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Essay backup: Let’s compete with Facebook

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rather than play fantasy-despot regulator

I am sick of reading about people who want to regulate Facebook. You didn’t come up with the idea. You didn’t build the business. Now that it’s here, who the heck do you think you are telling them how to run it?
It’s not that I’m happy with Facebook. Far from it. But to me, the best way to fix it would be to come up with something better. I figure that if we really do come up with a much better way of running a social network, then some entrepreneur will be able to make a success out of our idea.
I’ll start with my pet peeve about Facebook.
The Stupid Algorithm
My problem with the infamous algorithm that governs the news feed is not that it’s mysterious or that it’s malicious. My problem is that it’s just unforgivably stupid.
— It shares jokes from friends who don’t have my sense of humor.
— It shares political opinions from friends who aren’t insightful.
— It shares life events from friends with whom I have no personal relationship.
— It gives me frequent updates from people who I only want to hear about occasionally.
— It misses updates from people who I really care about.
Toward a smarter algorithm
With our Facebook competitor, our algorithm will give users much better control. When John and I link up as friends, I will be able to indicate how often I want to hear various sorts of news from John. As John and I link up, I will consider a list of topics:
— items that pertain to me as an individual, such as comments on my writing
— jokes or amusing videos
— food
— entertainment
— news related to a specific hobby or interest (one of the interests could be politics, or a particular sub-field of politics; I would have specified my interests when I created my basic profile)
— news related to work
— news related to friends we have in common
— news related to an affiliation we have in common, such as a previous school or employer
— major life events
— minor life events
— etc.
For each category, I can say whether I want to see what John posts in that category.
Whenever anyone posts something, they check boxes indicating what it pertains to. The algorithm feeds me news by comparing what gets checked by my friends with what I have said I am interested in from those friends. I think that this would eliminate much of the stupidity that bothers me about the current algorithm.
Suppose that John posts something really interesting about politics, but I have turned politics off as a category for John. It still might get through to me if it gets shared through the network to another one of my friends whose political posts interest me. Otherwise, I might never see the post. I am willing to take that chance.
An alternative implementation
It might not be optimal for us to impose a fixed set of categories on users. An alternative would be to let the categories emerge organically through a hashtag mechanism.
With this approach, we do not start with a pre-determined set of categories. Instead, categories emerge from hashtags as people write posts. So if I write a post about folk dancing activities, I include a hash tag “#folkdancing.” Then, when you connect with me as a friend, you look at the list of all the hash tags that I have used. You can decide whether going forward you want to see my #folkdancing posts or not. Instead, you might only want to see my #economics posts.
I can imagine that it would be easier to use fixed categories to start with. But over time, the hashtag approach would turn out to be more robust.
The Business Model
As plenty of commentators have pointed out, Facebook’s reliance on advertising creates adverse incentives. When Facebook and its advertisers study your behavior, it is not with the goal of improving your experience as a user. The goal is to make ads more effective.
Instead, our competitor will use a “freemium” model. Our money will come from subscriptions, but anyone may join for free. People who do not subscribe will have limits on the features that they may use. For example, they might be limited to, say, 5 posts per month.
With the “freemium” model, our incentive is to create the best experience possible for subscribers, while making our service at least minimally attractive to everyone. Unlike the advertising model, this aligns the interests of our business with those of our users.
What do you think?
These ideas may be flawed. They may very well be even worse than Facebook as it currently exists. But I’ll bet that somebody can come up with better ideas that work. My point is that I would prefer to see such ideas tested in the market, rather than imposed by a regulator.

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ahofer
4 days ago
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Too much configuration overhead, it wouldn't catch on.
Princeton, NJ or NYC
freeAgent
3 days ago
This is similar to Google's idea for Google+ "circles", but with additional complexity.
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Elizabeth Warren’s wealth tax might sound like nothing. But the numbers aren’t small.

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The billionaire tax base would decline by a lot — and enormous economic disruption could follow.
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ahofer
4 days ago
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I don't think billionaires own a ton of Treasuries, but otherwise solid points.
Princeton, NJ or NYC
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Wealth by Generation and Age

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Kurt Andersen made the following arresting tweet

Fraction of all US wealth owned by Boomers & Gen-Xers when the average member of each was age 35:

Boomers, 1989 21%
GenX, 2008 8%
The average Millennial turns 35 in 2023. Right now they own 3%.

There will surely be political implications.

Definitions: Baby Boomer=born 1946-1964, Gen X=born 1965-1980, and Millennial=born 1981-1996.

You can’t take it with you, so this will change eventually but perhaps too late. Think of this as the Prince Charles effect. Prince Charles hasn’t offed his mother and led a revolution yet but in an earlier age he probably would have and surely he has thought about it. Similarly, perhaps the demand among some Gen-Xers and Millennials for wealth redistribution can be understood as a demand to get their share of the pot before they are old and tired.

The data, which are from the Federal Reserve are here.

The post Wealth by Generation and Age appeared first on Marginal REVOLUTION.

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ahofer
19 days ago
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Or consider Anthony Marshall.

https://www.npr.org/sections/thetwo-way/2014/12/02/367923183/anthony-marshall-convicted-of-raiding-mothers-fortune-dies-at-90
Princeton, NJ or NYC
freeAgent
18 days ago
This is pretty fascinating. We only know the world from our own first-hand perspective, but seeing statistics like this make it clear that the experience of people a generation or two ago can differ substantially from today. Increasing life expectancies have probably also shifted this number. I would imagine that the percentage of Boomers who had inherited wealth from deceased parents at 35 is much greater than Millennials. Then again, the age of parents when having children has also risen.
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Conscientiousness vs. working hard

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South Korea ranks second to last in terms of conscientiousness but also ranks first in the number of hours worked.  South Korea is not an anomaly.  Country-level reports of Big Five conscientiousness are unrelated to the number of hours worked.  The rank correlation between hours worked and conscientiousness across countries is negative, though statistically insignificant.

That is from “Some Contributions of Economics to the Study of Personality,” a new working paper by James J. Heckman, Tomas Jagelka, and Timothy D. Kautz.  How do you interpret these numbers?  That the notion of conscientiousness is poorly measured?  Or that “susceptibility to manipulation by incentives” is a separate quality, highly valued in a workforce, but not well correlated with “conscientiousness as we know it”?

The post Conscientiousness vs. working hard appeared first on Marginal REVOLUTION.

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ahofer
19 days ago
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"The rank correlation between hours worked and conscientiousness across countries is negative, though statistically insignificant."
Princeton, NJ or NYC
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"Clinton Foundation Reports $16.8 Million Loss in 2018"

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With this nice zinger at the end:

The foundation's financial prospects will presumably look much brighter after Hillary inevitably declares her candidacy for the Democratic Party's presidential nomination in 2020.

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ahofer
25 days ago
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This could be a total yawn. They don't exist to make a profit. The question is what are the expenses? How much goes to Clinton comfort and how much to mission?
Princeton, NJ or NYC
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Essay backup: Why we need the profit system

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This is also the Paradox of Profits, part 2

In the first essay in this series, I discussed the problematic nature of individual profits from the standpoint of justice. In this essay, I explain why a profit system is the most effective, humane way to organize economic activity. Or, as Winston Churchill once said about democracy, it is the second worst way to organize an economy, and all the others are tied for the worst.
Humane but Primitive
You might think that the most humane way to run an economy would be to use deliberation and consensus. And this might work if we had a small, self-contained economic unit, a village of 150 people or less.
But with 150 people in a self-contained village, you are restricted to a primitive economy. By self-contained, I mean that everything that we are able to consume has to be produced in the village, from start to finish. We could not use modern farm implements, because our village does not have enough people to produce them. Forget about modern medicine, electronics, plumbing, and all the rest.
What we have come to expect from economic life cannot be procured without extensive specialization and trade. Ultimately, the work of millions of people goes into creating the goods and services that we enjoy in a modern economy.
Bosses and Profits
In a modern, large-scale economy, coordination takes place through a combination of bosses and profits. Bosses order people to undertake particular tasks. Profits and losses provide incentives to engage in certain economic activities and to curtail others.
Within any one organization, you take orders from a boss. Your only alternative is to leave that organization and find another boss or start your own organization.
Profits determine the success or failure of different organizations. Organizations that earn profits can continue to operate. Organizations that fail to earn profits have to go out of business, unless they can survive on donations or subsidies.
The profit system helps to discipline bosses. Really bad bosses, who use resources inefficiently (including mis-use of workers), tend to perform poorly in terms of profits. This poor performance eventually gets weeded out, either by the boss’s boss or by the inability of a poorly-performing firm to stay in business.
Profits and Sustainability
Profits are a measure of economic sustainability. A business earns a profit if it offers to consumers something that is more valuable than the costs of the resources used by the business to provide its goods and services. For the most part, a business that earns a profit is using resources efficiently. For the most part, a business that operates at a loss is wasting resources.
When people accuse the market system of using resources unsustainably and they propose alternatives, they are almost always wrong. For example, the ethanol mandate for gasoline almost surely wastes resources. Overall, it probably increases carbon dioxide in the atmosphere, because it encourages more land to be covered with corn fields instead of forest.
Mandatory recycling wastes resources. We know that, because if recycling really saved resources, then it would be profitable. If recycling were sustainable, then private firms would pay you for recycled trash; instead, the local government has to mandate recycling and subsidize recycling services. That is a drain on resources.
Government as Boss
Government works by bossing people. This could be directly controlling activity, as when a government runs a school system. Or it could be indirectly controlling people, as when a government issues regulations.
There are good reasons for having at least some government bossing. I have a hard time imagining urban sanitation working well without regulation. There are many other cases where the absence of a central boss would lead to bad outcomes. Economists refer to these cases as “market failures.”
But just because there might be market failure does not mean that we necessarily should take economic decisions away from the profit system and turn those decisions over to a government boss. We might be better off leaving decisions to the market, even though the market is not perfect.
Reasons to Prefer the Profit System
One reason to leave decisions to the profit-and-loss system is that this gives more people more autonomy. Government works by bossing, and that reduces individual autonomy. Yes, in a democracy each of us can vote, but our voting has very little effect on how the government bosses operate. If I disagree with the government’s decision to allocate valuable spectrum to local television stations, I have close to zero chance of having any impact on that decision. As a consumer and as a worker, I do not have to sit back and accept something I do not like. I can “vote with my feet” to go to a different employer or find a different seller.
Another reason to be wary of government bosses is that they are not so smart. When a government boss decides that women under 40 do not need mammograms for breast cancer screening, that boss does not know the circumstances of every woman. The government boss does not know how the state of screening technology is progressing. The government boss does not know how much some women may value the peace of mind that comes from cancer screening.
It is easy for a person to say, “I do not like the market outcome of X. I want to see the government change it.” But when you say that, you are saying that you want to be the boss. And no matter how much you think you know, the chances are that you are not as wise a boss as you think you are. That goes for trained economists, too.
And even if you happen to be the one who is wise about a particular issue, there is no guarantee that the government boss will make the choice that you would make. There is also the phenomenon of “government failure,” and often it is worse than market failure.
Conclusion
A modern economy is going to be coordinated by a combination of the profit/loss system and bosses. Even in Denmark and Sweden, profits and losses play a major rule. Indeed government bosses are in some ways more intrusive in the United States than they are in those “socialist utopias.”
So we are stuck with the paradox of profits. Individual profits are not always just. yet the profit system is necessary for coordinating a modern economy. How should we be trying to deal with this paradox? That will be the subject of the third and final essay in this series.

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ahofer
25 days ago
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"It is easy for a person to say, “I do not like the market outcome of X. I want to see the government change it.” But when you say that, you are saying that you want to be the boss. And no matter how much you think you know, the chances are that you are not as wise a boss as you think you are. "
Princeton, NJ or NYC
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