EC101: Links for 19th September, 2019

  1. Are we all Japan now?
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  2. A review of the Jalan comittee report.
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  3. Eric Maskin writes an appreciation of Kenneth Arrow’s ouevre.
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  4. A New Yorker profile of Stephanie Kelton.
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  5. Bookmarked as want to read.
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RoW: Links for 18th September, 2019

  1. How was London’s tech scene built?
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  2. If you ever get the chance to pick a train journey…. for me, this one, for sure.
    “And so it was no small relief when, there the next morning, was the train at the platform. Its Chinese provenance was confirmed by the ethnicity of the “Captain” ushering people aboard, and by our salmon-colored tickets, the same as those issued by China’s National Railway.An hour later, we were enjoying a rare sensation: swift, ceaseless movement through a sub-Saharan landscape.”
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  3. Or wait, hang on
    “For most of human history, it was impossible to grasp the range of the habitable world in a single day. Beginning in the mid-20th century, one could fly from a cool region to a hot region in one day. But that was an artificial experience—you missed everything in between. That all changed in 2012, when China built a high speed rail line from the north to the south of the country. Now you could board a train at 9am in cold, snowy Beijing, and get off 8 hours later in tropical Guangzhou, at the same latitude as Havana.

    A few years later the line was extended further south to Hong Kong, where you arrive an hour later. For the first time ever, humans can see the gradual change in landscape from the temperate zone to the tropics, all in a single day.”
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  4. “In the picture, he departs from this earth like an arrow.”
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    Especially given the context, the rest of this first paragraph is some of the finest writing I have ever read. That is not an exaggeration.
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  5. “But improving American higher education would be the final plank of the Tyler Cowen industrial policy.”
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    Tyler Cowen on industrial policy in America.

Navin Kabra on Game Theory and Blockchain: Notes

Navin Kabra was on campus yesterday, to talk about blockchain. More specifically, game theoretic aspects of blockchain. The talk was excellent throughout, and lasted well beyond the scheduled 90 minutes (and I mean that as a compliment!)

What follows are my key takeaways of the talk (although I have cheated just a little bit):

Introduction

  • Navin began the talk with a brief summary of the prisoner’s dilemma, the Nash equilibrium, repeated games and iterative games
  • He briefly touched upon the surprising success of the tit-for-tat algorithm
  • He mentioned the Schelling point

The Use Case

  • He then got into the need for a technology such as blockchain. He used land records and trust issues from this area as a use case.
  • When I buy land, or an apartment, from somebody, the following issues emerge:
    • How do I know that the land is yours to sell?
    • How do I know that you are you?
  • Of these, we focused more on the first one: how do I know that the land is yours to sell?
  • Without blockchain, the idea is to go to a centralized repository, and check who owns the land. If it is indeed the person who wants to sell you the land, great. If not, ask the prospective seller to buzz off.
  • But how do I make sure that the prospective seller is who she says she is?
  • One way to prevent this from happening is by using modern cryptography to digitally sign these land records. Navin didn’t mention this in his talk yesterday, but here’s one recommendation to learn more about this topic: The Code Book.
  • But what if the prospective seller has sold the land to somebody else, and gotten that transaction struck off the official record?
  • Enter blockchain

The Basic Idea

  • Take a block of transactions, and apply a seal to them. A digital seal, although the idea is the same as a mohar.
  • But that’s not enough: what we then do is also use an identifier for this block of transactions, that is generated in a unique, but random way, from the previous block of transactions (this is called a hash).
  • If somebody were to hack into this block of transactions and change something, it would therefore change the hash for the next block, rendering the next block untrustworthy.
  • This dependency works across the entire chain of blocks, hence “blockchain”.
  • Better still, this entire chain of blocks is not stored on one central server, but across many different servers – this is the distributed ledger concept.

The Distributed Ledger

  • So why would these different servers (or rather, their owners) want to be a part of this?
  • So here’s the incentive mechanism: servers solve an algorithm that isn’t difficult, but is time consuming. Whoever solves the next chunk of this algorithm gets to seal the next block, and alerts all other servers about having done so.
  • Once all servers get this alert, they all update the chain of blocks so that everybody has the same version of events. This, of course, happens automatically.
  • The server that sealed the latest block gets as reward: bitcoins.

Bitcoins

  • These bitcoins are, in essence, a reward mechanism for making blockchain work.
  • Once folks start trading these bitcoins, especially in exchange for stuff from the real world, the value of bitcoins goes up.
  • We didn’t explicitly speak about this yesterday, but here’s my understanding: It becomes, as with any other currency, a medium of exchange, and also a store of value. (The unit of account bit is more troublesome, and I won’t get into it right now)
  • That reward mechanism is randomized, in the sense that any computer/server is equally likely to crack the next chunk of the algorithm. The more computing power you have, over timethe more you will get a higher share of bitcoins.
  • The number of bitcoins that can be mined is limited, and the number that is released per chunk of algorithm solved may change as a function of the number of computers trying to compete. In other words, the incentive mechanism is built in (I was rather impressed with this)
  • There are ridiculously large buildings in China stocked to the roof with servers whose sole objective is to mine bitcoins.

Game Theoretic Aspects of Blockchain

  • This is as pure an experiment in game theory as one could hope for.
  • You have people, necessarily anonymized, who can’t communicate with each other, who are trying to mine bitcoins
  • Also, you have folks who are, again necessarily anonymized, trying to transact using bitcoins.
  • Should they cooperate with each other or not? What are the implications? Since I’m already at around 750 words right now, I’ll outsource this part. Do read it, it is a very good summary of both game theory as well as its application to blockchain.

Also…

  • I enjoyed the fact that the numbers 42 (check the last bullet point, especially. But also, see this), 1729 were used in the presentation. This had nothing to do with anything, but Easter Eggs are always fun.
  • Also, yesterday I learnt (is YIL a thing? It should be)
  • I (and I think I speak for all the students who were present yesterday) would love to learn more about applications of Bitcoin. If there are folks in Pune who would like to come talk about this at Gokhale Institute, please get in touch! ashish at econforeverybody dot com

 

Finally, a huge thank you to Navin! The talk was hugely informative, thought provoking and easy to understand – and that’s a very rare combination indeed.

Tech: Links for 17th September, 2019

  1. “Never attribute to malice that which is adequately explained by stupidity“.
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  2. Jason Snell reviews the iPhone launch event.
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  3. … as does Ben Thompson.
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  4. The importance of the U1 chip.
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  5. I don’t quite remember how I landed up here, but this was interesting for a variety of reasons. On a company called OKCredit.

India: Links for 16th September, 2019

  1. India’s fourth party system.
    Here’s the context:
    “There is broad consensus that India’s electoral history—from the inaugural postindependence general election in 1952 until the sixteenth Lok Sabha elections in 2014—can be roughly divided into three electoral orders. Yogendra Yadav, one of India’s leading political scientists, was among the first to provide this organizational rubric. Yadav has also argued that a new electoral system commences whenever an observer can “detect a destabilisation of [an old system] and its replacement by a new pattern of electoral outcomes as well as its determinants.””
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  2. “Between ‘comb’, ‘kanghi’ and ‘kakahi’; ‘plate’, ‘thaali’ and ‘tharia,’ and ‘here’, ‘yehaan’ and ‘hene’ my mother introduced us to the grammar and syntax of all three languages in everyday conversation. I think her own regret of not knowing English drove her to this inventiveness.”
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    On the delights of knowing multiple, interrelated languages.
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  3. On the history of the rupee.
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  4. Indian airport police have been asked to smile less.
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  5. Have you heard of Israil Ansari? I hadn’t. Would you pay 400 rupees to meet him?

Video for 15th September, 2019

Tweets for 14th September, 2019