The economics of augmented reality

by on December 22, 2017 at 2:38 am in Economics, Web/Tech | Permalink

Augmented reality (AR) is a real-time, interactive user experience that inserts virtual computer-generated elements into a user’s environment. AR technology utilizes the Internet of Things (IoT) to enable smart devices to capture and identify “scenes” as a user moves through her world, generate contextually relevant holograms, sound, and other sensory inputs, then project those virtual elements through the user’s display. AR technology is coordinative in that it assists in economic calculation, aids in tracking usage, and helps agents overcome some kinds of information asymmetries. We provide examples from existing AR applications and conceptualize how AR strengthens self-organization and enables polycentric loci of private governance to emerge, what we call agile self-organization. Examples include information-enhancing overlays, automatic language translation, individualizing and privatizing the provision of personal and worker safety, reducing emergency response times, and enriching education with overlays and holograms. We conclude that AR technologies could erode traditional policy rationales for intervention and allow private governance to take hold and flourish in situations where it has traditionally had difficulty doing so.

That is a paper from the still-underrated Abigail Devereaux (a former student of mine), via Kevin Lewis.

1 maros December 22, 2017 at 3:21 am

What keeps me amazed is how divorced are the futuristic visions of workplace Augmented/Virtual Reality from the actual reality on the ground.

Microphones are 150-year technology and we cannot even get that one right. Unless you splurge $300 or more for a mic and speak from a recording studio, they have a tendency to amplify every sniff, cough, squirm, wind; basically anything but a human voice. Most of them require the speaker to be but a few inches from the sensor, and even then the voice of ~30% of the speakers gets altered significantly compared to how to sound in real life.

Conference software is an absolute joke. You have no way of knowing how well or badly the other side can hear you. Voice gets choppy, video / screen sharing is laggy. Even companies that tout themselves as technology leaders tend to spend the first 3-5 minutes of large conference calls with the obligatory ‘Can you hear us well?’, ‘Do you see my presentation?’, ‘Please go on mute’,…

Oh, and then there are VPNs. You can purchase a 1Gbps internet connection, but what good is it if your workplace VPN throttles it to 100 kbps? Again, I’m talking about big, lumbering tech enterprises here.

Each of these technologies is decades old, but their quality is pitiful. Virtual Reality requires some 360 Mbps at 15 millisecond latency. Given the fact we cannot even get the basic technologies working fine, I don’t see AR/VR in workplaces for the next 20 years.


2 Nigel December 22, 2017 at 3:50 am

AR – and particularly real world use of AR – has very little to do with immersive virtual reality.
AR is already very effective for solving problems in relatively constrained environments:


3 JWatts December 22, 2017 at 3:17 pm

” tend to spend the first 3-5 minutes of large conference calls”

More like the first 10 minutes.


4 drive-by commenter December 22, 2017 at 4:39 am

Underrated? Economists are interested in papers about economics, not libertarian utopian fantasies.


5 Patrick Laske December 22, 2017 at 6:09 am

Inventor, Idealist: “This new technology will revolutionize productivity and worker safety and our understanding of the world around us”

Future: “It’s mostly used for a bad Pokemon game and helping waiters find tables who need a drink refill.”


6 JWatts December 22, 2017 at 3:18 pm

“…”and helping waiters find tables who need a drink refill.””



7 The Anti-Gnostic December 22, 2017 at 6:31 am

Not quite VR, but RPG strikes me as a way to set up and run economic experiments with certain inputs using human players.

The Skyrim economy is interesting. After a point, you have more money than you can spend, you have more commodities than the market can absorb, and you can buy your way out of any trouble.It’s not a feature but if the currency were to disappear and barter was to replace indirect exchange, the market would quickly settle on a commodity in ultimate or near-ultimate demand. Of course, we already know that last part from prison economies.


8 yo December 22, 2017 at 9:12 am

RPGs (and RTS/any strategy games for that matter) are designed for good game balance and challenge until the point were you’ve won – just restart then. Eventually you’re going to have overcome all challenges in any game, including life. In the videogame however, the advantage is that the world doesn’t care whether you’ve done it. In real life, you’ll find yourself in a new challenging game that isn’t fun, dodging beggars and the yellow press.


9 Tom West December 23, 2017 at 1:39 pm

It’s interesting to see “Path of Exile”, which I haven’t played, but my son does. In a barter economy, certain items naturally evolved into “currency”. As I would expect, there are massive market swings based on rumor and the like.

I’d be surprised if there wasn’t the Master’s thesis in that game on the evolution of a functioning market in the absence of any support by the government (=game creators).


10 rayward December 22, 2017 at 7:10 am

“Erich Fromm, a German-Jewish psychoanalyst who fled Nazism, described authoritarian personalities as simultaneously craving power and submission. “The authoritarian character loves those conditions that limit human freedom; he loves being submitted to fate,” he wrote. Fate, in his formulation, can be the laws of the market, the will of God, or the whims of a leader. According to Fromm, authoritarians might make a show of valuing freedom and independence — watchwords of the American right — but long to be ruled by a stronger force.” And you thought those who worshiped at the alter of markets were freedom-loving libertarians. Augmented reality (AR) may be more accurately described as alternative reality, providing the illusion of “private governance” and freedom. “Let us do evil so good may come.”


11 Ray Lopez December 22, 2017 at 7:26 am

That’s quite a screen scrape screed.

“generate contextually relevant holograms, sound, and other sensory inputs, ” – one word: cyber -stench.


12 Al December 22, 2017 at 11:07 am

While it is a little early to talk about the economic benefits of VR, it is far better than the usual screeds which claim that funding their values will somehow improve the world in some unlikely way.


13 Al December 22, 2017 at 11:10 am

I hope that the final sentence : “We conclude that AR technologies could erode traditional policy rationales for intervention and allow private governance to take hold and flourish in situations where it has traditionally had difficulty doing so.“ is correct.


14 JWatts December 22, 2017 at 3:24 pm

“AR technology utilizes the Internet of Things (IoT) to enable smart devices to capture and identify “scenes” as a user moves through her world,”

Sigh, Someone using a buzzword in an incorrect way. The IoT is providing everyday things a connection to the internet. IE having a refrigerator with an internet connection that might enable it to reorder milk automatically, or a car schedule an oil change based upon a sensor that measures the quality of the oil, etc. Using a recorder to capture and stream video to the internet predates the usage and meaning of IoT.


15 Matthew Young December 22, 2017 at 6:11 pm

Auto mechanics can look through the mechanical drawing, in run time, find all the bolts. Same with construction workers and manufacturing workers looking at thr drawing. Dentists can see the X rays overlaid, drivers see the overlay map. And so on.


16 Tekslate December 23, 2017 at 12:35 am

The Internet of Things is an idea which is quite simple in its essence, but extremely complicated when one delves into the details. The main idea of IoT is this: eventually, every physical object in our world which exhibits any sort of variation or movement will be connected to the Internet. This will allow physical objects to transmit and receive information, permitting their normal affairs and maintenance to run automatically. This in turn would increase the efficiency and reduce the time needed, cost, and errors of virtually every occurrence and event in our modern world.


17 Barkley Rosser December 23, 2017 at 3:31 pm

I do not know how much this will get used, but Abby is one of the smartest grad students to run through the GMU econ dept. More power to her.


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