Monthly Archives: April 2018

Ethan Zuckerman on the Internet business environment

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He says,

I’ve been thinking a lot lately about how you’d launch rival social networks. My sense is that unless you can find something that lets you stay in touch with your friends that are already on Twitter and Facebook, you sort of have no prayer of launching anything new. And so my analogy for this is to say, imagine that you had a web browser that could only look at Facebook. It couldn’t look at any other website. Well, that’s what we had more or less in the days of AOL and CompuServe. They finally had to open up, otherwise they would die. But that was that walled-garden model.

In many ways, that’s now what we’re all dealing with on our phones, you know? My Facebook app won’t let me look at Twitter, and it won’t let me look at Mastodon, and it won’t let me look at anything else. I would really like to get back to the moment where I could have a single application that could let me look at existing social networks and new social networks. And that seems like the sort of direction we’d need to go in if we actually wanted more competition and more creativity than we’re getting right now.

Thanks to commenter Handle for the pointer to a whole set of articles on the theme of “what went wrong on the Internet.” The entire interview has a lot of thoughts that are similar to mine. But not the last two paragraphs.

He suggests giving users information about why they are being fed certain content and certain ads. I would say that most users would do nothing with that information. By the way, that is also a valid argument against my idea for a competitor to Facebook where users give more indications of what they would like to see, rather than having it fed to them by algorithm. That is, users are too lazy to create metadata.

Which leads me to think that we need to pay attention to the problems that emerge when a service caters to users who aren’t very savvy and aren’t very pro-active. The folks who need to be regulated are not the service providers–it’s the users.

As a thought-experiment, perhaps we should imagine requiring a license to use the Internet, or some parts of it. The analogy would be with a driver’s license. There are different licenses with different restrictions. I cannot drive a bus, for example. So maybe certain apps on our phone would not be available until you got the necessary license, which might require you to pass a test of some sort.

The question is not whether you would want this implemented–I am pretty sure that I would not. But come up with ideas as if you were going to implement this, just to see how the problem looks from that perspective.

Intellectuals worthy of respect

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Tyler Cowen writes,

Paul Krugman recently made a splash in a New York Times column by suggesting there are no “serious, honest, conservative intellectuals with real influence,” referring to the “unicorns of the intellectual right.” I largely agree with his criticisms, but I would like to offer a very different perspective. This column is my corresponding warning to the left

I think that for an intellectual to be worthy of respect, he or she must be able to recognize, understand, and confront the best arguments of the other side. This aligns closely with what Bryan Caplan calls the “ideological Turing test.” By that standard, Krugman himself is a dismal failure. The vast majority of his columns are comprised of nothing but asymmetric insight, the self-deceptive belief that you understand your opponents better than they understand themselves.

Cowen says,

the right is extremely familiar with the doctrines of the left and center-left, but the converse is somewhat less true.

That’s putting it mildly. Krugman’s credentials are imposing, and Kevin Williamson’s are not. But in a one-on-one debate between them, I would bet on Williamson.

The term “market fundamentalism”

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I encountered it in the preface in the review copy I received of the book Radical Markets, by Eric A. Posner and E. Glen Weyl. On p. xvi, they write

Many on the Right support Market Fundamentalism, an ideology they assume to have been proven in economic theory and historical experience. In reality, it is little more than a nostalgic commitment to an idealized version of markets as they existed in the Anglo-Saxon world in the nineteenth century. . .We contrast Market Fundamentalism with Market Radicalism, which is our own commitment to understand, restructure, and improve markets at their very roots.

I have never heard anyone explicitly say, “I am a Market Fundamentalist,” or “I believe in Market Fundamentalism.” As far as I can tell, the term is only used to disparage and to straw-man others. It does not encourage a conversation with people on the Right. It’s like trying to start a conversation with the Left by calling them Social Justice Warriors.

Non-cognitive human capital

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Chong Xiang and Stephen Ross Yeaple write,

First, the U.S. has very high output per worker. The abundance of resources makes the low U.S. PISA scores even harder to justify. Second, the employment share of cognitive occupations is relatively low in the U.S., implying weak incentives to accumulate cognitive human capital. The effects of resources and incentives thus offset each other, leaving the U.S. ranking in cognitive productivities very close to its ranking in PISA scores, near the bottom in our set of 28 countries. In our Introduction, we discussed the worries and concerns about the quality of the U.S. educational system. Figure 3 quantifies these concerns and shows that they are well justified, when we look at the cognitive dimension.

,,,the U.S. indeed has a comparative advantage for noncognitive skills

As I understand it, they show that the proof of this comparative advantage is that a lot of our labor force is engaged in occupations that are classified as “non-cognitive” but with high productivity. I found the paper difficult to follow, so I won’t comment on this interpretation.

Jonah Goldberg and Russ Roberts podcast

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The topic is Goldberg’s new book, The Suicide of the West. One of its themes is that we should appreciate the achievements of modern Western civilization. That also seems to be a theme of Steven Pinker’s latest book. One excerpt from the podcast:

if we don’t civilize people to understand this distinction between the micro- and the macro-cosm, what inevitably happens is that the logic of the microcosm, the desire to live tribally which we’re all born with, starts to infect politics. And if you are not on guard for it, it can swamp politics. And this is why I would argue that virtually every form of authoritarianism, totalitarianism–whether you want to call it right-wing or left-wing–doesn’t really matter to me any more. They are all reactionary. Because they are all trying to restore that tribal sense of social solidarity

This reminds me of what I wrote about a few weeks ago concerning the intellectual dark web. By the time you read this post, I expect that I will be much of the way through Goldberg’s book, which came out on Tuesay.

Response to a comment

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He wrote,

I really don’t understand how a libertarian economist thinks of large corporations as wrong in general.

Well, if you ask me to compare my feelings about government with my feelings about large corporations, I will sound like a libertarian economist.

But large corporations trouble me for many reasons.

1. There is a lot of power concentrated at the top.

2. By the same token, there usually are many workers who lack autonomy.

3. What I call corporate soap opera, and what most people call office politics, is a big part of life in large corporations.

4. Internally, a business is run as a command-and-control operation, not as a market. In any command-and-control setting, a lot of effort goes into gaming the system. That is, for any set of compensation policies and corporate rules, the employees mostly try to maximize their ratio of reward to effort. For its part, top management has to put a lot of effort into designing and policing the system in order to try to minimize gaming.

5. Large corporations and government tend to form symbiotic relationships, aka crony capitalism. The big corporation can negotiate for favors (“too big to fail” being one example). And big corporations are handy targets for regulation and extortion.

By the way, I found many of the comments on that post, about the Internet’s bad turn, insightful.

City income differentials widen

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Thomas B. Edsall writes,

According to Romem, between 2005 and 2016, those moving into the San Francisco area had median household incomes averaging $12,639 a year more than the households of the families moving out, $70,015 to $57,376.

Conversely, in the struggling Syracuse metropolitan area (Clinton 53.9 percent, Trump 40.1 percent), families moving in between 2005 and 2016 had median household incomes of $35,219 — $7,229 less than the median income of the families moving out of the region, $42,448.

It’s a long essay, worth reading in its entirety. Edsall’s focus is on the evolution of the political coalition that makes up the Democratic Party. But I find the economic phenomenon interesting. The data support the Handle Hypothesis that urbanization has become a winners-take-most game. The article by Issi Romem that Edsall refers to is also worth reading. Romem writes,

Why do the expensive coastal metros exhibit positive income sorting? These metros are expensive because they have restricted their supply of new housing even as they continue to generate strong demand for it.

Kevin Erdmann and many others have been saying this for quite some time.

Related: Pew reports,

In 2001, 13 percentage points separated the shares of white and African-American renter households that were burdened: 26 and 39 percent, respectively. . .By 2015, the share of African-American-led renter households that were burdened had risen to 46 percent

Rent-burdened is defined as spending more than 30 percent of a household’s income on rent. Pointer from Tyler Cowen.

I think that the political threat to the Democratic Party is minimal. Group identity seems to overcome anything. The Democrats can be anti-Israel and still get most of the Jewish vote. Their policies make housing less affordable and drive African-Americans out of Washington, D.C. or San Francisco, but they still get most of the black vote.

Jason Collins on self-discipline

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He writes,

My iPhone is used for four main purposes: as a phone; as a train timetable; as a listening device (podcasts, audiobooks and music); and for my meditation apps (more on meditation below). It also has a few utilities such as Uber that I rarely use. I don’t use my phone for social media, as a diary, or for email. Most of the day it stays in my pocket or on my desk. All notifications, except calls and text messages, are turned off. I rarely have any reason to look at it.

The whole post is interesting.

I think that it pays to evaluate your daily habits and try to reinforce the ones that you want to keep and eliminate the ones that you want to drop. I saw a reference recently to a “stoplight” system where you give yourself a list of 10-15 desired habits and, when you keep them, give a green check and when you break them, give yourself a red check. My current list is:

1. Do serious writing first thing in the morning (that is when I am sharpest).

2. Do foot stretches twice a day (to protect against the dancer’s habit of plantar fasciitis)

3. Review one dance using YouTube.

4. Read 20 pages in a book (in practice, I tend to binge-read or read nothing)

5. Straighten up an area

6. Organize web site (I am failing at this habit)

7. Aerobic exercise at least 2 hours

8. Touch base with any friend

9. Eat an apple

10. Eat broccoli

Estimating consumers’ surplus from information goods

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Erik Brynjolfsson, Avi Gannamaneni, and Felix Eggers have a paper on the topic. From the abstract:

We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods. We test the robustness of the approach and benchmark it against established methods, including incentive compatible choice experiments that require participants to give up Facebook for a certain period in exchange for compensation. The proposed choice experiments show convergent validity and are massively scalable. Our results indicate that digital goods have created large gains in well-being that are missed by conventional measures of GDP and productivity.

Pointer from Tyler Cowen.

Based on their powerpoint, I gather that the method is something like this.

1. Ask a user of, say, Facebook how much they would need to be paid to give it up for a month.

2. If they say they would give it up for $25, tell them to do it.

3. If after a month they have not used it, give them $25.

The methods that they use are really interesting, but I have doubts about the approach. I think dollars are too abstract. I would like to see a lot of “give up X or give up Y” choices offered. The authors do some of this and apparently it confirms their findings.

The values that the authors get are really high. If the median Facebook user gets over $40 a month in value from it, then Facebook is leaving a fortune on the table by not having a subscription service. Yes, they have to be careful that charging a subscription price could drive some customers away, lowering the value of the service to other customers, but the “freemium” model could be used to address that. That is, let anyone join for free, but give more privileges to subscribers.

Finally, note that if I pay less for Google Maps and other digital services than I would be willing to pay, I also pay more for my smart phone, home Internet connection, and wireless service provider than I would if all I were getting were just plain phone service. In other words, some of the “consumer’s surplus” from digital goods goes to Verizon and Apple as revenue, not to consumers.

Give up privacy, get free content: grand bargain?

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James Pethokoukis writes,

Overall, there still seems to be great satisfaction with “the internet’s grand bargain: the exchange of free or subsidized content for personalized advertising,” as Larry Downes, project director at the Georgetown Center for Business and Public Policy, writes in Harvard Business Review. And what would the internet look like if this bargain collapses due to new government data privacy regulation?

Some companies might have to find a new business model. More likely, the incumbents would be able to afford the legal overhead to comply with regulations, and new competitors would not.

If you had told me in 1994 that the Internet’s “grand bargain” would be about getting personalized advertising, I would not have been nearly so romantically taken with it. At that time, the grand bargain I was hoping for was to be able to achieve success based on taking initiative and using some technical skills instead of relying on the ability to dazzle a crowd or elbow rivals out of the way playing office politics in big organizations.

The technical architecture of the Internet put intelligence at the edges, not in the center. The social architecture would work similarly.

But that vision for the social architecture seems to me to be far from reality. Since about 2000, the intelligence at the edges has gone down, as Internet usage spread to the masses. And the intelligence at the center went up, thanks to advances in artificial intelligence and the ability to manipulate large datasets.