What has Economics Done for You Lately?

A very nice talk by Robert Litan on the contributions of economists and economic ideas to the internet economy:

Comments

This video does not start off right. The speaker says "Two guys walk into a bar" and instead of cracking a joke he tries to make a joke about 'artificial scarcity'?! No wonder people don't take economists seriously.

But the rest of the talk is pretty good ...

What each of the examples given by Litan, in which suggestions by economists promoted success, have in common is a competitive market. It's not surprising that economists are good at dealing with competitive markets. What Litan ignores, however, is who pays the price for that competition. Litan gives Amazon as one of his examples, and he attributes deregulation of the shipping industry (promoted by economists) for Amazon's success (because it lowered Amazon's shipping costs). What Litan doesn't mention is that those shipping costs were cut in large part by cuts at the bottom of the shipping chain, the driver of those FedEx trucks, who more often than not is treated today as an independent contractor, for whom FedEx provides no benefits and makes no contributions to social security on behalf of the driver. Competition among would be drivers of FedEx trucks, and the lower compensation that competition produced, made Amazon's success possible. Is that a good thing? It is as long as there are customers of Amazon who aren't subject to the same competitive markets and can afford to buy what Amazon is selling.

"...for whom FedEx...makes no contributions to social security."

You mean, "from whom FedEx collects no contributions to social security." Employees pay *both* the employee and employer portion of social security. Understanding that is another contribution from economists.

+1 util.

No, that isn't what economics says at all. Look up the "incidence of a tax" section of any Econ 101 textbook.

Employees must produce at least as much as the total cost of hiring them.

No textbook, just real-life small business experience. Some people learn this the hard way, I suppose.

I should mention that the proper classification of FedEx drivers is being litigated in the courts, and that this past Wednesday the Ninth Circuit ruled that FedEx had misclassified over 2,500 drivers in California and Oregon.

Stallman has demonstrated, for more than a generation, how utterly immaterial 'contributions of economists and economic ideas to the internet economy' are - but then, it isn't as if the GPL, with its absolute insistence that anyone distributing GPL software is required to allow all future users to do the same, is something that economists actually care about.

Because as noted by Thomas Jefferson (a man not exactly in favor at this web site) - ”He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

I like the Jefferson game:
"I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them."

Well, the full quote is '"If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property."' and it comes from Jefferson's Selected Writing, which you are welcome to read here - https://archive.org/details/lifeandselectedw031716mbp

Your quote, however, is inaccurate - 'Note: This passage has often been mis-quoted as, "I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them." All three major print editions of Jefferson's writings that have published this letter so far have mis-transcribed the original text as, "If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy."' http://www.monticello.org/site/jefferson/wasting-labours-people-quotation

I prefer playing the accurate Jefferson quote game myself - which in the case of yours would be '"if we can but prevent the government from wasting the labours of the people, under the pretence of taking care of them, they must become happy."

I stand corrected, and thank you for that erudite display, but it doesn't really change the meaning of the quote, a point you carefully avoided. I think we might both agree the latter would be much more welcome at GMU.

Likewise this
"My reading of history convinces me that most bad government results from too much government."

Micro, micro, micro!

Chief economist at google didn't come up with the idea of 2nd price auction, why give him the credit? In business, you dont need to have a theoretical proof to support a business idea. My observation is that economic ideas are important to understand but rarely the academically trained economist.

I agree economics and economist who study it are useful

Well, one wonders where the economists were as this happened under most people's radar - '

To 3-year-olds, she is an obsession. To their parents, a mystifying annoyance. To YouTube marketers, an elusive moneymaker no one’s been able to tap for profit.

To the rest of us, DisneyCollectorBR is a faceless YouTube channel giant that is consistently among the site’s top most viewed per month. In April, the channel was the third-most viewed worldwide, coming in right behind Katy Perry. During the week of July 4, the DisneyCollectorBR channel received more views in the United States — 55 million — than any other channel on YouTube, according to data from OpenSlate.

Despite the channel’s massive, sweeping, and somewhat perplexing popularity, no one — neither the toddlers who watch with near-religious fervor and their parents, nor executives deeply embedded in the YouTube ecosystem and its economics — seem to have much of a clue who’s behind it. In an earlier, more anonymous internet era, popularity and anonymity were more commonly paired. But today, where marketers have wrangled nearly every viral hit and YouTube stars’ faces are on billboards in Times Square, staying anonymous amid billions of views is not only unusual, but damn near impossible to pull off.' http://www.buzzfeed.com/hillaryreinsberg/youtubes-biggest-star-is-an-unknown-toy-reviewing-toddler-wh#42bbhy7

Here are some things economics have done for us lately:

1. Not avoid the 2008 crash

2. Provide mathematical justification for wealth transfers to the top

3. Provide ideological justification for wealth transfers to the top

Yay econ!

http://www.vulgartrader.com/post/89328953060/the-shortest-economics-textbook-ever

It's a joke, right? Online dating succeeded because of the contribution of two economists that made a suggestion on how to "save" it? Even if all economists disappeared one day, online dating would still be huge (and the trivial tweak would have been found independently by many).

Some of my best friends are economists, but this is most unconvincing. Is every marketing innovation to be attributed to some economist? Is that what economics has come to -- the desperate attempt to take credit for marketing?

The odious 'nudge' crowd is the worst case. They take credit for 100-year-old marketing practices like the negative-option book club or putting batteries on end caps in grocery stores. As if any of these marketing practices had anything to do with academic economics.

Internet marketing in particular is just an application of direct marketing techniques developed more than half a century ago, now made scaleable by having tons of response data.

I find this effort pathetic. Economists will have to do better than that in their quest for respect.

“If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.”
(John Maynard Keynes)

Hasn't happened yet.

In general, I think the talk was good. However, I think Litan commits a "roads and bridges" fallacy, reflecting a misunderstanding of entrepreneurial skill, when he credits the deregulation economists for Bezos's success 20 years later. No doubt, we are all beneficiaries of that deregulation, including, but not more so, Bezos. Entrepreneurs look for business opportunities that match their environment, including regulatory (and road and bridge configuration). In the regulated-trucking counterfactual, Bezos might not have started Amazon, but that doesn't mean that he wouldn't have pursued some other business that would work in a regulated trucking environment. For all we know, he might have built a truck-sharing app that allows independent truck owners to circumvent such regulation. He might also have found a way to earn rents by taking advantage of the regulations, which may not have been beneficial to society of course but still could have been lucrative for Bezos personally. It's probably most accurate to say that the deregulation economists helped all of us by creating an environment where entrepreneurs' profit seeking activities coincided with social gains rather than social waste.

Also, all of Bezos contemporaries (including all of us) lived in the same deregulated trucking environment (and configuration of roads and bridges), but no one else created Amazon. Thus, Bezos, rather than trucking deregulation or roads and bridges, was the differentiating factor in Amazon's success. It's more accurate to say that Bezos enabled all of Amazon's customers to gain the full benefits of the economists' deregulation efforts.

The other quibble I have is in crediting Bill James's Sabremetrics to economics. Isn't that an accomplishment of statistics, or maybe math more generally? Where is the economics in that? Economics may involve optimization but not all optimization is economics.

"thou doth protest too much..."

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