Tag: Information Economy

Must-read: Izabella Kaminska: “Bob Gordon’s Not Getting in Your Driverless Car”

Posted on by Brad DeLong

Must-Read: Izabella Kaminska: Bob Gordon’s Not Getting in Your Driverless Car: “Reading Coyle’s review it’s clear Gordon uses the book to expand in more detail…

…on some of the ideas presented in his October 2015 paper “Secular Stagnation on the Supply Side: U.S. Productivity Growth in the Long Run”… that the days of miracle growth are long gone and that slower growth lies ahead…. There is something different about information-fuelled growth compared to technique-fuelled growth. The former’s advantage for some reason stales more quickly than the latter’s…. Think of it this way: when you had a Blackberry and nobody else did, the competitive advantage associated with having that blackberry felt incredibly beneficial to you. Now that everyone has a smartphone, however, that advantage (namely, being able to work on the go, at home or from your bed) has diminished entirely. What was once an information advantage has in some cases become an information burden because people’s expectations about when, how and where it is appropriate to work have changed entirely…. Fundamentally, Gordon’s core point doesn’t seem to rest on whether we’ve stopped innovating or not, but rather whether innovation is happening fast enough to counter the diminishing returns of past innovation as well as to create entirely new types of returns.

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: Nick Bunker: Trying to Get a Grip on the “Gig Economy”

Posted on by Brad DeLong

Must-Read: Our smart young Equitable Growth whippersnapper Nick Bunker reads Dourado and Koopman and, correctly, sees the “gig economy” as a positive way of trying to turn our current sow’s ear of a low-pressure labor market into some reasonable facsimile of a silk purse. When put that way, what we need is not a halfway house between W-2 employees and 1099 independent contractors, but more expansionary monetary and fiscal policy:

Nick Bunker: Trying to Get a Grip on the “Gig Economy”: “The trend… starts around the year 2000…

…The sharing economy companies didn’t get started until at least eight years later… follows rather than causes the bulk of the increase in independent contracting. Dourado and Koopman point out that business dynamism… began to decline around 2000 as businesses stopped creating jobs at the rate they once did. These new gig-based or sharing economy businesses seem to be seizing the opportunity created by a structural change in the U.S. labor market rather than causing it…. If we want to understand this trend, perhaps we should change the focus of our investigations.

Must-Read: Ben Thompson: Digital Dopamine

Posted on by Brad DeLong

Must-Read: Ben Thompson: Digital Dopamine: “Consider the one app category that continues to succeed wildly on the App Store…

…free-to-play games like Candy Crush or Clash of Clans. Critics complain that they are manipulative, extracting money from culpable players in exchange for a worthless digital good that delivers little more than a sense of accomplishment to the buyer — a shot of dopamine, basically. But, if I may put on my contrarian hat, so what? Is said shot of dopamine any different than that obtained by any number of other means, many of which cost money? If differentiation is more about how something makes you feel and less about features then why the special bias simply because one particular something happens to be created in software? And, I’d add, digital dopamine results in a far more equitable business model for the developer: the more a user plays the more money a developer earns…

Must-Read: Ben Thompson: Google and the Shift From Web to Apps, Indexing App-Only Content, Streaming Apps

Posted on by Brad DeLong

Must-Read: The walled gardens of the pre-1995 .net strike back. I am left curious: why are browsers good enough on the desktop and the laptop to wipe the floor with walled gardens, but not so on smart phones?

Ben Thompson: Google and the Shift From Web to Apps, Indexing App-Only Content, Streaming Apps: “The core reality that drove Google’s dominance…

…the public availability of linked information… [is] at least weakening…. The first phase was the shift in usage from the web to apps… [where] the actual infrastructure and logic for displaying content is downloaded and installed when you get the app from the App Store. Then… the app simply downloads… content… and drops the content into the pre-existing templates. It’s super fast. This was certainly an annoyance for Google… [which] has focused on deep linking… to a mobile web site….

Now we are into the second phase in the shift from the web to apps: apps that don’t exist on the web at all…. “Up until now, Google has only been able to show information from apps that have matching web content. Because we recognize that there’s a lot of great content that lives only in apps, starting today, we’ll be able to show some ‘app-first’ content in Search as well….”

This is a far graver threat to Google than someone simply starting their search in a vertical app like Yelp or Trip Advisor: Google can win that fight by delivering a superior experience, and they’ve made great strides in that regard over the past few years…. There’s one big problem with Google’s new capability, though: how do you actually show said content to users? The app installation problem remains a significant one: there is simply too much friction in expecting a search user to download an app to see a result. Enter app streaming…

Must-Read: Willem Buiter: Transferring Robot Incomes to the People

Posted on by Brad DeLong
Actor Arnold Schwarzenegger poses for photographers at a preview of the film ‘Terminator: Genisys’. (AP Photo/Jacques Brinon)

Must-Read: The distribution of wealth; the distribution of income; the distribution of utility–and, possibly, the distribution of eudaimonia, of lives worth living if we reject the hardline Benthamite pushpin-as-good-as-poetry position. For example, Milanovic, Lindert, and Williamson (2010) convincingly paint a picture in which (a) pre-industrial inequality in wealth is very large, (b) pre-industrial inequality in income is moderate, and (c) pre-industrial inequality in utility is very large indeed. I think that this is a large part of what Willem Buiter is groping towards:

Willem Buiter: Transferring Robot Incomes to the People: “I’m more an optimist on technological change than some…

…who argue that the low-hanging fruit on the Tree of Knowledge has all been plucked. That we’ve done fire, we’ve done the wheel, we’ve done horsepower, and, you know, coal, electricity, chemicals, and all we have now is the tail-end of the boring ICT revolution, robotics, artificial intelligence and biotechnology, that is just a big yawn. I think this is completely wrong….

We haven’t begun to scratch the surface yet of many of the applications of ICT, robotics, artificial intelligence, and everything that goes with it, is going to create huge social, political problems. But in terms of wealth creation, you know, it’s the ultimate thing if you do this right. If you get the distributional aspects right, and don’t turn the world into an economy where the owners of capital and a few winner-take-all entrepreneurs are with all the money and the rest starve, I think technical progress is not the issue….

It’s always true that existing jobs are wiped out in a hundred years, but it’s going to go much faster now, in twenty years time, maybe half the existing jobs in the service sector, the white collar jobs, are going to be gone. Because the scope for automation is actually greater, probably, in cerebral work than in physical work. It’s very hard to get robots to walk properly. It’s much easier to make them think really fast. So I think this is going to be the real challenge. You know, unless we blow ourselves up in religious extremism…. This is going to be the real challenge we have to face, avoid the Piketty nightmare, although he got his analysis wrong…

Must-Read: Ben Thompson: Selling Feelings

Posted on by Brad DeLong

Must-Read: So how do we build an information-age economy in which producers have incentives to learn as much as they can about consumers to successfully anticipate them without also giving them an even bigger incentive and capability to deceive them?

Ben Thompson: Selling Feelings: “The model is broadly applicable…

…I wrote two weeks ago about how the future of publishing will not be about monetizing pure words but rather about using words to gain fans that can be monetized through other harder-to-discover media. Time and attention remain precious commodities…. Earning trust in one area gives you the right to make money from it in another…. Software generally should be seen as a lever to solutions that are much more meaningful to customers…. Software is infinitely copyable: better to use that quality to your advantage than to base your business model on fighting gravity….

Business is difficult–it was difficult before the Internet, and it’s difficult now–but the nature of the difficulty has changed. Distribution used to be the hardest… but now… time and money… must instead be invested in getting even closer to customers and more finely attuned to exactly why they are spending their money on you…. Create the conditions where the need might manifest itself and then meet that need, and not only will your business succeed, it will, in all likelihood, succeed to an even greater extent than the physically-limited lowest common denominator winners from the ‘good old days.’

Must-Read: Adam Posen: Some Big Changes in Macroeconomic Thinking from Lawrence Summers

Posted on by Brad DeLong

Must-Read: Adam Posen: Some Big Changes in Macroeconomic Thinking from Lawrence Summers: “In the United States, since 1965, there has been a tripling of the non-employment rate…

…for men… 24 and 54… similar trends… elsewhere…. It is a real puzzle to observe simultaneously multi-year trends of rising non-employment of low-skilled workers and declining measured productivity growth. Either we need a new understanding, or one of these observed patterns is ill-founded or misleading…. Unless we can somehow transform that sustained lower demand for workers into the widespread leisure of the sort imagined by Keynes and some science fiction writers, with the income redistribution to support it, I would think this is very bad news for social stability and technological progress….

Unmeasured quality improvement… [the] fraction of the economy… [susceptible] has been rising, so the amount of mismeasurement (and therefore productivity understatement) would be rising…. [Thus] inflation is lower than even its currently low level–and that has the consequence that real interest rates are higher, so monetary policy at present is tighter… [and] farther away from its mandated inflation target…

Recessions in the OECD… in most cases the level of GDP is lower five to ten years afterward than any prerecession forecast or trend…. “The classic model of cyclical fluctuations… around the given trend is not the right model…. The preoccupation of macroeconomics should be on lower frequency fluctuations that have consequences over long periods of time….

Discussing… Abenomics’ results… I asked whether a message we should take from the Japanese experience is to avoid bad states of the economy at almost any cost…. [And] the very language we use to speak of business cycles, of trend growth rates, of recoveries of to those perhaps non-stationary trends, and so on–which reflects the underlying mental framework of most macroeconomists–would have to be rethought.

Must-Read: Duncan Weldon: Are the Robots Taking Enough Jobs?

Posted on by Brad DeLong
Actor Arnold Schwarzenegger poses for photographers at a preview of the film ‘Terminator: Genisys’. (AP Photo/Jacques Brinon)

Must-Read: Human smiles and human truly creative thought look to remain economically valuable. So learn how to smile!

Duncan Weldon: Are the Robots Taking Enough Jobs?: “Andy Haldane has warned that new technologies could replace up to 15 million British jobs…

…Ignazio Visco, trod much the same ground. Both policymakers are taking the threat of computerisation… seriously…. Historically… waves of new technology have created as many jobs as they have destroyed…. This time might be different, the next wave of labour-saving technology looks to be replacing human brains, rather than human brawn, and the impact could be far more wide-reaching. And, even if this time isn’t different… adjustments… in the past led to a generation or more of economic pain…