You are currently browsing the monthly archive for September 2010.
- Most family home videos are boring. You film your kid doing something, like tying his shoes for the first time. It seems really exciting the first time, but years later you’ve seen your kid do that every day for years. The video is boring but it’s entertaining to notice things in the background like “hey remember when our yard looked like that before the landscaping?” So the best home videos are of things that are boring now because you currently do them all the time. Someday you will no longer be doing them and the video will bring back memories.
- “Jack of all trades, master of none.” The causality actually goes in the opposite direction than the phrase is usually intended to mean. (Take it from me.)
- Can someone explain to me why I want a ceiling fan to cool my room? The hot air is near the ceiling. I would rather it stay there. Storn, are you reading this?
- Like any other measurement, the “hawkeye” electronic line judge in tennis has confidence intervals. When the human judge calls it in, and the hawkeye’s point estimate is one millimeter out, why does the hawkeye trump?
- For any album there is a finite number N of listenings before it grows on you. All album reviews should begin by stating the smaller of the following two numbers: N or the number of times the reviewer listened to the album (before giving up.)
- Nature gives men a powerful urge for sex with a lexicographic preference for quantity of mates over quality. But when it comes to our sons having sex the preference completely reverses. But both are means to the same end: passing on genes. Puzzle.
Watch the ad and then go to 1.10 minutes for the Simpsons’ prediction….
If Twitter bans the sale of usernames then they take away any incentive to squat. But is the commitment credible?
While Twitter tries to work out how to make money, a Spaniard has sold his username on the site for a six-figure sum.
In 2007 Israel Meléndez set up a Twitter account under his first name. This year he was approached by the state of Israel, which wanted to buy @Israel from him for a quantity of dollars that, he told Spain’s Público newspaper, included “five zeroes”.
The sale went through despite Twitter’s stated policy of preventing username squatting and Meléndez, who runs adult websites for a living, said Twitter itself had advised the Israeli government on how this could be done.
“All the business of getting in contact with Twitter was done by them [Israel],” Meléndez said. “I never saw any emails [between them] and Twitter never contacted me, but if the @Israel account is open and working I imagine it means that Twitter had no problem with the transaction.”
Cell phone use increases the risk of traffic accidents right? But how do we prove that? By showing that a large fraction of accidents involve people talking on cell phones? Not enough. A huge fraction of accidents involve people wearing shoes too.
I thought about this for a while and short of a careful randomized experiment it seems hard to get a handle on this using field data. I poked around a bit and I didn’t find much that looked very convincing. To give you an example of the standards of research on this topic, one study I found actually contains the following line:
Results Driver’s use of a mobile phone up to 10 minutes before a crash was associated with a fourfold increased likelihood of crashing (odds ratio 4.1, 95% confidence interval 2.2 to 7.7, P < 0.001).
(Think about that for a second.)
Here’s something we could try. Compare the time trend of accident rates for the overall population of drivers with the same trend restricted to deaf drivers. We would want a time period that begins before the widespread use of mobile phones and continues until today. Presumably the deaf do not talk on cell phones. So if cell phone use contributed to an increase in traffic risk we would see that in the general population but not among the deaf.
On the other hand, the deaf can use text messaging. Since there was a period of time when cell phones were in widespread use but text messaging was not, then this gives us an additional test. If text messaging causes accidents, then this is a bump we should see in both samples.
Anyone know if the data are available? I am serious.
Each brain-damaged person got a wad of play money, and instructions to gamble on 20 rounds of coin tossing (heads-you-win/tails-you-lose, with some added twists). Other people who had no such brain lesions got the same money and the same gambling instructions.
The brain-damaged gamblers pretty consistently ended up with more money than their healthier-brained competitors. The researchers speculate that when “normal” gamblers encounter a run of unhappy coin-toss results, they get discouraged and become cautious – perhaps too cautious. Not so the people with brain-lesion-induced emotional disfunction. Encountering a run of bad luck, they plough on, undaunted. And then enjoy a relatively handsome payoff. At least sometimes.
Stalin stayed in Moscow during WWII to lead resistance against the approaching German armed forces. He was putting his own life at risk. Why do leaders have to take costly actions to persuade followers to follow?
A seminal paper Leading by Example (jstor link) by Ben Hermalin (AER 1998) has an answer based on a classical signaling model. Suppose a leader wants followers to exert costly effort. The ideal level effort depends on some factor known only to the leader. Stalin might have a better idea as to the chances of success against the Germans; or a C.E.O. might have better information about the state of demand. What if the leader simply tells the followers his information? Of course, this is Cheap Talk. If the leader wants the followers to exert high effort whatever the true state of affairs, the followers cannot believe anything the leader says. For example, Stalin might tell his troops to fight hard whether they have a good chance of beating the Germans or not. Communication breaks down and the followers’ effort cannot be a function of the truth.
The picture changes if the leader can himself exert costly effort and lead by example. Then, he might only be willing to work hard if and only if he thinks the chances of his effort paying off are good. Stalin’s decision to stay in Moscow signals that he believes that his life is likely to be safe as the chances for Soviet success are good. If the Germans have the advantage, he does truly risk his life and would prefer to leave Moscow. As the leader’s incentives to send the signal or not depend on the true state of affairs, his “message” is credible. The followers can then fight hard or work hard if and only if the leader leads by example and works hard himself.
“Actions speak louder than words” and Costly Signaling is more informative than Cheap Talk. Hence leaders must lead by example because words cannot be believed while actions can. This is the heart of Hermalin’s idea.
Once you buy into the framework, it is easy to think of variations. Hermalin does not talk explicitly about competition but let’s add that in. If things are going well for the organization in the product market, then the competition does not matter – you have a good product so you can slack off. More importantly the leader slacks off and the followers do too. If the organization is defunct if the crew does not pull the oars hard, the captain has a good incentive to pitch in and row. So, this is similar to the first Hermalin story except the leader works hard when the going is bad and effort is very important and not when the going is good. The followers do the same.
Another variation: Middle managers looking to get promoted have weird incentives. They want to signal how hard-working they are to their superiors. They want to work hard even when the going is bad. So, the followers cannot filter out the true state from the middle manager’s effort. The followers will slack off. The middle manager cannot be a credible leader by example as signaling to his superiors destroys the credibility of the signal to his juniors. This is a good reason to appoint someone who does not want to be senior manager into the middle position. Hence, looking at the leading by example issue alone, academic department should appoint Chairs who do not have any ambition to rise further in the hierarchy. Many other examples can be given…
This article from Not Exactly Rocket Science discusses an experiment studying “competition” between the left and right sides of the brain. Subjects in the experiment had to pick up an object placed at different points on a table and what was observed was which hand they used depending on where the object was. The article makes this observation in passing.
they always used the nearest hand to pick up targets at the far edges of the table, but they used either hand for those near the middle. Their reaction times were slower when they had to choose which hand to use, and particularly if the target was near the centre of the table.
This much is expected, but it supports the idea that the brain is choosing between possible movements associated with each hand. At the centre of the table, when the choice is least clear, it takes longer to come down on one hand or the other.
I stopped there. Because while this sounds intuitive, there is another intuition that points squarely in the opposite direction. When the object is in the center of the table, that’s when it matters least which hand you use, so there is no reason to spend extra time thinking about it. Right? So…when you have competing intuitions you need a model.
You have to take an action, say “left” or “right” and your payoff depends on the state of the world, some number between -1 and 1. You prefer “right” when the state is positive and “left” when the state is negative and the farther away from zero is the state, the stronger is that preference. When the state is exactly zero you are indifferent.
You don’t know the state with perfect precision. Instead, you initially receive a noisy signal about the state and you have to decide whether to take action right away (and which action) or wait and get a more accurate signal. It’s costly to wait. For what values of the initial signal do you wait? Note that in this model, both of the competing intuitions are present. If your initial signal is close to zero, it is likely that the true state is close to zero so your loss from choosing the wrong action is small. Thus the gain from waiting for better information is small. On the other hand, if your initial signal is far from zero, then the new information is unlikely to affect which action you take so again the gain from waiting is small.
But now we can compute the relative gain. And the in-passing intuition quoted above is the winner.
Consider two possible values of the initial signal, both positive but one close to zero and one close to +1. In either case if you don’t wait you will take action “right.” Now consider the gain from waiting. Take any state x and let’s consider the scenario where waiting would lead you to believe that the state is x. If x is positive then you would still choose “right” and waiting would not gain anything. So fix any negative x and ask what would the gain be if waiting led you to believe that the state is x. The key observation is that for any fixed x, this gain would be the same regardless of which of the initial signals you had.
So the comparison then just boils down to comparing how likely it is to switch to x from the two different initial signals. And this comparison depends on how far to the left x is. Signals very close to -1 are much easier to reach from an initial signal close to zero than from an initial signal close to 1. And these are the signals where the gain is large. On the other hand, for x’s just to the left of zero (where the gain is small), the relative likelihood of reaching x from the two initial signals is closer to 50-50.
Formally, unless the distribution generating these signals is very strange, the distribution of payoff gains after an initial signal close to zero first-order stochastically dominates the distribution of payoff gains when you start close to 1. So you are always more inclined to wait when your initial signal is close to zero.
In search of a rural retreat, ideal for apple picking? A decent close option to Chicago is Heinz Orchard. No mazes, hay rides etc…just apples. The only problem: what do you do with the 40 pounds of apples you end up picking…?!!
- Submitted with no implied approval and simply as an exquisite example of a rhetorical takedown by someone apparently deeply scarred by whoknowswhat. (This doesn’t mean that all other sordid links lacking this disclaimer are submitted with implied approval. Thank you for the cake, now I will eat it too.)
- Mobius comic strip
- Reading Playboy to the blind.
- Soap operas and unknown soldiers.
- Pine-nut mouth. Clues from Denmark.
- “We shared a cab, you hit me in the face.”
I double-checked to make sure it wasn’t April 1 when I saw this story in the Independent:
The Queen asked ministers for a poverty handout to help heat her palaces but was rebuffed because they feared it would be a public relations disaster, documents disclosed under the Freedom of Information Act reveal.
Royal aides were told that the £60m worth of energy-saving grants were aimed at families on low incomes and if the money was given to Buckingham Palace instead of housing associations or hospitals it could lead to “adverse publicity” for the Queen and the Government.
Check out their request.
And why you should too.
There is a painful non-convexity in academic research. Only really good ideas are worth pursuing but it takes a lot of investment to find out whether any given idea is going to be really good. Usually you spend a lot of time doing some preliminary thinking just to prove to yourself that this idea is not good enough to turn into a full-fledged paper. Knowing that most ideas are unlikely to pan out there is an incentive not to experiment on new projects.
Blogging bridges that gap in a way I didn’t expect when I started. Blogging means that half-baked ideas have scrap value: if they are not publishable you can at least write about them on the blog. This means that you are more likely to recoup some of those costs of experimentation and you undertake more projects ex ante.
So, readers, don’t thank me for blogging (not that I thought you had any good reason too.) I thank you for wading through the scraps.
Mayor Daley will step down as Chicago Mayor after over two decades in office. His campaign coffers are full and his popularity is high and yet Daley the Younger will voluntarily leave office after serving a slightly longer term than Daley the Elder. We can ascribe lofty reasons for his departure but at Cheap Talk we usually focus on the basest of human motives: rational self-interest.
First, if Daley had decided to run again, I’m assuming he would have been re-elected easily with no candidate coming close to him popularity. His voluntary departure signals that there is some hidden problem that’s going to be trouble in the next term. It could be trouble for Daley alone, the private value case, such as an affair, some personal corruption or something of that sort. And there is a prime candidate for this scenario: Daley’s wife has cancer and he may rightly want to concentrate on her welfare. So, the private value case is possible. In the opposite scenario, there is some issue that will affect anyone who becomes Mayor, the common value case. There is an obvious candidate for this scenario too: the City of Chicago is in deep financial trouble and the next Mayor will have to sort that out. Forget the glamourous public projects like Millenium Park, greening the city etc. There will be nitty-gritty fights with unions to renegotiate pension deals, cutbacks, layoffs and protests.
Not only will that be painful but re-election will be hard. Voters will blame the next Mayor for everything that goes wrong whether it’s is his fault or not. The next Mayor will be a one term Mayor.
So, Rahm should spend a few years at some investment bank, making millions in a few short years – just like he did last time around. He can build his political machine and run for Mayor the next time around.
The never-enigmatic Presh Talwalker analyzes the strategic bobbling occasionally effected by the heads of Indians.
I have personally witnessed this maneuver in two contexts which fall outside of the categories Presh identifies in his post.
- Indian students asking me a question and getting an answer. The ensuing head-bobble has always suggested to me something like “of course. obvious. so obvious in fact that the thundering stroke of clarity is making my head roll around.” I have also noticed that on these occasions the bobble is contagious. The Indian student sitting next to the questioner bobbles sympathetically.
- Indian classical music. The tabla player, say, will bobble just after a rapid-fire phrase. There might even be a sound emitted. It’s something like “Chella.” The whole display says something like “Behold, the rhythm is so frenetic that it is rebounding back through my arms and neck and dissapating through the top of my head. Chella.”
Obama has an interesting strategic decision to make about how to engage the Tea Party. If there is one power that the President has, even when he has lost momentum policy-wise, it is to control attention. How should he use this power in relation to the Tea Party?
Right now the Tea Party has few leaders, and none with any real power. Obama can essentially anoint a leader by picking him/her out of the crowd and engaging directly. For example, by personally responding in a press conference to some attack and addressing the Tea Partier by name. As the Tea Party tries to internally organize, a well-targeted salvo could throw a wrench in the works. On the other hand, it could backfire and provide them with a much-needed lightning rod.
He could frame the upcoming election as “sane, albeit perhaps incompetent Democrats” versus “nutty Tea Partiers.” By doing so he would raise the stakes for the Tea Party higher than they might want to make them. In its infancy, the Tea Party may not be ready for an up-or-out test.
Obama could be wisely waiting until after this election to make any move like this. It may even be that he and the Tea Party have a mutual interest in keeping their profile low for now. Because making this election out to be a test of the Tea Party’s fitness can only really have consequences in the event they fail to make a good showing. In that case, the Tea Party disappears and Obama loses a potentially valuable third-party threat in 2012.
Instead, if they tacitly agree to view the Tea Party as too young to be a big contender this November, they both keep their hopes alive in the event of defeat. Which of course means that the mainstream Republicans should have exactly the opposite incentive.
Now I am trying to figure out how this fits in with the story.
For the sake of argument let’s take on the plain utilitarian case for waterboarding: in return for the suffering inflicted upon a single terror suspect we may get information that can save many more people from far greater suffering. At first glance, authorizing waterboarding simply scales up the terms of that tradeoff. The suspect suffers more and therefore he will be inclined to give more information and sooner.
But these higher stakes are not appropriate for every suspect. After all, the utilitarian cost of torture comes in large part from the possibility that this suspect may in fact have no useful information to give, he may even be innocent. When presented with a suspect whose value as an informant is uncertain, these costs are too high to use the waterboard. Something milder is preferred instead like sleep deprivation.
So the utilitarian case for authorizing waterboarding rests on the presumption that it will be held in reserve for those high-value suspects where the trade-off is favorable.
But if we look a little closer we see it’s not that simple. Torture relies on promises and not just threats. A suspect is willing to give information only if he believes that it will end or at least limit the suffering. When we authorize waterboarding, we undermine that promise because our sleep-deprived terror suspect knows that as soon as he confesses, thereby proving that he is in fact an informed terrorist, he changes the utilitarian tradeoff. Now he is exactly the kind of suspect that waterboarding is intendend for. He’s not going to confess because he knows that would make his suffering increase, not decrease.
This is an instance of what is known in the theory of dynamic mechanism design as the ratchet effect.
Taken to its logical conclusion this strategic twist means that the waterboard, once authorized, can’t ever just sit on the shelf waiting to be used on the big fish. It has to be used on every suspect. Because the only way to convince a suspect that resisting will lead to more suffering than the waterboarding he is sure to get once he concedes is to waterboard him from the very beginning.
The formal analysis is in Sandeep’s and my paper, here.
Peter Cramton emailed a bunch of us today asking us to sign a comment he and others are submitting to a House Committee. There are many issues but one is related to an odd pricing rule proposed for buying equipment for Medicare.
Suppose Medicare needs x machines and wants to save money. They can run a simple procurement auction (or some variant) as follows: Suppliers submit bids and the lowest x bids are accepted and all are paid the highest accepted bid. This is similar to a market mechanism that spits out a market clearing price that all suppliers receive. Just like the market mechanism, all but the highest cost supplier get surplus at the market-clearing price. Is there some way to leave the suppliers with less rent and for Medicare to save more money? Unless Medicare knows the costs of production of the suppliers, the answer is basically “No”, under reasonable assumptions. Any mechanism has to leave low cost suppliers with information rent and the minimum rent is left by the market-clearing mechanism.
But it seems that does not stop Medicare from trying! They are proposing a median pricing rule where the lowest x bidders are chosen but are paid the median of the x winning bids. This means the top 50% of bidders are not paid their submitted bids. This leads to many pathologies as the authors point out in their comment. First, the top 50% may simply refuse to supply and withdraw their bids (this is allowed under the present auction rules). Then Medicare will be left with less equipment than it needs. Or the suppliers may make a loss if they are forced to supply for one reason or another. This is not good for the long term financial health of the suppliers. Or they may game and shade their bid etc. etc.
Check out the comment for more detail. Peter is providing a public good and testifies in front of the House Committee on September 27. We’ll see what happens. If the median pricing rule stays in place despite Peter’s best efforts, expect to see (many!) papers working out equilibria of the procurement auction under that rule!
Two guys named David Pendelbury and Eugene Garfield use citation counts (combined with some other magic) to predict Nobel laureates. They claim success: they have“correctly predicted at least one Nobel Laureate each year with the exception of the years 1993 and 1996.” Granted, since they are picking 5 or so people in four fields (Chemistry, Economics, Physics, Medicine) that doesn’t seem like such a big deal.
But for the record, here are the predictions for Economics.
- Alberto Alesina for theoretical and empirical studies on the relationship between politics and macroeconomics, and specifically for research on politico-economic cycle.
- Nobu Kiyotaki for formulation of the Kiyotaki-Moore model, which describes how small shocks to an economy may lead to a cycle of lower output resulting from a decline in collateral values that creates a restrictive credit environment.
- John Moore for formulation of the Kiyotaki-Moore model, which describes how small shocks to an economy may lead to a cycle of lower output resulting from a decline in collateral values that creates a restrictive credit environment.
- Kevin Murphy for pioneering empirical research in social economics, including wage inequality and labor demand, unemployment, addiction, and the economic return of investment in medical research, among other topics
David K. Levine has written a white paper for the NSF proposing that they invest in large-scale simulated economies as virtual laboratories:
An alternative method of validating theories is through the use of entirely artificial economies. To give an example, imagine a virtual world – something like Second Life, say – populated by virtual robots designed to mimic human behavior. A good theory ought to be able to predict outcomes in such a virtual world. Moreover, such an environment would offer enormous advantages: complete control – for example, over risk aversion and social preferences; independence from well-meant but irrelevant human subjects “protections”; and great speed in creating economies and validating theories. If we were to look at the physical sciences, we would see the large computer models used in testing nuclear weapons as a possible analogy. In the economic setting the great advantage of such artificial economies is the ability to deal with heterogeneity, with small frictions, and with expectations that are backward looking rather than determined in equilibrium. These are difficult or impractical to combine in existing calibrations or Monte Carlo simulations.
My colleague Josh Rauh who is a pensions expert testified in the front of the Evanston City Council. You can read about his report here. I particularly enjoyed the little jokey exchange at the end:
‘Do we want to take action now and forge a financially responsible course?” If not, he [Josh Rauh] said, the City could just keep going in the present direction, “hoping that someone will bail us out. We could get state and federal bailout money.”
“Are we too big to fail?” asked Mayor Tisdahl.
“The City of Chicago is too big to fail,” responded Dr. Rauh; “the City of Evanston may not be. …
A guy sometimes says stuff that, for reasons completely mysterious to him, hurts a girl’s feelings. It comes out that she’s hurt and he desperately tries to explain. He didn’t mean it. He didn’t think she would interpret it that way. He was just talking. She’s taking it too personally.
He forgets to call, he misses important dates, he get stalled by unexpected commitments. She listens to all of his excuses.
He’s trying to convince her that he had the right intentions. You see, he thinks that relationships are all about moral hazard. He wants her to know that he’s trying hard, but mistakes get made.
And he can never figure out why this isn’t enough for her. But the reason is simple. For her, relationships are all about adverse selection. It’s not his actions per se, it’s what they reveal about his type. She’s perfectly willing to forgive his missteps, she believes him that he’s trying hard and that he didn’t know he was being a louse, but that’s precisely the problem. If he weren’t such a lemon he would know the right way to say things, she’d always be in his thoughts, and she’d always be his highest priority.
Plenty of government intervention means plenty of data – data that can be creatively exploited to study long-standing questions of political economy such as….
Do politicians vote based on ideology, constituent preferences or to get lots of cash from lobbyists to pay for the re-election campaigns?
“The Political Economy of the U.S. Mortgage Default Crisis” by Atif Mian, Amir Sufi and Francesco Trebbi (forthcoming in AER I believe) uses data on voting in Congress on the American Housing Rescue and Foreclosure Prevention Act AHRFPA and the Emergency Economic Stabilization Act EESA to study politicians’ voting behavior. AHRFPA supported mortgage holders who were financially distressed and EESA supported banks supplying them with liquidity. We can think of them as constituents and special interests. There is data on default rates in a district at the ideological level - you can see the default rate among Democrats and Republicans. There is data on contributions made by the financial industry to a candidate’s campaign war chest.
There is no variation in Democratic votes for AHRFPA so the paper studies Republican votes. The authors find that Republican politicians’ votes for the bill are correlated with the default rate of Republican constituents in their district. Moreover, if the district lies in a Presidential swing state and is more competitive,the response is stronger.
On the EESA, the authors find that campaign contributions by the financial industry are correlated with voting for the bill. Also, retiring politicians less likely to vote for the bill, even if they received campaign contributions from the financial industry in the past. Finally, the more ideological a politician is, the less likely he is to respond to these measures (ideology is measured on some scale that is usually employed in these studies).
Lots of interesting and provocative results. Lots of caveats and subtlety I cannot do justice to in this post. Take a look at the paper.
This morning I was on my own for breakfast so I looked around and saw heirloom tomatoes from the garden, a jar of artichoke hearts with a few left after last night’s chickpea salad, and chive oil which I made last week as a lobster marinade and have put to good use in various applications since.
So I made an omelette. (I am a devotee of the Alton Brown omelette method.) And then I ate it.
Sarah Palin puts her toe in the water in Iowa and Robert Gibbs calls her:
“a formidable force in the Republican Party and may well be, in all honesty, the most formidable force in the Republican Party right now.”
On the other hand:
“While popular among conservatives, Palin still has a long way to go with other Americans. A CBS News poll on Thursday said 46 percent of American voters viewed Palin unfavorably, compared with 21 percent who have a favorable opinion of her and 33 percent who are undecided.”
The season finale of Bachelor Pad featured a surprise twist. The share of the prize money would be decided by a “keep” or “share” Prisoners’ Dilemma-style game. $250,000 was at stake and the last standing couple, Dave and Natalie, could split the money if they both chose Share. If one of them chose “Keep” then he/she would take all the money for him/her-self. If they both chose “Keep” the $250,000 would be shared among all the contestants who were previously eliminated from the show.
What makes this game different from the Golden Balls game is that the decision to Share doubles as a signal to be a faithful partner in their post-show everlasting love.
The clip below is a bit long, but the highlight comes in the middle when the loser bachelor(ettes) give their game theoretic analyses while Dave and Natalie go into separate rooms to prove theorems.
Thanks to Charles Murry for the pointer.
Elton John and Bernie Taupin pose a classic conundrum:
It’s sad, so sad
It’s a sad, sad situation
And it’s getting more and more absurd
It’s sad, so sad
Why can’t we talk it over
Oh it seems to me
That sorry seems to be the hardest word
Elton must have done something in the recent past that requires an apology. He wants his partner to “make you love” him. What has he “got to do to be heard”?
So his entreaties are not being heard. Why? Elton has a credibility problem. He wants love whether or not he is truly sorry. If he gets a positive response from saying “sorry” whether he means it or not, he’ll just say it. It is, of course, cheap talk.
To make Elton’s apology credible, it has got to be hard or costly to say sorry. There has to be some loss of face, some blow to pride from saying sorry. But to make “sorry” truly credible, the cost of saying sorry has to be low if Elton is truly sorry and high if he’s not sorry at all. So, if Elton is having a hard time saying sorry, maybe he’s not really sorry?
What would you believe in the face of the unbelievable? For example, how would you react if you discover suddenly that you can fly. Before today flying was impossible, but now you can do it. Something you were convinced of is wrong and you have to decide whether it’s that you can’t fly or that you are not prone to hallucinations.
In fact you already know how you would react, because it happens in your dreams. Have you ever dreamed you could fly? If so, did you infer that you must be dreaming? Some do, and then wake up. (Poor them.) Others just go on flying.
Are you irrational to believe you can fly?
Maybe you aren’t fooled by flying dreams or maybe you’ve never dreamed of flying. But crazy things happen in everybody’s dreams. What is the craziest thing that happened in your dreams that you nevertheless accepted as the way the world must work since after all it’s happening right before your eyes?
Tomatoes are about the only attribute these two have in common, so the choice comes down to personal preference. Heinz is spicier, with distinct Worcestershire notes. Market Pantry has mostly tomato flavor, which comes through precisely because it’s not as spicy. The flavor differences are apparent straight from the bottle or with fries.
With that conclusion, summarized briskly in workmanlike prose by journalists you’ve never heard of, Gladwell’s Grand Unifying Theory of Ketchup–which he was allowed to present in painstaking detail (and 5,000 words) in the nation’s most prestigious magazine–simply turns to air.
The background is in the Globe article.
Jean Tirole has written the best theoretical analysis I have seen of the role of government intervention to revitalize frozen asset markets. The key idea in this paper is that investors need to finance their next project and are unable to do this by selling their “legacy” assets because adverse selection has frozen the market.
A government buyback of these toxic assets attracts the bottom tail. The government of course is losing money on all of the assets it buys. But the payoff is that it rejuvinates the market: private financiers will now step in and buy the assets of those who refused the government offer. It’s a surprising result but ex post its pretty easy to understand.
If the government is offering a price 
All that was required was that the government price
The paper then goes on to study the optimal intervention when the market is not restricted to simple buybacks. The optimal scheme is a mix of buybacks and partial transfers of legacy assets that keep “skin in the game” to reduce the downstream adverse selection problem. The government is trying to minimize the cost of the intervention by spurring as much activity as possible from the private finance market.
This paper is worth studying.
