Tag: Information Age

Must-read: Shane Ferro: “Thoughts on Business Insider”

Posted on by Brad DeLong

Must-Read: Shane Ferro may think that she is not so good at the game of being a twenty-first century journalist working in internet advertising-supported media. But she is very good as a trusted information intermediary and synthesist. In an ideal world, I think she would be one of two-hundred and fifty people I follow who would spend one week a year doing ten posts a day and the rest of the year doing from between five posts a week down to one a month…

Shane Ferro: Thoughts on Business Insider: “Tanzina Vega went on a tweetstorm this morning about the state of journalism…

…based on some thoughts about… why so many people have left Business Insider…. I used to work at Business Insider. I quit after 10 months. The first three months were great…. During the second three months the pressure to get more traffic and write a higher number of posts per day ramped up. The last four months, I remember mostly tense meetings about how I wasn’t hitting my goals–five posts per day and one million unique visitors per month. I remember riding the elevator downstairs in the afternoons, hoping that no one would see me crying until I hit the front door and made a left from Fifth Avenue onto 21st Street. I cried a lot while pacing back and forth on 21st street in the summer of 2015…. I never came close to hitting my goals, despite the fact that I became something of a hot take machine….

As Tanzina says in her tweetstorm, it takes quite a bit of thought to come up with a coherent opinion. I don’t have five opinions per day. I have maybe one…. The pro-labor rights econ nerd in me has at times been really angry with BI for how much content they try to squeeze out of writers. But the truth is I knew what I was getting into when I joined…. I wanted to learn how to be Joe Weisenthal. I expected it to be hard, but to ultimately give me another tool in my journalist toolbox…. My problem is my brain doesn’t work the way that it needs to work in order to succeed in that kind of environment. I either spend five seconds on a subject — I read, I think of one thought, I tweet it, and I move on — or I spend somewhere between five hours and five days really thinking through something. I am either intensely focused or completely unfocused. To succeed at BI, you have to be good at the middle ground, where you can read something, spend 30 minutes putting together a summary, maybe add another thought or two, hit publish, and then be immediately ready to start again….

BI is the extreme version of what every news organization now expects of its journalists: fast copy with a broad appeal that’s turned in without much need for editing…. I did not do well at BI…. It ended up being a good thing. It sped up the time it took me to realize that I am bad at the click game, and that means I probably don’t want to be a journalist forever. I spent the last year and a half giving a lot of thought to what’s next (and omfg I am so excited about it!).

Must-read: Benjamin Mitra-Kahn: “Keynes passed away 70 years ago today–his copyright follows”

Posted on by Brad DeLong

Must-Read: Benjamin Mitra-Kahn: Keynes passed away 70 years ago today–his copyright follows: “The most frustrating (or magical) thing about doing archival research…

…is the need to first identify and then physically inspect every box of unknown letters. But what if… we could… move the history of economics scholarship from dusty rooms around the world to the web…. The Carnegie Mellon University digitisation of Herbert Simon’s papers shows it can be done though. Building an on-line Keynes archive would be a sizeable task, but not impossible. Including Keynes’ published, unpublished (possible through Rod O’Donnell’s INET project) and uncategorised work could be a real boon to scholars and people interested in Keynes…. I think there are a number of institutions out there with a real interest in Keynes’s work, meaning this could be done…

Must-read: Gavyn Davies: “The internet and the Productivity Slump”

Posted on by Brad DeLong

Must-Read: Gavyn Davies: The internet and the Productivity Slump: “How much would an average American, whose annual disposable income is $42,300…

…need to be paid in order to be persuaded to give up their mobile phone and access to the internet, for a full year? Would it be more, or less, than $8,400 for the year?… Chad Syverson… calculates that the productivity slowdown in the US is equivalent to about $2.7 trillion of lost output per annum by 2015. Even on the most generous method that he can find to calculate the extent of the underestimated consumer surplus from the digital economy, he reckons that only about one third of the productivity gap can be explained in this way…. He suggests, on prima facie grounds, that few people would value their access to the digital economy at one fifth of their disposable income. Maybe, but… most people are now extremely reliant upon, or addicted to, the internet, especially via their smartphones. Faced with the choice, I doubt whether they would be prepared to be transported back to the obsolete technology of a decade ago in exchange for an annual payment of less than, say, a few thousand dollars a year–i.e. far less than than the value currently accorded to digital activity in GDP…

Must-read: Tim Worstall: “Facebook Doesn’t Waste Trillions In Time: That’s The Value Facebook Adds For Us”

Posted on by Brad DeLong

Must-Read: Tim Worstall: Facebook Doesn’t Waste Trillions In Time: That’s The Value Facebook Adds For Us: “CNBC… [is] saying that we all spend lots of time on Facebook…

…That’s entirely true…. They’re then saying that that time has a value: this is also true…. But then they say that the time we spend on Facebook is a waste… because we are doing Facebook rather than working to make money. And that’s entirely the wrong way around. That we are on Facbeook rather than making money shows that we value the Facebook time more than the money. Thus this financial value of this time is the value that is being added to our lives. And yes, this is an important economic point which then feeds through into public policy….

[CNBC’s] is bad economics… a fetishisation, a reification, of GDP… not something that we want to do at all: we need to remember that GDP is only a proxy for how well we’re doing, not how well we’re doing itself…. Facebook is valued in GDP at it’s profits plus its wage bill… about $10 billion [a year]…. [But] we’ve got people giving up $900 billion in hypothetical labour value…. I’m not going to insist upon that $900 billion…. But I am going to insist that the addition is very much larger than the $10 billion odd that sits in GDP…

Must-read: Mark Thoma: “Why GDP Fails as a Measure of Well-Being”

Posted on by Brad DeLong

Must-Read: Mark Thoma: Why GDP Fails as a Measure of Well-Being: “Catherine Rampell provides a nice summary of the alternative measures that have been proposed…

…However, none of these alternatives deal with the main problem… how to measure the full impact of technology on our lives…. GDP assigns a zero value to goods with a zero price, but those goods aren’t valued at zero and as they become more prominent, we’ll need to find a way of including the benefits they provide in our measures of the standard of living…. When you hear that your standard of living has gone up, ask yourself what has happened to leisure time?… How much of technology’s benefits might have been missed–how often do you use Wikipedia? And how was the additional GDP distributed across the population–did it mostly go to the 1 percent?…

Must-read: Paul Krugman: “Review of ‘The Rise and Fall of American Growth’ by Robert J. Gordon”

Posted on by Brad DeLong

Must-Read: I need to read and then come up with my own informed view of the book that ruled the American Economic Association meeting earlier this month: Robert Gordon’s Rise and Fall of American Growth. But until I do, I am going to steal Larry Summers’s and Paul Krugman’s reviews. Here’s Paul’s:

Paul Krugman: Review of ‘The Rise and Fall of American Growth’ by Robert J. Gordon: “Herman Kahn and Anthony J. Wiener’s ‘The Year 2000’ (1967)… offered…

…a systematic list of technological innovations Kahn and Wiener considered ‘very likely in the last third of the 20th century.’ Unfortunately, the two authors were mostly wrong. They didn’t miss much, foreseeing developments that recognizably correspond to all the main elements of the information technology revolution…. But a majority of their predicted innovations (‘individual flying platforms’) hadn’t arrived by 2000 — and still haven’t arrived, a decade and a half later.

The truth is that if you step back from the headlines about the latest gadget, it becomes obvious that we’ve made much less progress since 1970 — and experienced much less alteration in the fundamentals of life — than almost anyone expected. Why? Robert J. Gordon… has been arguing for a long time against the techno-optimism that saturates our culture… has argued that the I.T. revolution is less important than any one of the five Great Inventions that powered economic growth from 1870 to 1970: electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication. In ‘The Rise and Fall of American Growth,’ Gordon doubles down on that theme…. Is he right? My answer is a definite maybe. But whether or not you end up agreeing with Gordon’s thesis, this is a book well worth reading….

Techno-optimists… [say] official measures of economic growth understate the real extent of progress, because they don’t fully account for the benefits of truly new goods. Gordon concedes this point, but notes that it was always thus — and that the understatement of progress was probably bigger during the great prewar transformation than it is today…. Gordon suggests that the future is all too likely to be marked by stagnant living standards for most Americans, because the effects of slowing technological progress will be reinforced by a set of ‘headwinds’…. It’s a shocking prediction for a society whose self-image, arguably its very identity, is bound up with the expectation of constant progress. And you have to wonder about the social and political consequences…

Must-read: David Warsh: “Whose ‘Rules?'”

Posted on by Brad DeLong

David Warsh (1998): Whose `Rules?’: “For the last year, hardly a week has passed without…

…some bright new book fetching up on my desk promising to explain some aspect of the business dynamics of the new age of information…. In all this stack of books on managing knowledge, intellectual capital, the ecology of information and the like, the single volume most worth reading — and, for many persons having, for it bears consulting again and again — is ‘Information Rules.’…

Shapiro and Varian are professors at the University of California at Berkeley. Shapiro served for a time in Washington, D.C., as deputy assistant attorney general for economics. Varian is dean of Berkeley’s School of Information Management and Systems, an expert on Internet economics and the author of a leading microeconomics text as well.

As they increasingly were drawn into the policy battles of the information age, Shapiro and Varian heard the constant refrain from entrepreneurs, consultants, and journalists: the old rules had been broken; a new set of principles was required to guide business strategy and public policy.

They write in their introduction:

But wait, we said. Have you read the literature on differential pricing, bundling, signalling, licensing, lock-in, or network economics? Have you studied the history of the telephone system or the battles between IBM and the Justice Department?

Our claim: You don’t need a brand-new economics. You just need to see the really cool stuff, the material they didn’t get to when you studied economics.’

And so they wrote their book.

The battle over incompatible standards, for example, is as old as North vs. South in railroad track gauges; between Edison and Westinghouse in electricity. True, the old story had been given some new twists, by Sony vs. Matsushita in videotape players, or 3Com vs. Rockwell and Lucent in modems. The jury is still out on DVD and Divx (both of which play CDs). But same as it ever was, standards wars may end in truce, as with modems; in duopoly, as with video games; or in annihilation of one of the parties, as with videotape players.

The keys to the analysis of networks are the twin concepts of positive feedback and network externalities, the authors say. Neither one is a recent arrival. Network externalities — when the value of a product to one user depends on how many other users there are — have long been recognized as keys to transportation and communications industries.

For example, a handful of telephones will have only limited value. Then positive feedback sets in: as the installed base of telephones grows, more and more users find it worthwhile to tap into the network. Eventually growth levels off, but only after a successful technology has taken over the market. Railroads, highways, electricity grids, television, e-mail: all obey the same basic principles.

‘Information Rules’ has something to say about nearly every aspect of today’s business terrain; it is hard to exaggerate how pervasive is the logic of positive feedback. Among the most interesting chapters are those on recognizing and managing ‘lock-in,’ the widespread situation in which choices today are hemmed in by selections made in the past. The cost of abandoning your Toyota for a Ford may not be great, but just try switching from a Macintosh to a Windows PC.

Savvy marketers, moreover, are trying to raise the switching costs to their customer base, and not just through tricks of engineering, training, and design. Frequent-flier miles are an especially successful device for increasing lock-in, a subtle form of volume discount. Consumer loyalty programs are proliferating everyday as computation power creates ‘synthetic frictions,’ little barriers designed to influence your choice. Those supermarket cards, for example, that gain you sale prices, in return for the windfall of information about your tastes that store owners receive, are a prime example.

The overriding virtue of ‘Information Rules’ is that it is clearly written but deeply grounded in a sense-making discipline that has evolved over a couple hundred years. If you want to know more about the whys and wherefores of ‘Goldilocks’ pricing — if your market doesn’t segment naturally, choose three versions, just like Goldilocks — you are referred to a paper by Itamar Simonson and Amos Tversy (and to the three sizes of peanut butter in your supermarket!). Got a question about the virtues of standardization through committees vs. the market? See the recent work by Joe Farrell and Garth Saloner.

Economics isn’t perfect — far from it. But it has raced ahead in the last 25 years in topics of the greatest concern in industrial organization. This book is the best available introduction to the nuts and bolts of new learning.

Must-read: Chris Dillow: “Innovation and Well-Being”

Posted on by Brad DeLong

Chris Dillow: Innovation and Well-Being: “Diane Coyle and Emily Skarbeck point out that…

…‘the way GDP is measured makes it impossible to capture fully the effect of innovation’ [as] GDP data don’t capture ‘the explosion in variety’…. [But] not only does innovation not appear in the GDP statistics, it doesn’t appear in subjective well-being statistics either. The OECD has reported (pdf) that the UK ‘experienced no consistent change’ in life satisfaction between the mid-70s and late 00s, and the ONS estimates (pdf) no change since then either….

Here are two theories. First… ‘more of the same’ gives us increases in real incomes in a steady environment…. Increases in variety, however, entail creative destruction… generates uncertainty for workers. And many (pdf) people hate uncertainty…. Second… as variety increases, so too does opportunity cost: we can’t afford both the new phone and the PS4, or if we’re holidaying in the Maldives, we can’t be in Dubai. Variety brings with it regret…. I don’t say this to deprecate increased variety…. Intuitively, it seems to me that variety must be a great good…. Perhaps… not only is GDP an inadequate measure of a healthy economy, but so too in some respects are measures of subjective well-being.

Must-read: Timothy Aeppel: “Silicon Valley Doesn’t Believe U.S. Productivity Is Down”

Posted on by Brad DeLong

Must-Read: Timothy Aeppel: Silicon Valley Doesn’t Believe U.S. Productivity Is Down: “Contrarian economists at Google and Stanford say the U.S. doesn’t have a productivity problem…

…it has a measurement problem. Google Inc. chief economist Hal Varian says sluggish U.S. productivity doesn’t reflect a high-tech wave of innovations that save people time and money. ‘There’s a lack of appreciation for what’s happening in Silicon Valley,’ he says, ‘because we don’t have a good way to measure it.’…

U.S. productivity, meanwhile, has hit the skids. From 1948 to 1973, it grew at an annual average of 2.8%. The rate through the 1980s slowed to half that, even as computers spread through the economy, driving everything from welding robots in auto plants to bank ATMs. In 1987, during the last period of productivity hand-wringing, Nobel Prize winning economist Robert Solow quipped: ‘You can see the computer age everywhere but in the productivity statistics.’ From 1995 to 2004, it finally looked like the digital age was paying off: Productivity growth rates closed in on post-World War II highs of near 3%. Then average gains fell to 2% from 2005 to 2009; since 2010, they have dipped below 1%…. ‘You can’t be in the Valley without thinking we’re in the middle of a productivity explosion,’ Mr. Bloom says. ‘And when they do discuss it, everyone jumps to Hal’s conclusion here.’…

Outside Silicon Valley, the arguments aren’t as persuasive. University of Chicago economist Chad Syverson said there might be some measurement problems, but that has always been the case. And, he says, he doubts it would account for more than a small part of the recent productivity slowdown…. ‘I’m always reluctant to point a finger at failure in measurement because it feels like you’re making excuses, ’ says Marco Annunziata, chief economist for General Electric Co. One explanation for the paradox of low productivity in a time of technical advances may be the uneven way innovation spreads, he says…. American business since the recession has, in fact, been stingy about investing in new equipment…

Must-read: Paul Krugman: “Summarizing the Trialogue”

Posted on by Brad DeLong

Must-Read: Paul Krugman: Summarizing the Trialogue: “Martin Sandbu has a summary…

…Brad DeLong has excerpts for those without FT Premium access. I have some quibbles, basically amounting to ‘But I’m right in the end!’ But never mind. One important meta-thing… is that discussions like this are… only a possibility thanks to the internet. Getting three well-known policy-oriented economists in the same room with time for a substantive discussion is, as Brad notes, very hard. And to-and-fro discussions in the journals are (a) relatively stiff and formal, (b) v-e-r-y s-l-o-w compared with what just went down…. The web has recreated in a virtual way the kind of coffee house discussions out of which the modern scientific journals emerged, without the necessity of all of us being in London, and drinking incredibly terrible coffee.