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These are my thoughts and not those of Northwestern University, Northwestern Athletics, the Northwestern football team, nor of the Northwestern football players.

  1. As usual, the emergence of a unionization movement is the symptom of a problem rather than the cause.  Also as usual, a union is likely to only make the problem worse.
  2. From a strategic point of view the NCAA has made a huge blunder in not making a few pre-emptive moves that would have removed all of the political momentum this movement might eventually have.  Few in the general public are ever going to get behind the idea of paying college athletes.  Many however will support the idea of giving college athletes long-term health insurance and guaranteeing scholarships to players who can no longer play due to injury.  Eventually the NCAA will concede on at least those two dimensions.  Waiting to be forced into it by a union or the threat of a union will only lead to a situation which is far worse for  the NCAA in the long run.
  3. The personalities of Kain Colter and Northwestern football add to the interest in the case because as Rodger Sherman points out Northwestern treats its athletes better than just about any other university and Kain Colter is on record saying he loves Northwestern and his coaches.  But these developments are bigger than the individuals involved. They stem from economic forces that were going to come to a head sooner or later anyway.
  4. Before taking sides, take the following line of thought for a spin.  If today the NCAA lifted restrictions on player compensation, tomorrow all major athletic programs and their players would mutually, voluntarily enter into agreements where players were paid in some form or another in return for their commitment to the team.  We know this because those programs are trying hard to do exactly that every single year.  We call those efforts recruiting violations.
  5. Once that is understood it is clear that to support the NCAA’s position is to support restricting trade that its member schools and student athletes reveal year after year that they want very much.  When you hear that universities oppose removing those restrictions you understand that whey they really oppose is removing those restrictions for their opponents.  In other words, the NCAA is imposing a collusive arrangement because the NCAA has a claim to a significant portion of the rents from collusion.
  6. Therefore, in order to take a principled position against these developments you must point to some externality that makes this the exceptional case where collusion is justified.
  7. For sure, “Everyone will lose interest in college athletics once the players become true professionals” is a valid argument along these lines.  Indeed it is easy to write down a model where paying players destroys the sport and yet the only equilibrium is all teams pay their players and the sport is destroyed.
  8. However, the statement in quotes above is almost surely false. Professional sports are pretty popular. And anyway this kind of argument is usually just a way to avoid thinking seriously about tradeoffs and incremental changes. For example, how many would lose interest in college athletics if tomorrow football players were given a 1% stake in total revenue from the sale of tickets to see them play?
  9. My summary of all this would be that there are clearly desirable compromises that could be found but the more entrenched the parties get the smaller will be the benefits of those compromises when they eventually, inevitably, happen.

Boredom is wasted on the bored

 

I coach my daughter’s U12 travel soccer team. An important skill that a player of this age should be picking up is the instinct to keep her head up when receiving a pass, survey the landscape and plan what to do with the ball before it gets to her feet.  The game has just gotten fast enough that if she tries to do all that after the ball has already arrived she will be smothered before there is a chance.

Many drills are designed to train this instinct and today I invented a little drill that we worked on in the warmups before our game against our rivals from Deerfield, Illinois. The drill makes novel use of a trick from game theory called a jointly controlled lottery.

Imagine I am standing at midfield with a bunch of soccer balls and the players are in a single-file line facing me just outside of the penatly area.  I want to feed them the ball and have them decide as the ball approaches whether they are going to clear it to my left or to my right. In a game situation, that decision is going to be dictated by the position of their teammates and opponents on the field. But since this is just a pre-game warmup we don’t have that.  I could try to emulate it if I had some kind of signaling device on either flank and a system for randomly illuminating one of the signals just after I delivered the feed.  The player would clear to the side with the signal on.

But I don’t have that either and anyway that’s too easy and quick to read to be a good simulation of the kind of decision a player makes in a game.  So here’s where the jointly controlled lottery comes in.  I have two players volunteer to stand on either side of me to receive the clearing pass.  Just as I deliver the ball to the player in line the two girls simultaneously and randomly raise either one hand or two.  The player receiving the feed must add up the total number of hands raised and if that number is odd clear the ball to the player on my left and if it is even clear to the player on my right.

The two girls are jointly controlling a randomization device.  The parity of the number of hands is not under the control of either player.  And if each player knows that the other is choosing one or two hands with 50-50 probability, then each player knows that the parity of the total will be uniformly distributed no matter how that individual player decides to randomize her own hands.

And the nice thing about the jointly controlled lottery in this application is that the player receiving the feed must look left, look right, and think before the ball reaches her in order to be able to make the right decision as soon as it reaches her feet.

We beat Deerfield 3-0.

I just had one of my worst travel experiences. On United.

I was flying with my two kids and we got to O’Hare at 9 am in plenty of time for our 10.30 am flight to Seattle. The plane was delayed for one hour initially but then, after the airplane arrived, it turned out there was some malfunction so we had to wait for another plane. That one was due to leave at 2 pm.

My kids are pretty good but they were getting a bit restless so I decided to let them pick a treat for every delay. They opted to have lunch at Wolfgang Puck’s in the other of the two United terminals. They got to veto Frontera Fresca. So far so good.

The next bit of news – easy to forecast – further delay till 2.25. Peanut M&Ms. But then things got interesting. The pilots on the incoming flight had timed out given the additional 25 minute delay and we had to wait for new pilots to turn up. Ice cream for the kids. But no-one was insuring me so I was getting more and more pissed off. This pilot time out was news to me but surely eminently foreseeable for United? We left at 4.30 pm. Kids were on a sugar high and I was on a United low.

We, Jeff and Sandeep, are working with Northwestern Sports to launch what we think is going to be a revolutionary way to sell tickets to sporting events (and someday theatre, concerts, and restaurants…). Starting today it is in effect for two upcoming Mens’ Basketball games: The February 28 game against Ohio State and the March 7 game against Penn State.

We are using a system which could roughly be described as a uniform price multi-unit Dutch Auction. In simpler terms we are setting an initial price and allowing prices to gradually fall until either the game sells out or we hit our target price. Thus we are implementing a form of dynamic pricing but unlike most systems used by other venues our prices are determined by demand not by some mysterious algorithm.

But here is the key feature of our pricing system:  as prices fall, you are guaranteed to pay the lowest price you could have got by delaying your purchase. That is, regardless of what price is listed at the time you reserve your seat, the price you will actually pay is the final price.

What that means is that fans have no reason to wait around and watch the price changes and try to time their purchases to get the best possible deal. We take care of that for you.

It also removes another common gripe with dynamic pricing, different people paying different prices for the same seats. Our system is fair: since everyone pays the lowest price, everyone will be paying the same price.

We explain all of the details in the video below. If you have any questions please ask them in the comments and we will try to answer them.

purple pricing

The system is live right now at NUSports.com.  Support common-sense pricing by heading over there now and getting your tickets for either NU v Ohio State on Feb 28 or NU v Penn State on March 7.

And Go ‘Cats!

Update:  Price alerts are now available. You may send email to wildcatmarketing@northwestern.edu to be notified when prices fall. (And if you just want to know when prices reach some target p, put that in your message.)

Here’s what I presented on Friday in Cambridge:

 

And here’s what I presented on Saturday in Chicago:

Its 61F today in Chicago and its going to push 70 tomorrow.  According to my phone it will drop down to normal seasonal temperatures by the end of the week but according to my phone that downward trend has been expected for each of the last three weeks and it hasn’t happened.  My phone hasn’t identified the structural change yet.

That got me thinking about some indices of global warming that weather forecasters might want to start tracking.

  1. The flipflop index:  How late in the season will I still be putting on flipflops to take out the recycling?  Current value:  Dec 2 and counting.  
  2. The Giro index:  How many times will I have to go back into the crawl space to get the kids bike helmets out because there is yet another day of bike-friendly temperatures?  Current value:  3.
  3. The Christmas/tennis index:  How many days will I play tennis outside in view of christmas trees for sale in the neighboring lot?  Current value: 1 as of tomorrow morning.
  4. Tulip index:  How many times will we have to buy another supply of tulip bulbs and not plant them because I threw away the last pile thinking that Winter had finally put a stop to that cycle of self-deception?  Current value:  I learned my lesson last year.

Any others?  These data will be updated as the season (supposedly) progresses.

If you got out a pencil and graphed my kids’ time outside, with the date on the horizontal axis and the number of hours spent outside (and not fraying their parents nerves alternately bickering with one another and submitting requests to play on the iPad or watch TV) on the vertical, you would find a dramatic and sustained upward spike beginning right after Labor Day.

What is the underlying structural change that explains this?  School has begun.  Indeed, just as the school year begins and forces them to stay inside half the day (thankfully under the care of somebody else), suddenly going outside and playing with their friends becomes their favorite way to pass the time.

It’s not because time outside has suddenly become more precious.  On any August day when they have already wasted half of it sitting around inside, the time has become equally scarce.  And it’s not because time outside is a way to escape homework because that doesn’t really start until the second or third week of school.

I think the reason is coordination failure.  Playing outside by yourself is not very much fun, you only want to go outside when everyone else is outside.  But when you have the luxury of the entire day, it becomes difficult to predict the precise time of day when all the neighborhood kids are going to be outside.  And since they all have the same problem there in fact is no time of the day when all the neighborhood kids are outside and therefore no time of day when any of the neighborhood kids are outside.

Uniformly robbing all children in the neighborhood of 6 hours of prime playtime leaves them with only a few hours left in the day in which to coordinate.  And releasing them all from captivity at exactly the same time synchronizes them and creates an ideal focal point.  You find your friends outside immediately after school is out.

Unfortunately, in September in Chicago the sun is going to set not long after that, the weather is getting cool, and we really have only a month or so before playing outside is not going to be feasible anymore.  And that’s why “Summer Vacation” is a badly misguided convention.  School should be in session through the entire summer so that kids can make the most out of its coordination benefits.  There would be no more “summer time blues.”

Since kids spend their vacation indoors anyway, the vacation should be in the Winter when going outside isn’t an option.  Then we can really put Winter Vacation to good use:  they can catch up on all of the homework they avoided during the Summer School year when they were instead outside playing.

This is a personal note for a friend.  Read it when you get turned down for tenure.

I was an Assistant Professor at Northwestern, came up for tenure according to schedule and was denied.  Fired.  Canned.  Sent packing.  It sucked.

But actually it wasn’t so bad.  First of all even if you never get tenure anywhere you have like the greatest job ever.  I live in a neighborhood full of people who earn 10 times what I do and they are all 10 times less happy than me.  I once asked an investment banker whose daughter is in my daughter’s class how much of his salary he would sacrifice for the non-pecuniary benefits of an academic (doing whatever interests you, freedom to set your own schedule, university culture) and the best estimate we could come up with is that being an investment banker sucks big time.

But you will get tenure somewhere.  Some places will want to put you on a fresh, probably shortened clock, you could go for that.  But the other option is to ride out your lame-duck year.  Universities are civilized enough to give you over one year notice before you are out on your ass.  All the papers that have been in journal review purgatory will finally get published in that year and in the next year you will probably have a tenured offer.

It does kinda suck though to be dead man walking for a whole year surrounded by your executioners.

But the joke is going to be on them once you get tenured because here’s a little secret that only you, I, and our chairmen know:  when you are finally tenured you will be making more money than most of them.  Here’s a simple model.  Professor A is employed by Department B and Departments C and D are considering making A an offer.  Whatever they offer, Department B is going to match it, and you with your lexicographic preference of money first, avoid-the-hassle-of-moving second, will stay at department B.  Since it’s costly to recruit you and make you an offer and that won’t be accepted in equilibrium anyway, Departments C and D don’t bother, B has no offer to match, and A, despite his new higher rank continues to live in Assistant Professor poverty.  On the other hand when A is exogenously separated from B, he has a credible commitment to take the highest offer from C or D.

Failure rules.

(I must caution you however.  As with any rejection, at first you will not be able to shake the hope that your current department will eventually see the error of its ways and hire you back after one year with tenure, Full Professor even.  Don’t get your hopes up.  That never happens.)

Drawing:  Part of Your World from http://www.f1me.net

It can land you in jail.

Despite growing up nowhere near an ocean, Rex Flodstrom fell in love with surfing at an early age on trips to the West Coast. It’s a spiritual experience, pushing the Chicagoan to brave even the punishing snow and ice on Lake Michigan for the thrill of a winter wave.

But a chilly ride last month landed Flodstrom, 40, in trouble with police. He was arrested Jan. 17 near Oak Street Beach on misdemeanor ordinance violations of surfing more than 50 yards from shore, unlawful presence on a closed beach and jeopardizing the safety of others on the beach.

I lived in view of Lake Michigan for 4 years and I never once saw a surfable wave. And if  the hilarious video at the link is any indication, neither has Rex, bless his frozen heart.

For those of you coming to Chicago this weekend, here is Elie Tamer’s Chicago restaurant map . Elie is your kind of foodie: very good taste, unswayed by hype. And he has been to every restaurant in the greater Chicago area, so he knows what’s good. The center of mass is slightly North of the conference cetner but there are many options close by. I asked him for some recent recommendations and he wrote to me:

all good places, but less my style:

in that area there. recently been to: Ria and balsan (in the elysian hotel… really nice and $$$), girl and the goat, publican, purple pig… all good but very flashy….
for out of towners, mexican here is amazing and they can try xoco(lunch sandwich)/frontera/topo there next to the AEA on clark and salpicon in old town,
and mercat a la planxa (spanish inspired on south michigan) also if people are interested in steak, there are a ton there (gibsons on rush (you might run into the kardashians here it is so hip) and gene and georgettis on franklin are two examples) and of course avec is always good -really good.

I would echo his Mexican recommendations. They mostly tilt toward the high end, but you can’t go wrong. Another addition is Big Star Tacos, which Emir Kamenica recently turned me on to. Topolobampo is the best of course but good luck getting a reservation. There is the bar/cafe attached called Frontera Grill which does not take reservations but my urgent insider advice is not to go there. Especially not Saturday night around 8.

Update: Xoco/Frontera/Topo all closed through Jan 9.

We had a spectacular Fall in Chicago with lots of sun and warm temperatures. Usually October is fried green tomatoes month for us, but this year after the leaves had fallen off the birch tree in our backyard they got a good couple weeks of sun and many of them ripened on the vine.  Here’s your picture of empty plates:

While on the subject here’s a trick for ripening your green tomatoes when the sun won’t do it for you.  Bring them inside and put then in a paper bag along with some bananas.  Ethylene gas stimulates the ripening process and bananas, the champions of ripening, put out a lot of it.

We enjoyed our tomatoes with this 2004 Bordeaux, Chateau Lascombes which I must say is drinking perfectly right now.

My street is a Halloween Mecca.  People flock from neighboring blocks to a section of my street and to the street just North of us.  (Ours is an East-West street as are most of the residential streets in the area.) And I have noticed that in other neighborhoods in the area and in other places I have lived there is usually a local, focal Halloween hub where most of the action is.

And on those blocks where most of the action is the residents expect that they will get most of the action.  They stock more candy, they lavishly decorate their yards, and they host haunted houses.  They even serve beer.  (To the parents)

I think I have figured out why we coordinated on my street.

In a perfectly symmetric neighborhood lattice, trick-or-treating is more or less a random walk. With a town full of randomly walking trick-or-treaters every location sees on average the same amount of traffic.  Inevitably, one location will randomly receive an unusually large amount of traffic, those residents will come to expect it next year, decorate their street, and reinforce the trend.  Then it becomes the focal point.

In this perfectly uniform grid, any location is equally likely to become that focal point.  That is the benchmark model.

But neighborhoods aren’t symmetric.  One particular asymmetry in my neighborhood explains why it was more likely that my street became the focal point.  Two streets to the South is a major traffic lane that breaks up the residential lattice.  In terms of our Halloween random walk, that street is a reflecting barrier.  People on the street just to the South of us will all be reflected to our street.  In addition we will receive the usual fraction of the traffic from streets to the North.  So, even before any coordination takes hold our street will see more than the average density of trick-or-treeters.  For that reason we have a greater chance of becoming the focal point.  And we did.

January of 1996 I was on the junior job market and I had just finished giving a recruiting seminar at the University of Chicago.  This was everything a job market seminar at Chicago was supposed to be.  I barely made it through the first slide, I spent the rest of the 90 minutes moderating a debate among the people in the audience, and this particular debate was punctuated by Bob Lucas shouting “Will you shut up Derek?  Contract theory has not produced a single useful insight.”

Suffice it to say that my job market paper had nothing in common with either contract theory, Bob Lucas, or the Derek in question.  But it was the most fun I have ever had in a seminar.

So I was going out to dinner with Tom Sargent and Peyton Young.  Peyton was visiting the Harris school for the quarter and we would be going in his car to the restaurant.  Actually it was his mother’s car because his mother lived in the area and he was borrowing it while he was visiting.  It was one of those Plymouth Satellite or Dodge Dart kinda cars:  a long steel plinth on wheels. Peyton warned us that it hadn’t been driven much in recent years and it had just gotten really cold in Chicago so there was some uncertainty whether it would actually start.

We got in with me on the passenger side and Sargent in the back seat and sure enough the car wasn’t going to start.  It was making a good effort, the battery was strong and the starter was cranking away but the engine just wouldn’t turn over.  After a while Tom says let him have a crack at it.  I am sitting there freezing my never-been-out-of-California butt off thinking that this is the comical extension of the surreal seminar experience I just went through.  First I had to play guest emcee while they hashed out their unfinished lunchtime arguments, and now I am going to have to get out and push the car through the snow.

But when Sargent got into the front seat there was this look on his face.  I know these American cars, he says, you gotta work with them.  He leans forward to put his ear close to the dashboard, he’s got the ignition in his right hand and his left hand looped around the steering column holding the gear shift.  And then he goes to work.  He turns the key and starts wiggling the gear shift while he is pumping the gas pedal.  This makes the car emit some strange sounds but apart from that it doesn’t accomplish much and he starts over.  He’s mumbling something under his breath about engine flooding, his head is bobbing manically and his eyes are folding down giving the effect of a cross between Doc Brown and Yoda.  In the back seat Peyton appears to have total faith in this guy’s command of the machine, meanwhile I am about to start laughing out loud.

After three or four more cycles, he starts ramping up the body English.  He is bouncing off the seat to get extra leverage on the gear shift. His ear is right up against the steering wheel, his eyes are shut and from the look on his face you would assume he was straining to heed the car’s wheezing, last dying wish. But then there is a different sound.  The dry electric sound of the starter motor starts to give way to the deep hum of internal combustion.  The car begins to bounce along with Professor Tom Sargent.  Bounce, bounce, bounce, vrum –ayngayngayng– vrum ayng vrum -vrum -vrum, BANG.  That backfire knocks me out of my seat, but it just gently opens Sargent’s eyes and Peyton’s look is pretending that he saw all of this coming.

Sargent turns back the ignition, pauses and draws his face back away from the wheel.  His head turns toward me and a grin comes over his face.  He’s saying here it goes, watch this.  He turns the key one last time and the engine rolls over like a cat, stretching out its neck for one more scratch.

“You don’t mind if I drive do you Peyton?”

Registration for the 2012 Allied Social Sciences Meetings has just opened up today. The ASSA meeting is the annual “winter meeting” in which hordes of economists descend on a rotating list of cities to spend a weekend shuffling papers around and stiffing cab drivers.

It was by sheer luck that last night I noticed that today would be the first day to register. And so this morning I was one of the first to login to the ASSA hotel registration system and reserve one of the better suites (we will be in the Fairmont) in one of the more central conference hotels where Northwestern Economics will conduct its job market interviews.  (New PhD recruitment is one of the main, perhaps the main, activity at the ASSA meetings.) Had I been just a few hours later we would have been relegated to a remote hotel making it harder for interviewers and interviewees to get to and from the interviews.

(If that happened to you, you can follow @ASSAMeeting on Twitter to wait for announcements of new suites opening up.  But wouldn’t you rather follow me? Sandeep?)

It’s funny that a conference run by economists uses a qeueing/rationing system to allocate scarce hotel space.  The system doesn’t even allow ex post exchanges between departments which would undo inefficient misallocations. If MIT gets stuck in the Embassy Suites and Podunk U is in the Hyatt Regency, then tough luck MIT (maybe Podunk can build a stronger theory group, ha ha ha.)

The problem is that ASSA negotiates discounted rates for the suites by reserving them in bulk.  Obviously that is good for everyone.  But the discounted rate is below market clearing and therefore there  will be excess demand for the best hotels.  It would seem that the resulting inefficiency is the price we have to pay for our monopsony power.

Indeed it would not work to have ASSA negotiate hotel space at discount rates and then turn around and use an efficient auction internally to allocate it.  The reason is somewhat subtle.  Here’s one way of seeing it.  An efficient auction for a single suite is (essentially) a second-price auction.  It works efficiently becuase when I know that I will have to pay the second highest bid then I will bid exactly my willingness to pay.  Therefore the winner will be the bidder who values the suite the most.  However, because ASSA bought the suite at a rate that is below market clearing, the second highest bid for a suite is going to be more than ASSA paid for it.

That means ASSA makes money.  Sounds good right?  No.  In fact it is a problem precisely because we all benefit from ASSA making money (we get lower registration fees, lower journal subscription fees, etc.) You see I internalize the benefits of ASSA’s revenue which essentially means that I get back some of the price I pay when I win the auction. In other words I am not really paying the second highest bid, I am paying something less.  And because of that I no longer want to bid my true willingness to pay, and the mechanism breaks down.  In the jargon, the efficient auction is no longer incentive compatible.

But there is a solution.  The basic mistake ASSA is making is to negotiate discounted suites.  Why does it do that?  Well, it has monopsony power and it has different hotels in the area compete with one another for the business. Since we are buying hotel space it seems natural to make hotel discounts the currency of that competition.  But we saw the problem with that.  Instead ASSA should ask for lump sum cash bids from the hotels.  The highest bidding hotel gets the right to auction off their suites to ASSA members using an efficient auction. The hotel keeps all revenues from the auction.

That way I don’t internalize any of the revenues from the auction.  The mechanism is incentive compatible again and therefore gives an efficient allocation.  The hotels make some money.  And the amount of money they can expect to earn is exactly how much they are willing to pay to ASSA in advance for that right.  So in fact ASSA comes away with their monopsony rents without having to sacrifice efficiency.

The weather in Chicago sucks but at least there are real seasons (there’s only one in SoCal where I am from.)  Here’s a thought about seasons.

Everything gets old after a while. No matter how much you love it at first, after a while you are bored. So you stop doing it.  But then after time passes and you haven’t done it for a while it gets some novelty back and you are willing to do it again.  So you tend to go through on-off phases with your hobbies and activities.

But some activities can only be fun if enough other people are doing it too. Say going to the park for a pickup soccer game.  There’s not going to be a game if nobody is there.

We could start with everyone doing it and that’s fun, but like everything else it starts to get old for some people and they cut back and before long its not much of a pickup game.

Now, unlike your solo hobbies, when the novelty comes back you go out to the field but nobody is there. This happens at random times for each person until we reach a state where everybody is keen for a regular pickup game again but there’s no game.  What’s needed is a coordination device to get everyone out on the field again.

Seasons are a coordination device.  At the beginning of summer everyone gets out and does that thing that they have been waiting since last year to do. Sure, by the end of the season it gets old but that’s ok summer is over.  The beginning of next summer is the coordination device that gets us all out doing it again.

We never had them when I was a kid.  There was “Adult Swim” but that was like a 3 hour block of time on a week night, legitimately so that adults could swim without being terrorized by cannonballs, marco polos, jacknifes, watermelons, palm geysers and the dreaded depth charge.

(There’s another recent development in swimming pool administration. At my community pool whenever anything is even slightly amiss the lifeguard is supposed to give three sharp whistles which in turn alerts the entire crew of 20 or so lifeguards each stationed at her own corner of the pool [yes the pool does have 20 or so corners] to also emit three sharp whistles, repeatedly, while pointing in the direction of the other lifeguard whose whistle it was that alerted them.

That way, in the midst of the cacophony of whistles you can look at any random lifeguard, see where they are pointing, follow the trail of shrieking, pointing lifeguards until you find the root of the tree and then you know where all the trouble is.  At least that’s the theory. Meanwhile over the loudpseaker the lifeguard who appears to have been selected for this job on account of having the most panic-stricken-yet-somehow-deeply-caring voice is sooth-screaming “Attention swimmers.  Three whistles have been blown, please leave the pool.  7 year old Dennis is missing.  He is wearing a red swim suit, a blue mask and snorkel. He is not wearing his plastic pants.”

This is followed every 30 seconds or so by further announcements of additional information that might be useful to us in our search for Dennis, “Attention swimmers [she hasn't seemed to have noticed that we stopped swimming 5 minutes ago and in fact we are now more appropriately addressed like "Attention patrons who were previously swimming and who are now digging through your beach bags for earplugs"] we are looking for Dennis. Dennis has a My Little Pony beach towel and he was last seen by his 5 year old sister when she was holding him down so his friends could give him a plastic pants wedgie.”  Then “Attention swimmers, we are looking for Dennis.  Dennis is going through a bed-wetting phase at home.”

Finally Dennis, who of course had just been undergoing repeated Whirlys in the bathroom emerges and the whistles fall silent but the cackling doesn’t.)

But the “Adult Safety Break” has very little to do with adults and nothing at all to do with their safety. Every 90 minutes all children under the age of 16 are required to leave the pool for 15 minutes.  In the meantime, adults can swim but since nobody goes to this pool to swim in the literal sense of prostrating and propelling yourself through water with a well-defined origin and destination, what happens instead is that all of the adults leave the pool too and the lifeguards are the ones that get a break.

And that is precisely the rationale.  Not the break for the lifeguards, but the temporary evacuation of the pool.  Now note that this is a community pool, run by the community association so we have a situation in which the community is voluntarily destroying 15 minutes of pool value.  So there must be a good reason.

And the good reason is that admission to the pool is by flat fee with no marginal time-use pricing.  This means that the admission fee can be adjusted only to meter the number of people entering the pool but it provides no means to stop them from staying all day long.  And indeed while their marginal value declines over time it appears to stay bounded away from zero until either nightfall or lightning strikes, whichever comes first.

The safety break makes us decide whether its worth it to sit through 15 idle minutes before climbing back onto the marginal utility slide.  A large number of families by now already on the very flat end of that slide, its no wonder that the safety break culls a significant segment of the pool’s patronage in one fell swoop. It helps that the safety break consolidates all the kids in one place making the exit that much easier.

Bad for them but good for the community at large.  Their tiny residual marginal utility is dwarfed by the externality of their presence multiplied by the number of other swimmers in the pool.  Absent any way to expose them to their externality through prices, a community-imposed waste of time is the second-best solution.

Unfortunately for Dennis though, giving Whirlys only gets better and better.

A series of photos he took in the summer of 1949 as a journalist.  Many of them are downright Kubrickian.  He has a way with furniture.

That’s the famed Pump Room

Two aspects of our taste for good weather are in force in the Spring.  First, we enjoy the warmer weather but we have diminishing marginal utility for higher and higher temperatures.  Second, we have reference-depenendence:  a 40F day feels balmy in March when its been below freezing for the past three months but the same 40F day gives you the chills in May on that day when Winter sends you its final parting gift from the grave.

Given those preferences, here’s how a benevolent Mother Nature would maximize the joy of Spring.  Each day raise the temperature by just a little bit.  Gobble up the steep part of our utility for warmth but stop before marginal utility declines too much.  Then, tomorrow when our reference point adjusts upward pushing the steep part back into play, gobble up those marginal utils again.  Repeat.  This steady but gradual transition from Winter to Summer would be the hallmark of a benevelont Mother Nature.

But woe is us, here in Chicago our Mother Nature is of a different sort than that. She seems well-acquainted with another aspect of our reference-dependent weather preferences:  loss aversion.  Drops in temperature hurt more than equal-sized jumps upward.  Our Mother has figured out how to exploit this to full effect and minimize the joy of Spring.  It all starts in late February when she lays on us a miraculous 60F day right out of nowhere.  Our reference points soar. But then we take the plunge back down on the steep side of the loss-aversion curve and the round trip is worse than if we just had another two days of plain old Winter.

And that pattern pretty much repeats until about June 1.  Instead of that gradual steady incline our Spring in Chicago is the classic sawtooth pattern, a series of tragicomic episodes in which our reference points are coaxed upward and then smashed back into place like some kind of meteorologic Moe-Curly routine. Thoughts of summer give us the hope to soldier on, but only if in the past year we were lucky enough to have forgotten whom she hands the baton to once the temperature finally settles down:  the mosquitos.

Barack Obama was not the first to wear flip flops in the Oval Office:

That and other flip flop trivia here.

I wore exclusively flip flops up until the time I moved to the Midwest.  My standby ride was the 99 cent pair found at the pharmacy checkout line. They would disintegrate in about a month but 12 bucks for a year of footwear is like Divine Grace. As a bonus, that day when the stem blows out and you wind up dragging the rubber carcass around is bound to attract some fun conversations.

My high water mark came in the 9th grade which saw the greatest innovation in flip flop history:  Cheap Charlie’s Sole Suckers. These are nothing more than slabs of polyurethane that you literally glue to the bottom of your feet.  No flipping, no flopping. (Also, it turns out no running, skateboarding, stepping in puddles, or being victimized by the dreaded flat tire else you destroy the fragile adhesive and spend the rest of the day barefoot and sticking to dirt, shag carpet, NoDoz, PeeChees, Djarums, NoSkote, bus fare, bottlecap rebuses, Rocky Horror rice, Galaga, duct tape, Space Shuttle debris, jacuzzi bubbles, and hall passes.)

I passed through the flojo phase, and now I am a shamelessly gentrified Reef-o-phile once the temperature rises above 60F which in Chicago is the day before it rises above 80F.

Porkpie plié:  Courtney Conklin Knapp.

At this stage of the Chicago Mayoral election we have the following candidates: Rahm Emmanuel and a bunch of people who for entered a race they had almost no chance of winning and so presumably were motivated by something other than being the Mayor of Chicago.  It is past the stage when new candidates can enter the race.  Perhaps you dread having Rahm Emmanuel as Mayor, but at this point wouldn’t removing him be even worse?  Just sayin’.

Made it to Brooklyn alive. I don’t see what the big deal is, some nice chap shoveled me a spot and even gave me a free chair!

From @TheWordAt.

Speaking of which, have you noticed the similarity between shovel-earned parking dibs and intellectual property law?  In both cases the incentive to create value is in-kind:  you get monopoly power over your creation.  The theory is that you should be rewarded in proportion to the value of the thing you create.  It’s impossible to objectively measure that and compensate you with cash so an elegant second-best solution is to just give it to you.

At least in theory.  But in both IP and parking dibs there is no way to net out the private benefit you would have earned anyway even in the absence of protection.  (Aren’t most people shoveling spaces because otherwise they wouldn’t have any place to put their car in the first instance? Isn’t that already enough incentive?)  And all of the social benefits are squandered anyway due to fighting ex post over property rights.

I wonder how many people who save parking spaces with chairs are also software/music pirates?

Finally, here is a free, open-source Industrial Organization textbook (dcd: marciano.)  This guy did a lot of digging and we all get to recline in his chair.

You hear this a lot in Chicago.  “We are having a cold snap because there is a low-pressure system over the Midwest and a high-pressure system to the North.  This causes windy conditions which brings cold air down from Canada.”

This sounds better than just saying “it’s cold today” but I can’t tell if it really is saying anything more than that.  First of all, as I have said before the following two statements are equivalent, at least empirically:

  1. The air is colder than usual
  2. The air was blown here from some place colder than here.

So telling me that the air came from Canada isn’t telling me much more than I already knew, it’s cold.  But the extra bit here seems tautological at an even deeper level because these two statements:

  1. The air is blowing from down Canada
  2. There is high pressure in the North and low pressure here

appear to be literally the same thing.  Why else would the air move from position A to position B if it were not due to pressure imbalances?

Is meteorology really just like finance?  (“Stocks fell today because of bearish investors”)  Or is there a non-circular way of explaining my frozen toes that just doesn’t fit into a 30 second weather report?

(drawing: glooming from http://www.f1me.net)

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…?!!

I’m revisiting old haunts to try to get back into my Chicago equilibrium.  Today, I ended up at Nazareth Sweets to pick up baklava for a party tonight.  An assortment of 40-50 sets you back, wait for it……..$14!  The pricing is the opposite of Pasticceria Natalina.

I am worried abut the calorific content but luckily it’s far enough from Evanston that I do not end up there too often.  I love the walnut baklava and the bamya. The knaffeh is repulsive in my opinion.  At the risk of causing an uproar, I somewhat concur with an earlier post of Jeff’s on Asian desserts as far as his point extends to knaffeh from the Middle East.  Anyway, it is always good to buy some knaffeh – have some after one piece of walnut baklava so it grosses you out and you don’t eat any more dessert.

Chicago somewhat controversially privatized its parking meters.  Now you have to walk over to a machine, put in money or a credit card, get the receipt and put in on your dashboard – the meters are defunct.  It’s $1.25/hour so it’s still way cheaper than parking in a private lot. And now the machines work, unlike many that were installed earlier.

And here’s the cool thing: Suppose you’ve paid for two hours, only use up an hour and drive off and park somewhere else.  As long as parking costs the same in new spot where your car ends up and the parking rate is the same, your receipt is still valid and you do not have to pay for more parking.  There is less chance of wasting quarters like you do now when you leave the meter with time on it.

The fact that the receipt gives you option value means you might put in extra.  The company makes more money potentially because of this.  Also, with a meter, the next person to park might get lucky and get some time paid for by someone else.  This is a classic positive externality – each individual parker does not take into account and skimps on how much they out into the meter.  This cannot happen anymore because your receipt stays in your car (or goes into the trash) and not to someone else. So, they have to pay for their time themselves.  Another round of extra money for the parking company.

But, all in all, it not as bad as people thought originally.  And I love my durable receipt.

With many neighbors willing to help with childcare, my wife and I managed to escape for a quick meal on our own.  We went to Anteprima, within easy striking distance of Evanston.  At a dinner at Rialto in Boston, I’d guessed that we’d eat better and cheaper at Anteprima and our experience proved me right.  The chef has the market-driven sensibility that is all the rage.  I was in luck because someone must have brought squash blossoms to the market that week.  So, I had lovely fried zucchini flowers stuffed with ricotta-herb mix.  My wife had the Tuscan crostini and enjoyed it as well.  We both settled for the spaghetti with tomato, chilis and crispy breadcrumbs – easily made at home unlike the stuffed squash blossoms!  We didn’t regret it as it was executed perfectly.

In New York City, people might expect this kind of meal from their local Italian joint.  After Boston, it seemed extraordinary to us.

For dessert, we ended up getting overpriced gelato at Pasticceria Natalina. The owner makes quite exceptional pastries but the pricing is crazy.  No-one else was there and I wonder if this unique place is going to last too much longer.  Someone should tell them about the trade-off between margin and volume and perhaps also how to calculate margin correctly in the first place – don’t incorporate fixed and sunk costs into your pricing decision!  It makes you think that elementary economics is actually useful for business owners.

I am driving to Chicago from Boston with two kids in the back of my car.  Random observations:

1. Julia Child’s My Life in France audiobook is family-friendly.  It sent the five year old to sleep and the nine year enjoyed it quietly, as did I.  Julia got a couple of rejections before getting her magnum opus accepted by Knopf.

2. Ithaca, Rome, Troy, Seneca Falls, Utica, Syracuse…..Why do so many towns have ancient, classical names?

3. We are staying in Geneva, faux-Switzerland, not Greece or Italy.  I recommend the Ramada Inn, right on the lake.

About twice a year the Chicago “classic rock” station does something strange.  Instead of its regular programming sequence, it sets aside about a week to play through all the greatest songs in alphabetical order.  And this is advertised as a big event, a restoration of order out of chaos that the audience has apparently been desperate for since the last time they did it.  They are at it again this week and in between “Boys of Summer” and “Brain Damage/Eclipse” I started to wonder why this was thought to be a good marketing strategy.

  1. There is the possibility of coordination failure between audience and programmer at certain time slots.  If everybody tuning in at noon is expecting late 70′s prog rock then they better play that or lose their audience.  The A to Z is a way to break the trap.
  2. It works as a commitment not to repeat a song for a whole week.
  3. It’s really just a negotiation tactic with the program director.  The station proves publicly that the program director’s choice of playlist on a daily basis is completely irrelevant to the listeners.
  4. The station is just pruning its library and it takes a week to do that every 6 months.  While they are at it, they might as well play the songs that made the cut.
  5. It gets the listeners into the game of predicting the next song.  (They just played “Back Door Man” by the doors.  We know “Back in the USSR” is coming soon.  Is there anything in between that we are forgetting?  Let’s stay tuned and find out!)

If it is any one of the demand-side explanations (like 2 and 5) there is a residual puzzle.  Presumably listeners have some given satiation point for classic rock and this trick is just getting them to inter-temporally substitute their listening.  They listen more now, less later.  Why is that good for the station?

I think the answer has to do with the convex value of advertising.  Advertisers’ willingness to pay increases more than proportionally with the size of the audience.  This is due to “bandwagon” and “water cooler” effects.  (Michael Chwe has a paper about this.)  With that in mind the station would prefer everyone listen this week and nobody listen next week rather than half and half.

You can see the whole list (up to now) here.

This weekend we attended a charity auction for my kids’ pre-school.  What does a game theorist think about at a charity auction?

  1. There is a “silent auction” (sealed bid), followed by a live auction (open outcry).  How do you decide which items to put in the live auction?
  2. The silent auction is anonymous, so items with high signaling value should be moved to the live auction.  A 1 week vacation in Colorado sold for less than $1000 (who would want to signal that they don’t already have their own summer home?) wheras a day of working as an assistant at Charlie Trotter’s sold for $2500.
  3. There is a raffle.  You sell those tickets at the door when people are distracted and haven’t started counting how much they have spent yet.  But what price do you set?
  4. The economics of the charity auction are such that vendors with high P-MC markups can donate a high value item (high P) for a low cost (low MC).  This explains why the items usually have a boutique quality to them.
  5. In the silent auction, you write down your bids with a supplied pen on the bid sheet.  Sniping is pervasive.  Note for next year:  bring a cigarette lighter.  You make your last minute bids and then melt the end of the pen just enough to stop the ink from flowing.
  6. When you are in suburban Winnetka on Chicago’s North Shore, for which kind of item is the winner’s curse the strongest: art or sports tickets/memorabilia?
  7. One of the live auction side-events is a pure signaling game where you are asked to give an amount of money to a special fund.  They start with a very high request and after everyone who is willing to give that much has raised their hand, they continually lower the request.  I think this is the right timing.  With the ascending version the really big donors will give too early.
  8. How do you respond when asked to pay to enter a game with the rules to be announced later?  Answer:  treat it like a raffle.  Surprise answer:  A chicken will be placed in a cage.  The winner of the game is the player whose number the chicken poops on.

That didn’t turn out to be such a good idea.  Someone forgot to put a lid on the cage and the chicken, well-versed in the hold-up problem, found a way to use his monopoly power:

The game of chicken

That is an actual-use, signed and engraved hockey stick from Patrick Kane of the Chicago Blackhawks.  It subsequently sold for over $1000.  The chicken was unharmed and eventually spent the evening perched on a rafter high above the proceedings threatening to select a winner directly.

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