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Its called Chhota Pegs and so far has been mostly a chronicle of a visit to Calcutta (his hometown?) where food seems to be the star attraction:

Now this is the hard part. The damn thing must cook above and below but it is thick, and hard to turn over.   On the other hand if you don’t turn it over the potatoes will burn. So what you do is cook it for a while (covered if needed) until you can move the pan and have the entire omelette wobble in it. The top will still be uncooked (if it is cooked, I’m guessing the bottom is burnt).

Then (and here you must take a large swig of what’s left of the Bloody Mary / Laphroaig and if you are married and male, remove spouse from kitchen) cover the pan with the snug plate, put on the oven mitts, and turn the whole contraption over until the omelette is on the plate.  Or at least, try turning it.

Do not forget the oven mitts as you will have to grab the bottom of the pan. Exhortations such as Allah ho AkbarJoy Ma Kali or milder (Hare Krishna!) or even secular variants, such asBande Mataram, are useful here. Indeed, I encourage them.

With a sprinkling of Peter Hammond:

Thanks to Diego Garcia (uninhabited except temporarily by various U.K. and U.S. military personnel) and to Pitcairn (population now about 50), the British Empire appears safe from sunsets for the time being. (Both these territories have websites, by the way, though that for Diego Garcia is maintained by the U.S. Navy at www.nctsdg.navy.mil.) But the sun will be getting very low over the British Empire at around 01:40 GMT in late June each year….

Also, it seems that the sun could finally set over the British Empire if the sea level were to rise high enough because of global warming. It turns out that Diego Garcia has a mean elevation of only 4 feet above sea level, and a maximum elevation of only 22 feet. Perhaps the U.S. Navy will erect dikes around their strategically located communication facilities…

And Paul Dirac:

“[W]e have an economic system which tries to maintain an equality of value between two things, which it would be better to recognize from the beginning as of unequal value. These two things are the receipt of a single payment (say 100 crowns) and the receipt of a regular income (say 3 crowns a year) all through eternity…May I ask you to trace out for yourselves how all the obscurities become clear, if one assumes from the beginning that a regular income is worth incomparably more, in fact infinitely more, in the mathematical sense, than any single payment?” (From Dirac’s biography, The Strangest Man, by Graham Farmelo. Highly recommended btw.)
Coming from a physics genius, this is quite stunning in its stupidity. The most charitable thing I can say about the bloke is that he certainly wasn’t a hyperbolic discounter. (Never mind.) I find particularly telling the following observations: (a) how winning the Nobel prize appears to confer intellectual “rights” over other disciplines that one just don’t have the ability to exercise, but more importantly (b) how fundamentally “intuition” differs from field to field, so that a genius in one area can be a blithering idiot in another.
This promises to be a good one.  I have already put it in my Safari Top Sites.

The Universe holding you by the fist and shaking

If you are like me you subscribe to many RSS feeds and you find them accumulating articles faster than you can read them.  What do you do when MetaFilter has 500 unread articles?

Use the glance and scroll method.  Look at an article and read it if it looks interesting.  But if it doesnt then don’t keep browsing.  Give a hard flick on your mousewheel, trackpad, phone screen whatever and scroll rapidly past a large number of articles and glance at the next one you land on.  Repeat.

The point is that all articles, regardless of their position in the feed are equally likely to be interesting, other things equal.  So if you can only read a fraction of what’s there you can’t do any worse than this.  But in fact other things are not equal.

The quality of articles is endogenously serially correlated.  Because any blog runs the best material available that day/couple of days/week.  If you landed on a lame article then chances are you landed on a lame day.  Scroll your way out of that trough and hope you land on a peak.

Cheap Talk has turned 4 years old.  In honor of that, I could tell you about how many of you read us, how many of you subscribe to us, which were the greatest among all the great articles we wrote last year, etc. but instead I’ll take this opportunity to do something I have been wanting to do for a while.

A very interesting side benefit of having a blog is seeing the search terms that lead people to us.  Its a fun game trying to figure out which post Google sent them to when they searched for terms like  “students can lie to teachers very easily” but more than that, as the range of topics we have covered gets wider and wider just reading down the list of search terms each day starts to look like pure poetry.

So I decided to compose a poem entirely out of search phrases and as my fourth birthday present to myself I am going to make you read it. It is a testament to the power of the Internet that for each and every line below there was someone who, in a quest for knowledge, typed it into Google and Google dutifully led them to our blog.

For the best effect I recommend reading this poem in your best mental Christopher Walken voice.

Feral Dogs in Tampa

I like bareback sex with hookers
Explaining infinity to children,
The god in heaven
Serving Guinness

Statistically birthdays increase your age
What is there to do?
Remember abstract things
Courtney Conklin Knapp

Low hanging balls
Kink on demand,
Pile driver sex
I am tired of cohabitation

You are nothing
Empty plate with crumbs,
Playing with yourself in public
When will the Devil talk to you?

Novel figure skates,
Who invented sarcasm,
Orthogonally-minded,
Try to arrange a meeting

Fuyuh.

Classic Tyler:

I say the deadweight loss here is not so large.  Most art exhibitions are not self-financing from the side of the viewers, which suggests that the demand to see the pictures is not higher than the costs of mounting the exhibit.  Arguably you can throw in philanthropic support as another part of “market demand,” but I consider that a separate valuation issue.  Maybe our current artistic institutions are under-providing marketing opportunities for businesses and foundations, but that still won’t get you a major pent-up demand to view the pictures, again not relative to cost.  The very popular pictures, such as the good works by the Impressionists and post-Impressionists, are shown quite frequently, including in traveling exhibitions.

Context matters a great deal in this setting.  Currently most of the Louvre is not being viewed at any point in time, as the crowds tend to cluster in a few very well-known areas.  Many people would want to go see anything they are told they ought to go see.  What is underfunded is some kind of “demand for participation in a public event,” not the viewing of art per se.  If only they could create more hullaballoo around the more obscure Flemish painters.

Almost all museums have large stretches of empty walls.  I would put up many more pictures there, as indeed I do in my own home.  That museums do not do this I find striking and indicative.  Nor do I see viewers and visitors demanding this, if anything the unspoken feeling might be to wish for a bit less on the walls, so that one may have the feeling of having seen everything without exhaustion.

The costs of storing art are high.  Perhaps the Louvre should sell some of its lower-tier works to private collectors.  But the general public just doesn’t want so much more art to see, not if they have to pay for it and maybe even if they don’t.

Nice.

But I can’t help but ask what was the deadweight loss of all of Tyler’s ideas lost to the world pre-blogosphere? Is MR self-financing? How good a measure is the price (free) of the consumers’ surplus it generates now?

I just hope this doesn’t make me a Flemish painter.

Arthur Robson is going to be sitting in with us this week.  I have written a lot about Arthur and his work, if you just enter his name into the Cheap Talk search bar you will find a lot of interesting stuff to read.  Arthur is an economist who has written on various areas in economic theory and who today is the main driving force behind an emerging field of biology and economics.

Here is a link to a recent conference he organized with a bunch of interesting papers.  At that conference, Balazs Szentes thanked the organizers, Arthur and Gary Becker, with a speech like this (paraphrasing from memory):  “Everyone thinks Becker is such a great pioneer but really he is so risk-averse.  He invented like 20 fields just hoping that one or two of them would take off.  Arthur on the other hand is the real hero to economics.  He was doing perfectly fine writing about normal theory and then he completely and permanently screwed up his career to pursue this biology and economics stuff.  So thank you.”  (Both Becker and Robson were present and both took it as the compliment it was intended to be.  We are still hoping to get video of that.)

So thank you Arthur.

From Tyler Cowen:

Any Martian visiting the economics blogosphere, …, could tell you that most of micro is a more or less manageable topic, whereas macro induces economists to start thinking of each other as idiots and fools.

 

  1. If you have a blog and you write about potential research questions, write the question out clearly but give a wrong answer.  This solves the problem I raised here.
  2. When I send an email to two people I feel bad for the person whose name I address second (“Dear Joe and Jane”) so I put it twice to make it up to them (“Dear Joe and Jane and Jane.”)
  3. If you have a rich country and a poor country and their economies are growing at the same rate you will nevertheless have rising inequality over time simply because, as is well documented, the poor have more kids.
  4. Are there arguments against covering contraception under health insurance that don’t also apply to covering vaccines?
  5. The most interesting news is either so juicy that the source wants it kept private or so important that the source wants to make it public.  This is why Facebook is an inferior form of communication:  as neither private nor fully public it is an interior minimum.

Yesterday I made a prediction but I want to keep the prediction a secret until the uncertainty is resolved so I encrypted it as an SHA1 hash:

7c6d61820d512c87789bf13a5fd16876da6d7004

I will reveal it sometime before the Summer Solstice.  For background see here.

It gives me a forum to tell the world that when you see me texting during your talk, I am not actually texting but rather I am emailing myself a thought that was inspired by your talk that I might write about on my blog later on.

I do most of my reading through Google Reader, and when I get an idea for the blog I post it to Google Buzz. The small number of followers I have there will sometimes comment and/or vote for ideas that pop up there. When its time to write something for the blog, I go back there for ideas.

Buzz will soon be retired by Google and Reader is going to be crippled. That’s going to affect me. For one thing, I won’t have access to Google Reader feeds from many of my favorite curators, most notably Courtney Conklin Knapp, the soy sauce of the internet. And I need a new place to pre-test my ideas. (I used to think that I would use Twitter for that, but my Twitter identity has become overrun with tweets like “I went back in time so I could be the first person to write about the paradoxes of time travel.”)

Google says that the retired services are to be replaced by Google+ so I am switching to Google+. In fact I have been using it for a while now, jotting down some ideas and getting feedback before posting them here. Google+ is more of a “social” social network than Buzz so instead of just dumping links and incomprehensible notes-to-self, I am writing little rough drafts. It works well. Writing doesn’t come easy for me but for some reason when I know that what I am writing is verifiably a rough draft, I loosen up a bit and it comes easier. The feedback is great too.

(One potential downside is that I write something wrong, people on G+ point out that its wrong and I am too embarrassed to post it here. You learn a lot from wrong ideas so that would be a loss.)

So if you are on G+ I hope to see you there, and I would be happy to get your feedback.

By the way, know any good blogs? It seems like a large number that I subscribe to on Reader have gone dark so I am looking for some new ones. “What’s Hot” in Google Reader is already gone!

Daniel, Diermeier, our Kellogg colleague has a new blog called Reputation Rules.  Daniel is a noted researcher and a star teacher at Kellogg.  Should be an interesting blog.

A great guest blogger.  We should do more of these.

Last week Sandeep and I were at the Cowles Summer Microeconomic Theory Conference at Yale, a fantastic conference with many great papers and an All-Star roster of pure attendees.  Tomasz Strzalecki presented a provocative new paper on limited attention and asset price volatility (joint with Faruk Gul and Wolfgang Pesendorfer), Olivier Gossner showed us how Fudenberg and Levine’s famous reputation papers should have been written, and Lones Smith presented his paper with Elena Quercioli on The Economics of Counterfeit Money.  When pressed with a technical question from the audience he deployed a line that I will certainly be using myself in the future under similar circumstances:

It sounds like you are talking about some subtle math, but I’m just trying to pretend I’m in the 5th grade.

We liked his paper so much we thought about blogging it but then decided to do it one better and ask Lones himself to write about it in a guest post. And he agreed.

Of course, while he is at it we might as well hear what else he has on his mind so we’re going to have him sit in here at Cheap Talk for the week.  And if you know Lones, then you know that anything can happen, so it’s going to be fun.

You know the show Iron Chef?  Someone should organize Iron Blogger.  You are the chairman, you assemble your Iron Bloggers, and each week you invite a challenger blogger.  The “secret ingredient” is a topic for the challenger and his chosen Iron Blogger to write about.  You appoint judges to evaluate the writing according to content, style, and originality.

I mostly read blogs through Google Reader but lately I have been thinking that my selection is becoming a little stale.  I want to mix it up a little bit, what blogs should I be reading?  I like economics blogs but I like/get ideas from all kinds of blogs.  What I am aiming for is a minimal spanning set.

Epilogue:  Thanks for all the great suggestions!  Keep them coming.

I am a postalite, and not a blitzer. I am not good at coming up with ideas on demand and in the moment.  Pretty much all of my work is based on waiting around passively for an idea to pop into my head.  It happens in the shower, in the car, at 4:00 in the morning when I am awakened by the snow plow, etc. Whenever that happens I immediately send it to myself in an email.

Then a complicated system of tubes that I have set up routes that email to my Google Buzz feed, then my other blog, and finally to a mail folder where I keep all of these ideas archived.  A typical auto-email looks like this:

—– Original Message ——–

Subject: Album of the summer
Date: Wed, 18 Aug 2010 10:02:56 -0700
From: jeffrey ely <jeffely@northwestern.edu>
To: post@cheepthoughts.posterous.com
Tmbg flood

Grownup now sounds like kids

Snorkeling

You're such a great Parker daddy

Guy teaching daughter to surf

The day it all came together

Old man learning new tricks

Which has the bare outline of a post I never wrote about my experiences surfing this past summer, and being an old man learning new things at the same time my kids are learning new things.

I send myself about 4 of these per day on average, although most of them are just links to stuff on the web I might write about.  People also send me links and I just forward them right away.

Every morning I go through my archive to find something I want to write about (If people have liked it on Google Buzz then I know its a go for the blog.)  I try to keep it in mind all day and work on what I can say about it and how to write it.  This allows me to take advantage of idle moments throughout the day to do most of the writing.  Ideally, by the time I sit down to write (usually just before going to bed at night) I have a good outline and the only thing left to do is find the right words.

(Ron Siegel took this photo of the car cemetery on Chicago’s Lake Shore Drive in last week’s blizzard.)

We have been blogging for two years now.  When we turned 1 I started writing a sequence of posts on Why I Blog.  Here’s a few of them.  As a final why-thought I would like to say that while blogging often feels like shirking, in fact the number one reason that keeps me going when I start to worry I am running out of ideas is that this blog has proved to be a huge boon to my research.

Sandeep and I started writing Torture on this blog.  Simply put, that paper would not exist if Cheap Talk did not exist.  This post I wrote recently about overbooking set me thinking for a day or two and now, with ideas from Daniel Garrett and Toomas Hinnosaar, the three of us are writing a paper on it. These are the concrete products but there are many more benefits that are harder to measure but easily as important.

First, if you look at the tag vapor mill, you will find a trail of ideas that I have written down, each of which has the potential to be a real research project.  A number of them I intend to work on when I have the time.  Second, its a true cliche that writing about “the real world” makes you a better theorist. Sometimes you learn that crucial assumptions are too restrictive to explain a story. Sometimes you find a new appreciation of just how far they go.  And not even the most prolific “applied theorists” get the opportunity to write as frequently and about the kind of wide-interest topics as a blogger gets.

Done with the why, onto the how.  Blogging is a big commitment and you learn only very slowly how to do it efficiently.  Given the amount of time I spend staring at a blank text editor I still have a lot to learn myself.  But I’ll write a few things I picked up.  For starters let me tell you how Sandeep and I started this blog because I think we did something smart that I would recommend to anybody who was thinking about jumping in.

We blogged to ourselves for about a month.  It was a a real dress rehearsal: we used the WordPress blog that we are using now, we wrote posts about once a day, but nobody read them because nobody knew the blog existed. This was mainly to see what it would be like to try to write on a daily basis.  If it looked like we wouldn’t be able to keep it going we would just call it off and nobody would know we were failures.

But when we finally decided that it was a go, it had a second benefit.  Before going public, we archived all of the posts we had written already and scheduled them to be published a day at a time over the next several weeks.  Here’s why this is such a great idea.  Blogging requires momentum.  Unless you are a highly unusual person, it is impossible to conjure up something to write about on a daily basis.  Instead, what you do is collect ideas, allow them to percolate around in your head for awhile and then write them down when they are ripe. It takes months before there’s enough in the pipeline to keep you actively writing. Having a headstart gives you the lead time you need to reach that cruising speed.

(Drawing: Riding The Wave from www.f1me.net)

I am making a prediction.  For reasons discussed in this previous post, its important that I announce the prediction but keep it a secret until the uncertainty is resolved. Following the suggestion of a commenter, I wrote my prediction in a text file and ran it through the SHA1 secure hash algorithm (using the web tool here.)  Here is the hash:

a35fc654c7a68404bcb94b3b6a1d162223ff69e5

Briefly, this is a digital signature that is (for practical purposes) uniquely associated with the text.  But the algorithm is “one-way:” unless you have a powerful computer you will not be able to invert the mapping and discover my prediction from the hash.

When the uncertainty is resolved (it will happen in the not-too-distant future) I will post the prediction here.  You can then take it and generate the SHA1 hash and verify that it is the one above.  That will prove that the prediction I show you is in fact the one that I have made today.

While we are waiting to find out, you can try to predict what my prediction is. (No, my prediction is not about what you will predict I predicted.)

Update on Jan 10 (one day later:) Having forgotten one important detail, I have updated the prediction and the new hash is:

f502acfb48395d6ab223ca30803f98b9bd6fd6ce

When I reveal the prediction, sometime before the Summer Solstice, I will reveal both text files and you will see the (innocuous) reason for the update.

As suggested in the comments, since I am able to modify the text of this blogpost, I should post the hash somewhere that it cannot be modified.  Since Twitter puts a timestamp on every tweet and tweets cannot be edited ex post, I tweeted the two hashes.  Here and here.

You did take my advice didn’t you?  If you did, then because of the January effect, you bought the S&P500 at 1180.55 on November 30 and sold it on the first trading day of the new year, yesterday, at a price of 1271.87 and made a 7.5% return in a single month.

There is a new blog, Spousonomics, written by two MILRs, Paula Szuchman and Jenny Anderson.  The topics are near and dear to the Cheap Talk heart: “Using economics to master love, marriage, and dirty dishes.”  You can read about The Definition of A Good Marriage, Wiki-Marriage-Leaks, and Signaling for Sex.

They are doing a series on “Economists in Love” and based on my post on Hormone Neutraility, they assumed I was a sensitive guy and so they asked me a few questions like “Why are you an economist?” and “Is marriage a repeated game?” Of course the reality is that I am emotionally stuck in the 7th grade and so you can see my smart-ass answers here.

Also, there is a picture of me and my wife (she looking hot, me looking like I need a nap.)

Facebook, Buzz, Reader, and other social networking sites all have one thing in common:  if you like something then you get to like it.  But you never get to dislike what you dislike.  (Sure you can unlike what you previously liked, but just as with that other interest rate you are constrained by the zero lower bound.  You can’t go negative.)

This kind of system seems to pander to people such as me who obsessively count likes (and twitter followers, and google reader subscribers and…) because for people like us even a single dislike would be devastating. With only positive feedback possible we are spared the bad news.

But after a while we start to get the nagging suspicion that the lack of a like is tantamount to being disliked. We put ourselves in the mind of each individual reader.  If she liked it then she will like it.  If she didn’t like it, she would like to dislike it but she can’t.  So she’s silent.  But then if she was neutral she now knows that by being silent she is going to be pooled with with the dislike haters.  She doesn’t want to hurt my feelings so she likes. Kindhearted but cruel:  now I know that everyone who didn’t like indeed didn’t like.  It’s exactly as if there was a dislike button.  Despair.

But wait.  One wrinkle saves our fragile ego.  Some people are just too busy to like.  Or they don’t know about the like button.  And who knows exactly how many people read the article anyway.  So a non-like could be any one of these. Which means that kindhearted neutrals can safely stay on the sidelines and pool with these non-participants. A pool big enough to drown out the haters. Joyful noise! And as a bonus I get to know for sure that the likers are likers and not just patronizers.

Finally there’s the personal aspect, it’s flattering to see who likes.  The serial likers keep me going.   Especially this one regular reader who by amazing coincidence has the same name as me and who likes everything I write.

(drawing:  emotional baggage from www.f1me.net)

You may have noticed the line drawings I have been putting at the top of some posts recently.  These are the work of Stephanie Yee and I found them on her blog f1me. I started noticing them in my Google Woody Buzz and something about them just clicked with me. When I started seeing connections with my blogging topics I had to ask her if I could use them on Cheap Talk and she graciously agreed. I think they are a great addition to the blog so let’s all cheer for Stephanie Yee’s playful artwork.

(Chickles:  my word, don’t blame her. It rhymes with tickles, they are way more than doodles, and because she is not a dood.)

I want to make a prediction.  But I want to do it like this:

  1. Keep the prediction secret, indeed even keeping secret what the prediction is about.
  2. Have the prediction revealed at some pre-specified future date.
  3. Have it certified that the prediction was recorded on a certain date and not changed after that.

Is there a web service that facilitates predictions like this?  It would be a useful service.  There are probably lots of reasons someone would want to keep their predictions secret prior to the resolution:  you don’t want your prediction to be self-fulfilling (or self-defeating), you don’t want others to know what you are predicting about (maybe it arises out of some proprietary research), or you want to trade anonymously on your prediction.

If anyone has any ideas, please let me know in the comments below.

Addendum: Mallesh correctly points out in the comments that the system would have to publicize that you made a prediction.  This I want to do.

We have a new guest-blogger:  Roger Myerson.

Roger is a game theorist but his work is known to everyone – theorist or otherwise – who has done graduate work in economics.  If an economist from the late nineteenth century, like Edgeworth, or early twentieth century, like Marshall, wakes up and asks, “What’s new in economics since my time?”, I guess one answer is, “Information Economics”.

Is the investment bank trying to sell me a security that it is trying to dump or is it a good investment?  Is a bank’s employee screening borrowers carefully before he makes mortgage loans? Does the insurance company have enough reserves to cover its policies if many of them go bad at the same time?  All these topical situations are characterized by asymmetric information: One party knows some information or is taking an action that is not observable to a trading partner.

While the classical economists certainly discussed information, they did not think about it systematically.  At the very least, we have to get into the nitty-gritty of how an economic agent’s allocation varies with his actions and his information to study the impact of asymmetric information.  And perfect competition with its focus on prices and quantities is not a natural paradigm for studying these kind of issues. But if we open the Pandora’s Box of production and exchange to study allocation systems broader than perfect competition, how are we even going to be able to sort through the infinite possibilities that appear?   And how are we going to determine the best way to deal with the constraints imposed by asymmetric information?

These questions were answered by the field of mechanism design to which Roger Myerson made major contributions.  If an allocation of resources is achievable by any allocation system (or mechanism), then it can be achieved by a “direct revelation game” DRG where agents are given the incentive to report their information honestly, told actions to take and then given the incentives to follow orders.  To get an agent to tell you his information, you may have to pay him “information rent”.  To get an agent to take an action, you may have to pay him a kind of bonus for performing well, “an efficiency wage”.  But these payments are unavoidable – if you have to pay them in a DRG, you have to pay them (or more!) in any other mechanism.  All this is quite abstract, but it has practical applications. Roger used these techniques to show that the kind of simple auctions we see in the real world in fact maximize expected profits for the seller in certain circumstances, even though they leave information rents to the winner.   These rents must be paid in a DRG and hence if an auction leaves exactly these rents to the buyers, the seller cannot do any better.

For this work and more, he won the Nobel Memorial Prize in Economics in 2007 with Leo Hurwicz and Eric Maskin.  Recently, Jeff mentioned that Roger and Mark Satterthwaite should get a second Nobel for the Myerson-Satterthwaite Theorem which identifies environments where it is impossible to achieve efficient allocations because agents have to be paid information rents to reveal their information honestly. This work also uses the framework and DRG I have described above.

Over time, Roger has become more of an “applied theorist”.  That is a fuzzy term that means different things to different people.  To me, it means that a researcher begins by looking at an issue in the world and writes down a model to understand it and say something interesting about it.  Roger now thinks about how to build a system of government from scratch or about the causes of the financial crisis.  How do we make sure leaders and their henchmen behave themselves and don’t try to extract more than minimum rents?  How can incentives of investment advisors generate credit cycles?

These questions are important and obviously motivated by political and economic events.  The first question belongs to “political economy” and hints at Roger’s interests in political science.  More broadly, Roger is now interested in all sorts of policy questions, in economics and domestic and foreign policy.

Jeff and I are very happy to have him as a guest blogger.  We hope he finds it easy and fun and the blog provides him with a path to get his analyses and opinions into the public domain.  We hope he becomes a permanent member of the blog.  So, if among the posts about masturbation and Charlie Sheen’s marital problems you find a post about “What should be done in Afghanistan”, you’ll know who wrote it.

Welcome Roger!

Here he writes about underappreciated economist Eric van den Steen.  Tyler is right, Eric van den Steen is underappreciated.  His work is fresh and creative and he is venturing into terrain (heterogenous priors) where few dare to tread.  Not only that but he is drawing out credible applied ideas from there, not just philosophy. (Ran Spiegler and Kfir Eliaz are two others that come to mind with the same creativity and courage to embrace these models.)

Tyler Cowen is under-appreciated.  Not as a blogger of course, he writes the most popular blog in economics and one of the most popular blogs full stop.  It may sound strange, especially to readers of Marginal Revolution, but Tyler Cowen is an under-appreciated economist.

Here is his CV.  Here is his google scholar listing.  Here is the ranking of his economics department.  If it were not for Marginal Revolution, very few economists would know who Tyler Cowen is.

But we all read Marginal Revolution.  And we all know that Tyler is smarter, broader, more knowledgeable, more intuitive than most of us and our colleagues.  If he wanted it to, his CV could run circles around ours.  I don’t claim to know why he doesn’t want that, but I infer that Tyler believes he is innovating a new way to be a successful and influential economist without compromising on the very high standards that those of us in the old regime hold.

Public signals like Google scholar cites, and top-journal publications can’t measure his contribution to economics but we measure it privately every day when we read Marginal Revolution.  And it deserves to be made public:  Tyler Cowen is a great economist.

One doesn’t just accidentally know who Eric van den Steen is, let alone be able to summarize in a paragraph his contribution and its relation to the literature.  I barely knew who he was and its my job as a member of Northwestern’s recruiting committees to know.  For Tyler Cowen to be able to pick him out of the very many young economists and identify him as the most under-appreciated reveals that Tyler Cowen knows and reads every economist. I believe it is true.

And he understands them better than most of us.  Look at what he wrote about Dale Mortensen.  And the Mortensen-Pissarides model.  Here’s Tyler re-arranging the literature on sticky prices, trade, and monetary policy.  His piece on free parking shows a mastery of the lost art of price theory, whether or not you agree with his final conclusion.  Look at his IO reading list for crying out loud.  Finally, set aside an hour and watch him in his element speaking at Google about incentives and prizes.

So hail T-Cow!  Wunder-(not)-kind!

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.

Eli Dourado writes

The commenting dynamic is very different on small blogs than it is on popular blogs. On small blogs, people typically comment when they have something to contribute or ask that is relevant to the post. These are frequently of high quality (relatively speaking; recall Sturgeon’s Law: 90 percent of everything is crap). On more popular blogs, this positive commenting dynamic is confounded by the presence of eyeballs. Every post is read by many thousands of people. For the self-involved who could never attract such a large audience on their own, this is an irresistible forum for expounding pet hypotheses, axe-grinding, and generally shouting at or expressing meaningless agreement with the celebrity post-authors.

which sounds plausible but it assumes a sorting condition that is debatable.  Presumably everyone, the high-quality and low-quality commenters alike, want a bigger audience.  The question is one of relative elasticities:  does a percentage increase in audience lead to a larger percentage increase in low-quality comments relative to high-quality?  I am not sure.

There is a perception cloud because most of us think that our own comments are the highest-quality ones and so the overall pool of comments appears distorted downward in quality.  But there is one force for Gresham’s law that may swamp any having to do with commenters’ motives.  There are simply more ways to be wrong, off-topic, and crazy than there are to be right, on-topic, and smart.  So even if the sample scales proportionally with audience size, the space of good quality comments will be exhausted quickly leaving the long tail for the riffraff.

Bottom line:  the way to maximize the proportion of good-quality comments is for the bloggers themselves to use up all the crazy ideas at the start.  I like to think Sandeep and I are getting better and better at this.

My approach to blogging is pretty simple.  When I have an idea I email it to myself.  My mail server deposits these in a special folder which I then dig through when I am ready to write something.  Some ideas don’t get written up and they start to attract dust.  I am going to clean the closet and write whatever I can think of about the ideas that piled up.  Here is one that Sandeep and I actually talked about some time ago, but I can’t now figure out where I wanted to go with it.

Shouldn’t gang wars end quickly?  All you have to do is kill the leader of the rival gang.  Instead, at least anectdotally, gang wars are more like wars of attrition.  You have the low-level thugs picking each other off and the leaders are relatively safe.  Why?

The leader embodies some valuable capital:  control of his organization.  Even if you could decapitate the rival gang by killing the leader it may be preferred to weaken him by taking out enough of his henchmen.  Then you can offer him a deal.  Maybe its a merger, maybe its a collusive agreement, but either way the point is that the coalition is more valuable with the opposing hierarchy intact than in disarray.  Knowing all of this, each gang leader feels perfectly safe even in the midst of an all-out war.

Under this theory, gang wars break out because a rival has become too powerful and it is no longer clear which is the dominant gang.  Its a necessary part of renegotiating the pre-existing power-sharing arrangement in light of a new balance of power.

  1. I am trying to sell Elie Tamer on one of my ideas so we can write a paper that would be cited Ely-Tamer.  (ps. I have got some great ideas for anybody whose last name is Jeff.  I will give you first billing.)
  2. Couldn’t get a job as a theater critic.
  1. I am still trying to convince Sandeep to follow me on Twitter.
  2. It’s all part of an experiment which I shall be writing about in a forthcoming paper.
  3. Hoping for venture financing for levitating balls.
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