Tuesday, August 14, 2018

Robots Are Ready to Shake (and Stir) Up Bars

Robot bartenders are mostly novelties today. But a group of startups is hoping to bring automation to your neighborhood watering hole—and even your home bar

By Leigh Kamping-Carder of The WSJ. If workers are replaced by machines, economists call that structural unemployment. Below I have links to earlier posts on that as well as whether or not automation necessarily increases unemployment. One mentions "Flippy, a robot that turns the burgers and cleans the hot, greasy grill."

"There’s no need to tip the mixologist at the Tipsy Robot, a glittering bar in Las Vegas where automated arms handle all the shaking, stirring, muddling and garnishing, making up to 120 cocktails an hour.

The silver-and-turquoise lounge, in the Miracle Mile Shops mall on the Strip, has 28 counter-style seats, each equipped with a tablet, facing a bar counter topped with two industrial-grade robotic arms. Patrons can order signature and classic cocktails, or fill a virtual cup with up to 14 ingredients of their choosing. Then the robotic arms go to work, gathering ingredients from a kind of futuristic back-bar automat; reaching up to a lattice of 120 liquor bottles; and tipping the resulting cocktail into a plastic cup proffered by a mechanical dispenser in the counter. Drinks take 60 to 90 seconds to make, and cost $12 to $16, said Stephan Mornet, president of Robotic Innovations, Tipsy Robot’s parent company."

"According to manufacturers, robot bartenders are money savers, cutting down on spillage, eliminating employee theft and ensuring consistency. Another selling point is their ability to collect data on drink orders and, when users create profiles to save custom cocktails, on demographics."

"The Smartender, another automated cocktail dispensing system, aims to replace the back-of-house bartender who pours drinks for servers at chain restaurants, casinos and sports stadiums. The system costs roughly $30,000 including shipping, installation and training for employees, an expense that Barry Fieldman of Smart Bar USA, the Las Vegas-based manufacturer, said companies quickly recoup by reducing bar staff and waste."

"Robot bartenders are unlikely to eliminate human bar jobs in the near future, experts say. “The mistake to make is always to think that just because a new piece of automation comes along that the total number of jobs is going to go down,” said Andrew McAfee, a principal research scientist at MIT and co-founder of the school’s Initiative on the Digital Economy. Crucially, a human needs to be present to verify age and ensure that overly intoxicated patrons are not served."
Related posts:

Reckoning With the Robots

Can the Robot Revolution Create Enough Jobs?

The Robots Are Coming And It Might Not Be A Case of Structural Unemployment  

What Econ 101 Can Teach Us About Artificial Intelligence

Are Robots Going to Steal Our Jobs? Many technologists think so, but economists aren't so easily convinced

Automation Can Actually Create More Jobs

Robot Journalists-A Case Of Structural Unemployment?

Structural Unemployment In The News-Computers Can Now Tell Jokes 

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot jockeys in camel races

Are Computer Programs Replacing Journalists?

Monday, August 13, 2018

Learning the Right Lessons From the Financial Crisis

By Harvard professor N. Gregory Mankiw.Excerpts:
"In the mid-2000s, the nation experienced a housing bubble. A combination of stupidity, negligence and malfeasance led a bunch of Wall Street firms to make excessively risky bets that the bubble would go on forever. Through mortgage-backed securities and related instruments, they extended credit to home buyers of dubious credit quality.

For a while, this credit expansion fueled the bubble. But when the bubble burst, these new homeowners defaulted in record numbers, and the Wall Street firms headed toward insolvency. The whole financial system teetered on the edge of collapse, leading to a deep recession.

Fortunately, policymakers came to the rescue. Henry M. Paulson Jr., the secretary of the Treasury, persuaded Congress to pass the Troubled Asset Relief Program, which he and his successor, Timothy F. Geithner, used to recapitalize the banks. Ben S. Bernanke, the chairman of the Federal Reserve, expanded the tools of monetary policy to support the financial system and the economy more broadly. Their bold steps saved us from another Great Depression.

In this conventional narrative, Wall Street financiers are the villains and Washington policymakers are the heroes. Certainly, the policymakers have promoted this view. Mr. Bernanke even titled his memoir “The Courage to Act.”

Yet a new book, “The Fed and Lehman Brothers,” by Laurence M. Ball, an economist at Johns Hopkins University, casts doubt on this narrative. Mr. Ball (who is a friend of mine) does not excuse the financiers from starting the trouble. But he draws attention to the policymakers who, in his view, failed to do their jobs at a crucial moment."

"A central bank can solve this liquidity problem by lending to a financial institution experiencing a run. That is why the Federal Reserve Act calls for an “elastic currency.”"

"When mortgage defaults started rising, many financial institutions experienced a run on their short-term liabilities. These liabilities were not traditional bank deposits but rather repurchase agreements, called repos. But the forces at work were much the same.In September 2008, the financial giant Lehman Brothers found itself facing a liquidity crisis. Yet the Fed, rather than acting as a lender of last resort, pushed Lehman into bankruptcy."

"Mr. Ball argues that a careful look at Lehman’s finances shows that it did have enough collateral. In addition, he examines the historical record and finds no evidence that Fed officials at the time were concerned about the insufficiency of collateral.

The claim of inadequate collateral arose weeks later when the full impact of the Lehman bankruptcy became clear. It was, Mr. Ball suggests, an attempt to cover up a policy blunder."

"the Dodd-Frank Act has increased restrictions on Fed lending, making it harder for the Fed to act as lender of last resort."

Sunday, August 12, 2018

How insurance companies are using technology to better assess how risky customers might be

The basic idea is that if you drive more safely, you have fewer accidents and insurance companies like that. Some of my students might recall one of the lessons from the supply and demand game. That was that one condition for markets to work optimally is that buyers and sellers have equal access to information. When they don't, markets won't work as well as they should.

For instance, in used car markets, the sellers know alot more about the product than the buyers. Economists have studied the problems this causes in the "market for lemons" research. If you want to sell your used car for $1,000, some people won't believe it is worth it. So they only offer maybe $800. If you believe your car is worth $1,000, you won't sell it. Then there are not enough sales in that market and the quantity is too low or sub-optimal. And many of the cars on the market are lemons.

But in insurance markets, buyers know more than the sellers. You know how risky you are but the insurance companies don't. Insurance companies want your premiums to reflect your risk. The riskier people need to pay higher premiums. If insurance companies can learn more about your driving habits, they can know better what to charge you.

See Insurers Turn to Technology to Woo Drivers by Lacie Glover of NerdWallet. Excerpt:
"Here’s a look at what insurers are doing today — and what they might try next.

1. Tracking driving for discounts, rewards

Many major insurers now offer telematics, technology that collects information about your driving behavior, in exchange for discounts or rewards.

Progressive was first, having launched its telematics-based program “Snapshot” in 2011. Customers who plug a device into their cars’ diagnostic ports to allow the company to monitor their driving can earn discounts. The technology — which tracks data like acceleration, hard braking, time of day and how much you drive — is also available in an app.

Other insurers that track driving behavior reward safe drivers with cash back, freebies or a combination of rewards and policy discounts. Often, drivers get a discount simply for opting in. While many companies say that driving behavior is monitored solely to determine discounts, Progressive might increase rates if your data show unsafe behavior.

2. Setting prices based on your (actual) driving

Auto insurers’ use of demographic factors, such as age, gender and marital status, when setting rates isn’t exactly popular with drivers.

A start-up, Root Insurance, is trying a new model: Pricing based on how you drive, which could save money for safe drivers. The insurance, currently available in 19 states with plans for five more, tracks driving behavior during a two- to six-week “test drive” before giving you a quote.

The company still considers some demographic factors, but it isn’t as interested in your personal details, says CEO and co-founder Alex Timm. “There’s not really a ‘great driver’ demographic — we find them across the country, in all sorts of situations,” Timm says.

Other companies are pricing coverage based on how much you drive. In select states, MetroMile, Allstate and Esurance, for example, offer policies where drivers pay a base rate, plus a per-mile rate.

3. Evaluating driving to curb bad habits

Beyond offering discounts to customers who opt into monitoring programs, insurers want to make you a better, safer driver. Depending on the program, drivers may get immediate feedback through in-app driving reports and scores, or even from devices that beep when drivers brake hard or turn too sharply.

Insurers are also targeting distracted driving, which was reported in 9% of fatal crashes in 2016, according to the latest data from the National Highway Traffic Safety Administration. Because crashes often result in claims, insurers hope to see a decrease by monitoring cell phone use, a common driving distraction.

In addition to tracking how you drive, apps from Root and AAA can tell if you’re using your phone while you drive, which will have an impact on your rate. Arity, a subsidiary of Allstate, is working to bring this capability to existing monitoring programs at Allstate and Esurance."
See also The EU Says Insurers Can No Longer Discriminate On The Basis Of Gender. Woman are generally safer drivers than men, so insurance companies charge men higher premiums. But the EU said they could no longer do this.

Related posts:

Lose the Fat to Lower Your Insurance Rates
How Did Astronauts Of The 60s "Purchase" Life Insurance?
Should Overweight People Pay More For Health Insurance?
Should We Pay People To Adopt A Healthy Lifestyle? 

'Spy car' worries raised by new Allstate patent
Should your company or insurer reward you for meeting exercise goals?

Saturday, August 11, 2018

Physicists have a new, maybe better way to predict GDP

See Physicists’ simple spanks economists’ complex in economic growth forecasts: Take economic ideas, add a touch of dynamics, get accurate GDP predictions by Chris Lee, a physicist who writes for Ars Technica.

The main idea seems to be using "economic fitness" to predict a country's future GDP (along with past GDP). Fitness means that a country has a wide variety of exports. If the rest of the world likes many of your products, that might mean your economy is "fit" or in good shape. Maybe that means that no matter what happens in the world economy, your country will usually have something other countries will want to buy. Excerpt:

"Applying physics to economics

The economy is a bit different from many physical models, though: there is no complete model of an economy. There isn’t even a good approximate model. Indeed, simple models that provide insight do not offer predictions. Instead, predictive models are statistical in nature. These make use of historical economic data to predict future economic data—essentially, the model looks for correlations between historical and recent data. These correlations are then used to take current economic data to predict future economic data. The model is then constructed from our understanding of how the measured data relates to economic activity.

The problem with this approach is that, if you don't have sufficient data, predictions quickly become inaccurate. To resolve this problem, we collect more information. That information allows new processes to be included in the model with the hope that this will yield increased accuracy over longer time intervals. And this certainly works: current models are better than older models.

To improve on predictive models about the economy, researchers took a counterintuitive approach. They reduced the number of parameters in their model to just two: economic fitness and gross domestic product, the idea being that if the economic fitness and GDP are measured at a given time, then the change in GDP can be predicted.

So what is the economic fitness? It is, in short, a measure of the complexity of a country’s exports. The idea is that exports represent the products from a country that are competitive with like products from the rest of the world. The larger the variety of exported products, the fitter an economy is. One advantage of it as a measure is that exports and imports are very carefully measured, because companies rely on that data to survive. And that data is collected and reported in a relatively standardized way. The researchers basically created a matrix that allows the variety of exports to be summed.

This number is then iteratively normalized with data from all other countries to come up with a self-consistent scale of economic fitness. Economic fitness drives changes in economic growth, which is accounted for in GDP.

Now, it is important to realize that no one really has a model (in the physical sense) of the link between economic fitness and GDP. But we do have statistical data that can be used to infer how the two are linked. We can estimate from the averages in the dataset how high the economic fitness of an economy has to be to support a given GDP and use that to determine if the GDP will increase or decrease.

The speed of the increase or decrease is estimated using a kind of force-response model. In other words, if the GDP is far away from that expected from the current economic fitness, there is a strong hidden economic drive to change the GDP. Hence, we can expect rapid economic growth (or contraction).

Predicting the past

This case is exemplified by China in 1995. China at that time had a low GDP but high economic fitness. As predicted by the model, China experienced 20 years of steep economic growth, with its GDP increasing remarkably. In a standard economic analysis, this seems extraordinary. But, the researchers argue that this is actually expected behavior: much like a stretched spring being released to jump back to its position.

The model also allows economic momentum to play a role. The speed at which economic fitness is changing also influences the change in GDP. The researchers found that using the trajectory of economic fitness to predict GDP leads to even more accurate results.

The researchers tested their model on historical data from 169 countries over three different five-year windows. They compared their GDP predictions with those produced by the international monetary fund (IMF) model and with the actual GDP data.

They found that their model was better than the IMF model, especially when they also took into account the trajectory of the economic fitness. Furthermore, a close analysis of how the IMF model and their dynamical model predictions differed showed that the sources of inaccuracy were different. That meant that combining the two models led to predictions that were even more accurate.

Another important factor is that there is a kind of self-similar behavior in trajectories. Even though the total size of the economy might be different, countries with similar ratios (I’m simplifying here) of economic fitness to GDP experienced similar trajectories. And a final point: the model also shows where predictability fails. Countries with a very low economic fitness are incredibly difficult to predict. This is true of both the IMF model and their model, but it highlights that the poorer you are, the more subject you are to the random buffeting of economic noise."

Friday, August 10, 2018

More “agreeable” men earn significantly less

See How does your personality correlate with your paycheck? by Tyler Cowen.
"That is the topic of my latest Bloomberg column, here is one excerpt:
Gensowski revisits a data set from all schools in California, grades 1-8, in 1921-1922, based on the students who scored in the top 0.5 percent of the IQ distribution. At the time that meant scores of 140 or higher. The data then cover how well these students, 856 men and 672 women, did through 1991. The students were rated on their personality traits and behaviors, along lines similar to the “Big Five” personality traits: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism.
One striking result is how much the trait of conscientiousness matters. Men who measure as one standard deviation higher on conscientiousness earn on average an extra $567,000 over their lifetimes, or 16.7 percent of average lifetime earnings.
Measuring as extroverted, again by one standard deviation higher than average, is worth almost as much, $490,100. These returns tend to rise the most for the most highly educated of the men.
For women, the magnitude of these effects is smaller…
It may surprise you to learn that more “agreeable” men earn significantly less. Being one standard deviation higher on agreeableness reduces lifetime earnings by about 8 percent, or $267,600.
There is much more at the link, and no I do not confuse causality with correlation.  See also my remarks on how this data set produces some results at variance with the signaling theory of education.  Here is the original study."

Thursday, August 09, 2018

Real GDP over time

The table below shows the annual percentage change in per capita Real GDP and Real GDP since 2001. The base year is 2012. Data from the Commerce Department (Bureau of Economic Analysis). Then some timeline charts covering the years 1948-2017

Date %CHPerCap %CHRGDP
2001 0.0025% 1.00%
2002 0.80% 1.74%
2003 1.98% 2.86%
2004 2.84% 3.80%
2005 2.56% 3.51%
2006 1.87% 2.86%
2007 0.91% 1.88%
2008 -1.08% -0.14%
2009 -3.39% -2.54%
2010 2.12% 2.56%
2011 0.77% 1.55%
2012 1.48% 2.25%
2013 1.09% 1.84%
2014 1.65% 2.45%
2015 2.07% 2.88%
2016 0.79% 1.57%
2017 1.27% 2.22%