Author Archives: Net economy

How ergodicity reimagines economics for the benefit of us all

By Mark Buchanan – The principles of economics form the intellectual atmosphere in which most political discussion takes place. Its prevailing ideas are often invoked to justify the organization of modern society, and the positions enjoyed by the most wealthy and powerful. Any threat to these ideas could also be an implicit threat to that power – and to the people who possess it. Their response might be brutal.

In the real world, through the pages of scientific journals, in blog posts and in spirited Twitter exchanges, the set of ideas now called ‘Ergodicity Economics’ is overturning a fundamental concept at the heart of economics, with radical implications for the way we approach uncertainty and cooperation. The economics group at LML is attempting to redevelop economic theory from scratch, starting with the axiom that individuals optimize what happens to them over time, not what happens to them on average in a collection of parallel worlds.

The new concept is a key theme of research initiated by Peters about a decade ago, and developed with the collaboration of Gell-Mann and the late Ken Arrow at SFI, and of Alex Adamou, Yonatan Berman and many others at the LML. Much of this view rests on a careful critique of a model of human decisionmaking known as expected utility theory.

But there is one odd feature in this framework of expectations – it essentially eliminates time. Yet anyone who faces risky situations over time needs to handle those risks well, on average, over time, with one thing happening after the next. The seductive genius of the concept of probability is that it removes this historical aspect by imagining the world splitting with specific probabilities into parallel universes, one thing happening in each.

The expected value doesn’t come from an average calculated over time, but from one calculated over the different possible outcomes considered outside of time. In doing so, it simplifies the problem – but actually solves a problem that is fundamentally different from the real problem of acting wisely through time in an uncertain world. more>

How America Lost Faith in Expertise

By Tom Nichols – I’m used to people disagreeing with me on lots of things. Principled, informed arguments are a sign of intellectual health and vitality in a democracy. I’m worried because we no longer have those kinds of arguments, just angry shouting matches.

I fear we are moving beyond a natural skepticism regarding expert claims to the death of the ideal of expertise itself: a Google-fueled, Wikipedia-based, blog-sodden collapse of any division between professionals and laypeople, teachers and students, knowers and wonderers—in other words, between those with achievement in an area and those with none. By the death of expertise, I do not mean the death of actual expert abilities, the knowledge of specific things that sets some people apart from others in various areas.

There will always be doctors and lawyers and engineers and other specialists. And most sane people go straight to them if they break a bone or get arrested or need to build a bridge. But that represents a kind of reliance on experts as technicians, the use of established knowledge as an off-the-shelf convenience as desired. “Stitch this cut in my leg, but don’t lecture me about my diet.”

The larger discussions, from what constitutes a nutritious diet to what actions will best further U.S. interests, require conversations between ordinary citizens and experts. But increasingly, citizens don’t want to have those conversations. Rather, they want to weigh in and have their opinions treated with deep respect and their preferences honored not on the strength of their arguments or on the evidence they present but based on their feelings, emotions, and whatever stray information they may have picked up here or there along the way.

This is a very bad thing. more>

Updates from Siemens

Transforming the Capital Asset Lifecycle – Part 1
By John Lusty – “Innovate or die”. Three years ago, in the global oil & gas industry, this was the dire message communicated from the boardroom to the operating plant as falling commodity prices were hollowing out corporate income statements. The same story echoed through the supply chain as engineering contractors and equipment manufacturers fought for survival – trying to win enough work to remain healthy within a shrinking capital project market while creating greater value from the existing capital asset lifecycle.

The cost-cutting that ensued was ugly, and the job losses were substantial. In parallel, the appetite for innovative ideas sky-rocketed as producers worked to wring out costs and remain profitable at any price. This triggered a new behavior within the traditionally siloed energy industry, for the first-time visionaries started to look to other manufacturing industries for capabilities that could be adapted to their own companies.

What they saw was a shock. Despite years of investing in software and technology, capital asset owners in the energy and process industries still had a long way to go to get full value from their technical information compared to other, more mature, industries. Unlike their business information which, to a greater degree, had been consolidated following two decades of ERP implementations, the technical information supporting their plant assets was still scattered across different locations and incompatible file formats.

To make matters worse, data from multiple projects and facilities used software from a variety of vendors along with their own standards and specifications. Plants that came in through acquisitions and mergers were even more unique. more>

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Updates from ITU

Dark skies, bright future: overcoming Nigeria’s e-waste epidemic
By Eloise Touni – Nigerian law prohibits burning plastic cables, as well as acid leaching and other common methods used by John and his fellow pickers to reclaim valuable metals from discarded electronics. But minimal enforcement and a low awareness of the risks they are running means most pickers continue to regularly expose themselves to toxins that cause respiratory and dermatological problems, eye infections, neurodevelopmental issues, and, ultimately, shorter lives.

While international agreements like the Basel Convention prohibit the import of hazardous waste, unscrupulous importers and a porous customs system mean Nigeria now ranks alongside Ghana as one of the world’s leading destinations for electronic waste. The country receives 71,000 tonnes of used consumer goods through the two main ports in Lagos from the European Union and other more industrialized economies every year.

“Some of the e-waste from abroad is comprised of cathode-ray TVs, which contain lead, as well as refrigerators and air conditioners containing hydrochlorofluorocarbons, making it a threat to those who are dismantling and dealing with the products,” the UN Environment Program’s Eloise Touni says.

Plastic components, including hard casings and cables, also contain persistent organic pollutants used as flame retardants, such as polybrominated diphenyl ethers (PBDE).

These were banned by the Stockholm Convention due to their long-lasting global impacts and are regularly detected in ecosystems and people all over the world, including in Arctic wildernesses and their traditional inhabitants. more>

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America’s Hot New Job Is Being a Rich Person’s Servant

“Wealth work” is one of America’s fastest-growing industries. That’s not entirely a good thing.
By Derek Thompson – In an age of persistently high inequality, work in high-cost metros catering to the whims of the wealthy—grooming them, stretching them, feeding them, driving them—has become one of the fastest-growing industries.

The MIT economist David Autor calls it “wealth work.”

While there are reasons to be optimistic about this trend, there is also something queasy about the emergence of a new underclass of urban servants.

Wealth work falls into two basic categories. First, full-time retail and service jobs at places like nail salons and spas. “You’re talking about people with $30,000 incomes that are often employed in high-wealth metro areas, or resort economies,” Muro said.

Because they often cannot afford to live near their place o-f work, they endure long commutes from lower-cost neighborhoods. These arrangements aren’t merely time-consuming; they can also be exploitative. For example, New York City nail salons are notorious for flouting minimum-wage laws and other labor regulations, and massage parlors across Florida have served as fronts for human trafficking.

A second category is the “Uber for X” economy—that nebulous network of people contracted through online marketplaces for driving, delivery, and other on-demand services.

Optimistically, these jobs offer autonomy for workers and convenience for consumers, many of whom aren’t wealthy. But the business models that keep these firms aloft rely on the strategic avoidance of laws like the Fair Labor Standards Act, which regulates minimum wage and overtime pay. These laborers often do the work of employees with the legal protections of contractors—which is to say, hardly any. more>

Is Tourism an Antidote to the Global Wave of Nationalism and Xenophobia?

By Stewart M. Patrick – As vacation photos from exotic locales pile up in Facebook and Instagram feeds this summer, it’s easy to take far-flung tourism for granted. Well-heeled friends riding elephants in Thailand or camels in Giza might as well be at the Jersey shore or beside a lake in the Adirondacks. Mass international tourism, like the free flow of goods, services, money and data, has become a hallmark of globalization.

This is neither accidental nor trivial. The ability of those with with means and passports to travel the world is a function of international cooperation. It is also a force for global understanding, a potential antidote to the resurgent nationalism that now infects this era. Achieving such cosmopolitan ideals, however, requires a tourism focused on people-to-relpeople contacts and mutual benefits, rather than perpetuating self-contained bubbles of privilege.

At the dawn of the 20th century, foreign leisure travel required no passports. But it was the province of aristocrats and plutocrats of the sort that populated Henry James novels. The advent of jet travel, followed by package tours and declining airline fares, hastened mass tourism. According to the World Bank, between 1995 and 2017 the number of international tourist arrivals rose more than 250 percent, from slightly above 500 million to more than 1.3 billion, while tourist expenditures more than tripled, from $463 billion to $1.45 trillion. The United Nations estimates that tourism now accounts for 10 percent of global GDP and 7 percent of exports, and supports one out of every 10 jobs. Tourists still flock to Paris and Acapulco, but new, once unimaginable destinations from Antarctica to Zanzibar have also emerged.

Back in 1795, the philosopher Immanuel Kant famously outlined three preconditions for “perpetual peace.” The first two are more well-known: the emergence of self-governing constitutional republics and open international commerce. Kant’s third precondition is more often overlooked. It is the principle of “universal hospitality”: the right of all “citizens of the earth” to visit and be welcomed in all lands, regardless of their country of origin.

Kant believed that humans should act according to moral imperatives regardless of the precise effects of those actions. But his concept of hospitality still carried a utilitarian logic, since if universally practiced it would contribute to a cosmopolitan peace. more>

Updates from Ciena

Photonic integration and co-packaging: Design tools for footprint optimization in data center networks
As traffic within and between data centers continues to grow, operators need to constrain the resulting increase in power consumption to minimize operational costs. This is driving the need to manage footprint and power at the system design level. Photonic integration and co-packaging are related approaches to addressing area and power challenges for networking applications.

By Patricia Bower – Data center networks have evolved rapidly over the last couple of years, in large part due to the scalability and flexibility supported by today’s compact modular DCI solutions.  System designers leveraged advances in key foundational technologies to pack significant capacity and service density into these products, and their popularity is growing as these solutions capture new market segments.

The same advances have also paved the way for new consumption models for coherent optical technology in the form of footprint-optimized, pluggable solutions. As traffic growth for server interconnect within data centers continues to increase, greater for interconnect between data centers (DCI) will be required.

Scaling of data center traffic to get more bandwidth adds to the power consumption overhead and real estate requirements for operators which adds to capital and operational costs.

With each new generation of switching platform and coherent optical transport systems, designers have met the challenges by increasing throughput density and reducing power/bit. Both intra-DC and DCI traffic flows will increasingly rely on advances in foundational technologies and system design options to mitigate power consumption while maximizing interconnect densities.

What are these foundational technologies?  They include:

  • Complementary Metal-Oxide Semiconductor (CMOS)
  • Indium phosphide (InP)
  • Silicon photonics (SiPhot)

In networking applications, CMOS is the basis for both high-capacity switch chips used in router platforms and coherent optical digital-signal-processors (DSP).

InP and SiPhot are used to build electo-optical circuits for signal transport over optical fibers.  Together, the DSP and electro-optical components are the heart of coherent optical transport systems. more>

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Updates from Chicago Booth

Are investors chronically pessimistic?
No—but that doesn’t mean they adhere to rational expectations
By Dwyer Gunn – The assumption that investors hold rational expectations of market returns is central to many asset pricing models. However, in recent years, surveys of investors have revealed that market participants’ reported expectations often deviate from the objective predictions of financial models working with large pools of data. One theory is that these deviations are the result of persistent pessimism on the part of investors: survey respondents, according to this hypothesis, are discounting the rationally expected rate of return to reflect the risk of investing in stocks.

To examine whether investors have a pessimistic bias, Oxford’s Klaus Adam, the Bank of Canada’s Dmitry Matveev, and Chicago Booth’s Stefan Nagel examined existing evidence—including surveys of individual investors, professional investors, and CFOs going back to the 1980s—to compare expected returns with realized returns.

The research suggests that, contrary to the pessimism hypothesis, investors are just as likely to be optimistic.

Investor expectations closely matched realized market returns over the full length of time the researchers examined. But at any given time, expectations tended to be procyclical: investors expected higher returns during boom times in the stock market and lower returns during market contractions, even though many asset pricing models work in precisely the opposite direction.

Thus, the apparent conformity of investor expectations to market returns on average over time actually reflected investors’ biases—alternately optimistic and pessimistic, with the two balancing each other out. more>

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The end of us

By Thomas Moynihan – As ideas go, human extinction is a comparatively new one. It emerged first during the 18th and 19th centuries. Though understudied, the idea has an important history because it teaches us lessons on what it means to be human in the first place, in the sense of what is demanded of us by such a calling.

For to be a rational actor is to be a responsible actor, which involves acknowledging the risks one faces, and this allows us to see today’s growing responsiveness to existential risks as being of a piece with an ongoing and as-yet-unfinished project that we first began to set for ourselves during the Enlightenment.

Recollecting the story of how we came to care about our own extinction helps to establish precisely why we must continue to care; and care now, as never before, insofar as the oncoming century is to be the riskiest thus far.

The story of the discovery of our species’ precariousness is also the story of humanity’s progressive undertaking of responsibility for itself. One is only responsible for oneself to the extent that one understands the risks one faces and is thereby motivated to mitigate against them.

It was the philosopher Immanuel Kant who defined ‘Enlightenment’ itself as humanity’s assumption of self-responsibility. The history of the idea of human extinction is therefore also a history of enlightening. It concerns the modern loss of the ancient conviction that we live in a cosmos inherently imbued with value, and the connected realization that our human values would not be natural realities independently of our continued championing and guardianship of them.

But if human extinction was first spoken about in the 18th century, where was the notion prior to this point? What about the perennial tradition of end-of-the-world scenarios coming from religion? For a start, prophecies concerning religious apocalypse provide us with a final revelation upon the ultimate meaning of time. Prognoses concerning human extinction, instead, provide us with a prediction of the irreversible termination of meaning within time. Where apocalypse secures a sense of an ending, extinction anticipates the ending of sense. They are different in kind – not degree – and therefore different in their origins.

So, why was human extinction and existential catastrophe not a topic of conversation and speculation prior to the Enlightenment? more>

Tackling precarity in the platform economy—and beyond

To focus on online platforms in isolation would miss the point that they are part of a wider phenomenon of spreading and intensifying precarity at work.

By Sacha Garben – In our increasingly digitalised world, a crucial role is played by online platforms. These platforms—dynamic websites which constitute digital public squares or marketplaces—affect the economy and our society in various ways and their regulation (or lack thereof) is increasingly the subject of public and political debate. Whether it be the way in which Facebook deals with personal and public information, the influence of Airbnb on our habitat, Uber’s effects on the taxi sector or the working conditions of Deliveroo couriers or tech-workers on Amazon Mechanical Turk, the ‘disruptive’ effects of the activities of the platforms regularly make headlines.

A key social problem is the labor status of those working in the online-platform economy. These drivers, riders, cleaners, designers, translators, technicians and others are often formally contracted as independent and their working arrangements tend to exhibit features which are difficult to square with the traditional employment relationship. These include use of their own materials (such as the driver’s car), autonomy concerning working hours (logging into work via a smartphone app), the short duration of the relationship (translation of perhaps a single sentence) and its multilateral character (the platform linking the producer and consumer).

At the same time, the worker may well be economically dependent on the platform work, the contractual independence can be constructed in rather artificial ways—such as if a driver works full-time for a platform for several years yet remains formally contracted per journey—and the platform can exert significant control over the work and the person performing it.

Furthermore, their ‘independent’ status often means platform workers lack the benefit of the social, labor, health and safety protections which in most countries are connected to an employment contract—even if their precarious working conditions and socio-economic position very much require such protection. more>