Here’s a model of self-confidence. People meet you and they decide if they admire/respect/lust after you. You can tell if they do. When they do you learn that you are more admirable/respectable/attractive than you previously knew you were. Knowing this increases your expectation that the next person will react the same way. That means that when you meet the next person you are less nervous about how they will judge you. This is self-confidence.

Your self-confidence makes a visible impression on that next person. And it’s no accident that your self-confidence makes them admire/respect/lust after you more than they would if you were less self-confident. Because your self-confidence reveals that the last person felt the same way. When trying to figure out whether you are someone worthy of admiration respect or lust, it is valuable information to know how other people decided because people have similar tastes on those dimensions.

And of course it works in the opposite direction too. People who are judged negatively lose self-confidence and their unease is visible to others and makes a poor impression.

For this system to work well it must escape herding and prevent manipulation. Herding would be a problem if confident people ignore that others admire them only because they are confident and they allow these episodes to further fuel their confidence. I believe that the self-confidence mechanism is more sophisticated than this. Celebrities complain about being unable to have real relationships with regular people because regular people are unable to treat celebrities like regular people. A corollary of this is that a celebrity does not gain any more confidence from being mobbed by fans. A top-seeded tennis player doesn’t gain any further boost in confidence from a win over a low-ranked opponent who wilts on the court out of awe and intimidation.

Herding may be harder to avoid on the downside. If people who lack confidence are shunned they may never get the opportunity to prove themselves and escape the confidence trap.

And notwithstanding self-help books that teach you tricks to artificially boost your self-confidence, I don’t think manipulation is a problem either. Confidence is an entry, nothing more.  When you are confident people are more willing to get to know you better. But once they do they will learn whether your self-confidence is justified. If it isn’t you may be worse off than if you never had the entry in the first place.

Drawing:  Life is a Zen Roller Coaster from www.f1me.net

[P]olicymakers are seriously discussing a so-called Grexit—in which Greece would default on its debts and abandon the euro.

This isn’t an outcome that anyone wants. Even though a devalued currency would make Greece’s exports cheaper and attract tourists, it would do so at a terrible price, destroying huge amounts of wealth and seriously harming the country’s G.D.P. It would be costly for the rest of Europe, too. Greece owes almost half a trillion euros, and containing the damage would likely require the recapitalization of banks, continent-wide deposit insurance (to prevent bank runs), and more aid to Portugal, Spain, and Italy, which seem to be the next countries in line to default. That’s a very high price to pay for getting rid of Greece, and much more expensive than letting it stay……

But the catch is that Europe isn’t arguing just about what the most sensible economic policy is. It’s arguing about what is fair. German voters and politicians think it’s unfair to ask Germany to continue to foot the bill for countries that lived beyond their means and piled up huge debts they can’t repay. They think it’s unfair to expect Germany to make an open-ended commitment to support these countries in the absence of meaningful reform. But Greek voters are equally certain that it’s unfair for them to suffer years of slim government budgets and high unemployment in order to repay foreign banks and richer northern neighbors, which have reaped outsized benefits from closer European integration……

The basic problem is that we care so much about fairness that we are often willing to sacrifice economic well-being to enforce it…. a famous experiment known as the ultimatum game—one person offers another a cut of a sum of money and the second person decides whether or not to accept—shows that people will walk away from free money if they feel that an offer is unfair. Thus, even when there’s a solution that would leave everyone better off, a fixation on fairness can make agreement impossible.

Hart and Moore and Hart and Holmstrom have offered theories of centralization based on behavioral issues. I’m not familiar with the other work on behavioral contract theory. But my guess is there is plenty of room for interesting research in the area along lines implicit in this article.

If you are a game theorist you start to analyze the question and discover that, as with all language there is some ambiguity. There’s more than one way to answer the question, the answer could be very detailed or just straightforward, the question might actually be rhetorical, there may be some implicit message to you in the question.

You begin to analyze how else she might have posed the same question. The fact that she chose this particular wording over another gives you clues about what precisely she is getting at. By a process of elimination this leads you to refine your interpretation of the question.

But if you are just a mediocre game theorist its pretty likely your analysis is totally wrong and you are worse off than if you hadn’t ever thought to analyze it. Indeed there is a good reason that your intuitive interpretation was the right one. Because the language evolved that way. And the evolution was probably so complex that there is no way a mediocre game theorist could have traced through the path of evolution to deduce that interpretation.

This is like how drugs can be found from compounds that have evolved in the plant and animal kingdom despite the fact that science has no way of knowing how to synthesize those.

And of course pretty much all of us are mediocre game theorists at best.

Public policy debates often involve appeals to results of work in social sciences like economics and sociology.  For example, in his State of the Union address this year, President Obama cited a recent high-profile study to support his emphasis on evaluating teachers by their students’ test scores.  The study purportedly shows that students with teachers who raise their standardized test scores are “more likely to attend college, earn higher salaries, live in better neighborhoods and save more for retirement.”

How much authority should we give to such work in our policy decisions?  The question is important because media reports often seem to assume that any result presented as “scientific” has a claim to our serious attention. But this is hardly a reasonable view.  There is considerable distance between, say, the confidence we should place in astronomers’ calculations of eclipses and a small marketing study suggesting that consumers prefer laundry soap in blue boxes.

Either we have to pay teachers according to test scores or not. A choice is unavoidable. Similarly, soap has to be packaged in some way, a choice is unavoidable. Better to make that choice based on research. If we can place great confidence in the research, all the better. But even if we have less confidence, so be it, because what choice do we have other than to use the research?

4. In The Vicinity
The restaurant’s high-profit dishes tend to cluster near the anchor. Here, it’s more seafood at prices that seem comparatively modest.

5. Columns Are Killers

According to Brandon O’Dell, one of the consultants Poundstone quotes in Priceless,it’s a big mistake to list prices in a straight column. “Customers will go down and choose from the cheapest items,” he says. At least the Balthazar menu doesn’t use leader dots to connect the dish to the price; that draws the diner’s gaze right to the numbers. Consultant Gregg Rapp tells clients to “omit dollar signs, decimal points, and cents … It’s not that customers can’t check prices, but most will follow whatever subtle cues are provided.”

For each note there’s a corresponding drink – either a wine, spirit, liqueur or fruit juice. The loud pedal puts in egg flip and the soft pedal adds ice. For soda you play a cadenza in F sharp. The quantities depend on how long a note is held – you get the sixteenth of a measure for a hemidemisemiquaver; a whole measure for a black note; and four measures for a semibreve. When you play a slow tune, then tone comes into control to prevent the amounts growing too large and the drink getting too big for a cocktail – but the alcoholic content remains unchanged. And, depending on the length of the tune, you can, if you like, vary the measures used, reducing them, say, to a hundredth in order to get a drink taking advantage of all the harmonics, by means of an adjustment on the side.

And here it is, realized:

(Porkpie pirouet:  Adriana Lleras-Muney)

Alicia Shepard, NPR’s former ombudsman and a visiting journalism professor at the University of Nevada at Las Vegas, had a similar view. “David Sedaris has never been presented as a journalist,” she said. “He’s a storyteller. I do think there are different expectations. It’s acknowledged that he’s making things up.”

In fact, listeners would be unlikely to know this by the way NPR and “This American Life” present Sedaris on the air. NPR introduced its last rebroadcast of Sedaris reading “SantaLand” in December by calling it “a ‘Morning Edition’ holiday tradition.” It has used similar language in each of its rebroadcasts.

“This American Life” rebroadcast an old Sedaris monologue on May 5 — a nearly 15-minute piece about his family’s pets — without any hint that parts of it might have been untrue.

In an interview, Glass said no one at his program was concerned about Sedaris before the Daisey episode. “We just assumed the audience was sophisticated enough to tell that this guy is making jokes and that there was a different level of journalistic scrutiny that we and they should apply,” he said.

But the Daisey debacle has brought about a reassessment. Glass said three responses are under discussion: fact-checking each of Sedaris’s stories to ensure their accuracy, labeling them to alert the audience that the stories contain “exaggerations” or doing nothing.

At the moment, Glass said, he thinks the best course is to check Sedaris’s facts to the extent that stories involving memories and long-ago conversations can be checked. The New Yorker magazine subjects Sedaris’s work to its rigorous fact-checking regime before it publishes his stories.

My theory is based on public goods and free-riding.  If as a kid you shared a room then you and your sibling didn’t internalize the full marginal social value of your efforts at tidying up and as a consequence your room was probably a mess.  At least messier than it would have been if you had the room to yourself.

This would suggest that if you want to know whether your girlfriend is going to be a tidy roommate when you shack up one easy clue is whether she has a sister.  If not then she probably had a room to herself and she is probably accustomed to tidiness.

But here is where I start to think it can go the other way. A kid who shares a room needs to adapt to the free-rider problem. It pays off if she can develop a tit-for-tat strategy with her sibling to maintain incentives for mutual tidiness. This kind of behavioral response is most credible when it stems from an innate preference for cleanliness. Bottom line, it can be optimal for a room-sharing sibling to become more fussy about a clean room.

As I said I am not sure how it all balances out. But I have a few data points. I have two brothers and we were all slobs as kids but now I am very tidy. My wife has no sisters and if I put enough negatives in this sentence then when she reads this it will be hard for her to figure out how untidy I am herein denying she never fails not to be.

Her brothers also cannot be accused of coming dangerously close to godliness either but I don’t think they shared a room much as kids. One of them now lives in an enviably tidy home but I credit that to his wife who I believe grew up with two sisters.

My son has his own room and at age 5 he is already the cleanest person in our house. He is also the best dressed so there may be something more going on there. My two daughters have been known to occasionally tunnel through the pile of laundry on their (shared) floor just to remind themselves of the color of their carpet.

I have a cousin whom I once predicted would eventually check herself into a padded cell mainly because those things are impeccably tidy. She always had her own room as a kid. Sandeep is an interesting case because as far as I know he has no brothers and while his home sparkles (at least whenever they are having guests) his office is appalling.

Jamie Dimon, head of JPMorgan Chase, argues against regulation because, according to him, it lumps in good bankers with bad bankers. For example, via Maureen Dowd,

After the economy nearly atomized in a cloud of cupidity, Dimon became known as America’s least-hated banker. But now the blunt 56-year-old Queens native who snowed Democrats in Washington with all his talk about not lumping in “good banks” with “bad banks” has fallen off his pedestal.

For us humble outsiders, it is hard to tell a good banker from a bad banker, particularly when even good bankers can’t catch a “whale”. This generates Gresham’s Law of Bankers – bad bankers adversely affect good bankers. If I am not sure if I am employing the services of a good banker or a bad banker, I am going to make transactions under an expected quality of banker. Then good bankers suffer as they are pooled with bad bankers.

Screening out the bad bankers via regulation can help the good bankers by creating separation.