Tyler Cowen's Blog, page 351
June 8, 2013
The loss of privacy and the collapse of creative ambiguity
Remember the regime of creative ambiguity when it came to Fed bailouts? You kind of expected one, but weren’t totally sure what might come, and so the banking sector felt safe but not absolutely guaranteed on the side of the creditors. Post-Lehman, those days seem to be over and now the moral hazard problem looms larger.
Perhaps we had a regime of creative ambiguity when it came to privacy and government surveillance. You (or at least I) thought the government was spying on you, but there was some ambiguity as to how much. You could acquiesce to the previous status quo, without fearing it would get worse, because it was not commonly recognized public knowledge that so much spying was going on. Maybe you figured you could tolerate a 0.8 probability of that level of spying because there were checks on it becoming worse, more extensive, more selective, and so on.
But now that previous level of spying is common knowledge (or at least part of it is common knowledge, I suspect there are further revelations to come). At the same time, the IRS, Verizon, and other scandals are common knowledge too, all of a sudden.
The old equilibrium is perhaps no longer stable. People may even be fine with that level of spying, if they think it means fewer successful terror attacks. But if they acquiesce to the previous level of spying too openly, the level of spying on them will get worse. Which they do not want.
On top of all that, the common knowledge of the old spying also may make the old spying less effective in purely practical terms, as potential suspects adjust their behavior. That also may lead a risk-averse government to pursue additional and more intrusive means of spying.
So if the status quo of a few weeks ago is no longer an equilibrium, what happens next?
I predict we will see more spying and more intrusive spying. You should not think that recent events will simply cement a previous status quo in place, rather it moves us down a very particular path and probably makes the entire problem worse. The age of creative ambiguity in surveillance is over and probably not for the better.
June 7, 2013
The value of the pause?
…research suggests that taking breaks between episodes can increase your enjoyment. Perhaps most amazingly, commercials can improve the experience of watching television. Even entertaining shows start to drag after five to seven minutes, decreasing our enjoyment. Commercials disrupt that adaptation process, so when the show comes back on, we can fall in love with Jim and Pam all over again.
The quotation is from Elizabeth Dunn and Michael Norton, Happy Money: The Science of Smarter Spending, and the underlying research is here. I believe this hypothesis does not apply to me, nonetheless I am glad to season two of Borgen does not arrive until later in June. I am never tempted by binge viewing, and in general I do not like to watch two episodes in a row.
Our government will end up thwarting tech innovation and balkanizing the web
…Google Glass + NSA PRISM essentially amounts to a vision in which a foreign country is suddenly going to be flooded with American spy cameras. It seems easy to imagine any number of foreign governments having a problem with that idea. More broadly, Google is already facing a variety of anti-trust issues in Europe where basic economic nationalism is mixing with competition policy concerns. Basically various European mapping and comparison and shopping firms don’t want to be crushed by Google, and European officials are naturally sympathetic to the idea of not letting local firms be crushed by California-based ones. Legitimate concern that US tech companies are essentially a giant periscope for American intelligence agencies seem like they’d be a very powerful new weapon in the hands of European companies that want to persuade EU authorities to shackle American firms. Imagine if it had come out in the 1980s that Japanese intelligence agencies were tracking the location of ever Toyota and Honda vehicle, and then the big response from the Japanese government was to reassure people that Japanese citizens weren’t being spied upon this way. There would have been—legitimately—massive political pressure to get Japanese cars out of foreign markets.
The intelligence community obviously views America’s dominance in the high-tech sector as a strategic asset that should be exploited in its own quest for universal knowledge. But American dominance in the high-tech sector is first and foremost a source of national economic advantage, one that could be undone by excessive security involvement.
That is from Matt Yglesias.
Import Competition and the Great US Employment Sag of the 2000s
That is the new paper (pdf) by Acemoglu, Autor, Dorn, and Hanson, and here is the abstract:
Even before the Great Recession, U.S. employment growth was unimpressive. Between 2000 and 2007, the economy gave back the considerable jump in employment rates it had achieved during the 1990s, with major contractions in manufacturing employment being a prime contributor to the slump. The U.S. employment “sag” of the 2000s is widely recognized but poorly understood. In this paper, we explore an under-appreciated force contributing to sluggish U.S. employment growth: the swift rise of import competition from China. We find that the increase in U.S. imports from China, which accelerated after 2000, was a major force behind recent reductions in U.S. manufacturing employment and that through input-output linkages with the rest of the economy this negative trade shock has helped suppress overall U.S. job growth.
If you ask me what knowledge academic economics generated in the past year, one answer is a better sense of how much the rise of China has had an impact on labor markets in other countries.
Elsewhere in labor economics, the econ blogosphere very much underrates and indeed sometimes even scorns “matching theory.” But this new paper by Larry Katz et.al. (pdf) suggests a calibrated matching model can explain almost all of the rise in observed long-term unemployment. You will note that this is appended to other, more macro theories of unemployment to “fill in the boxes” and should not be considered a substitute for them.
The Washington Post is on a roll
Here is one excerpt from their latest investigation:
It is possible that the conflict between the PRISM slides and the company spokesmen is the result of imprecision on the part of the NSA author. In another classified report obtained by The Post, the arrangement is described as allowing “collection managers [to send] content tasking instructions directly to equipment installed at company-controlled locations,” rather than directly to company servers.
Government officials and the document itself made clear that the NSA regarded the identities of its private partners as PRISM’s most sensitive secret, fearing that the companies would withdraw from the program if exposed. “98 percent of PRISM production is based on Yahoo, Google and Microsoft; we need to make sure we don’t harm these sources,” the briefing’s author wrote in his speaker’s notes.
An internal presentation of 41 briefing slides on PRISM, dated April 2013 and intended for senior analysts in the NSA’s Signals Intelligence Directorate, described the new tool as the most prolific contributor to the President’s Daily Brief, which cited PRISM data in 1,477 items last year. According to the slides and other supporting materials obtained by The Post, “NSA reporting increasingly relies on PRISM” as its leading source of raw material, accounting for nearly 1 in 7 intelligence reports.
James M. Buchanan: A Celebration of Scholarship
I am pleased to announce that a conference and memorial program will be held to celebrate the work of Jim Buchanan. The conference will be on Saturday Sept. 28 and the memorial program to which all of Jim’s students, colleagues and friends are invited will be on Sunday Sept. 29. More information and rsvp here.
June 6, 2013
Edward Luce is what I call “prescient plus”
A few days ago he wrote this subtitle in the FT:
Self-interest guides the Big Data companies, and the same is often true of the White House
And this:
Big data’s agenda is not confined to immigration reform. Among other areas, it has a deep interest in shaping what Washington does on privacy, online education, the school system, the internet, corporate tax reform, cyber security and even cyber warfare. Big data is also likely to be influential in the US-European trade partnership talks, which start this month. Whether the sector becomes a thorn in the side of the process remains to be seen. Either way, Americans should be relieved someone is making the case for privacy.
He closes with this:
A century ago, Theodore Roosevelt pushed back against the power of the rail barons and oil titans – the great technological disrupters of his day. Mr Obama should pay closer heed to history. And he should become wary of geeks bearing gifts.
Don’t forget this line:
One of the geekocracy’s main characteristics is a serene faith in its own good motives.
The general problem is the unholy government and tech alliance, based on a mix of plutocracy, information-sharing, and a joint understanding of the importance of information for future elections. Which current politician wouldn’t want to court the support of tech, and which major tech company can today stand above politics?
I will add this: if you were surprised by today’s revelations, shame on you!
The economics of declining teacher quality
I hear this topic discussed quite often, yet rarely does this 2006 paper by Darius Lakdawalla, “The Economics of Teacher Quality,” come up in the popular conversation. Here is the abstract:
Concern is often voiced about the quality of American schoolteachers. This paper suggests that, while the relative quality of teachers is declining, this decline may be the result of technological changes that have raised the price of skilled workers outside teaching without affecting the productivity of skilled teachers. Growth in the price of skilled workers can cause schools to lower the relative quality of teachers and raise teacher quantity instead. Evidence from the National Longitudinal Survey of Youth demonstrates that wage and schooling are good measures of teacher quality. Analysis of U.S. census microdata then reveals that the relative schooling and experience-adjusted relative wages of U.S. schoolteachers have fallen significantly from 1940 to 1990. Moreover, class sizes have also fallen substantially. The declines in class size and in relative quality seem correlated over time and space with growth in the relative price of skilled workers.
The jstor link is here, this version is (I think) ungated for you. Here is an ungated, earlier version with some related results. Here is a good sentence from the middle of the paper:
Both schooling and experience-adjusted wages entered a period of relative decline for teachers beginning with the cohorts entering the labor force during the 1950s.
On pp.318-318 Lakdawalla discusses the importance of superior labor market opportunities for women for the argument. Here is Lakdalla’s earlier argument that Medicare benefits the poor to a disproportionate degree.
I was reminded of the education paper by a tweet from Austan Goolsbee.
Assorted links
1. Daron Acemoglu on Turkey, and Norman Stone on Turkey.
2. One (not the only) behavioral analysis of Obamacare. From a man of the cloth (but not the Vicar of Aldeburgh).
4. How do you cheat with computer aid in rapid (chess) games when there are plenty of observers? Note this is not mainly a question about chess.
5. Food markets in everything: gravy candy.
6. The ECB is not at the zero bound.
7. Did Proposition 13 starve the beast?
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