Assorted links

by on February 20, 2015 at 3:48 pm in Uncategorized | Permalink

1. What Chris Blattman has been reading.

2. How capital regulations are changing banks.

3. Yet more cruelty to robot dogs.

4. German performs iPad magic tricks; perhaps he also was negotiating with Greece.

5. The Greek agreement, annotated.

That is the new and forthcoming book from Richard H. Thaler, due out in May.  It is excellent and fascinating, and yes even if you have read all of the other popular books on behavioral economics you should read this one too.

The title is good but I find the subtitle even more alluring.  For me the very best parts of the book are about Thaler’s career as an economist.  Indeed much of the book traces the development of behavioral economics through a biographical lens.  Here is one excerpt:

…my thesis advisor, Sherwin Rosen, gave the following as an assessment of my career as a graduate student: “We did not expect much of him.”

And:

I spent a fair amount of time staring at the List and adding new items, but I did not know what to do with it.  “Dumb stuff people do” is not a satisfactory title for an academic paper.

Other figures of note make cameo appearances in the book, including Cass Sunstein and John Lott.

Here is one account:

Nobel Laureate Amartya Sen, today withdrew his candidature for a second term as Nalanda University chancellor. He blamed this on the Government’s delay in approving his candidature. He also alleged that the Government is using its political might to “interfere in academic matters“. He was helped by fellow “liberals” on Twitter, in playing the victim of political vendetta.

Here is Sen’s full letter of protest.  Here is the matter trending on Twitter.  Many of the opinions expressed are rather strong.

The Rise of Opaque Intelligence

by on February 20, 2015 at 7:31 am in Economics, Science | Permalink

Many years ago I had a job picking up and delivering packages in Toronto. Once the boss told me to deliver package A then C then B when A and B were closer together and delivering ACB would lengthen the trip. I delivered ABC and when the boss found out he wasn’t happy because C needed their package a lot sooner than B and distance wasn’t the only variable to be optimized. I recall (probably inaccurately) the boss yelling:

Listen college boy, I’m not paying you to think. I’m paying you to do what I tell you to do.

It isn’t easy suppressing my judgment in favor of someone else’s judgment even if the other person has better judgment (ask my wife) but once it was explained to me I at least understood why my boss’s judgment made sense. More and more, however, we are being asked to suppress our judgment in favor of that of an artificial intelligence, a theme in Tyler’s Average is Over. As Tyler notes notes:

…there will be Luddites of a sort. “Here are all these new devices telling me what to do—but screw them; I’m a human being! I’m still going to buy bread every week and throw two-thirds of it out all the time.” It will be alienating in some ways. We won’t feel that comfortable with it. We’ll get a lot of better results, but it won’t feel like utopia.

I put this slightly differently, the problem isn’t artificial intelligence but opaque intelligence. Algorithms have now become so sophisticated that we human’s can’t really understand why they are telling us what they are telling us. The WSJ writes about driver’s using UPS’s super algorithm, Orion, to plan their delivery route:

Driver reaction to Orion is mixed. The experience can be frustrating for some who might not want to give up a degree of autonomy, or who might not follow Orion’s logic. For example, some drivers don’t understand why it makes sense to deliver a package in one neighborhood in the morning, and come back to the same area later in the day for another delivery. But Orion often can see a payoff, measured in small amounts of time and money that the average person might not see.

One driver, who declined to speak for attribution, said he has been on Orion since mid-2014 and dislikes it, because it strikes him as illogical.

Human drivers think Orion is illogical because they can’t grok Orion’s super-logic. Perhaps any sufficiently advanced logic is indistinguishable from stupidity.

Hat tip: Robin Hanson for discussion.

Oceanic average is over

by on February 20, 2015 at 1:41 am in History, Science, Uncategorized | Permalink

The animals in the ocean have been getting bigger, on average, since the Cambrian period – and not by chance.

That is the finding of a huge new survey of marine life past and present, published in the journal Science.

It describes a pattern of increasing body size that cannot be explained by random “drift”, but suggests bigger animals generally fare better at sea.

In the past 542 million years, the average size of a marine animal has gone up by a factor of 150.

It appears that the explosion of different life forms near the start of that time window eventually skewed decisively towards bulkier animals.

Today’s tiniest sea critter is less than 10 times smaller than its Cambrian counterpart, measured in terms of volume; both are minuscule crustaceans. But at the other end of the scale, the mighty blue whale is more than 100,000 times the size of the largest animal the Cambrian could offer: another crustacean with a clam-like, hinged shell.

There is more here, and here is Wikipedia on Cope’s Rule.  Here is one possible explanation.  Does the Rule apply to dinosaurs?  I wonder if the risk-adjusted returns to species size also are going up.

Inequality vs. the productivity slowdown

by on February 20, 2015 at 12:37 am in Economics, History | Permalink

Greg Mankiw writes:

The Economic Report of the President was released today.  A friend draws my attention to Table 1-3 on page 34, which presents several historical counterfactuals.  It finds:

1. If productivity growth had not slowed after 1973, the median household would have $30,000 of additional income today.
2. If income inequality had not increased after 1973, the median household would have $9,000 of additional income today.

So, which is the bigger problem?

The Department of Economics at the University of Chicago announces the first annual Summer Institute on Field Experiments for scholars, to be held the summer of 2015 at the Saieh Hall for Economics. The Summer Institute will train the brightest young researchers to partner with key stakeholders in government, industry, and the not-for-profit sector to solve the unique problems faced in society through applying economic theory and rigorous field experiment methods.

Organized by John List, there is more information here, a post by Steve Levitt on the Institute here.  Many of you should consider applying.

The military that is German

by on February 19, 2015 at 2:11 pm in Current Affairs, History | Permalink

The German army has faced a shortage of equipment for years, but the situation has recently become so precarious that some soldiers took matters into their own hands.

On Tuesday, German broadcaster ARD revealed that German soldiers tried to hide the lack of arms by replacing heavy machine guns with broomsticks during a NATO exercise last year. After painting the wooden sticks black, the German soldiers swiftly attached them to the top of armored vehicles, according to a confidential army report which was leaked to ARD.

…To make matters worse, the broom-equipped German soldiers belong to a crucial, joint NATO task force and would be the first to be deployed in case of an attack.

There is more here.

Complex sentences to ponder

by on February 19, 2015 at 1:19 pm in Current Affairs, Economics | Permalink

How quickly are negative nominal interest rates self-correcting?  Izabella Kaminska at the FT serves up part of an answer here:

Yet, in a globalised FX market, it’s arguably not until all carry is exhausted that excess funds can lead to a commodity-style liquidation effect that corrects the price of money against a basket of goods and services, by means of actual consumption.

Quick: true, false, or uncertain?  Show your work.  The rest of the post will make your head hurt, in the best sense of course.

Via Craig Richardson, here is a story about a parmesan cheese bank.

That is the topic of my new column for The Upshot.  Here is one excerpt:

Higher prices also skew the customer mix toward wealthier and thus older people, who exert less influence over the purchasing decisions of their peers. They are less likely to text about a concert, put it on their Facebook pages or talk up its reputation to dozens of friends at parties. The younger buyers are usually the ones who make places trendy, thus many sellers use lower prices, with lines if need be, to lure in those individuals and cultivate their loyalties.

The next time you are waiting in line, take consolation in the fact that otherwise you might not have heard of the opportunity in the first place. If we see a line at a club, restaurant or movie, we figure something interesting is going on there, and so lines have become a driver of publicity.

Income inequality also may be encouraging sellers to use lines to better segment the market. The rich line-jump by buying Museum of Modern Art memberships, to see special exhibits before they open, while others line up. Restaurateurs give regular customers prime tables, especially if they are good tippers and order expensive wines, while others can’t get a reservation after 5:30 or before 11 p.m. This may seem unfair, but it extracts higher prices from those able to pay the most for New York’s cultural institutions and restaurants. In fact, the inconvenience of the line helps sell the more expensive line-jumping package to those who don’t have the time or the patience to wait.

Do read the whole thing.  There is also this part:

Waiting a bit can also make people more patient, by removing their attention from the immediate here and now and stretching out their time horizons. Some of these positive effects of waiting have been studied by Professors Xianchi Dai of the Chinese University of Hong Kong and Ayelet Fishbach of the University of Chicago in their paper “When Waiting to Choose Increases Patience.”

There’s also evidence that people value some things more if they have to wait for them. Provided it does not dominate your daily life, a bit of waiting can help create a special experience or memory. The people who wait in line for new iPhones rarely need the product immediately. Waiting in line binds them to a community and demonstrates their commitment.

The waiting also heightens the value of anticipation and makes the product seem more exciting. A world where there is nothing to wait in line for is arguably a less interesting place.

Assorted links

by on February 19, 2015 at 7:44 am in Uncategorized | Permalink

1. Noah Smith recommends economics blogs.

2. Facts about young Americans.

3. How effective is pharmaceutical self-regulation in Sweden and the UK?

4. Justice reform is uniting the left wing and the right wing.

5. Oliver Sacks writes of David Hume and his terminal illness.  And a good review of Ian Bostridge’s superb Winterreise book.

6. Fixed costs really matter, Indian wedding edition.

That is a new and provocative paper by James Edward Mahon Jr. of Williams College, the abstract is here:

This paper explores the relationship between government size and economic freedom, relating these patterns to theories of fiscal politics. In order to address current political controversies, it uses data on pre-1990 OECD members (minus Norway) for central government tax revenues and spending, as well as indicators of economic freedom derived from the Fraser Institute, ICRG, Heritage Foundation, and the World Bank. It finds that it matters a great deal whether we define size as expenditures or taxation. Spending has no relationship with freedom, or a negative one, across this data set. Initial tax revenue levels, however, positively predict subsequent changes in economic freedom. We find similar patterns using different measures of economic freedom and whether we use annual data (1995-2010) or overlapping six-year averages going back to 1970-75. These results challenge the common preconception that taxes and economic freedom are negatively related. In addition, the divergence between tax revenue and spending in this regard is more consistent with a “fiscal contract” model of the state, in which taxation and economic freedom go together, as governments attend to their legitimacy and the health of the private sector in order to increase revenue, but flag in these efforts when they enjoy sources of income other than taxes.

For the pointer I thank the excellent Kevin Lewis.

Assorted links

by on February 18, 2015 at 2:33 pm in Uncategorized | Permalink

1. Purported advice for NYC.  And Zimbabwe covets canines.

2. What are the limits of ECB assistance to Greek banks?  And it is becoming increasing difficult to maintain natural history museum collections.

3. Shipping the good lobster out? (China fact of the day) — “Chinese New Year is on the verge of becoming Maine’s second-biggest lobster shipping week of the year, behind Christmas week, according to industry officials.”

4. Gordon Wood on Bernard Bailyn.

5. The economics of Orthodox monastic communities in the United States.  And Hasidic atheists.

6. Does talking about inequality and stagnation prompt political inaction?

Here is a piece by Tomala, Jia, and Norton:

When people seek to impress others, they often do so by highlighting individual achievements. Despite the intuitive appeal of this strategy, we demonstrate that people often prefer potential rather than achievement when evaluating others. Indeed, compared with references to achievement (e.g., “this person has won an award for his work”), references to potential (e.g., “this person could win an award for his work”) appear to stimulate greater interest and processing, which can translate into more favorable reactions. This tendency creates a phenomenon whereby the potential to be good at something can be preferred over actually being good at that very same thing. We document this preference for potential in laboratory and field experiments, using targets ranging from athletes to comedians to graduate school applicants and measures ranging from salary allocations to online ad clicks to admission decisions.

Here are some ungated copies.  For the pointer I thank the excellent Kevin Lewis, who sent me the link in response to my earlier post on age discrimination.

In 1971 — when the North Sea oil was just beginning to flow — the average Norwegian was about as poor as the average Greek…

That is from Matthew C. Klein at the FT, the post on Norway is interesting more generally.  Here are my earlier remarks on whether Norway is an economically overvalued country.

Addendum: See the comments, it is not obvious this is true, I will look into the matter (but must teach shortly).  You can see in this OECD data source that, in 1971, Finland is only barely richer than Greece per capita, ppp-adjusted.  Via Klein on Twitter, here is the original source, from Norges Bank through BIS, but it seems to run counter to the other numbers.  Matt has some follow-up tweets here.