Intelligent Agents or How to Stop Consumers Getting Screwed

Seemingly inadvertently yesterday, David Cameron made a commitment to legislation that would force utilities to ensure their customers were always on the cheapest tariff for their energy supplies.

The proposal has been met with some derision and now seems to be unravelling, but it’s problematic principally because it does not go nearly far enough.

In this, as in many markets, the odds are stacked against the consumer. Tariffs have proliferated, becoming increasingly difficult to compare, making informed decisions almost impossible. Few people really understand what they’re buying.

This is not simply a problem for the ill-educated. As I pointed out in a paper for the Long Finance initiative, MBA students prove incapable of determining which mortgage offers them a better deal, even when dealing with fewer parameters than are offered to British borrowers.

A massive information asymmetry is at work. Companies understand their customers’ cognitive biases. They crunch the likely impact of millions of buying decisions. And they frame choices in ways that turn what should be plain-vanilla commodities into much more profitable branded products.

There is only one answer to this: redesign markets from the consumers’ point of view. There are two main tasks.

First: enable the creation of technologies that level the playing field for consumers.

If you venture into a complex market without representation, you are asking to be fleeced. Traditional agents (people), however, are expensive, and their role as honest brokers has often been eroded when they are paid by the seller, not the buyer.

Technology can solve this problem. It is now a very simple task to design an intelligent agent that scours the market  on behalf of a consumer, inviting bids and accepting them, based on criteria that its master has specified.

Here’s how it might work in the utility market.

Continue reading

Freudian tweet of the day

An intriguing tweet from EU development commissioner Andris Piebalgs:

What could he possibly have said?

Interesting factoids on employment and development

…courtesy of the World Bank’s 2013 World Development Report (which is on jobs, and definitely worth a read):

  • 1.6 billion people work for a wage or salary, compared to 1.5 billion in farming or self-employment
  • The average Mexican firm will grow to employ twice as many people over 35 years; in the US, it’s 10 times as many over the same period
  • 21 million people are victims of forced labour
  • Women’s labour force participation is 77% in Vietnam, but only 28% in Pakistan
  • 600 million new jobs are needed over the next 15 years just to keep current global unemployment rates [6%, according to the ILO] at its current level
  • The global total of NEETs (young people not in education, employment or training) is 621 million
  • The number of international migrants as a share of world population is 3% – but in Kuwait, Qatar and the UAE, the foreign-born population is 60%

The times they are a-changing at the IMF

“Some dismiss inequality and focus instead on overall growth – arguing, in effect, that a rising tide lifts all boats. When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”

Um, that’s a group of IMF economists speaking (quoted in an NYT piece today).

Even more interesting is this little nugget:

“Growth becomes more fragile” in countries with high levels of inequality like the United States, said Jonathan D. Ostry of the International Monetary Fund, whose research suggests that the widening disparity since the 1980s might shorten the nation’s economic expansions by as much as a third.

Reducing inequality and bolstering growth, in the long run, might be “two sides of the same coin,” research published last year by the I.M.F. concluded.

Pretty arresting, when you stop to think about how long the IMF argued that inequality was in effect the price you had to pay for policies that would foster high growth rates.

Coca Cola – active healthy living

Here in Addis Ababa, last weekend saw the Coca-Cola Road Race, an annual 7km race. The strapline for the event was “active healthy living”. Um, really? Seriously?

If you talk to food experts like my friend Professor Tim Lang at City University in London, they’ll tell you that highly sugared soft drinks are right up there as prime villains of the current obesity epidemic. Here’s a quote from a commentary piece that Tim co-authored with his colleague Geoff Rayner (emphasis mine):

Dietary patterns have always been changing. But now, part of the public health crisis is due to the pace and scale of that change. Two examples are the vast increase in production and thus consumption of sugared soft drinks and of sugary energy-dense ultra-processed products, and the distortion of customer and consumer demand that is driven by commercial marketing power.

Right now, Ethiopia has the lowest rate of obesity in the world. As a result, you never see Diet Coke for sale here – there just isn’t the demand.

But hey – give it a few years.

“You always become the thing you fight the most…”

Two car bombs exploded in Karbala, a centre of Shia worship south of Baghdad, killing 13 people and injuring 50 in a shopping area … A similar double bombing took place in Kirkuk, a city in the north of the country at the centre of several sectarian and ethnic divides, also killing 13 people …

The double car bomb is a standard tactic of al-Qaeda and linked to Sunni militant groups in Iraq, with an initial explosion attracting the attention of police and other emergency services and a second bomb exploding when they arrive.

– From the Daily Telegraph, 20 March 2012

There is now significant evidence that the US has repeatedly engaged in a practice sometimes referred to as “double tap,” in which a targeted strike site is hit multiple times in relatively quick succession. Evidence also indicates that such secondary strikes have killed and maimed first responders coming to the rescue of those injured in the first strike …

Those interviewed for this report were acutely aware of reports of the practice of followup strikes, and explained that the secondary strikes have discouraged average civilians from coming to one another’s rescue, and even inhibited the provision of emergency medical assistance from humanitarian workers.

The lone survivor of the Obama administration’s first strike in North Waziristan, Faheem Qureshi, stated that  “[u]sually, when a drone strikes and people die, nobody comes near the bodies for half an hour because they fear another missile will strike.” …

One interviewee told us that a strike at the home of his in-laws hit first responders: “Other people came to check what had happened; they were looking for the children in the beds and then a second drone strike hit those people.”

– From Living Under Drones, a report from New York University Law School, 2012

“Whoever fights monsters”, warned philosopher Friedrich Nietzsche, “should see to it that in the process he does not become a monster.”

Over and over we have failed to recognise this truth. In its resistance to Hitler, the United States became a militarised society. In its opposition to communism, the US was as willing to incinerate the world as its opponents. To keep communism from spreading in Africa, Asia, or Latin America, the US felt it had to move in with its troops, or manipulate elections, or unseat legitimately elected regimes, or assassinate leftist leaders. To fend off revolution in client states, the US beefed up and trained local police and soldiers, only to watch the military itself becomes the gravest threat to democracy in one country after another. To counter Soviet espionage, the US created a spy network; to make sure that no one cooperated with the enemy, it spied on its own citizens.

“You always become the thing you fight the most,” wrote Carl Jung, and the United States has done everything in its power to prove him right.

– From The Powers That Be by Walter Wink (credited by Neal Stephenson with developing an “epidemiology of power disorders”)

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