Category Archives: Media

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>

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 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>


Updates from Adobe

Maria Brzozowska Makes Magical Realities
By Jenny Carless – “My aim is to empower my audience as active storytellers,” Maria Brzozowska says. “It’s very valuable for me when my audiences are able to relate to my illustrations and create or find pieces of their own stories. It’s like an invisible connection between us.”

The Ankara-based artist and book illustrator describes her art as a merging point of fantasy and reality—what she calls magical realism.

“My illustrations allow the audience to encounter new, unknown lands where there is no definite time or space, and in doing that, return to a sense of possibility that we lose as we grow up,” she says.

Brzozowska grew up in a household of creatives, so in many ways her career was an inevitability, she says.

“I remember being encouraged to look at the world through different perspectives and to ask myself ‘what if?’,” she recalls. “Many of the answers to that question I found in the endless possibilities of being a visual storyteller.”

She spent time experimenting with various media before finding a balance between a digital and traditional styles. She started with a digital approach, but with practice and patience developed her manual skills. “The more confident I became, the easier it was for me to do most of my work by hand,” she says. more>


Optimizing for Human Well-Being

By Douglas Rushkoff – The economy needn’t be a war; it can be a commons. To get there, we must retrieve our innate good will.

The commons is a conscious implementation of reciprocal altruism. Reciprocal altruists, whether human or ape, reward those who cooperate with others and punish those who defect. A commons works the same way. A resource such as a lake or a field, or a monetary system, is understood as a shared asset. The pastures of medieval England were treated as a commons. It wasn’t a free-for-all, but a carefully negotiated and enforced system. People brought their flocks to graze in mutually agreed- upon schedules. Violation of the rules was punished, either with penalties or exclusion.

The commons is not a winner-takes-all economy, but an all-take-the-winnings economy. Shared ownership encourages shared responsibility, which in turn engenders a longer-term perspective on business practices. Nothing can be externalized to some “other” player, because everyone is part of the same trust, drinking from the same well.

If one’s business activities hurt any other market participant, they undermine the integrity of the marketplace itself.

For those entranced by the myth of capitalism, this can be hard to grasp. They’re still stuck thinking of the economy as a two-column ledger, where every credit is someone’s else’s debit. This zero-sum mentality is an artifact of monopoly central currency.

If money has to be borrowed into existence from a single, private treasury and paid back with interest, then this sad, competitive, scarcity model makes sense. I need to pay back more than I borrowed, so I need to get that extra money from someone else. That’s the very premise of zero-sum.

But that’s not how an economy has to work. more>

Your Job Will Be Automated—Here’s How to Figure Out When A.I. Could Take Over

By Gwen Moran – Automation is increasingly making its way into the workplace, raising concerns among employees about the ways technology will change their jobs—or eliminate them entirely. A June 2019 report by Oxford Economics predicts that 8.5% of the world’s manufacturing positions alone—some 20 million jobs—will be displaced by robots by 2030.

Some tasks aren’t easy to evaluate. A 2013 paper, “The Future of Employment: How Susceptible are Jobs to Computerisation?” found that roughly 47% of jobs were at high risk of being automated with advances in artificial intelligence.

Carl Benedikt Frey, Ph.D., co-author of that paper and author of The Technology Trap: Capital, Labor, and Power in the Age of Automation says predictions around automation’s impact have become very polarized: Either you believe that the robots are coming for many jobs—leaving many with no employment—or you believe it’s going to change the nature of work. more>

Consumerism isn’t a sellout – if capitalism works for all

By Richard V. Reeves – The essential thinginess of capitalism has been one of its most-criticized features. Materialism, and specifically consumerism, are almost always used as pejorative terms. Nostalgic conservatives, egalitarian progressives and environmentalists loudly agree on at least one thing: we are just buying too much stuff.

They’re not wrong. The U.S. self-storage market is already worth $38 billion, and growing fast. Almost one in ten households are now renting extra space. One feature of late capitalism is that many of us have more things than we have space for things.

At its best, however, consumerism is a powerful, positive force. It allows for the expression of identity, it can hold sellers to public account, and it drives new thinking and development. But this is only the case when consumers are being served fairly in the market. Today, there is a pressing concern about whether the forces of “bigness” – a trend toward fewer larger companies – combined with a reluctance on the part of governments to intervene in consumer markets, is dampening innovation and narrowing choice.

Before worrying about whether the market is serving consumers, we need to agree that it should. Critiques of consumerism have to be taken seriously before examining whether contemporary capitalism is friendly to consumers. These critiques usually come in four types: moral, aesthetic, financial, or environmental.

The moral critique of consumerism is that the acquisition of things displaces more worthwhile activities or priorities. Instead of shopping, we should be spending time with friends and family, in places of worship, or in nature. more>

Nobel Economist Says Inequality is Destroying Democratic Capitalism

By Angus Deaton – As at no other time in my lifetime, people are troubled by inequality.

Across the rich world, not only in America, large groups of people are currently questioning whether their economies are working for them. The same can be said of politics. Two-thirds of Americans without a college degree believe that there is no point in voting, because elections are rigged in favor of big business and the rich. Britain is divided as never before and, once again, many believe that their voice doesn’t count either in Brussels or in Westminster. And one of the greatest miracles of the 20th century, the miracle of falling mortality and rising lifespans, is no longer delivering for everyone, and is now faltering or reversing.

At the risk of grandiosity, I think that today’s inequalities are signs that democratic capitalism is under threat, not only in the US, where the storm clouds are darkest, but in much of the rich world, where one or more of politics, economics, and health are changing in worrisome ways. I do not believe that democratic capitalism is beyond repair nor that it should be replaced; I am a great believer in what capitalism has done, not only to the oft-cited billions who have been pulled out of poverty in the last half-century, but to all the rest of us who have also escaped poverty and deprivation over the last two and a half centuries.

But we need to think about repairs for democratic capitalism, either by fixing what is broken, or by making changes to head off the threats; indeed, I believe that those of us who believe in social democratic capitalism should be leading the charge to make repairs. As it is, capitalism is not delivering to large fractions of the population; in the US, where the inequalities are clearest, real wages for men without a four-year college degree have fallen for half a century, even at a time when per capita GDP has robustly risen. more>