Noah Smith presents Ryan Oprea
But a new paper by Ryan Oprea challenges the idea that we even need something like Prospect Theory at all. Oprea hypothesizes that a lot of the seemingly “irrational” experimental behaviors are really just due to the excessive complexity of the task they’re being asked to do. He does an experiment where he takes away all the risk in the decision — there are no probabilities and no losses involved. One option just gives you more money than the other. And yet experimental subjects still make mistakes that look a lot like the “irrational” choices they make in Kahneman-type experiments. Eric Crampton has a good blog post summarizing the details of Oprea’s experiment.
So it’s possible that a lot of what looks like “irrationality” is just human beings being unable to deal with complex calculations. That doesn’t kill the idea of behavioral economics — it just means we need different theories about why people don’t act like homo economicus.
Here is the link to Noah.
Saturday assorted links
1. Brazilian economists are seeking a kind of occupational licensing (Portuguese).
2. Sovereign AI project for Thailand?
3. Is there a law for AI “capacity density”?
4. More on AI and board games.
5. Royal Mint honors Macca with his own coin.
7. o1 for a cancer therapy project.
8. Reinforcement fine tuning (2nd day of Christmas!).
Markets in everything, personal fire hydrant edition
The latest sought-after home amenity? Personal fire hydrants. The logic is that when there’s a major disaster there may not be enough fire engines to protect every house in an area. If homeowners have their own hydrant ready to go—along with hoses, nozzles and adapters—and are trained to use it all, that could help reduce the number of homes destroyed.
Real-estate agents say mentioning a personal fire hydrant in the marketing materials now helps sell homes. “People notice it. It’s definitely a plus,” says Stephen Kotsenburg of Christie’s International Real Estate, who has the listing for a four-bedroom, three-bathroom, 3,388-square-foot home in Park City, Utah. It’s on the market for $2.1 million and advertises a fire hydrant, which is painted bright red and is visible as you come up the driveway.
Victoria Waldorf is the listing agent for a five-bedroom, three-bathroom, 4,691-square-foot house that is for sale for $1.775 million in Agua Dulce, Calif. She says she points out the personal fire hydrant to everyone who comes through for a viewing. “There’s relief in people’s faces,” she says.
Here is more from the WSJ, via Daniel Lippmann.
How is the Russian war economy doing?
Here is a gloomy account from Vladimir Mirov:
Ruble depreciation will contribute to inflation even further, as Russia is continued to be heavily reliant on imports – this is a kind of self-sustaining spiral. I also strongly disagree with those who say that cheaper ruble is “good” for exporters and the budget. Exporters have yet to make good use of devaluing ruble – which they can’t do, because Russia is under all sorts of embargoes, and China and other Global South countries are not opening their markets to most Russian goods. As to the budget, the effect is much more complex than many consider: on one hand, budget gets more rubles from export revenues due to ruble depreciation, while minimizing ruble-nominated costs. On the other hand, though, higher inflation and costlier imports will, in my view, more than offset these budget-positive effects.
I think we have to look at the situation in a more complex way. Sharp ruble depreciation is a mere illustration of Russia’s deepening economic woes. Nearly three years since the beginning of Russia’s full-scale invasion of Ukraine, Russian economy is stranded. No new sustainable economic model has been found. Import substitution is not working. China is only buying our most basic commodities at heavy discounts, while keeping its market closed for other Russian goods. There’s no investment or technology coming into Russia from China and other Global South countries. Everything is dependent on state subsidies – but the government’s financial reserves are running thin. if you listen to industry and business speakers at the most recent economic fora, there’s an endless stream of begging – we won’t survive with state subsidies for this, state support for that, we haven’t got technology, haven’t got investment, haven’t got profitability, haven’t got workforce. etc. Makes one wonder – what have you got then?
There is much more at the link, bearish throughout.
*Vita Nuova*, und *Herzzeit*
There is a new translation by Joseph Luzzi, and I find it an order of magnitude better than the older treatments. It somehow communicates the strangeness of this work in a new and unprecedented way. You can order it here.
I also very much enjoyed my read through the letters of Paul Celan and Ingeborg Bachmann. You can feel all the different stages of their relationship, without even necessarily knowing how the story develops. Max Frisch and Nelly Sachs make cameo appearances. The highlight perhaps is when she writes him a lengthy letter about how he is the one who is actually complicated and unhappy (and not she), and then decides not to send it.
I also enjoyed this part:
Lieber Paul,
nach allem, was geschehen ist, glabue ich, dass es für mich uns kein Weiter mehr gibt. Es ist mir nicht mehr möglich.
Es fällt mir sehr schwer, das zu sagen.
Ich wünsche Dir alles Gute.
Ingeborg
It was not the end of their correspondence.
Paul Krugman retires as Times columnist
Here is the NYT announcement.
I hope they consider Noah Smith as the obvious replacement…
Friday assorted links
1. AI video for training embodied agents?
2. “She uses the hashtags “hemmaflickvän” and “hemmafru” (Swedish for stay-at-home girlfriend and housewife) and describes herself as a “soft girl” – an identity that embraces a softer, more feminine way of living rather than focussing on a career.” Link here.
4. How will AI and the law interact?
5. Jeffrey Wernick, prediction markets pioneer.
You Have Been Warned
New paper in Science, A single mutation in bovine influenza H5N1 hemagglutinin switches specificity to human receptors. If that isn’t clear enough, here is the editor’s summary:
In 2021, a highly pathogenic influenza H5N1 clade 2.3.4.4b virus was detected in North America that is capable of infecting a diversity of avian species, marine mammals, and humans. In 2024, clade 2.3.4.4b virus spread widely in dairy cattle in the US, causing a few mild human cases, but retaining specificity for avian receptors. Historically, this virus has caused up to 30% fatality in humans, so Lin et al. performed a genetic and structural analysis of the mutations necessary to fully switch host receptor recognition. A single glutamic acid to leucine mutation at residue 226 of the virus hemagglutinin was sufficient to enact the change from avian to human specificity. In nature, the occurrence of this single mutation could be an indicator of human pandemic risk. —Caroline Ash
Time to stock up on Tamiflu and Xofluza.
Addendum: See also A Bird Flu Pandemic Would Be One of the Most Foreseeable Catastrophes in History
My excellent Conversation with Stephen Kotkin
It was so much fun we ran over and did about ninety minutes instead of the usual hour. Here is the audio, video, and transcript. Here is part of the episode summary:
Tyler sat down with Stephen to discuss the state of Russian Buddhism today, how shamanism persists in modern Siberia, whether Siberia might ever break away from Russia, what happened to the science city Akademgorodok, why Soviet obsession with cybernetics wasn’t just a mistake, what life was really like in 1980s Magnitogorsk, how modernist urban planning failed there, why Prokofiev returned to the USSR in 1936, what Stalin actually understood about artistic genius, how Stalin’s Georgian background influenced him (or not), what Michel Foucault taught him about power, why he risked his tenure case to study Japanese, how his wife’s work as a curator opened his eyes to Korean folk art, how he’s progressing on the next Stalin volume, and much more.
And here is one excerpt:
COWEN: What did you learn from Michel Foucault about power, or indeed anything else?
KOTKIN: I was very lucky. I went to Berkeley for a PhD program in 1981. I finished in 1988, and then my first job was at Princeton University in 1989. In the middle of it, I went for French history, and I switched into Habsburg history, and then finally, I switched into Russian Soviet history. I started learning the Russian alphabet my third year of the PhD program when I was supposed to take my PhD exams, so it was a radical shift.
Foucault — I met him because he came to Berkeley in the ’80s, just like Derrida came, just like Habermas came, Claude Lévi-Strauss, the anthropologist, came through. It was California. They were Europeans, and there was a wow factor for them. Foucault was also openly gay, and San Francisco’s gay culture was extraordinarily attractive to him. It was, unfortunately, the epoch of the AIDS epidemic.
One time, I was at lunch with him, and he said to me, “Wouldn’t it be amazing if somebody applied my theories to Stalinism?” I’m sitting there, okay, I’m 23 years old. Imagine if you had traveled to Switzerland in the late 19th century, and you went up in those Engadin mountains, and you were at some café in the mountain air, and there’s this guy with a huge forehead and hair up in the air sitting there, and you went and introduced yourself. You said, “Hello, I’m Tyler,” and he said, “Hello, I’m Friedrich Nietzsche.” You would say, “Well, geez, this is interesting. I should have more conversations with you.”
So, that’s the experience I had. I had read Foucault in seminar because it was very fashionable to do so, obviously, especially at Berkeley, especially in a culture that tilts one way politically, and I think you’ll guess which way that might be. But I didn’t understand what he said, so I went up to him as a naïf with this book, Madness and Civilization, which we had been forced to read, and I started asking him questions. “What does this mean? What does this mean? What is this passage? This is indecipherable.”
He patiently explained to the moron that I was what he was trying to say. It sounded much more interesting coming from him verbally, sitting just a few feet away, than it had on the page. I was lucky to become the class coordinator for his course at Berkeley. He gave these lectures about the problem of the truth-teller in Ancient Greece.
It was very far removed from . . . I had no classical training. Yes, I had Latin in high school because I went to Catholic school, and it was a required subject. I started as an altar boy with the Latin Mass, which quickly changed because of what happened at Vatican II. But no Greek, so it was completely Greek to me. Forgive me, that wasn’t planned that I was going to say that. It just happened spontaneously.
Anyway, I just kept asking him more questions and invited him to go to things, and so we would have lunches and dinners. I introduced him to this place, Little Joe’s in Little Italy, part of San Francisco, which unfortunately is no longer there. It was quite a landmark back then, and then he would repair after dinner to the bathhouses in San Francisco by himself. I was not part of that. I’m neither openly nor closeted gay, so that was a different part of Foucault that I didn’t partake in, but others did.
Anyway, I would ask him these things, and he would just explain stuff to me. I would say, “What’s happening in Poland?” This is the 1980s, and he would say things to me like, “The idea of civil society is the opiate of the intellectual class.” Everybody was completely enamored of the concept of civil society in the ’80s, especially via the Polish case, and so I would ask him to elucidate more. “What does that mean, and how does that work?”
He told me once that class in France came from disease in Paris — that it wasn’t because of who was a factory worker, who wasn’t a factory worker, but it was your neighborhoods in Paris and who died from cholera and who didn’t die from cholera. A colleague of ours who was another fellow graduate in Berkeley ended up writing a dissertation using that aside, that throwaway line.
I was able to ask him these questions about everything and anything. What he showed me — this is your question — what he showed me was how power works, not in terms of bureaucracy, not in terms of the large mechanisms of governance like a secret police, but how all of that is enforced and acted through daily life. In other words, the micro versions of power. It’s connected to the big structures, but it’s little people doing this. That’s why I said totalitarianism is using your agency to destroy your own agency.
That means denouncing your neighbors, being encouraged to denounce your neighbors for heresies, and participating in that culture of denunciation, which loosens all social trust and social bonds and puts you in a situation of dependency on the state. You’re a gung-ho activist using your agency, and the next thing you know, you have no power whatsoever. So, those are the kinds of things that I could talk to him about.
After he passed away from AIDS in the summer of 1984 — it was the AIDS epidemic, horrific. He passed away, and we had a memorial for him. I was still a PhD student, remember. I didn’t finish until ’88. There was this guy, Michel de Certeau, who wrote a tribute to Foucault in French that he was going to deliver at the event. It was called “The Laughter of Foucault.” I had these conversations with de Certeau about his analysis of Foucault and the pleasure of analytic work, which had been a hallmark of Foucault.
De Certeau taught me a phrase called “the little tactics of the habitat,” which became one of the core ideas of my dissertation and then book, Magnetic Mountain, about this micropower stuff. Even though Foucault was gone, I was able to extend the beginning of the conversations with Foucault through de Certeau.
I learned how power works in everyday life, and how the language that you use, and the practices like denunciation that you enact or partake in, help form those totalitarian structures, because the secret police are not there every minute of every day, so what’s in your head? How are you motivated? What type of behavior are you motivated for?
We say, “Okay, what would Stalin do in this situation?” Many people approach their lives — they’ve never met Stalin; they’ll never meet Stalin — but they imagine what Stalin might do. That gets implanted in their way of thinking; it becomes second nature. I learned to discuss and analyze that through Foucault.
I have to say, I didn’t share his analysis that Western society was imprisoning, that the daily life practices of free societies were a form of imprisonment in its own way. I never shared that view, so it wasn’t for me his analysis of the West that I liked. It was the analytical toolkit that I adapted from him to apply to actual totalitarianism in the Soviet case.
Excellent throughout.
Why are no trillion dollar companies being created in Europe?
That is the theme of a new Substack by Pieter Garicano, here is one excerpt:
These answers, according to a recent paper by Olivier Coste and Yann Coatanlem, two French investors, miss the point: the reason more capital doesn’t flow towards high-leverage ideas in Europe is because the price of failure is too high.
Coste estimates that, for a large enterprise, doing a significant restructuring in the US costs a company roughly two to four months of pay per worker. In France, that cost averages around 24 months of pay. In Germany, 30 months. In total, Coste and Coatanlem estimate restructuring costs are approximately ten times greater in Western Europe than in the United States…
Consider a simple example. Two large companies are considering whether to pursue a high risk innovation. The probability of success is estimated at one in five. Upon success they obtain profits of $100 million, and the investment costs $15 million.
One of the companies is in California, where if the innovation fails the restructuring costs $1 million. The other company is in Germany, where restructuring is 10x more expensive, it costs $10 million (a conservative estimate).
The expected value of this investment in California is a profit of $5 million. In Germany the expected value is a loss of $3 million.
Recommended.
Thursday assorted links
2. These South Korean Catholic priests should be bloggers.
3. Zero-based regulation by James Broughel. And from Alex Adams.
4. RLHF propaganda posters, funny stuff.
5. Scientific breakthroughs of 2024.
6. Weather forecasting breakthroughs with AI.
7. Scott Sumner on Cowen and Tabarrok on money. The key I think is to have a theory that explains why nominal variables sometimes forecast very well, and other times not well at all — this is very hard! I read Scott as significantly overrating the forecasting power of the nominal in the data.
Before AI replaces you, it will improve you, Philippines edition
Bahala says each of his calls at Concentrix is monitored by an artificial intelligence (AI) program that checks his performance. He says his volume of calls has increased under the AI’s watch. At his previous call center job, without an AI program, he answered at most 30 calls per eight-hour shift. Now, he gets through that many before lunchtime. He gets help from an AI “co-pilot,” an assistant that pulls up caller information and makes suggestions in real time.
“The co-pilot is helpful,” he says. “But I have to please the AI. The average handling time for each call is 5 to 7 minutes. I can’t go beyond that.”
Here is more from Michael Beltran, via Fred Smalkin.
Using AI to analyze changes in pedestrian traffic
That is the topic of my latest Bloomberg column, here is one bit:
Fortunately, there is new research. We have entered the age where innovative methods of measurement, such as computer vision and deep learning, can reveal how American life has changed.
Researchers at the National Bureau of Economic Research compiled footage of four urban public spaces, two in New York and one each in Philadelphia and Boston, from 1979-1980 and again in 2008-2010. These snapshots of American life, roughly 30 years apart, reveal how changes in work and culture might have shaped the way people move and interact on the street.
The videos capture people circulating in two busy Manhattan locations, in Bryant Park in midtown and outside the Metropolitan Museum of Art on the Upper East Side; around Boston’s Downtown Crossing shopping district; and on Chestnut Street in downtown Philadelphia. One piece of good news is that at least when it comes to our street behavior, we don’t seem to have become more solitary. From 1980 to 2010 there was hardly any change in the share of pedestrians walking alone, rising from 67% to 68%.
A bigger change is that average walking speed rose by 15%. So the pace of American life has accelerated, at least in public spaces in the Northeast. Most economists would predict such a result, since the growth in wages has increased the opportunity cost of just walking around. Better to have a quick stroll and get back to your work desk.
The biggest change in behavior was that lingering fell dramatically. The amount of time spent just hanging out dropped by about half across the measured locations. Note that this was seen in places where crime rates have fallen, so this trend was unlikely to have resulted from fear of being mugged. Instead, Americans just don’t use public spaces as they used to. These places now tend to be for moving through, to get somewhere, rather than for enjoying life or hoping to meet other people. There was especially a shift at Boston’s Downtown Crossing. In 1980, 54% of the people there were lingering, whereas by 2010 that had fallen to 14%.
Consistent with this observation, the number of public encounters also fell. You might be no less likely to set off with another person in tow, but you won’t meet up with others as often while you are underway. The notion of downtown as a “public square,” rife with spontaneous or planned encounters, is not what it used to be.
I prefer the new arrangements, but of course not everybody does. The researchers are
China markets in everything
This is very interesting, and I think a world first: a local government in China has just sold its sky, literally. This is the government of Pingyin County, Jinan, Shandong Province who sold for 924 million yuan (approximately $130 million) a 30-year concession to operate and maintain its low-altitude economic projects to a company called Shandong Jinyu General Aviation Co., Ltd. The “low-altitude economy” is a big trend in China at the moment. XPeng, one of China’s leading EV manufacturers, recently released a low-altitude flying car for instance. Drone deliveries are becoming increasingly common in Chinese cities, and various regions are actively developing low-altitude transportation networks. Shanghai, for instance, plans to establish 400 low-altitude flight routes by 2027. But this is the first time a local government has monetized its low-altitude airspace…
Here is more from Arnaud Bertrand. Via Jesper.
Wednesday assorted links
2. These names are not amongst the nine billion names of God.
3. Russ Roberts podcast with the translator of Life and Fate.
4. The Baby Money Index. Qatar is number three.
5. Lessons from working in an art gallery, excellent post recommended.