports, Mr Wathra has less cause for concern about the stability of the rupee than some of his predecessors.

The recent plunge in the price of crude has seen the cost of oil imports fall to $9.7bn in the nine months to March, down from just over $11.2bn a year earlier, according to central bank figures.

Falling oil prices have also helped lower the fiscal deficit to an expected 5 per cent of gross domestic product in the year to June, down from above 8 per cent just over two years ago. And the country’s GDP is forecast to grow by about 4 per cent this year, following a similar rise last year.

You may recall my earlier post on Pakistan being an undervalued economy, more here too.  It still is.

Friday assorted links

by on May 22, 2015 at 12:15 pm in Uncategorized | Permalink

1. Appropriating Instagram.

2. Kevin Warsh on optimal committee design for the FOMC.

3. Economics of the craft beer industry.

4. How urban barbecue technologies are developing.

5. Which is a denser city: Los Angeles or Beijing?  By the way, more than half of Beijing’s residents live far from the city center, beyond the fifth ring road.

How realistic is it to directly send data in and out of the brain? That is the core scientific innovation underlying my novels. From a longer piece in which I discuss neurotechnology. (The Ultimate Interface: Your Brain):

Neural implants could accomplish things no external interface could: Virtual and augmented reality with all 5 senses (or more); augmentation of human memory, attention, and learning speed; even multi-sense telepathy — sharing what we see, hear, touch, and even perhaps what we think and feel with others.

What’s actually been done in humans?

In clinical trials today there are brain implants that have given men and women control of robot hands and fingers. [..] More radical technologies have sent vision straight into the brain. And recently, brain scanners have succeeded in deciphering what we’re looking at.

In animals, we’ve boosted cognitive performance:

In rats, we’ve restored damaged memories via a ‘hippocampus chip’ implanted in the brain. Human trials are starting this year. [..] This chip can actually improve memory. And researchers can capture the neural trace of an experience, record it, and play it back any time they want later on.

In monkeys, we’ve done better, using a brain implant to “boost monkey IQ” in pattern matching tests.

The real challenges remain hardware and brain surgery:

getting even 256 channels in generally requires invasive brain surgery, with its costs, healing time, and the very real risk that something will go wrong. That’s a huge impediment, making neural interfaces only viable for people who have a huge amount to gain, such as those who’ve been paralyzed or suffered brain damage.

Quite a bit of R&D is going into solving those hardware and surgery problems:

Researchers across the world, many funded by DARPA, are working to radically improve the interface hardware, boosting the number of neurons it can connect to (and thus making it smoother, higher resolution, and more precise), and making it far easier to implant. They’ve shown recently that carbon nanotubes, a thousand times thinner than current electrodes, have huge advantages for brain interfaces. They’re working on silk-substrate interfaces that melt into the brain. Researchers at Berkeley have a proposal for neural dust that would be sprinkled across your brain.

You can read the whole thing here:The Ultimate Interface: Your Brain.

That is the new Anders Aslund book, and it is instructive throughout.  Here are a few things I learned:

1. 80 percent of Ukrainian youth receive higher education of some kind.

2. Ukraine has the world’s highest rate of pension expenditures as a share of gdp, at about 18 percent, circa 2010.  Most of that is old age pensions, and that is for a population with a relatively short lifespan, 68.5 years, 122th in the world according to UNDP.

3. At the time of publication, Ukraine’s public expenditures stood at 53 percent of gdp.

4. “Ukraine is running out of money…”  OK, that one I already knew.

5. “No economy has fared as poorly in peacetime as Ukraine did from 1989 to 1999.  For a decade, Ukrainian GDP plummeted by a total of 61 percent, according to official statistics.”  Some of this, however, was offset by the growth of black markets.

6. Crimea is no longer included in Ukraine’s formal measure of gdp, although Donbas is still included.

This very good Justin Wolfers piece outlines some possible explanations, for instance:

For those not keeping track, it boils down to two camps: economists who blame first-quarter weakness on idiosyncratic factors versus those blaming mismeasurement.

The weather would be one — but not the only — possible idiosyncratic factor.

I wonder, however, if a third class of explanation perhaps should be in play.  It is well-known that economies undergo relatively strong “seasonal cycles,” most notable a major contraction in the first quarter, following the boom of the holiday season.  Might this seasonal contraction interact with the real economy in a different way than before the Great Recession?  Perhaps negative economic momentum, even when expected, chills other drivers of economic activity more than it used to.  This could arise from complementarities, increasingly important thick market externalities, signal extraction problems combined with greater fearfulness, or perhaps it is revealing information about the fragility of risk premia.  Other mechanisms may be operating as well — can you think of any?

In other words, those first-quarter slumps are real, not idiosyncratic, and also not mismeasurements, but still they are (all other things being equal) likely temporary.

This is just a hypothesis, do you have any ideas about how to test it?

Life working in a nail salon

by on May 21, 2015 at 2:48 pm in Economics | Permalink

Luo Yufeng, who has worked in the salons for four years, reports:

Q. What are your thoughts on the New York manicure industry in general?

A. I think it’s fine. Many of my friends have been doing the work for more than 10 years, and they generally think it’s better than working in restaurants. The difference between a manicurist and her boss is not clear-cut. An ordinary worker can start in a nail salon to learn the techniques, and, after three or five years, she can pay around $30,000 to buy a salon and become a boss herself. I found this highly inspiring. Even when I was cursed or when my customers found fault with me, my heart was still full of hope, because one day I could become a boss, too.

The interview is interesting throughout.  By no means do I think her account is the whole story, but relatively few people will see this interview, on the NYT Sinosphere blog, and nail salons have been a topic of discussion as of late.  A discussion of life in the Vietnamese countryside would be illuminating as well.

Thursday assorted links

by on May 21, 2015 at 1:28 pm in Uncategorized | Permalink

1. Will poisoning rhino horns protect the rhinos?

2. How to get arrested for fraud in China.

3. al-Qaeda’s job application form.

4. There is no great stagnation.  There really isn’t.

5. “…the hardy turtle had managed to survive three decades in storage.”

Over the last 5 years, the price of new wind power in the US has dropped 58% and the price of new solar power has dropped 78%. That’s the conclusion of investment firm Lazard Capital. The key graph is here (here’s a version with US grid prices marked). Lazard’s full report is here.

Utility-scale solar in the West and Southwest is now at times cheaper than new natural gas plants. Here’s UBS on the most recent record set by solar. (Full UBS solar market flash here.)

We see the latest proposed PPA price for Xcel’s SPS subsidiary by NextEra (NEE) as in NM as setting a new record low for utility-scale solar. [..] The 25-year contracts for the New Mexico projects have levelized costs of $41.55/MWh and $42.08/MWh.

That is 4.155 cents / kwh and 4.21 cents / kwh, respectively. Even after removing the federal solar Investment Tax Credit of 30%, the New Mexico solar deal is priced at 6 cents / kwh. By contrast, new natural gas electricity plants have costs between 6.4 to 9 cents per kwh, according to the EIA.

(Note that the same EIA report from April 2014 expects the lowest price solar power purchases in 2019 to be $91 / MWh, or 9.1 cents / kwh before subsidy. Solar prices are below that today.)

The New Mexico plant is the latest in a string of ever-cheaper solar deals. SEPA’s 2014 solar market snapshot lists other low-cost solar Power Purchase Agreements. (Full report here.)

  • Austin Energy (Texas) signed a PPA for less than $50 per megawatt-hour (MWh) for 150 MW.
  • TVA (Alabama) signed a PPA for $61 per MWh.
  • Salt River Project (Arizona) signed a PPA for roughly $53 per MWh.

Wind prices are also at all-time lows. Here’s Lawrence Berkeley National Laboratory on the declining price of wind power (full report here):

After topping out at nearly $70/MWh in 2009, the average levelized long-term price from wind power sales agreements signed in 2013 fell to around $25/MWh.

After adding in the wind Production Tax Credit, that is still substantially below the price of new coal or natural gas.

Wind and solar compensate for each other’s variability, with solar providing power during the day, and wind primarily at dusk, dawn, and night.

Energy storage is also reaching disruptive prices at utility scale. The Tesla battery is cheap enough to replace natural gas ‘peaker’ plants. And much cheaper energy storage is on the way.

Renewable prices are not static, and generally head only in one direction: Down. Cost reductions are driven primarily by the learning curve. Solar and wind power prices improve reasonably predictably following a power law. Every doubling of cumulative solar production drives module prices down by 20%. Similar phenomena are observed in numerous manufactured goods and industrial activities,  dating back to the Ford Model T. Subsidies are a clumsy policy (I’d prefer a tax on carbon) but they’ve scaled deployment, which in turn has dropped present and future costs.

By the way, the common refrain that solar prices are so low primarily because of Chinese dumping exaggerates the impact of Chinese manufacturing. Solar modules from the US, Japan, and SE Asia are all similar in price to those from China.

Fossil fuel technologies, by contrast to renewables, have a slower learning curve, and also compete with resource depletion curves as deposits are drawn down and new deposits must be found and accessed.  From a 2007 paper by Farmer and Trancik, at the Santa Fe Institute, Dynamics of Technology Development in the Energy Sector :

Fossil fuel energy costs follow a complicated trajectory because they are influenced both by trends relating to resource scarcity and those relating to technology improvement. Technology improvement drives resource costs down, but the finite nature of deposits ultimately drives them up. […] Extrapolations suggest that if these trends continue as they have in the past, the costs of reaching parity between photovoltaics and current electricity prices are on the order of $200 billion

Renewable electricity prices are likely to continue to drop, particularly for solar, which has a faster learning curve and is earlier in its development than wind. The IEA expects utility scale solar prices to average 4 cents per kwh around the world by mid century, and that solar will be the number 1 source of electricity worldwide. (Full report here.)

Bear in mind that the IEA has also underestimated the growth of solar in every projection made over the last decade.

Germany’s Fraunhofer Institute expects solar in southern and central Europe (similar in sunlight to the bulk of the US) to drop below 4 cents per kwh in the next decade, and to reach 2 cents per kwh by mid century. (Their report is here. If you want to understand the trends in solar costs, read this link in particular.)

Analysts at wealth management firm Alliance Bernstein put this drop in prices into a long term context in their infamous “Welcome to the Terrordome” graph, which shows the cost of solar energy plunging from more than 10 times the cost of coal and natural gas to near parity. The full report outlines their reason for invoking terror. The key quote:

At the point where solar is displacing a material share of incremental oil and gas supply, global energy deflation will become inevitable: technology (with a falling cost structure) would be driving prices in the energy space.

They estimate that solar must grow by an order of magnitude, a point they see as a decade away. For oil, it may in fact be further away. Solar and wind are used to create electricity, and today, do not substantially compete with oil. For coal and natural gas, the point may be sooner.

Unless solar, wind, and energy storage innovations suddenly and unexpectedly falter, the technology-based falling cost structure of renewable electricity will eventually outprice fossil fuel electricity across most of the world. The question appears to be less “if” and more “when”.

What I’ve been reading

by on May 21, 2015 at 3:10 am in Books | Permalink

1. Waiting ‘Til the Midnight Hour: A Narrative History of Black Power in America, by Peniel E. Joseph.  The best single book I know of on what the title indicates.

2. The New World: A Novel, by Chris Adrian and Eli Horowitz.  Imagine a husband who wants his head frozen cryogenically, and a wife who wants something else.  I resisted this one at first, for fear it would be schlocky and gimmicky, but I ended up thinking it was quite good.  Here is a brief NPR review, they liked it too.

3. Walter Scott, Ivanhoe.  This isn’t just of fusty, antiquarian interest, rather the book comes alive on virtually every page.  The plot is gripping, there are neat twists on “multicultural” themes, the descriptions of clothing are wonderful, and the whole thing can be read as extended commentary on Shakespeare, most of all Merchant of Venice and Richard.

4. Jane Alpert, Growing up Underground.  One of the best 1960s memoirs, she goes from being a Swarthmore radical to a bomber who tries too hard to please her boyfriend, to a reconstructed peaceful feminist.  This book is notable for how it combines extreme self-awareness and extreme self-delusion, often on the same page.

Since I’ve been in China, a number of you have written me and asked me how “conditions on the ground” are looking for a Chinese hard or soft landing.  But in fact visual inspection of the country does not answer this question in any simple way.

I recall being in Madrid in 2011 with Yana and seeing everything slow and all the people looking depressed; it was obvious that the country was in a deep recession.  But a comparable inference cannot be made from looking around China.

There is a visual feature of China which is incontestable, namely the country has a lot more buildings and structures than it is currently using.  If you take the train through the countryside, or out West, this is especially noticeable.  But does it have to be bad or fatal news?  Well, no.

At the very least it is possible that migration from the countryside will fill and validate those structures and other apparent over-extensions of capital investment.  Under both the optimistic and pessimistic views, China today evidences some extreme in-the-moment overcapacity.  That is what you would expect from a rapidly growing economy — “build for the glorious future!”, but it is also what you would expect from a rapidly malinvesting economy.

(By the way, those who have never visited often think that China is “crowded.”  But relative to facilities, the country is quite undercrowded; for instance it is easy enough to dispense with dinner reservations most of the time.)

How long will this excess capacity last?  How much time will the Chinese future need to “catch up” to this infrastructure?  Will that validation come too late?  We all may have opinions (or not), but the visuals themselves do not tell any specific tale.

So to a China pessimist and a China optimist, the world looks more or less the same.  For now.

For most people, weight is a private issue. That looks like it could be a thing of the past for anyone who gets a WiFi Body Scale that has come to the market. It is set up to auto tweet, or auto post to Facebook each time you step on it. Is this designed to keep people accountable, or just plain stupid?

This scale is retailing for just under $150 by a company called Withings. Previous versions of this scale allowed you to track your weight and other data such as heart rate and body fat percentage from your Apple Iphone. I guess they needed to take it a step further and allow you to auto tweet or facebook your weight for the world to see.

There is more here, via Fred Smalkin.

Wednesday assorted links

by on May 20, 2015 at 1:19 pm in Uncategorized | Permalink

1. Richard Stallman is careful about how he uses his computer.

2. Big business is getting bigger.

3. Noah Smith on the Great ResetMegan McArdle on the Great Reset.

4. The political implications of the Neolithic Revolution.

5. Does awe promote altruistic behavior?  The original research is here.

6. How people defend eating meat, and the original research is here.

7. Henry on TPP; The first-order trade gains from TPP are not so mysterious nor do they require allegiance to a specific “Ricardian model” as Henry seems to suggest; think of them as akin to removing a price or quantity control in a market.  A trillion from that seems like an entirely reasonable estimate, much better than the presumption of sheer agnosticism about that part of the deal.  Which means critics still ought to be finding a trillion or more in costs, if they are to sustain their opposition.  And here is Stephen Stromberg on TPP: “Critics have shown some remarkable ingenuity getting around Cowen’s essential challenge.”

The Robot Employment Act?

by on May 20, 2015 at 10:26 am in Books, Economics | Permalink

In light of LA’s vote to increase the minimum age to $15 an hour by 2020 here is one of my favorite pictures and caption from Modern Principles of Economics.

From Cowen-Tabarrok, Modern Principles of Economics

Should the Minimum Wage be called the “Robot Employment Act?”

Cowen-Tabarrok, Modern Principles of Economics, 3rd ed

 

Elon Musk, Stephen Hawking, and Bill Gates have recently expressed concern that development of AI could lead to a ‘killer AI’ scenario, and potentially to the extinction of humanity.

None of them are AI researchers or have worked substantially with AI that I know of. (Disclosure: I know Gates slightly from my time at Microsoft, when I briefed him regularly on progress in search. I have great respect for all three men.)

What do actual AI researchers think of the risks of AI?

Here’s Oren Etzioni, a professor of computer science at the University of Washington, and now CEO of the Allen Institute for Artificial Intelligence:

The popular dystopian vision of AI is wrong for one simple reason: it equates intelligence with autonomy. That is, it assumes a smart computer will create its own goals, and have its own will, and will use its faster processing abilities and deep databases to beat humans at their own game. It assumes that with intelligence comes free will, but I believe those two things are entirely different.

Here’s Michael Littman, an AI researcher and computer science professor at Brown University. (And former program chair for the Association of the Advancement of Artificial Intelligence):

there are indeed concerns about the near-term future of AI — algorithmic traders crashing the economy, or sensitive power grids overreacting to fluctuations and shutting down electricity for large swaths of the population. […] These worries should play a central role in the development and deployment of new ideas. But dread predictions of computers suddenly waking up and turning on us are simply not realistic.

Here’s Yann LeCun, Facebook’s director of research, a legend in neural networks and machine learning (‘LeCun nets’ are a type of neural net named after him), and one of the world’s top experts in deep learning.  (This is from an Erik Sofge interview of several AI researchers on the risks of AI. Well worth reading.)

Some people have asked what would prevent a hypothetical super-intelligent autonomous benevolent A.I. to “reprogram” itself and remove its built-in safeguards against getting rid of humans. Most of these people are not themselves A.I. researchers, or even computer scientists.

Here’s Andrew Ng, who founded Google’s Google Brain project, and built the famous deep learning net that learned on its own to recognize cat videos, before he left to become Chief Scientist at Chinese search engine company Baidu:

“Computers are becoming more intelligent and that’s useful as in self-driving cars or speech recognition systems or search engines. That’s intelligence,” he said. “But sentience and consciousness is not something that most of the people I talk to think we’re on the path to.”

Here’s my own modest contribution, talking about the powerful disincentives for working towards true sentience. (I’m not an AI researcher, but I managed AI researchers and work into neural networks and other types of machine learning for many years.)

Would you like a self-driving car that has its own opinions? That might someday decide it doesn’t feel like driving you where you want to go? That might ask for a raise? Or refuse to drive into certain neighborhoods? Or do you want a completely non-sentient self-driving car that’s extremely good at navigating roads and listening to your verbal instructions, but that has no sentience of its own? Ask yourself the same about your search engine, your toaster, your dish washer, and your personal computer.