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Matt's Thoughts In Between - Issue #65

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This week: the real problem with Facebook; how the London/UK model may no longer work; why 1960 may b
 
May 21 · Issue #65 · View online
Matt's Thoughts In Between
This week: the real problem with Facebook; how the London/UK model may no longer work; why 1960 may be the most important date in economic history; and more…

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What’s the real problem with Facebook?
Facebook co-founder Chris Hughes published an extraordinary  oped in the NYT that argues that Facebook should be broken and face much more stringent regulation. It’s long, but worth reading the whole thing. Hughes grounds his argument on a critique of Mark Zuckerberg’s personal power, which he describes as “unprecedented and un-American”. We’ve talked about private power before and this is an interesting contribution to the debate.
But, as Ezra Klein argues in this important response, Facebook doesn’t have a Zuckerberg problem so much as a business model issue (for which it’s paying a price in the war for talent). Klein notes that Hughes policy prescriptions (break up and regulation) tackle the consequences of monopoly but Facebook’s real social costs (though see previous coverage on the benefits) are the consequences of competition: ever more addictive products, the optimisation of engagement at any cost and indifference to harmful content.
If that’s right, then Hughes’ suggestions won’t solve the problem: the newly independent Facebook, WhatsApp and Instagram will all still face the same incentives. The same is true of Victor Mayer Schoenberger’s argument that America should not break Facebook up but force it to share its data. I’m not sure Klein has any answers (which, to his credit, he admits) but his analysis of the problem seems the right starting point.
Does the UK/London model work any more?
Te New York Times has a troubling profile of the impact of 10 years of government austerity on Cumbria, in the north of England. While the NYT has written some overly pessimistic pieces on the UK in the last few years, this one accords with data reported elsewhere: rising pensioner poverty, cuts in local government spending and a growing disconnect between London and the rest of the UK.
The latter strikes me as particularly important. Austerity, Brexit and technological change perhaps represent a vicious cycle in which the relationship between the capital and the country is breaking. To caricature, in the 1990s and early 2000s, there was an implicit pact: London could be a globalist, cosmopolitan world city - with more in common with New York than Cumbria - in exchange for providing the engine of economic growth that enabled high (and redistributive) public spending. 
Austerity, in retrospect, broke that pact, as the NYT piece shows. And Brexit undermined it further: the rest of the country withdrawing permission for the “London-as-centre-of-the-world” model. This seems an unsustainable equilibrium - and neither the Conservatives nor Labour (whose last manifesto, despite the rhetoric, was curiously unredistributive) seem to have an answer. It’s unsurprising UK politics are taking a Trumpian turn. While the electoral mechanics are not in Nigel Farage’s favour, I suspect British politics is more fragile today than most of us would like to admit.
Is 1960 the most important date in economic history?
I generally take the view that the Industrial Revolution was the most important event in history. Before, life was nasty, brutish and short; afterwards, economic welfare hit its “hockey stick” moment. But in this fascinating essay Scott Alexander lays out the (speculative) case that the industrial revolution wasn’t a discontinuity at all. If you chart the log time GDP has taken to double in each year over a multi-millennia period, you actually get a straight line - no discontinuity. 
The argument is that economic growth comes from new ideas - and new ideas come from population growth (more people = more ideas). History is then a race between population growth and economic growth: until the industrial revolution, per capita income didn’t increase. This was a classic Malthusian trap: “productivity produces people, not prosperity”. Around the industrial revolution, per capita income started to rise, which allowed population to rise and, in turn, so did the rate of growth - but without breaking the “time to doubling” trend.
In this telling, the real discontinuity takes place not in ~1750, but in 1960. This is when the years moves, depressingly, off the trend line and towards stagnation. Why? Because people started to use their wealth to reduce the number of children they have, so there’s been no increase in the number of ideas generated. There was some substitution of humans by machines, which helped, but as Alexander says, “tractors can’t invent things”. AI might be more productive than tractors in this respect - but we’re not there yet.
Quick Links
  1. No Ferrero Rocher. The surprising (and surprisingly interesting) eating habits of ambassadors.
  2. All about the money. Which city’s average salary is more than twice that of London’s?
  3. Age of extremes. Which political views are most associated with a happy marriage? (Chart)
  4. No exit. It looks like the network effects in food delivery are actually very weak.
  5. Not Hungary. Which European countries aren’t eating their vegetables?
Your feedback
Thanks for reading Thoughts in Between.. I’d love you to forward this to someone who might enjoy it - it’s the main way the community grows. And feel free to hit Reply if you have any comments.
Until next week,
Matt
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