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Published by Anonymous (not verified) on Sat, 25/11/2017 - 1:00am in

Staggering Variety of Clandestine Trackers Found In Popular Android Apps

Published by Anonymous (not verified) on Fri, 24/11/2017 - 10:00pm in

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Researchers at Yale Privacy Lab and French nonprofit Exodus Privacy have documented the proliferation of tracking software on smartphones, finding that weather, flashlight, rideshare, and dating apps, among others, are infested with dozens of different types of trackers collecting vast amounts of information to better target advertising.

Exodus security researchers identified 44 trackers in more than 300 apps for Google’s Android smartphone operating system. The apps, collectively, have been downloaded billions of times. Yale Privacy Lab, within the university’s law school, is working to replicate the Exodus findings and has already released reports on 25 of the trackers.

Yale Privacy Lab researchers have only been able to analyze Android apps, but believe many of the trackers also exist on iOS, since companies often distribute for both platforms. To find trackers, the Exodus researchers built a custom auditing platform for Android apps, which searched through the apps for digital “signatures” distilled from known trackers. A signature might be a tell-tale set of keywords or string of bytes found in an app file, or a mathematically-derived “hash” summary of the file itself.

The findings underscore the pervasiveness of tracking despite a permissions system on Android that supposedly puts users in control of their own data. They also highlight how a large and varied set of firms are working to enable tracking.

“I think people are used to the idea, whether they should be or not, that Lyft might be tracking them,” said Sean O’Brien, a visiting fellow at Yale Privacy Lab. “And they’re used to the fact that if Lyft is on Android and coming from Google Play, that Google might be tracking them. But I don’t think that they think that their data is being resold or at least redistributed through these other trackers.”

Among the Android apps identified by the researchers were, with six or seven trackers each, dating apps Tinder and OkCupid, the Weather Channel app, and Superbright LED Flashlight; the app for digital music service Spotify, which embedded four trackers, including two from Google; ridesharing service Uber, with three trackers; and Skype, Lyft, Accuweather, and Microsoft Outlook.

(A Spotify spokesperson wrote, “We take data security and privacy very seriously. Our goal is to give both our users and advertising partners a great experience while maintaining consumer trust.” An Uber spokesperson referred The Intercept to its published details on its use of cookies, which lists some of their third-party cookie providers but is not intended to be comprehensive. Users who visit the privacy policy section of Uber’s website can follow an opt-out link which appears to only apply to interest-based advertising on web traffic. The preferences do not work if a user disables third party cookies, and users must opt out again after deleting their cookies.)

Some apps have their own analytics platforms but include other trackers as well. For example, Tinder uses a total of five trackers in addition to its own.

“The real question for the companies is, what is their motivation for having multiple trackers?” asked O’Brien.

“Data is the oil in the machinery here, and I think they’re just trying to find different ways to extract it.”

Tinder’s heavy use of trackers means the company has been able to make use of behavior analytics, and also to accept payment from shaving supply company Gillette for highly targeted research: Do college-aged male Tinder users with neatly-groomed facial hair receive more right swipes than those with untidy facial hair?

Capabilities of the trackers uncovered by Exodus include targeting users based on third-party data, identifying offline movement through machine learning, tracking behavior across devices, uniquely identifying and correlating users, and targeting users who abandon shopping carts. Most trackers work by deriving an identification code from your mobile device or web browser and sharing it with third parties to more specifically profile you. App makers can even tie data collected from trackers with their own profiles of individuals, including names and account details. Some tracking companies say they anonymize data, and have strict rules against sharing publicly identifiable information, but the sheer wealth of data collected can make it possible to identify users even in the face of such safeguards.

Although some or all of the apps identified by Exodus and Yale researchers may technically disclose the use of trackers in the fine print of their privacy policy, terms of service, or app description, it is difficult, to say the least, for smartphone users to get a clear handle on the extent and nature of the monitoring directed at them. The whole point of using a mobile app, after all, is often to save time.

“How many people actually know that these trackers are even there?” said Michael Kwet, another visiting fellow at Yale Privacy Lab. “Exodus had to create this software to even detect that they were in there.”

A few of the trackers offer users the option to opt out via email or through their privacy settings. But tracking can resume even after this step is taken. For example, one app requires that users who clear their cache set up the opt-out again. Some opt-outs are temporary. Even if the opt-outs do end up being permanent, few users would even know to activate them in the first place.

FILE - In this May 28, 2015,  file photo, David Singleton, director at Android Wear, speaks during the Google I/O 2015 keynote presentation in San Francisco. With the upcoming M version of Android, you give permission as apps need it. (AP Photo/Jeff Chiu, File)

David Singleton speaks during the Google I/O 2015 keynote presentation in San Francisco.

Photo: Jeff Chiu/AP

Meet the Trackers

Google has a vested interest in allowing liberal use of trackers in apps distributed through Google Play: One of the most ubiquitous in-app trackers is made by Google’s DoubleClick ad platform, which targets users by location and across devices and channels, segments users based on online behavior, connects to personally identifiable information, and offers data sharing and integration with various advertising systems. DoubleClick’s tracker is found in many popular apps, including Tinder and OkCupid, Lyft and Uber, Spotify, the Weather Channel and Accuweather, and the popular flashlight apps Superbright LED flashlight and LED light.

A Google spokesperson confirmed that its ad platforms DoubleClick for Publishers and AdMob serve ads on both Android and iOS devices, and that it ties information collected by the networks to a persistent identifier to measure engagement. Although users can control information Google uses to show them ads, they cannot specifically opt out of DoubleClick.

DoubleClick prohibits vendors from sharing personally identifiable information or other unique identifiers, and states that it only stores general location data like city and zip code rather than precise location information unless users enable location history in their Google account. App developers who use the DoubleClick Ad Exchange are required to disclose in their privacy policies that the user’s identifier will be shared unless the user opts out of ad tracking, and to explain how the user can reset their identifier. Google shares attribution data with advertisers and third party measurement partners using these identifiers.

Perhaps the most invasive of the trackers is Fidzup, a France-based mobile performance marketing platform for brick and mortar retailers. The company has stated in its advertising copy that it has developed communication between a sonic emitter and a mobile phone (either iOS or Android) by emitting an inaudible tone to locate a user within a shopping mall or a store. User phones receive the signal and decode it to give away their location. The company further uses geofencing to track users to a so-called “catchment area,” such as a specific section within a store, where it can serve them targeted ads, possibly for a competing retailer.

Mathieu Vaas, a spokesperson for Fidzup, said that the company has not used inaudible tones in two years, but is instead using wifi-based technology to obtain data regarding how customers behave within stores and to retarget them with ads. But information on sonic technologies is posted on Fidzup’s website (as of November 21st) and detailed further in an older version of the site accessed on October 15. Vaas stated that these pages are outdated and inaccessible from the main page, and will be scrubbed from a new website that’s currently being prepared.

Vaas also confirmed that, even just using wifi technology, Fidzup can track highly specific in-store behavior such as aisles visited, the time spent in them, the number of visits to a store, and so forth. Fidzup can also leverage other apps to obtain geolocation data, but the only third parties receiving that data are retailers that have installed the company’s wifi technology within their store, he added, and the data it is only related to behavior within the store.  Vaas later said that Fidzup does not share information with third parties.

“In every store where we are present, we inform the public of the presence of data-gathering technology in the store and indicate to them that they can turn their wifi off, as well as provide them with a link that allows them to permanently opt-out of Fidzup. In that case, their data will be recognized and scrapped automatically and they won’t be retargeted with ads from Fidzup ever,” he said via email.

Though based in France, Fidzup has a presence in San Francisco, and Vaas said that the company plans to start effectively operating in the U.S. soon. Since Fidzup is a French company, Vaas said they are subject to stricter privacy laws and regulations than the U.S. has, and as they “deeply respect consumers’ rights to privacy and their civil liberties,” they plan to operate under those standards in the U.S. as well.

O’Brien and Kwet seemed less impressed with the company’s privacy commitment, writing, “Fidzup’s practices mirror that of Teemo (formerly known as Databerries), the tracking company that was embroiled in scandal earlier this year for studying the geolocation of 10 million French citizens.” Teemo collected navigation data from mobile users and used it to drive in-store sales by targeting users based on locations they had visited. Its website states that it may collect location data using GPS, cell towers, wifi access points, wireless networks, and sensors such as gyroscopes, accelerometers, compasses, and barometers. In addition to collecting IP addresses and identifiers assigned to mobile devices, it also may obtain information from third parties to combine with what it has and share its information with third parties (with some stipulations) as well. As with Fidzup, it is not immediately clear to what extent Teemo is operating in the U.S. Although Teemo is a French company based in Paris, it has an office in New York. Teemo did not respond to request for comment.

Surveillance Mission Creep

Not all trackers are equally invasive, though many grab more information than they arguably should. For example, Google-owned Crashlytics is presumably just a crash reporter, but it does much more than simply performing analytics on app logs. The app, used by Tinder, OkCupid, Spotify, Uber, Superbright LED and LED Light, can also link users across multiple cookies and devices. Microsoft’s HockeyApp, used by Microsoft Outlook, Skype, and the Weather Channel, goes beyond simply collecting and analyzing crash reports but can also track daily active users, monthly active users, the net number of new users, and session counts. AppsFlyer (used by Tinder, Superbright LED, and the Weather Channel) does fraud prevention and protects from malware, but also fingerprints devices by their IDs, tracks users across datasets to circumvent the fragmentation caused by users with different devices, and tracks which users install which apps. A spokesperson for AppsFlyer directed The Intercept to the company’s privacy policy, and stated that the tracker only works with businesses and advertisers, and does not engage with end users. Its terms and conditions also require clients to disclose the collection and use of data in their own privacy policies.

In addition to DoubleClick, Teemo, and Fidzup, Braze (formerly App-Boy) and Salesforce DMP (formerly Krux) appear to collect large amounts of user data. Braze, used by OkCupid and Lyft, can track users by location, target them across devices and channels, and serve targeted advertising based on consumer actions. Salesforce DMP, used by OkCupid, not only captures user clicks, downloads, and other interactions, but also uses hashed device management to effectively circumvent Safari’s third-party blocking. The tracker allows marketers to use machine learning to discover personas, uses cross-device ID, and even uses behavioral analysis to guess when a user is sleeping, and a probabilistic matching algorithm to match identities across devices. There is an opt-out on the Salesforce website, though it’s unclear what percentage of OkCupid users are aware that the dating site is wrapped around the Salesforce DMP tracker and would even know to opt out. (OkCupid did not respond to request for comment.)

 Weather apps are ubiquitous, and one wouldn’t guess that they’d include surveillance. But both Accuweather and the Weather Channel apps (along with Spotify) use the ScoreCardResearch tracker, which can also track data on usage, including information on web browsing and app usage behavior over time and across digital properties, possible relationships between browsers and devices—which can be provided to third parties for advertising purposes. The tracker can even use third-party service providers to obtain more non-personally identifiable information to add to unique profiles using cookies.

The tracker Millennial Media (formerly Nexage) is used by Accuweather and Super Bright LED to “automate the buying and selling of mobile advertising” targeting channel and demographic segments, such as a shampoo company targeting “women ages 25-55 with an emphasis on…pregnancy, stress, and bleach/coloring.”

Microsoft Outlook, the Weather Channel, Superbright LED, and LED Light use Flurry, a mobile ad platform acquired from Yahoo! by Verizon subsidiary Oath. Flurry tracks device and app performance metrics and analyzes user interactions, identifies user interests, stores data profiles as personas, groups and correlates user data, and injects both native and video ads. A spokesperson for Oath said that Flurry’s terms of service require app developers to post a privacy policy notifying what data is collected, stored, and shared and either linking to Flurry’s privacy policy or describing their opt-out service. In addition, the spokesperson said only information that’s not personally identifiable leaves Flurry’s system.

Another tracker, Tune, follows Rideshare users’ online and offline behavior  across devices and also tracks in-app user behavior, uniquely identifies users, and tracks their location.

The AppNEXUS tracker, used by, among other apps, Superbright LED, uses machine learning for targeted advertising. In a phone call, AppNexus spokesperson Joshua Zeitz confirmed that the tracker collects mobile advertising identifiers, type of phone, IP addresses, and a unique app identifier. The company does store mobile advertising identifiers as well as cookies from web users, but Zeitz said data on what ads have been served to what identifiers is only retained for up to 33 days, and that the tracker does not collect names, numbers, or account numbers, that it only keeps device and browser identifiers and cookies, and that it cannot de-anonymize users from its data set. AppNexus stated that it does not share device and browser identifiers tied with third parties.

O’Brien said app developers can choose the types of advertising they embrace, but that it’s unlikely users are thinking about those decisions when installing apps. He also doesn’t see permissions as a solution. “If you’re in a situation where you’re asking the victim of the tracking how much tracking they want, you’ve already gone too far. It’s already a problem,” he said.

Without an overhaul of the advertising-rich phone system, O’Brien said the best solution may be to use the software repository F-Droid, which distributes only free and open source software that does not include unknown or masked trackers or code.

 

 

The post Staggering Variety of Clandestine Trackers Found In Popular Android Apps appeared first on The Intercept.

Randomized experiments — a dangerous idolatry

Published by Anonymous (not verified) on Fri, 24/11/2017 - 3:29am in

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from Lars Syll Nowadays many mainstream economists maintain that ‘imaginative empirical methods’ — especially randomized experiments (RCTs) — can help us to answer questions concerning the external validity of economic models. In their view, they are, more or less, tests of ‘an underlying economic model’ and enable economists to make the right selection from the […]

A Day Before A Baltimore Detective Was Set to Testify Against His Own Department, He Was Gunned Down. So Police Barricaded the Community.

Published by Anonymous (not verified) on Fri, 24/11/2017 - 1:00am in

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Last Wednesday, Detective Sean Suiter, along with an as-yet-unnamed partner, were in the West Baltimore neighborhood of Harlem Park. Suiter’s usual partner in the homicide unit, Detective Jonathan Jones, was off that day.

The police version of what happened, as relayed to the Baltimore Sun, goes like this: The detectives were looking for a witness to an unsolved triple homicide case that is nearly a year old when they spotted “suspicious activity” nearby. Suiter and his backup partner split up to cover different exits of the block. Suiter then confronted a man, who shot him in the head after the detective tried to speak. Suiter, an 18-year veteran of Baltimore’s police force, and a 43-year-old married father of five, was pronounced dead a day later, becoming the city’s 309th murder victim of 2017.  

Police Commissioner Kevin Davis condemned the killing as “ridiculous, absurd, unnecessary loss of life,” and the killer as “heartless, ruthless, soulless.” On the night of the murder, the police department offered a vague description of the suspect: a black man who may be injured, wearing a black jacket with a white stripe.

The neighborhood was promptly put on lockdown. Over the course of the week, the reward fund to find Suiter’s killer climbed to $215,000 – a figure experts think might be a state record. The Harlem Park neighborhood lockdown was justified as a way for cops to preserve the crime scene and collect evidence.

Davis defended the measures, emphasizing the unique role police play in society. “In America, in this free society, our democracy, police – and I don’t mean to sound like I’m teaching a civics class here, but policing in America is special,” said Davis on Monday in a press conference. “It’s difficult, it’s special though … any loss of life is unacceptable, but society says in particular a murder of a police officer is unacceptable.”

As police cars lined the perimeter of Harlem Park for days, residents were unable to enter their neighborhoods without showing IDs. Some complained about helicopters flying above their homes, flashing lights from police cars, and being subject to harassment and pat-down searches. Non-residents were barred from entering. On social media, many called to #FreeWestBaltimore.

On Sunday, while the cordon was still in effect, David Rocah, an attorney with the American Civil Liberties Union of Maryland, released a statement raising constitutional concerns regarding the police department’s actions. “While the search for a killer is, of course, a high priority for the police, the limits on lawful police behavior do not disappear even when engaged in that pursuit,” said Rocah. “The residents of Baltimore, and, in particular, the residents of the affected community, deserve a clear explanation from the City as to why this unprecedented action has been taken, what rules are being enforced, and why it is lawful.  The need to secure a crime scene from contamination to preserve evidence does not, on its face, explain the wide area to which access has been restricted for days after the incident.”

Baltimore,MD--11/16/17 -Baltimore Police Commissioner Kevin Davis and Mayor Catherine Pugh at a press conference announcing that Detective Sean Suiter, an 18-year veteran of the department died Thursday. after he was shot in the head yesterday.  DSC_9971.JPG  Sun Staff photo by Lloyd Fox

Baltimore Police Commissioner Kevin Davis and Mayor Catherine Pugh speak at a news conference on Nov. 16, 2017, announcing that Detective Sean Suiter, an 18-year veteran of the department, died after he was shot in the head in Baltimore.

Photo: Lloyd Fox/Sun Staff/Getty Images

Six days after the murder, The Baltimore Sun reported that the city was entering “uncharted territory” for the police department, which usually apprehends police killers shortly after the fact. The longest it’s taken Baltimore police  to do so over the last five decades was five days, in 1985. In that instance, the suspect had fled to Oklahoma.

Within hours of the murder, though, residents of Baltimore started to wonder if the police search, by looking for a member of the community, may be too narrow. The no-snitching mantra mythologized in pop culture would be unlikely to hold back informants with more than $200,000 on the line, noted community organizer Ralikh Hayes on Monday in an Intercept interview. Hayes has long been a fixture in all sorts of Baltimore activism – focusing on policing, housing, worker rights, and building black political power.

“If it was a citizen who did this, it would have already been over by now with that high of a reward,” Hayes said Monday, suggesting community members would have come forward to exchange information for the payout. “You have to think about it, that kind of money is the kind that could change someone’s entire life and citizens like us have never had access to that kind of money.”

The rumor that had been circulating through the neighborhood was that Suiter was preparing to testify against some of the seven officers indicted for racketeering charges in March. An eighth was indicted in August and a ninth last week. (The charges were filed by former U.S. Attorney Rod Rosenstein, a month before he was named Deputy Attorney General in Trump’s Department of Justice. It was there he would have his moment in the historic sun. After Trump blamed him for firing FBI Director James Comey, he appointed special counsel Robert Mueller.)

A spokesperson for the current U.S. Attorney for Maryland told The Intercept on Monday that they could not comment on whether or not Suiter was planning on testifying in their case. But on Wednesday evening, Commissioner Davis confirmed that Suiter was in fact set to testify before a grand jury that Thursday, a day after he was shot. He also said that Suiter appeared to have been killed by his own weapon after a struggle.

Earlier this week, before that news broke, the Intercept asked TJ Smith, the Baltimore police spokesperson, whether the BPD was investigating the possibility that Suiter’s killer was within the police department or if it’s clear at this stage if it was a civilian shooter. Police had already confirmed that Suiter was placed into a police car to head to Maryland Shock Trauma Center, though who was driving the car was not made public. That police vehicle reportedly crashed into another cop car on the way to the hospital, and Suiter was then transferred into an ambulance for the rest of the trip.

Smith responded that they are “looking for a suspect in the community.” When asked for further confirmation if the murder investigation included any non-civilian suspects he referred to a link of Monday’s press conference.

During that press conference a reporter asked Commissioner Davis if the backup detective with Suiter that day personally observed the suspicious activity or if he was acting on observations from Suiter.

“That’s something I am not gonna comment on,” replied Davis. “The backup partner, who’s also a homicide detective, we’re not identifying him, he’s considered a witness in this case, and I’m not gonna comment on what role or what observations or what he did at this point in time.”

The Intercept reached back out to Hayes, the community organizer, following the news that Suiter had been set to testify against the indicted officers.

“It’s at the point where it’s no longer in the realm of conspiracy theory,” he said. “There’s still details we don’t know, and frankly this is just what the police is willing to give us—what they thought would pacify us—but what is it they still haven’t told us?”

Few in the community were startled, Hayes argued. “We’re not surprised at this level of corruption,” he said. “It requires us to reexamine what public safety is and what do we do now, because obviously DOJ mandates aren’t enough.”

 

Baltimore, indeed, has already been under intense scrutiny for its unconstitutional police practices. In 2016, the Department of Justice released a searing report finding that the department engaged in a number of systemically racist practices, leading ultimately to a court-ordered consent decree.

When cities enter into consent decrees for police reform, courts appoint what’s known as an “independent monitor” to oversee the legal agreement. The monitor is charged with assessing and reporting how well the terms of the decree are being carried out.

Last month a federal judge appointed Kenneth Thompson, a Baltimore-based attorney, to serve as the independent monitor. Civil rights advocates and local police brutality activists raised concerns with the number of current and former law enforcement officials slated to be on Thompson’s monitoring team — nine out of 22 members. Seattle’s consent decree monitoring team, by contrast, has one law enforcement official out of a team of 12. Cleveland’s team has five former law enforcement officers out of a team of 21.

On Saturday evening, Lawrence Brown, a professor at Morgan State University, criticized Thompson’s team for being absent as Harlem Park residents dealt with what many felt to be unconstitutional policing.

In an email to The Intercept, Brown called the Thompson team’s commitment to monitoring a sham. “They were nowhere to be seen, and we can see over the next few days if they’ll even make a statement or try to make amends for their absence or neglect. But I doubt it.”

Both Thompson and the Department of Justice did not return The Intercept’s requests for comment. Thompson’s team has about 45 days left to establish its first-year police reform implementation plan. A Baltimore official told The Intercept that Thompson’s team is “very hard at work” putting together its plan, and “it’s never been contemplated at this stage that they would show up at crime scenes.”

A member of the Baltimore Police Department walks behind a police line near the scene of the shooting death of Baltimore Police detective Sean Suiter in Baltimore, Friday, Nov. 17, 2017. The manhunt for Suiter's killer has entered its third day. Suiter was shot Wednesday in a particularly troubled area of West Baltimore while investigating a 2016 homicide and died Thursday. (AP Photo/Patrick Semansky)

A member of the Baltimore Police Department walks behind a police line near the scene of the shooting death of Baltimore Police Detective Sean Suiter in Baltimore on Friday, Nov. 17, 2017.

Photo: Patrick Semansky/AP

At Monday’s press conference, Davis said he would “much rather endure some predicted criticisms from the ACLU and others about [the cordon] than endure a conversation with Detective Suiter’s wife about why we didn’t do everything we possibly could to recover evidence and identify the person who murdered her husband.” Andre Davis, the city solicitor and a former judge on the 4th Circuit Court of Appeals defended the cordon, telling the Baltimore Sun, “There’s no more compelling need to control a crime scene than under circumstances such as these.”

In 2008, police in Washington, D.C., set up a military-style checkpoint in Trinidad, a neighborhood in the northeast part of the city, in response to spates of shootings and murders. Cops stopped people driving into the area and required them to show IDs and justify that they had a “legitimate purpose” to enter. D.C. modeled its checkpoint after a similar one established in New York City in the early 1990s, which was ruled constitutional by a federal appeals court in 1996. In 2009, a federal appeals court ruled that the Trinidad checkpoints were unconstitutional. “It cannot be gainsaid that citizens have a right to drive upon the public streets of the District of Columbia or any other city absent a constitutionally sound reason for limiting their access,” wrote the chief judge. “It is apparent that appellants’ constitutional rights are violated.” (The ACLU of Maryland did not respond to request for comment on whether it is considering legal action.)

This undated photo provided by the Baltimore Police Department shows Det. Sean Suiter. Suiter was shot Wednesday, Nov. 15, 2017, in a particularly troubled area of West Baltimore while investigating a 2016 homicide and died Thursday. (Baltimore Police Department via AP)

This undated photo provided by the Baltimore Police Department shows Detective Sean Suiter. Suiter was shot Wednesday, Nov. 15, 2017, in West Baltimore while investigating a 2016 homicide. He died Thursday.

Photo: Baltimore Police Department/AP

John Bullock, a city council person who represents the district encompassing Harlem Park, told The Intercept that as of Monday afternoon, “not a whole lot” of information has been shared with him and his colleagues. “I spoke with the police on Wednesday, then again on Friday, and had communication with them [Sunday]. … They were hopeful that they would be able to close the crime scene,” he said. “I don’t know what information has been gathered at this point.”

The lockdown was lifted Monday. The funeral is scheduled for Wednesday.

Correction: November 23, 2017

This story initially misstated the day Suiter was scheduled to testify. He was to appear before the grand jury on Thursday, the day he died, and one day after he was shot.  

Top photo: Members of the Baltimore Police Department gather near the scene of the shooting death of Baltimore Police Detective Sean Suiter in Baltimore, on Nov. 17, 2017.

The post A Day Before A Baltimore Detective Was Set to Testify Against His Own Department, He Was Gunned Down. So Police Barricaded the Community. appeared first on The Intercept.

Cartoon of the day

Published by Anonymous (not verified) on Fri, 24/11/2017 - 1:00am in

The budget, the OBR, and futurology

Published by Anonymous (not verified) on Fri, 24/11/2017 - 12:41am in

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The OBR has followed the Bank of England and downgraded its medium/long-term forecast of the growth in the productive potential of the economy.  It now thinks only 1.6% is likely.  This comes after 10 years of zero productivity growth has disappointed forecasts that were forever projecting the old growth rate of 2.5% to resume, something at the time that had a note of pessimism to it, since it was reasonable to speculate early on in the crisis that the productivity level extrapolated out from the old trend might one day be recovered [let alone the growth rate].

But this is not itself really news.  It’s a revelation that one group of experts – who incidentally have no special insight into future productivity – have fallen into line with another.  The depressing productivity data were there before budget day.  We now know what the OBR made of them.

Another reaction that might be tempting from the Remainer tribe is:  ‘You see!  Brexit!  I told you so.’  See, for example, these tweets:Screenshot-2017-11-23 Alastair Campbell ( campbellclaret) TwitterScreenshot-2017-11-23 Polly Toynbee ( pollytoynbee) Twitter

But the forecast gloom was not really about Brexit.  The OBR’s economic and fiscal outlook explains its Brexit assumptions on page 96:

Screenshot-2017-11-23 Nov2017EFOwebversion-2 pdf

This is – unless I am mistaken – a smooth transition to a Brexit that affects nothing.  This is not on either account a Brexit that is likely to happen.  We know from previous work [for example by the CEP / OECD / IMF /BoE] that anything but continued membership of the single market and customs union, transited to smoothly, will have significant negative consequences for GDP/head over the next 10 years.  So if we layered on top of this forecast a probability-weighted sum of possible Brexits, the outlook would be substantially worse.  Perhaps by something of the order of 0.5pp on growth each year, until the transition to our new, dislocated trading state is complete, and longer if the worse surmises about whether openness affects growth are proved correct.

Brexit gloom is not entirely absent.  The Brexit story is in the depreciation of Sterling following the referendum;  the subsequent predictable rise in inflation to 3%, the protracted adjustment downwards of real wages this means;  and the slowing of growth relative to our trading partners.  And this impulse will have made itself felt somewhat in the early part of the forecast.

Another thing to take away from the day is that the institution of the OBR is doing its job.  At least, it is producing a forecast that seems plausible and unaffected by the tendency for Brexiters to taint comments about the future with unwarranted optimism.  And there have been no personal attacks – unlike in the immediate aftermath of some of the Bank of England’s interventions.  Recall, for example, these tweets:

Screen Shot 2017-11-23 at 12.50.02

Prior to the OBR, there was ample scope for fiddling the uncertain science of estimating potential output, and forecasting its expansion into the future, to make fiscal policy look more prudent than it really was.  This time around, it is easy to imagine a world without the OBR in which Brexit Jacobins putting pressure on Philip Hammond to forecast that the future will be rosey, rather than simply make relatively anodyne comments about Brexit presenting ‘opportunities’.  One wonders what fiscal policy would have been like in that world;  contrasting it with the one we inhabit would provide a measure of the added value of the OBR.

For this to work the independence of the OBR has to be credible.

But not just that.  We have to be convinced that they are not overstepping their remit.

One finance chat I am part of on WhatsApp [every self respecting economist has to WhatsApp-drop these days] included a caricature that its the OBR that actually sets fiscal policy.  One can see the spirit in which this was meant.  Imagine the government had figured out, finally, a scheme for setting fiscal policy [as it is often urged to do in these pages and those of other commentators].  In that case the OBR would come along with new forecasts, and the Treasury would simply crank the handle and set fiscal instruments appropriately.

Lurking there is the danger that the OBR might, or might be thought to taint the forecasts itself to bring about a particular mechanical following through of their consequences in fiscal policy.  To prevent that, we can observe that in practice there are watchdogs of the fiscal watchdog:  the Institute for Fiscal Studies, the Bank of England, and other external forecasters.

Another reaction to the forecast gloom was from Iain Martin.  ‘Futurology is futile’ he tweeted above his Times piece.  Unfortunately, futurology is essential.  Why?  Because there are long lags between deciding to do something with fiscal policy [or monetary policy for exampe] and those decisions having their full effect on the things that we care about [like growth, debt, inflation, cost of finance].

In the case of fiscal policy it can take quite some time between making a decision to spend more and having any effect on anything whatsoever [viz the myth of ‘shovel ready projects’].  So, in order to make sure that your fiscal instrument settings are doing the right things to what you care about you have to line up candidate alternative fiscal plans against what you forecast will happen to what you care about.

The OBR forecasts will no doubt prove to be wrong ex post.  All forecasts are.  But that won’t invalidate them as forecasts now.  [Tired example:  when I roll a six sided dice 10 times and get a total score of 60, my forecast of a 35 is not proved wrong].  If you are a technological pessimist, you might plausibly be tempted to extrapolate flat productivity from the last 10 years very far out into the future, and get forecasts that are much more gloomy than the OBR’s.  If you are an optimist and think that the data is missing digital miracles, or that a stimulative fiscal policy could unleash a return to the old trend line, or at least its old slope, you would have a much more optimistic perspective.  The OBRs forecasts are a finger in the air, but a reasonable one at that, and necessary.

 

 

How does Germany’s Monopolies Commission combat market concentration? By making sure that no good data is available.

Published by Anonymous (not verified) on Thu, 23/11/2017 - 11:22pm in

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from Norbert Häring How many companies have merged into corporate groups in Germany? We don’t know. The official figures are completely unconvincing. We have a Monopolies Commission which, together with the German Federal Statistical Office, has the legal mandate to monitor market concentration. Germany’s parliament wanted to ensure that the necessary information about the possible […]

AM05 Consumer Theory

Published by Anonymous (not verified) on Thu, 23/11/2017 - 10:26pm in

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Lecture 5 of Advanced Microeconomics at PIDE. The base for this lecture Hill & Myatt Anti-Textbook Chapter 4 on Consumer Theory.

Hill and Myatt cover three criticisms of conventional microeconomic consumer theory.

  1. Economic theory considers preference formation as exogenous. If the production process also creates preferences via advertising, this is not legitimate.
  2. Consumers are supposed to make informed choices leading to increase welfare. However, deceptive advertising often leads consumers to make choices harmful to themselves. The full information condition assumed by Economics is not valid.
  3. Economic theory is based on methodological individualism, and treats all individual separately. However, many of our preferences are defined within a social context, which cannot be neglected.

Before discussing modern consumer theory, it is useful to provide some context and

1      Historical Background:

In a deeply insightful remark, Karl Marx said that Capitalism works not just by enslaving laborers to produce wealth for capitalists, but by making them believe in the necessity and justness of their own enslavement. The physical and observable chains tying the exploited are supplemented by the invisible chains of theories which are designed to sustain and justify existing relationships of power. Modern economic consumer theory is an excellent illustration of these remarks.

As we have discussed elsewhere, the basic dynamic of industrial societies is massive overproduction. But how can this excess product be sold? Initially, after England acquired a 50 year lead in the industrial revolution over Europe, the Free Trade theory was invented as a weapon – those who bought it, permitted England to export its surplus, and acquire wealth in return. As Paul Bairoch notes in Economics & World History: Myths and Paradoxes, this resulted in recession all over Europe. Friedrich List created the infant industry argument to protect Germany, successfully fighting soft power with soft power. Imposition of trade barriers against England led to recovery and growth in European economies. Competition with England led to a scramble to industrialize in Europe, which created the potential for massive overproduction in the European economies.

To realize this potential, it was essential to find markets for these goods. These were created by imperialism and colonialism, which destroyed self-sufficient societies all over the globe, in order to create markets for surplus European products. Wars against China and Japan had the end result of forcing them to open their economies to trade, again to create markets for European surplus. Destroying local economies and institutions also provided a vast labor force, harnessed by economic necessity to the factories producing wealth for the capitalists. Production-Consumption chains were set up all over the world, to absorb the excess production. For instance, Opium addicts were created in China, an addiction to tea was induced in India, English laborers were addicted to sugar, and so on. This artificially created demand enabled artificially increased production, by transporting African slaves to produce sugar in the Caribbean, and similarly harnessing laborers trapped by newly created needs into laboring for wages, in the new market economies created all over the world.

2      Modern Consumer Theory

The same pattern of creation of production-consumption chains can be found in modern times. As Galbraith wrote in the Affluent Society, corporations sell products by creating demand for them through advertising, and other means. This is “Say’s Law” but with a radically different meaning. This artificial demand creation is harmful to consumers, since it creates aspiration and desires in all, but only a small part of this can be fulfilled. Furthermore, it necessitates all consumers to labor more in order to meet their artificially increased demands. All this rat-race for higher and higher standards of living does not buy happiness, as noted by Easterlin, and confirmed by many psychological studies.   An important factor in happiness is the difference between aspirations and actual consumption levels – if the production process increases aspiration more than it increases consumption, this can lead to a decline in happiness. See for example, Lane in Loss of Happiness in Market Economies.

CONCLUSION: It is not legitimate for economists to treat preferences as exogenous, since they are created by the production process itself.

3      Failure of Full Information

The assumption that consumers make choices with full information can easily be proven wrong, as Hill and Myatt do by a broad range of examples. There are two levels of failure. At one level, corporations deliberately deceive consumers regarding the benefits of purchase of consumer goods. Examples are given from Big Pharma deceptive advertising to market dangerous or useless drugs. Prominent examples are Tobacco, and Baby Milk Powder, known to cause deaths. The 2014 documentary “Fed Up” shows how the search for profits has led the sugar industry to create massive amounts of obesity, and related diseases such as diabetes, deliberately. Corporations guided by the making of profits as the sole “moral” principle make cold-blooded calculations of profits from sales versus costs of being sued by damaged customers. In an environment where massive amounts of advertising is carried out to shape preferences and deceive consumers, the idea that consumers make informed choices which maximize their welfare cannot be sustained.

An even deeper problem, is that people do not know what is good for them, and may make wrong choices which lead to unhappiness. There is massive amounts of empirical evidence that there are systematic errors made routinely which cause regret in later life. For example, market societies teach people to value wealth and career over friends and relationships, but people in hospices express regret at making these choices. Psychological studies show that social relationships bring us more happiness than consumption. This leads to the third way in which modern consumer theory is deeply misleading, both empirically as a guide to real human behavior, and theoretically, as a normative guide to “rational” choices required to maximize our welfare.

4      The Social Dimensions of Preference

Methodological individualism adopted by economists blinds them to social dimensions, which are central aspects of preferences and welfare, as demonstrated by strong empirical evidence. Envy, conspicuous consumption, and externalities created by the need to keep-up-with the Joneses, are crucial to understanding consumer behavior, and completely neglected by economic theory. The simple idea that we evaluate the utility of a consumption bundle by comparison with our neighbors has radical implications for consumer theory. This immediately invalidates the Pareto principle, since making a certain group of consumers better off will make the rest worse off in comparison. Furthermore, relative consumption creates a rat-race. Everyone believes, correctly, that if they increase their consumption they will be better off, ceteris paribus. That is, assuming everyone else remains where they are. But of course, when all people strive to increase their standard of livings, then the average standard of living increases so that no one is better off (except the capitalists, who extract profits from laborers in the process of production, and profits from the consumer in the process of sales). There are many ways to prevent this rat race, which will make everyone better off. But these measures require social consensus.

Another aspect of economists failure to understand social preference arises from the false and misleading idea taught in textbooks that aggregate demand of the consumers is just the sum of the individual demand functions. As we learn from complexity theory, the whole is not the sum of its parts when interaction are important. This is precisely what happens when social dimensions of consumption matter. Mathematically, the Sonnenschien-Mantel-Debreu theorem shows that the aggregated demand function need not satisfy any of the properties of the individual demand. This has been labeled the “anything-goes” theorem and create massive difficulties for conventional consumer theory. This problem has been highlighted by Steve Keen in Debunking Economics: The Naked Emperor De-Throned?

90min Video Recording of AM05: Consumer Theory

happy holiday and submit to contexts

Published by Anonymous (not verified) on Thu, 23/11/2017 - 4:10pm in

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I wish you all an excellent holiday. And while I have your attention, you should consider submitting an article to Contexts, which Rashawn Ray and I now edit. Here are the submission guidelines. If you want a 99% acceptance rate, send us a piece for the blog! Orgtheory has the lowest standards in academia. We really do.

50+ chapters of grad skool advice goodness: Grad Skool Rulz ($4.44 – cheap!!!!)/Theory for the Working Sociologist (discount code: ROJAS – 30% off!!)/From Black Power/Party in the Street / Read Contexts Magazine– It’s Awesome!

At the bottom of the wealth pyramid in the United States

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from David Ruccio Yesterday, I looked at the enormous wealth of U.S. billionaires and the growing gap between them and the rest of the American people. Today, I want to examine what’s happened in recent years at the bottom of the wealth pyramid. We know that, for decades, the share of net personal wealth owned […]

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