A weekly summary of what I’ve found interesting at the intersection of economics, finance and technology.
On the Privacy Paradox — The NYT caused somewhat of a stir last week with an op-ed arguing there is no “tech backlash.” The thesis of the article is that consumers keep adopting privacy-invading products, like “smart” speakers, and that usage of services like Facebook even in the US is still increasing. Of course, with so many antitrust investigations now underway and hearings in front of elected representatives that it’s hard to keep track, it’s hard to argue that the situation is the same as in, say, 2016. Others were therefore quick to refute this article, see for example Casey Newton’s comprehensive takedown.
Still, I don’t doubt that the facts cited in the article are correct, but the issue is whether this is the result of a conscious decision. I covered similar ground in Issue 5 with the “Privacy vs Convenience Fallacy,” and the main arguments are playing out here again. The fundamental issue is that due to a gaping information asymmetry, an individual consumer is not in a position to make an informed consent decision regarding privacy. As if a 20,000 word privacy agreement wasn’t enough, privacy-invading platforms employ all manner of tricks designed to get users to consent, as described in this academic paper.
Studies that seek to put a monetary value on consumers’ privacy also have issues, among others due to the fact that the values are wildly different between groups of users (some are happy to give away their data, for others it’s a matter of life and death, e.g. dissidents in repressive regimes.) The normal antitrust standard of monetary damages to consumers is therefore difficult to apply, and probably not the right lens through which to view privacy issues.
Stepping back from the details, I think it’s instructive to look at historical similarities, for example smoking. Here too, there were information asymmetries between producers and consumers, and light regulation that allowed tobacco firms to claim health benefits to smoking, for example. For more than 10 years after the first reports definitively linking smoking to lung cancer came out, cigarette consumption in the US continued to rise (see Figure 2.1). It took a comprehensive Surgeon General’s report and tough regulation (advertising bans, tax increases) to effect a lasting decline in consumption. Surveillance capitalism is still in that first stage, where it’s becoming clear there are significant negative effects, but no one is quite clear what they are, let alone what to do about it. Early attempts are being made however, and if history is any guide, the direction of travel is clear.
Did QE break money markets? — US repo markets broke last week, sending the repo rate soaring above 10% on more than one occasion and forcing the Fed to intervene by offering a funding facility. The big moves are attributed to technical reasons driving higher demand for cash (like tax payments etc.), but Gillian Tett in the FT argues that quantitative easing has changed the markets enough that central banks can no longer predict how they will behave, for what it’s worth. While the “technical factors” explanation sounds reassuring, and without wanting to be alarmist, similar strange behaviour was also explained away in 2007.
The wheels are coming off the WeWork IPO — The bad news is piling up for WeWork, which cut its valuation, then postponed its IPO. Next, the WSJ published more disturbing revelations of how the company is run, and now (in late-breaking news) it seems the CEO is on the way out. Prof Galloway has a great summary, laced with his usual acerbic wit.
Apple launched iOS 13 — It comes with some nifty privacy features, although given the amount of bugs, it may be advisable to wait for iOS 13.1, slated for release this week…
French economist Thomas Piketty has a new book — Called “Capital and Ideology”, it delves into the justifications for inequality and proposes solutions. One of the themes is a lucid explanation of recent political shifts towards nativist parties.
Is this when the “tech backlash” started? — Six years on from his explosive revelations on NSA surveillance, Edward Snowden published a memoir explaining his motivation, with a spot-on commentary from one of his editors.
The Democratic party has fallen out of love with Silicon Valley. Some great reporting here. Read
Debt collectors in the US built a database of 9bn vehicle registrations, accessible to private investigators, law enforcement etc. This kind of massive scale surveillance is now basically routine, and it shouldn’t be. Read
Machine Learning methods proved to be worse than good old-fashioned statistical methods for time series forecasting… Read
Contract-based workers suffer from a structural power imbalance with their employers, and hence should be alllowed to unionise for collective bargaining, argues this academic paper. Read
That’s it for this week’s edition. As always, thanks for reading and please forward this to anyone who you think might be interested, it would be much appreciated.