A blog about economics, politics and the random interests of forty-something professors
He is the singer and songwriter for The Mr. T Experience and he wrote King Dork. His new book, Andromeda Klein is not as great but still good. His next book is a King Dork sequel called King Dork, Approximately. And a film adaptation of King Dork is in development with Will Ferrell producing.
Here is the inteview. And here is Frank Portman’s blog.
Let me begin by saying that I’m with the new Keynesians on the central issue here. I believe real world markets break down. A stunning point for me is the juxtaposition between the fact that much of modern macro began by trying to incorporate micro foundations into their models, but in the end, many of the proponents of the extreme version of fresh-water economics have ignored 30 years of micro that is pretty specific on all sorts of ways that markets can fail to clear.
That said, one can argue about the role of government on many levels. I take a variety of positions on these issues. I’m a deficit hawk, but a big believer in well-timed intervention. I’m in sympathy with the comment from our treasury secretary that we need to pay serious attention to the deficit, just not this year. I sure as heck hope he means the second part, though. The long chain of budget deficits forecast by the CBO scares the heck out of me.
Today, however, I want to make two reflections on the right form of stimulus.
The first is an easy one. In talking about the purported wastefulness of direct stimulus spending, I think it is well worth noting that very few people would argue that this country has been spending too much on infrastructure. Clearing up a lot of deferred maintenance seems like a fine idea to me, and getting our transportation system back up to something approaching the quality viewed as normal in much of the developed (and developing) world a pretty good idea too. For much the same reason, I get less worked up than many about “pork-barrel” spending; sure, it would be nice to have a more transparent process, and maybe doing a little better on allocating scarce resources on the margin, but we seem so far from a sensible amount of public goods in this country that I’m doubtful that much of the spending is truly a waste.
Now to my second, and maybe less trivial point about stimulus spending. One theme that has recurred in left-of-center blog land of late is that if only we could have another round of “real” stimulus, we wouldn’t need to be doing back door stuff like cash for clunkers and the tax subsidy for home purchasers. I disagree! If one wants to stimulate economic activity at reasonable cost, this seems like a good way to go. Why? Because it is pulling exactly the right lever if you think hard about why spending has fallen in the first place.
One reason, of course, is because some people have less money. Extending unemployment insurance benefits seems a good idea in this context. State governments, many of which have mandatory budget balance mechanisms, are also in the class of entities to which a direct cash transfer is likely to stimulate spending.
But, the bulk of the reduction in spending, by both firms and consumers, is not “we have no money to spend, or nothing worth spending it on”. Rather, they are properly exercising option value in a setting of wildly increased uncertainty. In the months after the financial meltdown, a new TV suddenly needs to meet a much higher hurdle: the question is not “do I think the flow of services from the TV over the next 8 years is more than worth the cost”, but “do I expect to derive enough value from owning this TV now instead of 3 months from now that I wouldn’t rather wait a bit, and see how the situation develops.” If things look less apocalyptic in three months, one can always buy the TV then, having foregone only a few months of HDTV heaven. On the flip side, if in three months the situation has shifted for the worse, then one has avoided being saddled with a TV/car/house/factory that does not make sense in the new environment.
If I’m waiting to buy a new house because I’m waiting to see if I get tenure, this delay is economically efficient. But, if the uncertainty is aggregate and extreme, so the we all want to exercise the option value of delay, and if one believes that markets don’t always clear, then if we all start delaying economic activity because we want to see if the future is bad, the future has a decent chance of being just that.
In such a context, a tax cut, or a check from the government, is likely to have very little effect. I’m a little more flush than I was (although I’m also guessing that my future tax liability is going to be higher), but heck, I had money to spend before anyway. If the issue is uncertainty, then the right thing to do with extra money that appears is to simply stick it in the bank.
On the other hand, if the choice is “new car today at huge discount” vs. car in 3 months at normal prices, then I may well pull the trigger even if I face a moderate degree of uncertainty. Note then, though, that cash for clunkers and the housing subsidy are particularly effective precisely to the extent that people think they will end. If I am pretty sure the program will be renewed, then the original calculation is back in effect, and waiting is probably the right thing to do.
This brings us to one of the most important points made by Lucas, Phelps, and company: economic policy based on consistently fooling people is unlikely to be a great idea. Here, the problem is to avoid the temptation to go back and re-new each program as it nears expiration. If people grow to expect this, they lose their oomph.
This has been illustrated in a paper by Megan Busse, Duncan Simester, and Florian Zettelmeyer. In the wake of 9/11, GM ran “The best deal you’ll ever get.” Precisely because it had a well-defined end date, and one that seemed credible given the extraordinary circumstances, the program was extremely effective in raising sales for GM despite the uncertainty rampant that fall. But, when GM renewed it, the effect was much smaller, probably because people no longer saw the cost of delay as being large.
Our youngest son went to a preschool in Evanston and goes halfday to a nursery school here. The kids muck about with Lego, go to a playground in both settings and the only difference is that the nursery school has an all day option which some kids in the morning class (or their parents!) take up. Therein lies the rub.
Anyone who values the all day option uses the nursery school as daycare as both spouses work and do not have a nanny. The parents’ are sometimes forced to drop off a child with a cold or the beginnings of flu. On the other hand, if your child goes to preschool you must have some afternoon solution, a solution you can employ if your child is sick. So, halfday nursery school leads to more infections than preschool, as we are finding out.
Computer scientists study game theory from the perspective of computability.
Daskalakis, working with Christos Papadimitriou of the University of California, Berkeley, and the University of Liverpool’s Paul Goldberg, has shown that for some games, the Nash equilibrium is so hard to calculate that all the computers in the world couldn’t find it in the lifetime of the universe. And in those cases, Daskalakis believes, human beings playing the game probably haven’t found it either.
Solving the n-body problem is beyond the capabilities of the world’s smartest mathematicians. How do those rocks-for-brains planets manage to do pull it off?
Well, just to get warmed up, how about something with (almost) no economic content?
Review: Avec
The 17 year old (Brian) and I ended up at Avec (615 W. Randolph) nearly at random: a last minute decision to go see Faust at the Lyric Opera, and then a scramble to find somewhere near the Ogilvie Station that had decent reviews and would let us get to the opera early.
The place looks like a nicely equiped Finnish sauna. There is a line of tables along one side of the room, and a bar along the other. If you sit at a table with your back to the wall, a line of finely clothed posteriors that forms a rythmic backdrop above your dinner companions.
Tables are communal style, with what seems like too little room per person. But, the closeness forces a certain breaking of barriers (as do the seats at a football game) that in the end we found nice. Acoustics are pretty good, and all in all the atmosphere does a very nice job of creating that “I’m safe in my cave with my tribe” feel that is part of why we like crushing ourselves together in restuarants so much (and why any decent restaurant host/hostess groups full tables together on a quiet night).
The menu is of medium length. Sharing is strongly encouraged. The restaurant seems to have a commitment to re-introducing squeamish diners to the wonders of tripe, offal, etc, and does a good job of advancing the cause. It might be difficult for vegetarians to find a lot of variety: both I and a substantial portion of our meal were in hog heaven. To add the mandatory economic theory content to this entry, I had fun trying to convince my son that precisely because offal carries a bad connotation, we should be willing to try it: after all, why would the restaurant serve something that fought our biases if it wasn’t especially good?
The highlight of the meal was probably the veal liver. Crisp from the pan, in a soubise (I had to look it up: it’s a Bernaise sauce with lots of onion, and they were careful not to drown the dish in it) with parsnips, rapini and lemon. The acidic flavors from the lemon and onion set off the sweetness of the veal liver very nicely, the rapini and parsnips added some undertone and texture, and the liver itself was kick-ass. In many ways, like a slighlty less fatty, firmer fois gras. And, of course, without any of the guilt!
The pumpkin pizza with pheasant sausage and a pumpkin also had a lot going for it. The sausage was nicely spicy and worked very well with the pumpkin, and the roasted pumpkin seeds were terrific. We disagreed on whether the pumpkin should have been further roasted (to remove some more liquid) before it was mashed up to put on the pizza. I say yes, but I quibble. It is something I’d eat again in a minute, and I think its something one could do pretty well at home. Add smoked pork product to taste.
The amberjack with mint cured bacon, garbanzo beans, preserved lemon and olives was not a favorite. On execution, the amberjack was over-cooked. But, more fundamentally, the rest just didn’t hang together very well. The mint-cured bacon had an off-taste (perhaps picked up from the fish), and the preserved lemon was too staccato. The garbanzo beans, on the other hand, were excellent.
The restaurant does not take reservations. We were there on a miraculoulsy nice November evening, and the waiting diners seemed to be having a nice time with their drinks under the gas heaters outside. This adds to the happening feel, but probably means that I would not go there at a busy time in the winter.
Faust was, of course, a blast. Who knew that unwed sex had such dire consequences? I’m glad that like almost everyone of my generation (and, I am told, this one), I waited.
Tomorrow, perhaps some thoughts on stimulus. On the other hand, research is going pretty well, so the opportunity cost is high…
We are officially big-time bloggers now because today we have our first guest blogger. This week Jeroen Swinkels will be shirking sharing his thoughts with us and you and we are really looking forward to it.
Jeroen is a Northwestern guy so we are keeping it in the family and he is forty-something too (albeit a tad more “something” than Sandeep and I.) In case you don’t already know, Jeroen is a game/auction/micro/evolution-theorist who teaches in the Management and Strategy department in Kellogg. I like all of his work but I am especially fond of a somewhat idiosyncratic paper he wrote with Larry Samuelson on evolution and behavioral biases and I blogged about it here before. He’s got lots of ideas on lots of subjects so he is going to be a blogging natural. So thanks Jeroen and welcome.
I have a student who is in charge of Northwestern’s Undergraduate Economics Society and he is planning an event in the Spring. They have some money and they want to organize an activity for their membership that will be fun and economics-oriented. Think of this as an opportunity to design an experiment involving any number of students (up to hundreds of students), but it should be fun as well as educational. I know that our readers will have some good ideas for them. Please share them in the comments.
Not exactly. But the story is about the same guy who I blogged about before (United Breaks Guitars):
After baggage handlers at United broke his guitar last summer and the airline refused to pay for the $1,200 repair, Mr. Carroll, a Canadian singer, created a music video titled “United Breaks Guitars” that has been viewed more than 5.8 million times. United executives met with him and promised to do better.
So how was Mr. Carroll’s most recent flight on United?
Same as usual:
This Everyman symbol of the aggrieved traveler was treated, well, like just another customer. United lost his bag.
In an interview, Mr. Carroll said that for more than an hour on Sunday, he was told he could not leave the international baggage claim area at Denver International Airport, where he had flown from Saskatchewan. He said he had been told to stay because his bag was delayed, not lost, and he had to be there to claim it when it came down the conveyor belt.
“I’m the only person pacing around this room,” Mr. Carroll said, recalling how he was caught between an order from United staff members to stay and collect his bag, and a federal customs official telling him he had to leave the baggage claim area. The bag never showed.
As we say in MBA world, Carroll has “turned a crisis into an opportunity” – he has a business speaking to customer service reps:
This latest episode provided him with fresh material for his most recent performance, which was why he was flying on United — to speak to a group of customer service executives on Tuesday (though without his best shoes and “United Breaks Guitars” CDs that were in his still missing suitcase).
Shows that are widely time-shifted are not losing money due to skipped commercials.
Against almost every expectation, nearly half of all people watching delayed shows are still slouching on their couches watching messages about movies, cars and beer. According to Nielsen, 46 percent of viewers 18 to 49 years old for all four networks taken together are watching the commercials during playback, up slightly from last year.
On net, the gain in viewership from time-shifted shows often more than compensates for the few who skip ads.
When NBC added the “The Jay Leno Show” at 10 each weeknight, it boasted that the show would be “DVR proof,” meaning that because the humor was topical, viewers were more likely to watch it live, avoiding much of the commercial-skipping that was expected to plague recorded shows.
Now being “DVR proof” looks like a disadvantage. Mr. Leno’s shows were among the few with three-day commercial ratings lower than their live ratings. Not enough people have been recording the show and playing it back to overcome the commercial-skipping being done by a percentage of its live viewers.
From the NY Times.
Three very nice Pinot Noirs, all under $25.
First, Martinborough Vineyards Russian Jack, NZ 2008: $19 from Wine Bottega in the North End of Boston. Best wine for everyone but me. Cherries, floral nose and very smooth. Coconut taste at end suggests oak. My second best.
Second, A to Z Pinot Noir, Oregon 2007: Widely available. But rough to begin with. Still classic cherry. Consensus worst of three. But I would buy it and drink it again as it was quite good nevertheless.
Third, Soris Pere and Fils, Santenay, 2006: $25 at Formaggio Kitchen. Multi-layered. Stinky barnyard and hay as well as cherry. But tannic. My favorite, everyone else’s number two.
Overall, very good wines at this price. Had some Vin Santo (Allegrini 1999) as well that our guests brought. Four bottles of wine between four people at one sitting! Didn’t feel worse for wear the next day. Either liver is in trouble or the wines were good. Hope it is the latter.
Japanese scientists asked study subjects to try 38 red wines and 26 whites while eating scallops. Some of the wines contained small amounts of iron, which varied by country of origin, variety and vintage. The tasters noted which wines really didn’t work with scallops. And the researchers found that those wines all had high levels of iron. So they doctored the wine with a substance that binds iron, keeping it away from the tasters’ tongues. And voila, the bad taste became a bad memory. The study appears in the Journal of Agricultural and Food Chemistry.
With that knowledge in hand, wine lovers should be able to find reds that taste terrific with tilapia. So look for red wines with low iron.
From a Scientific American podcast. Transcript here.
Big events at Northwestern this weekend, including Paul Milgrom’s Nemmers’ Prize lecture and a conference in his honor. (My relative status was microscopic.) A major theme of the conference was market design and I heard a story repeated a few times by participants connected with research and implementation of online ad auctions.
Ads served by Yahoo!, Google and others are sold to advertisers using auctions. These auctions are run at very high frequencies. Advertisers bid for space on specific pages at specific times and served to users which are carefully profiled by their search behavior. This enables advertisers to target users by location, revealed interests, and other characteristics.
Not content with these instruments, McDonalds is alleged to have proposed to Yahoo! a unique way to target their ads and their proposal has come to be known as The Happy Contract. Instead of linking their bids to personal profiles of users, they asked to link their bids to weather reports. McDonalds would bid for ad space only when and where the sun was shining. That way sunshine-induced good moods would be associated with impressions of Big Macs, and (here’s the winner’s curse) the foul-weather moods would get lumped with the Whopper.
I can relate to this.
For most of history, almost everything people did was forgotten because it was so hard to record and retrieve things. But this had a benefit: “social forgetting” allowed us to move on from embarrassing moments. Digital tools have eliminated this: Google caches copies of blog posts; networking sites thrive by archiving our daily dish. Society defaults to a relentless Proustian remembrance of all things past.
From an article in Wired.
Central Square has gentrified since my days living on Harvard Street. There’s a Starbucks (whoopee). There’s still a range of eclectic stuff left over from the dodgy past – the Middle East is still there and the Toscanini’s. They’ve been joined by some high-end restaurants. One of them, Central Kitchen, was recommended to us with the caveat that those of us in the sunrise of our forties might be able to bear the background music better than those approaching the sunset. They were right- I hardly noticed the music. I did notice the food.
Closest I’ve come to Mussels from Brussels are Jean Claude van Damme movies. So, my reference point for the best mussels I’ve eaten is the Hopleaf in Andersonville on the North side of Chicago. And I prefer them cooked in beer rather than cream and wine. Central Kitchen does them in some kind of herb butter. They plonk some frites on top with aioli. The mussels were soft and delicious, bless their little hearts. The broth was wiped up with stellar bread. Jacques Brel on the stereo and a Chimay in my hand would have completed the picture. No need for beer – I was happy with the pinot noir.
The main course was very good but couldn’t live up to the moules. And it was too big and too expensive – I felt bloated at the end. Next time, a salad for the appetizer and the moules for the main course.
We shared the cinnamon beignets for dessert. They were stale. The falling down chocolate cake has to be ordered thirty minutes in advance. Next time.
Extremely simple and good. You need corn tortillas, some kind of meaty fish, some kind of salsa. I like guacamole. I wouldn’t use anything more than this. Store bought corn tortillas are dry but you can steam them and then keep them in a damp kitchen towel and they will work great. Or you can try making your own. It takes some practice, but it pays off.
Mahi Mahi works great. Just squeeze some lime on it, then coat with light oil and let it marinate for about 15 minutes. (Much longer and the acid in the lime will make the fish too flaky and the next step won’t work.) Cut into small pieces and grill. Get yourself a cast-iron grill pan and you can do this indoors.
Put it all together and eat. With store-bought tortillas the whole preparation takes no more than 1/2 hour.
James Surowiecki of the New Yorker describes and analyzes a price war for Stephen King:
Wal-Mart began by marking down the prices of ten best-sellers—including the new Stephen King and the upcoming Sarah Palin—to ten bucks. When Amazon, predictably, matched that price, Wal-Mart went to nine dollars, and, when Amazon matched again, Wal-Mart went to $8.99, at which point Amazon rested. (Target, too, jumped in, leading Wal-Mart to drop to $8.98.) Since wholesale book prices are traditionally around fifty per cent off the cover price, and these books are now marked down sixty per cent or more, Amazon and Wal-Mart are surely losing money every time they sell one of the discounted titles. The more they sell, the less they make. That doesn’t sound like good business.
We have a few answers to avoid this. But if tell you, I have to redo large chunks of my class…..
Sex is a puzzle for evolutionary biologists. It seems to be a waste of reproductive output. A population of a fixed size which requires two members to produce offspring reproduces, and therefore grows, at half the rate of the same sized asexsual population (which requires only one member to produce one offspring.)
So to explain the prevalence of sexual reproduction in nature we need to find some advantage to offset this so-called two-fold cost of sex. There are two prominent theories. The first is that sexual reproduction allows a species to shed disadvantageous mutations. Sexual reproduction thus ensures that offspring loses any harmful mutation with probability 1/2 (we are assuming that the parents do not have mutations of the same gene, a good approximation when there are many genes.) But with asexual reproduction, these mutations just accumulate.
Another theory is that sexual reproduction, by mixing around genes, ensures genetic diversity which enables a species to survive changes in the environment.
Not Exactly Rocket Science reports on an experiment designed to test these theories.
Like humans, C.elegans has two sexes but unlike us, they are males and hermaphrodites (with males making up just one in every two thousand individuals). Equipped with both sets of genitals, hermaphrodites worms can fertilise themselves without male help – far from being rude, telling C.elegans to go &$&! itself is a feasible lifestyle suggestion. Hermaphrodites could also mate with males, but they do that on less than one in 20 occasions.
The biologists manipulated the genetics of a population of these worms so that half would always mate with themselves and the others would always mate sexually. Next, they exposed the worms to a chemical that raised their rate of mutations. As the theory predicts, the sexually reproducing worms were more successful.
Next, they exposed the worms to a deadly bacterium. Consistent with the second theory, the sexually reproducing worms also fared better in this experiment.
Now the big puzzle. If sexual reproduction is beneficial, why do all sexually reproducing species in nature do it in pairs? This paper by economists Motty Perry, Phil Reny, and Arthur Robson proves that, at least with respect to the harmful mutation theory, a particular form of tri-parental sex dominates bi-parental sex. In the Perry-Reny-Robson world, reproduction requires two males and one female. The offspring receives genes with half-probability from the mother and 1/4-probability from each of the fathers.
(With this particular menagerie, in every reproductive cycle each female gets two partners per encounter but each male gets two encounters. Not only does this ensure that the “cost of sex” is again two-fold and not three-fold, but it also maintains equity in the gettin’ busy department. Only fair.)
Pronounced ‘Ely’ (unless Marciano corrects me.) They are expanding their ‘Artisti del Gusto‘ program in the US in which
Illy supplies shops with Italian espresso machines, coffee cups, artwork, drink recipes and intensive training, after which the cafe becomes a certified Illy purveyor. In return, the shop must agree to serve only Illy coffee for at least three years.
This can’t be bad, but I would guess that Illy coffee is too light for American tastes. I have tried the Illy in vacuum sealed cans and it is never fresh enough to be worth buying. Will the coffee sold in the Artisti del Gusto shops be shipped from Trieste?
He is a political scientist at NYU who uses spreadsheets to predict how conflicts will be resolved. He consults for the CIA, earns $50,000 per prediction, and uses his brand of game theory to offer wisdom on questions like “How fully will France participate in the Strategic Defense Initiative?” and “What policy will Beijing adopt toward Taiwan’s role in the Asian Development Bank?”
To predict how leaders will behave in a conflict, Bueno de Mesquita starts with a specific prediction he wants to make, then interviews four or five experts who know the situation well. He identifies the stakeholders who will exert pressure on the outcome (typically 20 or 30 players) and gets the experts to assign values to the stakeholders in four categories: What outcome do the players want? How hard will they work to get it? How much clout can they exert on others? How firm is their resolve? Each value is expressed as a number on its own arbitrary scale, like 0 to 200. (Sometimes Bueno de Mesquita skips the experts, simply reads newspaper and journal articles and generates his own list of players and numbers.) For example, in the case of Iran’s bomb, Bueno de Mesquita set Ahmadinejad’s preferred outcome at 180 and, on a scale of 0 to 100, his desire to get it at 90, his power at 5 and his resolve at 90.
His model is a secret but it seems to be some kind of dynamic coalition formation model. He has predicted that Iran will not obtain a nuclear weapon owing to the rising power of dissident coalitions. In August,
He spent that morning looking over his Iranian data, and he generated a new chart predicting how the dissidents’ power would grow over the next few months. In terms of power, one category — students — would surpass Ahmadinejad during the summer, and by September or October their clout would rival that of Khamenei, the supreme leader. “And that’s huge!” Bueno de Mesquita said excitedly. “If that’s right, it’s huge!” He said he believed that Iran’s domestic politics would remain quiet over the summer, then he thought they’d “really perk up again” by the fall.
A long profile appeared in The New York Times Magazine.
So long, anonymity — it’s been swell. For nearly ten years now, I have done my job incognito. Now I am joining the ranks of no-longer-anonymous restaurant critics. Last Friday, I gave a lecture to the students and faculty of the Texas A&M Meat Science Center without the usual hat and sunglasses. I didn’t wear a disguise on Sunday when I appeared at the Texas Book Festival either. Soon you will be able to Google grainy photos of me to your heart’s content. I also have given my publishers an author’s photo to use for publicity.
So writes Robb Walsh, the no-longer-anonymous food critic for the Houston Press. He is the latest critic to shed his anonymity since the google-able Sam Sifton took over the job at the New York Times. Before that, professional food critics were expected to visit restaurants anonymously and indeed the presumption was that anonymity was required for a critic to provide a useful review. But there are arguments either way.
You might think that the job of a critic is to distinguish the great chefs from the merely good ones. A conspicuous critic would get special treatment and this biases the test. But as long as the critic (or the reader) accounts for this and can “invert the mapping,” essentially factoring out the extra effort, this is not really a problem.
We may only want a relative ranking of chefs and adding a constant to each chef’s baseline quality won’t change that.
Noise in the signal can complicate the inversion but this could go either way. One theory is that the effect of extra effort is to reduce variance in the quality of the dish. If so, a conspicuous chef gets a better signal. Alternatively it could be there is a uniform upper bound and any competent chef can hit that upper bound with enough effort. In this case, anonymity is required.
An anonymous critic generates other welfare gains. Every diner has a positive probability of being Ruth Reichl and so every diner gets a slightly better meal than otherwise. Once critics out themselves, we are all 100% nobodies again.
We may not care who is the most talented chef but instead we want to know where we (nobodies) are going to get the best meal. As long as these are sufficiently correlated, again not much is lost from going conspicuous. But in any event it is not clear that a single critic provides much more information about this than could be had from data on popularity alone. If we want critics to break herds, then they should be anonymous.
Maybe we want critics to start herds. Critics are most influential for tourists and locals prefer to avoid tourists. Conspicuous critics enable efficient market segmentation where restaurants wishing to cater to tourists give special treatment and get good reviews. A good review can destroy a restaurant that caters to locals so all parties benefit if the critic is conspicuous ensuring he is given a bad meal.
(Arising from conversations with Ron Siegel, Mike Whinston, Jeroen Swinkels, Eddie Dekel and Phil Reny.)
As the cliche goes, “The More Things Change, the More They Stay the Same.”
David Brooks has an excellent column on the way texting has influenced dating. It is based on an even more interesting article by Wesley Yang in New York magazine. The magazine has been posting sex diaries of New Yorkers online. There is a wealth of information and here is one snippet, a quote by a Diarist followed by an implication of his predicament:
12:32 p.m. I get three texts. One from each girl. E wants oral sex and tells me she loves me. A wants to go to a concert in Central Park. Y still wants to cook. This simultaneously excites me—three women want me!—and makes me feel odd.
This is a distinct shift in the way we experience the world, introducing the nagging urge to make each thing we do the single most satisfying thing we could possibly be doing at any moment. In the face of this enormous pressure, many of the Diarists stay home and masturbate.
Technology has taken paradoxes of choice to a new level of frequency but the essential idea remains unchanged. It is the paradox created by Buridan’s Ass – I should hasten to add that this is an animal not a body part. The poor Ass, faced with a choice of which of two haystacks to eat, cannot make up its mind and starves to death. The option the Ass “chose” may seem less pleasurable than the option that comes to hand to the diarists but the point is the same: a decision maker facing a wealth of great choices cannot make up his mind and ends up with a poorer default option.
The paradox has important implications for choice theory. I first learned about one possible implication from Amartya Sen many years ago. Sen’s point was that the revealed preference paradigm beloved of economists does not fare well in the Buridan’s Ass example. The Ass through his choice reveals that he prefers starvation over the haystacks and hence an observer should assign higher utility to it than the haystacks. Sen, if I remember correctly (grad school was a while ago!), says this interpretation is nonsense and an observer should take non-choice information into account when thinking about the Ass’s welfare.
A second interpretation is offered by Gul and Pesendorfer in their Case for Mindless Economics. Who are we to say what the Ass truly wants? To impute our own theory onto the Ass is patronizing. Maybe the Ass is making a mistake so its choices do not reflect its true welfare. But we can never truly know its preferences so we should forget about determining its welfare. This story works a little better with the masturbation scenario than the Buridan’s Ass example. This view is a work in progress with researchers trying to come up with welfare measures that work when decision makers commit errors.
So, we have no final answer and maybe we never will. Aristotle first discussed the paradox of choice the modern want-to-be-promiscuous texter faces. It is easy to give advice to all such asses (“make up your mind already!”) but if they continue to choose indecision how can we ever reach an unambiguous conclusion as to their welfare? The more things change, the more they stay the same.
Mamihlapinatapai (sometimes spelled mamihlapinatapei) is a word from the Yaghan language of Tierra del Fuego, listed in The Guinness Book of World Records as the “most succinct word”, and is considered one of the hardest words to translate.[1] It describes “a look shared by two people with each wishing that the other will initiate something that both desire but which neither one wants to start.”
Comcast is in talks with GE to buy NBC Universal which would give Comcast all of NBC’s television and movie assets. According to the Wall Street Journal we should know in a matter of weeks if agreement is reached but any deal would certainly be given a lengthy review by anti-trust authorities. A concern often cited is the motive of vertical foreclosure: a merged Comcast-NBC would use their alliance to gain advantage over competitors for content provision. This issue also foreshadows those that would arise with internet content provision should net-neutrality be abandoned.
Comcast is a monopoly provider of access to content. Think of Comcast as the guy at the door charging you a fee to get into the party. You want to get in because inside there are people providing various services, perhaps for an additional fee. The best structure of all for Comcast would be to take ownership of all the service-providers inside and act as a joint monopoly collecting entrance fees and selling the services inside.
What would such a monopoly do to maximize profits? It would maximize the value of the services offered inside and then extract that value in the form of an entrance fee.
But this same outcome is achieved with the structure in which the services inside are provided competitively. Competition among service providers maximizes the value of the service thereby enabling the monopoly gatekeeper to earn the same profits as if it owned the entire enterprise.
So if you think that content is provided competitively (in my opinion its pretty close) then you shouldn’t worry too much about vertical foreclosure. On the other hand we should still wonder why Comcast is interested in NBC. Are there any plausible efficiency gains from a merger?
Merger review is based on looking for likely anti-competitive results or motives and if there is no clear anti-competitive motive then the merger is approved. But it’s worth considering a different standard here (and in the net-neutrality debate as well.) If there are no clear efficiency gains and a merger enables anti-competitive behavior even though that behavior may not have any clear rationale, then the merger should be rejected.
Allowing the merger would be like leaving scissors within reach of my (then) three-year-old. No good will come of it, and if I trust that she acts in her self-interest no harm would come either. But she is hard to predict:
I once linked to something like this. But that didnt hold a candle to this one:
Did you notice that when the song starts to go in the right direction his voice has an Eastern European accent? I have no idea whether this guy is a native English speaker. If he is then this is an artifact of singing backwards. If he really is Eastern European then it says something about language accents that they appear even when singing a foreign language backwards.
Don’t go here. It’s expensive, the food is good but not great, the atmosphere is corporate and the service is poor.
We’ve been looking for a good Italian food and Rialto got “Best of Boston” so we thought we’d give it a shot for a wedding anniversary dinner. At first, we were happy to be put in a quiet area but a few minutes later a large table nearby was filled by management consultant types and the room became distinctly louder. It also slowed down the food service. Our server forgot to bring my wife’s wine and had to be reminded. When the pasta finally arrived, my wife’s dish was a little cold and my pasta was congealed and overcooked. Fresh pasta is often sticky and gooey but this was over the top. It tasted good but for the price it was hardly transporting. Then, someone at the consultants’ table stood up and started making a speech. Fine if you have a private room but rude when there are fifty other people who are trying to have a civilized meal. It would never happen in a really classy restaurant.
The much cheaper Anteprima in Chicago dominates and, if I could afford it, I would go to Spiaggia for an excellent if even more expensive meal. La Summa in the North End is still the best Italian restaurant we’ve found locally.
I came across this simple theory of overoptimism recently (though it was published years ago). Suppose an agent has at least two actions from which to choose. An action gives either a payoff one or zero. For each, the agent has a subjective probability that the action gives a payoff of one. The probabilities of success are drawn independently from the same distribution G. Agent A then chooses one his actions, the one with the highest mean, according to his subjective beliefs. How do his beliefs about this action compare to those of an arbitrary observer?
Here’s where it gets interesting. The observer’s beliefs are different from agent A’s. They are drawn from the same distribution G but there is no reason that the observer’s beliefs are the same as agent A’s. In fact, the action agent A took will only be the best one from the observer’s perspective by accident. Actually, the observer’s beliefs will be the average of the distribution G which is lower than the belief of agent A since agent A deliberately took the action which he thought was the best. This implies that the agent A who took the action is “overoptimistic” relative to an arbitrary observer.
There are two further points. If there is just one action, this phenomenon does not arise. If agents have the same beliefs (a common prior), it also does not arise. So it relies on diverse beliefs and multiple actions. The paper is called “Rational Overoptimism and Other Biases” and is by Eric Van den Steen.
Thanks to Tyler and Alex for their good nature. They know that this was the sincerest form of flattery.
It is extremely easy to parody MR, especially Tyler because there is so much output and it is all part of his characteristic style. I think that being easy to parody is a great sign of success.
My favorite post was the one about Swedish meatballs because I think of the enumeration style of reasoning as being quintessential Tyler. Little known fact: Tyler Cowen is the reason I am an economist. 20 years ago as an undergraduate adrift I was inspired by his microeconomics course and he convinced me to go to grad school. In that course we learned the enumeration style via his “thought questions” and in fact, looking back, I think we were learning to be bloggers before the channel for that existed. Our final exam question was “Write down a thought question and answer it.” I owe Tyler Cowen a tremendous debt.
Tyler’s reading habits are obvious fodder for parody. I have no doubt that Tyler reads as much as he claims and, while easy to make fun of, his approach to books should be taught to children at an early age. (Start reading everything that might be interesting. Stop as soon as it isn’t. Skip over parts that are boring.) I never was much of a reader before, now I read quite a lot.
FYI, I copied MR’s look by switching to a generic wordpress theme (andreas09) and then modifying the css to get the colors, fonts, and look/feel right. I didnt know anything about css (and the normally helpful Kellogg support team didn’t see this as falling under their job description, not surprisingly) so I had to figure it out on the fly. If anyone is interested I can send you what I did.
And now back to our regular programming…
As Jonah Goldberg points at NRO:
As many as 20,370 low-income households in Sangamon County could qualify for a free cell phone and 60 minutes of free monthly talk-time, according to a spokesperson with TracFone Wireless, Inc., a national prepaid cell phone provider.
Jose Fuentes, TracFone’s director of government relations, announced earlier this month that the company would add Illinois to the list of 17 states that offer SafeLink Wireless — a new extension of Lifeline, a government program that has provided affordable landline telephone service to low-income families for 25 years.
“There’s never been a jump into 21st century communications,” Fuentes says. “TracFone came up with this device to bridge that gap.”
The Federal Communications Commission created Lifeline in 1984. SafeLink Wireless will now take the service a step further by offering free cell phones and service for a year to any household that receives federal public housing assistance, food stamps, low income home energy assistance, supplemental security income, temporary assistance for needy families or Medicaid.
I wonder what analogous slippery slope healthcare reform will create.
Ventilation mine in desired are which air movements regular, slow with the intefere seriously would which currents strong produce tunnels and subways in trains of movements the but different with dealt be to impurities the are only not.
That’s from The Air and Ventilation of Subways. What does it mean that I was bored by page 5, then skipped to page 97, read every odd-numbered page after that and then realized that the best way to appreciate what this book has to offer was to read it backwards starting from chapter 10?
Here is Bryan Caplan on getting dates.
Recent Comments