IAST #
CONNECT 13Autumn 2018
INSTITUTE FOR ADVANCED STUDY IN TOULOUSE
TRADING PLACES: HOW TRADE SHAPES OUR WORLD 2 IN THIS ISSUE iast.fr #13 IAST Connect #13 3 “IAST is a fantastic IAST CONNECT #13 CONTENTS meta-cognitive IN THIS ISSUE...... 2 collaboration” NEWS CORNER...... 4
I was very glad to be invited to speak at IAST’s Economics and Biology SPECIAL GUEST workshop on ‘Evolution, Cognition and Rationality’ in May. I was soon COGNITIVE GADGETS...... 6 Cecilia Heyes Is finance wishing that I’d been to previous events in the series as well. How did IAST is a fantastic collaboration. It’s a great thing to have all these disciplines too fast? in close proximity to each other. My impression is also that the people chosen IN-DEPTH our minds PAGE 14 for positions here are chosen very well. Not everybody can do interdisciplinary ON TRADE exchange. Not everybody can use those other languages or have enough tole- MERCANTILISM, SLAVERY AND WAR...... 10 evolve? PAGE 6 rance of uncertainty to really listen to somebody from another discipline. But IAST panel I spoke to lots of people here who have that meta-cognitive capacity: they’re NEED FOR SPEED...... 14 brilliant in their own discipline but they can also step back and compare diffe- Fany Declerck rent ways of thinking. And that’s crucial for effective interdisciplinary work. PLATFORM POWER...... 15 This edition of IAST Connect highlights IAST’s strength in promoting interac- Alexandre de Cornière tion and diverse perspectives on human behavior. In a global context of rising Who GLOBALIZATION’S VICTIMS...... 17 trade tensions, this issue takes on a subject traditionally seen as the reserve of Irene Menendez economists and shows how its effects explode across disciplinary boundaries, TOMB RAIDER...... 18 benefits from throwing up surprises that reshape our societies. Inside, a panel of IAST histo- Eric Crubézy rians discuss the far-flung effects of mercantilism, slavery and trade war; Fany Declerck and Alexandre de Cornière examine the lightning speed of modern CHANGING TRACK trade war? finance and the power of digital platforms; Irene Menendez analyzes the geo- Should tech ...... 20 PAGE 10 graphical and political fates of globalization’s victims; while Eric Crubézy draws What if you could switch careers? giants be tamed? on archaeology and genetics to reveal the impact of trade on Siberian gender IDEAS EXCHANGE PAGE 15 relations. IAST research around the globe...... 22 My own research, also featured in this issue, focuses on the cultural evolution of thinking. It draws on comparative and developmental psychology, cognitive neuroscience, philosophy, anthropology, behavioral economics and theoretical biology to suggest how our agile minds enabled us to construct the vast edifices of knowledge and skill that distinguish us from other animals. Interdisciplinary What are institutions like IAST represent an exciting new chapter in that story, bringing together Where does Siberia’s frozen different ways of thinking to better unders- globalization tand what makes us human. hurt? secrets? PAGE 18 Biannual magazine of the Institute for Advanced Study in PAGE 17 Toulouse, 21, allée de Brienne - 31 015 Toulouse Cedex 6 FRANCE - Tél.: +33 (0)5 67 73 27 68
Cecilia Heyes is Senior Research Fellow •Commissioning editor: Paul Seabright in Theoretical Life Sciences and Professor •Editor-in-chief: Jennifer Stephenson •Production manager: Carolyne Lamy of Psychology at All Souls College, •Editorial contributions: James Nash University of Oxford. •Iconography: ©Darian Garcia ©Studio Tchiz ©Eric Crubézy ©Istock •ISSN number: 2554-2141 •Graphic design, layout: Agence Yapak, www.yapak.fr •Environmentally friendly printing in France by Indika Iso14001 - Imprim’Vert - 4 rue Douladoure 31100 Toulouse - France - www.indika.fr •Circulation: 1 600 copies Anthropology 4 NEWS CORNER iast.fr IAST Connect #13 5
Biology FLASHBACK TO RECENT EVENTS IAST in action RULES OF PHILOSOPHY, DEMOCRACY AND DEVELOPMENT History LAW AND ECONOMICS JULY 5-6 JUNE 18-19 POLITICAL SCIENCE, ECONOMICS What can these subjects teach us about The second IAST-Sciences Po Paris conference on political Economy property, possession and modern economy and political science was held at IAST. Initiated markets? The second IAST Philosophy and by the CAPS center, this yearly event aims to promote Social Sciences conference investigated interdisciplinary, analytical and quantitative research. Philosophy the philosophical foundations of the economic analysis of law. Political science
IAST PRIZE IAST ERC Psychology appointments AWARD JUNE 21-22 BIOLOGY, ANTHROPOLOGY, ECONOMICS IAST prizewinners Jeanne Bovet, Jonathan Stieglitz and Boris Van Leeuwen presented their research explaining how factors during one’s development can influence future economic preferences.
INFORMATION, COMMUNICATION AND KNOWLEDGE HISTORY NEW CAPS DIRECTOR ADVANCED GRANT IDEOLOGIES AND PREFERENCES JUNE 25-26 MICHAEL BECHER INGELA ALGER JUNE 14-15 With specialists on subjects including Congratulations to Michael Becher who is now in charge of Congratulations to Ingela Alger who has been awarded an the British in Afghanistan, Revolutionary the Center for Analytical Political Science (CAPS). advanced grant by the European Research Council for her research POLITICAL SCIENCE France and Black Lives Matter, this project “Evolving Economics – Human motivation: Evolutionary conference examined how information What do millionaires think about redistribution? How do ideas about fairness, foundations and their implications for economics”. and communication has shaped our healthcare and vegetarianism spread? These intriguing questions were among world over centuries. those discussed at an international conference entitled ‘The Origins of Moral and Political Ideologies and Preferences’. UPCOMING IAST EVENTS IN TOULOUSE See www.iast.fr for more details
October 21-22, EVOLUTION, COGNITION AND RATIONALITY November 8, December 6, Scientilivre book SAVE Distinguished Lecture #2 Distinguished Lecture #3 MAY 24-25 festival Today’s identity discourse Gender norms In the footsteps of humans ECONOMICS, BIOLOGY and women’s work THE DATE and animals Biology is the natural foundation for any science that seeks to understand the behavior of living beings, including humans. This year’s Economics and Biology workshop also welcomed experts in computer science, physics, and psychology. 6 SPECIAL GUEST iast.fr IAST Connect #13 7 How did our minds evolve? • CECILIA HEYES • COGNITIVE GADGETS
example of a culturally inherited cognitive If Cecilia’s theory is true, human cognition is What makes human minds different from those of other animals? Visiting IAST in May, gadget. “Nobody doubts that reading is dis- at risk of falling down a ravine. “The cognitive Professor of Psychology (All Souls College, Oxford) Cecilia Heyes argued that small tinctively human cognitive mechanism. And instincts view suggests that human nature tweaks to our genetic starter kit allowed a much greater role for cultural evolution there is no print or script older than 6,000 is relatively invulnerable. In the cognitive than previously thought. Drawing on new evidence from the rapidly developing field years so reading has to be because of cultu- gadgets view, we don’t just lose knowhow, of social cognitive neuroscience, she believes that culture-rich human environments ral evolution; there hasn’t been enough time facts and techniques after a catastrophic war play a crucial role in teaching children not only what to think, but how to think it. for genetic evolution.” or epidemic, we would also lose the cogni- Starter Kit - Humans appear to have a genetically inherited tive mechanisms that enable us to learn attentional bias towards faces. Newborns and fetuses Construing the mind as the software run- These ways of thinking are culturally inhe- Just as we learn print reading through social look longer at the face-like triangle on the left, than at the from others. We would be in a better posi- triangle on the right (see Johnson, 2005; and Reid, 2017). ning on the brain, Cecilia studies the deve- rited, says Cecilia, a bit like simple physi- interaction, Cecilia points to evidence that tion than chimpanzees to culturally evolve lopment of distinctively human cognitive cal technologies such as spinning wheels parents also provide children with explicit them again, but they wouldn’t be restored abilities such as language, imitation, and or canoes. “A canoe doesn’t do its job well instruction in mind reading (that is, ascribing with each birth.” the capacity to conceive of mental states thanks to genetic evolution. It’s also unlikely thoughts and feelings to others). Similarly, far by living conditions that depart from in other minds, to reconstruct the past, ima- that it’s been designed. A good canoe is more research into the spontaneous emergence On the bright side, Cecilia suggests that those of hunter-gatherer societies. Rather gine the future, and to understand the way likely to be a consequence of many bad ones of a new sign language in Nicaragua in the human cognition is more agile than pre- than taxing a Stone Age mind, new techno- the physical world works. in the past. The good canoes didn’t sink and 1970s suggests that the ability to commu- viously thought, constantly adapting to new logies – social media, robotics, virtual reality were therefore more likely to be available for nicate with others is crucial for learning to social and physical environments. “We need – provide the stimulus for further cultural A widely held view, put forward by evolu- copying when new canoes were needed.” read minds. not fear that our minds will be stretched too evolution.” tionary psychologists such as Steven Pinker, is that these mechanisms are cognitive ins- tincts that we are born with. If we are able to “The mechanisms that read the minds of others, and reason about cheating and causation, it is largely thanks distinguish us from other to genetic evolution. Experience, in this animals are small additional the minds of baby humans are very similar view, plays only a triggering or tuning role. fittings. They’re little extras to those of baby chimpanzees. But humans with big effects” are more motivated for social reward and less mutually aggressive, enabling the young to learn from a much broader range of adult models. At the same time, she insists, a newborn human mind is no blank slate. “The lion’s Another important tweak is human infants’ share of human behavior is controlled by genetically inherited bias to look at faces. psychological mechanisms which, although “That initial bias quickly becomes converted much changed by experience, are originally into gaze cueing, a tendency to look where genetically inherited. Most of our cognitive another individual is looking. Then with machinery is shared with other animals but even greater specificity, if another indivi- genetic evolution has made small tweaks to dual has looked you in the eye, you are more our starter kit that allow us to upload from likely to turn to where they are now looking. other people these new pieces of cognitive This sequence enables adults to direct the kit. The mental mechanisms that distinguish flow of information to infants by control- us from other animals are small additional fit- ling their attention.” Humans are also better Cecilia argues that evolutionary analysis tings, gadgets; they’re not heavy machinery. than newborn chimpanzees at associative should be refocused from genetic to cultu- They’re little extras with big effects.” learning, memory and resisting temptation.” ral evolution. Rather than fully formed cogni- tive instincts inherited at birth via DNA, she Some of the most important modifications Sifting the evidence, Cecilia finds that the FIND OUT MORE suggests that during childhood we down- to our genetic starter kit relate to changes case for the cognitive instincts view has Cecilia’s book ‘Cognitive Gadgets’ (2018) load “cognitive gadgets” from the social in our temperament, attention and mul- been steadily eroded over the past 25 is available from Harvard University Press. environment. ti-purpose cognitive mechanisms. At birth, years. Print reading is perhaps the clearest 8 IN DEPTH iast.fr 9 TRADING PLACES
In depth on trade What explains the human propensity to ‘truck, barter and ex- change’? In a political climate in which the free-trade consen- sus is under attack, this special edition of IAST Connect fo- cuses on the ways in which trade has shaped our societies, from the slave ships and mercantilists of the 17th century, via the frozen wastes of Siberia, to the high-speed trading and digital monopolies of today’s tech giants. Drawing on a range of disciplines including finance, history, political eco- nomy, geography, genetics and archaeology, IAST resear- chers highlight trade’s complex dynamics and often unfore- seen, far-reaching consequences.
P10-12 ...... THE GOOD, THE BAD AND THE UNEXPECTED IAST panel – Mercantilism, slavery and trade wars
P14 ...... TRADING AT THE SPEED OF LIGHT Fany Declerck – Can regulators catch up?
P15...... PLATFORM POWER Alexandre de Cornière – Taming tech giants
P17...... OPEN BORDERS, OPEN WOUNDS Irene Menendez – Free trade and its discontents
P18-19 ...... TRADE SECRETS IN FROZEN GRAVES Eric Crubézy – Raising the dead 10 IN DEPTH iast.fr 11 TRADING PLACES The good,the bad and the unexpected • IAST PANEL • MERCANTILISM, SLAVERY AND TRADE WAR
The history of trade is about more than the exchange of physical goods. It has standard explanation is the European dis- involved the transfer of services, ideas, disease, even humans and other spe- covery of the New World, which flooded the Simon cies. It has also opened up communities to other cultures, exposing them to European market with silver and rendered Fuchs new risks and opportunities. We asked a panel of IAST specialists in economics Asian goods less significant, and the corres- and history to discuss the role of trade in creating a more interdependent world. ponding development of European imperia- lism, whereby European powers dismantled What are the conditions for trade? well as cultural, linguistic, and political bar- Middle Eastern monopolies for producing Why does it flourish in certain riers. These problems seem at times almost goods, gained tax exemptions and conces- locations and periods of time? insurmountable, yet the ubiquity of trade sions for extracting natural resources, deve- speaks to its enormous benefits. loped actively managed colonies, and also Simon Fuchs: Imagine two villages: each can lent money to Middle Eastern rulers whose try to provide for all its inhabitants’ needs Kathryn Why did the West overtake the states became heavily indebted to them. Schwartz alone or seek to trade with the other. Trade trading empires of China and the is beneficial if it provides existing goods Islamic world? at lower prices or entirely new goods. As “Britain needed to export Ricardo pointed out 200 years ago, trade Kathryn Schwartz: My research focuses on manufactures and import food, benefits both villages by allowing them to the Middle East, a region which was once so it had a strong incentive to specialize in what they are best at. However, the crucial axis of trade between Europe, support international trade” The Khan El Khalili bazaar in Cairo, Egypt. trade between the villages also involves the Far East and South Asia, and which gene- challenges: it requires the establishment rally functioned on a provisionalist model. of trust, transportation infrastructure and a It gradually became a fiscally indebted area Gabriel But this is somewhat ahistorical, as in the exports. In addition to these tariffs, mono- 17th and 18th centuries European coun- poly systems kept goods more expensive steady flow of merchants who must grapple which sourced raw materials to Europe, and How did mercantilism come to be Mesevage with fluctuations in supply and demand, as consumed European processed goods. The tries were constructing monopoly markets, for citizens at home. By the end of the 18th challenged by ideas about free trade? extracting raw materials from colonies and century, ‘fiscal military crisis’ in Europe was selling their own exports to colonial markets an important catalyst for American rebel- Gabriel Mesevage: Mercantilism is a term at monopoly prices. lion, French revolution and wide-ranging HISTORICAL TRENDS IN GLOBAL DISTRIBUTION OF GDP used to describe the economic policies of reform in the UK. GDP European states in the 17th and 18th cen- The economic historians Findlay and turies. It is conventionally associated with an O’Rourke suggest that “given this ‘zero- Britain was at the forefront of the move- economic policy focused on the accumula- 40 sum’ focus on the international division of ment toward free trade in the 19th cen- tion of monetary resources (at that time gold Mohamed monopoly rents, classical arguments regar- tury. This may have been due in part to Saleh and silver) and the perception that interna- ding the gains from trade to all parties under ideas popularized in the 1840s by radical USA tional economic affairs are zero-sum: one 30 peaceful conditions of perfect competi- political economists, and new journals like state’s gain is another’s loss. Mercantilist thin- Europe tion did not apply”. If all other states pur- The Economist, but there are simpler eco- kers viewed political power as a tool for car- sue a policy of mercantilism, attempting to nomic reasons: Britain needed to export ving out gains in international trade, which 20 China be a unilateral free-trader could end disas- manufactures and import food, so it had in turn could be used to enhance a state’s trously: rival states might shut you out of a strong incentive to support a well-func- India political power. export markets and use their earned foreign tioning international trade system. British 10 exchange to build large armies that they landowners who wanted high tariffs on Middle East Nowadays there is a tendency to deride Nicholas might turn against you. imported foodstuffs were eventually co-op- ‘mercantilist’ thought, particularly as it is Crawford ted or replaced by a manufacturing elite, 0 Year easy to find examples of fallacious econo- Mercantilism, however, was quite costly as who had a vested interest in cheap labor 1 1000 1500 1600 1700 1820 1870 1 13 1 50 1 73 2013 mic reasoning by mercantilists that fail to it involved nearly constant warfare, funded (made possible with cheaper food) and a Source: Maddison A (2007), Contours of the World Economy I-2030 AD, OUP recognize the potential gains from trade. through debt and taxes on imports and reduction in European tariffs. 12 IN DEPTH iast.fr 13 TRADING PLACES
DENMARK undercut the important work of develop- NORWAY ICELAND SWEDEN ment economics, but rather highlights the RUSSIA
fact that questions of who profits and who CANADA GREAT BRITAIN suffers from globalization have always had DUTCH REPUBLIC F urs ASIA complex and unexpected relationships. NEW , fish FRANCE ds EUROPE FRANCE fish oo ber, d g My sociologist colleague Kofi Asante has NORTH Tim re tu ac CHINA BRITISH NORTH o uf SPAIN OTTOMAN AMERICA bacc an PORTUGAL traced the continuing political and economic AMERICA To M EMPIRE JAPAN
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of economic exchange have fostered coope- e , s c , societies until about 200 years ago. South f e i e l d f n l e tutions, but also at the level of individual v a r o THE TRIANGULAR TRADE o f o a f c t e G l C t th th o p , ration across cultures from the earliest socie- s o e AMERICA c s p Late 16 to early 1 century e , c e What does your research reveal , e f f s lives. For example, Omar Cheta has shown y , P k c o e n l i k c i l C i o p i p ties, though historians of the early modern b S S S Euro e E S about the dynamics and interest that in 19th-century Cairo, an entirely new Manufactures Atlantic world (c. 1450-1800), which I’m Cape of groups involved? form of courts was developed to oversee ood ope broadly trained in, tend to focus as much financial disputes between Egyptians and on the losers as on the winners in exami- Mohamed Saleh: Ending slavery was the foreign merchants. This year I have been Manufactures ning the “globalizing” effects of commerce. primary objective of the American Civil War researching Amin al-Madani, who took the Raw materials Slaves British Danish Dutch French Portuguese Russian Spanish (1861-1865) and the subsequent blockade The transatlantic slave trade was one of the bold step in 1883 of traveling from Cairo to America Africa on cotton exports from the US confederacy, most impressively integrated cross-cultural Amsterdam with several hundred Islamic but the rise in world cotton prices led to a systems of exchange in the early modern manuscripts, hoping to sell them to orien- massive expansion in cotton cultivation in period, and we’ve learned much about the talist antiquarians. The Dutch publisher Brill the world’s major cotton producers at the volume and scope of the traffic as well as eventually purchased and sold these books time: India, Brazil, and Egypt. In my research, the complex, varied forms of credit utilized to universities such as Princeton and Yale. ‘Trade wars are good, and easy to the trade spat. Trade policy was wielded to raised on manufactured goods, industries which is based on Egypt’s population cen- in transactions that rendered people into There, they have shaped research by gene- win,’ insists Donald Trump. benefit some other US industry, but with that relied on those goods required subsidy. suses of 1848 and 1868, I found that agricul- commodities. rations of scholars. Is protectionism viable in the 21st knock-on consequences. This stimulated legislative horse-trading tural slavery increased dramatically in Egypt century? between US politicians, each seeking to following the cotton boom. Slaves were There are long-running debates on the Simon Fuchs: My research shows that trade Tariffs allow governments to pick domestic defend his constituencies’ interests. imported from current-day Sudan via cara- degree to which “Europe underdeveloped caused by the First World War had unex- Gabriel Mesevage: Trade wars are not good winners and losers. Although the Smoot- Protectionism is a boon to politicians, pro- vans across the Sahara desert. Interestingly, Africa” through the slave trade, but recent pected effects: it fostered development in and it’s unclear how one might ‘win’ one. Hawley increase in tariffs was not enormous, viding an opportunity to wave sticks and the demand for slaves in Egypt came from historical research has also unearthed the countries that did not participate in the war Protectionism is always ‘viable’ but will be it morphed into a bill that provided protec- dispense carrots, and invites lobbying by village headmen and other medium landhol- surprisingly significant roles played by themselves. Specifically, while France and costly. The case that tariffs were responsible tion for numerous industries; as tariffs were industry. ders. Large Egyptian estates, whose owners indigenous African and “mixed race” Afro- other trading partners entered the war, Spain for the Great Depression in the US is cer- were mostly state officials, did not purchase European merchants. If you were well-po- remained neutral and increased exports tainly overstated. But the Smoot-Hawley slaves and relied instead on Egyptian labor. sitioned as a middleman trader between to the belligerent countries. Using histori- tariffs in the 1930s, and resulting retalia- FIND OUT MORE This puzzling finding was arguably due to local African leaders and coastal European cal statistics, I show that the war redirected tion, show how protectionism opens up a the fact that large landowners were able to merchants and slave ships, you could profit trade demand towards Spain and that this Pandora’s box of lobbying by vested inte- Research papers by Simon Fuchs, Gabriel Mesevage, Kathryn Schwartz, Mohamed Saleh coerce local labor, whereas medium land- handsomely from the exploitation of your resulted in a fresh bout of industrialization, rests. Similarly, the US is currently seeking and Nicholas Crawford are available to view at www.iast.fr holders had to purchase imported slaves. countrymen. This research doesn’t so much particularly in the north east of Spain. to compensate agribusiness suffering from 14 IN DEPTH iast.fr 15 TRADING PLACES
Trading at THE SPEED OF LIGHT • FANY DECLERCK AND ALEXANDRE DE CORNIÈRE • CAN REGULATORS CATCH UP?
The steam engine and other industrial innovations allowed faster transport of Regulators are also seeking to reconstruct US EQUITY MARKETS: RISE OF THE ALGORITHMS goods over much larger distances, radically altering the way we live. The impact the sequence of events across linked mar- of digital technology may prove to be even greater, not least in its acceleration kets via a master clock, to detect predatory 80 of the transmission of ideas and information. Here, TSE economist Fany Declerck or illegal trading behaviour. However, as the 70 analyzes the impact of high-frequency trading on financial markets while her arms race has almost reached the physical colleague Alexandre de Cornière highlights some of the economic challenges in limits set by the speed of light, it is impos- 60 the age of digital platforms. sible to precisely sequence such trades. Instead of trying to implement a speed 50 Meanwhile, several firms are developing bump, regulators could speed up access to 40 FANY DECLERCK high‑tech surveillance techniques to supply protect large orders and avoid disclosing traders with non‑public information, using information to HFTs. 30 FAST FINANCE a patented private network of in‑the‑field How has information technology monitors, maritime freight tracking, infrared 20 diagnostics, electromagnetic frequency influenced financial markets? 10 monitors, high-resolution aerial photogra- ALEXANDRE DE CORNIÈRE
FD: In the early 1840s, information took phy and near‑earth satellite imagery. Volume Equity of Percentage 0 two weeks to travel from Wall Street to PLATFORM POWER 2005 2006 2007 2008 200 2010 Chicago. Today, companies like Anova are How have digital platforms changed High-touch orders Algorithmic trades Direct market access installing laser networks between stock the way we trade? “High-frequency trading exchanges to gain a few nanoseconds in The big question for economists is about Source: Marco Avellaneda, NYU & Finance Concepts, 2011 can lead to an arms race AdC: The five biggest firms today in terms speed over microwave and fibre‑optic links. the effect of HFT on liquidity. Working with between traders, venues and of market capitalization (GAFAM – Google, High‑frequency trading (HFT) algorithms Bruno Biais and Sophie Moinas, using a Amazon, Facebook, Apple, Microsoft) are users. There’s great diversity: trading plat- the launch phase. Other strategies include aim to minimise the time it takes to receive investors. However, it has huge 60-terabyte database from the French all platforms. These actors allow different forms (Amazon, AirBnb or Ebay); social and react to messages from trading plat- also improved liquidity financial markets authority (AMF), we have asymmetric pricing and vertical integration, groups to interact, selling access to other networks (Facebook, LinkedIn, Twitter); pay- forms. The first HFT was plugged into the and price discovery” found that HFTs have a generally positive attracting users with additional, often com- ment systems (Visa, PayPal); operating sys- Nasdaq in 1987. Nowadays, HFT represents effect on the market, to the extent that they plementary services. tems (IoS, Android); communication systems between one and two thirds of volumes contribute liquidity and do not withdraw (email, Skype). Inside these ecosystems, we exchanged on financial markets. when price volatility is higher. Their speed Should tech giants like GAFAM don’t always know who or what we are dea- What problems arise for traders when enables them to stabilize the market, sel- be regulated? ling with, and actions often have conse- every nanosecond counts? ling as soon a stock rises and buying as quences for unrelated third parties. soon as it falls. AdC: Everything hinges on contestability. FD: The algorithms are obviously confiden- It’s important for regulators to create the When a platform’s value increases with its conditions that allow other firms to enter and tial, so the market is vulnerable to coding or What can policymakers do configuration errors. Knight Capital used a number of users, these network effects overtake the established firm. While network to keep up? wrongly configured algorithm in 2012 and create economies of scale – the more users, effects can be an obstacle for new firms, they lost over $400 million in a few moments. HFT FD: The secrecy of HFT firms and their algo- the lower the average cost. Network effects can be a formidable shield for established can lead to an arms race, as traders, venues rithms has led regulators to propose various present a problem of coordination in which firms. Microsoft’s insistence that Internet or investors compete to be the fastest, with reforms. Bruno Biais (2015) has looked at the people will only use a platform if they anti- Explorer be installed with Windows is an exa- liquidity as the unintended victim. The evi- possibility of using a ban on fast trading, the cipate that others will also participate. In mple of bundling, and Europe has recently dence is mixed regarding negative exter- coexistence of slow and fast markets, and a these multiple equilibria, everyone joins fined Google for similarly anti-competitive nalities such as adverse selection. However, Pigovian tax on HFT technology. Only the lat- in or everyone doesn’t. Dynamic pricing behaviour. Other problematic strategies most evidence suggests that HFT has led to ter enables a socially optimal level of invest- is one way firms deal with this problem, are the buyout or imitation of competitors. improvements in price discovery. ment in HFT technology. offering very low or negative prices during 16 IN DEPTH iast.fr 17 TRADING PLACES
Open borders, open wounds • IRENE MENENDEZ • WORLD'S LARGEST COMPANIES By market capitalization in billions of US dollars FREE TRADE AND ITS DISCONTENTS In many countries, rising support for anti-free trade policies has focused atten- tion on those who suffer the costs of globalization. Policymakers can attempt to Recommendations play a powerful and sometimes negative role. Platforms like soften the blow of job losses and depressed wages by increasing welfare spen- ding such as unemployment benefits, but such efforts vary greatly from country Google and Netflix are likely to recommend to country. A new paper by IAST political scientist Irene Menendez finds that their own services and advertising space the interplay of economic geography and electoral systems can help to explain rather than those of rivals. Price control is why some voters get more compensation than others. another burning issue, as are most favoured nation clauses, in which platforms insist that Why does globalization have more impact Irene argues that welfare policy is shaped sellers never offer a lower price elsewhere. on welfare spending in certain countries? For by the way such patterns of economic geo- Platforms need to protect their investment, A le Google Microsoft Amazon Faceboo Tencent Ber shire Alibaba J J JP MORGAN Irene, part of the answer lies in the variable graphy interact with different electoral but these practices provide an incentive for impact of trade liberalization within coun- systems. “Long-standing research in com- 11 2 2 3 3 44 5 5 6 6 7 7 88 1010 excessively high commissions. tries. “Research in economic geography pro- parative politics suggests that under parti- Petro E on General China ICBC Gaz rom Microsoft Ro al Sino ec AT T vides reasons to expect variation among cular institutional conditions, low-income -china Electric mobile Dutch Shell those that lose from trade. For instance, voters constitute attractive political targets. “It’s important for regulators during the 1980s, Spanish workers in decli- Yet how, precisely, the distributional effects to create the conditions that allow ning manufacturing industries faced severe of globalization map on to policy outcomes other firms to enter and overtake competition in the wake of EU membership, remains unclear. Understanding who bene- Irene’s findings matter for our understan- which required lowering the trade barriers of fits from trade and which voters are targeted ding of how economic geography shapes the established firm. the Franco dictatorship. However, their risk by governments is thus key to better unders- democratic politics. “My results resonate While network effects can be an profile differed across regions. Workers in tanding the relationship between globali- with prominent studies emphasizing the obstacle for new firms, the northwestern region of Asturias, heavily zation and domestic outcomes.” joint role of geography and electoral insti- they can be a formidable shield specialized in mining and steel production, tutions on trade protection, fiscal structure,
for established firms.” Google. Bloomberg, Source: faced very limited chances of reemployment. and redistribution. They also advance our In contrast, workers in the Basque Country, “Understanding who benefits understanding of the role of electoral insti- also heavily industrialized but industrially from trade and which voters are tutions in shaping policy outcomes.” Regulators need to be aware of the impor- diversified, faced lower levels of risk.” targeted by governments is key to tance of network effects for market struc- understanding globalization and Free trade has often been touted as a pana- tures and strategies. The ambiguity of the HOW TECH GIANTS MAKE THEIR BILLIONS domestic outcomes” cea that will provide for all, ignoring those relationship between the platform and the Revenues in billions of US dollars in 2017 WITHIN-COUNTRY CORRELATION who are vulnerable to economic competi- OF CHANGES IN BENEFIT tion and market volatility, or assuming they user is a very new research area. Economists . . . . . GENEROSITY AND IMPORTS have plenty of work to do! in Western Europe, 1 80-2010 Using data compiled on 14 Western European will be compensated by the state. Irene’s democracies, Irene has now produced empi- research helps to explain why this compen- AUSTRIA rical evidence for her theory that trade leads sation often never materializes. Some vic- GERMANY SWEDEN to greater compensation when trade losers tims of globalization will find it easier to sway ITALY are concentrated geographically and poli- politicians. Less fortunate voters, poorly PORTUGAL ticians have incentives to target specific placed on the economic and electoral map, SPAIN BELGIUM constituencies. “These incentives tend to have nothing left to trade. FINLAND exist in electoral systems with lower district NETHERLANDS magnitude, where electoral districts are small FIND OUT MORE UNITED KINGDOM Advertising Hardware Advertising Online retails Software and geographically based. In contrast, trade FIND OUT MORE Discover more cutting-edge research IRELAND GREECE dampens compensation in political econo- Read ‘Globalization and Welfare Spending’ on the digital economy by Fany, FRANCE and other research by Irene on internatio- Alexandre and other Toulouse mies where trade losers are dispersed, and DENMARK nal and comparative political economy at researchers at www.tse-fr.eu/digital decreases it where electoral districts are lar- www.iast.fr -.2 -.1 .1 .2 .3 ger and losers are concentrated.” 18 IN DEPTH iast.fr 19 TRADING PLACES
Trade secrets in fr ozen graves • ERIC CRUBÉZY • Eric’s research offers a rare insight into the FEAR OF THE DEAD RAISING THE DEAD native perspective. “The Yakuts had no idea of the link between the fur trapping the Ethnographic studies and 19th-century pho- Russians pressured them into and the demo- tographs reveal that the Yakuts normally What can archaeology and genetics reveal about the impact of international cratization of clothing styles in European placed their dead on raised outdoor plat- trade on remote indigenous societies? Since 2002, Eric Crubézy has been dig- and Asian capitals. forms. “This helps us understand why so ging up frozen bodies in the Siberian tundra to study population development over few tombs have been found for a popula- several centuries. His work demonstrates the advantages of a multidisciplinary tion estimated at 40,000 for the beginning approach that connects historical events to the evolution of a community’s DNA “The economy underwent of the 17th century,” says Eric. “Finding out and social customs, offering a glimpse through the eyes of a forgotten people. total change because cattle why only certain people were buried remains farming had to be expanded one of our major research goals.” Professor of Anthropobiology (UPS and the rest of the world. Finely worked leather to feed the Russians” CNRS) in Toulouse, Eric has excavated more clothing is replaced by fabric imported from One answer may be that the Yakuts were than 150 native burial sites in Yakutia, dating Europe. Evidence of Christianity is increa- afraid of the dead returning, particularly from 1632 to 1922. The region is inhabited singly apparent, first with the reduced num- The funeral sites reveal what contempo- blacksmiths and young shamans. “The way by a Turkic-speaking population of cattle ber of objects alongside bodies, then with raries wanted to be carried into the grave. the tombs were locked, their depth, the and horse farmers, with winter tempera- the appearance of crosses and candles. fact that the bodies were bound and their Accessories and jewelry found alongside Bringing together archaeological and his- a female Yakutsk tomb. tures that can drop to -50°C. The Siberian torical data shows that the rich had seve- fingers sewn into sleeves led us to won- permafrost has provided exceptional pre- ral wives, each of whom lived in her own der whether these were the people whose servation of biological samples. “Archaelogical evidence house and occupied a commanding posi- tombs we had found.” had been bent in two, and arrows were sub- suggests new trade routes also suggest that mass evangelization was tion of power, that the economy underwent tly made unusable. Stylized cows symbo- Ethnographic descriptions also helped Eric’s FROZEN ASSETS enriched the Yakut elite and preceded by tuberculosis and smallpox epi- total change because cattle farming had to lized fertility, while drawings of bees and team decode the “neutralized” objects and ants were ‘working animals’ the Yakuts held Archaeological evidence suggests the impacted gender relations” demics, which could explain how the age of be expanded to feed the Russians, and that decoration inside the tombs. Knife blades in esteem. Yakuts’ traditional lifestyle was increasingly prosperity came to an end.” the society evolved.” influenced by international trade. Tombs EXPLORING THE PAST from the 17th century and earlier are scarce, BEYOND THE GRAVES Historical data reveals a lot more about holding only men or, occasionally, boys, Russian colonization of the area, driven by Eric believes his team’s multidisciplinary generally dressed in horse or reindeer skin Eric’s painstaking analysis suggests that this international demand for sable and other approach can shed new light on native leather, and bearing the weapons of hun- economic and social evolution took place furs. From 1632 onwards, the Russians and societies elsewhere. “In Yakutia, we found ters or warriors. Imported objects, such as without the population undergoing major their Cossack mercenaries advanced quickly that archaeological and paleo-genetic data beads, are rare. genetic changes. “The cultural changes seem and levied a pelt tax, the yasak, enforcing do not coincide with history that has been to have resulted from an influx of cultural ele- control through a system of forts (ostrogs). written to date. Ethnographers helped us New trade routes enriched the elite and ments rather than foreigners. Genetic data In 1689, Russia made peace with the Chinese understand the meaning of objects, adorn- appear to have impacted gender relations. and set up a trading post in Nertchinsk. This ments, and social status. On the other hand, “From the beginning of the 18th century,” boosted the fur trade, helping to create we often found signs of practices rarely men- says Eric, “the tombs hold women and a new Yakut elite. To calm hostilities, the tioned elsewhere, if at all. This leaves a vast men, but few children. These later tombs Russians also allowed Yakut chiefs to col- field to be explored, not just for Yakutia, but are astonishingly lavish, with many objects lect the yasak themselves. for all areas visited by ethnologists in the imported from the West or China. The clo- 19th and 20th centuries.” thing is adorned with hundreds of thou- In 1728 the Nertchinsk trading post was relo- sands of beads. Women have whips and cated far to the west, in Khiakhta, excluding decorated undergarments. Both sexes bear the Yakuts from trade circuits. It may have FIND OUT MORE signs of power such as signet rings.” been the decline in commerce and of their Read about Eric’s work on Yakutia in control over Yakutia that led the Russians English in Clashes of Time (PUL, 2017); or Signs of wealth decrease dramatically in to evangelize the population, with pari- in French in Vainqueurs ou vaincus? (Odile graves from the late 18th century, when shes replacing the ostrogs in the late 18th Jacob, 2017). the Yakuts became more assimilated with Hand bracelet and purse century. Tomb excavation in Yakutia where temperatures can reach -50°C in January 20 TRADING PLACES iast.fr IAST Connect #13 21 Changing track IAST is about thinking differently. These six new members have already begun careers that are full of promise. But as they arrived in Toulouse for the start of the academic year, we asked them what might have happened if they had chosen a different path.
D E B A If you could 1 redo your PhD in another discipline, what would it be?
F C
A SREEMATI MITTER HISTORIAN FROM BROWN* 1 – “I have learned a lot from CULTURAL If you could ANTHROPOLOGY, which deeply informs my own 2 E FRANCESCA DE PETRILLO research and approach to sources as a historian.” trade careers PSYCHOLOGIST FROM MICHIGAN with someone, 2 – “EDWARD SAÏD is, for me, the definition of the 1 – “I have always been interested in SOCIAL SCIENCES, ‘scholar “scholar engagé” which is what I’d like to be, who would it be? in the ultra-social nature of humans, and their ability and his book Orientalism not only changed several to create different cultural groups and cooperate with fields, it remains the most important work in post- strangers via institutions”. colonial studies”. 2 – “I’d trade careers with GINO STRADA, founder of * (research fellow at IAST-TSE 2014-2016) the NGO Emergency. Research has a huge impact on society in the long term, but providing help to people in need has a huge impact in both the short and the B VIVEK VENKATARAMAN BIOLOGIST FROM HARVARD long term.” D LEAH ROSENZWEIG 1 – “I would get a PhD in HISTORY or PHILOSOPHY OF POLITICAL SCIENTIST FROM MIT SCIENCE. I love to think about the big history of ideas, C BENCE BAGO F SAURABH PANT and I’m fascinated by how the scientific process is 1 – “I’d probably do a joint JD/PhD. Understanding the PSYCHOLOGIST FROM PARIS DESCARTES POLITICAL SCIENTIST FROM PRINCETON influenced by personalities in addition to the social LAW and helping to form policy would be an excellent and political climate.” 1 – “I find both scuba diving and MARINE BIOLOGY way to have a large impact on the world.” 1 – “Probably ASTROPHYSICS. I have always found 2 – “I’d switch with science writer DAVID QUAMMEN. breathtakingly fascinating.” 2 – “Economist JEFF SACHS has broadened the scope space fascinating, and the more I read about stars Scientists communicate in a rather peculiar way that 2 – “JACQUES-YVES COUSTEAU will always be an inspiration. of what it means to be an academic. While he still and planets, the more I wonder ‘what if?‘” doesn’t easily resonate with non-scientists. It would be Not only did he carry out groundbreaking scientific work in writes academic articles, he also spends a lot of time 2 – “Economist STEVEN LEVITT not only asks interesting interesting to focus on distilling complex ideas into a developing scuba diving apparatus and marine biology, but writing press pieces and travelling the globe to meet questions but I like that he always points out how digestible and compelling narrative.” he did it while helping the Allies during WW2.” citizens and governments.” incentives matter.” 22 IDEAS EXCHANGE iast.fr IAST Connect #13 23
Germany POLITICAL ECONOMY IAST across the world France The Center for Analytical Worldwide RISK THEORY AND Political Science (CAPS) ANTHROPOLOGY • A FEW OF OUR RESEARCH PARTNERSHIPS • ENVIRONMENTAL ECONOMICS promotes interdisciplinary, Luke Glowacki is testing the ability of Nicolas Treich has recently begun analytical and quantitative different cultures to identify universal AND FIELDWORK IN 2018 research on the economics of research in political economy forms and functions in vocal music. animal welfare, visiting farms and political science. and slaughterhouses.
USA LAW, ECONOMICS Data analysis by Daniel Chen has revealed some of the surprising social, psychological, economic and political influences on the behavior of US judges. United States China PSYCHOLOGY Jean-François Bonnefon BIOLOGY Jeanne Bovet’s study in is working with MIT Kunming found that parents researchers on a tend to prefer a high- worldwide survey about income but less attractive the moral implications of man for their daughters. self-driving cars.
Ghana SOCIOLOGY Colombia AND HISTORY Egypt INDUSTRIAL ORGANISATION Kofi Asante is investigating ECONOMIC HISTORY After studying Costa Rican supply the struggle for power and Mohamed Saleh is studying the chains, Josepa Miquel-Florensa is influence of diverse interest impact of state industrialization now looking at the sustainability of groups in colonial Africa. and mass education on religious coffee production in Colombia. groups in the Middle East and IAST’S North Africa. INSTITUTIONAL Brazil PARTNERS Bolivia POLITICAL SCIENCE Lucas Novaes has recently ANTHROPOLOGY evaluated the performance Namibia Jordan Jonathan Stieglitz’s of politicians who promise a BIOLOGY Syria work with Tsimane return to ‘law and order’. Alice Baniel is studying Germany hunter-gatherers mating strategies and Madagascar GEOGRAPHY and horticulturalists aims sexual violence in ANTHROPOLOGY David Lagarde interviewed at studying the impact of chacma baboons. Harilanto Razafindrazaka is studying Syrian refugees in Jordan and ecology and evolution on sensitivity to smell and other genetic Dortmund to study the impact the human life course. and phenotypic traits in Indian Ocean of social networks on refugee This magazine has been funded by a French government populations. itineraries. subsidy managed by the Agence Nationale de la Recherche under the framework of the investissements d'avenir programme reference ANR-10-LABX-0029. SUPPORT IAST on social media
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