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AI, Blockchain, Privacy and More: Leveraging Benefits, Mitigating Risks. Research Roundup October 2018

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*The Research Roundup is a semi-regular list of outside research we have found interesting and think is worth sharing. The views and conclusions of the papers’ authors do not necessarily reflect the opinions of anyone affiliated with TPI. The information below includes edited author abstracts*

 

This month’s research roundup focuses on technologies and innovation in modern life. New technologies can yield large benefits to society, but those benefits may be highly concentrated. Researchers like Arnaud Costinot and Iván Werning consider how public policies might address such inequality while ensuring continued technological progress, specifically regarding artificial intelligence (AI) applications. Others, like Ryan Henry, Amir Herzberg, and Aniket Kate balance the ease of use of cryptocurrencies with the need to ensure users’ privacy. Together, the articles in this month’s roundup consider public policy solutions to big questions –  how do we think about technology as value-added? How do we leverage technology in our classrooms? In our social lives? In the economy? How can we minimize abuse of technologies like piracy? How do we promote innovation? Click through to read this month’s selected articles.

 

Robots, Trade, and Luddism

Blockchain Access Privacy: Challenges and Directions

Innovation Policy in a Networked World

Online Piracy and the “Longer Arm” of Enforcement

Innovation and American K–12 Education

5G networks: Will technology and policy collide?

 

Descriptions of papers below are edited abstracts from authors

 

Robots, Trade, and Luddism

Arnaud Costinot & Iván Werning

Technological change, from the advent of robots to expanded trade opportunities, tends to create winners and losers. How should government policy respond? And how should the overall welfare impact of technological change on society be valued? The authors provide a general theory of optimal technology regulation in a second-best world, with rich heterogeneity across households, linear taxes on the subset of firms affected by technological change, and a nonlinear tax on labor income. Their first results consist of three optimal tax formulas, with minimal structural assumptions, involving sufficient statistics that can be implemented using evidence on the distributional impact of new technologies, such as robots and trade. Their second result is a comparative static exercise illustrating that while distributional concerns create a rationale for non-zero taxes on robots and trade, the magnitude of these taxes may decrease as the process of automation and globalization deepens and inequality increases. The final result shows that, despite limited tax instruments, technological progress is always welcome and valued in the same way as in a first best world.

 

Blockchain Access Privacy: Challenges and Directions

Ryan Henry, Amir Herzberg, and Aniket Kate

Privacy, facilitated by a confluence of cryptography and decentralization, is one of the primary motivations for the adoption of cryptocurrencies like Bitcoin. Alas, Bitcoin’s privacy promise has proven illusory and, despite growing interest in privacy-centric blockchains, most blockchain users remain susceptible to privacy attacks that exploit network-layer information and access patterns which leak as users interact with blockchains. Understanding if and how blockchain-based applications can provide strong privacy guarantees is a matter of increasing urgency. Many researchers advocate using anonymous communications networks, e.g., Tor, to ensure access privacy. The authors challenge this approach, showing the need for mechanisms through which non-anonymous users can (i) publish transactions that cannot be linked to their network addresses or to their other transactions, and (ii) fetch details of specific transactions without revealing which transactions they seek. This article may inspire blockchain researchers to think ‘beyond Tor’ and tackle these important access privacy problems head-on.

 

Innovation Policy in a Networked World

Olav Sorenson

Social relationships channel information, influence, and access to scarce resources. As a consequence, social networks—the patterns of these relationships across the members of a community—influence who comes up with important innovations, whether and how rapidly those innovations get adopted, and who has the ability to commercialize them. They therefore also affect the overall rate at which innovation occurs in the economy. This paper provides an introduction to and review of the research on social networks most relevant to innovation, with a particular focus on the earliest stages of the innovation process. It then discusses the likely consequences of a variety of policy interventions that could either reduce the importance of social relationships to innovation or alter the patterns of relationships in ways that might promote innovation.

 

Online Piracy and the “Longer Arm” of Enforcement

Debabrata Day, Antino Kim, and Atanu Lahiri

Controlling digital piracy has remained a top priority for manufacturers of information goods, as well as for many governments around the world. The authors focus on an increasingly common form of digital piracy —namely, online piracy — that is facilitated by torrent sites and cyberlockers who bring together consumers of pirated content and its suppliers. Motivated by recent empirical literature that makes a clear distinction between anti-piracy efforts that restrict supply of pirated goods (supply-side enforcement) and anti-piracy efforts that penalize illegal consumption (demand-side enforcement), the authors develop a simple economic model and discover some fundamental differences between these two types in terms of their impacts on innovation and welfare. All in all, supply-side enforcement turns out to be the “longer arm”—it has a more desirable economic impact in the long run. These results have clear implications for manufacturers, consumers, and policy makers.

 

Innovation and American K–12 Education

Aaron K. Chatterji

Economists have long believed education is essential to the acquisition of human capital and contributes to economic growth. However, education researchers, political and business leaders, and other stakeholders have raised concerns about the quality and costs of the K–12 education system in the United States and the implications for the development of the nation’s future workforce. Some of these groups have called for more innovation in K–12 education, leveraging technology in the classroom and experimenting with different organizing models for schools, both as a means to lower costs and increase quality. To shed light on the prospects of this approach, the author reviews the economics literature at the intersection of innovation and K–12 education from two different, but related, perspectives. First, he summarizes the evidence about the efficacy of technological and other kinds of innovation in the classroom. Second, he discusses the state of research on how the American K–12 system influences the production of innovators and entrepreneurs. In both instances, the author identifies implications for policy and opportunities for future research to generate actionable insights, particularly around increasing the low levels of research and development in the education sector.

 

5G networks: Will technology and policy collide?

Zoraida Frias & Jorge Perez Martinez

Despite being still under development, it is envisaged that 5G networks will provide a ‘fibre-like’ experience to mobile users. As such, they are expected to accommodate services with very different requirements in terms of latency, bandwidth and reliability, among others, for the vertical sectors. However, the European Union has just approved the Telecommunications Single Market Regulation, which enshrines the network neutrality principle and guarantees that ‘all traffic through the Internet is treated equally’. This article explores the potential conflict between net neutrality regulation and future 5G services, particularly regarding network virtualization. The authors present a discussion on the challenges of building net neutrality upon judgements on whether traffic optimization is objectively necessary. This proves complex in a technological environment that envisions network ‘slices’ created and priced on-demand according to the Quality of Service (QoS) required by specific applications at any given time. In addition, the authors argue that the ‘anything-as-a-service’ paradigm might turn into an important source of innovation for the future Internet infrastructure layer, and thus for the ecosystem as a whole.