Category Archives: Web Article Review

technological unemployment

This New York Times Magazine article about an American returning home after living abroad is mostly fluff, but it did contain these few interesting paragraphs on technological unemployment.

One day, I drove down Highway 101 to Silicon Valley to meet Reid Hoffman, a partner at the venture-capital firm Greylock and the chairman of LinkedIn, the professional-social-networking company, which was then in the process of being sold to Microsoft for $26.2 billion. Hoffman founded LinkedIn the same year I left for Beijing; now he was a billionaire. He is politically active, having supported and advised Obama and raised money for and donated money to Hillary Clinton. I mentioned how the election had become a referendum of sorts on globalization and trade, yet there had been little discussion about the next big earthquake — artificial intelligence, or the approaching world of self-driving cars, smartphones that can diagnose a melanoma and much more. Globalization may have ravaged blue-collar America, but artificial intelligence could cut through the white-collar professions in much the same way.

Hoffman said the reactions to artificial intelligence range from utopian to dystopian. The utopians predict huge productivity gains and rapid advances in medicine, genetic sequencing, fighting climate change and other areas. The dystopians predict a “Robocalypse” in which machines supplant people and, possibly, threaten humanity itself. “My point of view,” he said, “is that it is a massive transformation and does really impact the future of humanity, but that we can steer it more toward utopia rather than dystopia with intelligence and diligence.”

Either way, another major economic shift is coming, perhaps sooner than people realize. Hoffman said that many of the jobs in today’s economy will change fundamentally during the next 20 years. On the same day I met with Hoffman, Uber announced a pilot program to test self-driving vehicles in Pittsburgh. It also bought a company developing self-driving trucks. “We have to make sure that we don’t have a massive imbalance of society by which you have a small number of people that own the robots and everyone else is scrambling,” he said.

If the current political upheaval in the U.S. and elsewhere is caused by the onset of technological unemployment, we could truly be in trouble, because not only is it going to get worse, it is being completely misdiagnosed. When an illness is misdiagnosed, it can be treated in ineffective or even completely counterproductive ways. If underemployment caused by technological progress is the root of our current problems, the solutions have to lie in providing people with the skills they need to work with the new technology, helping people to build an ownership stake in the technology, lowering barriers to startups and innovators, and providing a safety net for those still left behind through no fault of their own. Instead, we are talking about subsidizing outdated technologies and industries, blaming mythical internal and external enemies for our problems, and removing the limited safety net we have fought so hard to build up until now.

inflation

The Economist says inflation could be on the verge of a comeback.

Some economists reckon a sustained rise in inflation is overdue. Most of the rich world is out of recession, emerging markets seem to have put the worst of their commodity bust behind them, and in a few places, like America, low unemployment has at last given way to accelerating wage growth. It is possible, some suppose, that the weak growth and sustained disinflation of the past half-decade has blinded markets and policy-makers to the potential for a sharp swing in the other direction, toward uncomfortably high inflation.

The rest of the article goes on to poo-poo the idea that inflation may be on the verge of a comeback. But we’ll see.

Washington State carbon tax voted down

I wrote recently about a carbon tax referendum in Washington State. Sadly (in my view), it was voted down.

The carbon tax initiative (I-732) garnered only 42 percent of the vote in Washington State. The tax was supposed to be revenue neutral by lowering the state sales tax by 1 cent and provide tax rebates of up to $1,500 per year to 460,000 low-income households. The initial $25 per ton would have boosted the price of gallon of gas by about 25 cents, and added 2.5 cents to each kilowatt-hour of coal-fired electricity, and 1.25 cents to electricity generated by natural gas. Interestingly, the proposal which aimed to cut emissions of carbon dioxide that are contributing to man-made global warming was opposed by many leading environmentalist groups. Why? Largely because of the tax’s revenue neutrality. The climate activists wanted to use the revenues to “invest” in various projects such as subsidizing solar and wind power schemes, mass transit and job training for folks put out of work by climate policies.

It’s unfortunate. Let’s review: Taxes on externalities (which occur when the activity of Group A results in a profit while unfairly imposing a cost on Group B) are a good thing for at least three reasons. First, they give Group A to engage in less of the offending activity because they now have to pay the cost rather than imposing the cost on someone else. Second, if Group A decides the activity is still worthwhile, revenue is raised for the government which it can spend on some worthy cause, like helping Group B. Third, the revenue raised by taxing bad things can be used to reduce taxes on good things, like work and savings and investment and making a profit without hurting other people. All this is good for people and the economy as a whole. The only party hurt is Group A, which had no right to profit at everyone else’s expense in the first place. The reason we don’t do this more is that Group A is able to use some of its profits to buy off politicians and mount propaganda campaigns to convince the public to vote against their own interests.

learn about carbon trading and R

This is pretty cool – an interactive website that lets you explore a real-world carbon trading research problem while learning new tricks in R.

Many economists would agree that the most efficient way to fight global warming would be a world-wide tax or an emmission trading system for greenhouse gases. Yet, if only a part of the world implements such a scheme, a reasonable concern is that firms may decide to relocate to other parts of the world, causing job losses and less effective emmission reduction…

In their article ‘Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme’ (American Economic Review, 2014), Ralf Martin, Mirabelle Muûls, Laure B. de Preux and Ulrich J. Wagner study the most efficient way to allocate a fixed amount of free permits among facilities in order to minimize the risk of job losses or carbon leakage. Given their available data, they establish simple alternative allocation rules that can be expected to substantially outperform the current allocation rules used by the EU.

As part of his Master’s Thesis at Ulm University, Benjamin Lux has generated a very nice RTutor problem set that allows you to replicate the insights of the paper in an interactive fashion. You learn about the data and institutional background, run explorative regressions and dig into the very well explained optimization procedures to find efficient allocation rules. At the same time you learn some R tricks, like effective usage of some dplyr functions.

It’s an interesting question at a time when some U.S. states and Canadian provinces have started introducing carbon trading and taxation schemes that differ from their neighbors (sometimes because their neighbors have nothing at all). Perhaps there is a win-win where a policy can gradually phase out less productive, dirtier industries while replacing them with cleaner and higher-value-added industries, then sharing enough of the wealth so everyone benefits.

breakthroughs in antibiotic resistance

There are potential breakthroughs against antibiotic-resistant bacteria, which I think is good as I’ve been coughing up some kind of alien green goo for about a week now.

An anti-infective synthetic peptide with dual antimicrobial and immunomodulatory activities

Antibiotic-resistant infections are predicted to kill 10 million people per year by 2050, costing the global economy $100 trillion. Therefore, there is an urgent need to develop alternative technologies. We have engineered a synthetic peptide called clavanin-MO, derived from a marine tunicate antimicrobial peptide, which exhibits potent antimicrobial and immunomodulatory properties both in vitro and in vivo. The peptide effectively killed a panel of representative bacterial strains, including multidrug-resistant hospital isolates. Antimicrobial activity of the peptide was demonstrated in animal models, reducing bacterial counts by six orders of magnitude, and contributing to infection clearance. In addition, clavanin-MO was capable of modulating innate immunity by stimulating leukocyte recruitment to the site of infection, and production of immune mediators GM-CSF, IFN-γ and MCP-1, while suppressing an excessive and potentially harmful inflammatory response by increasing synthesis of anti-inflammatory cytokines such as IL-10 and repressing the levels of pro-inflammatory cytokines IL-12 and TNF-α. Finally, treatment with the peptide protected mice against otherwise lethal infections caused by both Gram-negative and -positive drug-resistant strains. The peptide presented here directly kills bacteria and further helps resolve infections through its immune modulatory properties. Peptide anti-infective therapeutics with combined antimicrobial and immunomodulatory properties represent a new approach to treat antibiotic-resistant infections.

Washington State’s carbon tax vote

Washington State voters are considering a carbon tax. The proceeds would be used to offset other taxes, making it revenue neutral. This could be a national model, if we weren’t all so allergic to the word tax.

The proposal is strikingly simple and refreshingly bipartisan. According to Yes on I-732.org, I-732 would:

  • Directly address climate change by adding a tax of $25/ton on carbon emissions;
  • Reduce the statewide sales tax by 1%;
  • Add a tax credit of $1500/year for low-income households; and
  • Lower the Business and Occupation (B&O) tax on manufacturers to .001%.

This type of fossil fuel tax would be first of its kind in the United States, though it has been implemented elsewhere. According to the World Bank, 15 countries currently tax carbon. Sweden’s policy is the most aggressive, at rate of $168/ton. Closer to home, a carbon tax has been in place in British Columbia, Canada, since 2008, which has resulted in a 5-15% reduction in greenhouse gas (GHG) emissions. BC’s tax is much lower than Sweden’s, at a rate of $30/ton.

my election prediction

I have a little election prediction spreadsheet. It takes the poll averages for swing states as reported by RealClearPolitics, generates a random number for each with a 4% standard deviation, and runs 1,000 trials in about 10 seconds. Go to Nate Silver or other online sites for a much more professional and sophisticated approach. I do this just for fun and to help me understand how the system works. So without further ado, here is how I think Tuesday night might unfold. The poll closing times are the earliest closing times in a given state according to ballotpedia, so you would expect some numbers to start tricking in at that point. I’m writing Sunday around noon, just in case there is some big development between now and Tuesday.

Based on RealClearPolitics, if both candidates win the states they lead in right now, Hillary would win with 298 electoral votes to 240 for Trump. Nate Silver predicts 290-247, and puts the odds at 65-35. Betfair puts it at 323-215 and the odds at 80-20. My spreadsheet comes up with an electoral college average of 295-243 and odds of 85-15.

Here is one way the evening could unfold to get in the ballpark:

First, I assume Clinton and Trump have both won all the states considered relatively safe by RealClearPolitics. This means Hillary starts off with 218 and Trump with 165. Seems unfair, doesn’t it? But these are the demographics, and why the breathless media coverage of swing states is a bit misleading. If Trump is leading half the swing states on a given day, that doesn’t mean the race is anywhere near tied.

7:00 p.m. EST

  • Results start to trickle in from Florida, Georgia, Virginia and New Hampshire.
  • The night starts off with a bang for Clinton with wins in Florida and Virginia.
  • Trump gets Georgia and New Hampshire.
  • Clinton leads 247-185.

7:30 p.m. EST

  • North Carolina and Ohio
  • I’ll throw both to Trump.
  • 247-218. Getting slightly interesting.

8:00 p.m. EST

  • Pennsylvania and Michigan
  • I don’t think Trump has a realistic shot at either. They go to Clinton.
  • 283-218. It’s over!

9:00 p.m. EST

  • They split Arizona (Trum) and Colorado (Clinton).
  • 292-229

10:00 p.m. EST

  • Iowa and Nevada
  • I’ll throw both to Trump. I’ll also throw him New Mexico to look like slightly less of a loser.
  • 292-246

This is what I expect to happen. Of course, the votes get counted slowly, and we can pretend there is some suspense as they are counting votes in states that are not expected to be close. Still, I think we might all be in bed at 10 p.m. on the east coast knowing who the next President. And this is what I want to happen. Although I would enjoy some suspense on some level, rationally I know it is better not to live in interesting times.

For Trump to win, a lot of unlikely things have to fall into place, but here is a plausible scenario: Trump starts the night with a huge bang, winning Florida, Georgia, North Carolina, New Hampshire, and Ohio. Clinton gets Virginia. Trump would be up 252-218. By the way, I gave Clinton New Mexico to start off this time. Clinton wins Pennsylvania and Michigan, going up 254-252. They split Arizona and Colorado (263-263!). Trump gets Iowa and goes up 269-263. It comes down to Nevada. Right now it looks like Nevada is reasonably solid for Clinton, so it comes down to a 269-269 tie. The House of Representatives casts the deciding vote, picking Trump for President. The National Guard is deployed in some states to ensure order.

So Florida is a big deal, obviously. We knew that.

my final case against Trump

I write this two days before the election. Trump has announced that he intends to cancel all spending to deal with climate change if elected. The evidence that we need to deal with climate change is so clear, and it is so clearly an existential threat to our civilization, that this is completely unethical. If I liked everything else about Trump, it would be enough, by itself, to cause me to reject him. (For the record, I like nothing about him.) Combine it with the completely unacceptable bigotry, racism, and religious intolerance, and it is just completely unacceptable. Finally, the lack of universal health care continues to be an international disgrace for our country. But we are closer thanks to Obama’s efforts to take on a Congress bought and paid for by the finance industry. Trump has vowed to destroy this progress and replace it with…nothing. Completely unacceptable.

Speaking of the finance industry, if a complex crisis like the 2007-8 financial crisis were to arise, we can’t trust Trump to understand it or to seek out advice from people who understand it. I don’t expect Hillary Clinton to take bold action to support long-term financial stability, which is what we need, but I do trust her to keep a cool head in a crisis, seek out competent advice, and make rational decisions. Similarly, in case of geopolitical crisis, I don’t expect her to be a strong force for peace, but I trust her to keep a cool head, seek out competent advice, and make rational decisions. Trump doesn’t have the ability to understand complex issues, yet he is overconfident and doesn’t know what he doesn’t know, and if he seeks out the advice of others at all, I wouldn’t trust him to know whose advice to seek. Finally, he does not appear to be rational at times. I think he could easily make some horrible mistake if and when he is confronted by a crisis.

I don’t think either candidate will take bold action on campaign finance reform. Bernie Sanders was the candidate for that. Prove me wrong, Hillary!