Friday assorted links
1. Skepticism about AI and deep learning.
2.The Ethiopian Urban Expansion Initiative.
3. “Patients sitting in emergency rooms, at chiropractors’ offices and at pain clinics in the Philadelphia area may start noticing on their phones the kind of messages typically seen along highway billboards and public transit: personal injury law firms looking for business by casting mobile online ads at patients.” Link here.
4. There is a Klay Thompson Magnus Carlsen article of substance (WSJ).
The safety net in Ethiopia
They are participants in Ethiopia’s Urban Productive Safety Net Project, which was launched in 2017 and is among the largest social programmes in sub-Saharan Africa (outside South Africa) designed specifically for urban areas. About 400,000 poor Ethiopians in 11 cities are already enrolled. The government hopes it will eventually help 4.7m people in almost 1,000 towns. Beneficiaries are selected by a neighbourhood committee based on how poor and vulnerable they are. In addition to the paid work, they also receive training. Those who want to start their own businesses are given grants.
Safety-nets, in one form or another, have proliferated across Africa in recent years. Spending on them in sub-Saharan Africa now amounts to about 1.5% of GDP (see chart). In Tanzania 10% of the population is covered by its safety-net (at a cost of just 0.3% of GDP)…
Ethiopia’s programme is a step towards building a national social-security system that will, in time, replace a hotch-potch of small ones. It builds on Ethiopia’s flagship rural safety-net, which is the largest of its kind on the continent and covers some 10m poor people in the countryside (out of a total population of about 102m). The government has committed $150m to fund the new scheme and the World Bank has stumped up the remaining $300m needed for the first five years. Ethiopia hopes that within ten years it will no longer need help financing the programme.
Here is more from The Economist. You can think of this as further evidence of state capacity in Ethiopia.
The internet and inflation
From Austan D. Goolsbee and Peter J. Klenow:
We use Adobe Analytics data on online transactions for millions of products in many different categories from 2014 to 2017 to shed light on how online inflation compares to overall inflation, and to gauge the magnitude of new product bias online. The Adobe data contain transaction prices and quantities purchased. We estimate that online inflation was about 1 percentage point lower than in the CPI for the same categories from 2014–2017. In addition, the rising variety of products sold online, implies roughly 2 percentage points lower inflation than in a matched model/CPI-style index.
I call this “the gains from better matching,” as discussed in The Complacent Class.
Is there a Chinese salamander bubble?
Bizarrely, only 3 percent of the animals raised by the farms are eventually sold to restaurants. The rest are sold to more start-up farms. This absurd amphibian Ponzi scheme so inflated the worth of the salamanders that a small, 2-kilogram individual could sell for around $1,500. As a result, people began supplementing the farmed stock by illegally collecting the animals from the wild. “The high prices created a sort of salamander rush,” says Jing Che from the Kunming Institute of Zoology, who was involved in the recent study.
That is from Ed Yong, via Brian Slesinsky.
Thursday assorted links
1. How good or bad is it being a truck driver? (WaPo)
2. “‘Because she didn’t pay her bill.’ Then I realized, Oh my God, she is not legit.” And: “Money, like, there’s an unlimited amount of capital in the world, you know?” Anna said to me at one point. “But there’s limited amounts of people who are talented.”
4. The philosophy of computational complexity, yet another advance.
5. Unveiling secret Twitter accounts in which GMs perhaps criticize their players?
6. Why don’t insurers care more about large health insurance bills? An understudied puzzle.
What the Randomistas Taught TOMS
You probably know the story of Tom’s shoes (here told by Andrew Leigh):
After a visit to Argentina businessman Blake Mycoskie decided he wanted to do something about the lack of decent footwear in developing nations. A talented entrepreneur, Mycoskie had founded and sold four companies by his thirtieth birthday. Now he was affected by the poverty he saw in villages outside Buenos Aires”… “I saw the real effects of being shoeless: the blisters, the sores, the infections.”
To provide shoes to those children, Mycoskie founded ‘Shoes for Better Tomorrows’, which was soon shortened to TOMS. The company made its customers a one-for-one promise: buy a pair of shoes and TOMS will donate a pair to a need child. Since 2006, TOMS has given away 60 million pairs of shoes.
Perhaps you see where this is going (but don’t be too sure!):
Six years in, Mycoskie and his team wanted to know what impact TOMS was having, so they made the brave decision to let economists randomize shoe distribution across eighteen communities in El Salvador…
The results from the World Bank study were not great:
Results indicate high levels of usage and approval of the shoes by children in the treatment group, and time diaries show modest evidence that the donated shoes allocated children’s time toward outdoor activities. Difference-in-difference and ANCOVA estimates find generally insignificant impacts on overall health, foot health, and self-esteem but small positive impacts on school attendance for boys. Children receiving the shoes were significantly more likely to state that outsiders should provide for the needs of their family. Thus, in a context where most children already own at least one pair of shoes, the overall impact of the shoe donation program appears to be negligible, illustrating the importance of more careful targeting of in-kind donation programs.
In other words, the shoes didn’t add much to health but did increase feelings of dependency. Another bubble punctured by economists. End of story, right? No. To their great credit TOMS took the results to heart. TOMS reevaluated how they give, they made adjustments, they changed. The lead researcher Bruce Wydick wrote:
By our agreement, [TOMS] could have chosen to remain anonymous on the study; they didn’t…For every TOMS, there are many more, both secular and faith-based, who are reticent to have the impacts of the program scrutinized carefully by outside researchers…many organizations today continue to avoid rigorous evaluation, relying on marketing cliches and feel-good giving to bring in donor cash. TOMS is different…
Will TOMS’ new methods work better? Only randomization will tell. Fortunately, TOMS is committed to doing just that.
This is from Andrew Leigh’s excellent new book Randomistas. Leigh tells the story of how randomized controlled trials are being used to improve teaching, crime fighting, charitable giving and more. It’s a good read and even in areas that I know well, such as crime research, I learned new information. Leigh is also careful to point to the studies that didn’t replicate as well as those that did.
By the way, Leigh is a person to keep to an eye on. In 2011, he was awarded the Economic Society of Australia’s Young Economist Award, given to “honour that Australian economist under the age of forty who is deemed to have made a significant contribution to economic thought and knowledge.” As you can see from Google Scholar this was a well-deserved award. Yet even as he received this award, Leigh had already left his position at Australian National University to embark on a second career as a Member of Parliament. Since starting his second career, however, he has published three well received books about politics, economics, and inequality and now the world of randomized controlled trials! Look for Andrew as a future Australian Treasurer and who knows what more.
A microeconomic guide to travel, including Ethiopia
That is my latest Bloomberg column, here is the opener:
I sometimes wish the market supplied “travel guides as if microeconomics really mattered.” Most guides outline the major sights and the best hotels, but what about the little things that make up so much of the value of a trip? Here’s my handy introduction to the micro side of travel, based on my recent 10-day stay in Ethiopia. You should consider investigating these same factors before choosing a destination:
How are the sidewalks?
I enjoy walking around cities, but it’s not just the quality of the architecture or the vitality of the street life that matter. The quality of the sidewalks is a central consideration, especially in emerging economies. What good are the sights if you are looking down all the time to avoid a slip or a broken ankle because of gaping holes? Sometimes major thoroughfares have no sidewalks at all.
I am happy to report that in Addis Ababa, the capital city of Ethiopia, the quality of the sidewalks and street paths is high enough to sustain productive walking with your head held high. Most of the time. B, and B+ outside the capital.
There is much more at the link, definitely recommended.
Is surfing the internet dead?
I saw a few people asking this on Twitter lately, but my views don’t quite fit into a tweet. Ten to fifteen years ago, I remember the joys of just finding things, clicking links through to other links, and in general meandering through a thick, messy, exhilarating garden.
Today you can’t do that as much. Many media sites are gated, a lot of the personal content is in the walled garden of Facebook, and blogs and personal home pages are not as significant as before. Then there is the email subscription newsletter, whether free or paid. All you can do in fact is visit www.marginalrevolution.com and a few other sites and hope their proprietors have not been sleeping since you last stopped by.
That said, I do not feel that time on the internet has become an inferior experience. It’s just that these days you find most things by Twitter. You don’t have to surf, because this aggregator performs a surfing-like function for you. Scroll rather than surf, you could say (“scrolling alone,” said somebody on Twitter).
And if you hate Twitter, it is your fault for following the wrong people (try hating yourself instead!). Follow experts and people of substance, not people who seek to lower the status of others. And if you’re really feeling the internet to be rather empty, head on over to Twitter search, still the most underrated single thing on the internet today (the MR search function is another underrated corner of the internet). Type in words of interest, such as “Ethiopia,” and what comes up will be gold.
It’s a different method today, and it uses a more centralized portal, but no the internet is not in decline. Not yet at least.
Ben Thompson on data portability and Facebook
The problem with data portability is that it goes both ways: if you can take your data out of Facebook to other applications, you can do the same thing in the other direction. The question, then, is which entity is likely to have the greater center of gravity with regards to data: Facebook, with its social network, or practically anything else?
Remember the conditions that led to Facebook’s rise in the first place: the company was able to circumvent Google, go directly to users, and build a walled garden of data that the search company couldn’t touch. Partnering or interoperating with companies below the Bill Gates Line, particularly aggregators, is simply an invitation to be intermediated. To demand that governments enforce exactly that would be a massive mistake that only helps Facebook.
Link to the post, with further explanation, is here. You can and should subscribe to Ben here. Here is my earlier post on data portability.
Software is Eating the World-Tesla Edition
Last week Consumer Reports refused to recommend Tesla’s Model 3 because it discovered lengthy braking distances. This week Consumer Reports changed their review to recommend after Tesla improved braking distance by nearly 20 feet with an over the air software update!
Last week, after CR’s road test was published, Tesla CEO Elon Musk vowed that the automaker would get a fix out within days.
Until now, that type of remote improvement to a car’s basic functionality had been unheard of. “I’ve been at CR for 19 years and tested more than 1,000 cars,” says Jake Fisher, director of auto testing at Consumer Reports, “and I’ve never seen a car that could improve its track performance with an over-the-air update.”
…In retesting after the software update was downloaded, the sedan stopped in 133 feet from 60 mph, an improvement of 19 feet.
…The improved braking distances raised the Model 3’s Overall Score enough for the car to be recommended by CR
Tesla is also responding to other concerns raised by Consumer Reports. It’s quite astounding that Tesla is able to improve something as physical as braking distance with a software update and also astounding that they are able to update so quickly–even pure software firms don’t respond this quickly! Quite the win for Tesla.
The larger economic issue is that every durable good is becoming a service. When you buy a car, a refrigerator, a house you will be buying a stream of future services, updates, corrections, improvements. That is going to change the industrial organization of firms and potentially increase monopoly power for two reasons. First, reputation will increase in importance as consumers will want to buy from firms they perceive as being well-backed and long-lasting and second durable goods will be rented more than bought which makes it easier for durable goods producers not to compete with themselves thus solving Coase’s durable good monopoly problem.
What I’ve been reading
Economic Science Fictions, edited by William Davies. I didn’t quite come away with a takeaway from this book, but still I feel obliged to pass knowledge of it along to you. It is a bunch of essays about economic themes in science fiction, and/or how the two “genres” might be more closely integrated, with a lead essay by Ha-Joon Chang.
Allen C. Guelzo, Reconstruction: A Concise History. Could this new book be the single best brief introduction to Reconstruction available? Recommended.
Emily Dufton, Grass Roots: The Rise and Fall and Rise of Marijuana in America. I loved this book, which I also consider a paradigmatic example of how to write a wonderful non-fiction work. Throughout it is clear, substantive, balanced, passes various ideological Turing tests, and it focuses on essentials, as well as framing everything in terms of broader theories of social change. It is sure to make my best books of the year list, and if she had ten other books I would buy them all sight unseen. Here is Dufton’s home page.
Bekelech Tola, Injera Variety from Crop Diversity. She explains where all the different types of injera come from. I hadn’t realized for instance that teff is sometimes mixed with maize, or sorghum flour, or cassava powder, all in the service of variety.
Wednesday assorted links
1. How futures trading affected Bitcoin prices.
3. Ethiopia on me on Ethiopia: “In the US very well educated and very sophisticated cosmopolitan people have no sense of how nice things are in Ethiopia and how well things are going. These include people with PhDs in economics familiar with Davos for a regular economic meeting.”
5. The invisible asymptote: “More people are more skilled at being hurtful in text than photos.” A good post with many points of interest.
China Ethiopia donkey estimate of the day
There are estimated to be 44 million donkeys in the world, almost all of which are maintained for work. China has the highest population (eleven million) followed by Ethiopia (five million)…
Here is the source, via pointers from Yves-Marie Stranger and Michelle Dawson. That estimate seems to be from the 1990s, the article has much more data of donkey interest, and it is a good example of Cowen’s Second Law and indeed Cowen’s First Law: “It has been made clear that the estimates of donkey populations presented here should be treated with great caution.”
And here is a 2011 report on donkeys, horses, and mules in Ethiopia. Ethiopia has the third largest total equine population in the world.
Michael Nielsen, standing on one foot
A highly sophisticated MR reader demanded a dose of Michael Nielsen. I wrote to Michael, and he was kind enough to oblige. Everything that follows is from Michael, here goes:
I started with the question “What might amuse Tyler?”, and it became very easy.
Three opinions that may amuse MR readers:
1. Peter Thiel has said: “We wanted flying cars, instead we got 140 (280) characters.” Thiel is wrong: 280 characters are much, much better than flying cars. Twitter is misunderstood as being an online service; it’s merely the online component of a much improved offline experience. Twitter DM’s are a superpower, one of the most valuable ways of connecting people ever invented. More on one way of using Twitter here.
2. Movies are primarily a visual form; movie criticism and the popular conversation about movies are primarily a literary form, and informed by literary sensibilities. This is why good movies such as Transformers are so underrated. People who dismiss such movies are mostly revealing their own ignorance.
3. Many corners of the internet have a culture of judgement or argument. Typical subtexts in online conversation are: is this good or bad? What’s wrong with it? But until and unless healthy conversational norms are formed, argument and judgement are mostly useless status-seeking by participants. Much better is a “Yes, and” culture.
Three books or papers which should be better known:
1. Elinor Ostrom’s book Governing the Commons. Ostrom dismantles the market / government dichotomy, sketching out ways common pool resources (and, to some extent, public goods) can be provided using non-market, non-government solutions.
2. Alex Tabarrok’s paper introducing dominant assurance contracts. Cryptocurrencies have huge potential as a way of creating entirely new types of market, using ideas like this. This potential is mostly unrealized to date.
3. Bret Victor on Media for Thinking the Unthinkable.
Blog posts don’t really get going until about 5,000 words in. Here are three favourites of mine:
1. Thought as a Technology, on how imaginative designers invent fundamentally new modes of thought.
2. If correlation doesn’t imply causation, then what does?
3. Using Artificial Intelligence to Augment Human Intelligence (with Shan Carter).
Despite the fact I’m well short of 5,000 words, I’ll stop here.
You can follow Michael on Twitter here.
Dental DNA Beatle rent-seeking markets in everything
A DENTIST who bought John Lennon’s tooth is looking for potential love children of the late-Beatle in a bid to stake a claim to his £400million estate.
Dr Michael Zuk, 45, from Alberta, Canada, purchased the legendary songwriter’s decayed molar at auction in 2011 for around £20,000…
Speaking with The Sun Online, the dentist has sensationally revealed that he plans to stake a claim to the music icon’s vast estate using DNA from the body part.
He said: “I am looking for people who believe they are John Lennon’s child and have a claim to his estate and hopefully I can legitimise their claim.
“John was a very popular guy who was having sex with lots of women and I doubt birth control was on his mind.
…“I would ask anyone who is participating to sign a commission agreement which would mean if they were related they would pay my company a percentage of their inheritance.
“Like a finder’s fee.”
Here is the story, via Michael J.
P.s. Solve for the equilibrium.