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A few years ago, we had breakfast at Sandeep’s house and he made us a delicious breakfast. One of the dishes was a strange egg and tortilla chip creation that everybody loved. I got the recipe from Sandeep and it has become part of our regular rotation ever since. We never knew what to call it so in my house it has always been known as Sandeep’s Special Breakfast. (I since had breakfast in Mexico City and I noticed a resemblance to something called Chilaquiles, so I guess that is what it must be.) It’s extremely simple to make and super yummy. It works great for lunch or dinner too.
1 yellow onion, sliced into wedges.
1 bag of Whole Foods restaurant style tortilla chips. (Whole Foods is not important but you want the chips that are made from tortillas, not the denser chips that are made directly from masa.)
8 eggs, lightly beaten
1 jar of tomatillo salsa. Anything is fine here, but this stuff called Xochitl
works really well. It has a smoky flavor that makes your Special Breakfast extra special. You can get it at Chicago-area Whole Foods.
Over high heat, add olive oil to a large saute pan and saute/fry the onions. You want them to brown and then soften a little. Turn down the heat and add a few handfuls of tortilla chips to the pan, breaking them with your hands into medium sized pieces. Toss them around in the pan to get them coated with the oil. Then add the eggs. Let them sit in the pan for a minute to cook a bit and then break the whole mass up and turn it over to cook some more. When the eggs are not quite completely done, pour in some of the salsa. The right quantity is something you figure out form experience. It should not be drenched in salsa. If the salsa is watery you should raise the heat and cook off some of the water.
You are done. It looks something like this on the plate.
(Until you serve the plate that is. Not long after that the plate is empty.)
Paul Krugman songs continue:
Paul may have the blues but we don’t: Happy 4th of July!
(Hat tip: Our music correspondent, Tomas Sjostrom)
Via Robin Goldstein, the work of Coco Krumme who analyzed wine reviews and classified words according to whether they are typically used to describe expensive or inexpensive wines.
She found that “about 65% of commonly occurring words are non-overlapping.” Words like “old,” “elegant,” “intense,” “supple,” “velvety,” “smoky,” “tobacco,” and “chocolate” predict expensive wines; “pleasing,” “refreshing,” “value,” “enjoy,” “bright,” “light,” “fresh, “tropical,” “pink,” “fruity,” “good,” “clean,” “tasty,” and “juicy” predict cheap wines. As for suggested pairings, “steak” and “shellfish” predict expensive wines; “chicken” predicts cheap wines.
As Robin points out it matters whether the reviews were based on blind tastings. If so, then the choice of word is in response to the taste of the wine and the correlation with price just tells us which words reviewers use to convey good taste. (Assuming you think that price is correlated with taste.) If the tastings were not blind then it is more likely that reviewers are responding to the label and are choosing words in response to the price.
Compared to non-fiction. Co-authorships leverage specialization. Certainly there are heterogeneous strengths in fiction writing and this should create gains from collaboration. But we don’t see it. I can’t think of any great work of fiction that was co-authored. There must be a good reason.
- Writing style is crucial in fiction. Multiple voices would make the work feel disjointed. They could try to collaborate on the writing process and together create one voice but maybe this puts too much of a drag on the creative process.
- Still, there are some who are good at imagining plots and characters and others who excel at the stage of actually writing once the idea has been conceived. Why don’t we see this kind of partnership?
- I bet there are great partnerships like this but we never know it because the partners agree to a single nom de plume.
My bottom line is that, ironically, the attraction of great fiction is a connection with the author. When we read beautiful prose or get turned on by an ingenious plot twist, we think of the author and we enjoy being close to the mind that created it. Multiple authors would confuse and dillute this feeling.
Jonah Lehrer illustrates a common misunderstanding of (im)probability. He writes:
It’s been a hotly debated scientific question for decades: was Joe DiMaggio’s 56-game hitting streak a genuine statistical outlier, or is it an expected statistical aberration, given the long history of major league baseball?
He is referring to the observation that 56-game hitting streaks while intuitively improbable will nevertheless happen when the game has been around for long enough. Does this make it less of a feat?
- Say I have a monkey banging on a keyboard. Take any seqeunce of letters. The chance that the monkey will bang out that particular sequence is impossibly small. But one sequence will be produced. When we see that sequence produced do we change our minds and say that’t not so surprising after all because there was certain to be one unlikely sequence produced? No. Similarly, the chance that somebody will hit safely in 56 straight games could be high, but the chance that it will be player X is small. Indeed, that probability is equal to the probability that player X is the greatest streak hitter ever to play the game. So if X turns out to be Joe DiMaggio then we conclude that Joe DiMaggio indeed accomoplished quite a feat.
- We might be asking a different question. We grant that DiMaggio achieved the highly improbable and hit for the longest streak of any player in history, but we ask whether 56 is really all that long? After all, he didn’t hit for 57, which is even less likely. To address this question we might ask, on average, how many players “should” hit safely in 56 straight games in the time that the game has been around? But this question is very easy to answer. Our best estimate of the expected number of players to hit 56-game streaks is 1, the actual number. (Because the number is close to zero, this estimate is noisy, but this is still the best estimate without making any assumptions about the underlying distribution.)
Should we be more scared of North Korea after their recent nuclear tests? Kim Byung-Yeon and Gerard Roland say “No”! They study the impact of major events related to North Korea (e.g. the conduct of the nuclear test in 2006) on South Korean financial markets and conclude:
“We found basically no effects on financial markets of events perceived as increasing the tension on the Korean peninsula. In a nutshell, the financial markets in South Korea are not afraid of Kim Jong-Il.”
They use “event study methodology” which is typically used in finance to study mergers. Prices before and after the merger are used to estimate its impact on value. The key is getting the date of the event right. If you get it too late for example, the price already incorporates the event. For example, if the South Korean markets had already incorporated the “news” of the North Korean test, they would not react significantly to the actual test. Not sure how the authors deal with this issue. In any case, their approach is a highly original attempt to apply economic methods to foreign policy.
In case you have not been following the catfight, let me get you up to speed. Chris Anderson wrote a book called Free. I haven’t read it, but it apparently says “all your ideas are belong to us” because the price of ideas is crashing to zero. Malcom Gladwell says “please don’t let my employer read that”…I mean, “No its not.”
Let’s have a model. There are tiny ideas and big ideas. The tiny ideas are more like facts, or observations or experiences. They are costless to produce but costly to communicate. They are highly decentralized in that everybody produces their own heterogenous tiny ideas. The big ideas are assembled from a large quantity of tiny ideas. Different people have different production technologies for producing big ideas from small ones. These could differ just in cost, or also in terms of the quality of big ideas that are produced, it changes the story a little but doesn’t change the economics.
Start with a world where the marginal cost of communicating a tiny idea to another individual is large. Then the equilibrium market structure has big-idea producers who incur the high cost of acquiring tiny ideas, assemble them into big ideas and communicate the big ideas to the masses for a price. This market structure sustains high prices for big ideas and sustains entry by big-idea specialists.
Now suppose the marginal cost of communicating the tiny ideas shrinks to zero. Then an alternative for end users is to assemble their own big ideas for their own consumption out of the tiny ideas they acquire themselves for close to nothing. The cost disadvantage that the typical end user has is compensated by his ability to customize his palette of tiny ideas and resulting big ideas to complement his idiosyncratic endowment of other ideas, tastes, etc. The price of big ideas crashes. Former producers of big ideas exit the market. This is all efficient.
An important implication of this model is that the products that Anderson expects to be free are not the products Gladwell produces. So when Gladwell says that this is absurd because the economics do not support big ideas being sold at a price of zero, he is right. But that is because the big ideas are not being sold at all, and this is all efficient.
Our colleagues, Eran Shmaya and Rakesh Vohra have started a blog, The Leisure of the Theory Class. Only three posts so far, but it promises to be a feast of Gale-Stewart games, and gossip. I look forward to them making fun of Sandeep too.
When you self-check-in to United Airlines, they make a series of offers where you can upgrade to Economy Plus, get an aisle seat etc.
Why do they do this at the last minute? They are already experts at price discrimination but this usually occurs when you buy a ticket using advanced purchase, cancellation fees etc to separate out different buyers with different willingness to pay. You could do the same with aisle seats and Economy Plus.
Implementing price discrimination at the last minute helps you respond to information, e.g. how full the plane is, which you only have available at that time. Is that the only advantage?
There is a possible disadvantage for the airlines- price discrimination at the time of purchase is transparent to other airlines. They can coordinate on the pricing. But last minute pricing is intransparent. Maybe United even cuts the advance purchase fare, gives only interior seats to get surplus back via an “add-on” price for an aisle seat. This might trigger a price war.
On the other hand “add-ons” are very effective for extracting suplus at hotels (mini-bars etc) and for credit card companies (late fees etc). Is this what airlines are hoping?
Not Exactly Rocket Science describes an experiment in which vervet monkeys are observed to trade grooming favors for fruit. At first one of the monkeys had an exclusive endowment of fruit and earned a monopoly price. Next, competition was introduced. The endowment was now equally divided between two duopolist monkeys and as a result the price in terms of willingness-to-groom dropped.
Now, were the monkeys playing Cournot (marginal cost equals residual marginal revenue) or Bertrand (price equals marginal cost)? (The marginal cost of trading an apple for a grooming session is the opportunity cost of not eating it.) We need another treatment with three sellers to know. If the price falls even further then its Cournot. In Bertrand the price hits the competitive point already with just two.
Intermediate micro question: Can Monkey #1 increase his profits by buying the apples from Monkey #2 at the equilibrium price and then acting as a monopolist?
