Links October 2020

A brilliant quote from Protagoras: “Concerning the gods, I have no means of knowing whether they exist or not, nor of what sort they may be, because of the obscurity of the subject, and the brevity of human life.”

This is why I can never take the Marxists seriously. Around 44:45, “What sets interests rates is rate of profit. You can’t set interests rates higher than the rate of rate of profit because then no one will borrow.”

“Until recently I had no idea that game engines are basically eating the world. Urban planning, architecture, automotive engineering firms, live music and events, filmmaking, etc. have all shifted a lot of their workflows/design processes to Unreal Engine and Unity.”

A concise frame of the issue: “Every tech company is ridiculously over-valued right up until the day that the exact same company is a juggernaut that is killing industries.” https://buff.ly/3127oBO

HT from Neil Chilson, this edited volume on Social Media and Democracy

Research papers

“Surveys show majority U.S. support for a carbon tax. Yet none has been adopted. Why? We study two failed carbon tax initiatives in Washington State in 2016 and 2018. Using a difference-in-differences approach, we show that Washington’s real-world campaigns reduced support by 20 percentage points. Resistance to higher energy prices explains opposition to these policies in the average precinct, while ideology explains 90% of the variation in votes across precincts. Conservatives preferred the 2016 revenue-neutral policy, while liberals preferred the 2018 green-spending policy. Yet we forecast both initiatives would fail in other states, demonstrating that surveys are overly optimistic.” (Link)

In this paper we examine cases commonly characterised as risk-risk tradeoffs (i.e., creating new risks while solving existing ones), in an attempt to learn lessons that can be valuable for future regulatory decision-making. A broad range of environmental and health literature was reviewed and numerous cases of proclaimed risk-risk tradeoffs were analysed in order to determine: 1) why regulatory measures were initially taken, 2) why these measures caused a countervailing risk to emerge, 3) how tradeoffs could have been avoided, and 4) whether the case is a good example of a risk-risk tradeoff. The analysis reveals that only a small number of these cases can actually be considered risk-risk tradeoffs. In a large number of cases safer alternatives are and were available at the time decisions were made. In some cases the proclaimed risk-risk tradeoff simply did not exist or occur, and in some cases countervailing risks were ignored for reasons unknown. In many cases, the countervailing risks could have been anticipated and avoided by proactively seeking safer alternatives, completing a tradeoff and impact assessment, or increasing stakeholder input in the decisionmaking process. We conclude that concerns about risk-risk tradeoffs are not a reasonable argument against future application of the precautionary principle. Indeed, sound decision-making processes in the face of uncertainty should always consider and attempt to mitigate reasonable risk-risk tradeoffs. (link)

The costly search towards safety. https://www.nber.org/papers/w27882.pdf

“The paper investigates the relationship between capitalism systems and their levels of income and compositional inequality (how the composition of income between capital and labor varies along income distribution). Capitalism may be seen to range between Classical Capitalism, where the rich have only capital income, and the rest have only labor income, and Liberal Capitalism, where many people receive both capital and labor incomes. Using a new methodology and data from 47 countries over the past 25 years, we show that higher compositional inequality is associated with higher inter-personal inequality. Nordic countries are exceptional because they combine high compositional inequality with low inter-personal inequality. We speculate on the emergence of homoploutic societies where income composition may be the same for all, but Gini inequality nonetheless high, and introduce a new taxonomy of capitalist societies.” (link)

“This study empirically investigates the relationship between design structure and organization structure in the context of new infrastructure development projects. Our research setting is a capital program to develop new school buildings in the city of Manchester, UK. Instead of creating a controlled, hierarchical organization, which would mirror the buildings' design structure, the Manchester City Council created a “commons organization,” and chose to share decision-rights with local claimants. Each school’s faculty was thus given rights equal to Council staff to participate in the design process and to approve the school’s design. In the natural resources literature, commons theory predicts that, if a robust governance structure is created, this complex form of organizing gives claimants incentives to contribute to the enterprise whilst dampening collective action problems (Ostrom 1990). Here we extend this claim to the production of man-made artifacts. The design commons induced teachers to volunteer time and effort to communicate their practical knowledge, but created corresponding tensions over interdependent choices for the final design. Yet, none of the projects succumbed to collective action problems in the form of budget overruns, bogged-down processes, or users feeling disenfranchised. Applying Ostrom’s (1990) principles of robust commons governance, we show that the Manchester design commons organization was robust by her criteria and propose that robustness contributed positively to the outcome. We also discuss design flexibility as an intervening variable that was critical in reconciling differences that governance alone could not resolve. We conclude with the rudiments of a theory describing when and why a commons organization can be advantageous for production of designs.” (link)

“Between 2006 and 2011, daily print newspapers in the U.S. lost 20% of their paid subscribers, partly due to increasing availability of alternative sources of news, such as free content provided on newspaper websites and by news aggregators such as Yahoo. However, contrary to the expectation that firms respond to softening demand by lowering prices, newspapers increased subscription prices by 40-60% during this period. In this paper, we explain and quantify the factors responsible for these price increases. We calibrate models of readership and advertising demand using data from a top-50 U.S. regional print newspaper. Conditional on these demand models, we calibrate the newspaper’s optimal pricing equations, and assess whether the increase in subscription prices are mainly rationalized by: a) the decline in readers' willingness to pay (WTP) in the presence of heterogeneity among subscribers, or b) the newspaper’s reduced incentive to subsidize readers at the expense of advertisers, due to softening demand for newspaper advertising. We find that the decline in the ability of the newspaper to subsidize readers by extracting surplus from advertisers explains most of the increase in subscription prices. Of the three available subscription options (Daily, Weekend, and Sunday only), subscription prices increased more steeply for the Daily option, a pattern consistent with the view that newspapers are driving away low valuation weekday readers while preserving Sunday readership and the corresponding ad revenues. Thus, our research augments theoretical propositions in two-sided markets by providing a formal empirical approach to unraveling the relative importance of the role played by agents on the subsidy and demand side in determining prices.” (Link)

“Social media users face a tension between presenting themselves in an idealized or authentic way. Here, we explore how prioritizing one over the other impacts users' well-being. We estimate the degree of self-idealized vs. authentic self-expression as the proximity between a user’s self-reported personality and the automated personality judgements made on the basis Facebook Likes and status updates. Analyzing data of 10,560 Facebook users, we find that individuals who are more authentic in their self-expression also report greater Life Satisfaction. This effect appears consistent across different personality profiles, countering the proposition that individuals with socially desirable personalities benefit from authentic self-expression more than others. We extend this finding in a pre-registered, longitudinal experiment, demonstrating the causal relationship between authentic posting and positive affect and mood on a within-person level. Our findings suggest that the extent to which social media use is related to well-being depends on how individuals use it.” (link)

“A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being considerably more effective in recessions than in expansions. Second, we estimate multipliers for more disaggregate spending variables which behave differently relative to aggregate fiscal policy shocks, with military spending having the largest multiplier. Third, we show that controlling for predictable components of fiscal shocks tends to increase the size of the multipliers in recessions.” (Link)

“Social media users face a tension between presenting themselves in an idealized or authentic way. Here, we explore how prioritizing one over the other impacts users' well-being. We estimate the degree of self-idealized vs. authentic self-expression as the proximity between a user’s self-reported personality and the automated personality judgements made on the basis Facebook Likes and status updates. Analyzing data of 10,560 Facebook users, we find that individuals who are more authentic in their self-expression also report greater Life Satisfaction. This effect appears consistent across different personality profiles, countering the proposition that individuals with socially desirable personalities benefit from authentic self-expression more than others. We extend this finding in a pre-registered, longitudinal experiment, demonstrating the causal relationship between authentic posting and positive affect and mood on a within-person level. Our findings suggest that the extent to which social media use is related to well-being depends on how individuals use it.” (link)

“An emerging consensus in certain legal, business, and scholarly communities maintains that corporate managers are pressured unduly into chasing short-term gains at the expense of superior long-term prospects. The forces inducing managerial myopia are easy to spot, typically embodied by activist hedge funds and Wall Street gadflies with outsized appetites for next quarter’s earnings. Warnings about the dangers of “short termism” have become so well established, in fact, that they are now driving changes to mainstream practice, as courts, regulators and practitioners fashion legal and transactional constraints designed to insulate firms and managers from the influence of investor short-termism. This Article draws on academic research and a series of case studies to advance the thesis that the emergent folk wisdom about short-termism is incomplete. A growing literature in behavioral finance and psychology now provides sound reasons to conclude that corporate managers often fall prey to long-term bias—excessive optimism about their own long-term projects. We illustrate several plausible instantiations of such biases using case studies from three prominent companies where managers have arguably succumbed to a form of “long-termism” in their own corporate stewardship. Unchecked, long-termism can impose substantial costs on investors that are every bit as damaging as short-termism. Moreover, we argue that long-term managerial bias sheds considerable light on the paradox of why short-termism evidently persists among supposedly sophisticated financial market participants: Shareholder activism—even if unambiguously myopic—can provide a symbiotic counter-ballast against managerial long-termism. Without a more definitive understanding of the interaction between short- and long-term biases, then, policymakers should be cautious about embracing reforms that focus solely on half of the problem.” (link)

Wikiholes

“The problem of universals is an ancient question from metaphysics which has inspired a range of philosophical topics and disputes. Should the properties an object has in common with other objects, such as colour and shape, be considered to exist beyond those objects? And if a property exists separately from objects, what is the nature of that existence?”

https://plato.stanford.edu/entries/neurath/