This Week in Ideas — 15FEB21
Built Environment Progress and Ambition
Dan Wang made a fascinating point on the Sinica podcast with Kaiser Kuo. He says:
For a lot of [people in] the U.S. the built environment around them hasn’t changed a great deal…folks are, I think, somewhat limited in what they can imagine can be improved around them. I think this idea that the built environment cannot change but digital technologies can always get better pushes people in a dystopian direction.
In contrast, people in China have seen tremendous progress in their built environment. He then goes on to argue that this shows up in digital dystopia science fiction that’s popular in the U.S. vs. the more techno-optimist science fiction popular in China that often sees fantastical improvement in the physical world.
I’m not the best to disentangle cause and effect of these and all the other factors at play, but there is a lot more interesting discussion on that episode.
However, I think this idea of needing to see progress over time to envision progress now is important. Particularly when it comes to the real world. I’m going to keep my eye out for ideas on how to bring progress to the built environment.
Financial Education Video Games
I’m not going to weigh in much on the whole GameStop saga. It, unfortunately, was a pretty costly price to pay for financial education.
But Alexa von Tobel’s ideas in the TechCrunch piece above did resonate and gave me an idea.
What if there was a financial app that operated on video game principles? Gamification is not new and often use as a hack to get people addicted to something, but what if it was used for good?
The idea is simple. The app has many levels of increasing challenge. The first level is about getting set-up with basic accounts and learning to navigate the financial world. As you learn more and begin to level up, you can start choosing your unique path and setting goals. As you make progress, whether by saving a certain amount or establishing a new financial habit, you unlock new capabilities such as getting a credit card, buying an ETF, or buying a stock.
You can continue to level up as you prove your knowledge and skill, eventually earning full access to the financial world. But now you have the skills and experience to successfully navigate it.
The Natural Question
Every once in a while you read an idea that seems so obvious, you don’t understand how it wasn’t considered before. Furthermore, the effects of its absence now seem glaringly obvious.
The Economist had a piece last week on such an idea: the contribution of nature to the economy. It was based on a report from Partha Dasgupta from the University of Cambridge.
The report features its own illustrative production function, which includes nature. The environment appears once as a source of flows of extractable resources (like fish or timber). But it also shows up more broadly as a stock of “natural” capital from which humans derive “regulating and maintenance services”: the work of environmental cycles that refresh the air, churn waste products into nutrients, and keep global temperatures hospitable, among other things. With this new production function in hand, economists can properly account for nature’s contributions to growth. Functions that omit nature misattribute its benefits to productivity, exaggerating human capabilities.
While I don’t have a good opinion on the analytical approach of the model, this resonates with me conceptually. It is an example of an easy trap in modeling: varying the level of depth in the model based on available data rather than the level of impact.
The idea is simple. We want to make models as accurate as possible, so we add in any complexity we feel reasonably confident in. For areas we don’t have the detail, we simplify and assume away. However, what we should do is choose depth by the importance of the component. If a very important component can’t receive detailed attention, the model as a whole shouldn’t be very detailed.
Have Macro models made this mistake? They’ve made this mistake before by omitting the financial system. It seems like they may be making the mistake again by omitting the natural ecosystem.
One for the Road
