Tyler Cowen's Blog, page 173

Machines vs. lawyers

We all know the market for lawyers is shrinking, but not every part of the legal services sector is in retreat.  John O. MacGinnis writes:

The job category that the Bureau of Labor Statistics calls “other legal services”—which includes the use of technology to help perform legal tasks—has already been surging, over 7 percent per year from 1999 to 2010.

Much of the rest of the piece details how various legal functions can be taken only, if only slowly, by smart software.  Here is a bit more:

Until now, computerized legal search has depended on typing in the right specific keywords. If I searched for “boat,” for instance, I couldn’t bring up cases concerning ships, despite their semantic equivalence. If I searched for “assumption of risk,” I wouldn’t find cases that may have employed the same concept without using the same words. IBM’s Watson suggests that such limitations will eventually disappear. Just as Watson deployed pattern recognition to capture concepts rather than mere words, so machine intelligence will exploit pattern recognition to search for semantic meanings and legal concepts. Computers will also use network analysis to assess the strength of precedent by considering the degree to which other cases and briefs rely on certain decisions. Some search engines, such as Ravel Law, already graphically display how much a particular precedent affected the subsequent course of law. As search progresses, then, machine intelligence not only will identify precedents; it will also guide a lawyer’s judgment about where, when, and how to cite them.

The entire piece is here, interesting throughout, via B.A.

Is Piketty’s “Second Law of Capitalism” fundamental?

Per Krusell and Tony Smith have a new paper on Piketty (pdf), which I take to be reflecting a crystallization of opinion on the theory side.  Here is one excerpt:

There are no errors in the formula Piketty uses, and it is actually consistent with the very earliest formulations of the neoclassical growth model, but it is not consistent with the textbook model as it is generally understood by macroeconomists. An important purpose of this note is precisely to relate Piketty’s theory to the textbook theory. Those of you with standard modern training have probably already noticed the difference between Piketty’s equation and the textbook version that we are used to. In the textbook model, the capital-to-income ratio is not s=g but rather s/(g+ δ), where δ is the rate at which capital depreciates. With the textbook formula, growth approaching zero would increase the capital-output ratio but only very marginally; when growth falls all the way to zero, the denominator would not go to zero but instead would go from, say 0.12—with g around 0.02 and δ = 0.1 as reasonable estimates—to 0.1. As it turns out, however, the two formulas are not inconsistent because Piketty defines his variables, such as income, y, not as the gross income (i.e., GDP) that appears in the textbook model but rather as income, i.e., income net of depreciation. Similarly, the saving rate that appears in the second law is not the gross saving rate as in the textbook model but instead what Piketty calls the “net saving rate”, i.e., the ratio of net saving to net income.

Contrary to what Piketty suggests in his book and papers, this distinction between net and gross variables is quite crucial for his interpretation of the second law when the growth rate falls towards zero. This turns out to be a subtle point, because on an economy’s balanced growth path, for any positive growth rate g, one can map any net saving rate into a gross saving rate, and vice versa, without changing the behavior of capital accumulation. The range of net saving rates constructed from gross saving rates, however, shrinks to zero as g goes to zero: at g = 0, the net saving rate has to be zero no matter what the gross rate is, as long as it is less than 100%. Conversely, if a positive net saving rate is maintained as g goes to zero, the gross rate has to be 100%. Thus, at g = 0, either the net rate is 0 or the gross rate is 100%. As a theory of saving, we maintain that the former is fully plausible whereas the latter is all but plausible.

With the upshot coming just a wee bit later:

…Moreover, whether one uses the textbook assumption of a historically plausible 30% saving rate or an optimizing rate, when growth falls drastically—say, from 2% to 1% or even all the way to zero—then the capital-to-income ratio, the centerpiece of Piketty’s analysis of capitalism, does not explode but rather increases only modestly. In conclusion, at least from the perspective of the theory that we are more used to and find more a priori plausible, the second law of capitalism turns out to be neither alarming nor worrisome, and Piketty’s argument that the capital-to-income ratio is poised to skyrocket does not seem well-founded. [emphasis added by TC]

Krusell and Smith really know their stuff on this topic and their arguments to me seem completely correct.

By the way, here is a Chris Giles follow-up post from The FT, very useful.

Assorted links

1. The evolution of chess openings.  Chess openings have become more diverse over time.

2. Modular robots that double as furniture.

3. Piketty responds (again) to the FT.  And AFineTheorem on Piketty.  And knowhow, dark matter, and Piketty’s capital, from Ricardo Hausmann.  And me on Piketty on the radio, transcript.

4. Where to look for your lost mother.

5. Safety vest for chickens (there is no great stagnation).  And temporary tattoos hold cooking recipes for ready scrutiny.

6. Amazon responds on Hachette.

7. A Down Syndrome man searches for employment.

8. The World Bank shake-up doesn’t seem to be going well.

Individual NBA players hire statisticians

When will we all?:

Zormelo, who works for individual players and not their teams studies film, pores over metrics, and feeds his clients a mix of information and instruction that is as much informed by Excel spreadsheets as it is by coaches’ playbooks. He gives players data and advice on obscure points of the game — something many coaches may not appreciate — like their offensive production when they take two dribbles instead of four and their shooting percentages when coming off screens at the left elbow of the court.

There is more here, via @EdwardGarnett.  Kevin Durant and John Wall are two of his better-known employers.  The NBA coaches, by the way, are not necessarily informed about Zormelo’s work.

More cars, fewer pedestrian deaths

Michael Blastland and David Spiegelhalter have a new book about risk — The Norm Chronicles: Stories and Numbers About Dangers and Death — and it does actually have new material on what is by now a somewhat worn out topic.  Here is one example:

In 1951 there were fewer than 4 million registered vehicles on the roads in Britain.  They meandered the highways free of restrictions such as road markings, traffic calming, certificates for roadworthiness, or low-impact bumpers.  Children played in the streets and walked to school.  The result was that 907 children under 15 were killed on the roads in 1951, including 707 pedestrians and 130 cyclists.  Even this was less than the 1,400 a year killed before the war.

The carnage had dropped to 533 child deaths in 1995, to 124 in 2008, to 81 in 2009, and in 2010 to 55 — each a tragedy for the family, but still a staggering 90 percent fall over 60 years.

You can buy the book here.

*Age of Ambition*, by Evan Osnos

This is one of the best books on contemporary China, maybe the best.  The subtitle is Chasing Fortune, Truth, and Faith in the New China.  Osnos is the former New Yorker correspondent in the country for five years up through 2013.  Here is one excerpt:

Li routinely taught in arenas, to classes of ten thousand people or more.  The most ardent fans paid for a “diamond degree” ticket, which included bonus small-group sessions with the great man.  The list price was $250 a day — more than a full month’s wages for the average Chinese worker.  Students thronged him for autographs.  On occasion, they sent love letters, wrapped around undergarments.

There was another widespread view of Li’s work.  “The jury is still out on whether he actually helps people learn English,” Bob Adamson, an English-language specialist at the Hong Kong Institute of Education, told me.  Li’s patented brand of shouting occupied a specific register: to my ear, it was not quite the shriek reserved for alerting someone to an oncoming truck, but it was more urgent than a summons to the dinner table.  He favored flamboyantly patriotic slogans such as “Conquer English to Make China Stronger!”  On his website, he declared, “America, England,Japan — they don’t want China to be big and powerful!  What they want most is for China’s youth to have long hair, wear bizarre clothes, drink soda, listen to Western music, have no fighting spirit, love pleasure and comfort!  The more China’s youth degenerated, the happier they are!”

Definitely recommended, fascinating throughout.

*American Railroads* (arrived on my desk)

The subtitle is Decline and Renaissance in the Twentieth Century, and the authors are Robert E. Gallamore and John R. Meyer.  John Meyer passed away in 2009 and this volume is a finished version of his last major work.

Gini coefficient for U.S. universities

For the pointer I thank J.O.

Assorted links

1. Clever birds figure out automatic door.

2. Japanese book on how to use profanity correctly in English.  And other methods of Japanese quality improvement.

3. Entropy and inequality (speculative, possibly downright dubious).

4. Why the European left is collapsing (speculative and overblown, but also makes some good points).

5. Why restitution should be small (a 2002 essay by me).

6. “Let’s, Like, Demolish Laundry.”

7. More Galbraith on Piketty.  Nate Silver on Piketty and data.

8. And very very sadly the Mackintosh library in Glasgow has been destroyed by fire.

Underreported good news

Pakistan’s prime minister, Nawaz Sharif, met on Tuesday with his new Indian counterpart, Narendra Modi, in a swiftly arranged bilateral session that caught many by surprise and offered some hope that the two countries may resume a tentative peace process after a year and a half of frosty silence.

There is more here.  My previous discussion was here.