Robin Hanson Stuff

Posted on by David Wright

I’ve been listening to Robin and Russ talk and the flabbergasted first impression of Robin’s ideas is starting to wear off. I can just about start to think clearly about this.

Robin’s basic idea is that there have been about two technological revolutions in human history: farming and the industrial revolution. Following each of these, the pace of economic growth increased by an order of magnitude.

What, he asks, could cause the next such revolution and how will the economy look following it?

The farming revolution was all about food production. Suddenly we can produce a lot more food, a lot more reliably than before. Self-sufficiency diminishes and the manufacturing and service sectors are born.

The industrial revolution is pretty tricky to summarize. Suddenly productivity advance exploded (relative to before). Capital substitutes for labour in a meaningful way and, again, the jobs of the past need far fewer people. That seems a horribly inadequate explanation; maybe the vocabulary of economics just isn’t up to the task here. I’ll move on.

Robin’s next insight is that most of the economy is now in the service sector. To increase growth rates by another order of magnitude, we’d need to find a way of making human interaction more efficient. That’s a puzzler.

The short version of the rest is that cheaply replicated robots will take over these tasks.

The trick is that there is something necessarily human about much of the service industry; so, if robots are going to do it, they’d need to be more or less indistinguishable from humans. There’s an embarrassment of Sci-Fi examples here. My favourite is Battlestar Galactica.

Robin makes some points about the science of this, the upshot of which is that the most likely way we get there is by scanning and emulating the human brain. The idea is that we then get lots of replicas of particular individuals. To paraphrase a favourite meme of mine, the logic goes something like this:

1. Copy individuals’ brains

2. Enslave the copies

3. ????

4. Everyone gets rich.

To me, Robin rather casually brushes off the nastier historical precedents of slavery. He thinks the results of this process is a subsistence wage for everyone (really? we’ll stand for that?) and outrageous returns to capital for those that own something. Dude needs to read 19th century reactions to Marx to see how people will jive with THAT little nugget.

I’d quibble with the political economy here and say that we’d probably have a ridiculous social safety net and society becomes more of less socialist if suddenly everything were super-duper cheap. Welfare for all!

Hard work thinking about this without turning it into a TOTAL bullshit slinging contest. Too many assumptions. I understand why Tyler Cowen likes the guy so much.

He’s original!

Ridiculous Speculation

Posted on by David Wright

Here’s a theory of Human Progress: the more humans integrated economically and socially, the more progress there is.

The idea is that specialization of labour is the only reliable theory of progress. At any particular margin, innovation requires further specialization – the paths multiply like a web. The more scarce human-level intelligence is, the less innovation there is. Fewer paths are walked.

Likewise, these humans need to be brought to the font line before they can strike out on their own in their particular specialty. This is education, of course.

But the ‘system’ only really takes you to the 19th century-level of specialization; beyond that, you need to work and learn from people who work at today’s front line or, more specifically, where today’s front line is forming.

Sometimes this extra boost of education happens concurrent to the regular kind (think of computer programmers messing around on their own time, then founding a startup tech company).

THEN your training is complete and THEN you can innovate and contribute to technological progress.

Banker Bonuses – Shoot the Canary, Kill the Symptom, Treat the Messenger…

Posted on by David Wright

This article is pretty common. And stupid:

Investment banks, it seemed, were not being run in the interests of the economy or even of their owners, but for their staff. It was financial mutiny.

Bankers are salesmen. Just like Vacuum cleaner salesmen, jet engine salesmen and TV salesmen. If you’re selling a product that makes someone rich, they’ll pay you a big commission.

Bankers get rich because the people that buy their products get rich buying them. Their wealth the symptom of something else. Find a way to cut the bonuses/earnings of fund managers today (my favourite idea: stop friggen bailing out bondholders, for chrissakes), and banker bonuses will collapse tomorrow.

Guaranteed.

The Power of Data Mining

Posted on by David Wright

Reading about Emerging Adolescence in the NYT, I was particularly annoyed at this:

People can vote at 18, but in some states they don’t age out of foster care until 21. They can join the military at 18, but they can’t drink until 21. They can drive at 16, but they can’t rent a car until 25 without some hefty surcharges.

Rental companies’ decisions are based on insurance data and so are based on behaviour. The rest of these are political artifacts, long ago dressed up in the ‘logic’ of that age but really resting on ugly political deal-making, warped by public choice failures and surviving thanks to status quo bias.

But our author redeemed himself eventually:

The scientists found the children’s brains were not fully mature until at least 25. “In retrospect I wouldn’t call it shocking, but it was at the time,” Jay Giedd, the director of the study, told me. “The only people who got this right were the car-rental companies.”

This is why the auto industry has the capacity to be the most competitive insurance market of all – standardization of coverage and vast amounts of high quality data.

A Little Blast of Seratonin

Posted on by David Wright

I read something on the Internets today that tickled my bias. Always get the warm & fuzzies when that happens.

Here are the pertinent two quotes (on why Yahoo failed):

In the software business, you can’t afford not to have a hacker-centric culture.

and…

So which companies need to have a hacker-centric culture?… The answer is: any company that needs to have good software.

So what if every company needs to have good software?

The Future (no less!)

Posted on by David Wright

David Leonhardt has kicked off quite a discussion with an excellent piece in the NYT. Here’s the key bit:

In 2008, only 13.2% of the labor force was unemployed at some point. That compares to 18.1% in 1980, and 22% in 1982.

Real wages, which normally fall during recessions, have risen in this one. Even nominal wages are up.

Arnold Kling’s view (?) -this quote is out of context, but I think still gets the message across.

I am inclined to view what is happening today as the death of the pre-Internet economy.

Arnold goes on to say that this trend may change education and health care, which suffer from Baumol’s cost disease, of course.

I think he’s skipping a step, though, and is perhaps too influenced by Robin Hanson, the ultimate long-range thinker. I think that Arnold’s out-of-context quote is more normative than positive, more what-should-be than what-is.

The what-is is, to me, that, at the margin, the non-technical are having much more trouble getting a job.

I know that any time I have any influence in a job hiring situation, I push hard for someone who has math/science/programming skills or, at the very least, inclination.

As administrative roles are replaced by capital and ‘engineers’ are hired to run them, the unskilled labour either gets pushed, wrongly, into sales and fails or has to tool up with some technical skills.

Two effects: one, get those skills; and, two: the ways in which those skills can/will be deployed are exponentially increasing.

Inflation and Insurane

Posted on by David Wright

I like this presentation by Bob Hartwig at the III (haven’t finished it yet).

I find his treatment of real vs nominal variables frustrating, though. The CPI measures what people spend on stuff and is ultimately driven by wages, imho.

Wages might drive many insurance prices (rating basis for insurance costs for many companies is their payroll). But, realistically, insurance rates are not set by some theoretical link between the driving variable (wages or whatever) but by claims experience. Any changes from ‘inflation’ are competed away if the claims don’t show up. What drives claims? Well, of course they’re driven by changes in some components in the CPI, among many other things (legislative changes, exogenous shocks, etc). But this year’s claims cost is often driven by the CPI level from when the claim occurred, which may be years in the past. So there’s a lag. Tough to predict.

Bob’s an economist, so he lives and breathes ‘economic’ variables and probably doesn’t often dig into his preconceived notion of what they measure. Inflation is different depending on what you’re doing. I imagine the correlation between changes in the driving variable for an insurance policy (wages or whatever) and the actual claims cost changes is much smaller than one would think. I’d bet real money it’s less than 0.5 in the short/medium term (1-5 years).

Yeah, thanks, Naomi

Posted on by David Wright

I read No Logo years ago and remember being swayed by its arguments.

This is an article about Foxconn, which is clearly intended as an ‘exposé’ of a sweatshop in China. Would I choose to work in such a factory? Probably not. Why? Because I’m lucky enough to have better alternatives.

If you lift the facts out of the story, it’s not so sexy:

They live in dormitories, their supervisors get angry when productivity is hampered, a poor kid killed himself a week after he quit (relevant?), his family is sad.

The amazing parts of this story are completely ignored:

1. This factory employs FOUR HUNDRED AND TWENTY THOUSAND PEOPLE. Yep, you read that right. That’s amazing.

2. People choose to work in conditions we would scoff at. Why is that? BECAUSE THEY’RE BETTER OFF.

3. A job working in such a factory would be unbelievably prestigious here. Building ipods? Tell me you wouldn’t think that’s cool.

4. These people are genuinely making our lives better. International trade, man. Win-win in the long term.

Military Metaphors in Politics/Political Economy

Posted on by David Wright

My view on political discourse is that serious engagement is fundamentally Quixotic and pointless. Unfortunately, it often cannot be escaped, because three things I really do care about (economics, comedy and my personal finances) often require a moderate understanding of political happenings. I’m not happy about it, but them’s the breaks.

Anyway, the thing the I most dislike about political discourse is the exaggeration of the conflict in the debate. I think people do this to shake folks like myself out of our indifference so that we validate the discourse itself. These talking heads need an audience. Take military metaphors as an example.

One of the few commentators that I can stomach who spends a fair bit of time writing about the political economy is Arnold Kling. Today he wrote about a book called “The Battle” that outlines the “sides” various groups of people are on and, perhaps, talks about who will “win”. Arnold divides the world into statists and free enterprisists and is ready to “fight”:

The battle is to dislodge the statists. I think that Brooks raises a red herring when he argues that those of us on the free enterprise side are the majority. I am, like Bryan, skeptical that we are the majority. Moreover, even if we were in the minority, I would not wish to concede the battle.

I find it tiresome, though I agree with much of Arnold’s view of the world, so I suppose I can’t be worse off for his efforts.

In the post, he refers to Scott Sumner who once made the claim that “Presidents don’t go to war, countries go to war” and then controversially said that he thinks Al Gore would have invaded Iraq. That thought really opened up my mind, actually.

I think the result of “The Battle” is meaningless. We overemphasize individuals’ and even smallish groups’ effect on society over any time scale (and, yes, ANYONE who is consistently politically engaged, no matter what “side”, is a part of a small group – most people simply do not care. Look at voter turnout!). The will of a society is a reactionary aggregate phenomenon and no individual or group of individuals is, barring the use of military force, powerful enough to seriously effect anything long enough to matter.