Tim Harford The Undercover Economist

Articles published in December, 2017

Why the robot boost is yet to arrive

To adapt a 30-year-old quip from the great economist Robert Solow: you can see the robots everywhere except in the productivity statistics. This fact has been puzzling me for a few years now. Productivity growth is disappointing — especially but not only in the UK — and it has been for years. Unemployment is near record lows, and employment is high. All this is the opposite of what one would expect if the robot job apocalypse was upon us.

Yet there is no denying the remarkable advances in various branches of artificial intelligence. The most talked-about example is the self-driving car. This technology has come a long way in a short time, which is more than one can say for the original participants in the 2004 Darpa Grand Challenge, a race sponsored by the US military. With large cash prizes for the first autonomous vehicle to complete a 150-mile course in the Mojave desert, the best effort foundered after just seven miles. The contest became a punchline. Just 13 years later, nobody is laughing about autonomous vehicles.

Then there are deep-learning technologies such as AlphaGo Zero, which took just 72 hours to teach itself to become seemingly invincible at the formidable board game, Go. Alexa, Cortana, Google Assistant and Siri have made voice recognition an everyday miracle. Strides are being made in image recognition, medical diagnosis and translation. There are behind-the-scenes triumphs: deep learning is optimising power-hungry cooling in server farms.

All of this makes the puzzle of high employment and low productivity even more puzzling. Yet there are several ways to resolve it. A simple explanation is that the robot talk is all hype. Computer scientists have been over-optimistic before. Nobel laureate Herbert Simon predicted in 1957 that a computer would beat the world chess champion within 10 years; it took 40. In 1970 Marvin Minsky predicted that computers would have human-like general intelligence “within three to eight years”, a prediction even more inaccurate than Mr Simon’s.

A more encouraging story is that we are understating productivity, for example, by undervaluing the output of services in general and the digital economy in particular, much of which is free and therefore invisible to normal measures of economic output.

A third possibility is that — to borrow an idea from the writer William Gibson — the future has already arrived, but it is unevenly distributed. Perhaps the zero-sum scramble to dominate winner-takes-all markets is simply squandering most of the potential gains.

To tease apart these accounts, a research paper by a team including both sides: Erik Brynjolfsson, an economist well known for his writings on “the new machine age”, and Chad Syverson, one of the leading experts on economic productivity.

The researchers argue that the productivity slowdown is real. It may feel plausible to suggest our data simply are not good enough to recognise that productivity is growing strongly, but the story seems off in a number of ways — most obviously that the productivity shortfall is just too large to be a statistical illusion. Something similar can be said for the zero-sum fight for corporate dominance: it may well be happening, but is it really so wasteful that huge productivity gains simply evaporate?

How, then, to resolve the puzzle? In the simplest way possible: to say, “just wait”. There is no contradiction between disappointing productivity growth now and spectacular productivity growth in the near future.

This is true in the narrow statistical sense that productivity growth tends to bounce around: a bad decade may be followed by another bad decade, or by a good one, and today’s productivity growth tells us little about tomorrow’s.

But it is also true that there tends to be a delay between a technical breakthrough and a productivity surge. The most famous case in point is the electric motor, which seemed poised to transform American manufacturing in the 1890s, but did not realise that potential until the 1920s. To take advantage of the new technology, factory owners had to turn their organisations upside down, with new architecture, processes and training. Prof Brynjolfsson’s early research in the 1990s found companies saw little benefit from investing in computers unless they also reorganised.

If the benefits of today’s new ideas are real but delayed, that may also explain the productivity slowdown itself. Consider the self-driving car: right now it is a research expense, all cost and no benefit. Later, it will start to displace traditional cars, the traditional car industry, and many related businesses from parking garages to automotive repair. Finally, perhaps decades after a self-driving car becomes feasible, the full benefits are likely to be apparent. One does not simply invent a new machine: economic progress requires much more than that.

Perhaps, then, this is a brief lull before an explosion of new technology that will radically reshape the world around us. Or perhaps we are due for another decade or two of disappointment. Either scenario seems possible — and both of them promise an uncomfortable ride.

 
Written for and first published in the Financial Times on 17 November 2017.

My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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The dangers of dark nudging

“If you want people to do the right thing, make it easy.”

That is the simplest possible summary of Nudge (UK) (US) by Cass Sunstein and Richard Thaler. We are all fallible creatures, and so benevolent policymakers need to make sure that the path of least resistance goes to a happy destination. It is a simple but important idea, and deservedly influential: Mr Sunstein became a senior adviser to President Obama, while Mr Thaler is this year’s winner of the Nobel memorial prize in economics.

Policy wonks have nudged people to sign up for organ donation, to increase their pension contributions — and even insulate their homes by coupling home insulation with an attic-decluttering service. All we have to do is make it easy for people to do the right thing.

But what if you want people to do the wrong thing? The answer: make that easy; or make the right thing difficult. Messrs Thaler and Sunstein are well aware of the risk of malign nudges, and have been searching for the right word to describe them. Mr Thaler likes “sludge” — obfuscatory language or procedures that accidentally or deliberately encourage inertia. Voter ID laws, he says, are a good example of sludge, calculated to softly disenfranchise. Meanwhile Mr Sunstein has written an entire book about the “ethics of influence” (UK) (US).

And as we are starting to realise, Vladimir Putin is well aware of the opportunity that behavioural science presents, too. Rumours circulate that the Russian authorities are keen recruiters of young psychologists and behavioural economists; I have no proof of that, but it seems like a reasonable thing for the Russian government to do. I am willing to bet that not all of them are working on attic-decluttering.

According to Richard Burr, chair of the US Senate intelligence committee, Russian troll accounts on Facebook managed to organise both a protest and a counter-protest in Houston, in May 2016. Americans are perfectly willing to face off against each other on the streets, but if you want it to happen more often, make it easy.

A number of other memes, political advertisements and provocateur accounts — both left- and rightwing — have since been identified as of Russian origin. Social media networks have unwittingly sold them air time; news sites have cited them; people have shared them, or spent effort refuting them. Nudge isn’t the word for this, but neither is sludge. What about “grudge”?

The Russians are not alone in using grudge theory to manipulate public opinion. Three social scientists — Gary King, Jennifer Pan and Margaret Roberts — recently managed to infiltrate networks of shills in China, who are paid to post helpful messages on Chinese social media. (Their nickname is the “50 cent army”.) Unlike the Russian trolls, their aim has been to avoid engaging “in debate or argument of any kind . . . they seem to avoid controversial issues entirely”. The tactic is, rather, to keep changing the subject, especially at politically sensitive moments, by talking about the weather, sports — anything. If you want potential protesters to make cheery small talk instead, make it easy.

Just as noble tools can be turned to wicked ends, so shady techniques can be used to do the work of the angels. For example, why not disrupt online markets for illegal drugs by leaving bad reviews for vendors? Research by social scientists Scott Duxbury and Dana Haynie suggests that because people rely on user reviews on illicit markets, law enforcement officers could attack those markets by faking negative reviews, thus undermining trust.

The parallel with Mr Putin is alarmingly clear: it is possible to attack democracy and rational discourse by creating an information ecosystem where everyone yells at everyone else and nobody believes anything.

But we should not give too much credit to Mr Putin. He did not create the information ecosystem of the western world; we did. The Russians just gave us a push, and probably not a very big push at that. Perhaps I should say they gave us a nudge.

Social media do seem vulnerable to dark nudges from foreign powers. But more worrying is our vulnerability to smears, skews and superficiality without any outside intervention at all. Messrs Sunstein and Thaler ask policymakers to make it easy to do the right thing; what have we made it easy to do?

It is easy to find a like-minded tribe. It is easy to share, retweet or “like” something we have not even read. It is easy to repeat false claims. It is easy to get angry or personal.

It’s less easy to distinguish truth from lies, to clear time and attention to read something deep, and to reward an important article with something more than a digital thumbs up. But then, none of this is fundamental to the business model of many media companies — or of the social media networks that spread the news.

Nudge, sludge or grudge, we can change this. And we should start by asking ourselves whether when it comes to news, information and debate, we have made it difficult to do the right thing — and all too easy to stray.

 

 
Written for and first published in the Financial Times on 10 November 2017.

My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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Curious books

I’ve written recently about how much I’ve been enjoying Soonish (UK) (US) by Kelly and Zach Weinersmith, a highly amusing exploration of the latest technologies from satellite launch vehicles to 3D printed houses to gene therapy to self-organising robot swarms.

But what else is out there to celebrate the curious?

I recommend Steven Johnson’s Wonderland: How Play Made The Modern World (UK) (US) – a history of technology and economics with a difference. Johnson covers music, fashion, sports and much else with a lovely light touch.

Caspar Henderson’s new book is A New Map Of Wonders (UK) (US– it’s an exploration of art, science, and the way we perceive the world around us. The book itself is a kind of cabinet of wonders, packed with surprises and delightful digressions.

Puzzle fans will have their minds blown – if you’ve not already encountered it – by Raymond Smullyan’s What Is The Name of This Book? (UK) (USBegins with some silly puzzles, moves to variants of the one-always-tells-the-truth, one-always-lies puzzle, and before you know it you’re in the middle of Godel’s incompleteness theorem.

Richard Feynman was often billed as a “curious character”, although I prefer his lectures to his autobiographical work. Try the astonishing QED (UK) (US). I remember trying to explain this one in the pub to my friends, aged 18.

Claude Shannon’s endless desire to play with things and ideas is explored in a solid new biography, A Mind At Play (UK) (USby Soni and Goodman.

Next on my list: Philip Ball’s Curiosity (UK) (USand Walter Isaacson’s Da Vinci (UK) (US), which has been getting good write-ups.

My UK publishers have a competition going on Twitter to win all seven of my books. Or you can purchase any of them here.

 

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4th of December, 2017MarginaliaComments off

A way to poke Facebook off its uncontested perch

We need to talk about Facebook. Google (or Alphabet, if you prefer) is more ubiquitous; Apple makes more money; Amazon is a more obvious threat to the bricks-and-mortar economy; yet there is something uniquely troubling about the social media leviathan.

One concern is Facebook’s unwholesome contribution to our diet of information. Because what we see in Facebook is a function of what our friends share, the site echoes our prejudices. This effect is accentuated — at least modestly — by Facebook’s own algorithms, which have learnt to show us more of what we like to keep our eyeballs on the site.

Then there is accuracy. Whether what we are shown is true or false does not much matter for Facebook’s business model, unless we start to show more interest in not being lied to. For now, fake news entrepreneurs have realised that it is far more profitable to invent eye-catching fables than to research and confirm the everyday truth.

We are also beginning to realise that Facebook is the perfect vector for carefully-targeted advertisements containing dark political smears. A false claim in a TV spot or the side of a campaign bus can be challenged; a false claim carefully targeted to a few thousand voters in a swing state may go unchallenged and, for that matter, unnoticed except by the intended few.

These problems are sometimes exaggerated, and are not Facebook’s alone: Twitter is politically polarised; Google also shows targeted ads; and few Facebook news feeds are as relentlessly blinkered as the pages of a British tabloid newspaper. But Facebook bundles them into a uniquely powerful package.

And the inconvenient fact is that Facebook seems to make us miserable. We log on like joyless addicts, two billion of us each month. I doubt that we truly value Facebook. But we use it anyway. Writing in the London Review of Books, John Lanchester cites numerous studies that suggest Facebook use goes hand in hand with envy and sadness, and quite plausibly causes them. It is also a notorious time-sink and source of distraction.

None of this is good, unless you are Facebook. But behind all these injuries is a final insult: there is no serious alternative. Buyers of Microsoft’s Office and Apple’s iPhone could choose something else. Even dominant services such as Google’s search or Amazon’s store could in principle be challenged. It would be no easy thing to build a better rival, but anyone who did would be just a click away.

In contrast, making a superior social network app is not enough to unseat Facebook: the main appeal of the site is that everyone already uses it. A rival social network would need to somehow attract groups of users en masse, an extremely difficult prospect. Two of the companies that were managing it — WhatsApp and Instagram — were bought by Facebook. It is hard to understand why regulators thought these mergers were benign.

The lack of competition may explain why Facebook retains its grip on our attention despite being clunky and pernicious; a company that faces no serious competition can afford to stop worrying about keeping its users happy. It is easy to imagine a better social network than Facebook: more privacy, a slicker interface, and less fake news. It is not so easy to see how such a rival could tempt entire social groups to migrate together.

Could regulators change this? Perhaps. They could certainly have been more aggressive in scrutinising mergers. But traditional measures such as price regulation seem less relevant to what is, after all, a free service.  Instead, we should ask ourselves if we can find a way to re-introduce serious competition in social networking.

Luigi Zingales and Guy Rolnik of the University of Chicago have proposed an intriguing idea. They build on the concept of “number portability”, the principle that you own your own phone number, and you can take your number with you to a different phone provider. The idea has promise in retail banking.

Zingales and Rolnik suggest an analogy: social graph portability. The idea is that I could take my Facebook contacts with me to another service — call it “ZingBook”. I could read their Facebook posts on ZingBook and they could see my ZingBook posts over on Facebook.  I can send emails from any program or service provider to any other, so why not guarantee interconnection between social networks? I would get whatever it was I liked about ZingBook while maintaining contact with my own social network back on Facebook.

In practice, the Zingales/Rolnik idea faces serious stumbling blocks — making the technology work, preventing cheating, and navigating permissions. If a friend decides to move over to, say, NaziBook, will he still receive my Facebook content? Will I even know where my words are now being viewed?  But the idea of social graph portability squarely addresses one of the big issues of 21st-century economic policy. The new tech titans need serious competition. For a social network, serious competition needs new rules to enable it.
Written for and first published in the Financial Times on 3 November 2017.

My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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