For almost 40 years, inequality within the top percentile of the income distribution, measured as the ratio of income share of top 0:1% to the income share of top 1%, has been increasing in the US. The income of super-rich people increased more than the income of rich people. In this paper, we show that improvements in automation technology (the number of tasks for which capital can be used) is an important factor contributing to this inequality. We consider a model in which labor has a convex cost and capital has a linear cost. This leads to a decreasing returns to scale profit function for entrepreneurs. As capital replaces labor in more and more tasks, the severity of diseconomies of scale diminishes, hence the market share of top-skilled entrepreneurs increases. If entrepreneurial skill is distributed according to a Pareto distribution, then top income distribution can be approximated by a Pareto distribution. We show that the shape parameter of this distribution is inversely related to the level of automation. Finally, we rationalize convex cost of labor using the theory of efficiency wage.
That is my piece in the Globe and Mail, excerpted with edits from my new Big Business: A Love Letter to an American Anti-Hero, here is one excerpt:
Furthermore, it is striking just how effective the major tech companies have been as innovators. Other than providing the best free search in the world, Alphabet – the umbrella corporation under which Google is a subsidiary – gave us Gmail, one of the best and biggest e-mail services in the world, for free. Google Maps, which is also free, is pretty neat, too.
Then, despite the risks identified by critics of the deal – that YouTube appeared to be a bottomless pit for copyright-violation suits and nasty comments – Google bought the streaming-video service for US$1.65 billion, and dramatically upgraded it. Google cleaned up the legal issues, using its advanced software capabilities to spot copyright violations while enforcing takedown requests, improving search and heavily investing in the technology that has helped make video so widely used on the internet today.
In 2005, Google purchased Android and elevated the company’s open-source system to the most commonly used cellphone software in the entire world. Because of the Google-Android combination, hundreds of millions of people have enjoyed better and cheaper smartphones. More generally, Google has made most of its software open-source, enabling others to build upon it with additional advances, with entire companies now devoted to helping other companies build upon that infrastructure – meaning Google has not likely been the major beneficiary of its own actions.
Google, by way of Alphabet, has taken a lead role in developing self-driving vehicles and the underlying artificial intelligence, now being developed through Waymo; by throwing its weight behind this, Alphabet made the concept more publicly acceptable, and it could potentially save many lives on the road. After Hurricane Maria devastated Puerto Rico, Alphabet also stepped in to do good, deploying its work-in-progress Project Loon to restore internet access, which may eventually be integral for remote areas in Africa. It’s a bold attempt to create a better and more connected living situation for some of the world’s more vulnerable people.
All that from a company that is just a little more than 20 years old. Is this really the kind of company we should be punishing?
There are other points of interest at the link.
From my email:
We are now starting to get a hint of the future transformative technologies that you guessed were on their way in “The Great Stagnation”. You had not speculated on what they might be, but there are faint hints on what is likely to happen.I believe this article is one leg: extremely fast air travel. The second leg is the Hyperloop and similar: extremely fast ground travel. The third leg is synthetic biology (e.g: https://www.economist.com/leaders/2019/04/04/the-promise-and-perils-of-synthetic-biology). The fourth leg is quantum computing, which is finally starting to show that it might work. And the fifth, and final leg, is fusion energy, which looks eerily like it will actually come to fruition this time.Put those 5 together and you have the makings of a new economy, with a huge burst of growth to come for many decades. These are just faint hints, of course, but they’re starting to get increasingly clear.
COWEN: You’ve trained in chemistry, physics, electrical engineering, and neuroscience, correct?
BOYDEN: Yeah, I started college at 14, and I focused on chemistry for two years, and then I transferred to MIT, where then I switched into physics and electrical engineering, and that’s when I worked on quantum computing.
COWEN: Five areas, actually. Maybe more.
BOYDEN: Guess so.
COWEN: Should more people do that? Not the median student, but more people?
BOYDEN: It’s a good question.
COWEN: Are we less creative if all the parts of our mind become allies? Maybe I’m afraid this will happen to me, that I have rebellious parts of my mind, and they force me to do more interesting things, or they introduce randomness or variety into my life.
BOYDEN: This is a question that I think is going to become more and more urgent as neurotechnology advances. Already there are questions about attention-focusing drugs like Ritalin or Adderall. Maybe they make people more focused, but are you sacrificing some of the wandering and creativity that might exist in the brain and be very important for not only personal productivity but the future of humanity?
I think what we’re realizing is that when you intervene with the brain, even with brain stimulation, you can cause unpredictable side effects. For example, there’s a part of the brain called the dorsolateral prefrontal cortex. That’s actually an FDA-approved site for stimulation with noninvasive magnetic pulses to treat depression. But patients, when they’re stimulated here . . . People have done studies. It can also change things like trust. It can change things like driving ability.
There’s only so many brain regions, but there’s millions of things we do. Of course, intervening with one region might change many things.
COWEN: What kind of students are you likely to hire that your peers would not hire?
BOYDEN: Well, I really try to get to know people at a deep level over a long period of time, and then to see how their unique background and interests might change the field for the better.
I have people in my group who are professional neurosurgeons, and then, as I mentioned, I have college dropouts, and I have people who . . . We recently published a paper where we ran the brain expansion process in reverse. So take the baby diaper polymer, add water to expand it, and then you can basically laser-print stuff inside of it, and then collapse it down, and you get a piece of nanotechnology.
The co–first author of that paper doesn’t have a scientific laboratory background. He was a professional photographer before he joined my group. But we started talking, and it turns out, if you’re a professional photographer, you know a lot of very practical chemistry. It turns out that our big demo — and why the paper got so much attention — was we made metal nanowires, and the way we did it was using a chemistry not unlike what you do in photography, which is a silver chemistry.
COWEN: Let’s say you had $10 billion or $20 billion a year, and you would control your own agency, and you were starting all over again, but current institutions stay in place. What would you do with it? How would you structure your grants? You’re in charge. You’re the board. You do it.
COWEN: If you’re designing architecture for science, what do you do? What do you change? What would you improve? Because presumably most of it is not designed for science. Maybe none of it is.
BOYDEN: I’ve been thinking about this a lot, actually, lately. There are different philosophies, like “We should have open offices so everybody can see and talk to each other.” Or “That’s wrong. You should have closed spaces so people can think and have quiet time.” What I think is actually quite interesting is this concept that maybe neither is the right approach. You might want to think about having sort of an ecosystem of environments.
My group — we’re partly over at the Media Lab, which has a lot of very open environments, and our other part of the group is in a classical sort of neuroscience laboratory with offices and small rooms where we park microscopes and stuff like that. I actually get a lot of productivity out of switching environments in a deliberate way.
There is much more of interest at the link.
Amazon’s plan to launch thousands of internet satellites to connect billions of people around the world represents a serious and underappreciated entrant in the space business, multiple analysts and industry executives told CNBC.
The company is in talks to develop an underwater data cable that would encircle the continent, according to people familiar with the plans, an effort aimed at driving down its bandwidth costs and making it easier for the social media giant to sign up more users.
Both developments promise to contribute to the central achievement of our age, namely tying people to information, and to other people, at a hitherto unprecedented scale, mobile devices included of course.
I will be doing a Conversation with him, no associated public event. So what should I ask?
The internet gives us the technological capability to transmit digital information seamlessly over any distance. The concept of culture is more complicated, but I mean the influences and inspirations we grow up with, such as the family norms and practices of a place, the street scenes, the local architecture and cuisine, and the slang. Culture comes from both nearby and more distant sources, but the emotional vividness of face-to-face interactions means that a big part of culture is intrinsically local.
Rapid Amazon delivery, or coffee shops that look alike all around the world, stem in part from the internet. The recommendations from the smart person who works in the local bookstore, or the local Sicilian recipe that cannot be reproduced elsewhere, are examples of culture.
Since the late 1990s, the internet has become far more potent. Yet the core techniques of culture have hardly become more productive at all, unless we are talking about through the internet. The particular aspects of culture which have done well are those easily translated to the digital world, such as songs on YouTube and streaming. When people are staring at their mobile devices for so many minutes or hours a day, that has to displace something. Those who rely on face-to-face relationships to transmit their influence and authority don’t have nearly the clout they once did.
The internet gaining on culture has made the last twenty years some of the most revolutionary in history, at least in terms of the ongoing fight for mindshare, even though the physical productivity of our economy has been mediocre. People are upset by the onset of populism in world politics, but the miracle is that so much stability has reigned, relative to the scope of the underlying intellectual and what you might call “methodological” disruptions.
The traditional French intellectual class, while retrograde in siding largely with culture, understands the ongoing clash fairly well. Consistently with their core loyalties, they do not mind if the influence of the internet is stifled or even destroyed, or if the large American tech companies are collateral damage.
Many Silicon Valley CEOs are in the opposite boat. Most of their formative experiences are with the internet and typically from young ages. The cultural perspective of the French intellectuals is alien to them, and so they repeatedly do not understand why their products are not more politically popular. They find it easier to see that the actual users love both their products and their companies. Of course, for the intellectuals and culture mandarins that popularity makes the entire revolution even harder to stomach.
Donald Trump ascended to the presidency because he mastered both worlds, namely he commands idiomatic American cultural expressions and attitudes, and also he has been brilliant in his political uses of Twitter. AOC has mastered social media only, and it remains to be seen whether Kamala Harris and Joe Biden have mastered either, but probably not.
Elizabeth Warren is now leading a campaign to split up the major tech companies, but unlike the Europeans she is not putting forward culture as an intellectual alternative. Her anti-tech campaign is better understood as an offset of some of the more hostility-producing properties of the internet itself. It is no accident that the big tech companies take such a regular pounding on social media, which is well-designed to communicate negative sentiment. In this regard, the American and European anti-tech movements are not nearly as close as they might at first seem.
In the internet vs. culture debate, the internet is at some decided disadvantages. For instance, despite its losses of mindshare, culture still holds many of the traditional measures of status. Many intellectuals thus are afraid to voice the view that a lot of culture is a waste of time and we might be better off with more time spent on the internet. Furthermore, many of the responses to the tech critics focus on narrower questions of economics or the law, without realizing that what is at stake are two different visions of how human beings should think and indeed live. When that is the case, policymakers will tend to resort to their own value judgments, rather than listening to experts. For better or worse, the internet-loving generations do not yet hold most positions of political power (recall Zuckerberg’s testimony to Congress).
The internet also is good at spreading glorified but inaccurate pictures of the virtues of local culture, such as when Trump tweets about making America great again, or when nationalist populism becomes an internet-based, globalized phenomenon.
The paradox is that only those with a deep background in culture have the true capacity to defend the internet and also to understand its critics, but they are exactly the people least likely to take up that battle.
New research shows that the fear of smart phones and social media was built on a castle made of sand. Turns out almost all of previous research never bothered to validate their assessments of smart phone use – and that appears to have been a HUGE mistake.
The list of small-person or one-person innovators is long…[long list follows]…
The reason so few people can have such an outsize impact, Andreessen argues, is that when you’re creating a weird new prototype of an app, the mental castle building is most efficiently done inside one or two isolated brains. The 10X productivity comes from being in the zone and staying there and from having a remarkable ability to visualize a complex architecture. “If they’re physical capable of staying awake, they can get really far,” he says. “The limits are awake time. It takes you two hours to get the whole thing loaded into your head, and then you get like 10 or 12 or 14 hours where you can function at that level.” The 10Xers he has known also tend to be “systems thinkers,” insatiably curious about every part of the technology stack, from the way currents flow in computer processors to the latency of touchscreen button presses. “It’s some combination of curiosity, drive, and the need to understand. They find it intolerable if they don’t understand some part of how the system works.”
The subtitle is The Making of a New Tribe and the Remaking of the World, I enjoyed the book very much, you can order it here.
Mark [Lutter] has a PhD in Economics from George Mason, but don’t let that fool you into thinking he’s conventional.
Here is the full bit:
Mark Lutter (29) and Tamara Winter (23), United States
Mark and Tamara are building charter cities — a concept where cities are governed by their own charter rather than general law. Imagine a world with dozens of new cities, each with their own distinct style, governance and populace. Mark and Tamara are working to make that vibrant future a reality.
Noteworthy: Mark has a PhD in Economics from George Mason, but don’t let that fool you into thinking he’s conventional. He’s a disagreeable, life-long adventurer. He decided to do his own thing after questioning the profit share in his previous company. He moved to Honduras while it was the murder capital of the world. Now he’s stumbling through Africa looking for city settlers.
They are part of the third cohort of Pioneer winners, congrats to Justin Zheng too and all the others, read through the list for some fascinating ideas and projects to come. Tamara is a Mercatus alum, follow her here on Twitter, here is Mark. Here is their institutional website. Here is various information about Pioneer — apply!
Amazon has now joined other companies navigating the line between doing business and censoring it, in an age when, experts say, misleading claims about health and science have a real impact on public health.
NBC News recently reported that Amazon was pulling books touting false information about autism “cures” and vaccines. The e-commerce giant confirmed Monday to The Washington Post that several books are no longer available, but it would not release more specific information.
I cannot say I am entirely happy about that (grossly underreported) development. Here is the full WaPo story by Lindsey Beyer.
It seems to me that the new, pending reconfiguration of Facebook will bring much more user privacy, most significantly from the forthcoming integration of all of the Facebook messenging services. More concretely, WhatsApp is way better than Facebook Messenger as it stands, so why not make Messenger more like WhatsApp?
In some ways this will mean considerable sacrifice for the company. Facebook has been pushing through this plan for general, end-to-end encryption, even though one of the top product people at the company just resigned for exactly this reason, a very real loss to the building process.
There are inevitable trade-offs between “ability to control messages,” and “promoting user privacy.” In the longer run I think company control of messages does not face objective standards that can command social consensus, or for that matter survive competition from less salubrious and less mainstream alternatives. I fear also that company control of messages will evolve all too suddenly into government control, First Amendment or not. Even with a non-activist government, a large and publicly visible company cannot help but look over its shoulder, and consider the possible regulatory or antitrust reaction from the government, when making post/not post decisions.
General encryption and thus user privacy is the right way to go. Of course there will be public relations bumps along the way, and probably today we are seeing one of them, namely the personnel shifts. Facebook and Mark Zuckerberg are currently in a kind of PR trap where any decision, any announcement, can and will be taken the wrong way and as a sign that some value or another simply isn’t being served the proper way. We all know that negative news typically has more clicks and longer legs than positive news. But if you’ve been talking about user privacy, I think this is a decision you have to favor.
You can debate whether there should be one, two, or three cheers here, but the actual reality is we are taking some pretty big steps toward truly private internet social media.
No, there isn’t much evidence for that now-common claim:
As I show below, the claim that big business contributed to the rise of the Nazi Party is simply inconsistent with the consensus among German historians. While there is some evidence industrial concentration contributed in Hitler’s ability to consolidate power after he was appointed chancellor in 1933, there is no evidence monopolists financed Hitler’s rise to power, and ample evidence showing industry leaders opposed his ascent.
Here is the longer essay, with much more additional detail, from the soon-to-be-better-known Alec Stapp.
As always, note that the descriptions are mine and reflect my priorities, as the self-descriptions of the applicants may be broader or slightly different. Here goes:
Michelle Rorich, for her work in economic development and Africa, to be furthered by a bike trip Cairo to Capetown.
Jeffrey C. Huber, to write a book on tech and economic progress from a Christian point of view.
Mayowa Osibodu, building AI programs to preserve endangered languages.
David Forscey, travel grant to look into issues and careers surrounding protection against election fraud.
Jennifer Doleac, Texas A&M, to develop an evidence-based law and economics, crime and punishment podcast.
Fergus McCullough, University of St. Andrews, travel grant to help build a career in law/history/politics/public affairs.
Justin Zheng, a high school student working on biometrics for cryptocurrency.
Kyle Eschen, comedian and magician and entertainer, to work on an initiative for the concept of “steelmanning” arguments.
Here is the first cohort of winners, and here is the second cohort. Here is the underlying philosophy behind Emergent Ventures. Note by the way, if you received an award very recently, you have not been forgotten but rather will show up in the fourth cohort.