MetaFilter posts tagged with information and economics

Incommensurable values

kliuless — Mon, 25 Mar 2013 20:42:30 -0800

Economists and the theory of politics - "why unions were often well worth any deadweight cost" abstract:

The standard approach to policymaking and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic efficiency, which can be deleterious. We outline a simple framework for the study of the impact of current economic policies on future political equilibria — and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its influence on future political equilibria.

viz. What kind of mass movement with truly powerful institutional support can take the place of unions? - "I agree with just about everything they say about the value of unions, but I also feel forced to acknowledge that it doesn't matter. As a truly powerful mass movement, unions are dead and they aren't coming back. This has left a gaping hole in American politics: Corporations and the rich continue to have enormous institutional power, while the working and middle classes have almost no one to speak for them. I figure that filling this hole is the most important problem the left has to address over the next decade or so. Unfortunately, I don't know how." cf. The Tyranny of Political Economy - "In reality, our contemporary frameworks for political economy are replete with unstated assumptions about the system of ideas underlying the operation of political systems. Make those assumptions explicit, and the decisive role of vested interests evaporates. Policy design, political leadership, and human agency come back to life... Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes." also btw...

Markets in almost nothing - "One of the first things I noticed when I started studying economics was that goods that can't be bought and sold are basically ignored."
Wealth and Motivations for Saving - "teach the public more about how wealth builds over time"
The Supply and Demand for Safe Assets - "Where do safe assets come from? Empirical evidence suggests that the private sector creates more near riskless assets when the supply of government debt is low and reduces privately-created near riskless assets when the supply of government debt is high."
The safe asset shortage - "Safe debts – or what is often called information insensitive assets, as they do not suffer from the types of financial frictions that are characteristic to other financial assets – play a major role in facilitating transactions for institutional investors. And, as we have learned in the recent years, they also play a major role in triggering financial crises when they lose their safety status and turn into information sensitive assets."
GDP, welfare and the rise of data-driven activities - "The worry today is not that investment in technology might not be as productive as we thought (the so-called computer paradox), but the fact that the economic value of the fast growing consumption and production of online data may not be adequately captured in official statistics."
Uncle Sam, venture capitalist - "AMERICA, like much of the world, is facing a crisis of innovation. Its roots rest in several significant challenges: an awareness that rapid technological progress and growth will be crucial in weathering demographic headwinds and the threat of climate change among them. But there is very little consensus in Washington on just what the government ought to be doing to help."
What Google Reader tells us about banking and nationalisation - "Which is why the government taking charge of a service like RSS for the benefit of the public good — or for that matter providing the country with universal internet or high quality media — should not necessarily be treated with suspicion or mistrust. In the civilized world there is a perfectly reasonable way to ensure arm's length detachment and to protect such institutions from the political meddling of government."
If You Can't Fix It, You Don't Own It - "Who owns our stuff? The answer used to be obvious. Now, with electronics integrated into just about everything we buy, the answer has changed. We live in a digital age, and even the physical goods we buy are complex. Copyright is impacting more people than ever before because the line between hardware and software, physical and digital has blurred. The issue goes beyond cellphone unlocking, because once we buy an object — any object — we should own it. We should be able to lift the hood, unlock it, modify it, repair it... without asking for permission from the manufacturer. But we really don't own our stuff anymore (at least not fully); the manufacturers do. Because modifying modern objects requires access to information: code, service manuals, error codes, and diagnostic tools."

like think about sovereign debt -- that is safe assets -- more as a national equity: [1,2,3,4,5]

The US national debt is in truth - like all national debts - a complete and surreal fiction: it is a national equity, the greater part of which is interest-bearing either as claims over public or private revenues. At least two-thirds of the quasi tax credits created by banks came into existence as mortgage loans, and are therefore backed by claims over the productive value of the US land and buildings which they fund. Much of the rest consists of claims over the value of US assets which fund the productive capacity of US corporations. The remainder - which provides the credit necessary to finance the circulation of goods and services in the US - is based upon the magnificent productive capacity of the US people. Only by liquidating US Incorporated could this National Equity ever be redeemed... There is no shortage of dollars because every dollar's worth of productive capacity - public or private; productive people or productive assets - in the US is the capacity to issue a dollar credit, which reflects the increase in the US national wealth which underpins the US national equity. President Barack Obama and his government should get busy creating national equity by instructing the Fed to create and issue the necessary finance for the creation of a new generation of US infrastructure; the transition to a low carbon future which the US can, and should, be leading; and in increasing the capacity of the US people to do so.

(or how the government budget constraint is different than a household's or corporation's -- namely that they can tax and can't be liquidated, unless extraordinarily mismanaged or conquered, I guess...)

use value vs. exchange value

kliuless — Sat, 01 Sep 2012 00:12:16 -0800

What Is Value? What Is Money? (via via)

What is value about? and how do we measure value? Traditionally, the way of measuring value has been not been through measures of value, but actually through measures of appropriation: measures of the amount of money that you can appropriate through that business, not the value that it generates in society. We're starting to see this difference.

Reinventing Society In The Wake Of Big Data

With Big Data we can now begin to actually look at the details of social interaction and how those play out, and are no longer limited to averages like market indices or election results. This is an astounding change. The ability to see the details of the market, of political revolutions, and to be able to predict and control them is definitely a case of Promethean fire -- it could be used for good or for ill, and so Big Data brings us to interesting times. We're going to end up reinventing what it means to have a human society.

more on 'data science' -No, Really, Some of My Best Friends Are Data Scientists -Data Science: The Problem Isn't Statisticians, It's Too Many Poseurs more on 'big data' -Moving from Big Data to Smart Data -Top 10 categories for Big Data sources and mining technologies -Hadoop 2.0 -Grid computing -NSA Overview of Cloud Computing When Central Is Essential - "economist Glen Weyl* views changes in technology as leveling the playing field between central governments and free markets"

In his famous 1945 article, "The Use of Knowledge in Society," F. A. Hayek argued that despite their inequity and inefficiency, free markets were necessary in order to allow the incorporation of information held by dispersed individuals into social decisions. No central planner could hope to collect and process all the information necessary for social decisions; only markets allowed and provided the incentives for disaggregated information processing. Yet, increasingly, information technology is leading individuals to delegate their most "private" decisions to automated processing systems... While these information systems are [currently] mostly nongovernmental, they are sufficiently centralized that it is increasingly hard to see how dispersed information poses the challenge it once did to centralized planning.

The Optimist's Case For Information Technology

Schools have poured a ton of money into ICT and tech-focused startups are circling the education sector aiming to disrupt it. Something's going to change here. IBM built a supercomputer that can win at Jeopardy which is cool but useless and now they're trying to turn it into a medical diagnostic engine. Computer-driven cars are already a real thing. Right now, price is a big barrier to adoption but if there's anything we know about ICT hardware it's that the price will fall... I don't know that doing a medical consult with your home computer and then having your prescription automatically disatched by autonomous vehicle equals a change comparable to indoor plumbing, but it's a big deal.

Two Types of Knowledge: Human Capital and Information - "Human capital is knowledge that is hard to transfer. Information is knowledge that is easy to transfer." Desire Modification: the ultimate technology - "With humanity divided into clades by motivation and personality type, evolution would be very important." [1,2] --- *The Situation Bears Watching - "Hermann Weyl, the mathematician who was Einstein's friend, was a great uncle."

Outliers

vidur — Tue, 07 Jun 2011 17:28:11 -0800

The World Top Incomes Database (click on "Graphics" and select countries, years and other variables) (via)

Bubbles and Public Facts

kliuless — Mon, 23 May 2011 14:23:01 -0800

The Destruction of Economic Facts - "Renowned Peruvian economist Hernando de Soto argues that the financial crisis wasn't just about finance—it was about a staggering lack of knowledge" (via)

During the second half of the 19th century... To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Knowledge had to be gathered, organized, standardized, recorded, continually updated, and easily accessible... The result was the invention of the first massive "public memory systems" to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available... for investors to infer value, take risks, and track results... Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The results are hardly surprising. In the U.S., trust has broken down...

BONUS

The Gaussian copula function tattoo
The financial crisis was a major event which was caused by Wall Street's shortsighted greed — a greed which is epitomized in the way that the copula function became ubiquitous even though risk managers and even Li himself knew full well that it was extremely limited in how it should be used. If we want to 'be vigilant and not forget' the destructive potential of Wall Street, then the Gaussian copula function is actually a really good thing to get as a tattoo. There's an irony here too. Elms got this tattoo, in part, because of its very incomprehensibility — the way it epitomizes the way that Wall Street is 'predicated in obfuscation'. But Wall Street embraced Li's formula for the opposite reason — that it was very tractable and easy to understand, at least if you were a quant with a degree in finance. Elms's tattoo is the version of the formula which I used in the Wired article — but it's not, actually, the version of the formula which was used day-to-day on Wall Street... Most representations of the copula look nothing like that, and are much harder to understand. All of which shows that Elms is absolutely right, at heart, about the copula function and what it represents. To Wall Street, it's simple and easy — disastrously so. To the rest of us, however, it makes a Semiotext(e) book look like a Sesame Street lyric. And that, I think, is why Levin and Elms are going to be disappointed, and Blankfein is going to remain out of jail. Back in 1933, when Ferdinand Pecora uncovered huge scandals on Wall Street, they were easy for all Americans to understand, and easy to protect against. This time around, Wall Street's activities are incomprehensible not only to the lay person but even to senior bankers: a big part of the reason why the crisis was so big and so bad is precisely that people like Stan O'Neal and Bob Rubin failed at their job of understanding the risks their banks were taking. They were knavishly foolish, but still more fools than knaves — which means that it's extremely hard to make a strong case in front of a jury that what they did was criminal.
The new argument against financial innovation - "It is from the not yet but soon to be famous Alp Simsek, at Harvard, and smart people tell me it is important and already influential..." cf. Speculation and Risk Sharing with New Financial Assets
While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation... Financial innovation always decreases the uninsurable variance because new assets increase the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative variance. This is true even if traders completely agree about the payoffs of new assets. The intuition behind this result is the hedge-more/bet-more effect: Traders use new assets to hedge their bets on existing assets, which in turn enables them to place larger bets and take on greater risks. This effect suggests that financial innovation is more likely to be destabilizing in more complete financial markets and when it concerns derivative assets... A question emerges as to how new assets should be introduced to minimize their short run impact on the speculative variance. I show that staggering (or delaying) the introduction of new assets is not effective because it reduces traders learning simultaneously with their speculation. A viable alternative is to set temporary position limits (or taxes) on new assets.
Financial Repression - "There are only a few ways to bring down sovereign debt burdens. Growth is one, but growth may be impaired by high debt burdens. Austerity is another, but to cut debts this way requires a long period of painful policy, of the sort that's rarely tolerable to electorates. Default is another way. And rapid inflation is another way still... a fifth option—financial repression—was key to quickly and relatively painlessly addressing large sovereign debts... The tight financial controls associated with post-Depression financial regulation and the introduction of the Bretton Woods system enabled a period of financial repression that persisted from the end of the war to around 1980. This period was characterised by low real interest rates (during this time they were quite often negative) persistently, modestly high inflation rates, and rapid reduction in debt levels thanks largely to this 'financial repression tax'. It was an incredibly effective mix of policies." cf. The Liquidation of Government Debt [1,2,3]

Tracking the Knowledge Economy

JoeXIII007 — Sat, 06 Mar 2010 19:36:49 -0800

It has been looked at for many years (link to a 2003 PDF revised edition of a 1983 report). Inspiring reports trying to predict where this was heading, the knowledge economy is incredibly difficult to get a grip on, mainly because its products are intangible. There have been attempts, such as in this paper by Mark Cully who basically concluded workers either enter it at the beginning of their career and stay, or have a tough time working up the ladder and maintaining any momentum. Problems are many, with a very recent example illustrated in this paper (link to abstract partially quoted below with links to full text):

This paper advances the hypothesis that some of the roots of the present crisis are to be found in the present institutions of the knowledge economy. While protectionism is seen as a possible dangerous outcome of the crisis, the extent of protectionism inherent to the strengthening and globalisation of intellectual property rights (IPRs) associated, in particular, with the signing of the Trade-related Aspects of Intellectual Property Rights agreement is not generally perceived as one of its possible causes. Indeed, IPRs have acted as ‘super-tariffs’. Pagano, U. and Rossi, M. 2009. The crash of the knowledge economy, Cambridge Journal of Economics, vol. 33, no. 4, abstract

Also, there's the infamous (?) attempt by the European Union to transition to some form of sustainable knowledge economy: the Lisbon Strategy. Struggling under the weight of the current crisis, as evident on the front page of the project, it is possible to conclude that the strategy did not go as well as hoped, even by their own account (to be fair though, their report does highlight some great things). Previously (possibly somewhat related): this, this, and this.

Scrimping on the Future

kliuless — Sun, 18 Oct 2009 09:12:03 -0800

Information is stimulus, confusion is contraction.

Asymmetrical Information and Hooker-nomics.

chunking express — Mon, 16 Mar 2009 09:03:53 -0800

Asymmetrical Information and Hooker-nomics.