When I was a kid I had a book by George Carlin called Braindroppings. I have forgotten most of the book, but I still remember one passage :
“People say, ‘I’m going to sleep now,’ as if it were nothing. But it’s really a bizarre activity. ‘For the next several hours, while the sun is gone, I’m going to become unconscious, temporarily losing command over everything I know and understand. When the sun returns, I will resume my life.’”
There are a lot of things that, like sleep, seem weirder the more you think about them. Today Robin Hanson posted about trees. Why are trees so chaotically shaped? Why do they let any sunlight pass by them at all? Why are they supported by a single trunk? I am sure that there is some evolutionary arborist out there who can provide some insight.
I have mentioned before on this blog that the existence of firms is weird. Right-wingers in the United States (stereotypically) both love the free market and also support pro-business legislation. If you think about it, though, the market ends in the lobby of the firm. Within a firm is a command economy in which employees are directed to do different tasks by managers, and which are in turn directed by bigger managers all the way up to the CEO or board. Employees create output which is incrementally passed around to other employees (not bought or sold for a price) until a final product is delivered to buyers outside the firm. Each firm is a mini Soviet Union, with planners at the top allocating resources below based on their judgement about which department will need what and when. This can be a difficult task. My brother-in-law works for a large company as a controller. He flies around the country evaluating how much money to budget for various factories and branches. Presumably he reports to even higher level management who make an ultimate decision.
On an unrelated strange note, most employees have no contract with the firm–they just show up to work everyday, do a bunch of things, and then a paycheck arrives once a month. There is an excellent wikipedia article about why firms exist here.
There is a growing boycott of academic journal holding company Elsevier, initiated by no less than Fields Medal recipient Timothy Gowers. I had never thought deeply about the way journals work, but it is a bit ridiculous. Academics pay journals to submit content, and academics edit (referee) other people’s submitted content for free. The journals then charge libraries for access to the content, which they didn’t create or edit. Moreover, academics lose the copyright to their articles, and are paid no royalties as would be standard in the publishing industry. The main value added of the journal companies is presumably maintaining a database of articles. For this, companies like Elsevier rake in huge profits. Here is a list of Elsevier economics journals, including some fairly prestigious names:
Accounting, Organizations and Society
Agricultural Economics
Business Horizons
China Economic Review
Communist and Post-Communist Studies
Ecological Economics
Economic Modelling
Economic Systems
Economics and Human Biology
Economics Letters
Economics of Education Review
Emerging Markets Review
Energy Economics
European Economic Review
European Journal of Political Economy
Explorations in Economic History
Finance Research Letters
Food Policy
Games and Economic Behavior
Global Finance Journal
Information Economics and Policy
Insurance Mathematics and Economics
International Journal of Accounting
International Journal of Forecasting
International Journal of Industrial Organization
International Review of Economics and Finance
International Review of Financial Analysis
International Review of Law and Economics
Japan and the World Economy
Journal of Accounting and Economics
Journal of Accounting and Public Policy
Journal of Asian Economics
Journal of Banking and Finance
Journal of Business Research
Journal of Business Venturing
Journal of Comparative Economics
Journal of Corporate Finance
Journal of Development Economics
Journal of Econometrics
Journal of Economic Behavior and Organization
Journal of Economic Dynamics and Control
Journal of Economic Psychology
Journal of Economic Theory
Journal of Economics and Business
Journal of Empirical Finance
Journal of Environmental Economics and Management
Journal of Financial Economics
Journal of Financial Intermediation
Journal of Financial Markets
Journal of Financial Stability
Journal of Forestry Economics
Journal of Health Economics
Journal of Housing Economics
Journal of International Economics
Journal of International Financial Markets, Institutions & Money
Journal of International Money and Finance
Journal of Macroeconomics
Journal of Mathematical Economics
Journal of Monetary Economics
Journal of Multinational Financial Management
Journal of Policy Modeling
Journal of Public Economics
Journal of Socio-Economics
Journal of the Japanese and International Economies
Journal of Urban Economics
Labour Economics
Mathematical Social Sciences
North-American Journal of Economics and Finance
Pacific-Basin Finance Journal
Quarterly Review of Economics and Finance
Regional Science and Urban Economics
Research in Economics
Research in International Business and Finance
Research Policy
Resource and Energy Economics
Resources Policy
Review of Economic Dynamics
Review of Financial Economics
Structural Change and Economic Dynamics
Utilities Policy
World Development
Eric X. Li went trolling a couple days ago at nytimes.com. While I am aware that feeding the troll is against internet protocol, I can’t help myself.
1. Straw man: “Why, then, do so many boldly claim they have discovered the ideal political system for all mankind and that its success is forever assured?” Who makes that claim?
2. Who defines “national interest”?: “Its leaders are prepared to allow greater popular participation in political decisions if and when it is conducive to economic development and favorable to the country’s national interest.” “The fundamental difference between Washington’s view and Beijing’s is whether political rights are considered God-given and therefore absolute or whether they should be seen as privileges to be negotiated based on the needs and conditions of the nation.” What if policies which promote “national interest” hurt many individuals? Who makes up the nation?
3. Crystal ball: “[The Tiananmen Square] uprising was decisively put down on June 4, 1989. The Chinese nation paid a heavy price for that violent event, but the alternatives would have been far worse. The resulting stability ushered in a generation of growth and prosperity that propelled China’s economy to its position as the second largest in the world.” What is the counter-factual (Taiwan and Korea seemed to do ok…)? Also, what does “the nation paid a heavy price” mean? The leaders of China came out ok–it was the protestors who were shot on June 4 certainly paid a heavy price.
According to a recent nytimes article, Target has its ways of statistically uncovering your personal information:
“As [Target statistician] Pole’s computers crawled through the data, he was able to identify about 25 products that, when analyzed together, allowed him to assign each shopper a “pregnancy prediction” score. More important, he could also estimate her due date to within a small window, so Target could send coupons timed to very specific stages of her pregnancy.”
Yesterday I blogged about the ethics of police using related methods to choose where to look for criminal activity. Target’s goal is to predict the sort of products that customers will be interested in in the near future, and send relevant advertisements.
This sort of prediction makes me somewhat uncomfortable. Target doesn’t have a micro model of pregnant mothers purchasing behavior. The company presumably doesn’t know why pregnant mothers are making the product choices they do. What the company knows is that given present industry wide marketing practice, the state of the economy, and everything else, pregnant mothers buying habits are predictable. Now suppose that Target (or its competitor) changes marketing practices. Then pregnant mothers might buy a different set of products at Target, and the old statistical model may no longer hold.
If you don’t understand “why?”, it is hard to make accurate predictions. [HT Blattman]
If I feel sick and go to the doctor, I want my diagnosis to be based on all the relevant information the doctor has about me. This might include my symptoms, my parents medical history, my income level, my sexual orientation, my gender, my location, my race etc. Race, for example, can carry relevant information. Being white increases my likelihood of having type 1 diabetes. If I am black I am more likely to have sickle cell anemia, and asians are more likely to have hepatitis B.
Police, however, are expected to ignore relevant information when performing traffic or pedestrian stops. I can see how the doctor and police cases are different–you want the doctor to see you and accurately diagnose your disease, but you don’t want police hassle you or discover your crimes. Suppose for a moment that the only goal of the police is to uncover as many crimes as possible with a limited amount of time and resources. In this case, profiling based on all observables should be best practice. In the case of racial profiling for drug offenses, an article in a top economics journal finds evidence supporting a traffic stop model in which police adjust stops by race to equalize an endogenous marginal probability of arrest. In other words, police seem to act as though they are constrained arrest maximizers. A further implication is that in equilibrium individuals across all observables are equally likely to be carrying drugs (woman/man, nice car/crap car, etc).
So, is profiling based on observables unethical, and if so why? Disclaimer: as a WASA who drove his parents minivan growing up, my perspective might be a bit biased. I have never been stopped by the police (in the United States).
Edit: Thoughts a few minutes later: There is a trade-off here between being “fair” and maintaining a low rate of crime. Since people don’t choose many of their observables, it is not fair that some people will be hassled more by law enforcement. From this perspective, some reduction of observable profiling might be optimal at the expense of a higher crime rate.
Let me count the power laws:
1. My main work task was comparing a “networked” and “unnetworked” version of our search and learning trade model. The difference is that, as in the data, the networked version of the model gives rise to a power law tail in the client number distribution over firms. Here is the picture I made.
2. My office mate Felix and I were wondering whether the log-normal distribution had a fat tail or not. I looked up the definition of fat tail on wikipedia, and it turns out that fat tail means asymptotically proportional to a power law (A heavy tail, on the other hand, means not asymptotically bounded by any exponential distribution. You can be heavy but not fat, but all the fatties are heavy). A bit later, my other office mate Konstantin showed me why log-normal distribution does not have a fat tail. Log-normal is asymptotically proportional to x^-ln(x), which dies more quickly than a power law.
3. Robin Hanson’s blog post yesterday was about power law distributions. I remember reading some time ago that it is hard to differentiate between true power law tails and other “almost” fat tail distributions like log-normal. A recent article in Science makes this point again, but Robin thinks that the evidence against power laws is weak.
Seeing this wonky blog post over at the Center for Global Development blog reminded my of how confused I am by the farm subsidy issue. It is straightforward that domestic farm subsidies are a dubious transfer from Johnny American to Agro-Corp, but do subsidies hurt poor people in other parts of the world?
In the yes corner is the argument that many poor people are farmers. Poor farmers have a hard time competing with subsidized American farm products. If the US gov’t stopped dumping cheap agricultural goods abroad, prices would go up, which makes farmers abroad happy.
But wait! A year or two ago when the price of agricultural goods suddenly increased, poor city dwellers were pushed into poverty. From this point of view, by selling food abroad at very low prices, American tax payers are subsidizing the consumption of the urban poor (and non-poor for that matter).
It seems to me that the net effect of farm subsidies on the poor abroad is an empirical question. Am I missing something? Does anyone know of a paper which looks at this issue empirically?
A classmate and I were discussing how easy it is to gain administrator rights to most peoples’ computers simply by booting their computers in linux using a flash disk (note: it is easy to prevent this by putting a password on the computer’s bios–do this now if you have any sensitive information on your hard drive!). We agreed that it is a smart move to encrypt your hard drive, and my classmate told me about plausible deniability encryption, or steganography. With traditional encryption, it is hard to access encrypted information without a password, but it is easy to tell how much encrypted information is present. This makes the information vulnerable to rubber hose attacks, or coercing someone who knows the password to give it up. The idea behind plausible deniability is that there are multiple levels of encrypted data making it very difficult to tell how much encrypted information is actually present without knowing passwords. The idea is that whistle blowers can protect themselves if they are detained by claiming that there are only n levels of encrypted data, when there are actually n+k levels.
The best part is that there is a free, fairly easy to implement steganography program for linux called phonebook. I am going to try installing this on my test machine at home. All I need is some sensitive information to justify using the software–anybody have some for me?
Recently the economics blogosphere has been discussing why firms are willing to pay significant amounts of money for the advice of recent college graduates at consultancy firms. The consensus seems to be that management uses consultancy firms to justify decisions they have already made.
This discussion got me thinking about the mismanagement of firms. I keep hearing, from various sources, about how poorly many firms are run in the real world. There is a whole field in economics called the theory of the firm taking on the issue of why firms exist, and why they cannot maximize profits (essentially, people working at firms don’t like doing work–surprise!). Thinking about my I/O and trade research, I always take firms to be black boxes which maximize profits. In light of real world anecdotes and the theory of the firm, this assumption doesn’t seem very attractive even as an approximation.
This problem runs a nice parallel with the insights of behavioral economics. Years of experiments, both in the laboratory and in the real world, have shown that people do not maximize well defined preferences. However, most of economics marches forward modeling individuals as perfectly rational utility maximizers. The defense is usually to quote Tolstoy: “Happy families are all alike, but unhappy families are each unhappy in their own way.” There is a large body of work showing how to tractably model rational individuals, but it is not clear how to even begin to model irrational behavior. Sometimes it is better to have a result built on shaky foundations rather than no result at all (or is it?).
Industrial organization people sometimes defend their modeling assumptions by positing that while people may be irrational, irrational firms will be eliminated by a competitive market. The more I hear about firm management, the less I believe that argument. As a footnote, there is a neat, fairly recent literature being built which tries to measure the extent of misallocation of resources across firms. The results still depend heavily on strong assumptions about production functions and productivity, but I think this is an important direction to be moving in.
This year 160,000 people enrolled in a Stanford online artificial intelligence course (HT: Chris Blattman). While those that completed the course received a certificate including their rank in the class, they didn’t get any credit from Stanford. Why did so many people enroll?
My own prior is that tertiary education performs three roles: consumption, signaling, and training. Education is consumption because it is fun to learn new things, particularly if those things are presented well. A signaling aspect of college is necessary to explain why employers are willing to pay a large premium for a humanities major over a mere high school graduate. There is training in college as well. After four years of term papers I was able to write down my thoughts without embarrassing myself.
So which apply: Is the Stanford certificate worth something on the labor market, is it fun to learn AI basics from a couple of top researchers, or is there some productive use for the course material?