Update on Computers Playing Go

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From Bloomberg:

Jon Diamond, president of the British Go Association, said machines are five to 10 years ahead of where he expected them to be. “It’s really quite a large, sudden leap in strength,” he said. “This is a significantly better result than any other computer Go program has achieved up to now.”

Technology that improves exponentially will do that to you. Once somebody has a program that is sort of on the right track, you feed it more data and give it more processing power. Once the computer starts to get in the same range as the human, it very quickly races past and leaves the human in the dust.

As Tyler Cowen Alex Tabarrok puts it,

Win or lose, I will bet that Lee Sedol is the last human champion the world will ever know.

Why Measure GDP?

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EconoSpeak writes,

The questions we need to ask are: What do we really want to know and why? What purposes were we pursuing when we sought to measure economic activity? Is measuring GDP helping to achieve those purposes? Are those purposes still our priorities? If not, what should be? What different institutions might we invent to achieve our purposes as we NOW understand them?

Pointer fromMark Thoma, whose column stimulated the post quoted above.

Some possible reasons to measure GDP:

1. To provide an indicator of the economy’s capacity to produce the goods needed to win a war (including necessary consumer goods as well as arms).

2. To provide a measure of the economy’s ability to provide for consumer welfare.

3. To compare productivity across countries and over time.

4. To indicate the extent to which an economy is in a recession.

5. To measure economic activity at market prices.

I think that (1) would have been most useful around the time of World War II, when the outcome was very much affected by this sort of productive capacity. It probably is less useful today.

I think that (2) is a very interesting measure. But (a) why not just focus on goods and services consumed? (b) you need to think a lot harder about how to measure consumers’ surplus (c) you have to think a lot harder about how to measure the consumption services from durable goods, particularly housing (d) you need to think a lot harder about what Thoma refers to as “bads,” like pollution.

I think that (3) is useful, but stop pretending that you can be accurate to at least two significant figures. When someone says that productivity growth changed from X over a five-year period to Y over the subsequent five-year period, their view of the signal-to-noise ratio in the data is much more optimistic than mine.

I think that (4) relies too much on the AS-AD framework, to which I do not subscribe.

I think that (5) is useful, but our current approach is wrong. Most government services are not sold at market prices, and so I would exclude them from this sort of measure.

Dealers vs. Brokers in Housing

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Tyler Cowen points to a WSJ story about a start-up that will buy your house and flip it, so that you don’t have to spend time selling it.

In securities markets, we differntiate between brokers and dealers. A broker brings together buyers and sellers. A dealer buys from sellers, holds securities in inventory, and sells to buyers out of this inventory.

One challenge with trying to be a housing dealer is that it adds another transaction in a market where transaction costs are artificially high. Some jurisdictions have transfer taxes. You might have to pay for an extra title search. Another home inspection. Etc. Also, while a security still accrues interest while it is in inventory, an unoccupied house does not generate rent.

Impressions from Israel

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I am back now.

1. There is a construction boom underway. My best guess is that until recently household formation grew faster than supply, but now the opposite is going to happen. I believe that there are long lags between intent to build and completion. Perhaps projects that complete after the middle of next year will face some downward price pressure, although that seems inconceivable to Israelis.

2. The Israeli center-left seems bereft at the moment. They perceive themselves as lacking leaders. Netanyahu faces stronger threats from the right than from the left. No politician can get away with advocating a policy based on trust and confidence in Palestinian leaders.

3. My center-left friends, who were enthusiastic about Obama in 2008, feel very differently now. I think that on a scale of 1 to 10, where I might rate his foreign policy as about 4, they seem to rate it lower than 2. They believe that Europeans are similarly disillusioned with Obama. I have no first-hand evidence for or against that.

4. They don’t know what to make of U.S. politics. Israelis whose sympathies lie with Democrats have trouble grasping Hillary Clinton’s struggles. Those who align with Republicans cannot grasp what has happened to establishment candidates there. I cited Martin Gurri frequently.

5. On security, I never felt danger, nor did I sense an increased presence of guards.

6. What will Israeli Arabs do? There is a case for saying that rationally they are fortunate to be living in Israel, and polls show that close to half feel that way. In the Haifa area, there are middle-class Arab families moving into Jewish neighborhoods. But I would guess that ethnic identity and resentment are potentially strong.

The Quotable James Bartholomew

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He writes,

It’s noticeable how often virtue signalling consists of saying you hate things. It is camouflage. The emphasis on hate distracts from the fact you are really saying how good you are. If you were frank and said, ‘I care about the environment more than most people do’ or ‘I care about the poor more than others’, your vanity and self-aggrandisement would be obvious, as it is with Whole Foods. Anger and outrage disguise your boastfulness.

I think this is spot on. It may help explain some of the anger in political discussions.

The Quotable Roger Scruton

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In Frauds, Fools, and Firebrands, he writes about those who condemn the commoditification of labor,

are we not tired, by now, of this tautologous condemnation of the free economy, which defines that which can be purchased as a thing and then says that the man who sells his labour, in becoming a thing, ceases to be a person? At any rate, we should recognize that, of all the mendacious defences offered for slavery, this is by far the most pernicious. For what is unpurchased labour, if not the labour of a slave?

1. I am reminded of Milton Friedman’s famous retort to a general defending the draft. The general asks, “Would you want to lead an army of mercenaries? Friedman replies, “Would you rather lead an army of slaves?

2. I am reminded of the widespread requirement of high school students to complete hours of “community service” in order to graduate.

Scruton says to the left: Condemn paid labor all you like. It is more voluntary than the alternative.

Separately, on the philosophy of science, Scruton writes,

Philosophers of science are familiar with the thesis of Quine and Duhem, that any theory, suitably revised, can be made consistent with any data, and any data rejected in the interest of theory.

That is certainly my view of macroeconomic theory.

The Complexity Brake

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Nick Schulz points me to an essay from a few years ago by Paul Allen and Mark Greaves.

As we go deeper and deeper in our understanding of natural systems, we typically find that we require more and more specialized knowledge to characterize them, and we are forced to continuously expand our scientific theories in more and more complex ways. Understanding the detailed mechanisms of human cognition is a task that is subject to this complexity brake. Just think about what is required to thoroughly understand the human brain at a micro level. The complexity of the brain is simply awesome. Every structure has been precisely shaped by millions of years of evolution to do a particular thing, whatever it might be. It is not like a computer, with billions of identical transistors in regular memory arrays that are controlled by a CPU with a few different elements. In the brain every individual structure and neural circuit has been individually refined by evolution and environmental factors. The closer we look at the brain, the greater the degree of neural variation we find. Understanding the neural structure of the human brain is getting harder as we learn more.

The same appears to be true with cancer, and indeed with all diseases that combine genetic and environmental factors. I would argue that the same is true for macroeconomics. With some problems, you make a lot of progress until the complexity brake kicks in.

The Future of American Cities

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Walter Russell Mead writes,

The increasing fragility of blue cities and states is the biggest problem the Democratic coalition faces. Those who hope that demographic change will create a “permanent Democratic majority” need to think about arithmetic as well as demography. The numbers don’t add up for blue cities. The governing model doesn’t produce the revenue that can sustain it long-term. Making cities work—enabling them to provide necessary services at sustainable cost levels while achieving economic development that rebuilds the urban middle class—is the biggest challenge the Democratic Party faces.

Cities have three major Democratic Party constituents, in tension with one another: gentrifiers, thanks to the New Commanding Heights industries of education and health care; urban African-American remnants of the Great Migration of the 1940s and 1950s; and public-sector union members. Among the conflicts:

–public sector unions with lavish pension benefits vs. the gentrifiers who will have to pay higher taxes or enjoy lower levels of services.

–public sector police unions vs. African-Americans upset with police mistreatment

–gentrifiers and African-Americans having different identity-politics preferences for electoral officials

The Economics of Abundant Oil

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Anatole Kaletsky writes,

For Western oil companies,the rational strategy will be to stop oil exploration and seek profits by providing equipment, geological knowhow, and new technologies such as hydraulic fracturing (“fracking”) to oil-producing countries. But their ultimate goal should be to sell their existing oil reserves as quickly as possible and distribute the resulting tsunami of cash to their shareholders until all of their low-cost oilfields run dry.

His claim is that there is no need to discover more oil. There is plenty of cheap oil available, albeit in countries that are not our favorites. But if you can pump oil for a few dollars a barrel in Iran or Russia, it is wasteful to search for oil that costs over $30 a barrel to extract elsewhere.

My main reaction is that we sure have come a long way from “peak oil” theory.

Russel Arben Fox on Jacob Levy

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He writes,

It introduces, in clear and compelling language, a new way of making sense of the development of liberal ideas, by distinguishing between what he labels “rationalist” (consistent, transparent, state-centric) and “pluralist” (variable, private, culture-dependent) responses to the threats to individual freedom which have arisen throughout the history of liberalism.

Pointer from Tyler Cowen. I also recommend this podcast with Levy, Aaron Ross Powell,, and Trevor Burrus.

Should a restaurant owner be allowed not to serve someone based on race? The “rationalist” theory of liberalism says “no.” The pluralist theory of liberalism says “yes.” An often forgotten aspect of Milton Friedman’s Capitalism and Freedom is that he took the pluralist side on this issue.

Before you jump to the pluralist side of this debate, consider what Fox calls

the rational reformer who wishes to get rid of inconsistent trade barriers and idiosyncratic excise and sin taxes, all in the name of maximizing the benefits of creative destruction

Think of the Commerce Clause as being on the rationalizing side.