The economics of augmented reality
Augmented reality (AR) is a real-time, interactive user experience that inserts virtual computer-generated elements into a user’s environment. AR technology utilizes the Internet of Things (IoT) to enable smart devices to capture and identify “scenes” as a user moves through her world, generate contextually relevant holograms, sound, and other sensory inputs, then project those virtual elements through the user’s display. AR technology is coordinative in that it assists in economic calculation, aids in tracking usage, and helps agents overcome some kinds of information asymmetries. We provide examples from existing AR applications and conceptualize how AR strengthens self-organization and enables polycentric loci of private governance to emerge, what we call agile self-organization. Examples include information-enhancing overlays, automatic language translation, individualizing and privatizing the provision of personal and worker safety, reducing emergency response times, and enriching education with overlays and holograms. We conclude that AR technologies could erode traditional policy rationales for intervention and allow private governance to take hold and flourish in situations where it has traditionally had difficulty doing so.
That is a paper from the still-underrated Abigail Devereaux (a former student of mine), via Kevin Lewis.
Does the cream always rise to the top?
Or do we misallocate talent when it comes to innovation? Here is a not so famous but very interesting paper by Murat Alp Celik:
The misallocation of talent between routine production versus innovation activities has a fi rst-order impact on the welfare and growth prospects of an economy. Surname level empirical analysis employing micro-data on patents and inventors in the U.S. between 1975-2008 combined with census data from 1930 reveals new stylized facts: (i) people with “richer” surnames have a higher probability of becoming an inventor, however (ii) people with more “educated” surnames become more proli fic inventors. Motivated by this discrepancy, a heterogeneous agents model with production and innovation sectors is developed, where individuals can become inventors even if they are of mediocre talent by excessive spending on credentialing. This is individually rational but socially inefficient. The model is calibrated to match the new stylized facts and data moments from the U.S. economy, and is then used to measure the magnitude of the misallocation of talent in innovation. A thought experiment in which the credentialing spending channel is shut down reveals that the aggregate growth rate of the economy can be increased by 10% of its value through a reduction of the misallocation. Socially optimal progressive bequest taxes that alleviate the misallocation are calculated, which serve to increase the growth rate of the economy to 2.05% while increasing social welfare by 6.20% in consumption equivalent terms.
I am not so persuaded by the idea of buying your way into innovative circles with credentials, or the analysis of the inheritance tax, but nonetheless this should stimulate thought.
Favorite world music 2017
Danyèl Waro, Monmon. From the Reunion Islands, sample.
Residente, album is called Residente, Puerto Rican rap/reggaeton roots, but spreading out through diverse styles.
The Secret Ensemble, Call of the Birds, Turkish with classical roots, teaser here. Passionate stuff.
Minore Manes: Rebetika Songs, from Smyrna.
Sahra Halgan Trio, Faransiskiyo, Somaliland. Try this.
Duo Sabil, Zabad, oud and percussion. Here is one cut.
Try this music video by Afro-Haitian Experimental Orchestra.
If you insist on something Brazilian, we can go back a year and pull out Sociedade Recreativa.
Thursday assorted links
2. Licklider and Taylor, “The computer as communication device” (classic essay, pdf).
3. Mostly Indian best books of the year picks.
4. The great Javier Cercas on Spain and Catalonia (NYT).
5. Is Odisha [Orissa] India’s most underrated food destination?
An Economist’s Christmas
Merry Christmas and happy holidays to everyone! Enjoy our holiday greetings and analysis of the economics of gift giving.
Were U.S. nuclear tests more harmful than we had thought?
So says Keith A. Meyers, job candidate from University of Arizona. I found this to be a startling result, taken from his secondary paper:
During the Cold War the United States detonated hundreds of atomic weapons at the Nevada Test Site. Many of these nuclear tests were conducted above ground and released tremendous amounts of radioactive pollution into the environment. This paper combines a novel dataset measuring annual county level fallout patterns for the continental U.S. with vital statistics records. I find that fallout from nuclear testing led to persistent and substantial increases in overall mortality for large portions of the country. The cumulative number of excess deaths attributable to these tests is comparable to the bombings of Hiroshima and Nagasaki.
Basically he combines mortality estimates with measures of Iodine-131 concentrations in locally produced milk, “to provide a more precise estimate of human exposure to fallout than previous studies.” The most significant effects are in the Great Plains and Central Northwest of America, and “Back-of-the-envelope estimates suggest that fallout from nuclear testing contributed between 340,000 to 460,000 excess deaths from 1951 to 1973.”
His primary job market paper is on damage to agriculture from nuclear testing.
The future of crypto-assets? (from the comments)
mariorossi
I think one problem with this view is that the bitcoin storage cost is likely a function of the capitalization of bitcoin.
Bitcoin security is a function of the amount of miners. The amount of miners is a function of mining revenue streams. If there are not enough miners, stealing bitcoins becomes possible. So the bitcoin network needs to generate enough mining revenues to keep enough miners interested. This amount has to be a function of the capitalization as if it ever diverges stealing bitcoin would become a valid strategy. So bitcoin must have a negative yield, either because you need to pay for the miners energy or because your bitcoins are going to be stolen. This is currently hidden by the wave of investment in the sector (and the funding from the bitcoin seniorage), but that’s got to stop at some point. I don’t think gold for example has similar features. Securing gold is not a function of of the dollar value.
If miners are a competitive industry, miners revenue has to roughly equal miners costs, so it’s a real cost. Compared with other fiat currency cost of storage it seems incredibly wasteful. Storing government bonds is basically costless. You might get negative yields, but those are transfers, not consumption. Gold was valuable because it doesn’t rust. It doesn’t require maintenance. Bitcoins require a lot of maintenece… I think that’s a weakness…
Here is the link.
From the bench of Kevin Lewis shame on you tenured professors
A forthcoming study in the Journal of Economic Perspectives doesn’t use any of those terms and explicitly says it must not be read as an “indictment” of tenure. But it suggests that research quality and quantity decline in the decade after tenure, at least in economics.
The authors of the paper — Jonathan Brogaard, an assistant professor of finance at the University of Washington at Seattle; Joseph Engelberg, professor of finance and accounting the University of California, San Diego; and Edward Van Wesep, associate professor of finance at the University of Colorado at Boulder — started with a question: “Do academics respond to receiving tenure by being more likely to attempt ground-breaking ‘homerun’ research and in this way ‘swinging for the fences?’”
After all, they wrote, “the incentives provided by the threat of termination are perhaps the starkest incentives faced by most employees, and tenure removes those incentives.” (The question is sure to annoy academic freedom watchdogs. In the authors’ defense, they do cite the benefits of tenure, including job stability’s potential to encourage risk taking.)
Looking for answers, Brogaard, Engelberg and Van Wesep collected a list of academics who worked and were tenured in economics or finance departments at 50 top-ranked institutions at any time between 1996 and 2014. The final sample included 980 professors, all of whom were tenured by 2004.
Here is the link.
Wednesday assorted links
1. Trouble in Peru (NYT).
2. The wisdom of polarized crowds (pdf).
3. The year of Ben Stratechery.
4. Big advance in text-to-speech technology, the remaining blips: “For example, our system has difficulties pronouncing complex words (such as “decorum” and “merlot”), and in extreme cases it can even randomly generate strange noises.”
5. I just pre-ordered the new Edward Tenner book, due out in April.
6. 2017 in architecture (uneven, the reality and the piece).
My Conversation with Andy Weir
Andy was great, here is the text and audio, here is the introductory summary:
Before writing a single word of his new book Artemis, Andy Weir worked out the economics of a lunar colony. Without the economics, how could the story hew to the hard sci-fi style Weir cornered the market on with The Martian? And, more importantly, how else can Tyler find out much a Cantonese meal would run him on the moon?
In addition to these important questions of lunar economics, Andy and Tyler talk about the technophobic trend in science fiction, private space efforts, seasteading, cryptocurrencies, the value of a human life, the outdated Outer Space Treaty, stories based on rebellion vs. cooperation, Heinlein, Asimov, Weir’s favorite episode of Star Trek, and the formula for finding someone else when stranded on a lonely planet.
My favorite part was this, which Andy answered with no hesitation:
COWEN: What if there were two immortal people, let’s say it’s the two of us, placed on opposite sides of the Earth, an Earth-like planet, and we can wander freely with no constraints but just foot speed. How long does it take us to find each other?
WEIR: Can we collude in advance in any way?
COWEN: No, we cannot.
WEIR: OK.
COWEN: But we know we’re trying to find each other.
WEIR: We know we’re trying to find each other. Well, we should both — but can we have a — are we both rational actors and we —
COWEN: We’re as rational as you and I are; take that as you wish.
WEIR: So, no?
[laughter]
COWEN: No.
WEIR: I think the best thing to do would be for both of us to pick an arbitrary great circle to walk, around the planet, and leave markings along the way denoting what direction you’re walking. So I would arbitrarily pick a direction to go and I would just go that direction with the intention of circumnavigating the entire globe, and I would walk at maybe half what is a comfortable speed for me. And you would do the same thing. Now, somewhere, our two — in fact, in two points — our great circles will intersect.
COWEN: Right.
WEIR: And when one of us reaches the other one’s, then they start following the markers at full speed, and then you get the guy. Right?
COWEN: And what’s your best guess as to how long that would take?
WEIR: Well, if you pick two points, I’m guessing one of us would have to walk probably about a quarter of the way around the planet before we found the other one’s great circle. And then you’d have to walk again. So in terms of circumnavigation times, it would take you 2x to get all the way around the planet, because my initial plan was you’d walk half-speed. So I’m guessing it would be a quarter of that, so one-half x to get to your great circle, and then a quarter x to find you along your great circle, on average, I’m guessing. So one-half plus a quarter, so .75x. So three-quarters of the time that it would take to circumnavigate the planet.
COWEN: OK, great answer.
WEIR: That’s my guess.
Do read/listen to the whole thing…
A popular culture theory of why we misunderstand families
Due to TV, which shows us “false families,” we overrate the importance of the environmental and underrate the importance of genetics:
But here’s a totally different explanation for popular misconceptions about nature and nurture. Throughout most of human history, if you knew someone, you usually knew his family as well. When you grow up in a village, you make friends; and once you make friends, you regularly interact with their relatives.
In the modern world, in contrast, we are much less likely to meet the family. You almost never meet your co-workers’ families. And you often barely know the families of your close friends. Perhaps strangely, most of the families that we “know” well are the fictional families of popular culture. The Pritchetts. The Bluths. The Whites. The Sopranos. I’ve spent more time with the Simpson family than every family besides the Caplan family.
So what? Well, with rare exceptions, the actors who comprise t.v. families aren’t even remotely related. Do your ancestors come from the same continent? Then by t.v. logic, you could be brothers – and we’re conditioned not to find the fictional relationships ridiculous. Furthermore, since drama rests heavily on conflict and contrast, every family member gets a distinctive personality and social niche. What t.v. family has three studious kids – or three class clowns? Even a show like Shameless blends full-blown degenerates with nice people to handle damage control.
The result: We have little first-hand familiarity with actual biological families. But popular culture fosters that illusion that we do. Most of the biological families that we “know” are in fact adopted all the way down. The main exception being kids’ roles where two twins play the same role to ease compliance with child labor laws!
That is from Bryan Caplan.
Claims about baseball and Palau
Baseball has dominated the cultural and sporting life of Palau for almost 100 years, which is about four times longer than Palau’s been an independent nation. Over the years, Palauans have shaped the game to fit their island lives. Kids learn to play with bamboo bats and coconut-leaf balls. Pitchers chew betel nut instead of dip. Monsoons rain out not just games and series, but entire seasons of league play. Local traditions of witchcraft have crossed over into the country’s sporting life; even today, it’s not uncommon for accusations of black magic to fly after particularly contentious games. (I’ve been reporting on and off from Palau for seven years, so I’m used to it. THIS pitcher’s dad was a known wizard; THAT team’s manager caught women from an opposing village burning leaves over home base.) Baseball as it’s played in Palau is a decidedly Palauan thing.
But baseball has also shaped Palau. It’s more than a national pastime here. It’s an organizing principle—or, more accurately, a re-organizing principle. Before the 20th century, Palau was a matriarchy. Women controlled most aspects of society, and men were limited to fishing, fighting, and handling village-to-village diplomacy. Then colonial rule brought centralized government—and baseball—to the archipelago. Ever since, these two male-dominated worlds have fed on each other, with Palau’s baseball leagues serving as a kind of farm system for government service. Scores of congressmen, senators, diplomats, and heads of state have passed through Palau’s dugouts on their way to political power.
Here is much more, from David Walker, and here is Wikipedia on Palau. For the pointer I thank Stephen Jonoes.
Tuesday assorted links
Will virtual reality make our lives better?
That is the topic of my latest Bloomberg column, here is one excerpt:
Virtual reality technology can create vivid multiprojected environments, designed to feel real in some ways. In essence, with virtual reality we will be able to manage our empathetic and emotional reactions in a manner currently beyond us. The technology may make our medical treatments seem less painful by providing distractions. It could help alleviate post-traumatic stress disorder, by allowing sufferers relive the bad experience in a way that helps them get over it. Athletes and test-takers might use simulations to get over “choking” and other performance problems. There are plenty of other uses we probably haven’t much thought of — I was struck by a recent report of a virtual reality “death simulation machine,” to help prepare people for their passing.
In this future, we will be able to steer and manage our emotional reactions to a greater degree. Do you think you don’t care enough about starving babies around the globe? There probably will be a virtual reality program to fix that, at least temporarily. You will be able to enter their world and experience their suffering in a manner that will seem almost real, perhaps in preparation for writing a check to your favorite charity.
One key question is which emotions we will decide to have more of. It would be nice to think we will use virtual reality to make ourselves more caring and more empathetic, but I’m not convinced. Just as gossip magazines and celebrity-based reality TV have long been popular, we might use virtual reality to vicariously sample the lifestyles of the rich and famous. That could make us more callous rather than more caring, or at least less involved in the suffering of others, as competing experiences will seem so much more exciting.
There is much more at the link, interesting throughout, Smith’s TMS lurks throughout.
Political Incorrect Paper of the Day: Food Deserts
Here is the abstract to The Geography of Poverty and Nutrition: Food Deserts and Food Choices Across the United States (free version) by Allcott, Diamond, and Dubé:
We study the causes of “nutritional inequality”: why the wealthy tend to eat more healthfully than the poor in the U.S. Using two event study designs exploiting entry of new supermarkets and households’ moves to healthier neighborhoods, we reject that neighborhood environments have economically meaningful effects on healthy eating. Using a structural demand model, we find that exposing low-income households to the same food availability and prices experienced by high-income households would reduce nutritional inequality by only 9%, while the remaining 91% is driven by differences in demand. In turn, these income-related demand differences are partially explained by education, nutrition knowledge, and regional preferences. These findings contrast with discussions of nutritional inequality that emphasize supply-side issues such as food deserts.
This is a good paper with a credible research design and impressive data from some 35,000 supermarkets covering 40% of the United States. Moreover, because of the widespread attention given to “food deserts” this paper probably had to be written. But color me un-surprised. The results are obvious.
Indeed, I feel that in recent years I am reading a lot of papers that aim massive firepower on weak hypotheses. As an explanation for obesity and poor eating habits, the idea of “food deserts” was absurd. The reasons are manifold. Even in food deserts it’s actually not that difficult to get healthy food and, contrary to popular belief, healthy food is not especially expensive. Try an Asian supermarket for plenty of cheap produce. Indeed, in any part of the United States you can find plenty of poor-people eating healthy foods and plenty of rich people eating unhealthy foods.
The food deserts idea was especially implausible for America because Americans spend less of their income on food consumed at home (6%) than any other nation. The Dutch, for example, spend (12%) of their income on food, the Italians and Japanese (14%), the Vietnamese (35%). There is plenty of room in the American food budget for healthy eating. Finally, Allcott, Diamond, and Dubé show that relative to unhealthy food, healthy food is actually a bit cheaper in low-income areas.
More importantly, just open your eyes. Walk into a fast food joint in a food desert and ask yourself, do the customers really want brussel sprouts but are reluctantly settling for Chips Ahoy? The idea is ridiculous and not a bit insulting in denying agency to the people who live in low-income areas. If what people living in food deserts wanted was brussel sprouts, they would get them.
The Whole Foods class think their kale and kombucha are so obviously superior to what the poor eat that the only possible explanation for poor eating is that poor people are denied choice. Yet put an inexpensive but colorful produce stand next to a McDonald’s and you can be sure that the customers will differ by class. Why the poor choose to eat differently than the rich is an interesting and important question but one more amenable to answers focusing on culture, education and history than price and income. The idea applies widely.