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The Digital Age

The Digital Age

THE TOULOUSE SCHOOL OF MAGAZINE

Living economics

#11 SUMMER 2016

Specia� issu� THE DIGITAL AGE

Preston McAfee Torsten Persson on Vera Zaporozhets Stéphane Gregoir on & the the economics of on EU voting on university digital revolution democracy powers rankings Editor'� messag� #11 Content�

Welcome to New� & Event� the digital era! 4 Appointments & prizes 5 Newcomers The meteoric rise of digital platforms such as , Amazon, 6 Books from TSE researchers Facebook, but also Booking.com, AirBnB, Uber, or Deezer (to name but a few), is transforming the functioning of markets, 7 Save the date unsettling the value chain in the economy and profoundly reshaping almost every sector, including the organisation of work and of labour markets. As this special issue of our mag aims to highlight, our researchers are at the forefront of ex- � inker� plaining the economic underpinnings of this digital revolution. 8 EU politics: who decides? Specia� issu� Vera Zaporozhets TSE’s long-standing position as a leading research centre on 9 Noisy fiscal policy digital platforms and two-sided markets was further acknowledged with the creation of the Jean-Jacques THE DIGITAL Patrick Fève Laffont Digital Chair last year under the stewardship of the French Minister of Culture and Communication. AGE More recently, Jacques Crémer was appointed to the French National Digital Council, and Doh-Shin Jeon 11 Beautiful minds received the 2016 Award for the Best Korean Abroad for his work on the economics of IT and Torsten Persson intellectual property. The contributions of a number of TSE researchers to our understanding of the digital transformation are showcased in this issue. Essentials 14 • Surviving the digital revolution The interview with Preston McAfee (pages 25-27), who became Microsoft’s chief economist 16 • The future of work after a career in academia and later with Yahoo and Google, is a highly readable testimony to the value of economic analysis in tackling the digital revolution. TSE is rapidly expan- Expertise ding its footprint in the area; this year’s TSE Forum, our annual flagship event reaching out Our researchers are at the 18 • All about platforms to a wider audience (previously known as the Tiger Forum), is dedicated to the economics forefront of explaining the 20 • Digital firms must improve transparency of changing organisations in the digital era. Held on 16 June in and jointly organised economic underpinnings • What drives online behaviour? with the Digital Chair, the Forum boasts an impressive line-up of high-profile speakers, and of this digital revolution. 21 • A over disrupted markets crowns our intensive and increasing academic activities devoted to a wide area of issues in the digital economy. Already this year we held four events covering digital books, collective Experiences behaviour in the big data area, e-commerce, and the price implications of two-sided markets. 22 • Big data is watching you Researchers linked to the Institute for Advanced Study in Toulouse (IAST), our sister organization, further 24 • Dream team broaden the perspective by looking at the societal consequences of the digital revolution, for example via • Rencontres R in Toulouse Actor� an upcoming event on freedom and control of expression in social networks and digital media in the wake 25 has a culture of innovation of last year’s terrorist attacks. The digital transformation also plays an increasing role in our education pro- Preston McAfee, chief economist at Microsoft grammes, including the new big data masters course featured in this issue (pages 28-31).

To conclude with some faculty news, we are excited about several appointments: Estelle Cantillon from the Université Libre de Bruxelles and René Garcia from the University of Montréal as part-time faculty members, Ana Gazmuri from the Wharton School at the University of Pennsylvania as Assistant Professor, and David Austen-Smith from Northwestern on a Chair of Excellence funded by the French Government. In coming Campu� years, TSE will continue to be active in recruiting at the junior and senior levels to consolidate its standing 28 Big data at TSE in the highly competitive landscape of the world’s top research centres in economics. Sébastien Gadat and Anne Ruiz-Gazen Trimestrial magazine of Toulouse School of Economics Ulrich Hege, TSE Director 21, allée de Brienne - 31 015 Toulouse Cedex 6 - FRANCE - Tél. : +33 (0)5 67 73 27 68 30 University rankings deciphered Stéphane Gregoir , TSE Chairman Publication Director: Ulrich Hege - Managing Editor: Joël Echevarria Editor in chief: Jennifer Stephenson - Production Manager: Jean-Baptiste Grossetti With the help of: Claire Navarro - Priyanka Talim - James Nash This magazine has been funded by a Graphic and layout: Yapak French government subsidy managed by Pictures: © Studio Tchiz, © Microsoft, © Fotolia, © Shutterstock, ® Microsoft the Agence Nationale de la Recherche under the framework of the investissements d'avenir programme 1000 magazines printed on offset paper from renewable forests. ISSN number incoming. reference ANR-11-LABX-0052 tse-fr.eu 3 New� & Event�

Appointments Newcomers

TSE researchers awarded Europlace Institute of Finance Prize

Bruno Biais (CNRS-TSE), Sophie Moinas (TSE-UTC) and their colleague Thierry Foucault (HEC Paris) have been granted the 2016 EIF Prize for their work on high-frequency trading. This annual prize, awarded by the EIF alongside French daily Les Échos, rewards excellent research work dealing with finance issues. The EIF supports outstanding economic research in finance.

Jacques Crémer joins French Digital Council One of the co-founders of the Digital Chair Estelle in 2015, Jacques Crémer has joined the French Digital Council, which issues inde- Cantillon pendent opinions and recommendations TSE joins Toulouse network to Université Libre de Bruxelles on the impact of digital technologies on economy and society. The government combat neurodegenerative diseases joins TSE as an associate member can consult the council on new legisla- in the industrial organisation re- Toulouse’s NeuroToul has obtained offi cial recognition as a Centre of tion or draft regulations. Crémer also search group. Cantillon’s work coordinates TNIT, Excellence in Neurodegenerative Diseases after a national competition. lies between market design and and typi- a global network of TSE will be one of 13 Toulouse-based research institutes that will be contribu- Bruno Biais Sophie Moinas Thierry Foucault cally combines theory and data. digital . ting to this new research network. Researchers involved are Helmuth Crémer She has published work on auc- (TSE-UTC), Philippe De Donder (CNRS-TSE), Pierre Dubois (TSE-UTC), Frédérique tions, procurement, competition tse-fr.eu/people/jacques-cremer Fève (IDEI-TSE), Catarina Goulao (INRA-TSE), Jean-Marie Lozachmeur (CNRS- between exchanges, and assign- TSE) and Emmanuel Thibault (TSE-University of Perpignan). 30 June: TSE hosts annual Society ment problems. for Economic Dynamics meeting Christian Gollier Over 600 participants are expected in Toulouse to attend the 27th SED Annual conference, which brings together leading researchers from all fi elds René Garcia appointed co-editor of the Journal Montreal University of Risk and Insurance (JRI) of economics that make use of dynamic methods, such as , fi nance, labor economics, , , indus- joins TSE as an associate member The JRI publishes rigorous, original trial organization, and economic theory. in the finance research group. His research in risk and research interests include the va- insurance economics. The conference will feature theoretical and empirical cutting-edge research work luation of financial assets, portfolio Jean Tirole from these fields. Programme chairs are Manuel Amador (Federal Reserve Bank management and risk management. awarded Imperial of Minneapolis) and Pierre-Olivier Weill (UCLA). The event is organised at Toulouse In econometrics, he is interested tribute School of Economics by Christian Hellwig (TSE-UTC) and Franck Portier (TSE-UTC). in nonlinear models, in particu- Plenary speakers are Fernando Alvarez (), MariaCristina de lar regime-switching models. He The TSE chairman Nardi (Federal Reserve Bank of Chicago) and Jean-Marc Robin (Science-Po Paris). is the co-founder and editor-in- received an honorary chief of the Journal of Financial degree in May from Econometrics, published by Oxford Imperial College University Press. London.

www.economicdynamics.org/2016-sed-meeting/

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Jean Tirole Sav� th� dat� It’s book season at TSE ECONOMICS FOR THE COMMON GOOD UPCOMING TOULOUSE EVENTS Two of our top researchers, Emmanuelle Auriol (TSE - UTC) and Jean Tirole Published: 11 May 2016 in French (English version available soon) (TSE) recently published wide-reaching general audience books. With his first book aimed at the general public, the winner of the 2014 Nobel Prize in Economic Sciences invites us to delve into his passion for his field, sharing his vision of a 20-21 22-24 Emmanuelle Auriol science that the gap between theory and facts to JUNE 2016 JUNE 2016 AN END TO MAFIAS: WHAT IF WE further the common good. LEGALIZED SEX,DRUGS AND ILLEGAL As we turn the pages, we enter the economist’s laboratory IMMIGRATION? and explore the subjects that affect our daily lives: the di- Published: 4 May 2016 in French (English version available soon) gital economy, innovation, unemployment, global warming, Norms Actions 5th French “R” Europe, state intervention, finance, the market... By offering and Games Meeting Auriol analyses the black markets of drugs, prostitution and im- a broad panorama of his views on today’s great economic migration and comes up with innovative solutions: legalization, Conference 2016 challenges, Jean Tirole leads us to the very heart of the sanctions against customers, selling visas, all combined with theories he has fathered. strong repressive measures. She explains how the public policies she recommends could considerably reduce criminal activities. Since receiving the Nobel Prize in 2014, I have been struck by the general public’s curiosity about economics. People seem 23 JUNE 27 JUNE Suppressing supply isn’t enough to eliminate demand. eager to understand the mechanisms of our daily lives, but 2016 2016 Whenever people can’t legally get what they’re looking for, they the language of research is inevitably complex, a closed world tend to get it illegally. A prohibition-only policy is clearly not wor- to them. For me economics is fascinating and even fun, and I king and fuels organised crime: cannabis in France is a striking hope that this wide-audience book will go some way towards example. Combining legalisation with repression of residual cri- sharing my passion for economics with society. minality and implementing demand management policies seem Jean Tirole to lead to much better results. Health Economics Networks, Information Emmanuelle Auriol Workshop and Business: 2016 Innovation, Finance and Law Conference

28-29 30 JUNE - JUNE 2016 2 JULY 2016

Recent Advances Society for Economic in Econometrics Dynamics (SED) Congress 2016

Events by invitation only: tse-fr.eu/events

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INFLUENCE IN EUROPE FISCAL POLICY EU politics: who decides? Listen to the noise

hich countries decide European policies? Who benefi ts most from to political campaigns and expect t is 16 years since Patrick Fève left the University of Nantes and the the decisions of water regulatory agencies? What impact do lob- a return on their investment. CEPREMAP (Paris) to come to work in Toulouse. He fi rst joined GREMAQ, byists have on the European Parliament? These are some of the A number of empirical studies which specializes in quantitative and mathematical economics and was W on the US agricultural protection I questions addressed by INRA-TSE researcher Vera Zaporozhets in her work one of TSE’s three founding research units. Now director of TSE’s doctoral conclude that the government puts on voting power. unexpectedly low weight on the programme, he is currently working on the macroeconomic implications Zaporozhets joined TSE in 2009 from the the “needs” or the political power. The lobby contributions as compared of noise and expectations. Catholic University of Leuven. A specia- “needs view” states that the budget al- to the social welfare. It implies You recently published an article agents. The more noise, the less pri- list in , public economics location is determined by the principle that the interest groups have on ‘noisy fiscal policy’. Tell us more vate agents can react accordingly to and environmental economics, most of solidarity. According to this hypo- surprisingly little impact on the about it… fiscal policies. of her research analyses the way deci- thesis, the countries with a relatively government trade policy decision. This article, written with Mario Pietrunti sions are made in institutions such as large agricultural sector and/or a rela- But there isn’t much literature on (Banca d’Italia), had two objectives. Where did you get the data committees, parliaments or assemblies. tively worse economic situation are the agriculture protection in Europe.” First, we wanted to see if we could for your article? She has recently published three very major recipients of the EU budget. The quantify the level of noise on fiscal Our data come from forecast reports, well-received articles on related issues. second explanation is that the budget Two other articles by Zaporozhets, one process within environmental com- policies and measure its macroeco- either from government budget pro- allocation across the members reflects of which is co-written with INRA-TSE mittees (Zaporozhets, 2015). In the case nomic impact. To do so, we started jections or professional forecasters The first deals with EU budget allo- the distribution of their political power. researcher Alban Thomas, deal with of French water agencies, her main public to gather data such as budget pro- (for example, reports from the US cation among member states. Along Thus, the countries with more power in French water regulatory agencies and policy conclusion is that the committees’ jections or surveys of professional Survey of Professional Forecasters with Maria García-Valiñas (University the allocation process arguably receive the decisions made by the environmental composition and the voting rules should forecasters. We had enough data to conducted by the Federal Reserve of Oviedo) and Sascha Kurz (University larger shares of the budget. committees. “We saw in the data that be reconsidered. study three countries: Canada, the Bank of Philadelphia which began in of Bayreuth), Zaporozhets investigates there seemed to be excessive differences United Kingdom and the United States. 1968). Thanks to these reports, we whether EU spending is determined by Previous studies (e.g. Kauppi between the level of pay- Following the publication of those two have data on economic agents’ expec- and Widgren, 2004) reveal ments and the subsidies for articles, Zaporozhets will pursue her Our study shows What exactly is ‘noise’? tations of their government’s fiscal the strong prevalence of different water users.” The work on water issues and is currently In economic terms, noise is imperfec- policy. These expectations cannot political power motives that political researchers tested their intui- working on two papers related to irri- tion in the transmission of information disentangle the actual fiscal policy i.e. that political power power matters, tion with theoretical models gation in France. between two entities. In the example from noise. Comparing the variance matters much more than but not as much validated on real-world data of governments, noise is the difference of forecast reports and the variance needs when determining the as previously and detailed their results in between the announced fiscal policy of the actual fiscal policy allowed us allocation of budget expen- the publication (Thomas and and the one forecasted by economic to quantify noise. ditures among EU member thought Zaporozhets, 2016). states. Zaporozhets and her Building better co-authors challenge this assessment. The report from the French Audit Office institutions Looking into an extended data set, ta- also claims that the decisions taken by king into account recent budgets and French water agencies systematically Alban Thomas and Vera Zaporozhets applying alternative econometric speci- favor agricultural water users. Thomas are specialists in political economy fications, the researchers conclude that and Zaporozhets built a model to try to and use tools and methods to both power and needs are significant understand why such a distortion ap- analyze how decisions are made factors of budget allocation: “Our study pears in the data from environmental within public institutions. Their shows that political power matters, but tax and subsidies. “It seems that agricul- analysis is focused on the different not as much as previously thought, and ture users gets a lot of bargaining power voting processes and the impact that the solidarity principle in Europe and is also considered a good (“cheap”) they can have on the final outcomes. plays an important role.” partner by other voters.” The researchers Understanding how our public tested their model on the available data institutions work and detailing their Interested by decision-making at the successfully, confirming the underlying bias is essential to building better European level, Zaporozhets is currently theoretical reasons. working on a research project to analyze public services. the influence of lobbies for agriculture Using different tools and techniques Vera Zaporozhets protection in Europe. “The influence of from game theory, political science and www.tse-fr.eu/fr/people/ INRA-TSE researcher lobbies has been studied a great deal in welfare economics of voting power, vera-zaporozhets#publications the US where lobbies contribute directly Zaporozhets analyzes decision-making

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What is the level of noise in the agents won’t be able to react Investment countries you analysed? accordingly to such policies. To Our measures are to be taken with a put it simply, noise decreases the pinch of salt as there is always a margin impact of fiscal policies. Fiscal of error in this kind of work but you could stimuli are much less effective say that there is a large gap between in a noisy economic environ- countries. Our article points to a noise ment. More importantly, our level of 25% to 50% in the US, around article shows that the impact 75% in Canada and up to 84% in the UK. of noise can be witnessed after We don’t know what that level would a is implemented, be in other countries, such as France, meaning that a high noise level

because we don’t have enough data yet will have a long lasting effect on Fève & Pietrunti show that noisy fi scal policies to conduct similar analysis. the economy. For example, in the reduce the response of private investment US, where noise is significantly What are the main findings smaller than in Canada or the of your article? UK, we measure that noise on Our work suggests that the effectiveness a fiscal policy can cause invest- incomplete market setup. Finally, I am of public fiscal policies is proportional ment to be down 12% more than a year currently working with Franck Portier GROWTH, INNOVATION AND MOTIVES to the level of noise because economic after the policy has been implemented. (TSE-UTC), Paul Baudry (University of British Columbia) and Alain Guay on an What are your other projects article about the identification of expec- on this topic? ted shocks in SVARs. Chinese choices I am working on a project with Alain Guay (ESG UQAM Montreal) on sentiments orsten Persson is a Swedish economist and a specialist in political eco- in structural vector autoregressions nomy. Professor at the Institute for International Economic Studies in (SVARs), which also focuses on the size Stockholm, he is a member of the Royal Swedish Academy of Sciences, of noise and its consequences for ag- T and a member of TSE’s scientifi c council. His research interests include politi- gregate fluctuations. I am also working Noise decreases the impact cal systems, electoral cycles, civil war analysis, tax evasion and development with Jean-Guillaume Sahuc (Banque of fiscal policies, making fiscal clusters. In an interview with TSEconomist – TSE’s student magazine – he de France) on the effects of fiscal po- stimuli much less effective. licies in the eurozone and with Julien discusses ’s plans to promote innovation and his fondest memories of Matheron (Banque de France) on the celebrated mathematician John Nash. Torsten Persson quantification of the Laffer curve, in an In ‘Forms of Democracy, Policy and What about growth in autocratic go- Economic Development’, you discuss vernments? At which point is a system the influence of the form of demo- of government detrimental to growth? believe that there are important forces cracy on growth-promoting structural Some people say autocratic institutions to affirm innovation. China has no truly policies. What differences do you find may be conducive to a positive outcome independent judiciary, because at each Measuring fi scal multipliers between countries with a presidential at the first stage of development. Some level the local government can intervene. government – like most Latin American countries – you mentioned Latin America A fiscal multiplier is the measure of the impact of the money invested by the public So you probably need some political re- countries – and others with a parlia- – are facing a middle-income trap. It is an form as well. sector. For instance, a multiplier equal to 2 means that for every €1 invested in mentary government? issue for Chinese leaders, because they the economy by public institutions, the country will generate €2. It is very difficult Looking at the size of government, places plan to transition from being the world’s In your book ‘Pillars of Prosperity: The to measure multipliers: depending on the theories, models and quantitative which have a presidential democracy workshop of cheap manufactured goods Political Economics of Development techniques, they can vary from 0.5 to 2.5. Patrick Fève and Mario Pietrunti’s article rather than a parliamentary democracy to a more innovation-oriented economy. Clusters’, you state that there must shows that noise has a direct decreasing effect on fiscal multipliers. seem to have spent 5% less of their GDP. Innovators need the legal protection Patrick Fève be a correlation of income, absence TSE - UTC researcher Similarly, majoritarian democracies spend provided by intellectual property rights. of conflict and state capacities. Which www.tse-fr.eu/people/patrick-feve#publications on average 5% less than proportional Perhaps they also need a different type of those outcomes should developing democracies. of finance. Contracts can help investors countries focus on first? Patrick Fève TSE-UTC researcher tse-fr.eu 11 � inker� Specia� issu� THE ... Taking a broader view on macro deve- TSE. The theory behind these projects What is your view of TSE? lopment, economists focus on growth of builds on the work of Jean Tirole and Created by Jean-Jacques Laffont, and income per capita, which is important for Roland Bénabou. I am expanding that strengthened under the stewardship of wellbeing. But in developing countries, work in a different direction. How do Jean Tirole, TSE has developed into one DIGITAL the state is much weaker: it has difficulty people trade off these individual or of Europe’s bastions of economics. It is collecting revenues, supporting markets social motives? How do they make a great pleasure and a special privilege and satisfying demand for public goods this choice? to chair its scientific council. such as schooling and health. In many developing countries, there is also no AGE effective system for solving conflicts of interests. The problem is those things are tied together, it is not a monocausal A beautiful mind relation where A explains B. Torsten Persson has met many original There are various things that can help thinkers in his work as secretary of the a country transition from one develop- Nobel Prize committee for economics, ment cluster to another. After World War but one memory stands out. “When John II, countries like South Korea, Thailand Nash got the Prize in 1994, it was my and Finland were each under threat from most rewarding experience while working a very powerful neighbor. In such cases, on the committee. Perhaps you read the the interests of many people align and book, perhaps you watched the movie: he they invest in security, and to do that is someone who dealt with schizophrenia. you need to pay and reform the By the time he arrived in Stockholm he tax system. Another driver is the inclu- was OK, but still very uncertain how to siveness or cohesiveness of political behave in social situations. During his institutions. 10 days in Stockholm, he became more You led the seminar ‘Individual vs Social self-confident. By the end, it was easy to John Forbes Nash, Jr. Motives in Identity Choice: Theory and pursue a normal conversation.” June 13, 1928 - May 23, 2015 Evidence from China’ at the IAST. Could you tell us about the trade-off between , an economist at Princeton, claimed that when most people get this material benefits and social status? prize, they get crazy; but Nash got sane. It is so ironic. Mathematicians say that There are many choices we make, Nash’s best work was not on game theory but on partial differential equations. where some of our motives are indivi- Apparently he was in line to get the Fields Medal in the early 60s, the finest prize dual or material or intrinsic, and others for mathematicians. Once schizophrenia struck, they didn’t dare give it to him. are social. In China, mixed couples can choose their child to be a minority or to “My finest memory of Nash’s week in Stockholm is from a private dinner. Someone be Han – there are material benefits asked how he chose the topic for his PhD thesis [on the Nash Equilibrium] when tied to mixed marriages. There is also he arrived in Princeton as a 19-year-old. He said: ‘Well, I had two ideas. One was a pro-social expectation that the man has his own family name and its eth- on game theory, so I had a chat with Von Neumann. But he did not like it much. nic provenance. In our analysis, people The other idea was on a glitch in the theory of relativity – something about the trade off those material motives to get red-shift – so I had a chat with Einstein. But he did not like it much. In the end, the some potential benefits: if their child is math of game theory seemed a lot easier, so that’s what I chose.’” a minority, they may get higher scores when they go to high school or college; if they marry another minority, they get an exemption of the one-child policy. tseconomist.com/archives/interview-with-torsten-persson There is a local connection here with

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JEAN TIROLE ON THE NEW ECONOMY

Rising to the challenge Surviving the digital revolution The rapid development of digital technology brings new challenges and a fundamental trans- ow can we build trust in the digital ecosystem or Despite the new opportunities for hac- will allow insurers to recommend bet- Will there be enough jobs with decent formation of the everyday life of citizens and control access to our personal data? Why is infor- kers, we have no say in a company’s ter lifestyles, and reduce premiums for wages? Those with abstract knowledge, investment in IT security. Clauses pre- those who behave responsibly. facilitating adaptation to the environ- organisations, significantly impacting mation a threat to health insurance? Will intelligent H venting resale of customer data to third ment, will adapt best; will software and robots create mass unemployment? These across the world. The need to understand the The medical profession of tomorrow will are just some of the complex issues discussed in ‘Econo- parties may also be blurred if, for exa- take over routine tasks. challenges – and opportunities – of the digital mple, a firm freely transfers this data be unrecognisable: scientists, mics of the Common Good’, a new book by TSE chairman economy is an urgent priority for both the pu- to subsidiaries. And what happens in biotech researchers and neuroscientists Taxation blic and private sectors. Jean Tirole. To adapt to the digital revolution rather than case of bankruptcy? As data is a major will be at the heart of the value chain. As The intangibility of the become its prisoners, he warns, we must anticipate the asset, creditors are eyeing the personal elsewhere, the issue is whether the ma- $ € internet makes tax avoi- many challenges ahead. data collected by companies. Another chine will replace humans. Economists in Toulouse have been studying these dance easier. We often no challenge to confidentiality is the com- changes for more than 15 years. This research longer know exactly where a business is plexity of privacy policies. You cannot Technological advances also threaten has been enhanced by our collaboration with pri- located. Intellectual property of a book Trust require users to sift through detailed to create serious health inequalities. can be established in any country, re- vate partners. The first IDEI-Microsoft research The Internet of Things (smart homes, sensors documents every time they log on. Without regulation, those whose genetic partnership was signed in 2000, and the first of on watches, smart clothes, Google glasses, etc) tests predict poor health will see insu- gardless of the place of consumption. (so far) nine conferences on the economics of will mean we are always online, whether we like it or not. This rance costs rocket. Without any access The recent EU agreement allowing the Data country of the buyer, not the seller, the software and internet industries was held in future is full of hopes and fears. The social acceptability of digi- to our medical data, internet platforms to levy VAT on digital sales, is a step January 2001. Important theoretical advances in talisation rests on the assurance that the information we provide ownership can already predict whether we have a medical history, adopt risky behaviour, towards eliminating tax competition. our understanding of new phenomena, such as will not be used against us, that internet platforms respect their In future, added value contract with us, and that their recommendations are reliable. take drugs or smoke. But taxation of two-sided platforms platforms and multi-sided markets, have been will mainly be in data processing. Will In short, it is based on trust. like Google is very difficult, as they only stimulated by the exchange of information and we control access to our own data? If charge advertisers, and do not techni- eBay raises prices or provides a poor Employment and perspectives with our research partners. cally sell anything to consumers. service, we do not want to move to ano- inequality ther platform without the reputation To strengthen this fruitful relationship, TSE and we have painstakingly built on eBay. It A worrying statistic for the Institute for Advanced Study in Toulouse seems natural to distinguish between France is its lack of new (IAST) launched the Jean-Jacques Laffont Digital data that belongs to users of a plat- businesses on the inter- The medical profession Chair in February last year to promote research form, and the processing of such data, national stage. To create jobs, we need an of tomorrow will be entrepreneurial culture and world-class on the impact of digital technology in such areas which becomes property of the latter. In unrecognisable. practice, the distinction can be unclear. universities, as knowledge, data analy- Will machines replace as industrial organisation, competition policy, sis and creativity become central to the education, finance, culture and health. This im- humans? It is often said that platforms should pay value chain. portant development has helped to consolidate for our data. But because we exchange the research investment of Toulouse economists our data for free ancillary services (such Self-employment is on the rise, as new in this domain. As part of this initiative, the se- as search engines or online video), or in technologies facilitate contact with clients cond TSE Digital Forum is taking place this June commercial transactions (in the case of and allow low-cost reputation-building. in Paris. The event will bring together academics, Uber and Airbnb), companies can often Digitalisation has also facilitated the di- vision of production into basic tasks and policy-makers and private partners to discuss claim they have spent money to acquire the data. Uber’s controversial “surge pricing”. Our the big questions that digital technology raises labor code was designed for factory wor- for organisations. Health kers, not part-time students or retirees, freelance journalists or Uber drivers. The Jacques Crémer & Paul Seabright Big data is a great oppor- dice must not be stacked in anyone’s favor. TSE-IAST Digital Chair coordinators tunity for health. It will provide more accurate Digitalisation and robotics breed fears and cheaper diagnoses, strengthening of mass unemployment and inequality. preventative medicine. It may also enable But technological progress destroys jobs equal access to care. Cheap monitoring and creates others. The real question is:

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TSE DIGITAL FORUM

FORUM THEMES The future of work Staying ahead his June, the Jean-Jacques Laffont Digital Chair is bringing together and Jean Tirole (TSE). “The public will of the curve world-class economists, professionals and policy-makers at the TSE be high-level professionals with ac- Digital Forum in Paris. Under the theme ‘Digitalisation and the future of cess to top decision-makers,” says TSE T organizer Jacques Crémer. “The aim of work’, TSE faculty Jean Tirole and Augustin Landier will chair debates focused Optimal the Digital Forum is to present results on the impact of recent technological developments on the organization of based on the best recent research. We organization work, industrial structure and income inequality. want to convince people that economic How can newcomers build The stellar cast of speakers at Palais Hagiu (Harvard), Augustin Landier (TSE), thinking has something to bring to the an online marketplace? Brongniart will include Wouter Dessein Raffaella Sadun (Harvard), Marshall table. We have a great line-up and it Centralization vs (Columbia), Luis Garicano (LSE), Andrei Van Alstyne (Boston University, MIT) should be lots of fun.” decentralization Avoiding the pitfalls of Digitalisation is not multi-sided markets business as usual Transforming arshall Van Alstyne is a professor at Boston University and a visiting fi rms scholar and research fellow at the MIT Initiative on the Digital Eco- How to manage nomy. He is a world expert on and his work M transitions on two-sided networks is taught in business schools worldwide. Van Alstyne How IT and network Wouter Dessein Luis Garicano is an adviser to leading executives, a former entrepreneur, and a consultant to effects are changing the startups and Global 100 companies. His presentation at the TSE Digital Forum way we do business will focus on how digitalisation is changing the fundamental nature of how Where will we find the jobs fi rms are organised. of the future? In a recent book, Platform Revolution, and driving out competition but using the series of articles, Van Alstyne and collea- other side of the profit equation. Now gues argue that giant firms like Apple, firms use demand economies of scale, Alibaba, Facebook and Uber are inevi- also called ‘network effects’. By increa- Communication table. Monopolistic competition in the sing volume, firms can increase value, internet era resembles the monopolistic which increases volume, which in- revolution competition of the industrial era but for creases value. What are the consequences the opposite reason. At the turn of the for economic growth, Andrei Hagiu Augustin Landier previous century, supply economies of Network effects, however, scale more inequality and productivity? scale allowed firms producing , oil, readily outside the firm than inside the Attention allocation and automobiles and rail trans- firm. This inverts the func- its effect on organizational The aim is to present results to drive out competition. tions of the firm, moving performance By increasing volume, they value creation from inside to based on the best recent research. could lower prices, which in- outside. A shift in the source We want to convince people that creased their volume, and of value drives changes in economic thinking has something lowered prices. marketing, human resource to bring to the table. management, operations and Jacques Crémer In the current century, firms strategy. Emergence of mo- Co-organiser of the TSE Digital Forum providing operating systems, nopolistic competition also search, social networks, and drives changes in regulation Raffaella Sadun Jean Tirole Marshall Van Alstyne matching markets are also and policy.

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TAXING PROBLEMS How to make Blockchain: All about platforms platforms pay what’s it

ome digital fi rms have invented very successful business models, generating immense profi ts in the process. Yet they worth? S often pay very little tax. The challenge for economics is to help tax authorities to respond fairly and effi ciently. lockchain, an ingenious distributed TSE researcher Jacques Crémer is a guest editor of the upcoming special ledger technology that supports bit- issue of the Journal of Public Economic Theory (JPET) on taxation and re- B coin and other digital currencies, has gulation in the digital economy. Among other things, the issue studies how captured the imagination of bankers, econo- the tax bill of major internet platforms is often reduced because of the dif- mists, consumers and even criminals. ficulty in locating their activities to specific geographical jurisdictions and because major elements of the revenue-generating chain, such as the use With little consensus about the potential impact ISECO PROJECT of personal data uploaded by users, do not result in financial transactions. of the blockchain for good or ill, it’s clear that the subject requires serious analysis. Enter five Together with the issue’s co-authors, Crémer says tax authorities must TSE members – Bruno Biais, Christophe Bisière, Unlocking e-commerce platforms adapt to four important features of the digital economy: Fany Declerck, Bertrand Gobillard and Alexander Guembel – who have set up a working group on 1. A blurring of geographical frontiers the blockchain. The group aims to explain the im- runo Jullien recently joined an impressive array of TSE research pro- 3. Physical pact of this technology on financial intermediation Net neutrality - the principle that in- jects that have won vital funding from the European Research Council. (payment systems). Does it promote entry and ternet service providers must treat all 2. Large network effects which give monopoly power to platforms The ERC’s advanced grants aim to encourage exceptional research lea- competition? Does it increase risk? The group is B content equally - and data use will be because of coordination issues ders to pursue ground-breaking, high-risk projects that open new directions. currently in the preliminary stages of studying how examined using price theory, accounting the systems work. As leading thinker on the economics of two-sided markets, Jullien is a wor- for free services 3. Multi-sided markets, where platforms are used to connect different thy recipient of the grant. actors whose pricing strategies are interdependent His project aims to develop knowledge Under the title ‘Information Services: 4. Competition policy 4. The collection of user data of the economics of information services Competition and (ISECO)’, Providing decision tools for policy-makers by studying the strategic interactions Jullien’s project is organised in four parts: involved in the production and exchange Jullien plans to build on his pioneering For Crémer, the issue is whether the emergence of the digital economy of information. Jullien became interested 1. Development of relevant theory work on two-sided markets*, which is calls for new taxes, for the adaptation of former tax systems, or for fun- in information technologies in the late Focusing on two-sided markets*, network now a leading paradigm for the analy- damental reform of the international framework for corporate taxation. 1990s when working on bypass in te- dynamics and contractual externalities* sis of many information services. Much Toulouse economists have already contributed a great deal to our unders- lecommunications. Digitalisation has less is known on non-price dimensions tanding of the new strategies at work but more theoretical and empirical since triggered a massive increase in 2. Virtual content such as quality, consumers’ informa- work is needed. In particular, the design of new policies requires a more communications and huge changes in Studying specific issues such as search tion, consumers’ heterogeneity, the detailed analysis of the quantitative effects of taxation and of the likely the organization of trade. The conse- engines and other recommendations coordination process between the two reaction of digital firms to tax changes, as well as a better theory of cor- quences have been felt at multiple systems, privacy and online transac- sides, the role of exclusivity and design. porate taxation. levels: societal, political, cultural and tion costs He will investigate these issues using economic. state-of-the-art techniques such as global games. Watch and learn Susan Athey is member of the Toulouse Network *Basics Two-sided market: A platform that Building the digital society will require for Information Technology and set to receive the ties two distinct groups of users into massive investment in infrastructure, 2016 Jean-Jacques Laffont Prize. In this video she and a crucial factor will be how value : When the action of one a network of benefits. The platform explains how bitcoins work and how they might is shared between consumers, content party directly influences another, incurs costs and can collect revenue change the way we pay: without the latter having a link to the from both sides. For example: credit producers and infrastructure. Jullien Bruno Jullien Jacques Crémer original action. For example: research cards, search engines, social media plans to use original dynamic models TSE-CNRS researcher TSE researcher www.youtube.com/watch?v=JhdM4_iRHyE and development, air pollution. websites. to analyze the interplay of digital in- vestment and innovation. www.tse-fr.eu/iseco www.tse-fr.eu/people/jacques-cremer

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SEARCH ENGINE BIAS DIGITAL CHAIR SPECIAL REPORT Digital fi rms must A bridge over improve transparency disrupted markets

lexandre de Cornière joined TSE in September as assistant professor he Jean-Jacques Laffont Digital Chair, launched last year by TSE chair- after three years as a postdoctoral researcher at Oxford. With papers man Jean Tirole and French Minister for Culture and Communication Aon search engine bias and online advertising accepted for publication Fleur Pellerin, brings together academics, policy-makers and private Alexandre de Cornière T in prestigious journals, he lends a cutting edge to the work of the Digital Chair. partners to discuss digital technologies and their consequences for society. TSE researcher Google has recently been hit with an- whether intervention is required, and, if To help this vital work reach a wider audience, the Chair has recruited a dis- titrust charges by the EU. What are so, which type of policy – such as regula- tinguished economist to produce a special report on the impact of internet some of the key concerns about the tion or antitrust – is more likely to work. How has the Digital Chair helped you platforms such as Google, Facebook and Amazon. role of search engines as gatekeepers to develop your research? Professor of economics at the University very new and distinctive area of com- Diane Coyle to the web? Should internet platforms be allowed to TSE is a great place for any industrial of Manchester, Diane Coyle was formerly petition,” she says. “Economists have University of Manchester In the search engine market, Google is share personal data about their users? economist. The Chair was a big selling economics editor of The Independent, a very powerful set of tools for syste- accused of biasing its results towards The use of personal data, along with im- point to me. It allows me to meet many vice-chair of the BBC Trust and a member matically analysing these changes. We affiliate websites (Google Shopping, provements in targeting technologies, researchers from outside institutions of the UK Competition Commission. She want to explain what we know already, strategy? What can we say systemati- Maps). In the mobile operating system has helped bring many new products working on related issues, as well as wants to help TSE build a “virtuous cir- such as how two-sided market models cally about how competition is working, market, some complain that Google to the market. However, some consu- practitioners whose knowledge and cle” between the worlds of media, policy apply. We also want to set out what we because, say, Google is so dominant in forces Android phone manufacturers to mers are legitimately concerned about questions can trigger interesting re- and academic research. “The caliber of don’t know. What should researchers search or because there are new food pre-install Google apps. The two cases how their data is used. search projects. the research here is fantastic and Jean be looking at? How can they address start-ups all the time?” have a similar logic: Google allegedly Tirole’s Nobel Prize has attracted people the questions that are coming further uses its dominance in one market to The priority should not be to determine from all over the world. There’s a lot of down the track?” Access to data will be a key issue in acquire or strengthen its dominance in which type of data can be shared: some We must increase transparency interest in digital economics but the aca- Coyle’s report. “A dominant platform other markets by making it difficult for consumers are willing to share data by educating consumers demics are scattered in many places. So Coyle hopes to provide insights tailored might have very large consumer be- consumers to use rival services. to get free services, and over-regu- and having firms disclose having a forum to bring all this together to the concerns of people in business, nefits. Does that make it OK for, say, lation would hurt them. But we must Facebook to be dominant in social media? straightforward privacy policies. is an amazing opportunity.” as well as policy-makers. “We should These concerns are related to certain increase transparency by educating aim to explain what researchers are Can we rely on the fact that often the practices by financial intermediaries or consumers and having firms disclose From accommodation to taxis, mar- discovering. Which platforms work and disruptor gets disrupted 10-15 years price-comparison websites. With Greg straightforward privacy policies. This kets face increasing disruption with the which don’t? If you see somebody co- later? Often we don’t have the data www.tse-fr.eu/people/ Taylor, we study markets with biased would allow competition to operate spread of innovative digital business ming into your market, or if you want to address these questions. So one alexandre-corniere-de intermediaries to provide guidance as to at the privacy level. models. In her report, to be published to enter a market, what can we tell of my recommendations will be that this summer, Coyle hopes to inform you about the design, reputation and we need to get that data. Possibly it’s GEEKONOMICS the responses of all sectors of so- feedback mechanisms? What have eco- about the legal framework, the terms ciety. “Internet platforms represent a nomists learnt that will inform business of access, because non-digital compa- nies often have a legal requirement to What drives online behaviour? give data to the statistical authorities. With web-based businesses, it’s not ei Xu is a talented PhD candi- Why are you interested online labor market, organization of in- as obvious.” date at McGill University whose in digitalisation? formation, open-source software, as € $ arrival at TSE will energize the The digital economy has changed everyday well as the airline and telecommunica- $ ¥ L life profoundly. To researchers, it brings tions industries. € Digital Chair’s research team. both challenges and opportunities: new There’s a lot of interest in What attracted you to Toulouse? economic models are needed to explain What digital development are you digital economics but the I chose TSE because of its world-re- many new phenomena; the availability of most excited about? nowned researchers. With close ties data helps us to study a wider range of Self-driving cars can make commuting academics are scattered in to industry and government agencies, questions. I have written a paper titled a more pleasant experience. However, € many places. So having a forum it is also a place where research can ‘What Makes Geeks Tick?’, which establi- many full-time drivers would suffer from MORE MORE to bring all this together is an effectively contribute to the common shes a causal effect of career incentives structural unemployment. amazing opportunity. good. I am also deeply attracted by the on people’s online behaviour. My future French culture. projects include online communities, leixu.org/CCSOC

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COLLECTIVE INTELLIGENCE Big data is watching you

esearchers today can analyze staggering amounts of information servers come and go, hard drives die. quickly and cheaply, often capturing behaviour as it happens. In April, As soon as the information exists, it TSE hosted a unique interchange between economists, behavioural will be used, and in ways that we can’t R predict. Instead of killing this data, biologists, social and computer scientists, mathematicians and physicists we’re going to realize that privacy, as at a two-day conference on ‘Collective Behaviour in the Big Data Era’. Here, we imagined it 50 years ago, no lon- we present excerpts from their wide-ranging debate on the unprecedented ger exists. risks and possibilities of the information age.

effectively to troubled families. But does Paul Seabright Is privacy the ‘I come from a troubled family’ badge (economics, TSE) dead? then stick to children in their data for the Slavery was one of the consequences rest of their lives? In terms of regula- of moving from hunter-gathering to Matthieu Roy tion, tech companies like Twitter could agriculture but it didn’t become uni- (computer science, CNRS, Toulouse) be required to have a box of terms and versal. In a digital context, somebody’s We want to share real time data from a conditions on the screen. Or be told, ‘You going to have power over you if you are research project cross-tracking cyclists’ can collect data, use it to sell ads, but online. But it doesn’t follow that every movements and pollution indicators, you have to delete it after three months.’ social arrangement will produce the in an open source spirit. But how can same degree of digital slavery. we ensure private information can’t be Bruno Gonçalves traced back to the user? We know that it (physics, New York) Francis Heylighen is difficult to ensure mobile phone data Nobody reads those messages, they (cybernetics, VUB, Brussels) remains anonymous, but we want to just look for the ‘I accept’ button. And Data is power, but a gun is also power. avoid malicious use. what does it mean to delete informa- There are guns in the world but most tion? Companies like Facebook, Google of the time they are not used. Criminals Javier Borge-Holthoefer and Twitter cannot promise they have who do use them are often punished. (computational social science, deleted information. Because they don’t We need to define what abuse of data IN3, Barcelona) know. Everything lives in the cloud, is, then make laws to prevent it. Imagine I’m in a car with my lover and constraint used to be either the height I don’t care about fishing for cor- that is exposed without my permission. Does big data or the width of the data. Now, it’s the relations. I want to understand the In cities, you are ‘sensed’ in many ways, mean better time and scarce attention of resear- parameters, and give scientific ad- even if you are not consciously active on chers, and the gullibility of the public and vice to policy planners based on data your phone. I was living in Doha and traf- research? policy-makers. When you can generate and modelling. With data mining, we fic monitoring systems track Bluetooth hundreds of correlations by pressing a wouldn’t have the theory of relativity. devices to count passing cars. It means Derek Ruths button, it’s tempting not to bother with It’s important to believe in the power of I can trace people’s trajectory and say (computer science, McGill, Montreal) trying to understand causality. gray cells to extract meaningful infor- this guy lives here, works there. Online data can provide answers easily mation and understand the hierarchy and cheaply, but often at the expense Suzy Moat of mechanisms. Suzy Moat of accuracy. We use machine-learning (computer science, Warwick) (computer science, Warwick) techniques and algorithmic approaches, Big data does not mean all data, there Diane Coyle As well as negative outcomes, it’s impor- and it’s important to be aware where are clearly people missing. In some cases, (economics, Manchester) tant to consider opportunity cost. That’s these can break down. Most social media you can calibrate, but what’s exciting is My concern is about sampling and other not just what research we can’t do but content is complete gibberish. It’s very that these new data sources comple- issues: the data is private, it’s owned also what decisions can’t be improved. unstructured and noisy. ment traditional sources. It’s an extra by the large companies, we don’t know weapon to understand behaviour. what the data generation process is, Diane Coyle Paul Seabright if it’s stable, when it changes, or even (economics, Manchester) (economics, TSE) Marc Barthelemy whether it’s socially influenced. Big data analysis may be a fantastic Big data sets remove one constraint and (physics, CEA, Paris) opportunity to deliver services more make us more conscious of others. The I’m interested in good data, not big data. ...

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EXCLUSIVE: MICROSOFT’S CHIEF ECONOMIST TALKS TO TSE MAG ... But there are lots of applied microeco- Lessons for nomists working in health, education economics and social policy who have been doing careful, structured analysis on very large ‘France has Marc Barthelemy datasets, with solid inference techniques. (physics, CEA, Paris) Economics is still in its infancy, the pre-Co- Suzy Moat a culture pernican period, but now we can really (computer science, Warwick) push the models and test with data. It’s For many years, people were trained this loop between theory and empirical to work out a theory before collecting observation that produces robust mo- data. Starting from the questions is ar- of innovation’ dels and stronger predictions. Economics guably not the best approach anymore, needs its scientific revolution, moving because the data’s already there. Many far beyond linear regression. people in science, business and policy get fixated on a question which can’t Rencontre� R ince leaving his professorship Diane Coyle be answered with available data. But if at Caltech, Preston McAfee (economics, Manchester) you looked slightly to the side, there’s has held senior roles at Too many economists don’t take data se- often a very valuable question that you i� Toulous� S Yahoo and Google, before joining riously, particularly in macroeconomics. could answer. Following the success of previous Microsoft as chief economist in Rencontres R, the fifth meeting will 2014. In this exclusive interview take place at TSE from June 22 to 24. with TSE Mag, he offers the keys to The purpose of these meetings is to the digital future, from unexplored provide a national forum for interac- Drea� tea� technological frontiers and tion and sharing ideas on the use of R Advances in digital tracking and other technologies are encouraging economics software in various disciplines (such as accelerating business effi ciency to and other social and behavioral sciences to become ‘big-data sciences’, says visualisation, applied statistics, bioin- lifetime learning strategies and the TSE researcher Adrien Blanchet, who organised the conference in partnership formatics and biostatistics, Bayesian groundbreaking economic methods. with CNRS researchers Matthieu Roy, Clément Sire and Guy Théraulaz. “We set statistics, data analysis, modeling, ma- up the event to promote cross-disciplinary interactions between world-class chine learning and high performance How did you end up at Microsoft? researchers from various communities: quantitative ethology, social sciences, computing). economics, information technologies and statistical physics,” says Blanchet. To quote the Grateful Dead, “What a long, strange trip it’s been.” The short A series of tutorials on specific or ad- answer is that I’ve followed my interests “Our hope was that this approach would provide important insights into some vanced aspects of R will be offered to in mathematics, especially in the theory of of the big questions confronted by modern research into collective behaviour. participants on Wednesday, June 22. We want to understand how interactions between individuals can be modified algorithms, in mathematical economics, in applied economics, especially on making Preston McAfee to improve coordination or collaboration at a group level. There are so many ex- These meetings are intended for all governments and businesses more effi- Microsoft’s chief economist citing avenues of research. Computational analysis of digital traces may allow types of R users: researchers, teachers, cient by harnessing market forces. This led us to build predictive models of decision-making. We hope that quantitative students, professionals, etc. They are naturally to auctions and, through three analysis of behaviour will be able to reveal the information required to coordi- open to statisticians, computer scien- or four more steps, to being chief econo- nate individuals’ actions in a group or to help them to make efficient decisions.” tists and all areas of application. Novices mist of Yahoo, which in turn led naturally and return on investment; and lots in stage, where we help understand the and experts are equally welcome. to Microsoft via a brief detour to Google. common with engineering, such as tech- value in market segmentation created by niques and a culture of optimization. As multiple product versions. Our approach The official language is French but What is the role of economics a result, my team engages frequently in of using data to support decisions, with presentations can be made in English. in business decision-making work on pricing, collaborating with both only a modest use of theory, is very well at Microsoft? marketing and engineering. received within Microsoft. We also contri- One of the biggest advantages of economics bute to business models for new types training and analysis is that economists This engagement can work either after of engagements, especially between r2016-toulouse.sciencesconf.org have lots in common with marketing, in- the fact – estimating demand models to Microsoft Research (MSR) and customers. Adrien Blanchet Matthieu Roy Clément Sire Guy Théraulaz cluding language like net present value guide pricing – or at the product design

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How can France and other countries How do economists need to adapt to the foster a culture of innovation to rival digital revolution? What can we do to that of the US high-technology sector? prepare the economists of the future? First, France has a culture of innovation, The digital revolution has enabled three especially visible in the . important new methods for economists. France produces fantastic mathemati- The first is big data. The flow of data cians, scientists and engineers, and has is staggering and regressions are run especially where inputs are not numbers in the areas of mechanism and market a well-educated, capable workforce. with more than a billion right-hand- but images, unstructured text or audio. design. As much of my work at Microsoft Second, there is a tendency to look 1 2 side variables and a trillion observations. These techniques open new approaches is guided by market design research, my 3 4 at Silicon with envy, not just in Standard techniques break down - the to economic modeling, ones which will team are frequent consumers of this work. Europe but around the world. Success, variance-covariance matrix has 1018 ele- resist our standard “comparative sta- I think, comes not from copying Silicon ments and is not invertible. Moreover, tics” approach. What is the most exciting thing about Valley but finding the technological fron- these data are often non-quantitative: working at Microsoft? tier that doesn’t have an epicenter. In text, audio, images, video. The richness of Finally, as so much of the real economy Microsoft is in the midst of a massive this period of great technological flux, the data is striking as we can now mea- moves online, a whole new approach to transition from shrink-wrapped software there are many candidates – drones, sure economic activity at a very micro economic analysis becomes available, one to online services. This transformation re- design of new materials, 3D printing, level. I have heard of analysts setting up pioneered by John List and David Reiley: quires not only a change in products, but silicon photonics, cyber security, mi- cameras to track trucks leaving a firm to the field experiment. It becomes possible changes in update cycles (days instead of cro-satellites, industrial automation, estimate output. New statistical methods to intervene in markets in a much less years), testing methods, product deve- nano-machines, genomics, and solar, are needed. removed way, actually testing theories lopment, pricing and organization. As a wind or tidal energy. Any of these in the economy itself. result, there is an explosion of new ideas technological developments are large Second, problems of image recognition, and products. It is an incredibly exciting enough to spawn a substantial tech- 1 / The new Microsoft Flagship Store at Westfi eld Sydney, 2015. voice to text, language translation and How do you and your team interact time to be at Microsoft. In the past two 2 / At the Microsoft Flagship Store in New York before the launch of “Halo 5”. nology ecosystem and none currently 3 / The Microsoft Flagship Store on Fifth Ave and 53rd St in New York, 2015. video extraction have fallen to a new with TSE faculty? months alone, I’ve consulted extensively has an epicenter. Finally, the key to US 4 / E2 presentations for educators. machine-learning technology of deep I’m old friends with several TSE faculty. with the Royal Court of Saudi Arabia, a innovation is the willingness to fail. neural nets. This technology, unlike Most of our non-social interaction comes fashion company, and the Panama Making it easy to try and fail – fail fast earlier machine-learning approaches, ap- in the form of consumption of their pu- Authority, and in all cases helping them – is necessary. pears to solve a variety of problems that blished work. TSE is one of the very top by adding good economics to enginee- were considered intractable previously, economics faculty and is incredibly strong ring and data issues. It is fascinating. How will Microsoft and its competitors complex processes like supply chains, How do we get the balance right in this shape the future? What are some of can be improved, with both falling costs new gold rush? Who are the losers? And the opportunities and dangers of the and increased resilience. Businesses cur- what can public and private actors do digital economy? rently have very little insight into their to help them? There are huge opportunities. Cheap human resources, but that is about to For the past 10,000 years, there has Frenc� connectio� sensors – the Internet of Things – change, as the digitization of employee been an increasing favoritism of brains mean that much of the physical world behaviour, both communications and over brawn, of intellectual strength over For more than a decade, TSE researchers and Microsoft have work already spans a can be tracked and monitored. Machine physical actions, permit a great impro- physical strength. I don’t see the next de- been working together in an extremely productive collaboration. huge variety of topics, vement in management visibility into cades as anything but more of the same learning on top of that data means The Toulouse Network for Information Technology (TNIT) was and has helped further the workforce. We are not far from a in this trend. Moreover, the acceleration the efficiency of processes, even very created in 2005 to stimulate high-quality economic research on our understanding of day when machines can help remove in the pace of technologies means that, blockages, bring together employees where my parents could expect to hold the software industry, the development and role of the internet, these critically important Jacques Crémer, TNIT scientifi c coordinator who need to coordinate, reduce du- one job for an entire career, workers will and intellectual property. The network is funded by Microsoft, markets. plicated efforts, identify and provide have to be substantially retrained, to and managed by the Institute of Industrial Economics (IDEI), a Members commit themselves to active research in the network’s relevant resources, and even choose learn new tools, perhaps every five to 10 partnership-oriented research centre that draws on the skills interest, and to discuss each other’s research and engage in Microsoft is in the midst of team-members to improve efficiency, years. The winners are people who can of TSE researchers to work alongside businesses and the dialogue with high-level practitioners at a yearly meeting. To a massive transition from and reduce time-to-market. On the and are able to adopt a lifetime learning on economic questions and to accompany them meet TNIT’s expectation of world-class research, members enjoy shrink�wrapped software to dangers, we need to be careful to res- strategy. Government and companies in strategic decisions. complete academic independence in their work. online services. pect privacy, and use the new insight will need to invest in frequent retrai- TNIT aims to engage some of the best economists in the world to empower employees, and help them ning and encouraging skill acquisition, in the issues generated by digitalisation. The resulting body of idei.fr/tnit to grow. as most major corporations already do.

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TSE DIGITAL COURSES Cutting big data down to size

t the heart of the digital revolution, big data is transforming research, SG: Sometimes the value of applications business opportunities and our daily lives. To give students a fl ying is less clear. Surveillance and analysis of start in this ever-changing environment, TSE researchers Anne information sharing on social networks A is still not understood, for example, and Ruiz-Gazen and Sébastien Gadat teach cutting-edge courses that draw on Google Flu Trends has failed in the past, the skills of TSE’s innovative team of statisticians and computer scientists. significantly overestimating the real nu- In particular, their masters programme offers 30 hours of big data classes, mber of sick people. as well as the chance to become profi cient in machine learning, database management, web mining and statistical languages. What is the expertise of TSE What exactly is big data? , or BlaBlaCar, which depends on researchers on the subject? Sébastien Gadat (SG): Big data is the a community and the sharing economy, ARG: We have a team of 10 statisti- science of data, at the crossroads of are good examples. Marketing depart- cians working on complex data who computing, statistics, optimization and ments are also using big data to make are very useful when it comes to big modelling. What is really new is using use of information they gather from data. Sébastien joined us two years those different fields together. their customers; the recommendations ago, bringing his expertise at the To describe big data, we often refer to system of Netflix is one example among crossroads of statistical learning and optimization. Statistical learning (or the three “V”s: variety, volume and ve- many. In medical research, biologists are in computer science, more precisely in prediction method on a given database. three important questions: What data machine learning) allows algorithms locity. Variety stands for the analysis of now able to work with data volumes database management, web mining Together with other Toulouse universi- is available? What new and interesting to become smarter by comparing their many types of information, usually with they couldn’t process before. Finance is and statistical languages. ties, TSE is also participating in annual problem can we solve? What innovative predictions to real results. Our courses complex structures (graphs, temporal another field of application, particularly “big data days” in Toulouse. The last technology can we use? series, 3D pictures, social networks, etc) high-frequency trading. also draw on the skills of researchers How long has big data been taught two meetings were held at University which are saved in non-standard ways at TSE? Paul Sabatier but this year’s event will ARG: Because big data is very important (unsynchronized or in blocks). Volume ARG: Two years ago, when Sébastien take place at TSE. for companies, it isn’t surprising to see refers to the gigantic quantity of data joined us, 30 hours of big data classes the number of internships and jobs re- analysed. Velocity is perhaps the most were integrated into the Statistics and ARG: We always try to implement a pro- lated to these issues going through the crucial element given the need to pro- Econometrics master. gression system in our programmes from roof. It’s an exceptional opportunity for cess data almost instantly. Firms need the first year to the masters. So students our students to master these new skills algorithms which can answer complex What is unique about TSE’s in the first and second year are taught and boost their career plans. It should questions in a split second. approach to big data? the basic ways to crunch data on one or also be noted that recruitment methods SG: We focus our teaching on the un- two variables before, in their third year, are evolving fast and companies filter What are the fields of application? derstanding of theoretical tools, in being introduced to statistical methods job candidates using statistical learning Anne Ruiz-Gazen (ARG): There are order to master basic statistical and for more variables. More complex struc- projects. Our teaching, directly related to multiple applications for firms and re- mathematical methods, and on the tures are presented in the masters. these methods, is an ideal preparation searchers. Companies such as Waze, direct management of databases on for our students. which relies on the real-time positions computers. Our programme also em- What are the key issues for of their users to better evaluate phasizes project-based learning through companies and why is it important group work. Our students participate to master big data skills? The number of big-data in data science challenges every year SG: The main challenge is to innovate related internships and jobs in Toulouse and across France, com- in the way we use and analyze data in To describe big data, is going through the roof. peting with other schools to find the order to propose new services. Recent we often refer to the three best and fastest way to develop a successful start-ups ask themselves “ V”s: variety, volume and velocity. Sébastien Gadat, Anne Ruiz-Gazen TSE-UTC researchers ecole.tse-fr.eu/en/m2-international-econometrics-and-statistics

28 tse-fr.eu tse-fr.eu 29 Campu�

their readers, whose prio- University case, they might not take rities or interests may be rankings tend to into account the relevance different. They thus can be retrospective, of course content to anti- be misleading. Some of cipated developments in them, for example, adopt short-termist and market requirements for a a general approach to eco- self-fulfi lling given country, wages not nomic efficiency without earned during training or taking into account the economic prin- the impact of social security on pay. ciples that might be relevant to higher Data might be omitted because it is education institutions, such as club difficult to source or because of the theory and the local . Using complexity of the corrections required. While they have encouraged some fragile approximations, some others Other rankings estimate the scientific institutions to invest in neglected offer retrospective analyses from an quality of teaching staff using measure- fields, university rankings are retros- economic perspective in terms of re- ments taken from a backward-looking, pective and short-termist. They tend turn on investment in training. In this cumulative process. to be self-fulfilling, reinforcing the re- putational dimension on which they tend to rest. Certain rankings collect opinions on the reputation of insti- HOW SHOULD WE GRADE UNIVERSITIES? tutions. These opinions, taken from professionally qualified persons, can themselves be influenced by previous rankings (Bowman and Bastedo, 2009; The trouble with rankings Bastedo and Bowman 2010). It would be prudent to only give credence to rankings that are clear about their un- umerous university rankings are now produced by the specialist press way that suggests scientific accuracy, derlying assumptions, when these are or academic institutions. Shanghai, Times Higher Education, QS, the but they are far from robust statistical deemed to be relevant. It would also N FT, RePeC... these and other grading systems provide information for practice. It would seem more reasonable be advisable to not just refer to one future students and their parents, higher education institutions, academic to group similar institutions. Higher ranking, but to combine several for a staff and public authorities. But Stéphane Gregoir, TSE’s Dean, warns that education institutions are involved in a multi-faceted assessment. wide range of activities: from education rankings can be misleading, due to the nature of the data and the methods at various levels of qualification and in Given the complex reality of higher chosen to compile it. a variety of disciplines, to academic or education, it is important for a young Over the past few decades, globalisa- financed. The cost of compiling informa- applied research, through library ser- institution with an original project, such tion has increased mobility, particularly tion and the multiplicity of factors make vices, and career advice or support. Not as TSE, to disregard rankings when ma- among students. But it is difficult for stu- the choice of a particular institution very all of these dimensions are necessarily king strategic choices or investments. dents to compare the pros and cons of difficult. In Europe, efforts have been covered by a single institution; they are A ranking should be the result of a different universities, due to the variety made to harmonise degrees so that not homogeneous and comparable. The strategy based on convictions, values of ways in which they are organised and students will find it easier to compare production of a unidimensional ranking and a concern for the interests of gra- them and to move between different can only be the result of subjective duates – not vice versa. It is important academic programmes. However, more choices as to the importance of these to try to understand and explain our needs to be done. National or internatio- different dimensions. Some criteria the- ranking to the people interested in our nal accreditation bodies produce detailed refore have greater impact than others project, in relation to the objectives of the A ranking should be the reports, but these are often difficult to on the rankings. institution. This is not always possible, result of convictions, values understand. and remains costly. Above all, joining and a concern for graduates In these conditions, differences occur in a higher education institution must be University rankings may be easy to rankings, reflecting choices which have an outstanding intellectual experience, - not vice versa. read, but they are not always easy to not been made explicit. The rankings do Stéphane Gregoir enriching our lives through the people, Dean of TSE interpret. Rankings are presented in a not necessarily respond to the needs of learning and values we encounter.

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