J. Bradford DeLong's Blog, page 362

CFP Panel on the Transparent Society: David Brin's Book Ten Years Later: Hoisted Ten Years Later

It is now 20 years since David Brin wrote The Transparent Society. Book holds up very well, all things considering: CFP Panel on the Transparent Society: David Brin's Book Ten Years Later: Michael Froomkin:

The Transparent Society Ten Years Later : This year marks the 10th anniversary of the publication of David Brin's controversial book, "The Transparent Society". The book argues that in the face of the explosion of sensors, cheap storage, and cheap data processing we should adopt strategies of vision over concealment. A world in which not just transactional information, but essentially all information about us will be collected, stored, and sorted is, Brin says, inevitable. The only issue left to be decided is who will have access to this information; he argues that freedom, and even some privacy, are more likely to flourish if everybody - not just elites - has access to this flood of data. The book remains controversial and much-talked-about. The panel will explore how Brin's claims hold up ten years later and whether (or how far) we're on the road to a Transparent Society.

Here is my presentation:

I am a sidelight. I am here as a tame economist. The political and sociological questions are, I think, more important. Nevertheless I have a question to address: does turning the cameras not on Big Brother but on the other brothers--all the other brothers that are economic actors--help?

The first and most important of the not-Big Brothers for you--for each instantiation of "you"--is your particular employer. That is Medium-Sized Brother. The answer is that it isn't going to help, or not much. Employees of financial service firms will find their employers going through their trash in search of evidence of insider trading, and in the process employers will pick up every piece of information they could want and more. Cash-register operators in grocery stores find that their scanning frequency data plus the cameras on the cash registers give the store manager information about every gossip episode--and how costly it is in terms of items not scanned in that minute. There will be Taylorism, Taylorism rampant, Taylorism rampant in nearly every job where you have a boss.

Now this has an upside and a badside. The upside: My seventeen-year-old is a lifeguard. You clock in at the start of your shift, using nineteenth-century punch-card surveillance techology. You clock out at the end of your shift. But you don't clock out for breaks--hence some lifeguards shade their thirty-minute breaks into fifty-minute breaks, and the others grumble but don't want to be snitches, and morale falls, and the efficiency with which lifeguarding services are provided drops. Cheap cameras and infinite videotape scanned by artificially-intelligences vast, cold, and unsympathetic will allow the boss to see which lifeguards are pulling their weight and which are not, and so produce better morale and better outcomes Taylorist regimentation and restriction of individual employees' autonomy, discretion, and ability to goof off are, one might say, going to be used where they are good: where they lead to a lower-cost and a higher-quality outcome bosses will use them, and where they don't bosses won't. These Coasian arguments are trumps within economics, they are powerful, but they may not be right.'

The downsides of Medium-Sized Brother watching you: First of all, corporate bureaucracies are not rational and rationalized entities--the will to dominate and the desire to cover your butt make it certain that its surveillance powers will be badly used. Second, the coming of surveillance tools to the boss greatly alters the balance of power between bosses and workers, and eliminates a great deal of what we might think of as capillary income redistribution from rich bosses to poorer workers.

Here David Brin's solution to what are largely political problems--turn the cameras on the powerful so that the hive mind can look up at Big Brother looking down--does not, I think, apply. Absent a strong union, the boss simply does not care. Perhaps the hive mind looking up will be able to rank employers as to their relative desirability, and this will put some pressure on bosses to play nice. Perhaps not.

Then there are all the call them Little Brothers--the people who want to sell you things that you may need to be persuaded against your better judgment to buy. And then there are the people who want to figure out whether you will be a more expensive customer to serve--your health insurer, for example--so that they can decide not to let you be a customer.

Here the problem is that you--all of the yous out there--need an aggregator. Little Brothers can figure out how to use the raw data that the cameras spit out to determine what they want to know about how to sell or not sell to you, about how to manage you. The yous have a harder time figuring out how to use the information the cameras spit out to figure out how to manage the Little Brothers--you don't have a big interest in putting in the time and analytical effort to figure out how to manage one Little Brother, even though all the yous together do. Where these aggregators come from so that the yous can analyze the Little Brothers is not so clear...

David Brin wrote, I think, a wonderful book. And complaining that his solution--turn the cameras around--doesn't solve all problems is like complaining that the portions of the free ice cream aren't large enough. Nevertheless, I do complain.

And let me stop there...

Alexandra Petri: Rules for babies on the Senate floor: "W...

Alexandra Petri: Rules for babies on the Senate floor: "With babies present, senators may be held to a higher standard than previously...

...If��babies throw tantrums on the floor, they will be removed, instead of returned by the people of the state of Texas to serve another term. When asked whether President Trump is likely to fire the special counsel, babies at least have an excuse for giving a non-response. If, when presented with an exciting object, the baby becomes gravely concerned with it, and then the second that object is removed, the baby acts as though it has passed out of the world for good, the baby again has an excuse: It does not have object permanence yet. And if,��in the face of some horrible idea floated��by Trump, a baby rolls over, collapses and begins to cry, the baby still has an excuse: It is a baby. What is the Senate���s excuse?..."

#shouldread

Alma Mater Blogging...: Hoisted from the Archives from Ten Years Ago...

"How is Harvard like socialist Yugoslavia, comrade?" "I do not know: how is Harvard like socialist Yugoslavia, comrade?" "Like socialist Yugoslavia, the value of the outputs is less than the value of the input, comrade."

: Alma Mater Blogging...: Greg Mankiw's desire to move Harvard to someplace better adapted to human life than Massachusetts was triggered by:

Greg Mankiw's Blog: Time for Harvard to Move?: The Wall Street Journal reports one of the most pernicious ideas I have heard of late: 'Massachusetts legislators, demonstrating a growing resentment against the wealth of elite universities in tight economic times, are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion. The effort takes aim at one of the primary economic engines of the state, which is home to nine universities with endowments that surpass the $1 billion level, led by Harvard University's $35 billion cache, the nation's largest.... Supporters said the proposal would raise $1.4 billion a year. Based on the most recent size of Harvard's endowment, the university would have to shell out more than $840 million annually...'

There is an important underlying issue here with respect to America's private universities...

Let me put it this way: in 1960, the University of California--then overwhelmingly UCB and UCSF and UCLA--was about four times the size of Harvard, 5000 vs. 1200 undergraduates a year, with graduate students and faculty roughly in proportion. Clark Kerr, as president of the University of California in the 1960s, took a look at space constraints in Berkeley and Westwood, took a look at the rising population of California, took a look at increasing wealth, took a look at increasing educational attainment, took a look at the increasing attractiveness of American universities to people abroad, and conclude that the number of undergraduate students who could and would want to take full advantage of a UC education was going to grow eightfold over the next fifty years. So he decided to go all-out to clone UCB and UCLA.

And he did it.

Today we have UC Davis, UC Merced, UC Santa Barbara, UC Santa Cruz, UC Sunnydale, UC Irvine, UC Riverside, UC San Diego which together with UCB and UCLA graduate 40,000 undergraduates a year. Quality of education at UCB and UCLA has suffered a little bit as this cloning process has diverted resources away from us--but only by a very little bit. And the other UCs are damned good--with Davis and UCSD now being, I think, equal to the flagship campuses (although we don't admit it in bureaucratic system wars). And the Cal States do an impressive job as well. And the community colleges provide remarkable educational value for the money. The high administrators of the University of California starting with Clark Kerr have an extraordinary, remarkable accomplishment to look back upon. And they should be very proud--especially as they have accomplished it in the face of declining relative levels of support from the state legislature in Sacramento.

Harvard, over the same fifty-year time span...

Harvard has gone from 1200 undergraduates a year to 1600, and has done so in spite of starting with a substantial endowment and receiving $15B of private charitable gifts. Harvard does a great many things well--and I am impressed by the fact that Larry Summers's presidency seems to have had the effect of creating a large brand-new science building on every block. But it is hard to think that the production function from resources to outcomes is an efficient one or something to be particularly proud of: I think presidents Pusey, Bok, Rudenstine, Summers, and Bok again (and Faust) were beaten by the system. At meetings of high academic administrators Berkeley Chancellor Robert Birgeneau and his ilk can hold their heads up high as proud successors to a highly capable group of administrators who made a lot of lemonade out of the lemons that they were handed, but I don't think Harvard president Faust can do the same.

Somebody last week���was it Jan de Vries? John Ellwood? Somebody else? I forget who, but it is not original to me���said that the right model for Harvard over the past century is Yugoslavia. Remember the story of the Yugoslavian socialist worker-managed firm? If you add another worker to the firm, that worker gets a pro-rata share of the firm's value added. The firm's value added has a component attributable to the firm's capital stock, a component attributable to the ideas embedded in the firm, a component attributable to the firm's market position, and a component attributable to the workers. Hire another worker, and only the last of these goes up: the first three do not, and so average compensation falls.

This means that a worker-managed firm is likely to shrink whenever it gets good news that makes it more productive--the larger is the value added due to ideas, capital, or market position, the more expensive does it become for the existing workers to replace workers who leave, let alone hire enough workers to expand. While a competitive market capitalist firm responds to good news about its productivity and value to society by increasing employment, a Yugoslavian-model market socialist firm responds to good news about its productivity and value to society by shrinking. On this analysis, the very success of Harvard over the past two generations together with its degree of worker management has created enormous internal pressures not to expand, the better to share out the surplus among the existing stakeholders.

If this story of Harvard-over-the-past-two-generations-as-the-socialist-Yugoslavia is correct, then a bunch of hard questions are raised about:

The judgment of those who have tried to satisfy their charitable impulses by giving $15B to my alma mater over the past two generations.
The proper incentives that the government should try to present to the institution--and to those who might try to satisfy their charitable impulses in the future by adding to its endowment.
The responsibility of alumni like myself to try to influence the future governance of the institution: corporation members like Bob Reischauer know what is going on at least as well as I do, but seem to have been unable to move the institution.
The question of how Harvard should expand if indeed it should expand: it doesn't seem to be nearly as good as the small liberal arts colleges or even its rivals Yale and Princeton at undergraduate education (I did very well, but only because I quickly found two places--Social Studies in Hilles basement, and the graduate economics program--where Harvard was, effectively, a small college); the medical school and the biomedical complex that surrounds it appears to do very well indeed as research institutions; the public policy school seems to have been an experiment worth trying that did not fulfill Derek Bok's hopes, but that I cannot fully evaluate; few of the many people I know who went to the law school say many good words about it; et cetera...

Dark Satanic Millian Liberalism from John Stuart Mill

John Holbo used to talk about ���Dark Satanic Millian Liberalism���. But what he never said was that it has its origins in John Stuart Mill himself.

Here are three passages from Principles of Political Economy I find interesting:

(1) Mechanical inventions... have not yet begun to effect those great changes in human destiny, which it is in their nature and in their futurity to accomplish. Only when, in addition to just institutions, the increase of mankind shall be under the deliberate guidance of judicious foresight, can the conquests made from the powers of nature by the intellect and energy of scientific discoverers become the common property of the species, and the means of improving and elevating the universal lot...

(2) Every one has a right to live.... But no one has a right to bring creatures into life, to be supported by other people. Whoever means to stand upon the first of these rights must renounce all pretension to the last. If a man cannot support even himself unless others help him, those others are entitled to say that they do not also undertake the support of any offspring which it is physically possible for him to summon into the world... the state... is bound in self-protection, and... for the sake of every purpose for which government exists, to provide that no person shall be born without its consent...

(3) If the ordinary and spontaneous motives to self-restraint are removed, others must be substituted.... The guarantee of support could be freed from its injurious effects upon the minds and habits of the people, [only] if the relief, though ample in respect to necessaries, was accompanied with conditions which they disliked... some restraints on their freedom... privation of some indulgences... [their] condition... needs not be one of physical suffering, or the dread of it, but only of restricted indulgence, and enforced rigidity of discipline...

(1) says that there can only be a good society if fertility is brought under conscious control. (2) says that that conscious control over your fertility needs to be exercised by the state. (3) says that drawing on social insurance benefits needs to be made so unpleasant������enforced rigidity of discipline������that nobody who could earn enough to buy their ���necessaries��� in the market would choose to draw on their social insurance account.

The John Stuart Mill of On Liberty is not the only John Stuart Mill.. [As Theodore Roosevelt said]9https://archive.org/stream/addressofp... in trying to both draw on and distance himself from Puritans like William Bradford and John Winthrop and company, ���we have traveled far since their day...���

So why is John Stuart Mill, in at least some of his modes, this thing very strange to us? Why is finding your self unlucky in the market cause for the state to force you to choose either deaths from starvation or the loss of, well, your liberty������enforced rigidity of discipline...���? And why is everybody���s liberty so restricted that they have no right to have children but can only have children by the grace of the state���With the test being whether you can show that your potential children would not be a net drain on society?

In a word: . John Stuart Mill was a utilitarian first, a libertarian second, and a Malthusian always. Malthusians believed that maintaining a favorable balance between resources and mouths was the essential prerequisite to establishing an acceptable societal order. Therefore whatever was necessary to keep population in balance with resources had a lexicographic preference over all other good things. What Mill saw in his mind's eye was a world in which, as long as the state did not control and limit reproduction, for TIny Tim to be fed would mean that somebody else stronger, healthier, who could contribute more to augment the resources of society would not get fed. Thus the best thing would have been for Tiny Tim to die, and so diminish the surplus population.

"Lifeboat" ethics in action...

J. Bradford DeLong (2008): 1870: The Real Industrial Revolution?
Charles Dickens (1843): A Christmas Carol in Prose; Being a Ghost Story of Christmas
John Holbo (2003): John & Belle Have A Blog: Dead Right
Thomas Robert Malthus (1798): An Essay on the Principle of Population
John Stuart Mill (1848-71): Principles of Political Economy: With Some of Their Applications to Social Philosophy
John Stuart Mill (1857): The Project Gutenberg eBook of On Liberty, by John Stuart Mill.

Theodore Roosevelt (1907): On the occasion of the laying of the corner stone of the Pilgrim memorial monument"

malthusianeconomy

johnstuartmill

eugenics

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Ten Years Ago at Grasping Reality: May 21, 2008

Jared Diamond on Easter Island's Collapse: Needless to say, most societies���or at least most societies that we are aware of because they hang around for long enough to leave stone, pottery, or papyrus trails���do not behave this way. They evolve a social institution called private property to give individuals both control over scarce and exhaustible resources and an incentive to ensure wise and balanced extraction and careful and efficient use. It appears that the Easter Island people somehow failed to do so...

Warranted Stock Market Valuations and the Price-Earnings Equation Once Again: It can be shown http://delong.typepad.com/sdj/2007/05/a_teaching_note.html that the "right" way to value the stock market is with the price-earnings equation: P = E/[r - (1/�� - 1)��]. Here: (1) E are the earnings���the sustainable permanent cyclically-adjusted and correctly accounted for Haig-Simons earnings���paid on the index, (2) r is the appropriate real rate at which to discount cash flows of the riskiness of the stock market, (3) �� is the payout ratio of dividends to earnings, and (4) �� is the wedge (which may be positive or negative) between the appropriate external real interest rate r and the internal rate of return the firm can earn on its reinvested earnings. If we are willing to assume that �� is close to zero, than this equation is approximately: P/E = 1/r. The price-to-permanent earnings ratio is one divided by the market's expected discount rate. It's just worth pointing out that whenever the stock market is at valuation ratios that Gongloff and company consider "normal" then equities are an absolutely amazing deal relative to all kinds of bonds...

"We Always Thanked Robert Lucas for Giving Us a... Monopoly" Over Valuable Macroeconomics: Smackdown/Hoisted

Monday Smackdown/Hoisted from the Archives (August 2015): "We Always Thanked Robert Lucas for Giving Us a... Monopoly" Over Valuable Macroeconomics: The extremely sharp Paul Romer gets something, I think, very very wrong....

Paul is, I think, the captive of a folk story about the economy and economics that only survives���that could only survive���only within the epistemically-closed empirically-irrelevant calibration-scholastic hothouse....

Solow���s Choice: "Robert Solow had a choice about how to respond [to Robert Lucas]. He chose sarcastic denial over serious engagement. His optimistic assessment of the prospects for the simulation models, a grade of B or B- but nothing ���in that record that suggests suicide,��� is hard to reconcile with the decision by virtually all macroeconomists to abandon work on them.

Ummm...

That seem to me to be pretty completely wrong.

Consider Macro Advisers. [Larry Meyer's] Macro Advisors makes a very good living today selling its simulation models.... John Cassidy (1996): The Decline of Economics:

Meyer... "In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things���teach macroeconomics to graduate students, and publish in the journals...

Cassidy continues:

Meyer also pointed out that the large-scale Keynesian models that Lucas criticized have actually tracked the economy pretty accurately... when... modified....

People who have spent their lives doing macroeconomic forecasting and policy analysis know that over the last twenty-five years the Phillips curve has been the single most reliable tool in their tool kit...

And:

Meyer dismissed Lucas's followers as practitioners of what he terms closed-blind economics, saying mockingly:

When you close the blinds, you don't look out of your window and you don't care what's happening out there. You don't try to build models which are consistent with the real world. With the blinds closed, it's hard to see anything...

It is not just private-sector clients who are going to make investment decisions that depend on having a good macroeconomic forecast who are willing to pay handsomely for the output of the simulation models Romer scorns. The same holds true for central bankers as well....

From my perspective, to bet at the end of the 1970s that the right road was to require (a) consistency with the preferences of a rational representative agent, and (b) price-taking market-clearing���that was a completely wrong, disastrous, and highly irrational choice of academic fashion. I can think of a dozen alternative academic intellectual fashions that might have been adopted, and I cannot think that any of them would have been less productive.

Robert Solow tried to stop this when it started. And Robert Solow was right to do so:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the Battle of Austerlitz. If I do that, I'm getting tacitly drawn into the game that he is Napoleon Bonaparte. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludicrous���that is, by laughing at it���so as not to fall into the trap of taking it seriously and passing on to matters of technique...

Paul Krugman says that the public sphere���even the good ...

Paul Krugman says that the public sphere���even the good part of the public sphere���has gone wrong because of the threat and the menace that is twitter: Paul Krugman: Monopsony, Rigidity, and the Wage Puzzle: "This discussion is taking place marks a kind of new frontier in the mechanics of scientific communication���and, I think, an unfortunate one...

...Once upon a time economic debate took place in the pages of refereed journals, but that stopped being true at least 30 years ago, with working papers becoming the principal means of communication. Even that turned out to be too slow in the face of rapid change; so during the crisis years, say from 2008-2013, a lot of discussion and debate moved to blogs, which I���d say worked very well. In retrospect, the debates we all had over leverage, monetary policy, fiscal policy and more were really classic���the 21st-century equivalent of, say, Keynes vs. Ohlin on trade balances and relative prices.

But this latest debate has taken place largely through dueling Twitter threads���which is, I���d say, awful. The economists involved are very smart, and the threads very informative; but for people trying to keep track, including students, this is really a mess. If you want an entry point, you might try this tweet by Nick Bunker https://twitter.com/nick_bunker/status/996006320871497728. But guys, we really need something like, you know, articles���blog posts would do the trick���that summarize your positions...

#shouldread
#publicsphere
#internet

Best shadow graduation speech I have seen in quite a whil...

Best shadow graduation speech I have seen in quite a while: Simon Kuper: My life tips for graduates: embrace your ignorance: "You are graduating almost entirely ignorant. This isn���t your fault...

...Your most fecund educational years were aged nought to three, when your brain was fairly porous, but the opportunity was probably wasted. You then spent each school day surrounded by up to 30 other people, each with their own problems and ability levels. Since high school, you���ve been additionally handicapped by hormones, smartphones and early-morning starts. If you are graduating in a vocational or technical subject, then whatever you learnt is going out of date as I speak.... In short, you���re going to have to keep learning all your life. Here are a few tips:

Just shut up and listen....
Also avoid all house-price talk, route talk, diet talk, name-dropping and current-affairs clich��s. Over a lifetime, this can save you years.
Listen hardest to people younger than you. They are ignorant and generally have lowly jobs, but their fragments of knowledge will be more cutting-edge than yours. If you���re ever tempted to kid yourself that your knowledge will hold good over time, listen to aged relatives recite the race theories they picked up in the 1940s.
If you���re the smartest person in the room, you���re in the wrong room.
If you have a theory that explains everything, bin it....
When you meet someone who likes pontificating, you might pick up his tiny bit of expertise, if he has any. You���ll probably never have a productive conversation with him, and he won���t have learnt much from other people, so best to avoid.
When you discover you were wrong about something... treasure the moment
Don���t let conflicts derail your working life.... If you have to work with somebody irritating, deal with it. If you find lots of people irritating, then you���re the problem.
Even if you become an expert, you���ll still be pretty ignorant....
Obviously, you can���t be whatever you want to be. The trick is to work out what you should be.

#shouldread
#acrossthewidemissouri

Ten Years Ago at Grasping Reality: May 20, 2008

Bloomberg San Francisco Bureau at Pier 3: It is amazing what you can do with an old cargo terminal/wearhouse built out over San Francisco Bay... with a few coats of paint... and some hardwood flooring... and more miles of gigabit ethernet cabling than I have ever seen in my life... and teh scuba divers to lay the foundations for the elevators...

Ten Years Ago at Grasping Reality: May 19, 2008

A Spontaneous Order: Women and the Invisible Fist: RadGeek produces what I can only call the intellectual love child of Susan Brownmiller and Friedrich Hayek. Extremely well done: "When a large enough minority of men choose to commit widespread, intense, random acts of violence against a large enough number of women. And it can happen quite naturally without the raping men, or the protecting men, or the women in the society ever intending for any particular large-scale social outcome to come about. But what will come about, quite naturally, is that women���s social being���how women appear and act, as women, in public���will be systematically and profoundly circumscribed by a diffuse, decentralized threat of violence. And, as a natural but unintended consequence of many small, self-interested actions, some vicious and violent (as in the case of men who rape women), some worthwhile in their origins but easily and quickly corrupted (as in the case of men who try to protect women from rape), and some entirely rational responses to an irrational and dangerous situation (as in the case of women who limit their action and seek protection from men), the existence and activities of the police-blotter rapist serve to constrain women���s behavior and to become dependent on some men���and thus dependent on keeping those men pleased and serving those men���s priorities���for physical protection from other men. That kind of dependence can just as easily become frustrating and confining for the woman, and that kind of power can just as easily become corrupting and exploitative for the man, as any other form of dependence and power. (Libertarians and anarchists who easily see this dynamic when it comes to government police and military protection of a disarmed populace, shouldn���t have any trouble seeing it, if they are willing to see it, when it comes to male 'protection' of women)..."

What is worth teaching in graduate macro? My views as of ten years ago: Graduate Macroeconomics @ Berkeley: There are seven slots in the curriculum���four eight-week slots taken by everybody in their first year, and three sixteen-week slots in the second and third years for Ph.D. candidates especially interested in the field. As I understand macro, the slots are: (1) Moral hazard, near-rationality, and coordination failures, (2) Neoclassical growth theory, (3) Keynesian and new-Keynesian models, (4) Dynamic stochastic general equilibrium models, (5) Monetary theory, policy, and history, (6) Capital markets and macroeconomics, (7) Endogenous growth theories. Plus there are all the "international finance" topics. The question is: are these the right seven slots to teach, and is this the right ordering of them?..."

1870: The Real Game-Changing Industrial Revolution: The most important fact to grasp about the world economy of 1870 is that the economy then belonged much more to its past of the Middle Ages than to its future of���well, of us, and what our successors eventually decide they want to use as an overarching term with which to lable our age of fuel, machine, and digit...

John Stuart Mill teh Malthusian Neocon!!: Dark Satanic Millian Liberalism from... John Stuart Mill!!...

Gains from Trade Once Again: Mark Thoma muses about relative income--that perhaps much of American unease about globalization is the fact that the ability to buy cheap goods at Walmart doesn't balance out the belief that somebody somewhere is unfairly becoming immensely rich as the result of the process. We teach the 2 goods, 2 factors of production, 2 countries model because it is easy--but it has never been clear to me that the intuitions generated there transfer over to the more complicated real world at all...