Big Tech – the contrarian view

There’s a torrent of material to read about competition (lack of) in digital markets, which of course goes much wider than economics and law. Indeed, I’ve contributed to the many pages written, including in the form of being a member of the Furman Review team. The general theme is that Big Tech does indeed pose a challenge for competition policy, with the individual conclusions running from ‘some adjustment within current framework is needed’, all the way to ‘destroy them’.

What makes Big Tech and the Digital Economy by legal scholar Nicolas Petit so refreshing is its absolutely contrarian perspective. He has coined the phrase ‘moligopoly’ to describe Big Tech, and argues that while there has certainly been increasing competition in digital markets, there is also vigorous competition unremarked by all the commentators. I’d describe what he calls competition as oligopolistic rivalry, but the book does document the ways in which the GAFA and others compete with each other.

Some of the emprical evidence is rather interesting. For example, the book looks at what the big companies describe as the major risks facing them in their SEC filings and all but Facebook claim competition is their 1st or 2nd biggest threat – they would say that of course, but it intrigues me that Facebook doesn’t bother (number 4 or 5 in its ranking). The others do all see each other as their main rivals. Among the book’s other evidence is their high rate of spending on R&D – but I’d like to know about what it is they’re researching, though.

The ultimate question is not about current competitors, however, but about potential competitors. If you believe digital markets tend to winner-takes-all because of network effects, and you can live with concentration because of the large consumer benefits, then what matters is whether new rivals with great technology and products can take the current Big Tech markets. In that case, moligopolistic rivalry along various dimensions is not only fine but anyway inevitable.

The book didn’t win me over in the sense that I concluded there is no reason to be concerned about digital competition. Without intervention, it’s hard to see anybody rivalling Google in search, or Apple and Android in mobile operating systems. To be fair, the author doesn’t argue that there’s no cause for concern, quite. He is issuing a useful warning that we should think carefully and in detail about what harms we believe Big Tech is causing. This book is a distinctive corrective against the current tendency toward groupthink on this subject. As we said right at the start of the Furman Review, Big Tech has brought many benefits, and there is growing evidence about how much people value its products. Anyone certain they know Big Tech needs fixing should read this more nuanced argument with an open mind.

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Are humans or computers more reasonable?

This essay, The Long History of Algorithmic Fairness, sent me to some of the new-to-me references, among them How Reason Almost Lost its Mind by Paul Erickson and five other authors. The book is the collective output of a six-week stint in 2010 at the Max Planck Institute for the History of Science in Berlin. That alone endeared it to me  – just imagine being able to spend six weeks Abroad. And in Berlin, which was indeed my last trip Abroad in the brief period in September 2020 when travel was possible again. I started the book with some trepidation as collectives of academics aren’t known for crisp writing, but it’s actually very well written. I suspect this is a positive side-effect of interdisciplinarity: the way to learn each other’s disciplinary language is to be as clear as possible.

The book is very interesting, tracing the status of ‘rationality’ in the sense of logical or algorithmic reasoning, from the low status of human ‘computers’ (generally poorly-paid women) in the early part of the 20th century, to the high status of Cold War experts devising game theory and building ‘computers’, to the contestation about the meaning of rationality in more recent times: is it logical calculation, or is it what Herbert Simon called ‘procedural rationality’? This is a debate most recently manifested in the debate between the Kahneman/Tversky representation of human decision-making as ‘biased’ (as compared with the logical ideal) and the Gerd Gigerenzer argument that heuristics are a rational use of constrained mental resources.

How Reason… concludes, “The contemporary equivalents of Life and Business Week no longer feature admiring portraits of ‘action intellectuals’ or ‘Pentagon planners’, although these types are alive and well.” The arc of status is bending down again, although arguably it’s machine learning and AI – ur-rational calculators – rather than other types of humans gaining the top dog slot nowadays. As I’ve written in the economic methodology context, it’s odd that computers and also creatures from rats to pigeons to fungi are seen as rational calculators whereas humans are irrational.

Anyway, the book is mainly about the Cold War and how the technocrats reasoned about the existentially lethal game in which they were participants, and has lots of fascinating detail (and photos) about the period. From Schelling and Simon to the influence of operations research (my first micro textbook was Will Baumol’s Economic Theory and Operations Analysis) and shadow prices in economic allocation, the impact on economics was immense. (Philip Mirowski’s Machine Dreams covers some of that territory too, although I found it rather tendentious when I read it a while ago.) I’m interested in thinking about the implications of the use of AI for policy and in policy, and as it embeds a specific kind of calculating reason, thought How Reason Almost Lost its Mind was a very useful read.

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Places, and not

By chance, I’ve read a few books about places this week. Two were sent by an academic friend: Pico Iyer’s The Global Soul and Marc Augé’s (1992) Non-Places: An Introduction to Supermodernity. The third was a treat to self, Gareth Rees’s Unofficial Britain.

I enjoyed The Global Soul, not least because it travels all over the world and I have so had it with lockdown. I’ll be back on trains and planes as soon as anybody lets me. The book sent me off into pleasant reveries about cities I’ve visited and the best hotel rooms. Although Iyer worries about the delocalisation of his kind of life, my experience is that places are – still – very different. You can always tell when you’re Abroad. That’s why I like it so much. The difference is stimulating.

Non-places is another matter. The only thing I could understand it to be saying is that many people can no longer be identified by being tied to a bounded geographical locality, and there are these deracinated transient spaces like airport lounges and car parks. Either gibberish or banal.

Unofficial Britain was the best antidote to Non-places, being a celebration of exactly such locations – multistory carparks, under motorway flyovers, hospital corridors, travellers’ hotels. As Rees observes, they all have a quite distinctive culture and even inhabitants, and are often places of heightened emotion. We just don’t see them generally. I tore through this book, which took me from hairs rising on the back of my neck (ghosts in suburbia) to howling with laughter (the motorways chapter – it alone makes this book worthwhile). What’s not to like?

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When being fair to others is efficient

The title had slightly put me off the new book by David Bodanis: The Art of Fairness: The Power of Decency in a World Turned Mean. I’m not in the mood for self-improvement, given that (a) it’s January, always the worst month of the year and (b) it’s lockdown – so more in the mood for gin and chocolate. Despite my rather truculent seasonal despondency, though, I really enjoyed reading it.

The title is misleading, I think. The book seemed to me to be really about the power of making sure you get the widest range of information possible, by listening to enough people with respect and treating them well enough that they say what they think – while at the same time retaining enough scepticism about their motives. Not so much ‘do as you would be done by’ fairness, more ‘efficiency wage’ fairness – the way you treat people structures their incentives. There’s also a flavour of Team of Rivals about the argument: if you don’t listen to your opponents, or those who disagree with you, reality will bite you at some stage.

The author has his own views, though, and describes this as fairness, or as decency.  The book is structured into two halves. The first is a series of stories about effective leadership, divided into exemplars of the three skills of listening, giving and defending. Most of these are not well-known people – such as Paul Starrett, who won the contract to build the Empire State Building, or Ursula Bower, a British woman who led a team of hill tribe warriors in the mountainous North of India against the Japanese in the second world war. These tales are told crackingly well, and I raced through these chapters.

The second half works a bit less well, although still a compelling read. It starts by contrasting Goebbels and Roosevelt when young, the experiences that shaped them and how they responded, and broadens out into why Roosevelt’s leadership paved the way for the Allied victory and America’s postwar success. Perhaps it’s inherently hard to get the optimal focal length when so many volumes have been written about both men and about the war.

The book then ends with a very nice section of ‘readings and reflections’, a reading list with notes providing a sort of meta-commentary on the theme of decency, or how to be a good leader (one of Aristotelian virtue) in any context.

All in all, highly recommended. It certainly cheered me through a couple of grim January evenings.41RKfm5a9SL._SY346_

 

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Progress, and Greed

As there’s not much to do this holiday other than go for walks and read, and the dog has her limits in terms of walking now she’s 14, I’ve polished off (as well as Veblen) Robert Nisbet’s (now quite old) HIstory of the Idea of Progress, and a thriller, Greed, by Marc Elsberg.

The Nisbet book is quite interesting – apparently it’s a standard text for certain courses but was published after my time in the lecture hall. The book defines the idea of progress as a threefold phenomenon: a reverence for knowledge or science; a belief that it comes about through humanity’s own efforts; and a sense of incremental gain over time. The movement forward through time is a key aspect: Nisbet argues that the idea of progress had a setback during the Renaissance – contrary to what one learned at school – because of the widespread belief that the Middle Ages had been a regression from ancient Greece and Rome, and the belief in cycles that never moved on rather than forward momentum. Inherent, too, in that momentum is the ability to look forward to things getting better in future.

The read across to economics is obvious. ‘Growth’ is really another word for progress. I’m obviously interested in how we ought to be measuring (and thinking about) changing living standards: if policies are supposed to make things better, then what constitutes better and for whom? The advocacy of well-being or happiness, or degrowth, is in effect a claim for the benefits of stasis rather than forward movement. It’s well-known now that although happiness measured on any finite scale (a stationary time series) will not be correlated with income per head (a non-stationary series) over any length of time; but is correlated with growth in income. I wonder whether that’s a fundamental link and not just a statistical correlation? Or to put it another way, if people in two countries today have the same median income per capita but one has been growing and the other static, what should we expect about their well-being?

Anyway, mulling all this over for a lecture this spring. And good to fill gaps in one’s education anyway.

41yoBakhC+L._SX331_BO1,204,203,200_Greed is a page-turner about the murder of a Nobel prize winning economist at an ur-capitalist summit to prevent him giving a speech that would mathematically prove that a communitarian economy will grow faster than an individualist one. The mega-rich hedge fund guy is the murderous villain, and the Berlin anarchists win the day, having defied death many times over. The author has drunk the London Mathematical Laboratory/Ole Peters kool aid, for anyone interested in the character of the proof. Still, it’s set in Berlin, has lots of chases, and chunks of economic discussion too. What’s not to like (whatever you think about Peters’ dismissal of all economic theory prior to his own insights)? A must-read for anyone who hopes that understanding non-ergodic stochastic processes can make them rich.

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