Category: Uncategorized

Do algorithms collude?

Yes, in short.  Emilio Calvano, Giacomo Calzolari, Vincenzo Denicolò and Sergio Pastorello cover this topic in the latest issue of the American Economic Review:

Increasingly, algorithms are supplanting human decision-makers in pricing goods and services. To analyze the possible consequences, we study experimentally the behavior of algorithms powered by Artificial Intelligence (Q-learning) in a workhorse oligopoly model of repeated price competition. We find that the algorithms consistently learn to charge supracompetitive prices, without communicating with one another. The high prices are sustained by collusive strategies with a finite phase of punishment followed by a gradual return to cooperation. This finding is robust to asymmetries in cost or demand, changes in the number of players, and various forms of uncertainty.

Here is the paper.

Where and when does herd immunity kick in?

Here is the abstract of a new paper by Axel S LexmondCarlijn JA Nouwen, and John Paul Callan. So herd immunity yes, but at some point after fifty percent:

We have studied the evolution of COVID-19 in 12 low and middle income countries in which reported cases have peaked and declined rapidly in the past 2-3 months. In most of these countries the declines happened while control measures were consistent or even relaxing, and without signs of significant increases in cases that might indicate second waves. For the 12 countries we studied, the hypothesis that these countries have reached herd immunity warrants serious consideration. The Reed-Frost model, perhaps the simplest description for the evolution of cases in an epidemic, with only a few constant parameters, fits the observed case data remarkably well, and yields parameter values that are reasonable. The best-fitting curves suggest that the effective basic reproduction number in these countries ranged between 1.5 and 2.0, indicating that the curve was flattened in some countries but not suppressed by pushing the reproduction number below 1. The results suggest that between 51 and 80% of the population in these countries have been infected, and that between 0.05% and 2.50% of cases have been detected; values which are consistent with findings from serological and T-cell immunity studies. The infection rates, combined with data and estimates for deaths from COVID-19, allow us to estimate overall infection fatality rates for three of the countries. The values are lower than expected from reported infection fatality rates by age, based on data from several high-income countries, and the country population by age. COVID-19 may have a lower mortality risk in these three countries (to differing degrees in each country) than in high-income countries, due to differences in immune response, prior exposure to coronaviruses, disease characteristics or other factors. We find that the herd immunity hypothesis would not have fit the evolution of reported cases in several European countries, even just after the initial peaks; and subsequent resurgences of cases obviously prove that those countries have infection rates well below herd immunity levels. Our hypothesis that the 12 countries we studied have reached herd immunity should now be tested further, through serological and T cell immunity studies.

They offer an implied exposure estimate of 72% for Afghanistan, 67% for Ethiopia, 74% for Kenya, and 80% for Ethiopia.  Pakistan clocks in at 72%, South Africa at 71%.  Notice those are not case counts, rather it is working backwards, using a model, to infer exposure rates from the data we do have, assuming that not all cases are being measured.

Here is an earlier test of herd immunity theories for Europe that is still of relevance.  Here is mostly good NYT coverage on herd immunity theories, though in my view unfair on T-Cell immunity issues — they confuse uncertainty with “there is no reason to believe anything here.”  Here is a new and good NYT article on the Swedish approach.  The different pieces still do not all fit together.

Via Alan Goldhammer.

Tuesday assorted links

1. Beetle technicianRat tickler: “it’s crucial for researchers to know whether the animals are having a positive or negative experience.”

2. No central original point here, but this paper is actually an extremely useful piece for understanding currency risk.  And Captain Beefheart’s ten commandments of guitar playing.

3. “Surprisingly, we document that innovation was resilient in the face of one of the largest financial crises in the U.S. history, suggesting that it is likely to be even more so during milder economic recessions.”  Link here.  One plausible way of reading the result is that independent inventors were damaged, but their efforts were reallocated into firms, which improved by a result.

4. Buried lakes on Mars?

5. An actual scientific study of intermittent fasting suggests no real benefit and loss of muscle mass.

6. “With more of us than ever working from home during the coronavirus pandemic, there has been a spike in demand from employers for surveillance software. US-based Hubstaff says its number of UK customers is up four times year-on-year since February.”  Link here.

A Calculation of the Social Returns to Innovation

Benjamin Jones and Larry Summers have an excellent new paper calculating the returns to social innovation.

This paper estimates the social returns to investments in innovation. The disparate spillovers associated with innovation, including imitation, business stealing, and intertemporal spillovers, have made calculations of the social returns difficult. Here we provide an economy-wide calculation that nets out the many spillover margins. We further assess the role of capital investment, diffusion delays, learning-by-doing, productivity mismeasurement, health outcomes, and international spillovers in assessing the average social returns. Overall, our estimates suggest that the social returns are very large. Even under conservative assumptions, innovation efforts produce social benefits that are many multiples of the investment costs.

What was interesting to me is that their methods of calculation are obvious, almost trivial. It can take very clever people to see the obvious. Essentially what they do is take the Solow model seriously. The Solow model says that in equilibrium growth in output per worker comes from productivity growth. Suppose then that productivity growth comes entirely from innovation investment then this leads to a simple expression:

Where g is the growth rate of output per worker (say 1.8% per year), r is the discount rate (say 5%), and x/y is the ratio of innovation investment, x, to GDP, y, (say 2.7%). Plugging the associated numbers in we get a benefit to cost ratio of (.018/.05)/.027=13.3.

To see where the expression comes from suppose we are investing zero in innovation and thus not growing at all. Now imagine we invest in innovation for one year. That one year investment improves economy wide productivity by g% forever (e.g. we learn to rotate our crops). The value of that increase, in proportion to the economy, is thus g/r and the cost is x/y.

Jones and Summers then modify this simply relation to take into account other factors, some of which you have undoubtedly already thought of. Suppose, for example, that innovation must be embodied in capital, a new design for a nuclear power plant, for example, can’t be applied to old nuclear power plants but most be embodied in a new plant which also requires a lot of investment in cement and electronics. Net domestic investment is about 4% of GDP so if all of this is necessary to take advantage of innovation investment (2.7% of gdp), we should increase “required” to 6.7% of GDP which is equivalent to multiplying the above calculation by 0.4 (2/7/6.7). Doing so reduces the benefit to cost ratio to 5.3 which means we still get a very large internal rate of return of 27% per year.

Other factors raise the benefit to cost ratio. Health innovations, for example, don’t necessarily show up in GDP but are extremely valuable. Taking health innovation cost out of x means every other R&D investment must be having a bigger effect on GDP and so raises the ratio. Alternatively, including health innovations in benefits, a tricky calculation since longer life expectancy is valuable in itself and raises the value of GDP, increases the ratio even more. (See also Why are the Prices So Damn High? on this point). International spillovers also increase the value of US innovation spending.

Bottom line is, as Jones and Summers argue, “analyzing the average returns from a wide variety of perspectives suggests that the social returns [to innovation spending] are remarkably high.”

New measures for health care productivity

The most productive part of medical care is treatment for cardiovascular disease, both acute conditions and risk factors.  Productivity estimates for acute cardiovascular diseases are $89,000 in aggregate — 79% of the total increase [in health care productivity from 1999 to 2012].

There has been very little progress over that same period in treating mental illness, arthritis, and musculoskeletal conditions.  How about this:?

Despite a vast increase in the number of people treated with drugs for mental illness, the population’s mental health showed essentially no change over time.

Overall medical care was increasing in productivity over that period by about 0.7% a year, still great stagnation territory as they say.

That is all from a new paper by David M. Cutler, Kaushik Ghosh, Kassandra Messer, Trivellore Raghunathan, Allison B. Rosen, and Susan T. Stewart.

The Elite Quality Index

Here are the top ten, by Tomas Casas and Guido Cozzi:

1. Singapore

2. Switzerland

3. Germany

4. United Kingdom

5. United States

China comes in #12, Mexico wins for Latin America, Poland overperforms and France (!) underperforms.  Botswana is #23, and Argentina…uh-oh.  I don’t quite understand how the index is constructed, but how much a given elite focuses on Value Creation and avoids rent-seeking seems to be a key consideration.  The degree of Regulatory Capture counts as a negative.  Overall, the U.S. does very, very well on many metrics, but does poorly on Value Extraction.

Here is the underlying paper.  Here is the sponsoring organization.  Here is a lengthy treatment of the methodology.  For the pointer I thank Chandran.

*The Murder of Professor Schlick*

The author is David Edmonds, and the subtitle is The Rise and Fall of the Vienna Circle.  I very much enjoyed this book, and found its direct style refreshing, and I hope it will serve as a model for others.  The author actually tells you what you want to know!

I enjoyed the small tidbits.  I had not known that Frank Ramsey traveled to Vienna for psychoanalysis, because he was in love with a married woman his senior.  Ramsey ended up drinking the Freudian Kool-Aid, and also in Vienna became acquainted with Wittgenstein’s sister Gretl.

I had forgotten that Quine was two years the senior of A.J. Ayer.  He also spoke sarcastically of his forthcoming audience with Wittgenstein but sought it nonetheless.  Quine learned German remarkably quickly in Vienna, and then was lecturing philosophy in it without much difficulty.

Karl Popper was first an apprentice cabinetmaker, then a social worker, and then a teacher before he became a professional philosopher.  When he moved to New Zealand during the War, the university library in Otago had fewer books than his father’s library back home.

You can pre-order the book here.

Monday assorted links

What Alex Has Been Watching

Ted Lasso on Apple TV. My go to feel-good show. The relentlessly optimistic US soccer coach Ted Lasso finds himself teaching a moribund team of British footballers. Everyone needs some Ted Lasso in their life! Especially now. Hat tip: Joshua Gans.

Mythic Quest on Apple TV a situation comedy where the situation is game developer’s office. Nowhere near as good as Silicon Valley but there were three excellent episodes (5, 7, 10) and no bad episodes which is a pretty good ratio. Probably would not hold my interest outside of a pandemic.

Lovecraft Country on HBO–my favorite show right now. I’m not a big fan of horror but Lovecraftian horror is more about revealing the black depths of the mysterious unknown than about chainsaw massacres. The story is a mystery, taking place mostly in 1950s Jim Crow America. J.J. Abrams and Jordan Peele are among the show runners. I could do without the interruptions of spoken poetry. In one climatic scene we get a reading of Whitey On the Moon rather than a soundscape. Yeah, we get it, the horror is a metaphor for racism. The show also gets very weird. I worry that it is self-indulgent. Watchmen pulled it off by pulling it all together in the finale but that was a miracle. Can Lovecraft Country do the same? The show is based on the book Lovecraft Country by Matt Ruff. Ruff enjoys wordplay, fantastical stories, and he has a libertarian streak. My favorite Ruff novel, Sewer,Gas and Electric, features a billionaire beat to death with his prized first-edition of Atlas Shrugged and Ayn Rand as a resurrected A.I. bottled up in a hurricane lamp. It’s a satire but there’s love there. Ruff is also a fan of David Friedman. I haven’t seen much if any libertarian influence in Lovecraft Country.

Bandish Bandits on Amazon–an Indian rom-com series in which pop-singer girl meets classically trained boy. The rom-com is ok but I liked it especially for the many gorgeous shots of Jodhpur. It’s also an effortless way to listen to some Indian classical music. It gets better after the first few episodes. Probably only worth watching if you have some prior interest in the region or the music. Panchayat is another Indian show I gave a shot. It does a good job of explaining how Indian village politics actually works. The lead character, however, is so sullen than I had a hard time continuing. Apparently, he gets less sullen over time.

The Pharmacist on Netflix. A great documentary following a pharmacist’s investigation of his son’s murder that takes him deeper and deeper into the opioid crisis. The first three episodes are stellar while the last is also good but covers the big picture I was already familiar with. Much better constructed than Tiger King or The Vow, the NXIVM doc on HBO, which is far too long and surprisingly boring.

Perry Mason on HBO. A film noir reboot of the classic series, basically Perry Mason meets Chinatown. Much darker than expected. Tatiana Maslany has a good performance as an old-time revival preacher but her story arc felt incomplete. Della Street should have written the bar, not Mason, or at least they should have made the fact that she didn’t more pointed. Overall, good but not great. Character and location driven–this one might grow on me, like Bosch.

The remixing of quality in the pandemic

That is the topic of my latest Bloomberg column, here is one excerpt:

Now consider another of my favorite pastimes, watching professional basketball. I have been following the NBA bubble with great interest. The Miami Heat are now favored to reach the NBA Finals, even though they were only the fifth-ranked team in the East at the end of the regular season. What happened? They have played with grit and determination, and their entire active roster showed up in first-rate physical shape. That’s not easy to do after a five-month layoff, as it required tremendous discipline.

In contrast, the Los Angeles Clippers were among the favorites to win the NBA title. They were recently eliminated by the Denver Nuggets, a very good team but not previously a top contender. In the final quarter of the last game of the series, the victorious Nuggets played with energy and verve, while the Clippers seemed to be gasping for air. After their defeat, some of the Clippers admitted that inferior conditioning was part of their problem.

So “staying in shape during a five-month layoff” is now a critical skill for a basketball player. But this doesn’t necessarily mean the Clippers need to revamp their roster. Maybe they should just wait for a return to normal times.


Might these changes in quality affect your choices beyond work — such as your decisions about friends, family relations, romance, and much more? Should you buy a dog, knowing you probably won’t be homebound two years from now? How about dating? On a first date, presumably, looks should matter less and social carefulness more. But again, for how long? It would be very strange, and probably unwise, to form a lasting relationship based on how well your romantic interest wears a mask.

Sadly the world has entered a new paralysis, most of all because no one knows when things will return to normal, or what might become normal, or what might remain strange. When this pandemic ends, one thing we can all look forward to is making better plans.

Recommended, at least until the pandemic is over.

Decentralized serological testing?

I would like to know more, but here is one new paper on the topic, by Lottie Brown,

Serological testing is emerging as a powerful tool to progress our understanding of COVID-19 exposure, transmission and immune response. Large-scale testing is limited by the need for in-person blood collection by staff trained in venepuncture. Capillary blood self-sampling and postage to laboratories for analysis could provide a reliable alternative. Two-hundred and nine matched venous and capillary blood samples were obtained from thirty nine participants and analysed using a COVID-19 IgG ELISA to detect antibodies against SARS-CoV-2. Thirty seven out of thirty eight participants were able to self-collect an adequate sample of capillary blood (≥50 μl). Using plasma from venous blood collected in lithium heparin as the reference standard, matched capillary blood samples, collected in lithium heparin-treated tubes and on filter paper as dried blood spots, achieved a Cohen′s kappa coefficient of >0.88 (near-perfect agreement). Storage of capillary blood at room temperature for up to 7 days post sampling did not affect concordance. Our results indicate that capillary blood self-sampling is a reliable and feasible alternative to venepuncture for serological assessment in COVID-19.

Via Alan Goldhammer.

Markets in everything those new service sector jobs

Pornography is the most common form of sexual experience available online — so common, perhaps, that a market for rarer intimacies has emerged.

Bottles of influencer bath water sell for $30 a jar. Some cam models have scaled back on erotic performance because they can earn more money selling homemade cookies and hair clippings. You can even pay a stranger to gorge himself on snacks from Trader Joe’s, if that’s your thing.

For some people, such work is a full-time job; others see it as a side hustle — one where the hourly pay can be considerably higher than the going rate for, say, dog walking or bartending. Plus, it doesn’t require leaving your dorm room or apartment…

Ella says that in her first semester at Parsons, she made around $800 a week from a few different sex-work-based revenue streams, including selling photos of her feet…

Still, what’s the appeal, one may ask, of having someone pay you to count your stretch marks, or selling pictures of your phalanges to strangers?

Do note this (Average is Over!):

Becoming a successful online sex worker isn’t easy. To gain a following, freelancers have to be savvy marketers, be highly proficient in search engine optimization, know how to budget, maintain a blog, and have pretty advanced video editing and producing skills.

Mz. Kim has created courses to help people build that skill set, including “Monetizing Your Appeal Online: Content Strategies for Models”; before the pandemic, she held classes across the country. Part of her gospel is: “It’s not about starting a profile on Twitter. You have to provide something more than selfies. You have to think about: What is your core appeal?” (Next week a new class, “Investing for Sex Workers,” will go live.)

Here is the full NYT piece, with plenty of further examples.

Tyrone joins…that group…

Many of you ask me for reports of my evil twin brother Tyrone, but of course I demur because I am too embarrassed to pass along his doings.  They get worse and worse.  Nonetheless, Tyrone said he was going public with this one, so I thought the damage was done in any case.  The sad news is that Tyrone is now an active proponent of QAnon.  How can he fall for such fallacies and stupidities?  He sent me this letter to explain his decision:

Dear Tyler:

You have yourself blogged about the import of child abuse, and asked why it is not condemned more widely, most of all among elites.  You even wrote that the right wing ignored the issue — I thought it is time to remedy that!  We needed a right-wing movement to protect the world’s most vulnerable citizens, and it turned out that looked like QAnon.  Besides, who is more of an elite than I am?

To be sure, the QAnon movement has its excesses, but do not all social movements?  At least it attacks criminals rather than defending them.  The key question is whether social movements shine a light on abusive practices that need further scrutiny, and there QAnon passes with flying colors.

QAnon truly has attracted attention — just look at all the complaints about Facebook enabling it.  In this world you haven’t arrived until someone can turn a criticism of you into a criticism of Facebook.

Jeffrey Epstein was convicted of…stuff…and the world’s elites continued to treat him as normal and to take his money and fly on his plane.  He wasn’t cancelled.

Roman Polanski had a successful and feted career after repeatedly doing very bad…stuff.

The sexual abuse of children has turned out to be rampant in the Catholic Church and also in Hollywood.

I saw the new HBO documentary Showbiz Kids: “In my experience, I know a lot of kids that grew up in the industry. And what surprised me when I got older was finding out that pretty much all of the young men were abused in some way, sexually.”

French intellectuals — and was there ever more of an elite than them? — petitioned to repeal age of consent laws so they can do…bad stuff…with less fear of the consequences.  (See?  Petitions really are wrong!)

By the way, Berlin authorities placed children with pedophiles for thirty years.  And that is in Germany, a country with relatively responsible governance.

This is all so sickening I can’t go on any further, and we haven’t even discussed all that goes on over the internet.

There is in fact an epidemic of child abuse, it ruins or seriously damages many millions of lives, and elites are complicit in covering it up and refusing to address the preconditions that generate so much of it.  These same elites often downplay or discourage the elevation of social conservatism, one of the few possible regulatory mechanisms society might have.  In the very worst situations, these elites are directly complicit in covering up the abuse of children.  Many of the elites partake in it themselves.

Which group has done more to publicize these failings than QAnon, the worthy successor to The Jerry Springer Show?

Yes, Yes I know.  I do not endorse all of their hypotheses concerning political economy.  Maybe Donald Trump will not in fact set all things straight, and perhaps the apocalypse is not around the corner.  No, the molesters do not worship Satan, but given their behavior they might as well.  Should we lock up all those journalists?  I don’t know.  Comet Ping Pong was never as good as Pupatella anyway.  But look — this is what you get when you build a mass movement.  The message does get dumbed down and the crazies climb on board, just as we have Antifa and some other weird groups and demands connected to what are otherwise valuable social marches.  Tyler — you have to get used to this new world of internet communications!  Walter Cronkite is gone.  Either compete or give up, and I’m not willing to do the latter.

For whatever structural reason, elite media seem less obsessed with child abuse as an issue than is “non-elite media.”  That is simply a reality we need to work with, and our unwillingness to discard traditional canons of journalism has led to the perpetuation of these abuses for centuries, indeed dating back to the very founding of the American nation.

Haven’t you read Marcuse on repressive tolerance?

And come on, this very serious guy just wrote this, but not about QAnon:

“But actually diving into the sea of trash that is social science gives you a more tangible perspective, a more visceral revulsion, and perhaps even a sense of Lovecraftian awe at the sheer magnitude of it all: a vast landfill—a great agglomeration of garbage extending as far as the eye can see, effluvious waves crashing and throwing up a foul foam of p=0.049 papers. As you walk up to the diving platform, the deformed attendant hands you a pair of flippers. Noticing your reticence, he gives a subtle nod as if to say: “come on then, jump in”.”

The rot runs much deeper than the fallacies of QAnon.

Besides, it seems that the guy behind QAPPANON (don’t ask) is “a New Jersey man in his forties with prominent roles in technical analysis and IT security for the banking sector.”  Could there be a more reliable source?

And Tyler, I know your criticize me for following these conspiracy theories. But you yourself have written of the need to imagine a future very different from the present and then bring it about? Is that not what a conspiracy tries to do?  Do we not need to counter these evil conspiracies with some more benevolent plans?

Most of all, when it comes to evaluating social movements, you can only elevate so many victims at once.  Isn’t the notion of children as the true victims the most universal and indeed the only vision that can unify this great nation?  People complain about the truth-stretching in QAnon, and OK I get that, but isn’t their real worry the revolutionary re-appropriation of which groups in society can be granted true, #1 victimhood status?  Just as Christianity accomplished a similar revaluation way back when?  (And look at some of the wacky stuff that they believe — ever read The Book of Revelation Tyler?)

I don’t want QAnon to be in charge, but what other tool do we have to force elites to deal with this issue?  Aren’t these just Saul Alinsky tactics?  QAnon isn’t going to control Congress anyway.

Besides, is not apophenia one of the roots of creativity?  Have not Millenarian movements played key and sometimes beneficial roles in Western history?  Is not Christianity itself a Millenarian movement?  How about all that weird ass shit on the back of your dollar bill?

Child abuse is the #1 issue in society right now so…pick your side!  If you don’t like it, stop your silly blogging and come up with a better anti-child abuse movement.

TC again:  See?  This is why Tyrone doesn’t appear much on this blog any more.  It used to be a funny or sometimes even thought-provoking schtick, but these days things are so out of control you’ve got to stick with message discipline.  You can’t just let one speculation lead to the next, because we have so many crazies with major league internet platforms.

Rationalism.  Fact-checking.  Only one family member at a time (sorry sis!).

Please return tomorrow, or perhaps later in the day, for a proper analysis of the incidence of property tax reform in eastern Colorado.  And perhaps there will be some new service sector jobs as well — you can apply!  In the meantime, let’s hope that Tyrone’s QAnon fandom isn’t one of them.

And no, I’m not going to try to reenter the Philippines.