An Economic Model of Loneliness and Being Extremely Online

Bo Burnham is a comedian and musician who, like so many of the artists I enjoy, produces art that I can only describe as extremely specific to him. His newest special on Netflix features a song, “Welcome to the Internet” (some NSFW lyrics), that I liked so much I thought it was worth writing as a formal model.

No, really. Hey, we all need a hobby.

The whole song is a meditation on the overwhelming nature of the internet and is, in my opinion, fantastic. I think if we zero in on two pieces of refrain in the lyrics, we can get some traction in what Burnham believes is the underlying problem, if not outright crisis, that resides within the internet and those that are “extremely online”:

First, the lure:

Could I interest you in everything?
All of the time?
A little bit of everything
All of the time

This is the value-add of the internet and why we can never, and will never, leave it behind willingly. This is also the “cognitive overload” hypothesis of why the internet is bad. Sure, for the infovores of the world there hasn’t been a bigger technological shift since the printing press, but there certainly exists the possibility that most human minds (if any) aren’t built to handle the deluge of information they are drowning in. That’s one theory, but I think that’s the kind of problem that isn’t actually a problem. Some will consume more of the internet, some will consume less, c’est la vie.

It’s in the second half of the refrain, however, that we see the actual problem.

Apathy’s a tragedy
And boredom is a crime
Anything and everything
All of the time

And therein lies the rub. You can’t opt out. But is that true? Well, that depends on who you are and how you live your best life i.e. how you optimize your utility function. So let’s do it. Let’s write down the utility function that lives inside the song. What we’re going to do is this- we’re going to lay out the simple components as natural language, then turn it into formal math, and then bring it back to natural language.

In our Burnhamian mode, people need two things: Private goods like food and shelter and Social Goods like friendship and camraderie. How much Utility you enjoy will always be increasing in both, but the optimal mix will depend on your constraints (wealth, time, accessible population) and the mathematical function determining how much Utility you get from a mix of Private and Social goods i.e. are they additive, multiplicative, or something else. Utility equal to zero is equivalent to death.

Let’s add one last layer of complexity. Let’s say that your Social goods are a function of two kinds of elements: Friends and Clubs. Friends are direct, one-to-one relationships. Clubs are large social groups. We will define and differentiate between the two as such: if you cease to be part of a friendship (whether between 2,3, or 5 people), then that friendship no longer exists in the same form. If you drop out of a club, on the other hand, that club will persist without you.

So what a person has to do is, within their constraints, try to optimize how much of their resources they invest in their Private goods, their Friends, and their Clubs.

The first line is our base model, the second is an expanded version with our two-input model of Social goods. The function we are using is called a Constant Elasticity of Substitution utility function. The key parameter, α, determines how Private and Social goods interact. If α=1, then they are what economists call perfect substitutes. All that matters is how much you have in total of the two inputs, and if you want you could specialize in just one of them. They are perfectly additive. If, on the other hand, α=-∞ (negative infinity), then they are perfect complements, like right and left shoes. There is no point in adding even one more unit of Private goods until you have another unit of Social goods to pair with it. In a sense, they are multiplicative, meaning if either value is zero, then your utility is zero. The value of α will tell us whether the best life requires more of a mix of Social and Private inputs (if they are more complementary), or simply the most of whatever is the easiest to come by (if they are good substitutes for each other).

We’ve nested in our Friends and Clubs production of Social goods as a CES function within the second equation, with a similar story, only here β will determine how much of a mix of Friends and Clubs we want, or whether we can specialize more in one over the other. In the third and last line of the model, we’ve reduced it down to the underlying questions that will tell our story represented by addition and multiplication signs:

Are Private and Social Goods complements (multiplicative) or substitutes (additive) when we internally produce utility? Are Friends and Clubs complements or substitutes when we internally produce our Social goods?

Assumption 1: α= -0.1 Private and Social goods are weak complements. What this means is that there are diminishing returns to Private and Social goods, you need some of both, but you can have less of one or the other and its fine. Let’s just assume wealthy people need other people in their lives to stay sane while, at the same time people with rich social lives and supportive communities still need food and shelter. You can specialize a bit more on one side, depending on what’s available, but you can’t live without at least some of both.

We’re all different in how we build our social lives and, in turn, how we internalize the internet in our lives. I think we can gain some insight into this process by working out the stories in this simple model through our second parameter, β. Let’s consider three broad types of people.

Person Type 1: Friends and Clubs are Strong Substitutes (high β)

These people are either relatively offline (e.g. they still use their phones as phones to make phone calls) or extremely online (e.g. they get a panic attack unless they have 80% battery and a charge pack on their person). These are the people who can become hyper-specialized in new clubs if they are extricated from prior social networks or club settings. This is why cults recruit people who move to new places where they don’t know anyone. This is how your diehard hippie socialist friend grew up to be a conservative evangelical after they moved to the Texas suburbs.

With regards to our original question, people who hyperspecialize in their club and club identity will be constantly contributing grist to the club’s identity: evidence of the necessity of the club and it’s mission, rage at non-members, disappointment in members who aren’t committed enough, and constant vigilance in the monitoring of everyone else’s commitment. They are in it, they are of it, and they are ready to purge.

Apathy’s a tragedy (You must care about everything the club cares about)
And boredom is a crime (All of your time must be allocated to the club)
Anything and everything
All of the time

Type 2: Friends and Clubs are strong complements (low β)

These are the people that I think Burnham’s song is targeted at, for whom he has the most sympathy, and with whom I suspect he would count himself. These are people for whom the internet is the most taxing, the most exhausting to navigate.

Type 2 folks want to have personal friendships and friend groups while still feeling a part of something bigger, whether it’s a community, a political movement, or spiritual affiliation. Type 2 people will have preferences towards one or more social identities manifested as clusters on the internet, but they don’t want to purge people who don’t share those preferences from their circle of friends. Type 2 folks are interested in civil rights and social justice, but they want to diversify their emotional and material resources across their personal relationships and private wellbeing as well.

The deluge of the internet, with its stark images, focus on extreme outcomes, battle cries, and public reputation mauling, are constantly admonishing and shaming Type 2’s. Type 2 people are tired. Perhaps most importantly, the pandemic has been especially hard on Type 2’s. While Type 1 club-specialists have thrived by focusing the totality of their efforts to the online arena, their voices have been tearing the Type 2 social-portfolio diversifiers to shreds.

Type 3: Friends and Clubs are weak complements (middle β)

Type 3 people are a lot like Type 2’s, but it is easier for them to compartmentalize the production of their social goods. Type 3 people are often in clubs, but they are rarely of clubs. They’re not joiners. Whether you’re looking at sacrifice-demanding religious cults or extremely-online political culture warriors, if the social associations of the world demand too much of Type 3 people, they are happy to half-ass their contribution or opt-out entirely. They might be on Twitter or Facebook, but they don’t need to reply to anyone. They might go to church on Sunday with the family, but if the minister tells them their sister is going to hell for their sexual preference, it’s just not that costly to stop going. For them clubs will always remain a luxury good, never a necessity.


To be clear this post is an exercise in building a toy model of something big and complex and important. It’s a gross abstraction and shouldn’t be taken too seriously. The process of formalizing your thinking on a social mechanism, however, is something that I think you should take very seriously. Formal models are useful because there is no hiding what your idea actually is. There’s no “sorry, you misread me” or reliance on obscure jargon. Formal models force you to clarify and reveal your thinking to everyone, including yourself. They can open up new avenues for explorations and even generate empirically testable predictions. Formal models have in many ways been the principal force behind economic imperialism in the social sciences. Not because the math is perfect or all encompassing or even correct. It’s because it’s all out there, ready to be judged and dissected and tested. That transparency makes it a useful.

I don’t know if my interpretation of Bo Burnham’s theory of the internet is correct or even necessarily what he intended it to be. But this is one way we can take it a step forward and see what we can actually learn from it. Which is pretty much all I want to do for the rest of my research life, on every topic, all of the time.

The Strengths and Weaknesses of Contrarianism

A disproportionate share of my influences have been, at least in track record if not in conscious intellectual identity, contrarian voices. Contrarians are to me those thinkers who have a persistent mistrust of conventional wisdom. They tends towards a certain amount of Burkean conservativism (i.e. the status quo is usually better than we give it credit for), though not necessarily economic or cultural conservatism. The last 5 years, specifically the Trump administration and the Covid-19 pandemic, have to my mind presented perhaps the single greatest challenge for contrarians in my lifetime for a host of (maybe) obvious and non-obvious reasons. To better understand why, I think it’s worth casually investigating the strengths and weakness of contrarian sensibilities.

Contrarians are an antidote to herding

The Banerjee model of herding behavior is a masterclass of parsimonious modeling that changes the way you see the world the moment you internalize it. To oversimplify and already simple model, it’s the classic business cliché of “Nobody gets fired for buying IBM” writ both much larger and much smaller. If you’re on Twitter, it means nobody gets cancelled reaffirming the shibboleths within your intellectual and political social network. Following the herd can insulate you from bespoke micro consequences (i.e. no one can punish you without punishing everyone), but it can’t protect you from macro consequences (i.e. if the herd runs off a cliff, you’re going over with them).

Contrarian’s are useful because they are seemingly less susceptible to such pressures to conform because their identity, and the product they sell in the intellectual marketplace is defined by their distance from modal positions. What’s interesting here is that whether they are right or wrong is almost beside the point – contrarians add value just by adding noise to the intellectual marketplace, jittering herding populations out of potentially suboptimal equilibria. This is a powerful consideration – contrarians can make the world a smarter place even if their actual intellectual goods are complete trash.

Contrarians maintain our intellectual hygiene

Similar to their ability to break herding equilibria, contrarians offer a custodial service for science. Through their constant devil’s advocation, contrarians serve up intermittent stress tests for old ideas that might otherwise survive simply based on past glories. Just because something is an old truth doesn’t mean it’s a good or useful truth. Contrarians force us to regularly consider our core models and assumptions. Is it annoying when someone asks whether or not NASA was actually successful? Of course, it’s always annoying to defend a position that is obviously true. But sometimes you get a Warren Nutter telling anyone who will listen that Paul Samuelson’s textbook is wrong and the Soviet Union is a shell of its industrial reputation. Sure, it probably wasn’t fun to get run out of academia <adopts the snarkiest Ivy-league-jerk-in-a-skit-voice>for being just so obviously wrong, but checking every now and then that we actually know the things we think we know is an underprovided public good. We need contrarians to tell use when fads and social shibboleths are masquerading as science.

There’s more wisdom than madness in crowds

Hygiene and herd-prevention are definitively good things, but it’s important to remember that most conventional wisdom is in fact wisdom. There’s a been a certain agony in watching my favorite contrarians tie themselves in knots trying to find the strategic genius to Donald Trump, the collective madness that must be behind Covid fears, the grand lie of that surrounds Joe Biden as he sells his secret Republicanism to Democrats. Sometimes things are obvious because they are obvious.

Most of the time, whether it’s guessing the number of jellybeans in a jar or finding the best pizza in town, the crowd gets it right. The reason that most politically informed people think Donald Trump is a wet-brained buffoon is that he’s a buffoon (I will forever hold to the believe that his buffoonery wasn’t a strategic choice, but rather an pre-existing attribute that the political marketplace generally, and the Republican Primary specifically, selected for in 2016 and may select for again. Politics, like any habitat, can be quite cruel in its amorality.) The reason most people are afraid of Covid is because Covid is a danger of sufficient magnitude that it warrants private and public action to mitigate it. The reason that Joe Biden seems like a mix of the modal Republican and Democrat is because that’s exactly what the median voter is. The mob is good any taking a million small clues and turning them into a big conventional wisdom.

Intellectual Serial Autocorrelation

We should all be careful of our own intellectual brands, doubly so for contrarians. Yes, I’ll admit that in the market for takes there is a strong incentive to differentiate, but most following the path of optimal differentiation end up being just a different flavor of one of the two or three dominant conventional positions. Contrarians are far more likely to stake out territory as lone(-ish) wolves, perhaps on the periphery of one or more of the major intellectual identity clusters.

For these thinkers and commentators, they can often find themselves repelled from the obvious. Cultivating too strong a revulsion to the wisdom of crowds is often foolish and sometimes dangerous. Don’t get me wrong, sometimes there is no spoon. Sometimes. But most of the time it’s just a spoon and you should move on to the next puzzle. Maybe your model of world of the world is telling you to keep plowing ahead, but if everyone in the car is telling you to stop, you should probably stop.

On Manufacturing Collectability

Topps lost the the licensing rights to Major League Baseball which, prior to it actually happening, is a thing that your typical baseball fan would not have previously acknowledged as even possible. Topps makes baseball cards. Not the only baseball cards, but for most of the history of baseball cards, Topps were the baseball cards. How can baseball cards exist without Topps?

Major League Baseball (MLB), of course, simply sold the licensing rights to someone else: Fanatics. Now, to be perfectly clear, I don’t care abou, any of the corporate entities involved here, imaging rights, or even baseball cards. What I am interested in is the concept of a purposely designed collectible–not something that becomes collectible, an item designed solely to exist as a collectible.

The markets for baseball cards rise and fall, and there was one definitive bubble in the early 90s. Like any commodity, prices are an emergent outcome of supply and demand, and while in the short run price movements are associated with fad and event driven demand, in the long run a collectible item’s price ascent begins and ends with supply. For an item to exist as a collectible with investment-grade price growth potential, it’s supply must be short-term limited and long-term fixed.

Fanatics just paid a lot of money for the MLB imaging rights, more than Topps was willing to bring to the table as a 70-year producer and stake holder. Part of Fanatics reasoning in committing so many resources to the rights is their ambition to produce non-fungible tokens (NFTS), which they will no doubt restrict the supply of to a profit maximizing level. NFTs, I suspect, offer Fanatics the opportunity to pursue a parallel product distribution that will allow them a new channel for price discrimination. Specifically, I expect the physical cards to be relatively inexpensive, sold at a price comparable to recent historical prices in an effort to serve price sensitive kids and hobbyists. The NFTs, on the other hand, I expect to be greatly limited in supply, a promise to hardcore collectors that the assets in question will offer the investment-grade inelasticity of supply that collectors covet in their aspiration to hold collectible items that hold value as art-adjacent consumption value while also being long term lottery tickets.

Fanatics believe the key to unlocking this is the image rights to Major League Baseball. Their cards and NFTs are the real ones, the official ones.

But that begs the question: why does the market care that they are officially sanctioned? The value of the image rights was to be able to use the names and logos of Major League Baseball without getting sued. The only way to profit off baseball cards previously was to produce at scale – you couldn’t capture the future collectible value nearly as well as the present consumption value. And there was no way to produce at scale without the imaging rights – there’s no good way to secretly print and sell a million baseball cards with images you lack the rights for. A person or company can’t sell a million black market bootleg cards without getting caught.

But someone could sell three.

A person can sell three cards without getting caught. A person could sell an unlicensed NFT without getting caught. And so can it’s next owner, and the one after that, ad infinitum. In the crypto world of NFTs these transactions, especially in the long term, are feasibly untraceable. If anyone can sell three baseball cards and associated NFTs, then anyone can make them as well.

Remember zines? Actually, maybe you don’t. In the before-times, aficionados of musical, artistic, or even just aesthetic subcultures would print their own magazines at home, pay for a 100 copies at Kinko’s, and then distribute them independently on their own through the mail or at small local bookstores. Not dissimilarly, many artists have for years produced “Art Cards, Editions and Originals” (ACEOs). Essentially baseball cards, but with small collectible works of art instead.

An independent artist that tried to produce baseball ACEOs and sell them on eBay would probably fly below the radar. But in the unlikely event that their card did become the card that the market chose as the most sought after, then yes, MLB and Fanatics would likely pursue legal action. The thing about pursuing a copyright so vigorously is, like many consumer goods for which distribution is illegal, restricted supply only increases their value. And an NFT transaction is considerably harder to trace than a physical or even traditional software good. It’s called “crypto” for a reason.

Sure, Fanatics will be the only company that can sell the “official” baseball card, the “real” one. But who’s to say that they’ll be selling the best one? In a world without enforceable image rights, the market is likely to care a lot less about the what’s official, and a lot more what’s the, always ephemeral and hard to anticipate, best. When you’re talking about a commodity where limiting supply is the key to unlocking value, NFTs and crypto technologies change the entire landscape, because copyright and image rights are only only enforceable to limit production at scale, which means any effort to do so just creates great incentive for small scale independent production.

This isn’t just relevant to baseball cards, either. This is relevant to anyone designing a product with the intention of it becoming collectible, where some portion of its value today is it’s predictable scarcity tomorrow. Twenty years ago downloadable music changed the entire market for music. Musicians at the highest levels of popularity found themselves returned to a world where the bulk of their income came from live performance, which had of course been the norm for musicians for most of human history prior to the vinyl record. It would be interesting if baseball cards, and other portable pieces of functional art (such as Magic or Pokémon cards) found themselves on a similar path, where large scale production of collectibles becomes outflanked by anonymous independent artists.

You’ll probably never own a $5.2 million Mickey Mantle 1952 rookie card. But you maybe you’ll paint Shohei Ohtani as a half-man, half-Gundam neo-noir warrior prince pitching a no-hitter the same night he hit three grand-slams. And maybe the market will say that the official photo cards of Ohtani are nice, but your image, and your NFT, are the one true image that captured the moment he became the greatest baseball player ever. Maybe the market will select your card.

(What I’m saying is…maybe the market will say your card is….topps. Yeah, sorry, I’ll see myself out).

We need City-States

What happens when the world changes sufficiently that a subset of the institutions that laid the groundwork for the most successful nation of the last 200 years becomes becomes maladapted to their context? Well, thanks to a couple billion year of evolutionary biology, we know the possible outcomes. The classic evolutionary answer is that the species in question will either adapt, migrate, or die. Repurposed for the modern nation-state, the country in question will either:

  1. Adapt it institutions
  2. Change the context (i.e. whole nations can’t migrate)
  3. Steadily decline into some combination of irrelevance or chaos

Omar Wasow put together a nice thread, where each individual tweet stands wholly on it’s own as an acute observation, on the current state of the Senate as an elected institution:

So let’s think about our options here.

Decline into Irrelevance and Chaos

I mean, it’s a choice, but it’s not one I’m particularly excited about.

Adaptation

We could amend the constitution to change how the Senate is apportioned in some clever way that still maintains the mandated suffrage of every state. We could change/abolish the electoral college. I’ll be blunt: I don’t ever see a path forward for constitutional change that will entirely undermine the political power of the one of the major parties (good luck getting 2/3 of Senators to push through an Amendment that will undercut the careers of at least half of them). The resistance to it, at every level, will be extreme. The last time we tried to make an institutional change with that much impact on the balance of power, we had to fight a war to resolve it. There may be a path forward here, but not on a timescale that I’m interested in. I’m only interested in solutions that could be feasibly enacted in my lifetime.

Change the Circumstances

Unlike your typical seed-eating bird of the Galapagos Islands, we do have the means to change the map upon which the Senate is selected. In other words, more states. I don’t mean just granting statehood to Puerto Rico and DC (though it is mildly unconscionable that we haven’t done so already). And I don’t just mean (the very good and perfectly reasonable idea) of splitting California and Texas into 5 and 3 states. I mean a lot more states.

Let’s think about the underlying problem for a second. The Senate biasing representation towards a small minority of voters is a symptom of a larger phenomenon: the continued movement of Americans to dense urban areas. People keep moving to cities, and often from states without a major urban center, and into states with multiple large cities. The rural areas that they are emptying out from maintain their pool of slots for elected Senators, while the cities gain none. So what’s the answer?

Welcome to the great state of Seattle! [state motto: “If it’s not caffeinated, send it back”]

The Vinegar-Tomato Sauce State of Raleigh! [state color: halfway between Duke blue and UNC blue]

The Beechwood Aged State of St. Louis![ state left fielder: Lou Brock]

The Always Hustling State of Atlanta [state anthem: written and performed by Outkast]

City-states. Remember city-states!? Yes, I know, when we speak historically of city-states we mean entities independent of any other nation state – classic Venice, current Singapore or Monaco, but that doesn’t mean we can’t piggyback on their awesomeness. Texans already joke about the “People’s Republic of Austin” – let’s make it official! We can set a size minimum as either an explicit population threshold (e.g. 500k) or a moving bar, such as the population of the smallest state in the previous census. It’s essentially adding another option for a city to apply for inclusion in the next tier of our federalist system.

This is more feasible than you might think and vastly more feasible than amending the constitution.

Consider:

  1. These cities already have government infrastructures. The governor on day 1 is the current sitting mayor.
  2. The citizens of most medium- and large-sized cities derive the bulk of their regional identity from their city, not their state. Most urbanites will be thrilled at the notion of elevating the political status of their city while losing the affiliation of their previous state.
  3. New state coffers will be heavily subsidized with flag and swag sales the first few years (only mostly kidding)
  4. The remaining rural states will have the far more manageable task of trying to serve rural citizens without having to serve an urban voter base with radically different needs and preferences. Public goods will be better matched with the citizens of rural states as well.
  5. States will often look like Swiss cheese, which will be both hilarious and, slightly less importantly, will allow for constituents to even more easily vote with their feet when elected officials fall short in their duties.

Are there downsides? Sure.

  1. The speed traps before you enter and as you exit city-states into their rural envelopers will be aggressively extractive. There will be rampant attempts at exporting taxes across borders.
  2. Reconstituting water supplies as special districts supporting multiple states will be tricky.
  3. Coordinating interstate public goods will, no doubt, at times become even more farcical than the status quo.
  4. Decent chance this turns into a Neal Stephenson novel within 100 years.

But, in the medium and long run, I believe the benefits will greatly outweigh the costs. Throughout the pandemic there has been a constant tension, particularly in “red states”, between the public goods desired by the citizens in cities versus rural areas. While urbanites have been desperate for mask and vaccine mandates, rural citizens have been far more interested in consuming personal liberty and symbolic group-identity goods, at the expense of greater Covid cases and deaths for those in denser areas.

I’ve said it before and I’ll keep saying it tomorrow: there isn’t a red-blue divide, a religious divide, or a class divide. America is currently defined by an urban-rural divide. If we don’t adapt our institutions to reflect it and balance the equal political enfranchisement of people on both sides of that divide, it will continue to erode the integrity of our political infrastructure.

I imagine I don’t have to persuade many people that the integrity of the franchise is not something to be taken lightly. Regardless of the mathematical salience of an individual vote to any election, the fact remains that the less people believe their vote has at least the potential to be realized in the form of representation that serves them, the more they will look to alternative channels to the political process. And maybe, for the libertarian inside of you, the alternative you imagine might exist in the private marketplace for goods and services. But history informs us that the dominant alternatives to democracy are heritable lineage and bloodshed, and I don’t see any benevolent American scions laying in wait.

Scrolling Alone

Robert Putnam’s Bowling Alone was one of those high brow academic-ish books that, for a few months at least, made the leap to coffee and bedside tables across America, bringing a simple thesis that Americans had dropped out of the traditional social organizations that served, directly and indirectly, as the bedrock of civic life. It was a great read and made a compelling argument.

It was the book that introduced me, then still a grad student, to the concept of social capital to me. It had lots of stylized facts and broad theories, and was seemingly comfortable being at war with itself when the facts didn’t play nice. For a simple run down (and it’s been more than 10 years since I read the book, so take the accuracy here with a grain of salt)

  • Americans bowled more than they used to, but were less frequently members of leagues.
  • Americans didn’t join new associations when they moved to new towns, but they also moved towns less than they used to.
  • We worked a lot more, so there was less social-leisure time to dedicate to local associations.
  • Political and activist groups had sacrificed in-person meetings and local cohesion for greater national scale

You get the idea. Pushing his logic, Americans had become solitary households, islands held together less by social identities than work affiliations. The book, published in 2000, arrived while the internet was still in a pre-social media, pre-smart phone construct, but essentially warned that the growing dearth of social capital would undermine civic engagement and eventually democracy.

It might seem odd, but I think picking up (and picking on) a 20-year old book gives some insight into what we are frequently overlooking today.

  1. Bowling alleys are not filled with loners. They are filled with groups of friends bowling together. What changed wasn’t interest in social activities, it was how we schedule our lives. Work may be both more flexible for many of us, but also less predictable in the hours we work, and with (perhaps) more total hours. Combined with the predominance of two-earner households, its just that much harder for a casual bowler to lock down 2.5 hours every week for a league obligation. Remember, total bowlers increased– they didn’t actually start bowling alone, they just did it on their own schedule.

This a good thing to remember when we’re wringing our hands over the latest thing that the current generation is destroying (television, movies, cereal) or, ahem, abstaining from. What looks like the end of something central to human existence is more often than not just a refitting to new economic incentives and constraints. Humans are clever and we are well-advised not to mistake basic adaptation and re-optimization for massive generational divides.

2. We don’t need to make new friends as much when we move to new towns because we can actually stay friends with people in our old town.

When you moved to a new state, or even a new town in your state, that used to mean going years or decades without seeing or hearing from old acquaintances. That is not the case anymore. Between twitter, instagram, facebook, and zoom, I am in regular contact with people scattered both geographically and temporally (autobiographically?) from my life. Some fall in and out of touch, much the way they would if we lived down the street from each other, but the point is that there isn’t the same pressure to find local social institutions to rebuild a social network from scratch like there use to be.

I’m not sure this a good thing, by the way. I think it has removed important sources of noise and variation in our social networks. I think it was made them far too centered on the groups we formed during schooling, leading to homogeneity within networks and distrust across educational strata. But it doesn’t mean we are alone, but it does mean that shape of our social lives have changed in important ways.

3. Political activism as a source of social identity remains strong. But does it bring community or just conformity?

The clubs or group-identities that dominate our life are relatively unchanged: religion, politics, profession, ethnicity, sports, etc. But the manner in which those social groups cultivate identities has changed. As Putnam noted, politics has become considerably less local, a trend exacerbated by the rise of social media as a tool not just for promoting an identity, but for regulating that identity and assigning status within it.

There is no shortage of people that have noted the rising pressures to conform within groups. This is where I think Putnam’s original thesis has some unexpected bite: I don’t think our social capital has eroded, but it has become a lot less local. It is subject to standards less tailored to your currently lived experience. Further, as any good Orwellian knows, the rewards to successfully identifying in-group traitors and purging them scales with network size. With social media technology exponentially scaling the number of people monitoring us, it has brought with it tremendous pressure to conform. If the nuclear families in the small town 1950s lived in terror of what will the neighbors think, consider the pressure that extremely online millennial professionals are under. One mistake and a lifetime’s social capital can go poof as the hordes move in to shame, excommunicate, and (occupationally) terminate.

If you’re wondering why there seems to be so much in-group signaling on twitter, so much group think and obviously disingenuous mutual affirmation of seemingly ludicrous affronts against common sense and empirical reality, and so much viciousness, just remember what’s at stake. I tend to fall back on a simple model of human utility functions:

Utility = Stuff x Friends

What’s important is that it’s multiplicative, which means loneliness is deadly. In the modern world, our associations are in many ways less robust than previously – one false move and you’re being pushed out on an ice float. Maybe that’s why we should all join a sports league or a religious organization, why we should start volunteering twice a month at the YMCA, join the Rotary Club, help register people to vote. Because its great that you still have your old tribe, but it’s always nice to have a backup plan. A last resort. A set of associations you can keep in a glass box to “Break in Case of Purging”.

Neighbors.

When to weigh in on human suffering

The US began the process of pulling out of Afghanistan. The Taliban has begun rapidly retaking in cities. In doing so, it quickly has become apparent that conditions on the ground are not safe for anyone who aided the US military, journalistic, or perhaps even humanitarian efforts. People are rightfully terrified and the rapid evacuation of hundreds of thousands of Afghani’s is at this moment a global priority.

I am extremely comfortable and confident in the belief that the US should, without question, expedite the emergency accommodation and resettlement of several hundred thousand Afghani families, much in the way we resettled roughly 130,000 Vietnamese after the war in Vietnam (only faster). Yes, I believe it would be a boon to our economy and our society in the long run, but that is largely besides the point. We should welcome these men and women into our society because it is unequivocally the right thing to do, it is a moral responsibility we took on when we put boots on the ground there and left them there for a decade.

But that’s pretty much the limit of any insight I could possibly hope to have and, as such, it’s not what I want to talk about. I want to talk about the egregious smattering of take, hot takes, re-takes, W-taking takes, and L-giving takes that is currently proliferating on social media and the standard outlets at the moment. No, I am not going to link to any. No, I am not going to refer to anyone by name. Yes, this is one big, long-form subtweet.

Unless you are a bona fide expert in military incursions, occupations, or exit strategies, I do not care about what you have to say. Unless you have spent a non-trivial portion of your career covering or studying how to cope with a humanitarian crisis, I don’t value your opinion. Unless you can lend genuine insight into what the best course of action is at this moment, nobody needs to hear from you.

While they may be trivial in effect, you are well within your rights to express sympathy for the victims of this terrible moment and to extoll your leaders to ease and prevent as much suffering as possible. But trying to raise your status in this moment with anything remotely resembling an “I told you so” or claim to “victory” for your political identity du jour is horrifying. Please don’t equate this with pro-gun reprisals of “Now is not the time for politics” every time there is a gun-related tragedy, either. Rather, consider this a reminder that this moment, like nearly everything else, is not about you, your politics, or what you tweeted in 2011. We are all better served when we keep that in mind.

Maybe I’m overreacting. It’s easy to write such things when the crisis of the moment puts you squarely on the sidelines. And it’s not like an 800 word scolding calling out exactly no one is going to help anyone. But there are expert, scholarly, and journalistic voices that are being drowned out by the droning, self-congratulatory thirst for public approbation and status. And if this snotty little post rings in ears and reminds just one person that “this isn’t about you,”, and they choose to leave even one bad tweet in drafts, then it’ll be worth it.

But please, support any and all of your representatives that want to take action to bring as many refugees from Afghanistan to the US as is possible. I don’t know much about Afghanistan or wars, but I am confident it is the right thing to do.

Age ___ Do you smoke Y/N Will you get vaccinated Y/N

Jonathan Meer wrinkled my brain:

“Hospitalizations for COVID are almost entirely confined to those who are not vaccinated, often at the cost of tens or hundreds of thousands of dollars…why should the vaccinated bear those financial costs? Insurers, led by government programs, should declare that medically-able, eligible people who choose not to be vaccinated are responsible for the full financial cost of COVID-related hospitalizations, effective in six weeks….Standing up for your beliefs means being willing to bear the consequences. Otherwise, it’s just cheap talk.”

In summary, anti-vaccination positions are effectively being subsidized by taxpayers, members of insurance pools, and the vaccinated. It’s an expressive form of moral hazard. It’s selfishness, signaling, and group identity as club good. It’s cheap talk. It’s at least 5 different chapters of your microeconomics textbook. It’s a great article and I want to talk about it.

  1. “Cheap talk” doesn’t mean “costless.”

“Cheap talk” means you don’t have sufficient costs or benefits committing you to follow through on the future behavior you are promising. But I think a lot of people have painted themselves in a very public corner. If you spend 6 months telling everyone who will listen that Covid is just the flu, that the vaccines are dangerous or don’t work, then you’ve got a lot of social capital within your peer network (or audience) that will be destroyed if you publicly change your mind or are observed getting vaccinated. For most private citizens, the answer may be found in a hat and fake moustache. Nonetheless, the talk isn’t that cheap. Only a 1/3 of unvaccinated people claimed they’d be more likely to get vaccinated for $100. What Meer proposes is to “uncheapen” their talk at a far greater level, where $25k to $100k price tags are not out of the question. I think such a policy would work specifically because it creates an expected incentive greater than either peer stigma or any feasible reward policy for vaccination, and at levels large enough where loss aversion may likely kick in. Funny thing about people – we don’t plan for low probability events very well, often treating ~1% negative events as an impossibility. I know it may sound crazy, but a 10% chance of being impoverished may actually be a more powerful incentive than a 0.5% chance of dying.

2. It’s really hard to write complete contracts i.e. your health insurance company desperately wishes it could have included vaccination in your premium calculus.

“Knightian Uncertainty” i.e. when you don’t know what you don’t know remains one of the all-time “obviously important, but hard to operationalize” concepts in an economic analysis. If you write an economic model where people are purely backward looking you will get a lot of pushback for making your agents too myopic, too stupid. At the same time, if anyone out there has started a museum of apartment leasing contracts, I have no doubt they have grown at a near perfectly linear rate over time, as tenants forever explore the space for unanticipated holes and landlords continue to supplement their contracts in response. Every new paragraph in a lease tells the story of a previously unanticipated cost. Your health insurance is the same. For decades you’ve had to tell them if you smoke. Here’s a prediction: In the future you’ll have to tell them if you’ll receive FDA-approved vaccines.

3. Given the state of modern democracy, even for problems where government mandates are the first-best solution, we may have little choice but to rely on market- and community-based solutions going forward.

One of the big advantages of government mandated solutions over market alternatives is completeness i.e. you can make everyone do it (with concomitant provision, monitoring, and punishment). What the pandemic has made clear is that simply isn’t the case anymore, for the simple reason that our politics are so polarized and, more importantly, so efficient in polarizing any policy. Any issue where a universal mandate is the optimal policy will immediately be polarized into for/against constituencies, which will slow down and eventually weaken any possible mandate.

I’m honestly not sure we could pull off the small pox vaccination program today, and it is arguably the greatest government program in world history. That was the first-best means to eradicating small pox. So what’s the second-best means to coping with Covid? If health insurance wrote separate premium contracts for vaccinated and unvaccinated customers, maybe that could get us to herd immunity. Medicare and Medicaid could have similar contingencies for reimbursement, but I suspect it’s hospitals that would end up on the hook. If hospitals refused care to unvaccinated Covid patients, I don’t think it would go down very well politically.

What this leaves are the smaller groups within our nesting doll of associations (state, local… church, synagogue, university, Rotary club, hockey league, pub trivia, the eight people you always see on the bus). It may be within these smaller, more voluntary groups, with their easier entry and exit, that we may observe that necessary accepted coercion to produce club immunity. And while vaccination mandates as a series of parallel club goods is clearly inferior to its provision as a monolithic national public good, its still superior to purely independent production.

4. Could HMO’s have their moment?

Health Management Organizations (HMOs) have been pretty stagnant for a while. Skepticism over management incentives to provide optimal healthcare has always lingered, combined with the fact that health insurance does seem to work pretty well for the people that have it (it’s the 28 million Americans that don’t have health insurance where the bulk of problems lie). Given limits on in-network care and the difficulties assuring prospective members that physician and patient interests are aligned, HMOs have always had a hard time presenting a compelling sales pitch relative to traditional insurance.

The club nature of HMO’s, however, may give them a new structural advantage in the post-Covid world. They can exclude people from membership, from taking up limited resources and sharing space with potentially vulnerable members. Would I at this very moment prefer being sent to a hospital that only allowed vaccinated people to work or receive care in it? Yes, I would. If Covid variants become seasonal, if we’re entering an age of pandemics, or if we’re simply watching the emergence of costly medical luddites as a significant portion of the population, then a lot of us might give HMO’s a second look. (NB: This ability of HMOs to “exclude” is, of course, also their potential downfall. The power to exclude is, historically, almost always abused. The idea that healthcare would become a domain not just characterized, but driven, by the power to exclude should cause trepidation. If you thought there were going to be solutions without tradeoffs to the problem of vaccine refusal, get used to disappointment.)

5. Would universal healthcare (or “Medicare for All”) mandate vaccinations? Can they?

I’m genuinely curious about where policy proponents sit on this. If vaccinations are required to receive care, then it requires denying sick people care. Healthcare policy is a great topic to argue about on twitter, but it’s all cheap talk until orderlies are shoving dying patients out the door.

I’m not the kind of person that reads a lot of philosophy, but that’s really what this boils down to– moral philosophy. It’s easy to call yourself a “libertarian” until your personal freedom not to get a shot in your arm is literally killing millions. It’s easy to call yourself a “socialist” until the newly created levers of power to coerce hundreds of millions into receiving a drug today will set the precedent for the “next Trump” to use those same levers for their own nefarious ambitions. There’s always a risk, a trade-off, no matter how many capital letters you use to yell at me.

It’s all cheap talk, but that doesn’t mean it’s costless.


What happens when you can’t pay your employees in cool anymore

I’ve previously written about the dangers of trying to make a career out of something 19-year-olds think is cool. There are risks on the other side of the paycheck as well, though.

There’s been a flurry of media attention paid to the difficulties restaurants are facing trying to re-staff their kitchens and servers. This piece is my favorite so far, for the simple reason that it pays less attention to policy and politics, and more to the actual jobs in question and what restaurants can actually do to convince employees to return. Rather than condescend to the service industry as a petri-dish for wage policy experiments in “unskilled” labor markets, it dares to recommend employers investigate both the goods they are selling and the value proposition to employees they are trying to hire.

The restaurant and service industries have long been a haven for employees who might otherwise find resistance in the labor market. St. Anthony Bourdain first found his way into our hearts with his love letters to the kitchen as pirate ship, and in doing so contributed as much as anyone to making the restaurant industry cool. Really cool. 2nd-tier rock star cool. Not Beatles cool, but more than few chefs found their way to third-to-last-band at Lollapalooza cool.

And from this pirate ship rebel identity and willingness to hire employees of fringe legality, the restaurant industry found itself with a capacity enviable for any employer: it could pay people with something other than money. It could pay you with a willingness to overlook, ahem…questionable work histories or I-9 employment eligibility. It could pay you in enabling a contrived identity. It could pay you in “No, you’re not selling out trying build a career in a kitchen and yes, you can totally reaffirm that to yourself with two full sleeves of ink.” It could (unfortunately) also pay you through tolerance of workplace aggression, misogyny, and sundry behaviors otherwise on their way out of the office Overton window of acceptable behavior.

There is risk, however, in growing reliant on paying people in non-pecuniary rewards, especially “coolness”. What happens when, whether via a pandemic or just, well, aging, employees realize they can’t pay their rent with cool? What happens if working in your industry stops being cool? What if the world changes, and it broadly stops tolerating the workplace hostility attractive to some of your previous employees? Absent such variously fleeting, juvenile, or outright terrible non-pecuniary indulgences, they’re going to demand higher pay. In money.

The restaurant industry was, quite likely, in exactly the kind of equilibria that major exogenous shocks can shake us out of, sometimes forever. And make no mistake – this isn’t just something that restaurant owners are going to have a tough time adjusting to. I expect a lot us frequent restaurant customers are in for a rude awakening as well. Increased restaurant labor costs pass directly into higher prices. By 2010 the average household in the United States had grown accustomed to dining out more than at home, a luxury enabled by prices kept lower in no small part by a labor force paid in non-pecuniary benefits. I am very much part of that average. Growing up in a family that dined out less than once a month (and that was usually at Pizza Hut), constantly eating out at an endless variety of restaurants has become my single favorite luxury enabled by my employment.

Yes, I’ll probably get a little wistful for the days when I could afford to eat-out almost every night. But it’s also exciting to imagine what a new and different restaurant industry might look like. As an economist, I’ll admit a bit of ironic amusement if it is not the $15 minimum wage that makes way for the oft-prognosticated wave of automated kiosks and labor displacement, but rather the end of a labor pool mythos that leads to a labor exodus. The sudden and collective realization that while, yes, we all concede that a 14-inch scimitar and a flask of Fernet Branca on your hip are cool, they’re not nearly as cool as health insurance and a 401k from a job where the sous chef doesn’t hump your leg every shift.

Which is a long way of saying:

Beware dependence on monopsony power born of coolness, for it is fleeting and full of bankruptcies. Just ask every magazine or media company staring down a writer’s union who’s members have hit their early 30s and realize they can’t pay Brooklyn rent with Williamsburg street cred.

Another marginal cost bites the dust?

The story of renewable energy changing the world for the better has always been about solving two parallel concerns: figuring out 1) how to produce clean, renewable power cheaply and 2)how to store the power generated for long periods of time. Over the last decade the cost of solar and wind power generation has plummeted. It’s not just that its cheaper per megawatt than fossil fuels, its also that the rate of cost decline shows not signs of slowing. But to fully displace fossil fuels also requires solving the “intermittency problem”. You can store piles of coal and barrels of oil, but how do store solar power for use when the sun doesn’t shine?

If we allow ourselves a moment’s credulous excitement and believe the press releases from Form Energy, a major step towards solving the intermittency problem has been made. I am in no position to judge the credibility of their technology or their capacity to effectively scale its development and distribution, but I find the opportunity to engage in a little futurism too exciting to resist. (Warning: I’m an economist, not an engineer. But even if I have the specifics wrong here, it’s still a fun exercise.)

The new technology in question is an iron-based battery that stores power for upwards of 100 hours. This reads to me as meaning two things:

  1. Power is going to become very cheap
  2. The batteries are going to be heavy

The second part is important. These aren’t the batteries that Tesla wants to put in their cars. They are, however, the batteries that can make for a local power station…or perhaps enable a perpetually self-powered large train?

If you’ve been daydreaming about high-speed rail remaking day-to-day American life, today is potentially a very big day for you. If you want to see millions of travelers speeding along rails in the 21st century, however, you need to lure them out of their cars and business-class flights with a speed and cost proposition that is not just better, but irresistible. Even more, you need to lure them in numbers sufficiently vast that cities (states? nations?) face a value proposition so great that its worth making fixed cost investments measured in hundreds of billions of dollars. A 10% reduction in cost isn’t going to do that. Appeals to community, civic duty, environmental stewardship — I’m pretty sure that will have much effect. What I think might do it, however, is cutting travel costs in half.

Why stop at half though? What happens if a $500 billion investment means urban residents can travel for a twentieth of the cost we associate with cars and planes today? What if that investment only truly pays off if other cities on a route make commensurate investments? It’s easy to point out the challenges of multi-state coordination in a country with highly polarized politics. What’s maybe easier to forget are the challenges that success might bring.

In a world where public transit pushes the marginal cost of travel to a tiny fraction of that faced by travelers in regions without similar fixed cost investments, the urban-rural divide becomes all the starker. Furthermore, its not every urban center that participates – it’s only the ones in the network. Automobiles, while not necessarily inexpensive, evolved into a relatively democratic mode of travel. Combined with the interstate highway system, hamlets and towns could pop up all over the country, and sometimes hang around long after local industry had dissipated or fled. In a world extraordinarily low-cost transit, the gravity of the dense urban areas could become irresistible. Pick a side in a congress heavily gerrymandered along urban-rural lines, and imagine you’re a representative from either side, and it doesn’t take much reflection to realize that no one will be on the sidelines for these votes. If you’re from a rural district, your political life and the future of your party depends on stopping free high speed rail from ever seeing the light of day. Perhaps ironically, though, if the costs per mile of NYC subway are a relevant metric, union negotiated prices may be an even bigger obstacle.

We’ve spent the last year adapting to technologies that left us thinking half of us could work from home, that we could live anywhere, dispersing us to every corner of the globe in a thin layer of extremely online exurbanites. Today we got a glimpse of a different technology, one that might pull us closer together again while taking a major step towards addressing global climate change and increasing the wealth of billions of people at every decile of the income distribution. We’ve lived our lives on landscapes defined by the maps first drawn by sailors, caravans, and indigenous peoples. Maps full of rivers, mountains, and intricate webs of roads. If the next round of massive fixed costs investments allows those along its chosen network to enjoy the benefits of near costless travel, don’t be surprised when the defining maps of the future look like the London Tube.

Innovation in Consumption Goods will Never Stagnate

Was there a Great Stagnation in technological development? Definitely maybe! Are we still in one? Definitely maybe not! Am I the correct person to adjudicate such things? Absolutely not.

When we talk about stagnation, we focus on the sort of innovation that is most pertinent to economic growth, which means technology as it relates to production. More than just important, with any small amount of reflection on the human condition and how far we have come as a species, in a certain light the technology underlying production is very nearly the only thing that matters.

Only, in a far more comfortable and modern way, it’s not. With all due respect to the protests of those who used to hike 10 miles to three jobs, uphill all 4 ways, every day through the snow, our lives are about consumption. And before you cast me into The Pit of a Thousand Shopping Malls, I mean consumption in a very broad sense. Consumption of time with family and friends; consumption of the 5 senses; of active introspection and passive entertainment; of every new Zelda game they can possibly create.

And all I’d really like to do today is cheer you with a delightful reminder that there will never be a great stagnation of consumption goods. There really won’t be! Not because human genius is unlimited (though maybe it is, if you include exponential AI learning). Rather, it is because our wants are infinite, and from those wants we can fabricate a cheery synthesis of Say’s Law and the unrelenting optimism of Endogenous Technical Change – that Demand Creates its Own Innovation.

That might be overly cute, but I’m not taking the “infinity” in play here lightly. That infinity of wants is not a product of our imagination or the broad dimensions in which we can consume. That infinity is born of our capacity for niche refinement, for variation. If you don’t believe me, go a farmers market. Go a Wegmans. Go to your local Asian grocery store. Google “heirloom tomatoes.”

Our consumptive lives will never stop improving because each new good brings with it the infinite possibilities of small changes, of bigger/narrower/weirder/quieter/redder/hotter/faster/easier/drowsier/friendlier/adjective/adjective… And with each new variation comes a roll of the dice that just might send us down forking paths of inspiration and radical departure from past convention, toward that new way of living our lives that no one had thought possible before.

There was a time when we didn’t have enough calories, so we innovated ways to make more calories. Once we had enough calories, we invented better calories. Then we invented foods. Then meals. Then experiences. Then stories. Then identities. Each stage of innovation brings with it not the disappearing of low-hanging fruit, but an expanding horizon of all the possible ways our life-sustaining caloric consumption goods might evolve, and the infinite stories they might help us tell through the lives we live. And we will never run out of stories to tell.