Why Enterprise Blockchains Fail: No Economic Incentives ...

Cryptocurrencies will change the world, and other thoughts

I'm relatively new to Reddit and no crypto expert. I'm an amateur computer scientist, economist, and investor; I'm a professional risk manager; and I'm all in on Ethereum [EDIT: my only crypto is ETH and I'm very optimistic, but I also hold boring index funds]. Take my opinions with a grain of salt.
TLDR; Cryptocurrencies are great. I have miscellaneous thoughts I want to write down and get your feedback.
The idea of value intrinsic to an information system is bigger than most people realize.
There are many books (one of my favorites is William Bernstein's The Birth of Plenty) that try to identify the factors that drive economic and societal growth. One of the most important growth factors is how quickly we can scale resources. Land can't be scaled at all, and economic growth was very slow when land was the key constraint. The world has transitioned from an economy based on land to labor to capital to information, each time utilizing a quicker and more scalable resource.
For information based systems, the main constraint is the need to interact with slower resource types. If I could misappropriate cryptocurrency terminology, think of information systems being hampered by the number and types of oracles they need. You can gain a lot from improving these oracles (think of wearables replacing manual entry of health data), but the real revolutions come where we can remove these references to outside systems altogether. Virtually everything involves money, and money is one of the slowest, bureaucratic, and nationally constrained concepts. The real power of cryptocurrencies is that they can store value within an information system, without the need for outside reference. I think this is what makes the concept so interesting. Benefits often cited like reduced government manipulation or ease of cross border transactions are secondary or can only exist because of this main property.
When blockchain technologies mature, I think this will lead to possibilities we can't even imagine now. One day my A.I. may negotiate with and receive binding quotes from other A.I.'s around the world for some service I need, without having to reference anything outside the digital world. Think about how amazing it is that we can actually create scarcity in a digital world where everything can be copied for free. That's truly revolutionary.
On a side note, being intrinsic to the system is also why I think proof-of-stake will be more secure in the long run than proof-of-work. PoW relies on assumptions outside the system - that hashpower will be proportional to energy usage. If we're thinking decades, at some point a government or company could come up with a novel way to significantly speed up hashpower (an ASIC using carbon nanotubes or whatever) and quietly build resources to take down the system. PoS bootstraps its own value within the system, so as long as the network is big enough it should be safer for longer.
We should stop comparing cryptocurrencies to equities
Both on Reddit and in the news I see comparisons of market caps for cryptocurrencies with market caps for companies like Apple, implying present value of fees determines value. Transaction costs and mining/staking fees are a necessary evil but are not where the value of cryptocurrencies come from. If we could create an economically stable decentralized currency without any fees it would certainly be more valuable than the same currency with fees.
Ethereum is positioned to be the dominant cryptocurrency
I hope that the end state for cryptocurrencies will include multiple competing solutions with competition and innovation, but at least for now I think Ethereum is best positioned to be the dominant platform. I like how in many ways Ethereum taking the opposite approach of Bitcoin in terms of being open, ambitious, and flexible while Bitcoin is focused, narrow, and stable (in terms of protocol, not price). If Ethereum's ICO model fails, it might still be successful as collateral for financial transactions, or may become dominant in micropayments in the internet of things. Ethereum is flexible enough to adapt to the unknown risks it will face as it matures. I'm not worried about regulation because not all countries will be so short sighted to shut it down, and the countries that don't will prosper from it. I'm not worried so much about the ICO bubble or other specific issues because not all use cases will fail. The road will be bumpy and there will be multiple >50% price crashes, scams, hacks, and crises, but I think ETH has the people, momentum, and flexibility to ultimately deal with these challenges.
Banks aren't going anywhere
Being able to be your own bank is like saying you can keep cash in a safe in your house. For many technically inclined people on this sub it's definitely better to get a hardware or paper wallet and truly own your crypto. For 98% of the public, they will be better off keeping their account with some trusted company with a password they can reset, two factor authentication, and consumer protections. I don't think that in any way changes the vision for what crypto can do.
Speculators sometimes get lucky
Right now the value of crypto is ridiculously volatile compared to fiat because there are so few use cases and value is determined based on expected uses many years from now. It seems unfair that a group of speculators (us) can get lucky and make crazy returns without contributing much to society, but life isn't fair and there's precedence for this. During the industrial revolution many destitute populations in the middle east because insanely rich just because they happened to possess oil reserves. As smart as we think we are, most of us who have been in more than a month or two are lucky and should have the humility to recognize that.
Theoretically, if all the moontalk comes to pass and ETH is worth $30,000 each and you can purchase any digital good with it, it will be as stable as fiat. For a new ETH user they shouldn't care if ETH is $300 or $30,000 as long as the fiat to crypto conversion rate makes sense. In this scenario a group of speculators makes millions but late adopters don't appear to be hurt, and that can only be because fiat is devalued. Just for this risk I think most serious investors should hold a very small investment in crypto to hedge their exposure to fiat.
The possibility space is wider than people assume
People greatly overestimate their ability to predict the future. With a new concept like crypto, I think the range of possibilities in the near and far term are much wider than people realize. By the end of the year ETH could crash to $1 because of some unforeseen flaw, or it could hit $10,000 as part of a truly global bubble with Elon Musk saying ETH will be the only currency accepted on Mars.
Here's a thought experiment for the absolute maximum you should invest in crypto. You're allowed to wager money on a coin flip. If it's heads you'll be paid out 10x your investment and if it's tails you'll lose it all. How much would you wager? Regardless of how much of an optimistic moon kid you are, don't invest more than this.
If you read this far, thanks. I wrote more than I expected, but this is a great community in the early stages of what could be world changing tech at an exciting time to be alive.
submitted by MerkleChainsaw to ethtrader [link] [comments]

[Serious] Of Prices, ASICs and X11

Friends, shibes, it is my pleasure to speak with you for what I hope is the first and not the last time. I'm arrdem, I'm a Doge daytrader, economist and miner on the side, and a programmer during the day. Today I'd like to have a chat about some of the rumors with regards to ASICs and the X11 hash that have been floating around /dogecoin for the last few weeks and I hope bring some light to the discussions.
On Scrypt
What is special about our hash function? Why does Bitcoin use SHA256 and why does Doge use Scrypt? The hash function used by each cryptocurrency must have no known inverse function or algorithmic weakness which allows miners to cheat and compute nonces easily, and it needs to be easy to verify or recompute given an input. The first requirement is obvious in that if the hash function is weak, then someone can achieve a 51% attack potentially with less than 51% of the network's hashing power. The second is less obvious and is in fact entirely a performance issue.
SHA256 is a known and trusted algorithm which has yet to exhibit any known weaknesses, and it is very very fast to recompute. This is why Bitcoin is SHA based.
Litecoin, the intellectual father of Dogecoin, chose the Scrypt hash function because it was a memory bound algorithm. That is, the slowest part of computing the Scrypt hash of some value is waiting for values to be fetched from memory: an operation which it is amazingly expensive to make fast. The goal of choosing an artificially expensive hash function was to escape the Application Specific Integrated Circuits (ASICs or hardware miners) which had come to dominate Bitcoin mining. Because the SHA256 algorithm does not have large memory requirements, it was easy for Bitcoin speculators to develop cost effective hardware for the single purpose of searching for SHA256 nonce values.
Before we get to whether ASICs are good or bad for a coin, we must first assess why they made sense for Bitcoin so that we can reason about their impact on Doge.
Because the computational power to find a nonce for any good cryptocurrency is expected to be large, that means there is a literal cost attached to processing each transaction on the network. While transactions may be nominally free or at least low fee, miners are really speculators expecting that someday the value of the coins they earn computing nonce values for blocks will exceed the operating costs and purchase costs of the hardware they mine with. This expectation that one day mining costs will be repaid is in fact the key reason that Bitcoin featured block rewards. The block reward was seen as a bootstrapping mechanic with which to buy hardware investment in the Bitcoin network through currency inflation.
Now, ASICs and other mining hardware only pay for themselves if one expects to get enough return from block rewards and future coin price increases to cover the purchase and operating costs of the hardware. However, this is where the block schedule comes in. If we expect that thanks to the law of large numbers that one's return is on average the block reward times ones fraction of the network hashrate, it becomes clear that as the block reward falls it becomes very difficult for any purchased mining hardware to pay itself off let alone turn a profit especially as other miners purchase hardware to compete for the same block rewards thus driving up the hashrate.
On the block schedule
Looking at the Bitcoin block schedule, ASICs kinda make sense. The Bitcoin block schedule extends until 2140, at which time the "omega block" will be mined and the per block reward of Bitcoin mining will become zero. However until that time the per block reward will decrease 50% every four years. Today in 2014, the per block reward of Bitcoin is 25BTC and it won't change until 2017. That means that Bitcoin targeted ASICs can potentially run for three whole years or more and still have a reasonable chance of breaking even with no assuptions made about changes in the value of 1BTC.
Doge's block schedule looks completely different. Where Bitcoin has a long tail on its per block reward extending out to 2140, Dogecoin will reach it's minimum block reward at block 600,000 in January of 2015, less than 14 months after Dogecoin came into being. With the 3rd halvening about 11 days out and the 4th on the horizon, by the time big boy ASICs for Scrypt start shipping in Q3/Q4, being September and later, the per block reward of Doge will have fallen to 31.25KDOGE and below. Third generation ASICs slated for December and January will likely never see more than 15.625KDOGE/block.
On the price of Doge
So what does this mean for the price of Doge? If the price of Doge doesn't increase at all, it's clear that the expensive new ASICs will never break even. This suggests that late comers with high powered mining hardware will be looking to recoup their investments and asking higher and higher prices for their Doge which should drive up the price overall.
To put some numbers on this, at current prices and hashrate, accounting for halvenings, neither Gridseed ASIC even breaks even within 200 days if purchased within the next 48hrs. fn:1. Wait 30 days (after the comming halvening) and you don't come anywhere near break even. If I change my model to include some hashrate growth factor, the outlook is even worse. fn:2.
This isn't bad news. This is awesome news for the price of DOGE. Lets say that Gridseed ships oh 500 units of their big boy ASIC, which may be conservative. fn:3 That's right, if hardware equivalent to 1K large Gridseeds came on in the next 30 days and ran at least for 200, doge would have to go all the way up to 702DOGE/USD just for them to break even!
To the moon
So where does this leave us. I think that the numbers I've presented here show that ASICs for Dogecoin are patently absurd, unless you expect to see a gargantuan spike in the price of DOGE which would make us all rich men anyway. While I'm willing to speculate on block reward (which is easy to model) and on hashrate which I assume is more or less linear, I have no mechanism with which I can confidently predict the price of DOGE out more than a week. Naive linear projections from our initial open of 80 satoshi to today's 126 satoshi over the course of four months suggests that in 200 days we could well see the ~300 satoshi prices which would make Gridseed and other ASIC miners profitable. However once you account for the high volatility of Doge, of Bitcoin and general market manipulation who knows if it'd ever go that high stably.
So. To sum up. On the basis of these sketchy ROI numbers, I think that buying ASICs is probably ill advised. That said, I expect that people will buy ASICs and that in doing so they will drive up the price of DOGE at the same time as the supply of DOGE starts to dry up due to block reward decreases.
I will be interested to see what happens to DOGE mining in January, as we will be the first coin to reach their steady mining state. I hope that the 10,000 DOGE reward per block will be sufficient to support the ASIC and GPU mining required to keep our hashrate out of 51% threat, but only time will tell. There is a real threat that the ROI of mining will be too low to justify the purchase of new ASIC let alone GPU hardware, which would lead to a falling hashrate and a credible threat of 51% vulnerability. However we could also see prices to go to the moon in which case that is no worry as high efficiency ASIC farms would take over mining securing the coin's stability more or less. I will note that no coin has yet solved the 51% threat issues posed by centralized mining, and I'm personally convinced that it's an intractable problem because as rewards per block decrease as for bitcoin, the costs of mining operations must likewise fall leading to greater centralization of compute power. By fixing our block reward we may. may. be able to dodge (ha ha) this issue however the essential drive to cut mining prices for ROI maximization will remain and will continue to drive mining centralization.
With all this in mind, it's silly to talk about the adoption of X11 or another hashing algorithm, because if and when ASIC miners for DOGE become big business it'll already be too late and we will have already mined the vast majority of DOGE thus securing the distribution of DOGE away from the ASIC miners we seem to fear so much as a community. Making the switch to X11 simply delays the ASIC hardware which we want anyway due to the price increases it's likely to drive, forget about making us artificially dependent on GPU mining to secure our hashrate and creating an uncalled for blockchain fork.
  1. Stop worrying and love the ASICs, they won't make a ton of money and will secure our hashrate and by proxy our Doges!
  2. STFU about X11. It's even more ASIC friendly than Scrypt, and we gain nothing from another blockchain fork.
  3. Price projection: moon!
  4. Open issue: How do we limit mining centralization without increasing inflation? Are we already at a balance point?
The software I've built and used to make these models is entirely open source and written in Clojure, see the footnotes for source and libraries.
Other programs involved
Edit History
  1. Wording typo fixed
  2. Fix fn:2 to reflect increased network hashrate
  3. Don't bother asking me what I think the price of DOGE will be. Not the foggiest.
  4. Fix final block reward, 10k not 100k
  5. Fix omega block date for BTC, 2140 not 2024
submitted by Arrdem to dogecoin [link] [comments]

Would you contribute or be interested in this project?

Decentralized digital currency, and asset transfer P2P network, utilizing "Proof of Partnership" POP.
In the current blockchain model used by Bitcoin, validating nodes use UTXO set, while Ethereum use the Accounts Balances model to digest the unspent coins from the blockchain. We need to eliminate the digesting phase, dissolving the blockchain in 3 steps.
Using the concept of the Blockchaining, either an Updated Unspent Transactions Output (UUTO) or Updated Accounts Balances (UAB) will be used as the state of the network. In this project, " Blocks" is replaced by an "Updates", for storage reduction and better scalability.
Updated Accounts Balances, updated every 120 seconds, instead of building blocks filled with transactions. Spent transactions data will be extracted to a different database, which will not be part of the network's consensus protocol, that could be kept or discarded by partners.
Basically, instead of building blocks of transactions chained to each other and then extract the Unspent Output, we will chain the Updated Accounts Balances or the Unspent Transactions Output, and use it as the network's main consensus.
Proof of Partnership, eliminating the competition and incentive all Partners with a fixed amount per update to perform the work, instead of the known "block reward".
Partners will participate under 2 roles Updater Partner (UP) and Validator Partner (VP). Both roles are full nodes. Each have different responsibilities.
1 - Validator Partners - VPs
- Verify transactions against their UAB, then relay it to their peers. VPs do not create or relay UAB updates.
- Once an "Update Proposal" has been received from Updater Node, VPs will verify transactions again, update the UAB accordingly and broadcast an "Earn" transaction with the hash of the the new update.
The hashing difficulty should be accomplished with CPU from home PC or Laptop.
Our goal is to use resources efficiently and increase participation without the need for special hardware or entry barriers for joining the network. Full participation and bandwidth are more important than "hashrate" in this protocol.
Initially, VPs will have a minimum of 0.5 Mbps upload speed connection. For up to 5000 VPs.
Bandwidth requirement shall increase according to network growth, for example:
- 5001 to 10,000 1 Mbps upload speed.
- 10001 to 20000 2 Mbps.
- 20001 to 30000 4 Mbps.
- 30001 to 40000 6 Mbps.
- 30001 to 40000 10 Mbps.
- 40001 to 50000 12 Mbps.
Each VP will be connected to, and accept inbound connections from at least 120 peers, which will include at least 2 Updater Partners.
2- Updater Partner - UPs
- Bootstrap and serve the UAB to new VPs joining the network.
- Receive verified transactions from VPs, verify it against their UAB, broadcast the "Update Proposal" with transactions IDs, then hash the Update and broadcast with his "Earn" transaction.
(UPs do not initiate or relay transactions, they only create the new update from the transactions that has been relayed to them by VPs, update their UAB, collect tx ID that been used in the update and broadcast it to the network as an "update proposal").
Basically, the UP role is telling the network "These are the valid transactions I received from you, I have updated my UAB, do the same and broadcast an "Earn" transaction with the update hash.
As mentioned, instead of building a block with all transactions data as in the current POW protocol, only transactions IDs that UP used to create the new update will be relayed, the network will update their UAB accordingly, using the transaction data that they already possess.
As such, the UP who creates the new update can be chosen randomly or even assigned to each UP on weekly or monthly rotation, since there are no reward for creating Updates. We need to eliminate the competition, create a P2P network where partners work collaboratively and effectively, and use resources in other areas where it matters.
Since UPs are the Updates creators and relayers, and in order to achieve the highest TPS throughput, they will work from VPS and Dedicated servers due to the amount of bandwidth that will be required, along with a static IP addresses.

The "Earn" transaction.
In the current POW, block reward (coinbase transaction) only goes to the miner who build the valid block. Since we eliminating the "block" creation and adopting the "update" method, all partners in the network will be rewarded according to their role. but how we accomplish that if there are no coinbase transaction, and be able to pay every partner?
We can achieve that by the the Earn transaction. In order to visualize it, here is the flow of this network,
1 - Alice wants to send 10 XYZ to Bob, she initiate the transaction from her client.
2 - Transaction is verified against the UAB, and relayed to the network by the VPs, if valid.
3- Transaction will eventually reach the UPs.
4- The UP who will create the next update, will verify Alice's transaction, with all other transactions.
5- If valid, the UP will update his UAB by debeting Alice's account and crediting Bob's account with the transaction amount, same goes for all other transactions.
6- The UP will collect all the transactions IDs (hashs) of the transactions he used in updating his UAB, and send it to the network to do the same thing.
7- After sending out the transactions IDs to the network, the UP will hash the entire UAB with the previous update hash to come up with the new update hash.
8- The new update hash, previous update hash, update number, UP's address and his reward amount (coinbase) will be broadcasted to the network just like a regular transaction. This is the "Earn" transaction.
9- Every partner in the network will basically do the same thing after updating their UAB, they will broadcast their "Earn" transaction to the network.
10- The "Earn" transaction is a unique transaction that creates new currency just like the coinbase transaction in POW. This transactions will be validated by all partners by verifying the new update hash, which should match with every other partner network wide. (assuming they all did the update correctly as sent by the UP)
11- The "Earn" transaction amount, if valid, will be credited to every partner to his address provided within the transaction and will be updated in the UAB.
Now, when the next UP create the next update, he will follow the same updating process. When the next update hash matches the hash by every partner, it means that their previous update is correct and their "Earn" transactions has been confirmed, too.
This process assuming the network is operating under good condition, and assuming every partner is being honest in doing his updates. If the network is being attacked or there are some partners trying to cheat the protocol, here is what happens:
1- Attacker or malicious partner will try to cheat in updating his UAB.
2- He will broadcast his "Earn" transaction with the wrong update hash.
3- Other partners in the network will verify the hash, when it doesn't match, they will reject his transaction, resulting in his "Earn" transaction not being approved in the next update.
If that partner is honest but is being attacked, or hanging out with the wrong crowd (Man in the middle attack). He will be able to notice and take appropriate action, when he find out that his "Earn" transaction was not approved in the next update.

Please note, I'm neither a developer nor economist. All what I'm saying here is just my humble design based on my own research. I'm putting it here for further discussions or ideas to see how many people would be interested in creating not just a decentralized digital currency, but one that will remain decentralized.

submitted by sd70loco to u/sd70loco [link] [comments]

New NBER Papers - 12/19/2016

For access to gated papers, make a request on /Scholar. Most papers can also be found, ungated, on their author's website.
Feel free to discuss any of these papers in the comments section below. Please refrain from reposting any of these papers to this sub.
Learning, Confidence, and Business Cycles Cosmin L. Ilut Hikaru Saijo
We build a tractable heterogeneous-firm business cycle model where firms face Knightian uncertainty about their profitability and learn it through production. The cross-sectional mean of firm-level uncertainty is high in recessions because firms invest and hire less. The higher uncertainty reduces agents' confidence and further discourages economic activity. We characterize this feedback mechanism in linear, workhorse macroeconomic models and find that it endogenously generates empirically desirable cross-equation restrictions such as: amplified and hump-shaped dynamics, co-movement driven by demand shocks and countercyclical correlated wedges in the equilibrium conditions for labor, risk-free and risky assets. In a rich model estimated on US macroeconomic and financial data, the information friction changes inference and significantly reduces the empirical need for standard real and nominal rigidities. Furthermore, endogenous idiosyncratic uncertainty propagates shocks to financial conditions, disciplined by observed spreads, as key drivers of fluctuations, and magnifies the aggregate activity's response to monetary and fiscal policies.
Estimating market power Evidence from the US Brewing Industry Jan De Loecker Paul T. Scott
While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.
Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence Arik Levinson
Economists promote energy taxes as cost-effective. But policymakers raise concerns about their regressivity, or disproportional burden on poorer families, preferring to set energy efficiency standards instead. I first show that in theory, regulations targeting energy efficiency are more regressive than energy taxes, not less. I then provide an example in the context of automotive fuel consumption in the United States: taxing gas would be less regressive than regulating the fuel economy of cars if the two policies are compared on a revenue-equivalent basis.
Agricultural Fires and Infant Health Marcos A. Rangel Tom Vogl
Fire has long served as a tool in agriculture, but this practice's human capital consequences have proved difficult to study. Drawing on data from satellites, air monitors, and vital records, we study how smoke from sugarcane harvest fires affects infant health in the Brazilian state that produces one-fifth of the world's sugarcane. Because fires track economic activity, we exploit wind for identification, finding that late-pregnancy exposure to upwind fires decreases birth weight, gestational length, and in utero survival, but not early neonatal survival. Other fires positively predict health, highlighting the importance of disentangling pollution from economic activities that drive it.
A Behavioral New Keynesian Model Xavier Gabaix
This paper presents a framework for analyzing how bounded rationality affects monetary and fiscal policy. The model is a tractable and parsimonious enrichment of the widely-used New Keynesian model – with one main new parameter, which quantifies how poorly agents understand future policy and its impact. That myopia parameter, in turn, affects the power of monetary and fiscal policy in a microfounded general equilibrium.
How Destructive is Innovation? Daniel Garcia-Macia Chang-Tai Hsieh Peter J. Klenow
Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all non-farm private businesses from 1976–1986 and 2003–2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own-product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.
Some Simple Economics of the Blockchain Christian Catalini Joshua S. Gans
We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influence the rate and direction of innovation. We identify two key costs that are affected by distributed ledger technology: 1) the cost of verification; and 2) the cost of networking. Markets facilitate the voluntary exchange of goods and services between buyers and sellers. For an exchange to be executed, key attributes of a transaction need to be verified by the parties involved at multiple points in time. Blockchain technology, by allowing market participants to perform costless verification, lowers the costs of auditing transaction information, and allows new marketplaces to emerge. Furthermore, when a distributed ledger is combined with a native cryptographic token (as in Bitcoin), marketplaces can be bootstrapped without the need of traditional trusted intermediaries, lowering the cost of networking. This challenges existing revenue models and incumbents's market power, and opens opportunities for novel approaches to regulation, auctions and the provision of public goods, software, identity and reputation systems.
Interfirm Relationships and Business Performance Jing Cai Adam Szeidl
We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no- meetings” control group. We find that: (1) The meetings increased firm revenue by 8.1 percent, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score; (2) These effects persisted one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (4) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (5) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching. (6) Firms whose managers discussed management, partners, or finance improved more in the associated domain, suggesting that the content of conversations shaped the nature of gains.
Targeting Policies: Multiple Testing and Distributional Treatment Effects Steven F. Lehrer R. Vincent Pohl Kyungchul Song
Economic theory often predicts that treatment responses may depend on individuals’ characteristics and location on the outcome distribution. Policymakers need to account for such treatment effect heterogeneity in order to efficiently allocate resources to subgroups that can successfully be targeted by a policy. However, when interpreting treatment effects across subgroups and the outcome distribution, inference has to be adjusted for multiple hypothesis testing to avoid an overestimation of positive treatment effects. We propose six new tests for treatment effect heterogeneity that make corrections for the family-wise error rate and that identify subgroups and ranges of the outcome distribution exhibiting economically and statistically significant treatment effects. We apply these tests to individual responses to welfare reform and show that welfare recipients benefit from the reform in a smaller range of the earnings distribution than previously estimated. Our results shed new light on effectiveness of welfare reform and demonstrate the importance of correcting for multiple testing.
Leveling the Playing Field: How Campaign Advertising Can Help Non-Dominant Parties Horacio A. Larreguy John Marshall James M. Snyder, Jr.
Voters are often uncertain about and biased against non-dominant political parties. By reducing the information gap with dominant parties, political advertising may thus disproportionately benefit non-dominant parties electorally. We test this argument in Mexico, where three main parties dominate many localities. To identify the effects of exposure to partisan advertising, we exploit differences across neighboring precincts in campaign ad distributions arising from cross-state media coverage spillovers induced by a 2007 reform that equalized access to ad slots across all broadcast media. Our results show that ads on AM radio increase the vote shares of the PAN and PRD, but not the previously-hegemonic PRI. Consistent with our model, campaign advertising is most effective in poorly informed and politically uncompetitive electoral precincts, and against locally dominant parties of intermediate strength.
Understanding Inflation in India Laurence Ball Anusha Chari Prachi Mishra
This paper examines the behavior of quarterly inflation in India since 1994, both headline inflation and core inflation as measured by the weighted median of price changes across industries. We explain core inflation with a Phillips curve in which the inflation rate depends on a slow-moving average of past inflation and on the deviation of output from trend. Headline inflation is more volatile than core: it fluctuates due to large changes in the relative prices of certain industries, which are largely but not exclusively industries that produce food and energy. There is some evidence that changes in headline inflation feed into expected inflation and future core inflation. Several aspects of India’s inflation process are similar to inflation in advanced economies in the 1970s and 80s.
Growth Policy, Agglomeration, and (the Lack of) Competition Wyatt J. Brooks Joseph P. Kaboski Yao Amber Li
Industrial clusters are promoted by policy and generally viewed as good for growth and development, but both clusters and policies may also enable non-competitive behavior. This paper studies the presence of non-competitive pricing in geographic industrial clusters. We develop, validate, and apply a novel test for collusive behavior. We derive the test from the solution to a partial cartel of perfectly colluding firms in an industry. Outside of a cartel, a firm's markup depends on its market share, but in the cartel, markups across firms converge and depend instead on the total market share of the cartel. Empirically, we validate the test using plants with common owners, and then test for collusion using data from Chinese manufacturing firms (1999-2009). We find strong evidence for non-competitive pricing within a subset of industrial clusters, and we find the level of non-competitive pricing is about four times higher in Chinese special economic zones than outside those zones.
How Large Are the Gains from Economic Integration? Theory and Evidence from U.S. Agriculture, 1880-1997 Arnaud Costinot Dave Donaldson
In this paper we develop a new approach to measuring the gains from economic integration based on a generalization of the Ricardian model in which heterogeneous factors of production are allocated to multiple sectors in multiple local markets based on comparative advantage. We implement this approach using data on crop markets in approximately 2,600 U.S. counties from 1880 to 1997. Central to our empirical analysis is the use of a novel agronomic data source on predicted output by crop for small spatial units. Crucially, this dataset contains information about the productivity of all units for all crops, not just those that are actually being grown—an essential input for measuring the gains from trade. Using this new approach we find substantial long-run gains from economic integration among US agricultural markets, benefits that are similar in magnitude to those due to productivity improvements over that same period.
Distributional National Accounts: Methods and Estimates for the United States Thomas Piketty Emmanuel Saez Gabriel Zucman
This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.
Globalization and Wage Inequality Elhanan Helpman
Globalization has been blamed for rising inequality in rich and poor countries. Yet the views of many protagonists in this debate are not based on evidence. To help form an evidence-based opinion, I review in this paper the theoretical and empirical literature on the relationship between globalization and wage inequality. While the initial analysis that started in the early 1990s focused on a particular mechanism that links trade to wages, subsequent studies have considered several other channels, and the quantitative assessment of the size of these influences has been carried out in multiple studies. Building on this research, I conclude that trade played an appreciable role in increasing wage inequality, but that its cumulative effect has been modest, and that globalization does not explain the preponderance of the rise in wage inequality within countries.
Dominant Currency Paradigm Camila Casas Federico J. Díez Gita Gopinath Pierre-Olivier Gourinchas
Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer's currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) terms of trade are stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports and export expansions following depreciations are weak. Using merged firm level and customs data from Colombia we document strong support for the dominant currency paradigm and reject the alternatives of producer currency and local currency pricing.
Older Peoples' Willingness to Delay Social Security Claiming Raimond Maurer Olivia S. Mitchell
We have designed and fielded an experimental module in the 2014 HRS which seeks to measure older persons’ willingness to voluntarily defer claiming of Social Security benefits. In addition, we evaluate the stated willingness of older individuals to work longer, depending on the Social Security incentives offered to delay claiming their benefits. Our project extends previous work by analyzing the results from our HRS module and comparing findings from other data sources which included very much smaller samples of older persons. We show that half of the respondents would delay claiming if no work requirement were in place under the status quo, and only slightly fewer, 46%, with a work requirement. We also asked respondents how large a lump sum they would need with or without a work requirement. In the former case, the average amount needed to induce delayed claiming was about $60,400, while when part-time work was required, the average was $66,700. This implies a low utility value of leisure foregone of only $6,300, or under 20% of average household income.
Business Cycles, Investment Shocks, and the "Barro-King" Curse Guido Ascari Louis Phaneuf Eric Sims
Recent empirical evidence identifies investment shocks as key driving forces behind business cycle fluctuations. However, existing New Keynesian models emphasizing these shocks counterfactually imply a negative unconditional correlation between consumption growth and investment growth, a weak positive unconditional correlation between consumption growth and output growth and anomalous profiles of cross-correlations involving consumption growth. These anomalies arise because of a short-run contractionary effect a positive investment shock on consumption. Such counterfactual co-movements are typical of the "Barro-King curse" (Barro and King 1984), wherein models with a real business cycle core must rely on technology shocks to account for the observed co-movement among output, consumption, investment, and hours. We show that two realistic additions to an otherwise standard medium scale New Keynesian model – namely, roundabout production and real per capita output growth stemming from trend growth in neutral and investment-specific technologies – can break the Barro-King curse and provide a more accurate account of unconditional business cycle comovements more generally. These two features substantially magnify the effects of neutral technology and investment shocks on aggregate fluctuations and generate a rise of consumption on impact of a positive investment shock.
Sanitation, Disease Externalities, and Anemia: Evidence From Nepal Diane Coffey Michael Geruso Dean Spears
Anemia impairs physical and cognitive development in children and reduces human capital accumulation. The prior economics literature has focused on the role of inadequate nutrition in causing anemia. This paper is the first to show that sanitation, a public good, significantly contributes to preventing anemia. We identify effects by exploiting rapid and differential improvement in sanitation across regions of Nepal between 2006 and 2011. Within regions over time, cohorts of children exposed to better community sanitation developed higher hemoglobin levels. Our results highlight a previously undocumented externality of open defecation, which is today practiced by over a billion people worldwide.
Asymmetric Effects of Non-Pecuniary Signals on Search and Purchase Behavior for Energy-Efficient Durable Goods J. Scott Holladay Jacob LaRiviere David M. Novgorodsky Michael Price
We report the results of a field experiment where we exogenously vary the use of social comparisons "nudges" and subsidies for participation in an in-home energy audit program, and follow subjects through to the subsequent purchase of durable goods. We therefore can compare the causal effect of financial incentives and nudges along two margins, audits, which we liken to search, and purchase of durables. Using data on nearly 100,000 households, we document an asymmetry; nudges increase audits, but lead to lower rates of purchase. We find no evidence of a differential response for those offered a financial incentive. These differences suggest heterogeneity in the motives of the marginal consumer induced by nudges versus prices.
Improving the Measurement of Earnings Dynamics Moira Daly Dmytro Hryshko Iourii Manovskii
The stochastic process for earnings is the key element of incomplete markets models in modern quantitative macroeconomics. We show that a simple modification of the canonical process used in the literature leads to a dramatic improvement in the measurement of earnings dynamics in administrative and survey data alike. Empirically, earnings at the start or end of earnings spells are lower and more volatile than the observations in the interior of earnings histories, reflecting the effects of working less than the full year as well as deviations of wages due to e.g. tenure effects. Ignoring these properties of earnings, as is standard in the literature, leads to a substantial mismeasurement of the variances of permanent and transitory shocks and induces the large and widely documented divergence in the estimates of these variances based on fitting the earnings moments in levels or growth rates. Accounting for these effects enables more accurate analysis using quantitative models with permanent and transitory earnings risk, and improves empirical estimates of consumption insurance against permanent earnings shocks.
A Tale of Two Tails: Commuting and the Fuel Price Response in Driving Kenneth Gillingham Anders Munk-Nielsen
The consumer price responsiveness of driving demand is central to the welfare consequences of fuel price changes. This study uses rich data covering the entire population of vehicles and consumers in Denmark to find a medium-run price elasticity of driving of -0.30. We uncover an important feature of driving demand: two small groups of much more responsive households that make up the lower and upper tails of the work distance distribution. The first group lives close to work in urban areas. The second group lives outside of major urban areas and has the longest commutes. Access to public transport appears to be the force behind the existence of the tails, enabling the switch away from driving. We find that a fuel price increase of 1 DKK/liter implies an average deadweight loss of 0.66 DKK/liter, but there is considerable heterogeneity and the tails bear a larger share of the loss.
Commitment vs. Flexibility with Costly Verification Marina Halac Pierre Yared
We introduce costly verification into a general delegation framework. A principal faces an agent who is better informed about the efficient action but biased towards higher actions. An audit verifies the agent’s information, but is costly. The principal chooses a permissible action set as a function of the audit decision and result. We show that if the audit cost is small enough, a threshold with an escape clause (TEC) is optimal: the agent can select any action up to a threshold, or request audit and the efficient action if the threshold is sufficiently binding. For higher audit costs, the principal may instead prefer auditing only intermediate actions. However, if the principal cannot commit to inefficient allocations following the audit decision and result, TEC is always optimal. Our results provide a theoretical foundation for the use of TEC in practice, including in capital budgeting in organizations, fiscal policy, and consumption-savings problems.
Recent Flattening in the Higher Education Wage Premium: Polarization, Skill Downgrading, or Both? Robert G. Valletta
Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015. I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change (“polarization”); and (ii) a general weakening in the demand for advanced cognitive skills (“skill downgrading”). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.
Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation Rafael Di Tella Juan Dubra Alejandro Luis Lagomarsino
We analyze the role of people’s beliefs about the rich in the determination of public policy in the context of a randomized online survey experiment. A question we study is the desirability of government-private sector meetings, a variable we argue is connected to State capacity. Survey respondents primed with negative views about business leaders want fewer meetings, as well as higher taxes to the top 1% and more regulation. We also study how these effects change when subjects are (additionally) primed with positive/negative views about government officials. Distrust in the government increases the preferred tax rate on the top 1% only when business legitimacy is low. A model with multiple equilibria helps interpret these findings. In one of the equilibria, meetings are allowed, business legitimacy is high, and people set a low income tax rate for businesspeople. In the other, meetings are forbidden, business legitimacy is low, and people set high taxes to punish the businesspeople for their corrupt behavior.
Projections and Uncertainties About Climate Change in an Era of Minimal Climate Policies William D. Nordhaus
Climate change remains one of the major international environmental challenges facing nations. Yet nations have to date taken minimal policies to slow climate change. Moreover, there has been no major improvement in emissions trends as of the latest data. The current study uses the updated DICE model to present new projections and the impacts of alternative climate policies. It also presents a new set of estimates of the uncertainties about future climate change and compares the results will those of other integrated assessment models. The study confirms past estimates of likely rapid climate change over the next century if there are not major climate-change policies. It suggests that it will be extremely difficult to achieve the 2°C target of international agreements even if ambitious policies are introduced in the near term. The required carbon price needed to achieve current targets has risen over time as policies have been delayed.
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[STAT 432] R Debugging Example How to do Chaumian Coin Joins in Wasabi Wallet Eddy Lu of Grubwithus  Bootstrapping in America CRYPTO NEWS #5: Blockchain development and Bitcoin expansion #261 Ben Sharafian & Stefan Thomas: Coil - A New Business Model for the Web

Blockchain Technologies: Business Innovation and Application explores parallels between blockchain technology and other general purpose technologies, highlighting its capacity to enable widespread, transformational change. You’ll examine how blockchain technology can cheaply verify, under certain conditions, the attributes of a transaction. You’ll gain a deeper understanding of the cost of ... Enterprise blockchain is in the doldrums. Only three years ago, Gartner predicted blockchain would produce $3.1 trillion in new business value by 2030.But pilot project after pilot project has ... In the Bitcoin system, large numbers of miners invest massive computing resources in the blockchain mining process in pursuit of Bitcoin rewards, which are comprised of a fixed amount of system ... For example, a blockchain such as the Bitcoin one can be used to cheaply verify ownership and exchanges of its native digital asset. While this technically allows anyone to send and receive bitcoin globally without using an intermediary or being censored, actually being able to spend bitcoin to buy goods and services offline still runs into last mile issues. Hence, while Bitcoin has been used ... Find Blockchain Technologies: Business Innovation and Application (self-paced online) program details such as dates, duration, location and price with The Economist Executive Education Navigator.

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[STAT 432] R Debugging Example

Boostrap Legal, Inc's Founder and CEO Amy Wan was on Investor Town Hall Show while at the Crowd Invest Summit 2017 at the LA Convention Center talking about the latest trends in equity ... Latest plans and predictions over the last week including: - Price of the Bitcoin - Pharma industry development - New Japanese investors - Different expert's opinion on Bitcoin and their forecasts ... Your support helps us keep our content free for all. Donate now: https://www.92y.org/donate Recorded February 1, 2007 at 92nd Street Y. Subscribe for more vi... Eddy Lu is the co-founder and CEO of Grubwithus, Inc. Few years in the corporate world was enough! Eddy set-off with his Co-founder, Daishin Sugano, to franc... This video is unavailable. Watch Queue Queue. Watch Queue Queue