Sunday 15 March 2020

Online memes are viruses too

This morning’s Observer column:

One of the things that makes this epidemic different from predecessors is the dominance of social media in today’s world. One of the most perceptive analyses of what’s going on has come from Kate Starbird of Washington State University, who’s a leading expert on “crisis informatics” – the study of how information flows in crisis situations, especially over social media. Crises always generate levels of high uncertainty, she argues, which in turn breeds anxiety. This leads people to seek ways of resolving uncertainty and reducing anxiety by seeking information about the threat. They’re doing what humans always do – trying to make sense of a confusing situation.

In the pre-internet era, information was curated by editorial gatekeepers and official government sources. But now anything goes, and sense-making involves trying to find out stuff on the internet, through search engines and social media. Some of the information gathered may be reliable, but a lot of it won’t be. There are bad actors manipulating those platforms for economic gain (need a few face-masks, guv?) or ideological purposes. People retweet links without having looked at the site. And even innocently conceived jokes (a photograph of empty shelves in a local supermarket, for example) can trigger panic-buying…

Read on

Profiting from the crisis

The other day, partly out of curiosity — having noticed that our local Aldi store had apparently been cleaned out of hand-sanitisers, I went on to to see what was happening there. Lots of sanitizers on offer, though only a small percentage seemed to have the 60%+ alcohol content needed to see off the Coronavirus. So I chose one — priced at £6.99 (which seemed steep for a tiny bottle) but it advertised free delivery so I pushed it into the basket and continued. Turned out that the free delivery means delivery between March 30 and April 7. But if I wanted it sooner than that I could have it by paying for delivery. How much? £48. Having thus confirmed my low opinion of human nature, I deleted the item and logged off. (I have plenty of soap and have never hitherto used a hand-sanitiser.)

I guess this always happens when there’s a panic and people over-react. And of course there are smart people who know how to exploit that. The NYT has an interesting story today about two brothers who set about buying every hand-sanitizer and wipe they could find — in the process clearing the shelves of every story they visited on March 1 with the intention of selling them at a heavy markup on Amazon. Initially, it went swimmingly — until Amazon decided to take action against merchants the company judged to be engaged in price-gouging. Now, as the headline puts it over a photograph of one of the brothers in his lock-up garage, “He has 17,700 bottles of Hand Sanizer and Nowhere to Sell Them”.

Cue violins.

Andrew Sullivan on the Plague

“Reality Arrives to the Trump Era”. Spot on, as usual.

Dressing for the age of Surveillance

“If the government were to demand pictures of citizens in a variety of poses, against different backdrops, indoors and outdoors, how many Americans would readily comply? But we are already building databases of ourselves, one selfie at a time. Online images of us, our children, and our friends, often helpfully labelled with first names, which we’ve posted to photo-sharing sites like Flickr, have ended up in data sets used to train face-recognition systems.”

Yeah, but if you’re an AI geek, you can make a T-shirt with a pattern that renders you invisible to facial-recognition systems. This from a fascinating New Yorker essay by John Seabrook.

The economic impact of the pandemic (and related thoughts)

Greg Mankiw is the Robert M. Beren Professor of Economics at Harvard. People keep ringing him up asking for his views on the impact of the virus. Here’s his blogged reply:

  • A recession is likely and perhaps optimal (not in the sense of desirable but in the sense of the best we can do under the circumstances).

  • Mitigating the health crisis is the first priority. Give Dr. Fauci anything he asks for.

  • Fiscal policymakers should focus not on aggregate demand but on social insurance. Financial planners tell people to have six months of living expenses in an emergency fund. Sadly, many people do not.

  • Considering the difficulty of identifying the truly needy and the problems inherent in trying to do so, sending every American a $1000 check asap would be a good start. A payroll tax cut makes little sense in this circumstance, because it does nothing for those who can’t work.

  • There are times to worry about the growing government debt. This is not one of them.

  • Externalities abound. Helping people over their current economic difficulties may keep more people at home, reducing the spread of the virus. In other words, there are efficiency as well as equity arguments for social insurance.

  • Monetary policy should focus on maintaining liquidity. The Fed’s role in setting interest rates is less important than its role as the lender of last resort. If the Fed thinks that its hands are excessively tied in this regard by Dodd-Frank rules, Congress should untie them quickly.

  • President Trump should shut-the-hell-up. He should defer to those who know what they are talking about. Sadly, this is unlikely to occur.

Ian Donald’s tweetstream about UK government policy on COVID-19

Wonderfully succinct and helpful. Link

Why what happens in China matters more now than it did during SARS

From the Economist:

China now accounts for 16% of global gdp, up from 4% back then. Its share of all exports in textiles and apparel is now 40% of the global total. It generates 26% of the world’s furniture exports. It is also a voracious consumer of things such as metals, needed in manufacturing. In 2003 China sucked in 7% of global mining imports. Today it claims closer to a fifth.

The myth of American competitiveness

Most of the complacent guff about how American capitalism is better than its counterparts in other parts of the world is just that — guff.

The economist Thomas Philippon has done a terrific, data-intensive demolition job on the myth. In The Great Reversal: How America Gave Up on Free Markets he shows that America is no longer the spiritual home of the free-market economy (any more than Westminster is now “the mother of Parliaments”). Competition there is not fiercer than it is in ‘old’ Europe. Its regulators have been asleep at the wheel for decades and its latest crop of giant companies are not all that different from their predecessors.

Or, as he puts it:

”First, US markets have become less competitive: concentration is high in many industries, leaders are entrenched, and their profit rates are excessive. Second, this lack of competition has hurt consumers and workers: it has led to higher prices, lower investment and lower productivity growth. Third, and contrary to popular wisdom, the main explanation is political, not technological: I have traced the decrease in competition to increasing barriers to entry and weak antitrust enforcement, sustained by heavy lobbying and campaign contributions.”

So next time some tech evangelist starts to rant on about how backward Europe is, the appropriate reply is: give me a break.

‘Homo economicus’ is dead. Not before time.

Paul Collier writes a thoughtful obituary in the TLS:

Thankfully, we now know that Economic Man is a travesty. Blueprint: The evolutionary origins of a good society by Nicholas Christakis is the latest study to affirm this. It shows why, through the forces of evolution, Homo sapiens emerged as a uniquely social species. Far from being evolutionarily inevitable, Economic Man was culled almost to extinction, surviving only as the highly deviant behaviour we call psychopathic. In hunter-gatherer societies, hunters do not “eat what they kill”: such behaviour would bring social ostracism, so the hunters share their catch. The theorems derived from Economic Man explain the conditions under which a society of psychopaths would be able to function. In most contexts, those conditions turn out to be fanciful: the efficient paradise depicted in economics textbooks has never existed, and never will. Instead, in well-functioning societies, humans construct and abide by a vast web of kindness and mutual obligations of which Economic Man would be incapable.

Esther Duflo

Esther Duflo is only the second woman to win the Nobel Prize in economics (she shared this year’s prize with Abhijit Banerjee and Michael Kremer). She’s also the youngest recipient of the prize. This is the TED talk she gave in 2010 explaining some of the work which won the prize.

Our recent history, in a nutshell

From John Lanchester, opening a thoughtful and informative LRB essay on the idea of Universal Basic Income. “The broad outline of 21st-century history, its first couple of decades anyway”, he writes,

is starting to become clear. A period of credit-fuelled expansion and runaway financialisation ended with an abrupt crash and an unprecedented bank bailout. The public’s reward for assuming the bankers’ losses was austerity, which crippled the recovery and led to an interminable Great Recession. At the same time, increasing automation and globalisation, and the rise of the internet, kept first-world wages stagnant and led to an increase in precarity. Elites did fine, and in the developing world, especially Asia, economies grew, but the global middle class, mainly located in the developed world, felt increasingly anxious, ignored, resentful and angry. The decades-long decline in union power made these trends worse. The UK had its longest ever peacetime squeeze on earnings.​1 In response to this the political right played one of its historically most effective cards – Blame the Immigrants – and achieved a string of successes from Brexit to Trump to Orbán to Bolsonaro to Salvini and the AfD, succeeding in normalising its new prominence to such an extent that a quasi-fascist party scored 34 per cent in the French presidential elections, which were nonetheless hailed as a triumph for the ‘centrist’ winner.

That’s a pretty good summary, IMHO. Characteristically good piece by a terrific explainer. Worth reading in full.

The consolations of ageing

From The Economist:

Among the compensations of ageing is the right to bore youngsters with stories of the prices of yesteryear. Once upon a time a ticket to the cinema cost just five quid, and a hogshead of mead but a farthing. Of course, savvier youths know how to debunk such tales. Adjust for inflation and many things are cheaper than ever. Since 1950 the real cost of new vehicles has fallen by half, that of new clothing by 75% and that of household appliances by 90%, even as quality has got better. Tumbling prices reflect decades of improvements in technology and productivity. But the effect is not economy-wide. Cars are cheaper, but car maintenance is more expensive, and costs in education and health care have risen roughly fivefold since 1950. Though no mystery, this rise is often misunderstood, with serious economic consequences.

There are as many explanations for the ballooning cost of such services as there are politicians. But as a newly published analysis argues, many common scapegoats simply cannot explain the steady, long-run rise in such prices relative to those elsewhere in the economy. In “Why are the prices so damn high?” Eric Helland of Claremont McKenna College and Alex Tabarrok of George Mason University write that quality has improved far too little to account for it. Administrative bloat is not the answer either. In America the share of all education spending that goes on administration has been roughly steady for decades. Health-care spending has risen faster than gdp in rich countries, despite vast differences in the structure of their health-care systems….

Why digital tech might not be the key to development for poor countries

Interesting essay by Dani Rodrik:

Any optimism about the scale of GVCs’ contribution must be tempered by three sobering facts. First, the expansion of GVCs seems to have ground to a halt in recent years. Second, developing-country participation in GVCs – and indeed in world trade in general – has remained quite limited, with the notable exception of certain Asian countries. Third, and perhaps most worrisome, the domestic employment consequences of recent trade and technological trends have been disappointing.

Upon closer inspection, GVCs and new technologies exhibit features that limit the upside to – and may even undermine – developing countries’ economic performance. One such feature is an overall bias in favor of skills and other capabilities. This bias reduces developing countries’ comparative advantage in traditionally labor-intensive manufacturing (and other) activities, and decreases their gains from trade.

Second, GVCs make it harder for low-income countries to use their labor-cost advantage to offset their technological disadvantage, by reducing their ability to substitute unskilled labor for other production inputs. These two features reinforce and compound each other. The evidence to date, on the employment and trade fronts, is that the disadvantages may have more than offset the advantages.

The usual response to these concerns is to stress the importance of building up complementary skills and capabilities. Developing countries must upgrade their educational systems and technical training, improve their business environment, and enhance their logistics and transport networks in order to make fuller use of new technologies, goes the oft-heard refrain.

And here’s the punchline:

But pointing out that developing countries need to advance on all those dimensions is neither news nor helpful development advice. It is akin to saying that development requires development. Trade and technology present an opportunity when they are able to leverage existing capabilities, and thereby provide a more direct and reliable path to development. When they demand complementary and costly investments, they are no longer a shortcut around manufacturing-led development.

Great essay.

Quote of the Day

“Data is neither a good or service. It’s intangible, like a service, but can easily be stored and delivered far from its original production point, like a good.” Michael Mandel

He goes on to make a useful observation about how our national statistics surveys may be missing something important:

Paradoxically, economic and regulatory policymakers around the world are not getting the data they need to understand the importance of data for the economy. Consider this: The Bureau of Economic Analysis, the U.S. agency which estimates economic growth, will tell you how much Americans increased their consumption of jewelry and watches in 2011, but offers no information about the growing use of mobile apps or online tax preparation programs. Eurostat, the European statistical agency, reports how much European businesses invested in buildings and equipment in 2010, but not how much those same businesses spent on consumer or business databases. And the World Trade Organization publishes figures on the flow of clothing from Asia to the United States, but no official agency tracks the very valuable flow of data back and forth across the Pacific.

The problem is that data-driven economic activities do not fit naturally into the traditional economic categories. Since the modern concept of economic growth was developed in the 1930s, economists have been systematically trained to think of the economy is being divided into two big categories: ‘Goods’ and ‘services’.

Goods are physical commodities, like clothes and steel beams, while services include everything else from healthcare to accounting to haircuts to restaurants. Goods are tangible and can be easily stored for future use, while services are intangible, and cannot be stockpiled for future use. In theory, a statistician could estimate the output of a country by counting the number of cars and the bushels of corns coming out of the country’s factories and farms, and by watching workers in the service sector and counting the number of haircuts performed and the number of meals served.

But data is neither a good or service…