The forthcoming Facebook audio product

by  Tyler Cowen in

Facebook is making a push into audio, launching a suite of new features that will allow users to host audio conferences and podcasts, in a dash to compete with up-and-coming apps such as Clubhouse. Mark Zuckerberg, chief executive of the world’s largest social media company by users, said on Monday said that over the next three to six months it planned to roll out live audio rooms as well as new tools allowing users to search for, listen to and create podcasts.

In addition, its live audio rooms, which will be available on the main platform and its Messenger app, can be saved and turned into podcasts. Zuckerberg also announced the launch of a feature called “Soundbites”, where users can post or listen to short audio clips that will be showcased in a continuous feed, in a similar way to its Reels video feed in Instagram.

Facebook plans to allow users to earn money from the podcasts and audio rooms they create — for example, by allowing users to charge for access to a room by purchasing it individually or as part of a subscription.

Here is more from The Financial Times.

Risky Business Cycles

by  Tyler Cowen

Is there any other major macroeconomic idea you hear so little about outside the halls of academia?:

We identify a shock that explains the bulk of fluctuations in equity risk premia, and show that the shock also explains a large fraction of the business-cycle comovements of output, consumption, employment, and investment. Recessions induced by the shock are associated with reallocation away from full-time permanent positions, towards part-time and flexible contract workers. A real model with labor market frictions and fluctuations in risk appetite can explain all of these facts, both qualitatively and quantitatively. The size of risk-driven fluctuations depends on the relationship between the riskiness and productivity of different stores of value: if safe savings vehicles have relatively low marginal products, then a flight to safety will drive a larger aggregate contraction.

That is from a new NBER working paper by Susanto Basu, GiacomoCandian, Ryan Chahrout, and Rosen Valchev, and you will find related ideas in my 1998 book Risk and Business Cycles and also the earlier work of Fischer Black.

Effective Altruism: An Introduction

by  Alex Tabarrok

Effective Altruism: An Introduction is a collection of ten top episodes of The 80,000 Hours Podcast, specifically selected to help listeners quickly get up to speed on the school of thought known as effective altruism.

They cover:

  • What effective altruism is — the use of evidence and careful analysis to do as much good as possible
  • The strategies for improving the world that are most popular within the effective altruism community, and why they’re popular
  • The key disagreements between researchers in the field
  • How to ‘think like an effective altruist’
  • How you might figure out how to make your biggest contribution to solving the world’s most pressing problems

The only thing I would say is that Robert Wiblin has a funny idea about “quickly get up to speed”! But you won’t go wrong with any of these podcast episodes.

*Nuclear Folly: A History of the Cuban Missile Crisis*

by  Tyler Cowen in

Although they did not know it at the time, the seamen of the USS Cony and other ships of the Randolph group were moments away from being killed or shipwrecked by the tremendous waves that a nuclear explosion would produce. Savitsky’s torpedo carried a warhead with 10 kilotons of explosive power.  If dropped on a city, that would suffice to kill everyone with a half-mile radius. Moreover, the torpedoes’ nuclear warheads were designed to create shock waves that would topple or incapacitate ships. The 20-kiloton load tried by the US Navy in the Baker underwater test in 1946 produced waves up to 94 feet high. The Soviets tested their T-5 torpedoes near Novala Zemlia in the Arctic in 1957 but never released the results. Any ship hit by the torpedo would almost certainly have been destroyed, while the rest of the Randolph group would have suffered significant damage.

That is from the new book on this topic by Serhii Plokhy.  An excellent book, with much more on the Soviet side than any other source I am aware of.

What is the proper framework for thinking about cybersecurity?

by  Tyler Cowen in

Long-time MR reader here. I have a question: what is the appropriate framework to think about incentives (economic or otherwise) for electric power utilities to beef up their cybersecurity?

The Biden administration is reportedly putting together a plan to “rapidly shore up the security of the US power grid” [1]. As we know from the Solarwids hack, our nation’s cyber defenses (whether private industry or government) are inadequate [2], especially when targeted by nation-states [3].

The Bloomberg article says “The White House plan, which is voluntary, lays out a series of possible incentives to get power companies to sign on, a less politically precarious route than mandating their participation through regulation.”

It seems to me that the government offering money to private entities to buy some cybersecurity software products is not the optimal, and certainly not the sustainable, solution. There are needed investments in research & development, workforce training, and much more. Simply deploying today’s tech won’t solve this going forward.

So, what’s the right way to approach this from an incentives perspective? It seem to me that this is a very nuanced problem. We have no easy “target” to shoot for; there is no miles per gallon efficiency metric that can be used as a carrot.

That is an email from Matthew Backes.

Sunday assorted links

by  Tyler Cowen

1. Alaska to offer visiting tourists vaccines on arrival.

2. Harvard undergraduate general exam in economics, 1957.

3. Mundell stuff: they won’t let you be this way any more.

4. Carlos Reygadas, Our Time, imagine three hours running commentary on Bergman’s Scenes from a Marriage, but set on a Tlaxcala Mexican ranch with lots of bulls and a dash of visual Tarkovsky.  The director and his wife play the lead roles, most of you won’t like it but Scott Sumner did and he is almost always right about movies.

5. Italy (!) to run a massive fiscal stimulus.

Not everywhere needs another $1 trillion in stimulus

by  Tyler Cowen in

A McDonald’s in Florida is paying people $50 just to show up for a job interview. But it’s still not attracting many applicants.

Blake Casper, the franchisee who owns the restaurant, told Insider that a general manager and supervisor came up with the idea for the interview reward after he told them to “do whatever you need to do” to hire workers.

“At this point, if we can’t keep our drive-thrus moving, then I’ll pay $50 for an interview,” said Casper, who owns 60 McDonald’s restaurants in the Tampa, Florida area.

Here is the full story, via the excellent Samir Varma, excess unemployment insurance of course is an issue, and here is Scott Sumner on the summer of 2021.  So many data points about the rapid recovery and the prescience of Summers and Blanchard, right?

The relevance of ZMP and near-ZMP workers

by  Tyler Cowen in

From the St. Louis Fed:

Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α’s β’s and γ’s. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ’s. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.

Here is the NBER link.  The authors are Victoria Gregory, Guido Menzio, and David Wiczer.  The ZMP concept remains maligned and misrepresented, sometimes caricatured as a one-blade theory or as demand denialism, so I am happy to see this new evidence capturing the original intuition.

Via David Sinsky.

How rational was Spock?

by  Tyler Cowen in

[Julia] Galef was curious to see exactly how often these predictions pan out. “I went through all of the Star Trek episodes and movies—all of the transcripts that I could find—and searched for any instance in which Spock is using the words ‘odds,’ ‘probability,’ ‘chance,’ ‘definitely,’ ‘probably,’ etc.,” she says. “I catalogued all instances in which Spock made a prediction and that prediction either came true or didn’t.”

The results, which appear in Galef’s new book The Scout Mindset, are devastating. Not only does Spock have a terrible track record—events he describes as “impossible” happen 83 percent of the time—but his confidence level is actually anti-correlated with reality. “The more confident he says he is that something will happen—that the ship will crash, or that they will find survivors—the less likely it is to happen, and the less confident he is in something, the more likely it is to happen,” Galef says.

Spock’s biggest weakness is his failure to understand that other people don’t always behave “logically.” He also makes no attempt to update his approach, even when his mistakes get his crewmates killed.

Here is the full Wired story, and here you can buy Julia’s new book.  I wonder if he is more rational in the Star Trek movies than in the TV shows, or how about in the fan fiction?  Exactly where is the demand for dramatic irrationality highest, and why?

Legalize Direct Sales of Electric Vehicles to Consumers!

by  Alex Tabarrok in

I am a signatory to an open letter from economists, lawyers and others with expertise in market regulation advocating that states stop preventing auto manufacturers most notably manufactures of electronic vehicles such as Tesla from selling direct to the public:

…A brief review of the history of dealer franchise laws may help explain how we got to where we are today. In the mid-twentieth century, car dealers were mostly “mom and pop” sole proprietorships. By contrast, the “Big Three” auto companies were hegemonic firms that faced relatively little domestic or foreign competition. The dealers began to complain to state legislatures that the car companies were taking advantage of them in a variety of ways. This led almost all of the states to pass dealer franchise laws intended to protect the dealers. Among other things, these laws prohibited a manufacturer from opening its own showrooms or service centers and transacting directly with customers. The dealers successfully argued that if the manufacturers were allowed to distribute directly to consumers, they could unfairly undermine their own franchised dealers.

Fast-forward to 2021. The situation is very different. First, the dealership system has grown from its “mom and pop” roots to one where enormous companies operate large dealer networks. The top 10 dealership groups alone earn over $97 billion in annual revenue. Second, the car manufacturer market has become far more competitive. Today, there are at least 15-20 major manufacturer groups selling cars in the U.S. This gives dealers more choices, and hence more leverage in contractual negotiations with manufacturers. Third, and perhaps most importantly, technological and market changes have led new entrants into the market—particularly companies selling EVs—to choose to distribute directly to consumers and not to use franchised dealers at all. As the Massachusetts Supreme Court has recognized, the original concerns that animated the direct distribution prohibitions—protecting a franchisee from its own franchisor—do not apply to a company that is not using franchisees.

Here is a key reason why the dealers don’t want direct sales:

4) Different profit models: Traditional dealerships earn low profit margins on new car sales, and make it up on service. EVs have a much smaller service component since they don’t have service needs like oil changes or engine tune-ups. Traditional dealerships therefore lack much of an incentive to sell EVs.
5) Conflict of interest. EV sales cannibalize internal combustion sales, which are the dealers’ lifeblood. Dealers therefore lack the motivation to sell EVs.

…There is no credible consumer protection argument in favor of prohibiting direct distribution. Consumers should be given the choice of how they buy their cars.

See the letter for more. I wrote about this issue earlier in Tesla versus the Rent Seekers.

When doctors stay in their lane

by  Tyler Cowen in

Here is the paper, showing massive overdiagnosis, even following testing.  If you don’t wish to click through, here is a nice summary:

 

So what’s it like being red-pilled by the median voter theorem?

by  Tyler Cowen in

President Biden will limit the number of refugees allowed into the United States this year to the historically low level set by the Trump administration, reversing an earlier promise to welcome more than 60,000 people fleeing war and persecution into the country.

Here is more from the NYT.  I have been stressing for several years now that the Democrats are not going to die on the hill of an ultimately unpopular immigration policy.  Here is an earlier Angus, penned before the Afghanistan withdrawal news:

The marketing and associated cultural capital, however, are indeed very different, and you can expect that to continue and possibly intensify.

Update: Biden will budge.