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My friend and Berkeley grad school classmate Gary Charness posted this on Facebook:

It has finally happened. This could be a world record. I now have 63 published and accepted papers at the age of 63. I doubt that there is anyone who *first* matched their (positive) age at a higher age. Not bad given that my first accepted paper was in 1999. I am very pleased !!

Note that Gary is setting a very strict test here.  Draw a graph with age on the horizontal axis and publications on the vertical.  Take any economist and plot publications by age.  It’s already a major accomplishment for this plot to cross the 45 degree line at some point.  Its yet another for it to still be above the 45 degree line at age 63.  But its absolutely astounding that Gary’s plot first crossed the 45 degree line at age 63.

(Yes Gary was my classmate at Berkeley when I was 20-something and he was 40-something.)

The less you like talking on the phone the more phone calls you should make.  Assuming you are polite.

Unless the time of the call was pre-arranged the person placing the call is always going to have more time to talk than the person receiving the call simply because the caller is the one making the call.  So if you receive a call but you are too polite to make an excuse to hang up you are going to be stuck talking for a while.

So in order to avoid talking on the phone you should always be the one making the call.  Try to time it carefully.  It shouldn’t be at a time when your friend is completely unavailable to take your call because then you will have to leave a voicemail and he will eventually call you back when he has plenty of time to have a nice long conversation.

Ideally you want to catch your friend when they are just flexible enough to answer the phone but too busy to talk for very long.  That way you meet your weekly quota of phone calls at minimum cost in terms of time actually spent on the phone.  What could be more polite?

Matthew Rabin was here last week presenting his work with Erik Eyster about social learning. The most memorable theme of their their papers is what they call “anti-imitation.” It’s the subtle incentive to do the opposite of someone in your social network even if you have the same preferences and there are no direct strategic effects.

You are probably familiar with the usual herding logic. People in your social network have private information about the relative payoff of various actions. You see their actions but not their information. If their action reveals they have strong information in favor of it you should copy them even if you have private information that suggests doing the opposite.

Most people who know this logic probably equate social learning with imitation and eventual herding. But Eyster and Rabin show that the same social learning logic very often prescribes doing the opposite of people in your social network. Here is a simple intuition. Start with a different, but simpler problem.  Suppose that your friend makes an investment and his level of investment reveals how optimistic he is. His level of optimism is determined by two things, his prior belief and any private information he received.

You don’t care about his prior, it doesn’t convey any information that’s useful to you but you do want to know what information he got. The problem is the prior and the information are entangled together and just by observing his investment you can’t tease out whether he is optimistic because he was optimistic a priori or because he got some bullish information.

Notice that if somebody comes and tells you that his prior was very bullish this will lead you to downgrade your own level of optimism. Because holding his final beliefs fixed, the more optimistic was his prior the less optimistic must have been his new information and its that new information that matters for your beliefs. You want to do the opposite of his prior.

This is the basic force behind anti-imitation. (By the way I found it interesting that the English language doesn’t seem to have a handy non-prefixed word that means “doing the opposite of.”) Suppose now your friend got his prior beliefs from observing his friend. And now you see not only your friend’s investment level but his friend’s too. You have an incentive to do the opposite of his friend for exactly the same reason as above.

This assumes his friend’s action conveys no information of direct relevance for your own decision. And that leads to the prelim question. Consider a standard herding model where agents move in sequence first observing a private signal and then acting.  But add the following twist. Each agent’s signal is relevant only for his action and the action of the very next agent in line.  Agent 3 is like you in the example above.  He wants to anti-imitate agent 1. But what about agents 4,5,6, etc?

  1. Facebook’s business problem is that it is the social network of people you see in real life.  All the really interesting stuff you want to do and say on the internet is stuff you’d rather not share with those people or even let them know you are doing/saying.
  2. What is the rationale for offsides in soccer that doesn’t also apply to basketball?
  3. If the editors of all the journals were somehow agreeing to publish each others’ papers what patterns would we look for in the data to detect that?
  4. I need to know in advance the topic of the next 3 Gerzensee conferences so that I can start now writing papers on those topics in hopes of getting invited.

Suppose you and a friend of the opposite sex are recruited for an experiment. You are brought into separate rooms and told that you will be asked some questions and, unless you give consent, all of your answers will be kept secret.

First you are asked whether you would like to hook up with your friend. Then you are asked whether you believe your friend would like to hook up with you. These are just setup questions. Now come the important ones. Assuming your friend would like to hook up with you, would you like to know that? Assuming your friend is not interested, would you like to know that? And would you like your friend to know that you know?

Assuming your friend is interested, would you like your friend to know whether you are interested? Assuming your friend is not interested, same question. And the higher-order question as well.

These questions are eliciting your preferences over you and your friend’s beliefs about (beliefs about…) you and your friend’s preferences. This is one context where the value of information is not just instrumental (i.e. it helps you make better decisions) but truly intrinsic. For example I would guess that for most people, if they are interested and they know that the other is not that they would strictly prefer that the other not know that they are interested. Because that would be embarrassing.

And I bet that if you are not interested and you know that the other is interested you would not like the other to know that you know that she is interested. Because that would be awkward.

Notice in fact that there is often a strict preference for less information. And that’s what makes the design of a matching mechanism complicated.  Because in order to find matches (i.e. discover and reveal mutual interest) you must commit to reveal the good news. In other words, if you and your friend both inform the experimenters that you are interested and that you want the other to know that, then in order to capitalize on the opportunity the information must be revealed.

But any mechanism which reveals the good news unavoidably reveals some bad news precisely when the good news is not forthcoming. If you are interested and you want to know when she is interested and you expect that whenever she is indeed interested you will get your wish, then when you don’t get your wish you find out that she is not interested.

Fortunately though there is a way to minimize the embarrassment. The following simple mechanism does pretty well. Both friends tell the mediator whether they are interested.  If, and only if, both are interested the mediator informs both that there is a mutual interest. Now when you get the bad news you know that she has learned nothing about your interest. So you are not embarrassed.

However it doesn’t completely get rid of the awkwardness. When she is not interested she knows that *if* you are interested you have learned that she is not interested. Now she doesn’t know that this state of affairs has occurred for sure. She thinks it has occurred if and only if you are interested so she thinks it has occurred with some moderate probability. So it is moderately awkward. And indeed you know that she is not interested and therefore feels moderately awkward.

The theoretical questions are these:  under what specification of preferences over higher-order beliefs over preferences is the above mechanism optimal? Is there some natural specification of those preferences in which some other mechanism does better?

Update: Ran Spiegler points me to this related paper.

A firm has a basic goal:  maximize profits.  And then it has day-to-day decisions. It is far too complicated to every day try to trace through the consequences of those basic decisions on the fundamental objective of maximizing profits. A manager who tried to do that would spend so much time thinking that by the time he figured it out the day would be over and he’d have to start thinking again about tomorrow’s decision.

So firms don’t hire managers like that. Managers cling to intermediate goals, like say maximize market share. The best intermediate goals are the ones that are easy to monitor and which do a pretty good job of proxying for the underlying goal. These intermediate goals eventually become part of the culture of the firm and knowledge of their connection to the underlying goal can get lost. The manager can’t distinguish between intermediate goals and fundamental goals.

Now a consultant comes in to advise the manager. A consultant’s job is to show the manager how best to pursue his goals. So the very first thing a consultant should do is find out what the manager’s goals are. And here’s where the dilemma arises. The consultant might actually be smart enough to figure out that the manager’s goals are just intermediate goals. Does he say “De Gustibus” and advise the manager on how to pursue his goals even if he can see that in this particular instance it works against what the manager should really be maximizing?

Or does he have enough ambition in his job as advisor to try to convince the manager that his goals are all wrong, that he should really be maximizing something else? I honestly wonder what the smart consultant does in these situations.

More generally, in everyday life we have arguments about what’s the right thing to do. A lot of the time these arguments are confounded by the inability to distinguish whether we are arguing about the right course of action given our common goals (an argument that can be settled) or whether we have really just chosen different intermediate goals (loggerheads.)

  1. Exercise: find a name such that when you sing The Name Game (“banana fana fo …”) all three words you get are insults.
  2. The Northwestern Women’s Lacrosse team has won the NCAA championship like every year but two in the past decade.  The two losses make the overall dynasty more impressive.  Discuss.
  3. Why do fat people slide farther when they reach the bottom of a water slide?
  4. When hiking in a group, if an accurate measure of (changes in) elevation is unavailable but you have a watch and a GPS it’s better to share the work of carrying the backpack by dividing the time rather than the distance.

He died earlier this week.  If you grew up in Southern California, and you watched TV, you may have forgotten Cal Worthington but his dog Spot, the acres and acres of cars, the “Go See Cal”, the giant selection of cars and trucks on sale, the “open every day til midnight” and the music in the way “nineteen” springboarded the cars vintage out of your set and into your ears are all still stored away in some synapses somewhere in there and they’re all gonna come flowing out when you watch this video and probably bring with them a whole bunch of other stuff lost in there that you are gonna be pretty tickled to find again.  RIP Cal Worthington.

Here’s the preview:

Students all over are starting college this month, and some of them still have a nagging question: what, exactly, got me in? An admissions officer tells us the most wrongheaded things applicants try. And Michael Lewis has the incredible story of how a stolen library book got one man — Emir Kamenica — into his dream school. (Photo: Emir as a Harvard undergrad. Credit Terri Wang.)

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.

Yestermoment

Martin Osborne, the first Managing Editor of Theoretical Economics has just completed his term and handed the reins to George Mailath.  Martin is the last of the original co-editors to complete his final term and on the (private) TE Editorial Message Board he offers this reflection on the making of the journal.

TE has been—and continues to be—very much a collaborative project. With a few days to go before my term as editor ends, I want to acknowledge the contributors and outline their role in the development of the journal for those of you who may not be aware of the journal’s history.

TE emerged from a project initiated by Manfredi La Manna. In the late 1990s (or maybe the early 2000s—I have been unable to find a record), Manfredi proposed starting low-cost economics journals to compete one-on-one with a long list of high-priced Elsevier offerings. His plans were extremely (even absurdly) ambitious, and although many economists signaled their support, none was willing to commit to work on the project. None, that is, until Manfredi found David Levine and George Mailath. Manfredi had been looking for someone to act as an editor of a journal he hoped would compete with JET. As I understand it, David and George suggested instead that they form an Executive Board with the aim of searching for an editor. David and George soon recruited Drew Fudenberg, Patrick Bolton, and Ariel Rubinstein (with whom Manfredi had been in touch previously) to join the Board.

In October 2002, after no doubt getting turned down by their top picks, they asked me if I would become the editor. We quickly recruited Bart Lipman, Narayana Kocherlakota, and Georg Nöldeke to serve as coeditors, and for two years worked with Manfredi on the “Review of Economic Theory”. For a variety of reasons, we parted ways with Manfredi in mid-2004 and started designing and setting up an Open Access journal. The team initially consisted of Patrick Bolton, Drew Fudenberg, David Levine, George Mailath, Bart Lipman, Georg Nöldeke, and myself, and was soon augmented by Ted Bergstrom, Jeff Ely, Preston McAfee, and Ariel Rubinstein (who re-joined the group, having left the La Manna project before the rest of us). A huge amount of work was involved; everyone played an important role.

One of the major tasks in starting TE was setting up a nonprofit corporation to run it. This task was handled by Bart and David. David had previously set up such a corporation to run his “Not A Journal”, but even with the benefit of that experience, a huge amount of work was involved. In Bart’s role as Treasurer, he also conducted the tricky negotiations necessary to get a credit card authorizer to deal with us. Eventually he found a company that specialized in small operations. Although that company appeared a bit disorganized—at some point it has us down as “Theological Economics”—it served us flawlessly during our pre-ES days.

Another major task was soliciting papers. That involved finding papers, reading them, discussing them, and selecting the ones that were potentially publishable. And then, usually, finding out that the authors had submitted them to Econometrica. Bart, Jeff, and Drew were particularly active in evaluating papers. Collectively, we read over 250 papers; Bart alone posted comments on more than 200 of them.

A final task that proved to be especially difficult was the choice of a name. The list we considered was long; it was very hard to find a reasonable name that was not close to the name of another journal or book series and also had an acronym not close to the acronym of another journal. Dozens of creative titles were proposed. Three of the more colorful were Theoretical Economics Arsenal (acronym TEA, proposed by Jeff Ely), Ecotheoretica, and Ekonomiko (both proposed by Preston McAfee; Ekonomiko is Esperanto for economics). One thousand three hundred and thirty messages after I opened a thread to decide on a name, we voted for “Theoretical Economics” (which, incidentally, was one of the two options I suggested in my original message).

We were extraordinarily fortunate that just as the journal was starting, a new version of the Open Journal Systems software became (freely) available. This superb system allowed us to automate almost all the the “administrative” tasks of running a journal (tasks that, I might add, are still performed manually at many other journals). You may think that software quality is an incidental issue that has little bearing on the activities of a journal. I disagree. In fact, because it obviates the need for an editorial assistant, superb software like the OJS system allows Open Access journals to be financially viable—even ones without a rich aunt like the Econometric Society.

Once we started publishing, the generosity of another group of people came into play—authors. We owe the success of the journal in no small part to the generosity of the authors who submitted to TE papers that could have been published in Econometrica. Submitting a paper to TE now is, I hope, a natural step for the author of a outstanding paper. But despite the commitment of the coeditors that the project would succeed, submitting a paper to TE in 2005 entailed some risk, and we are certainly grateful to the authors who took that risk in order to support Open Access. Submitting a paper to TE in 2004, when we were not yet certain we would go ahead, entailed a much greater risk; we were certainly encouraged that Bill Zame was willing to take that step.

A key determinant of the reputation that the journal has earned is the quality of its editorial work. The decision letters written by the first group of coeditors—Jeff Ely, Ed Green, and Bart Lipman, joined by Debraj Ray in 2008—were better than any others I have seen. Even rejected papers received very close attention. The efforts of this initial group of brilliant coeditors were critical in establishing a reputation for the journal.

One measure of the extent to which the initial group worked together is the number of postings on this Message Board. Between 2004 and July 2009 (when the journal was taken over by the Econometric Society), the coeditors (Jeff Ely, Ed Green, Bart Lipman, Debraj Ray, and myself) and the other members of the Executive Board (Ted Bergstrom, Drew Fudenberg, David Levine, George Mailath, Preston McAfee, Ariel Rubinstein, and Joel Sobel) posted over over 5,000 messages here.

Finally, the coeditors who have served since TE’s takeover by the Econometric Society—Gadi Barlevy, Faruk Gul, Johannes Hörner, and Nicola Persico—have upheld TE’s standards of editorial excellence with enviable energy, and our outstanding Associate Editors have provided us with high-quality evaluations within timeframes matched by few other journals.

It has been a great pleasure to coordinate this very hard-working group, which has transformed TE from an idea to the success it is today. I am delighted to hand over my role to George Mailath, who will surely lead the journal to new heights!

Martin Osborne was a truly outstanding Editor.  He vastly understates his own role in building the editorial software that makes the journal run so smoothly.  In my opinion the open source software that we use for free and that Martin painstakingly customized is far superior to the commercial systems used by all of the major journals in economics.  Do not believe it when it is said that open access journals can only survive on large fees by authors.  TE is a top-class journal and it is incredibly cheap to run.  Do not believe it when it is said that a new open access journal faces a chicken and egg problem.  The people behind TE believed in it and made it happen.  People wishing to start open access journals would do well to copy what TE did.

(photograph taken by Ariel Rubinstein.  More photos here.)

As far as I know.  Anyway I always assumed that the Ely Lecture at the AEA meetings was named after me.

But changing the subject, Adriana Lleras-Muney writes to me:

From Henry Miller

“To be intelligent may be a boon, but to be completely trusting, gullible to the point of idiocy, to surrender without reservation is of of the supreme joys of life”

Agree?

I think Henry Miller is confusing correlation with causation.  Its probably true that in our happiest moments (among those moments we are with other people–I might even dispute that those moments are the happiest unconditionally) we are trusting, gullible and idiotically surrendering.  But that’s likely because we are with a certain person and in a certain blissful state that we respond by surrendering.  Its the person and the state that brings us the supreme joy and our surrender is just a symptom of that joy.  I might go far as to say that the surrender is a complementary good but its enough to think about surrendering to the very next person who knocks on your office door to convince you that the surrender is not itself the source of joy.

And I have been to many very good Chinese restaurants in China, Taiwan, Singapore etc.  This place is called Peter Chang’s China Grill.  Here’s Wikipedia about the chef.  Here are the badly misguided Yelp reviews.  Note that from the look of the restaurant, the location, the service you would never guess what was in store for you.  Indeed I was terrified when the folks at UVA told me we were driving off campus to go have Chinese for lunch, even moreso when I saw the place they were taking me to.  But the food was a revelation.  You probably do need to know what and how to order.  For that I suggest getting invited to give a talk at the University of Virginia Economics department.

It’s called Coffee Places Where You Can Think, and its right there.  A word of caution though.  Ariel is a connoisseur of coffee houses but his preferences are guided mostly by the atmosphere of the place and not at all by the quality of the coffee.  Indeed his bad taste in coffee rivals only his bad taste in web site designs. So use this guide accordingly.  (Here is a series of pictures of Ariel’s tin can of instant coffee traveling to exotic locales across the world.)

But the picture above is from The Mudhouse in Charlottesville, Virginia which is a place I can also highly recommend, having been there and had an exquisite cappuccino just last month with Federico Ciliberto.

There’s someone you want to hook up with.  How do you find out if the attraction is mutual while avoiding the risk of rejection?  That is simply not possible no matter how sophisticated a mechanism you use.  Because in order for the mechanism to determine whether the attraction is mutual you must communicate your desire to hook up but she’s not that into you, well you are going to be rejected.

But rejection per se is not the real risk. Because if she rejects you without ever actually knowing it, you will be disappointed but you won’t be embarrassed.  The real cost of rejection comes only when rejection is common knowledge between the rejector and the rejected.

So to design a mechanism that maximizes the number of hookups you need to give people maximal incentives to reveal whom they want to hook up with and to do that you need to insure them against common-knowledge rejections.

And that’s where Bang With Friends comes in.

Bang With Friends is a Facebook app, coded by a few college kids in a weekend, that facilitates no-risk hookups with people on your friends list. You say you’d like to bang them, and no one ever knows, unless they happen to say that they’d like to bang you, too.

Now this indeed takes care of one side of the incentive problem, but I worry about the other side.  Suppose I want to know who wants to bang with me even if I don’t have the same lust for them. I can find out by putting all of my friends on my Down To Bang list.  The only cost I pay for this information is that all of those who are down to bang with me will be told that I am down to bang with them. In some cases this could be lead to some embarrassment and awkwardness but I imagine some people would pay that price just to find out. And anticipating this possibility everyone is again reluctant to be truthful about who they do want to Bang for fear of being caught out this way.

One way to mitigate the problem is to replace the flat list with a ranking of your friends from most to least Bang-able, and then establish a hookup only with the friend who is highest on your ranking among those who want to Bang back. Then if you do decide to pad your list, you will put the reconnaissance Bangage low on your list. Of course this will allow you to find out those friends who put you highest on their ranking, but at least this is less information than you can get with the existing system.

Congratulations to our colleague Aviv Nevo on his appointment to this position which Thomson-Reuters says will make him the top non-lawyer at the Department of Justice (there’s a joke in there somewhere).

Aviv joined our department the same year I rejoined and we both wanted the same office.  Highest seniority in our department determines priority for choosing offices and to break the tie there was a coin toss.  I was in Boston and couldn’t actually witness the coin toss but they tell me I lost.

So Aviv got the office, but he also got seniority which means he is in line to be chairman before me.  I am sure he will be back with us in time to take his turn.

With social networking you are now exposed to so many different voices in rapid succession. Each one is monotonous as an individual but individual voices arrive too infrequently for you notice that, all you see is the endless variety of people saying and thinking things that you can never think or say. It seems like the everyone in the world is more creative than one-dimensional you.

  1. To indirectly find out what a person of the opposite sex thinks of her/himself ask what she thinks are the big differences between men and women.
  2. Letters of recommendation usually exaggerate the quality of the candidate but writers can only bring themselves to go so far.  To get extra mileage try phrases like “he’s great, if not outstanding” and hope that its understood as “he’s great, maybe even outstanding” when what you really mean is “he’s not outstanding, just great.”
  3. In chess, kids are taught never to move a piece twice in the opening.  This is a clear sunk cost fallacy.
  4. I remember hearing that numerals are base 10 because we have 10 fingers.  But then why is music (probably more primitive than numerals) counted mostly in fours?
  5. “Loss aversion” is a dumb terminology.  At least risk aversion means something:  you can be either risk averse or risk loving.  Who likes losses?

Can opposite-sex friendships last?  Only if the two are mutually deceived:

The results suggest large gender differences in how men and women experience opposite-sex friendships. Men were much more attracted to their female friends than vice versa. Men were also more likely than women to think that their opposite-sex friends were attracted to them—a clearly misguided belief. In fact, men’s estimates of how attractive they were to their female friends had virtually nothing to do with how these women actually felt, and almost everything to do with how the men themselves felt—basically, males assumed that any romantic attraction they experienced was mutual, and were blind to the actual level of romantic interest felt by their female friends. Women, too, were blind to the mindset of their opposite-sex friends; because females generally were not attracted to their male friends, they assumed that this lack of attraction was mutual. As a result, men consistentlyoverestimated the level of attraction felt by their female friends and women consistently underestimated the level of attraction felt by their male friends.

At some level this is automatically true. Assume simply this:  all men are attracted to all women. Then which women will the men be friends with? The ones they expect to be able to hook up with. Of these friendships few will survive:  if she figures out he is attracted to her she will either hookup with him (if its mutual) or run away (if its not). Either way the platonic friendship ends. The only surviving friendships will be those in which he thinks she’s attracted to him, she’s not attracted to him and she hasn’t yet figured out he’s attracted to her. QED.

Via The Morning News.

  1. Is it that women like to socialize more than men do or is it that everyone, men and women alike, prefers to socialize with women?
  2. A great way to test for strategic effort in sports would be to measure the decibel level of Maria Sharapova’s grunts at various points in a match.
  3. If you are browsing the New York Times and you are over your article limit for the month, hit the stop button just after the page renders but before the browser has a chance to load the “Please subscribe” overlay.  This is easy on slow browsers like your phone.
  4. Given the Archimedes Principle why do we think that the sea level will rise when the Polar Caps melt?

You must watch Balasz Szentes’ talk at the Becker Friedman Institute. At the very least, watch up until about 7:00. You will not regret it. (Note that Gary Becker was sitting in the front row.)

Ariel Rubinstein brings his game theory debunking manifesto to The Browser.

In general, I would say there were too many claims made by game theoreticians about its relevance. Every book of game theory starts with “Game theory is very relevant to everything that you can imagine, and probably many things that you can’t imagine.” In my opinion that’s just a marketing device.

Let’s show its usefulness by using game theory to analyze Ariel Rubinstein.  We model him with the following game.  Ariel is the first mover.  He privately observes whether game theory is useful.  Then he has the first decision to make.  He can either announce publicly that game theory is not useful or stay silent.  If he stays silent the game is over.  If he announces then everybody else moves next.  We can either try to prove him wrong by citing examples where game theory is useful or we can stay silent.  Then the game ends.

Let’s solve the game by backward induction.  If Ariel has announced that game theory is not useful, each of us has a strong incentive to find examples to prove him wrong so we do (assuming game theory is in fact useful which we will find out by looking for examples.)  Knowing this, and having privately observed that game theory is useful and being the humble yet social-welfare maximizing (not to mention supremely strategic) person Ariel is, Ariel announces that game theory is not useful so as to give the rest of us the incentive and the glory of proving him wrong.

And so it is done.

A key passage:

You poor sap. I know you won’t believe any of this, but you should. How can I get it through your thick, acne-pocked skull? All the stupid things you are so worried about really aren’t very important at all. In fact, they are the opposite of important. What if I told you that all the “winners” around you right now were actually the losers? Well, I just did tell you that, but you still don’t believe me because I’m an adult and 16 year olds can never trust adults.

What if I tried to explain it this way: That feeling you’ve never been able to put a name on — it feels something like, let’s say, a bone-crushing insecurity and cluelessness about your place in the world — just forget about it! That’s right. You can forget about it and go about your days — confident with the knowledge that it’s all going to work out just fine.

Could it be that this kind of confidence would just turn his 16 year old self into one of the winners who will eventually turn out to be a loser?  Isn’t that kind of confidence exactly what separates the winners in high school from the losers?  And what else but insecurity and cluelessness about your place in the world leads a 16 year old to give up on the present and try to explore ways of being that might one day give him real self-confidence and not just the artificially, socially propped-up kind?

Drawing:  Follow Your Heart from http://www.f1me.net

I have known Larry since the time I was on the junior job market and he was winding down a spectacular term as chairman of the BU economics department, having built a top-ten department out of nothing.  Eight years later I spent a year as a faculty member at BU and again Larry was chairman. Everybody who has spent any time with Larry in a professional capacity agrees that he is a natural-born leader.  He just has this quality that draws people from all sides to his.  And he knows how to make an organization work.  On top of all that he is great economist with world-leading expertise on the topics that would be most important for a President right now to know. I honestly can’t think of anybody I know personally who would make a better President than Larry.  I might even vote for him.

Here’s his campaign web page. Via Tyler Cowen on Twitter.

Someone you know is making a scene on a plane. They don’t see you. Yet.  As of now they think they are making a scene only in front of total strangers who they will never see again.  It might be awkward if they knew you were a witness.  Should you avert your eyes in hopes they won’t see you seeing them?

If they are really making a scene it is highly unlikely that you didn’t notice. So if eventually he does see you and sees that you are looking the other way he is still going to know that you saw him. So in fact it’s not really possible to pretend.

Moreover if he sees that you were trying to pretend then he will infer that you think that he was behaving inappropriately and that is why you averted your eyes. Given that he’s going to know you saw him you’d rather him think that you think that he was in fact in the right.  Then there will be no awkwardness afterward.

However, there is the flip side to consider.  If you do make eye contact there will be higher order knowledge that you saw him. How he feels about that depends on whether he thinks his behavior is inappropriate.  If he does then he’s going to assume you do too.  Once you realize you can’t avoid leaving the impression that you knew he was behaving inappropriately, and the unavoidable mutual knowledge of that fact, the best you can do is avoid the higher-order knowledge by looking the other way.

So it all boils down to a simple rule of thumb: If you think that he knows he is behaving inappropriately then you should look away. You are going to create discomfort either way, but less if you minimize the higher-orders of knowledge. But if you think that he thinks that in fact he has good reason to be making a scene then, even if you know better and see that he is actually way out of line, you must make eye contact to avoid him inferring that you are being judgmental.

Unless you can’t fake it.  But whatever you do, don’t blog about it.

When you shop for a gift, your recipient observes only what you bought, and not what alternatives you considered.

Why would price matter more to givers than receivers? Dr. Flynn and his Stanford colleague, Gabrielle Adams, attribute it to the “egocentric bias” of givers who focus on their own experience in shopping. When they economize by giving a book, they compare it with the bracelet that they passed up.

But the recipients have a different frame of reference. They don’t know anything about the bracelet, so they’re not using it for comparison. The salient alternative in their minds may be the possibility of no gift at all, in which case the book looks wonderfully thoughtful.

Click through for an excellent article on giving, touching on the potlatch, the gift registry, and re-gifting.

You and your partner have to decide on a new venture. Maybe you and your sweetie are deciding on a movie, you and your co-author are deciding on which new idea to develop, or you and your colleague are deciding which new Assistant Professor to hire.

Deliberation consists of proposals and reactions. When you pitch your idea you naturally become attached to it. Its your idea, your creation. Your feelings are going to be hurt if your partner doesn’t like it.

Maybe you really are a dispassionate common interest maximizer, but there’s no way for your partner to know that for sure. You try to say “give me your honest opinion, I promise I have thick skin, you won’t hurt my feelings.” But you would say that even if it’s a little white lie.

The important thing is that no matter how sensitive you actually are, your partner believes that there is a chance your feelings will be hurt if she shoots down your idea. And she might even worry that you would respond by feeling resentful towards her. All of this makes her reluctant to give her honest opinion about your idea. The net result is that some inferior projects might get adopted because concern for hurt feelings gets in the way of honest information exchange.

Unless you design the mechanism to work around that friction. The basic problem is that when you pitch your idea it becomes common knowledge that you are attached to it. From that moment forward it is common knowledge that any opinion expressed about the idea has the chance of causing hurt feelings.

So a better mechanism would change the timing to remove that feature. You and your partner first announce to one another which options are unacceptable to you. Now all of the rejections have been made before knowing which ones you are attached to. Only then do you choose your proposal from the acceptable set.

If your favorite idea has been rejected then for sure you are disappointed. But your feelings are not hurt because it is common knowledge that her rejection is completely independent of your attachment. And for exactly that reason she is perfectly comfortable being honest about which options are unacceptable.

This is going to work better for movies, and new Assistant Professors than it is for research ideas. Because we know in advance the universe of all movies and job market candidates.

Research ideas and other creative ventures are different because there is no way to enumerate all of the possibilities beforehand and reject the unacceptable ones. Indeed the real value of a collaborative relationship is that the partners are bringing to the table brand new previously unconceived-of ideas. This makes for a far more delicate relationship.

We can thus classify relationships according to whether they are movie-like or idea-like, and we would expect that the first category are easier to sustain with second-best mechanisms whereas the second require real trust and honesty.

(inspired by a conversation with +Emil Temnyalov and Jorge Lemus)


If you have a meeting scheduled at 2 and you are worried its going to drag on too long, what do you do?  Here’s a confession:  Sometimes I lie and say I have an appointment and I have to leave at 3. But it’s a double-edged sword.

Because warning my friend that I will have to leave at 3 implies that I anticipate that the hour will be a binding constraint.   That would only be true if I expect the meeting to go that long.   My friend will therefore infer that the topic of our meeting is important enough to me to potentially warrant an hour of face time.

As far as I know, had I never said anything he might have kept the meeting to 30 minutes, but now that I capped it at 3:00, its a sure thing we are going to meet for the full hour.

The problem is that there is no way I can know how long he was planning to meet. If i knew he was planning to leave at 2:30 I wouldn’t say anything. But if he is actually planning to stay until 4:30 and I don’t invent a 3:00 appointment I am hosed.

Of course some meetings really need to take more than 30 minutes and often you only discover that in the course of the meeting.  The downside of the cap is that it commits you.  Unless you want to lose all credibility you are going to have to keep to your fictional meeting and cut those meetings shorter than they should be.

So what is the optimal cap? The tradeoffs are reminiscent of textbook monopoly pricing. You have your marginal and infra-marginal meetings. If i raise the cap by a minute then the marginal meeting gets the extra minute that it really needs but the infra-marginal meeting gets needlessly extended.

Its a complicated calculation that comes down to hazard rates, incentive constraints, etc. but I will save you the effort; I have done the integration by parts.  The optimal cap is exactly 37 minutes.  You can’t say that of course because your friend will know that nobody schedules appointments at 2:37, so you will have to round up or down to the half hour.

Or schedule all your meetings to start at 23 minutes past the hour.

Measuring social influence is notoriously difficult in observational data.  If I like Tin Hat Trio and so do my friends is it because I influenced them or we just have similar tastes, as friends often do.  A controlled experiment is called for.  It’s hard to figure out how to do that.  How can an experimenter cause a subject to like something new and then study the effect on his friends?

Online social networks open up new possibilities.  And here is the first experiment I came across that uses Facebook to study social influence, by Johan Egebark and Mathias Ekstrom.  If one of your friends “likes” an item on Facebook, will it make you like it too?

Making use of five Swedish users’ actual accounts, we create 44 updates in total during a seven month period.1 For every new update, we randomly assign our user’s friends into either a treatment or a control group; hence, while both groups are exposed to identical status updates, treated individuals see the update after someone (controlled by us) has Liked it whereas individuals in the control group see it without anyone doing so. We separate between three different treatment conditions: (i) one unknown user Likes the update, (ii) three unknown users Like the update and (iii) one peer Likes the update. Our motivation for altering treatments is that it enables us to study whether the number of previous opinions as well as social proximity matters.2 The result from this exercise is striking: whereas the first treatment condition left subjects unaffected, both the second and the third more than doubled the probability of Liking an update, and these effects are statistically significant.

Assume that people like to have access to a community of people with similar habits, tastes, demographics, etc.  A “community” is just a group of some minimal absolute size.  Then the denser the population the more likely you will find enough people to form such a community.

But this effect is larger for people whose tastes, habits, and demographics are more idisyncratic than for people in the majority.  Garden-variety people will find a community of garden-variety people just about anywhere they go.  By contrast, if types of people are randomly distributed across locations, the density of cities makes it more likely that a community can be assembled there.

But that means that types won’t be just randomly distributed across locations. The unique types are willing to pay more to live in cities than the garden-variety types.

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