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.
The rate of return on everything
There is a new NBER paper on that topic by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor, here is the abstract:
This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run?Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including—for the first time—total returns to the largest, but oft ignored, component of household wealth, housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new insights and puzzles.
Here is what I learned from the paper itself:
1. Risky assets such as equities and residential real estate average about 7% gains per year in real terms. Housing outperformed equity before WWII, vice versa after WWII. In any case it is a puzzle that housing returns are less volatile but about at the same level as equity returns over a broader time span.
2. Equity and housing gains have a relatively low covariance. Buy both!
3. Equity returns across countries have become increasingly correlated, housing returns not.
4. The return on real safe assets is much more volatile than you might think.
5. The equity premium is volatile too.
6. The authors find support for Piketty’s r > g, except near periods of war. Furthermore, the gap between r and g does not seem to be correlated with the growth rate of the economy.
I found this to be one of the best and most interesting papers of the year.
Why Sex? And why only in Pairs?
Understanding the purpose of sex is a fundamental unresolved problem in evolutionary biology. The difficulty is not that there are too few theories of sex, the difficulty is that there are too many and none stand out. To distinguish between theories, we ask: Why are there no triparental species with offspring composed of the genetic material of three individuals? A successful theory should confer an advantage to biparental sex over asexual reproduction without conferring an even greater advantage to triparental sex. Of two leading theories (red queen and mutational), we show that only one is successful in this sense.
That is a new Economic Journal paper by Motty Perry, Philip J. Reny, and Arthur J. Robson. Of course the core question is a classic example of thinking at the margin. The core conclusion is that mutations continue to rise with the number of sex-participating partners, but in simple Red Queen models the limiting features of the genotypes is the same whether there are two, three, or more partners. The argument on pp.2739-2741 is not readily blog-summarizable, and I do not grasp it fully, but at the moment I have the following intuition. If a parasite attack comes, the species needs only move away from the targeted genome to continue reproducing, due to some all-or-nothing assumptions about the nature of the attack. This differs from the mutational game, where there is always some marginal (expected value) gain from moving yet further away from the initial nature of the species. Playing a game against an identified opponent brings a better-specified and more stable and less varying response strategy than playing a game against an as-yet-unidentified opponent. That isn’t how the authors put things, but…
Since we don’t observe much three-party reproduction (hardly any in fact), that suggests the Red Queen model is more likely to apply.
For the pointer I thank TEKL.
The great Ken Regan on AlphaZero
A must-read for anyone who has been following this issue, Ken considers how close to God AlphaZero actually came:
We must pause to reflect on how clarifying it is that this single heuristic suffices to master complex games—games that also represent a concrete face of asymptotic complexity insofar as their size n-by-ngeneralizations are polynomial-space hard…
It may be that we can heuristically solve some NP-type problems better by infusing an adversary—to make a PSPACE-type problem that hits back—and running AlphaZero.
That sort of thing. And don’t neglect the comments.
Abolish the penny?
There is the danger that prices will be rounded up more than down. A 19-year-old Canadian, Christina Cheung, has done a study of penny abolition in Canada and here are her findings:
She found 60.8 per cent of grocery store prices ended in 8 or 9.
Cheung put those numbers through a computer simulation program that generated hypothetical purchases.
“I simulated [grocery purchases] depending on what province you’re in, what tax rate you have, and how many items you buy,” she said.
She excluded the volume of credit and debit card transactions, which aren’t affected by penny rounding.
She then made a discovery: a typical grocery store would earn an additional $157 of revenue from rounding each year.
All together, she found grocery stores in Canada yield an additional $3.27 million dollars over a year.
The paper will be published in Atlantic Economic Journal. Here is the full story by Roshini Nair, via Michelle Dawson.
Monday assorted links
1. Excerpt from forthcoming biography of Rene Girard.
2. Politico update on anti-aging drugs (caveat emptor).
3. Norway decriminalizes drugs.
4. Appreciation of Calestous Juma. And another tribute.
5. Are early stage investors biased against women? And the gender wage gap in the U.S. government. And The Economist on women in economics. It is good to read this trio together. And some South Korean data.
6. Another argument for religion, it relates to #5 as well.
Star Wars and net neutrality
That’s why the latest Star Wars trilogy is so dark: It’s looking more and more like real life, where the credits never roll and problems can always recur…The Last Jedi premiered a few hours after we learned that the FCC had reversed its stance on net neutrality; we all sang “Yub Nub” back in 2015 when that vote went one way, but we know now that the war wasn’t won.
Here is the Ben Lindbergh piece on the pessimistic themes in Star Wars. Ted Cruz also serves up some unusual remarks.
Why are black incarceration rates falling?
So it may come as a surprise to learn that for the last 15 years, racial disparities in the American prison system have actually been on the decline, according to a Marshall Project analysis of yearly reports by the federal Bureau of Justice Statistics and the FBI’s Uniform Crime Reporting system.
Between 2000 and 2015, the imprisonment rate of black men dropped by more than 24 percent. At the same time, the white male rate increased slightly, the BJS numbers indicate.
Among women, the trend is even more dramatic. From 2000 to 2015, the black female imprisonment rate dropped by nearly 50 percent; during the same period, the white female rate shot upward by 53 percent. As the nonprofit Sentencing Project has pointed out, the racial disparity between black and white women’s incarceration was once 6 to 1. Now it’s 2 to 1.
As for potential answers:
1) Crime, arrests and incarceration are declining overall.
Those decreases benefit the most incarcerated group: African Americans. Crime rates have been on the decline since just after 1990, as have arrests. Given that both measures disproportionately affect the black community, one theory goes, the overall drop should shrink the racial gap in incarceration, too…
2) The war on drugs has shifted its focus from crack and marijuana to meth and opioids…
3) White people have also faced declining socioeconomic prospects, leading to more criminal justice involvement…
4) Criminal justice reform has been happening in cities, where more black people live, but not in rural areas.
Here is the full piece by Eli Hager, via Anecdotal.
Sunday assorted links
2. “Wine glass capacity in England has increased sevenfold in 300 years.”
3. The Economist appreciates Juan Rulfo.
4. Social psychology, meet Herodotus (on alcohol).
6. Star Wars 10k price range markets in everything. And to drive the point home, don’t romanticize the hunter-gatherer.
Do High School Sports Build or Reveal Character?
Michael R. Ransom and Tyler Ransom have a new paper on this question:
We examine the extent to which participation in high school athletics has beneficial effects on future education, labor market, and health outcomes. Due to the absence of plausible instruments in observational data, we use recently developed methods that relate selection on observables with selection on unobservables to estimate bounds on the causal effect of athletics participation. We analyze these effects in the US separately for men and women using three different nationally representative longitudinal data sets that each link high school athletics participation with later-life outcomes. We do not find consistent evidence of individual benefits reported in many previous studies – once we have accounted for selection, high school athletes are no more likely to attend college, earn higher wages, or participate in the labor force. However, we do find that men (but not women) who participated in high school athletics are more likely to exercise regularly as adults. Nevertheless, athletes are no less likely to be obese.
The pointer is from the excellent Kevin Lewis. Kevin also refers us to this paper: “…the large portion of the variance in a four-item economic egalitarianism scale can be attributed to genetic factor[s].”
“How can Bitcoin be a good store of value if its price is so volatile?”
I am oh so reluctant to repost old material, which is how bloggers fall from grace. Nonetheless I don’t think I can do better than to repeat my take from 2013:
Bitcoin is now 44 percent off its intraday high of $266.
Maybe it’s in the nature of Bitcoin to have volatile prices (and Megan comments here).
But that’s part of the point, isn’t it? (Have we ever posted on the two envelopes problem? I think so but I can’t find it through search.) Imagine you hold a currency which, over the next period will either double or halve in value. The expected return of such a Bitcoin is in fact (0.5 x .5) + (0.5 x 2) = 1.25.
What a good deal that is! Holding a single Bitcoin — a very volatile Bitcoin that is — seems like a lot of fun. It’s unlikely that simple risk aversion will take away the expected gain there.
Does this not mean that exchange rate variability is desirable per se, a kind of automatic utility machine? The party holding the other currency reaps a comparable gain from the ex ante volatility.
Fischer Black was obsessed with this problem for a few years, though I don’t think he ever quite nailed it. The mathematics behind Jensen’s Inequality are relevant here, but again that’s not the same as an explanation of the puzzle. My preferred path is to start with the Sumnerian “never reason from a price change” insight, but in any case this is a good brain teaser for your evening.”
Volatility is a feature of Bitcoin, not a bug, and that is in part for reasons that have nothing to do with speculation or bubbliness, but rather follow from the contours of the utility function. It’s that latter point that hardly anyone understands.
The seven forbidden words?
Policy analysts at the Centers for Disease Control and Prevention in Atlanta were told of the list of forbidden words at a meeting Thursday with senior CDC officials who oversee the budget, according to an analyst who took part in the 90-minute briefing. The forbidden words are “vulnerable,” “entitlement,” “diversity,” “transgender,” “fetus,” “evidence-based” and “science-based.”
That’s the WaPo piece everyone is abuzz about. A few observations:
1. This story may well be true, but I’d like more than “…according to an analyst who took part in the 90-minute briefing.” Here is another account of what exactly is known. Wasn’t “not publishing the article until it is better sourced” the evidence-based thing to do?
2. I don’t have a great fondness for the terms “evidence-based” or “science-based.” When they are used on MR, it is often as a form of third-person reference or with a slight mock or ironic touch. When I see the words used by others, my immediate reaction is to think someone is deploying it selectively, without complete self-awareness, or as a bullying tactic, in lieu of an actual argument, or as a way of denying how much their own argument depends on values rather than science. I wouldn’t ban the words for anyone working for me, but seeing them often prompts my editor’s red pen, so to speak. The most er…evidence-based people I know don’t use the term so much, least of all with reference to themselves.
3. In any case, the suggested replacement phrase — “CDC bases its recommendations on science in consideration with community standards and wishes” — I do not find offensive or anti-science, and I can imagine a plausible case that it is an actual improvement. Science is (ought to be) value-free, yet CDC and more broadly federal policy should embody values too. It should not think of itself as “the handmaiden of science.”
4. There is a fine line between “censorship” and “a bureaucratic organization which can be badly damaged by individual freelancing deciding to adopt uniform terminologies.” I don’t doubt both might be going on here, but I’d like to see the extant Twitter takes show a little more subtlety on the broader point. Don’t forget that the executive branch of government reports to the…executive, it is not a freestanding committee for debate, however much it might sometimes like to imagine otherwise.
5. The word “diversity” usually isn’t specific enough, or is channeling unstated preconceptions about how diversity should be interpreted. We should improve our use of this word. I have similar feelings about “vulnerable.”
6. People react to changes rather than levels.
7. “Fetus” — look, it is fine to disagree with the “pro-life view” (I’m not even sure what is the most neutral way of labeling it). But is banning the use of the word “fetus” in institutional documents censorship? What if an employee, during the Obama years, in an official CDC release had referred to a “fetus” as a “child”? Would that have been changed back to fetus? I am inclined to say yes. Is it censorship in only one direction, or are both decisions censorship? Or is this better seen as a disagreement over matters of fact? A disagreement over values? I am genuinely unsure, and I am unsure what a majority of the American public would think. But I would say this is sooner worth a ponder than a rant.
8. If nothing else, Sam Altman can show up in China, post “here is my vulnerable entitlement diversity transgender fetus, who is evidence-based and science-based” on his Weibo account, and then go order some Chairman Mao’s braised pork belly.
9. What are the forbidden words in other parts of the federal government, whether de jure or de facto? Will anyone be showing us a list? Or is that list censored too?
Model this for Sri Lanka Indian Coasean spite value
- India is buying Sri Lanka’s second-largest airport, despite it only handling a dozen passengers a day.
- China recently took control of a nearby port that opens up significant trade routes, and India is worried about China’s growing role in the Indian Ocean.
- Experts say the $300 million investment by India is an attempt to limit China’s ability to operate its port as a naval site.
Here is the story, via the excellent Samir Varma. India/China remains one of the world’s big stories…
Sam Altman and the fear of political correctness
Many are abuzz over Sam Altman’s short and politically incorrect blog post:
Earlier this year, I noticed something in China that really surprised me. I realized I felt more comfortable discussing controversial ideas in Beijing than in San Francisco. I didn’t feel completely comfortable—this was China, after all—just more comfortable than at home.
That showed me just how bad things have become, and how much things have changed since I first got started here in 2005.
It seems easier to accidentally speak heresies in San Francisco every year. Debating a controversial idea, even if you 95% agree with the consensus side, seems ill-advised.
Nerd that I am, I am immediately reminded of the theory of price indices. If you go to a new country with the same goods and prices as your home town, you won’t buy very much. Alternatively, if your port of call has radically remixed relative prices, you will do lots of shopping and go home pretty happy.
And so it runs with shadow prices for speech, including rights to say things and to ask questions. Whatever you are free to say in America, you have said many times already, and the marginal value of exercising that freedom yet again doesn’t seem so high. But you show up in China, and wow, your pent-up urges are not forbidden topics any more. Just do be careful with your mentions of Uncle Xi, Taiwan, Tibet, Uighur terrorists, and disappearing generals. That said, in downtown Berkeley you can speculate rather freely on whether China will someday end up as a Christian nation, and hardly anybody will be offended.
For this reason, where we live typically seems especially unfree when it comes to speech. And when I am in China, I usually have so, so many new dishes I want to sample, including chestnuts and pumpkin.
All of this will seem all the more true, the longer you have lived in your home base. You will note also that price variability increases consumer surplus, so it is no wonder that Sam enjoys China so much.