The citation is here:

Matthew Gentzkow has made fundamental contributions to our understanding of the economic forces driving the creation of media products, the changing nature and role of media in the digital environment, and the effect of media on education and civic engagement.

Matt is at the Booth School of Business at the University of Chicago and there is much more at that link.  Here is Matt at scholar.google.com.  Matt’s well-known paper on ideological segregation, with Jesse Shapiro, is here (pdf).  Our class on the economics of the media at MRUniversity.com considers Matt’s work, for instance see this video on ideological segregation.

Here is A Fine Theorem on the Bayesian persuasion paper.

An excellent choice, of course, and hearty congratulations are in order.

Here is what I had to say:

Tyler Cowen, a professor of economics at George Mason University, argues that the very definitions of labor and capital are arbitrary. Instead, he looks around the world to find the relatively scarce factors of production and finds two: natural resources, which are dwindling, and good ideas, which can reach larger markets than ever before.

If you possess one of those, then you will reap most of the rewards of growth. If you don’t, you will not.

There you go, you can tell I studied with Ludwig Lachmann.  The article is interesting throughout.  Here is a slightly earlier post, “Joseph Nocera calls me on the phone.”

From a report from today’s WaPo:

No examples have surfaced of anyone actually exploiting the vulnerability.

Of course that is no longer true, as The Royal Canadian Mounted Police are investigating the cases of 900 Canadian identity theft victims.  And there are likely undetected further cases.  Still, when I hear this crisis described as “On the scale of 1 to 10, this is an 11,” I conclude that economists think about risk differently than do most people, including tech consultants.  (To flip this coin on its other side, I am not especially reassured about the web sites judged as “safe” — should we now start trusting such judgments so strongly?)

What can the deadweight loss be of a previously unnoticed crisis?  And if that is an 11, what does a 12 look like?  How many Canadian victims would be needed to get us up to 13?

A restaurant with three Michelin stars is now trying to up its customer service game by Googling its customers before they arrive. According to a report from Grub Street, an Eleven Madison Park maitre d’ performs Internet recon on every guest in the interest of customizing their experiences.

The maitre d’ in question, Justin Roller, says he tries to ascertain things like whether a couple is coming to the restaurant for an anniversary, and if so, which anniversary that is. If it’s a birthday, for instance, he wants to wish them “Happy Birthday” when they arrive. He’ll scan for photos of the guests in chef’s whites or posed with wine glasses, which suggest they might be chefs or sommeliers themselves.

It goes deeper: if a particular guest appears to hail from Montana, Roller will try to pair up the table with a server who is from Montana. “Same goes for guests who own jazz clubs, who can be paired with a sommelier that happens to be into jazz,” writes Grub Street.

Obviously, the restaurant is just trying to be better in tune with the people sitting around eating its food and drinking its wine. But it seems like a reasonable assumption to believe people posting their birthday dates online aren’t doing so in the hopes that someone they’ve never met before will know, as if by telepathy, to wish them the best on their special day.

There is a bit more here, and for the pointer I thank Donnie Hall.

I am now curious what they would do for me.  Any ideas?

Addendum: Here is what happens if you buy a scale on Amazon.

Should we regulate Bitcoin?

by on April 11, 2014 at 9:16 am in Economics, Law, Web/Tech | Permalink

There is a new paper by Jerry Brito, Houman Shadab, and Andrea Castillo, the abstract is here:

The next major wave of Bitcoin regulation will likely be aimed at financial instruments, including securities and derivatives, as well as prediction markets and even gambling. While there are many easily regulated intermediaries when it comes to traditional securities and derivatives, emerging bitcoin-denominated instruments rely much less on traditional intermediaries. Additionally, the block chain technology that Bitcoin introduced for the first time makes completely decentralized markets and exchanges possible, thus eliminating the need for intermediaries in complex financial transactions.

In this article we survey the type of financial instruments and transactions that will most likely be of interest to regulators, including traditional securities and derivatives, new bitcoin-denominated instruments, and completely decentralized markets and exchanges. We find that bitcoin derivatives would likely not be subject to the full scope of regulation under the Commodities and Exchange Act because such derivatives would likely involve physical delivery (as opposed to cash settlement) and would not be capable of being centrally cleared. We also find that some laws, including those aimed at online gambling, do not contemplate a payment method like Bitcoin, thus placing many transactions in a legal gray area.

Following the approach to Bitcoin taken by FinCEN, we conclude that other financial regulators should consider exempting or excluding certain financial transactions denominated in Bitcoin from the full scope of the regulations, much like private securities offerings and forward contracts are treated. We also suggest that to the extent that regulation and enforcement becomes more costly than its benefits, policymakers should consider and pursue strategies consistent with that new reality, such as efforts to encourage resilience and adaptation.

Along related lines, you might consider Adam Thierer’s excellent new book Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.

In mathematics at least the answer appears to be yes:

A computer has solved the longstanding Erdős discrepancy problem! Trouble is, we have no idea what it’s talking about — because the solution, which is as long as all of Wikipedia’s pages combined, is far too voluminous for us puny humans to confirm.

A few years ago, the mathematician Steven Strogatz predicted that it wouldn’t be too much longer before computer-assisted solutions to math problems will be beyond human comprehension. Well, we’re pretty much there. In this case, it’s an answer produced by a computer that was hammering away at the Erdős discrepancy problem.


…it may not be necessary for humans to check it. As Gil Kalai of the Hebrew University of Jerusalem, Israel, has noted, if another computer program using a different method comes up with the same result, then the proof is probably right.

There is more here, via Gabriel Puliatti on Twitter.

INTIMACY is a high-tech fashion project exploring the relation between intimacy and technology. Its high-tech garments entitled ‘Intimacy White’ and ‘Intimacy Black’ are made out of opaque smart e-foils that become increasingly transparent based on close and personal encounters with people.

Social interactions determine the garmentsʼ level of transparency, creating a sensual play of disclosure.

INTIMACY 2.0 features Studio Roosegaardeʼs new, wearable dresses composed of leather and smart e-foils which are daringly perfect to wear on the red carpet. In response to the heartbeat of each person, INTIMACY 2.0 becomes more or less transparent.

There is more information here, and for the pointer I thank Samir Varma.

Vox is up!

by on April 6, 2014 at 8:40 pm in Current Affairs, Education, History, Web/Tech | Permalink

You will find the introductory video here.

Here is an explainer for Game of Thrones.

Here is Ezra on how politics makes us stupid.

Those two articles are very good, and “work” in the intended manner.  Here is the regular home page www.vox.com.

Is it possible their real competition is Coursera?

Andrew Sullivan argues Eich should not have been forced to resign from Mozilla for his anti-gay marriage donations, combined with his unwillingness to recant his position.  As a supporter of gay marriage (as of course Sullivan is too), I very much agree.  Like Sullivan, I see such such ideological witch hunts as unjust, counterproductive, and stifling of free discourse.

I see some further economic angles to this dispute.

First, it implies the market share of browsers is fairly arbitrary, and highly subject to potential consumer rebellion.  I can think of other businessmen who have alienated parts of the American public through their political stances, but still their products are bought and there is little talk of deposing them from their leadership roles.  Free products seem especially vulnerable to fluctuations in corporate image, in part because no product has a durable edge on price.  Since more of our economy seems headed in the direction of “free to consumers for direct use,” we might want to start thinking about this tendency a little more carefully and cautiously.  Charging people a positive price liberates you to be less conformist, at least provided you fare well in market competition.

Second, ambitious young people just got more boring.  It wasn’t long ago that opposition to gay marriage was the mainstream position in American society and of course in many places it still is.

Third, let’s say that “recantation” is becoming more important and more potent as a defense mechanism against charges (I’m not sure this is generally true, but it does seem to be true in the Eich case).  That will make people more likely to express their eccentricities in youthful bursts, rather than as a consistent pattern of donations or support over many years.  Consistent support over time is harder to recant, but a single act is easier to write off as a youthful indiscretion.

…the editors at The Verge have a policy that seems a little bit odd and anachronistic: They don’t let writers see how much traffic their stories generate. Ever.

As the American Journalism Review reported, in a piece called “No Analytics for You: Why The Verge Declines To Share Detailed Metrics With Reporters,” the editors at The Verge simply don’t want their writers thinking about traffic.

What’s more, The Verge is not alone in this practice. Re/code, a tech site run by Kara Swisher and Walt Mossberg, the longtime Wall Street Journal tech columnist, also won’t share traffic stats with writers. MIT Technology Review holds numbers back too.

“We used to show the writers and editors traffic, and told them to grow it; but it had the wrong effect. So we stopped,“ says Jason Pontin, CEO, editor in chief and publisher of MIT Technology Review. ”The unintended consequence of showing them traffic, and encouraging them to work to grow total audience, is that they became traffic whores. Whereas I really wanted them to focus on insight, storytelling, and scoops: quality.”

That phrase – “traffic whore” – tells you everything you need to know about why some journalists have an aversion to chasing traffic. They fear it creates an incentive to do the wrong things.

Of course these policies hold only at some margins I believe…nor are they used at Gawker.

The full article, by Dan Lyons, is here.

Many readers have asked me what I think of the email chain which shows evidence that Silicon Valley firms conspired to hold wages down, by refusing to engage in competitive bidding for workers’ services.

I would suggest caution in interpreting this event.  For one thing, we don’t know how effective this monopsonistic cartel turned out to be.  We do know that wages for successful employees in this sector are high and rising.  Many a collusive agreement has fallen apart once one or two firms decide to break ranks, as they usually do.  Without legal enforcement, or without an NCAA-like clearinghouse enforcement structure (also backed by the law), it is hard to find examples of persistently successful monopsonistic labor-buying cartels.  One reason is that workers can find means of switching firms which do not directly implicate the new hiring firm as the villain which plucked them away.  The most successful collusive agreements are not usually monopsonistic and furthermore they are often based on self-sustaining and self-interested norms which do not require articulation in the form of incriminating emails.

A second point is this.  Let’s say you knew that when you took a job at Apple or Google that no other Silicon Valley firm would bid you away.  You don’t need to have explicit knowledge of the workings of the cartel, rather you simply observe that other people in your general position seem to stay put rather than receiving fantastic outside offers.  Given that you have outside alternatives, you would demand, and receive, higher wages in the first place for moving to one of those firms.  This actually would increase wage compression and limit inequality, albeit while decreasing efficiency.  Still, workers as a whole would win back some of what they seemed to be losing, albeit not all of it.

The President and other apologists for the NSA have defended the NSA’s illegal mass surveillance of US telephones by arguing that it’s “only” metadata, so “nobody is listening to our telephone calls.” But where, when, how long and to whom customers make phone calls does reveal information that could easily be used to blackmail, stifle and control. A group of computer scientists at Stanford’s Security Laboratory gathered information from volunteers who agreed to have an app on their cell phone mimic what the NSA collects. Here is an initial report.

At the outset of this study, we shared the same hypothesis as our computer science colleagues—we thought phone metadata could be very sensitive. We did not anticipate finding much evidence one way or the other, however, since the MetaPhone participant population is small and participants only provide a few months of phone activity on average.

We were wrong…The degree of sensitivity among contacts took us aback. Participants had calls with Alcoholics Anonymous, gun stores, NARAL Pro-Choice, labor unions, divorce lawyers, sexually transmitted disease clinics, a Canadian import pharmacy, strip clubs, and much more. This was not a hypothetical parade of horribles. These were simple inferences, about real phone users, that could trivially be made on a large scale.

…Though most MetaPhone participants consented to having their identity disclosed, we use pseudonyms in this report to protect participant privacy.

  • Participant A communicated with multiple local neurology groups, a specialty pharmacy, a rare condition management service, and a hotline for a pharmaceutical used solely to treat relapsing multiple sclerosis.
  • Participant B spoke at length with cardiologists at a major medical center, talked briefly with a medical laboratory, received calls from a pharmacy, and placed short calls to a home reporting hotline for a medical device used to monitor cardiac arrhythmia.
  • Participant C made a number of calls to a firearm store that specializes in the AR semiautomatic rifle platform. They also spoke at length with customer service for a firearm manufacturer that produces an AR line.
  • In a span of three weeks, Participant D contacted a home improvement store, locksmiths, a hydroponics dealer, and a head shop.
  • Participant E had a long, early morning call with her sister. Two days later, she placed a series of calls to the local Planned Parenthood location. She placed brief additional calls two weeks later, and made a final call a month after.

We were able to corroborate Participant B’s medical condition and Participant C’s firearm ownership using public information sources. Owing to the sensitivity of these matters, we elected to not contact Participants A, D, or E for confirmation.

In other news, a former president believes that his email is being monitored. He is probably correct. Monitoring presidential candidates is all too realistic.

Fortunately, President Obama has announced that the bulk collection of phone calls will end. Dismantling that illegal program is a start. Obviously, this would not have happened without the revelations of Edward Snowden.

You will find it here.

Here is a piece on economic data.  What it says is fine, but it won’t interest me.  I wished this piece on hockey goalies had been longer and more analytic.  The same is true for this piece on corporations hoarding cash, which also could use more context.  Maybe it is I rather than they who is misjudging the market, but to me these are “tweener” pieces, too superficial for smart and informed readers, yet on topics which are too abstruse for the more casual readers.  I want something more like the very good Bill Simmons analytic pieces on Grantland, with jokes too, and densely packed narrative, yet applied to a much broader range of topics.  Barring that, I am happy to read one very good sentence or two on a topic.

Here is a piece on whether guessing makes sense on the new SAT.  It is fine but presents material already covered in places such as NYT.

Here is Silver’s introductory essay as to what they are about.  It is too sprawling and evinces a greater affiliation to rigor with data analysis than to rigor with philosophy of science or for that matter rigor with rhetoric.

I have long been a fan of Nate Silver, but so far I don’t think this is working.

There is the NYT’s and David Leonardt’s The Upshot, Nate Silver’s and ESPN’s 538, and the Ezra Klein and Melissa Bell-led Vox.com.  Probably they don’t want to be compared to each other, but they will be anyway so why can’t I make the same mistake?  I would ask the following questions, among others:

1. Which group has a cohesive core of initial workers, loyal to each other, and loyal to a common mission and vision for the project?

2. Which group has a charismatic leader who understands his role is now that of leader, and who can credibly sit down with venture capitalists, bosses, donors, and the like?

3. Which group has the capability to scale from a small operation to a larger, more bureaucratized level, without completely losing its initial inspiration and cohesion?

4. Which group has the best core idea for how to deliver a sustainable and interesting product?

5. Which group has the tightest connection to a web-obsessed back-up firm for project development and support?

6. Which group has the best and deepest collection of talent?

7. Which group has the strongest brand name behind it?

It seems to me The Upshot wins on #7, although arguably that is a partial weakness as well.  It helps them “survive at all,” but gives them less incentive to come up with a new and workable model.  ESPN is a strong TV and sports brand, but maybe not so strong among those who crave data-driven analysis.  The ESPN connection might even give 538 too many readers who want something else, at least insofar as the ESPN home pages are used as feeders.  It is hard to write for uninspired readers.  I would think Vox wins on #2, possibly on #1, and at least tie on #5 and possibly win on it.  About #4 — which of course is central — we are quite uncertain and thus we must be highly uncertain overall.

Bill Gates on poverty

by on March 15, 2014 at 1:03 pm in Current Affairs, Economics, Law, Web/Tech | Permalink

Should the state be playing a greater role in helping people at the lowest end of the income scale? Poverty today looks very different than poverty in the past. The real thing you want to look at is consumption and use that as a metric and say, “Have you been worried about having enough to eat? Do you have enough warmth, shelter? Do you think of yourself as having a place to go?” The poor are better off than they were before, even though they’re still in the bottom group in terms of income.

The way we help the poor out today [is also a problem]. You have Section 8 housing, food stamps, fuel programs, very complex medical programs. It’s all high-overhead, capricious, not well-designed. Its ability to distinguish between somebody who has family that could take care of them versus someone who’s really out on their own is not very good, either. It’s a totally gameable system – not everybody games it, but lots of people do. Why aren’t the technocrats taking the poverty programs, looking at them as a whole, and then redesigning them? Well, they are afraid that if they do, their funding is going to be cut back, so they defend the thing that is absolutely horrific. Just look at low-cost housing and the various forms, the wait lists, things like that.

As you would expect, the interview is interesting throughout.  For the pointer I thank Samir Varma.