Tuesday, September 25, 2012

This sort of thing has cropped up before

Having humans drive cars is about as efficient as having chimps hand deliver internet packets.

Shared cars can be used as another example of the difference that I see between the generation of value and the appropriation of value. If you go outside, you will see a large number of vehicles. Many of these are parked, and when a vehicle is parked it's not being used. If we wanted to increase GDP, well, we might want to increase the number of vehicles that get sold, and the number of people that own vehicles, and the number of vehicles per person. But if you think about it now, when there are technologies that are starting to ripen, such as the technology that allows us to have self-driving cars, you can think that actually you can reduce the number of cars needed by having self-driving cars as shared vehicles. You can have a transportation system that is much more shared. That is going to reduce the amount of money that flows through the car industry, simply because you're going to need fewer cars because their use is more efficient when this are shared.

Tuesday, September 18, 2012

A stunning failure of empiricism

This Edge conversation with Daron Acemoglu is pretty interesting.  I haven't read his new book "Why Nations Fail", but I know it's down there somewhere.  I like the particular bit I put in bold.  I feel like ~95% of all political debates (both public and private) proceed at exactly the level of superficiality he describes.  

Another superficial answer is you can say, India is a democracy and China is an autocracy and that means India is better. But actually, this is where it becomes important to put more flesh on the concept of institutions. Institutions are not just what's in the constitution. There's a very naive view of institutions that says it's the parchment, it's what is written on the parchment, it's what is written on the paper. I write you have a Supreme Court, you have a presidential election, that makes you a democracy. I write something else, that makes you an autocracy. And of course, that's not what we mean by institutions. That would be a very naive view of institutions and one that would have very little empirical power to explain things.
There's a great example that comes from the comparison of two defining events in the United States and Argentina. Argentina, like many other Latin American countries has a constitution that has many similarities to that of the United States: a Senate, a Congress, a Supreme Court, a president, but these work very differently. In the United States, for example, though we sometimes complain about the Supreme Court, that it's just unelected people making political decisions, it's one of the important checks on the abuse of political power. It's not something that you can easily sideline.
For instance, in the middle of the New Deal controversy, FDR tried to sideline the Supreme Court and say, these guys are really slowing my New Deal legislation. He had majorities in both houses. He was a popular president. Many people were at least hopeful about the New Deal policies, but when he came up with his schemes to either fire new justices or add new justices to the Supreme Court so that they wouldn't block or slow down his legislation anymore, nobody supported him. The Senate didn't go along with him. The media took a pretty negative attitude toward it, and FDR gave up. He didn't mess with the Supreme Court although the Supreme Court became more accommodating to him.        
The same sort of thing happened in Argentina with Peron. When Peron came to power he also didn't like that the Supreme Court was blocking him in his program. There were a lot of things that he was trying to do. Then lo and behold, he came up with exactly the same scheme. He said, these Supreme Court justices are overworked and they're too old and we need new justices and nobody raised a peep. He was able to fire the Supreme Court justices, and appoint new justices. Ever since then whenever a new president comes in in Argentina, there's a whole turnover of the Supreme Court and the Supreme Court institution is a joke in terms of what it does to restrict the president, as we're seeing right now in Argentina.
You have these same things written in the constitutions, but they work extremely differently. Why is that? Well, the reason is twofold. One is that actually the details of how these institutions work is much more important than what is written in the constitution, than what's written on the parchment. Second, these institutions don't exist independently from how political power is distributed.
In particular in Argentina, political power was highly concentrated in Peron and Peron's party's hands. The media was nonexistent. There was really no within party opposition and between party opposition was largely silenced. So that means that huge monopolization of political power enabled him to sideline whatever he wanted. In the United States that was different.

Friday, September 7, 2012


The Edge recently posted one of their conversations, this one featuring Joseph Henrich (he of WEIRD -- Western, Educated, Industrialized, Rich, and Democratic -- fame).  It's an interesting set of thoughts all around, and his basic thesis -- that it's not really possible to distinguish cultural from biological evolution because it's all part of one evolutionary process that of course has multiple levels working simultaneously -- is dear to my heart.  But there were two moments that stuck out.  

First, a point I mentioned just recently; from an ethnographic or ethological perspectives it is completely obvious that markets are fundamentally about cooperation, not competition.

One of the interesting things about the division of labor is that you're not going to specialize in a particular trade—maybe you make steel plows—unless you know that there are other people who are specializing in other kinds of trades which you need—say food or say materials for making housing, and you have to be confident that you can trade with them or exchange with them and get the other things you need. There's a lot of risk in developing specialization because you have to be confident that there's a market there that you can engage with. Whereas if you're a generalist and you do a little bit of farming, a little bit of manufacturing, then you're much less reliant on the market. Markets require a great deal of trust and a great deal of cooperation to work. Sometimes you get the impression from economics that markets are for self-interested individuals. They're actually the opposite. Self-interested individuals don't specialize, and they don't take it [to market], because there's all this trust and fairness that are required to make markets run with impersonal others.

Second, he tells a great story about Tasmanian history:

I began this investigation by looking at a case study in Tasmania. Tasmania's an island off the coast of Southern Victoria in Australia and the archeological record is really interesting in Tasmania. Up until about 10,000 years ago, 12,000 years ago, the archeology of Tasmania looks the same as Australia. It seems to be moving along together. It's getting a bit more complex over time, and then suddenly after 10,000 years ago, it takes a downturn. It becomes less complex. 

The ability to make fire is probably lost. Bone tools are lost. Fishing is lost. Boats are probably lost. Meanwhile, things move along just fine back on the continent, so there's this kind of divergence, and one thing nice about this experiment is that there's good reason to believe that peoples were genetically the same. 

You start out with two genetically well-intermixed peoples. Tasmania's actually connected to mainland Australia so it's just a peninsula. Then about 10,000 years ago, the environment changes, it gets warmer and the Bass Strait floods, so this cuts off Tasmania from the rest of Australia, and it's at that point that they begin to have this technological downturn. You can show that this is the kind of thing you'd expect if societies are like brains in the sense that they store information as a group and that when someone learns, they're learning from the most successful member, and that information is being passed from different communities, and the larger the population, the more different minds you have working on the problem. 

If your number of minds working on the problem gets small enough, you can actually begin to lose information. There's a steady state level of information that depends on the size of your population and the interconnectedness. It also depends on the innovativeness of your individuals, but that has a relatively small effect compared to the effect of being well interconnected and having a large population.

Apparently, you can start counting Neolithic Australia amongst the "things that are like a brain".