Month: September 2014

What are you good at smelling?

It seems culture and training matter a great deal.  T.M. Luhrmann reports:

Recently, a team of anthropologists and psychologists at the Max Planck Institute for Psycholinguistics and Radboud University, both in Nijmegen, the Netherlands, set out to discover how language and culture affected sensory awareness. Under the leadership of Asifa Majid and Stephen C. Levinson, they made up a kit of systematic stimuli for the traditional five senses: for sight, color chips and geometric forms; for hearing, pitch, amplitude and rhythm variations; for smell, a set of scratch-and-sniff cards; and so forth. They took these kits to over 20 cultural groups around the world. Their results upend some of our basic assumptions.

For example, it’s fairly common, in scientific literature, to find the view that “humans are astonishingly bad at odor identification and naming,” as a recent review of 30 years of experiments concluded. When ordinary people are presented with the smell of ordinary substances (coffee, peanut butter, chocolate), they correctly identify about half of them. That’s why we think of scent as a trigger for personal memory — leading to the recall of something specific, particular, uniquely our own.

It turns out that the subjects of those 30 years of experiments were mostly English-speaking. Indeed, English speakers find it easy to identify the common color in milk and jasmine flowers (“white”) but not the common scent in, say, bat droppings and the leaf of ginger root. When the research team presented what should have been familiar scents to Americans — cinnamon, turpentine, lemon, rose and so forth — they were terrible at naming them. Americans, they wrote, said things like this when presented with the cinnamon scratch-and-sniff card: “I don’t know how to say that, sweet, yeah; I have tasted that gum like Big Red or something tastes like, what do I want to say? I can’t get the word. Jesus it’s like that gum smell like something like Big Red. Can I say that? O.K. Big Red, Big Red gum.”

When the research team visited the Jahai, rain-forest foragers on the Malay Peninsula, they found that the Jahai were succinct and more accurate with the scratch-and-sniff cards. In fact, they were about as good at naming what they smelled as what they saw. They do, in fact, have an abstract term for the shared odor in bat droppings and the leaf of ginger root. Abstract odor terms are common among people on the Malay Peninsula.

I am good at smelling curries.

Should Twitter algorithmically curate the timeline?

Zeynep Tufekci on says no.  It seems Twitter is considering (instituting?) a method that would ignore strict reverse chronology, and if a user hasn’t accessed his or her timeline in a while, the more popular tweeters would be given some kind of priority in the queue.

She considers how the tweets about the death of Osama bin Laden spread so effectively, and from the account of a user (Keith Urbahn) who did not have many followers:

I honestly doubt that there is an algorithm in the world that can reliably surface such unexpected content, so well. An algorithm can perhaps surface guaranteed content, but it cannot surface unexpected, diverse and sometimes weird content exactly because of how algorithms work: they know what they already know. Yet, there is a vast amount of judgement and knowledge that is in the heads of Twitter users that the algorithm will inevitably flatten as it works from the data it has: past user behavior and metrics. I have witnessed Twitter network’s ability to surface unexpected content again and again, from matters small to large.

I suspect the really big news will get out very quickly under just about any reasonable algorithm.  The broader question is what kind of model we should use to consider Twitter curation.  Believe it or not, I am led to the thought of Ronald Coase.

As a reader, I seek an algorithm which weeds out some repetition.   For instance I sometimes see a article in my feed from three different sources — it would suffice to see it once, along with a color shading indicating that some other people in my feed were tweeting the same thing.  I also would like blocks on tweets about the Super Bowl, Academy Awards, and so on.

That said, from a Coasean perspective, the tweeters may wish to impose these messages on me nonetheless.  Allowing users to create their perfect filters would in equilibrium mean that those sources send fewer other tweets through the system.  Some might leave Twitter altogether.  They are producing a service for free, and the ability to impose the bundle on me and other readers is part of what they value.  And indeed I also send self-promoting tweets (a justifiable practice provided it is not abused), and that is for me one reason to be on Twitter.  In other words, a major goal is to keep tweeters interested in supplying content, not to give every reader a perfect experience, and those two variables often conflict.

At the margin, should Twitter institute queuing rules to encourage the tweeters with many readers or the tweeters with relatively few readers?  The answer is not obvious.  The major tweeters produce more social value through their greater number of followers, but they may be reaping such high returns from being on Twitter that they don’t need added encouragement at the margin.  One approach is to prioritize well-regarded tweets, regardless of the number of followers of the tweeter.

For myself, I believe the ideal algorithm is to prioritize tweets from those who are “like” me in the sense of following similar people.  Or perhaps using similar grammatical constructions, or having tweeted similar links in the past.

Within these rules there are further opportunities for Coasean bidding for attention, using the @ function and also direct messages.

A separate issue is whether Twitter may wish to remedy the “overfishing” of the common pool of our attention which occurs when too many people tweet at peak time, and not enough people tweet at off peak times.  I suspect the demand for immediate gratification is too high for there to be gains from reshuffling the supply of tweets across time.

Overall I don’t see why company-regulated customization has to be a negative.  Tufekci put her anti-curation piece on Medium, which itself seems to have algorithms of curation, which in this case (fortunately) led me to her argument, wrong though it may be.

The Pol Antràs manuscript on *Global Production*

The subtitle of the book is Firms, Contracts, and Trade Structure.  Here is one interesting bit of many:

…in that same year [2011] the share of intrafirm trade reached a record 89.6 percent for U.S. imports from Western Sahara. Leaving aside communist dictatorships and disputed territories, and focusing on the 50 largest exporters to the U.S., Figure 1.3 illustrates that the share of intrafirm trade still varies significantly across countries, ranging from a mere 2.4 percent for Bangladesh to an astonishing 88.5 percent for Ireland.

In that paragraph you can think of “intrafirm trade” as basically standing in for multinationals.  One motivation for this book is that a lot of earlier theories focus on international trade across firms and governments, when in fact much of what goes in is intra-firm and thus requires some more subtle theories.  Chapter two of the book is an excellent introduction to how international trade theory has shifted from an emphasis on countries or sectors to individual business firms, a significant advance.  A Nobel Prize for Marc Melitz and Antràs is by no means out of the question someday.

The manuscript itself is here (pdf), some data files are here.  His home page is here.

Very good sentences

The point is that as a society changes, as what’s held sacred and who’s empowered shifts, so do the paths through which evil enters in, the prejudices and blind spots it exploits.

So don’t expect tomorrow’s predators to look like yesterday’s. Don’t expect them to look like the figures your ideology or philosophy or faith would lead you to associate with exploitation.

Expect them, instead, to look like the people whom you yourself would be most likely to respect, most afraid to challenge publicly, or least eager to vilify and hate.

Because your assumptions and pieties are evil’s best opportunity, and your conventional wisdom is what’s most likely to condemn victims to their fate.

That is from Ross Douthat, on the general lessons of Rotherham.

Interview with a former Auschwitz prison guard

It is interesting throughout, here is just one bit:

SPIEGEL: What did people talk about?

W.: People weren’t enthused about the leadership. We of course knew and everybody almost felt that it couldn’t end well, that it couldn’t been good when trains were being brought here full of people who were then getting killed. We all had that feeling. But, I mean, when you’re a soldier …

[Commentary] In the personnel files of camp staff members, there are official declarations stating, “I may not cause bodily harm or death to opponents of the state (prisoners).” It also states, “I am aware and I have been informed today that I will be punished by death if I misappropriate Jewish property of any kind.” The SS team at Auschwitz — a camp where the indiscriminate torture, robbing and murder of people was part of everyday life — were required to pledge in advance to do precisely the opposite.

One could view forms like that as a special form of cynicism. Or one could see it as a pseudo-legal facade aimed at covering up the Holocaust. One provision called for “absolute secrecy” to be maintained. In practice, it had no meaning.

The full interview is here.

The dangers of “cooperation” in a Malthusian world

Sapiens [the new book by Yuval Noah Hariri] devotes large sections to unsparing accounts of the domestication and factory farming of cows, pigs and chickens. This, he contends, has made them some of the most genetically “successful” creatures in history but the most miserable too.

It is an interesting question how much that will prove to be the equilibrium more generally, namely the genetic superiority of slaves because they can reap more external investment.  After all, capital is more productive today than in times past, so evolution might now produce more slaves.  Here is another bit from John Reed’s coverage of the lunch interview with Hariri:

What allowed humans to become history’s most successful species, he [Hariri] argues, was our ability to construct and unify small groups behind certain “fictions” – everything from national legends and organised religion to modern value systems like human rights, and the modern limited liability company with thousands of employees and vast credit lines at its command.

…I tell Harari I like the idea of fiction as the supreme human construct.

That is from the FT’s lunch with Yuval Noah Hariri.  If I recall correctly, I pre-ordered Sapiens from UK Amazon.

Does sterlingisation make sense for Scotland? Or would a separate currency be better?

Angus Armstrong writes:

Sterlingisation appears to offer continuity but in fact much would change. This is the riskiest of all currency arrangements being considered. With a debt burden of more than 80 per cent and projected fiscal deficits, Scotland would have little capacity for independent macroeconomic policy. It would have no capacity to provide emergency liquidity to its financial sector and little scope for a credible deposit insurance scheme (for instance, Panama does not offer deposit insurance).

Financial services are Scotland’s largest export sector. Scotland’s non-oil trade deficit has been around 7 per cent of GDP over the past three years. Therefore, the loss of financial services exports would leave the balance of payments very exposed to declining oil and gas revenues. The fall in general prices and wages to restore competitiveness could be substantial. As we have seen, governments with high debt levels, no control over their currency and external deficits can also need emergency support.

That is from an FT symposium on Scottish currency choices, which is interesting throughout, at least for those of us obsessed with the theory of optimum currency areas.

Euro adoption does not generate much sympathy as an option.  Opinions are mixed on an independent, floating currency.  In the steady state it could work fine, as is the case for Sweden.  I worry about the transition, however, and finding a proper conversion rate for current Scot bank deposits denominated in sterling.

If the expectation is that those deposits will be undervalued in the process of conversion, bank runs may ensue.  Another option is continuing uncertainty about future monetary policy for New Scot Lanarks, combined with prices which are slow to adjust to the new medium of account.  In fact pricing in terms of English pounds might remain the dominant practice for years.  In that case exactly what kind of monetary policy promise is the new Scot central bank making in the first place?  Everything is priced in terms of pounds, and the New Scot Lanark floats against the pound in a meaningless fashion.  Who should want to hold the New Scot Lanark in the first place?  Won’t any combination of announced conversion rates/monetary policy reaction functions involve some risk of a weak Scot currency and thus again ex ante bank runs?

Even Ronald MacDonald, who favors the independent currency option, wrote this in the symposium:

The currency is likely to be very volatile in any transition period and this would have implications for trade. However, the macroeconomic benefits of a separate currency clearly vastly outweigh the microeconomic costs, although the transition period is likely to be very painful.

I guess we’ll know soon enough how they vote.

The agricultural origins of time preference

Here is a new paper by Galor and Özak, highly speculative of course:

This research explores the origins of the distribution of time preference across regions. It advances the hypothesis and establishes empirically, that geographical variations in natural land productivity and their impact on the return to agricultural investment have had a persistent effect on the distribution of long-term orientation across societies. In particular, exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that agro-climatic characteristics in the pre-industrial era that were conducive to higher return to agricultural investment, triggered selection and learning processes that had a persistent positive effect on the prevalence of long-term orientation in the contemporary era.

Didn’t Irving Fisher once say something like this?  My view in contrast is that virtually everyone has a high rate of time preference, but some (wise) people can act like low time preference individuals by choosing the proper perceived rewards and benefits, for instance by courting approval from others for saving or waiting.  It may just be pretense, but who cares?  It is not unusual to see the same person switch rapidly from high time preference to low time preference modes of thought and behavior, and this to me suggests it is all about perceptions, environment, expectations, peer effects, and other social factors, rather than genes.  In other words, choose your framing wisely.

More broadly, there is a “brute fact” that one bunch of societies have a lot of correlated positive features, and another group of societies do not.  I don’t think we’ve gotten very far beyond that brute fact in terms of what we can infer from that distribution.

The original pointer to the article is from

Assorted links

America facts of the day

A longer-term perspective shows that the median American family income has declined about 12.4 per cent since the peak in 2004…

There is also this:

For a brief time, the Midwest was the best-off region but median incomes there have fallen by a staggering 23 per cent since 2001…

Median net worth is down forty percent from its peak (“we’re not as wealthy as we thought we were”), yet the top three percent has done quite well.  And in case you are thrilled about the recent economic recovery:

The most striking finding is that the median American family earned 5 per cent less in 2013 than in 2010 after inflation even though the average American family took home 4 per cent more.

None of this is especially new, but these are the latest numbers and it is remarkable how much they confirm some of the more pessimistic readings of recent American history.

From Matthew C. Klein at FTAlphaville, there is more here.

Will a basic minimum income go up and up in a democracy?

Noahpinion writes:

But if you have one big, high-profile redistribution program, you can get enough popular support to overcome the concentrated opposition of the rich people footing the bill. As an example, look at the minimum wage, which gets big popular support. The Democrats can go back to the minimum wage again and again as a populist issue.

But that’s not true for the whole array of redistribution programs we currently have. If the Democrats want to increase the strength of the safety net as a whole, they have to mount a populist campaign for each one of its components. That’s hard to do. So a lot of the components of the safety net get left behind, or killed by Republicans when no one is looking.

Such a fate would never befall a Basic Income. It would be in the spotlight all the time.

In fact, by endorsing Basic Income, libertarians are walking right into a trap. Anti-redistributionists’ great fear has always been that the masses will use the power of majority rule to simply vote themselves more money. As things stand, the fragmentation of our redistribution programs makes it easier for the anti-redistributionists to punch holes in the safety net. If the fragmented system were replaced with one universal, high-profile program, the result would be a huge political gift to redistributionists.

My view is not the same.  I say we have so many small, distributed anti-poverty initiatives because no one of them was ever so popular, for better or worse.  That is also why we don’t have a Basic Income.

But let’s say a historical accident swept Basic Income proponents into power for a term and they passed that legislation.  Over time those income transfers would prove larger, more visible, and they would at least appear superficially more anti-work than the public stomach for them.  I predict they would be restricted along a number of possible dimensions, starting with (partial) work requirements for the able-bodied.

Under most plausible assumptions about the Basic Income level, most people would not be recipients, nor would they expect to be potential net gainers from the program.   And in general voters put much more importance on common sense notions of “desert” than do economists.  So I think the “why send money to people who aren’t working?” intuition will crowd out the “I want to think of myself as someone who helps other people” feeling.

So, unlike Noah, I don’t think the political future of a Basic Income would be especially strong.

In whose interest is globalization anyway? (hypotheses to ponder)

The architect of the present era of globalisation is no longer willing to be its guarantor. The US does not see a vital national interest in upholding an order that redistributes power to rivals. Much as they might cavil at this, China, India and the rest are unwilling to step up as guardians of multilateralism. Without a champion, globalisation cannot but fall into disrepair.

And yes a lot of the news is bad:

Then came the crash. Finance has been renationalised. Banks have retreated in the face of new regulatory controls. European financial integration has gone into reverse. Global capital flows are still only about half their pre-crisis peak.

As for the digitalised world, the idea that everyone, everywhere should have access to the same information has fallen foul of authoritarian politics and concerns about privacy. China, Russia, Turkey and others have thrown roadblocks across the digital highway to stifle dissent. Europeans want to protect themselves from US intelligence agencies and the monopoly capitalism of the digital giants The web is heading for Balkanisation.

The open trading system is fragmenting. The collapse of the Doha round spoke to the demise of global free-trade agreements. The advanced economies are looking instead to regional coalitions and deals – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Pact. The emerging economies are building south-south relationships. Frustrated by a failure to rebalance the International Monetary Fund, the Brics nations are setting up their own financial institutions.

That is from Philip Stephens at the FT.

Assorted links

1. The Milky Way is a suburb (no wonder it has good ethnic food).

2. Marginal revolution.  Really.

3. Emmanuel Todd on the new German empire and those who do not like Russia (in French).  The map is here large-scale.

4. Baidu’s “smart chopsticks” can (partially) test the safety of your food.

5. Michael Heise in the FT with the case against QE for Europe (not my view but a good piece).  And background on the European ABS market.