Super Crunchers by Ian Ayres Read Free Book Online

creepily suggests the opening lines of Psalm 139:

    You have searched me and you know me.
    You know when I sit and when I rise; you perceive my thoughts from afar.
    You discern my going out and my lying down; you are familiar with all my ways.

    We may have free will, but data mining can let business emulate a kind of aggregate omniscience. Indeed, because of Super Crunching, firms sometimes may be able to make more accurate predictions about how you’ll behave than you could ever make yourself.
    But instead of trying to prohibit statistical analysis, we might react to the possibility of advantage-taking by simply making sure that consumers know that the number crunching is going on. The rise of these predictive models suggests the possibility of a new kind of disclosure duty. Usually government only requires firms to tell a consumer about their products or services (“made in Japan”). Now firms sometimes know more about consumers than the consumers know about themselves. We could require firms to educate consumers about themselves. It might be helpful if Avis told you, before you agree to prepay for gasoline, that other people like you tend to leave more than a third of a tank full when they return the car—so that the effective price for prepaid gas is really four bucks per gallon. Or Verizon might be asked to tell you when their statistical model predicts that you’re on the wrong phone plan.
    Government could also Super Crunch some of its enormous datasets to inform citizens about themselves. Indeed, Super Crunching could truly help reinvent government. The IRS nowadays is almost universally disliked. Yet the IRS has tons of information that could help people if only it would analyze and disseminate the results. Imagine a world where people looked to the IRS as a source for useful information. The IRS could tell a small business that it might be spending too much on advertising or tell an individual that the average taxpayer in her income bracket gave more to charity or made a larger IRA contribution. Heck, the IRS could probably produce fairly accurate estimates about the probability that small businesses (or even marriages) would fail. In fact, I’m told that Visa already does predict the probability of divorce based on credit card purchases (so that it can make better predictions of default risk). Of course, this is all a bit Orwellian. I might not particularly want to get a note from the IRS saying my marriage is at risk. (A little later on, we will take on whether all this Super Crunching is really a good idea. Just because it’s possible to make accurate predictions about intimate matters doesn’t mean that we should.) But I might at least want the option of having the government make predictions about various aspects of my life. Instead of thinking of the IRS as solely a taker, we might also think of it as an information provider. We could even change its name to the “Information & Revenue Service.”
    Consumers Fight Back
    Even without government’s help, entrepreneurs are bringing new services to market which use Super Crunching as a consumer advocacy tool. Coming to the aid of consumers, these firms are using data-crunching to counteract the excesses of seller-side price extraction. The airline industry is especially fertile ground for such advocacy, because airlines engage in increasingly bewildering pricing shenanigans—trying to find in their databases any crevice of an opportunity to enhance their “revenue yield.”
    What’s a consumer to do? Enter Oren Etzioni, a professor of computer science at the University of Washington. On a fateful day in 2002, Etzioni was peeved to learn that the people sitting next to him on an airplane trip had bought their tickets for a much lower price merely because they waited to buy their tickets later. He had a student go out and try to forecast whether particular airline fares would increase or decrease as you got