Results for “age of em” 17227 found
Are computers coming up with answers we cannot understand?
In mathematics at least the answer appears to be yes:
A computer has solved the longstanding Erdős discrepancy problem! Trouble is, we have no idea what it’s talking about — because the solution, which is as long as all of Wikipedia’s pages combined, is far too voluminous for us puny humans to confirm.
A few years ago, the mathematician Steven Strogatz predicted that it wouldn’t be too much longer before computer-assisted solutions to math problems will be beyond human comprehension. Well, we’re pretty much there. In this case, it’s an answer produced by a computer that was hammering away at the Erdős discrepancy problem.
Fortunately,
…it may not be necessary for humans to check it. As Gil Kalai of the Hebrew University of Jerusalem, Israel, has noted, if another computer program using a different method comes up with the same result, then the proof is probably right.
There is more here, via Gabriel Puliatti on Twitter.
Assorted links
1. What happens when you conduct a census of the Mexican educational system?
2. Monopsony in motion, MP3 file, a song by the Anarchist Econometricians of A. What do you know about them? And Felix Salmon on Wonkonomics.
3. Can robots solve the Malaysian mystery?
4. Do poverty traps really exist?
5. An early history of cryptocurrencies.
6. A watch for blind people (mostly being bought by the sighted, note “you can check the time in a social or work setting without appearing rude.”)
Matt Rognlie on secular stagnation
In the comments of Askblog, Matt writes:
…the “secular stagnation” hypothesis is in dire need of some cogent back-of-the-envelope estimates, and I don’t think it holds up very well. A long-term fall in the average real interest rate from, say, 2% to -1%, would be absolutely extraordinary. It would imply massive increases in the valuation of long-lived, inelastically supplied assets like land, and massive increases in the quantity of long-lived, elastically supplied capital like structures.
Just to illustrate how extreme the implications can be, consider the following (sloppy) calculation. The BEA’s average depreciation rate for private structures is currently about 2.5%. A decline in the real interest rate from 2% to -1% implies a decline in user cost r+delta from 4.5% to 1.5%, of a factor of three. If the demand for structures is unit elastic (as economists, unjustifiably from an empirical standpoint, tend to assume with Cobb-Douglas functional forms), this would imply a threefold increase in the steady-state quantity. Since structures are already 175% of GDP, this would imply an additional increase of 350% of GDP, more than doubling the overall private capital stock and nearly doubling national net worth. The transition to this level would require such an extraordinary, prolonged investment boom that we would not face slack demand for many, many years.
(There are many things wrong with this calculation, but even an effect a fraction of this size serves my point, especially when you keep in mind that land values would be skyrocketing as well. The bottom line is that proponents of secular stagnation have not yet contended with some of the basic numbers.)
There is more here. That is via David Beckworth.
I am still waiting for a model of secular stagnation that rationalizes both a negative real interest rate and positive investment, which indeed we are observing in most countries circa 2014. That means, by the way, I don’t quite agree with Matt’s sentence “The transition to this level would require such an extraordinary, prolonged investment boom that we would not face slack demand for many, many years.” There are some “reasoning from a price change” issues floating around in the background here. Is it the productivity of just new capital that has fallen to bring the natural interest rate to negative one? Or the rate of return on old capital too, in which case the value of the extant capital stock is not given by the calculation in question? Tough stuff, but you know where the burden of proof lies. Can this all fit together with the fact that nominal gdp is now well above its pre-crash peak? And that we are seeing positive net investment? In any case I agree with Matt’s broader point that the implied magnitudes here don’t seem to fit the facts or even to come close.
Speaking of Piketty (or did I mean to write “speaking of Scott Sumner?”), Scott has a question:
…here’s what confuses me. Some of the reviews seem to imply that Piketty argues that real rate of return on capital represents the rate at which the wealth of the upper classes grow. Is that right? If so, what is the basis of that argument? I don’t think anyone seriously expects the grandchildren of a Bill Gates or a Warren Buffett to be 10 times as wealthy as they are.
Alabama Texas fact of the day
“Revenues derived from college athletics is greater than the aggregate revenues of the NBA and the NHL,” said Marc Edelman, an associate professor at City University of New York who specializes in sports and antitrust law. He also noted that Alabama’s athletic revenues last year, which totaled $143 million, exceeded those of all 30 NHL teams and 25 of the 30 NBA teams.
Texas is the largest athletic department, earning more than $165 million last year in revenue — with $109 million coming from football, according to Education Department data. The university netted $27 million after expenses.
Other major programs such as Florida ($129 million), Ohio State ($123 million), Michigan ($122 million), Southern California ($97 million) and Oregon ($81 million) also are grossing massive dollars.
Those numbers of course are not counting the fundraising value of collegiate athletics. There is more here, via Michael Makowsky.
Here is our previous post on higher education and athletics.
Assorted links
1. The demand for coordinated sentiment.
2. A small idea to reduce distracted driving.
3. Which two sports have a smaller field than physics predicts? (hint: squash and Jai alai).
4. How U.S. A.I.D. is shifting its strategy.
5. Long-term unemployment and older workers.
Is the safety net failing the poor?
Catherine Rampell has an excellent blog post on this question, here is one bit:
Since the mid-1990s, the biggest increases in spending have gone to those who were middle class or hovering around the poverty line. Meanwhile, Americans in deep poverty — that is, with household earnings of less than 50 percent of the official poverty line — saw no change in their benefits in the decade leading up to the housing bubble. In fact, if you strip out Medicare and Medicaid, federal social spending on those in extreme poverty fell between 1993 and 2004.
Then, during the Great Recession and not-so-great recovery, automatic stabilizers kicked in and Congress passed new, mostly temporary, stimulus measures (such as unemployment-insurance benefit extensions). As a result, spending on the social safety net increased sharply and this time for a broader swath of Americans, including the very poor, “near-poor” and middle class. But it still rose more for people above the poverty line than it did for the very poor, Moffitt found.
Other public policies not captured by Moffitt’s calculations have also effectively diverted funds away from the very poorest Americans. Consider the rise of “merit-based,” non-means-tested financial aid at public colleges or the increasing number of tax breaks and loopholes known as “tax expenditures,” more than half of which accrue to the top income quintile.
And another:
Since the early 1990s, politicians have deliberately shifted funds away from those perceived to be the most needy and toward those perceived to be the most deserving. The bipartisan 1996 welfare reform — like the multiple expansions of the earned-income tax credit — was explicit about rewarding the working poor rather than the non-working poor. As a result, total spending per capita on “welfare” slid by about two-thirds over the past two decades, even as the poverty rate for families has stayed about the same. Many welfare reformers would consider this a triumph. If you believe many of the poorest families are not out of work by choice, though, you might have a more nuanced view.
Meanwhile, there is probably greater political cover for expanding the safety net for the middle class (that is, the non-destitute). As mid-skill, mid-wage jobs have disappeared — what’s known as the hollowing-out of the labor market — middle-class families have lost ground and are demanding more government help. These middle-class families, alongside the elderly, are also substantially more likely to vote than are the poor. The feds have whittled away at welfare, and (almost) nobody has said boo; touch programs that the middle class relies on, and electoral retribution may be fierce.
The piece is interesting throughout.
Which social groups and classes should fear higher price inflation?
Paul Krugman considers who is helped and hurt by higher rates of price inflation, and he sees the big losers as the wealthy oligarchs (and see his column today here). In contrast, I see the big losers as those with protected service sectors jobs who do not wish to have their contracts reset. If you are a schoolteacher, a nominal wage cut is likely to mean a real wage cut because you don’t have the power to renegotiate into a deal as good as the one you started with. The declining labor mobility of the United States in general means that workers are more vulnerable to higher rates of price inflation. A guy living in Cleveland who plans on leaving for Houston is probably less worried about nominal variables, because he will be doing a new contract negotiation anyway.
We all know that inflation is extremely unpopular with voters. We also observe that inflation remains extremely unpopular in a variety of northern European economies, which typically have more egalitarian distributions of income (though not always wealth) than does the United States. In any case the top 0.1 percent in those countries has less wealth per capita than in the U.S. and, at least according to progressives, less political influence too.
Of course the ability of inflation to erode rents is one of its virtues. The super-wealthy are often earning rents, but typically those rents are structured to be relatively robust to changes in nominal variables. For instance the rent might take the form of IP rights, or resource ownership rights. Simple loans of money, as we find in traditional creditor-debtor relationships, just aren’t monopolizable enough or profitable enough to be a major source of riches for the most wealthy.
I was puzzled by this comment on Krugman’s:
But there is one small but influential group that is in fact hurt by financial repression
which is just like what Hitler did to the Jews: again, the 0.1 percent.
People that wealthy can put their money into hedge funds, private equity, private capital pools, and the like. Of course there is risk involved but they have a chance as good as anyone to earn the highest rates of return prevailing in an economy, through creative uses of equity and on top of that very good accountants and tax lawyers. The very wealthy also have the greatest ability to hedge against inflation using derivatives and commodities, if they do desire.
In other contexts, Krugman (correctly) stresses that price inflation lowers the real exchange rate of a country (and thus is not neutral, supporting the view that nominal variables really do matter). So one big group of gainers from domestic inflation are those who invest lots of money overseas, wait for some inflation, and eventually convert their foreign currency holdings back into dollars for a very high net rate of return.
Which group of people might that be? The super wealthy of course. (This internationalization of returns for the super wealthy, by the way, is one big difference between current times and the 1970s.)
I am not suggesting that the very wealthy are out there pushing for higher inflation. But they are much more protected against such inflation than Krugman’s analysis suggests, and the middle class in protected service sector jobs is more vulnerable than is usually recognized. There is a reason why 4-6% price inflation has become the new third rail of American politics.
Addendum: Here are some related comments from Brad DeLong. I understand the very wealthy as believing (rightly or wrongly) that higher rates of price inflation increase economic uncertainty without providing much in the way of benefit for the real economy. So, given that belief, why should they favor higher price inflation? Since the status quo is based on low rates of price inflation, a switch to higher inflation would in fact disrupt markets (for better or worse), which would send a kind of self-validating short-run signal, at least apparently affirming this view held by the super wealthy that inflation will increase economic uncertainty.
Assorted links
1. The old version of China Star has reopened out near Fair Oaks under a new name.
2. Do selfies encourage more plastic surgery? And barter markets in everything: payments in selfies, Beyonce edition.
3. Mango trees and African sadness.
4. “Dad’s Resume.” An excellent piece.
5. How many people does it take to colonize another star system? (maybe more than you think, via The Browser)
*Flash Boys*, the new Michael Lewis book
For all the criticism the book has received, I liked and enjoyed it. It illuminates a poorly understand segment of the financial world, namely high-frequency trading, and outlines some of the zero- and negative-sum games in that world. The stories and the writing are very good, as you might expect.
It is a mistake to take the book as a balanced or accurate net assessment of HFT, but reading through the text I never saw a passage where Lewis claimed to offer that. Maybe the real objections are to be lodged against the 60 Minutes coverage of the book (which I have not seen).
Why not read a fun book on a fun and understudied topic? Just don’t confuse the emotional tenor of the stories with a final and well-reasoned attitude toward the phenomenon more generally. Surely you are all able to draw that distinction. Right?
Educational markets in everything (a short disquisition on the Tullock paradox)
Taxation and the distorted allocation of talent
That is a paper from last year by Benjamin B. Lockood, Charles G. Nathanson, and E. Glen Weyl. The key sentence of the abstract is this:
If higher-paying professions (e.g. finance and management) generate less positive net externalities than lower-paying professions (e.g. public service and education) taxation may enhance efficiency.
In other words, marginal tax rates may be Pigouvian taxes on externality-generating activities. Note that in this model high elasticities of switching careers, in response to incentives, may motivate progressive taxation rather than militating against it.
The paper does not attempt to derive which are the positive-externality and negative-externality professions, but rather considers some left- and right-wing assumptions about various professions, as well as the views of the authors.
One worry I have about this paper is that it focuses only on the static dimension. If we believe that investment has higher positive externalities over time than consumption, that militates in favor of leaving resources in the hands of wealthier individuals.
If we consider wage structures within firms, equity norms and stickiness theories predict an excess of wage compression relative to marginal products. This is what we observe in academia and also scientific research. High marginal tax rates worsen that problem rather than alleviate it.
Most of all, I think of “fundamental innovation” as the great under-rewarded input. That doesn’t correspond well to either income levels or descriptions of professions, so maybe those are not the categories this paper should focus upon. And the number of true innovators may be fairly small, so thinking about typical cases may prove misleading. If we consult “our feelings” about various professions, we will focus on typical members of that profession and their social contributions, or lack thereof. An alternative approach is to start by listing the known under-rewarded innovators from the past, noting their distribution in the professions, and then thinking how to reward those professions with the tax system, along the way worrying less about the averages or typical members of those professions. That path will bring you some very different results, and I think results more favorable to both business and scientific research.
For the pointer to the paper I thank Daniel Frank.
A study of limiting HFT
These advantages were demonstrated in a recent natural experiment set off by Canada’s stock market regulators. In April 2012 they limited the activity of high-frequency traders by increasing the fees on market messages sent by all broker-dealers, such as trades, order submissions and cancellations. This affected high-frequency traders the most, since they issue many more messages than other traders.
The effect, as measured by a group of Canadian academics, was swift and startling. The number of messages sent to the Toronto Stock Exchange dropped by 30 percent, and the bid-ask spread rose by 9 percent, an indicator of lower liquidity and higher transaction costs.
But the effects were not evenly distributed among investors. Retail investors, who tend to place more limit orders — i.e., orders to buy or sell stocks at fixed prices — experienced lower intraday returns. Institutional investors, who placed more market orders, buying and selling at whatever the market price happened to be, did better. In other words, the less high-frequency trading, the worse the small investors did.
…In a paper published last year, Terry Hendershott of Berkeley, Jonathan Brogaard of the University of Washington and Ryan Riordan of the University of Ontario Institute of Technology concluded that, “Over all, HFTs facilitate price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory price errors, both on average and on the highest volatility days.”
The pdf of the paper is here. Here is the conclusion of a Charles M. Jones survey paper on HFT (pdf):
Based on the vast majority of the empirical work to date, HFT and automated, competing markets improve market liquidity, reduce trading costs, and make stock prices more efficient. Better liquidity lowers the cost of equity capital for firms, which is an important positive for the real economy. Minor regulatory tweaks may be in order, but those formulating policy should be especially careful not to reverse the liquidity improvements of thelast twenty years.
David Brooks on the McCutcheon decision
The Supreme Court just voted to eliminate aggregate contribution limits, here is David’s response:
The McCutcheon decision is a rare win for the parties. It enables party establishments to claw back some of the power that has flowed to donors and “super PACs.” It effectively raises the limits on what party establishments can solicit. It gives party leaders the chance to form joint fund-raising committees they can use to marshal large pools of cash and influence. McCutcheon is a small step back toward a party-centric system.
In their book “Better Parties, Better Government,” Peter J. Wallison and Joel M. Gora propose the best way to reform campaign finance: eliminate the restrictions on political parties to finance the campaigns of their candidates; loosen the limitations on giving to parties; keep the limits on giving to PACs.
Parties are not perfect, Lord knows. But they have broad national outlooks. They foster coalition thinking. They are relatively transparent. They are accountable to voters. They ally with special interests, but they transcend the influence of any one. Strengthened parties will make races more competitive and democracy more legitimate. Strong parties mobilize volunteers and activists and broaden political participation. Unlike super PACs, parties welcome large numbers of people into the political process.
For which political views should a CEO have to resign?
Andrew Sullivan argues Eich should not have been forced to resign from Mozilla for his anti-gay marriage donations, combined with his unwillingness to recant his position. As a supporter of gay marriage (as of course Sullivan is too), I very much agree. Like Sullivan, I see such such ideological witch hunts as unjust, counterproductive, and stifling of free discourse.
I see some further economic angles to this dispute.
First, it implies the market share of browsers is fairly arbitrary, and highly subject to potential consumer rebellion. I can think of other businessmen who have alienated parts of the American public through their political stances, but still their products are bought and there is little talk of deposing them from their leadership roles. Free products seem especially vulnerable to fluctuations in corporate image, in part because no product has a durable edge on price. Since more of our economy seems headed in the direction of “free to consumers for direct use,” we might want to start thinking about this tendency a little more carefully and cautiously. Charging people a positive price liberates you to be less conformist, at least provided you fare well in market competition.
Second, ambitious young people just got more boring. It wasn’t long ago that opposition to gay marriage was the mainstream position in American society and of course in many places it still is.
Third, let’s say that “recantation” is becoming more important and more potent as a defense mechanism against charges (I’m not sure this is generally true, but it does seem to be true in the Eich case). That will make people more likely to express their eccentricities in youthful bursts, rather than as a consistent pattern of donations or support over many years. Consistent support over time is harder to recant, but a single act is easier to write off as a youthful indiscretion.
How has introductory economics changed as it’s been taught in American universities?
That is a new Quora forum, via Justin Wolfers, and the question is referring to the last several decades. There are interesting answers by Summers, Jeremy Bulow, Preston McAfee, and others. My answer was this:
I see greater changes than some of these answers are suggesting.
Textbooks are much clearer, better written, and the quality of problem sets and auxiliary materials is much higher. Instructors can assign video supplements or other web materials, in a way that was not possible in earlier times.
Interactive homework sites help students discover what they know, or not. Aplia led a huge revolution, which is not over.
In terms of content, in current texts there is much more on economic growth and institutions and incentives. The macro models are much clearer, even if they are still not always intuitive. Every part of the book is expected to cover and explain its material very well, a quality which was not the case in most of the earlier texts, perhaps all of them.
Overall I don’t see the difference between “content” and “presentation” as being so clear at that level of learning. So improvements in presentation are also improvements in content. I might have added that the use of “clickers” allows students to be tested in real time, as a professor is lecturing (the professor asks a question and each student has to click on the right answer, with immediate feedback), and this technique seems to be an effective one.
