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I found this recipe on a now-defunct foodie blog a few years ago. It’s a pretty good replica of the grilled corn you find at Taipei Night Markets. Sweet, spicy and savory, it’s the definition of summer at our house.
The preparation is very simple, provided you have an immersion blender. You can make it by hand but its a fair bit of work.
To make about 6 ears of corn, dissolve 2t of sugar in 2T of soy sauce in the plastic vessel that goes with your immersion blender. Add 1 minced garlic clove, 1 minced shallot and 2T vegetable oil. (If you don’t have the blender, you will have to first pulvarize the garlic and shallot until they form a paste.) Blend until you have a thick sauce. Add cayenne pepper to taste.
Peel the corn fully and baste with the sauce. Place on a medium-hot grill. Continually turn and baste until they look like this (pictured alongside grilled lobster tails and a lovely Sauvignon Blanc from Quincy.)
Total grilling time is about 10-15 minutes.
Naming rights raise a lot of money. Think of professional sports stadiums like Chicago’s own US Cellular Field (does US Cellular still exist??) The amazing thing to me is that when Comiskey Park changed names to “The Cell,” local media played right along and gave away free advertising by parroting the name in their daily sports roundups. Somehow the stadium knew that this coordination/holdup problem would be solved in their favor.
We should seize on this. But not by selling positive associations to corporations that want to promote their brand. Instead lets brand badly-behaving corporations with negative associations.
The Exxon Valdez oil spill is a name that stuck. Every single time public media refer to that event they remind us of the association between Exxon and the mess they made. No doubt we will continue to refer to the current disaster as the BP Gulf spill or something like that. That is good.
But why stop there? (Positive) advertisers have learned that you can slip in the name of a brand before, after, and in-between just about any scripted words and call it an ad. The Tostitos Fiesta Bowl. The Bud Lite halftime show. The X brought to you by Y. These are positive associations.
Think of all the negative events and experiences that are just waiting to be put to use as retribution by negative association. “And today I am here to announce that the BP National Debt will soon reach 15 trillon Dollars.” Or “The BP recession is entering its fifth consecutive quarter with no end in sight.”
Why are we wasting hurricane names on poor innocents like Katrina and Andrew? I say for the 2010 hurricane season we ditch the alphabetical order and line em up in order of egregiousness. “Hurricane Blackwater devastates the Florida Coast. Tropical Storm Halliburton kills hundreds in Central America.”
The nice thing about negative naming is that supply is virtually unlimited. Cities don’t go selling the names of every street in town because selling the marginal street requires lowering the price. But you can put the name of every former VP at Enron and Arthur Andersen on their own parking meter and the last one makes you want to spit just as much as the first. Hey, what about parking tickets? This parking ticket is brought to you by Washington Mutual.
Suddenly the inefficiency of city bureaucracy is a valuable social asset. Welcome to the British Petroleum DMV, please take your place in line number 8. And some otherwise low-status professions will now be able to leverage that position to provide an important public service. “There’s some stubborn tartar on that molar, Ms. Clark, I’m going to have to use the Toyota Prius heavy-duty scaler. You might feel some scraping. Rinse please.”
“Good Afternoon, Pleasant Meadow Morturary, will you be interested in Goldman Sachs cremation services today?” Or “Mr. Smith we are calling to confirm your appointment for a British Petroleum colonoscopy on Monday. Please be on time and don’t eat anything 24 hours prior.”
Just as positive name-association is a lucrative business, these ne’er-do-wells would of course pay big money to have their names removed from the negative icons and that’s all for the better. If the courts can place a cap on their legal liability this gives us a simple way to make up the difference.
And I am ready to do my part. As much as I like one-word titles Sandeep and I are going to add a subtitle to our new paper. Its going to be called “Torture: Sponsored by BP.”
What do you do in the following awkward situation? your friend receives an invitation to a party. The host is also your friend but you haven’t received an invitation.
Was the invitation lost in the mail or were you not invited? You can’t ask the host directly because it would be too uncomfortable if the answer was you weren’t invited. But in the event that the invitation was lost in the mail it is in all parties’ interest in having that uncertainty resolved.
There would seem no custom that would allow communication of the good news and at the same time avoid communication of the bad news.
But RSVP does exactly that, as long as the custom is to RSVP both acceptances and regrets. Then if you were invited but you do not RSVP the host will know you didn’t get the invitation, and send a followup.
Game theorists will notice that the bad news can still be inferred. If the host does not follow up then you learn that you were not invited. But the beauty if this system is that it is never common knowledge. The host never knows with certainty that you know about the party you weren’t invited to. You know about the party but you know that the host does not know that you know, etc… This higher-order uncertainty goes a long way in alleviating the awkwardness.
More generally there is value in social conventions that allow non-public communication: exchange of information, especially bad news, without making that information common knowledge.
Younger siblings are said to be more prone to risky behaviors than their elders. This usually means stuff like drugs and sex, but now it means stealing bases:
For more than 90 percent of sibling pairs who had played in the major leagues throughout baseball’s long recorded history, including Joe and Dom DiMaggio and Cal and Billy Ripken, the younger brother (regardless of overall talent) tried to steal more often than his older brother.
Cap tap: Ron Siegel.
Via kottke, an argument against children’s menus in restaurants:
Nicola Marzovilla runs a business, so when a client at his Gramercy Park restaurant, I Trulli, asks for a children’s menu, he does not say what he really thinks. What he says is, “I’m sure we can find something on the menu your child will like.” What he thinks is, “Children’s menus are the death of civilization.”
I would guess that many parents would appreciate the removal of the child’s menus even if they aren’t worried about its implications for the fate of civilization. At home the kids know what’s in the pantry and if one of the parents is not prepared to make the children starve, they quickly learn to gag and choke on the fava beans to get to the mac-n-cheese (organic!)
If the restaurant has no children’s menu then this strategy is cut from the feasible set. The parents are effectively committed to make the child starve if she tries it. With that commitment in place, the child’s best response is to find something on the menu she will like and eat it.
Yesterday’s ruling came out of an appeal on a narrow case brought by American Needle, Inc. who complained about exclusive licensing of apparel/logos to Reebok. The league formed a single entity which centralized licensing for all teams. The Supreme Court ruled that this constituted concerted action by separate profit-maximizing entities and therefore falls under the purview of Section 1 of Sherman Act.
Here are the main points from the decision, which is an interesting read.
- The ruling suggests a broader scope than just licensing. The court notes that teams compete with one another not for just apparel sales but for gate receipts, to attract fans and managerial and player personnel.
- Rule of reason is suggested for determining which cooperative activities are permissible and which are not.
- For consideration of any activity, whether or not the teams should be considered competitors will be based not on legalistic distinctions like whatever contracts are in place. Instead the judgment is made on the basis of “a functional consideration of how they actually operate.”
Its easy to interpret these as opening the door to challenges to the systems of collective bargaining in place in all professional sports leagues.
As my wife will tell you, I hate clutter. Stuff that’s lying around I either put to use or throw away. Stray thoughts get the treatment today.
- Have the wasps in my neighborhood learned that the smell of citronella is actually a surefire signal that there’s something good nearby?
- I thank mother Earth for her two hemispheres as I enjoy this persimmon from Chile.
- Can the drunks’ favorite poker game, Indian, be solved like the dirty faces or other those common-knowledge puzzles?
- Classical field theory is doing physics by revealed preference.
- The reason it is so boring watching the Williams’ sisters in a grand slam final is that you either like both or hate both. Either way there’s nothing to root for.
- Is it pure coincidence that the Risk, Uncertainty and Decision Conference is on the exact same day as the Behavioral Economics Summer School two years in a row?
- Johnny Rotten is the perfection of Bob Dylan’s vocal style.
- How well do prediction markets forecast American Idol winners? Completely decentralized information, short time-horizon, shouldn’t this be an ideal test case?
I blogged about this before and in honor of the start of the French Open I gave it some thought again and here are two ideas.
Deuce. Each game is a race to 4 points. (And if you are British 4 = 50.) But you have to win by 2. Conditional on reaching a 3-3 game, the deuce scoring system helps the stronger player by comparison to a flat race to 4. In fact, if being a stronger player means you have a higher probability of winning each point then any scoring system in which you have to win by n is better for the stonger player than the system where you only have to win by n-1.
You can think about a random walk, starting at zero (deuce) with a larger probability of moving up than down, and consider the event that it reaches n or -n. The relative likelihood of hitting n before -n is increasing in n.
This is confounded by the fact that the server has an advantage even if he is the weaker player. But it will average out across service-games.
Grouping scoring into games and sets. Suppose that being a stronger player means that you are better at winning the crucial points. Then grouped scoring makes it clear which are the crucial points. To take an extreme example, suppose that the stronger player has one freebie: in any match he can pick one point and win that point for sure.
In a flat (ungrouped) scoring system, all points are equal and it doesn’t matter where you spend the freebie. And it doesn’t change your chance of winning by very much. But in grouped scoring you can use your freebie at game- or set-point. And this has a big impact on your winning probability.
Conjecture: freebies will be optimally used when you are game- or set-point down, not when it is set-point in your favor. My reasoning is that if you save your freebie when you have set-point, you will still win the set with high probability (especially because of deuce.) If you switch to using it when you are set-point down, its going to make a difference in the cases when there is a reversal. Since you are the stronger player and you win each point with higher probability, the reversals in your favor have higher probability.
Any thoughts on the conjecture? It should have implications for data. The stronger players do better when they are ad-down then when they have the ad. And across matches, their superiority over weaker players is exaggerated in the ad-down points.
My French Open forecast: This could be the year when we have a really interesting Federer-Nadal final.
Rand Paul, referring to criticism of BP’s handling of the oil spill says
“What I don’t like from the president’s administration is this sort of, ‘I’ll put my boot heel on the throat of BP,'” Paul said in an interview withABC’s “Good Morning America.” “I think that sounds really un-American in his criticism of business.”
“And I think it’s part of this sort of blame-game society in the sense that it’s always got to be somebody’s fault instead of the fact that maybe sometimes accidents happen,” Paul said.
This is symptomatic of the perennial time-inconsistency problem that comes with incentives for good behavior. The incentives are structured so that when bad outcomes occur, BP will be punished. If the incentive scheme works then BP acts in good faith and then it is true that bad outcomes are just accidents. The problem is that when the accidents happen it is true that BP was acting in good faith and so they don’t deserve punishment. And if doling out the punishment requires political will then the political will is not there. After all, who is going to stand up and demand that BP be punished for an accident?
This is the unraveling of incentives. Because the incentive worked only because BP expected to get punished whether or not it was an accident. To prevent this, it is the politician’s job to stir up outrage, justified or not, in order to reignite the political will to dole out the punishment. The blame game is a valuable social convention whether or not you believe there is someone to blame.
Answer: only if it’s good economic theory.
Any theory, not just economics has this structure: I assume A, I conclude C. It’s a good theory only if A logically implies C. And if A implies C then assuming A entails assuming C. Observations:
- If someone is not assuming their conclusion then you should ask them to come up with a better theory.
- Assuming your conclusions is a necessary condition for a good theory. It is not sufficient: it is possible (typical?) to assume your conclusion but have a bad theory.
- Once we have established that C follows from A, we can do the real work of evaluating a theory: assessing whether we believe A.
- That is the beauty of economic theory and other parts of the social sciences where we assume our conclusions: you get to see exactly what to focus on in trying to evaluate the theory. A theorist’s job is to take an argument and decompose it into two parts: the rules of logic and the assumptions. You can save your time not trying to evaluate the first part because you know in advance how logic works. We put in the hard work of separating that out so that you can see what’s left to argue about.
- There is no point in trying to figure out if someone has “predetermined their conclusion and picked assumptions that imply it.” The timing of how the theory came into existence is irrelevant. If it is a good theory and the theorist assumed his conclusion then you get to see exactly what assumptions led him to it. You get to decide whether you agree with C by deciding whether you accept A. And you are given a roadmap for how to convince the theorist he is wrong.
- In fact, given that we all have predetermined conclusions I would rather argue with someone who makes up a set of assumptions that imply his predetermined conclusion than someone who doesn’t. The first is doing the honorable thing of setting out conditions under which he can be proven wrong. There is no way to get started debating with the second person.
Sandeep and I are very close to finishing a first draft of our paper on torture. As I was working on it today, I came up with a simple three-paragraph summary of the model and some results. Here it is.
A number of strategic considerations play a central role in shaping the equilibrium. First, the rate at which the agent can be induced to reveal information is limited by the severity of the threat. If the principal demands too much information in a given period then the agent will prefer to resist and succumb to torture. Second, as soon as the victim reveals that he is informed by yielding to the principal’s demand, he will subsequently be forced to reveal the maximum given the amount of time remaining. This makes it costly for the victim to concede and makes the alternative of resisting torture more attractive. Thus, in order for the victim to be willing to concede the principal must also torture a resistant suspect, in particular an uninformed suspect, until the very end. Finally, in order to maintain principal’s incentive to continue torturing a resistant victim the informed victim must, with positive probability, wait any number of periods before making his first concession.
These features combine to give a sharp characterization of the value of torture and the way in which it unfolds. Because concessions are gradual and torture cannot stop once it begins, the principal waits until very close to the terminal date before even beginning to torture. Starting much earlier would require torturing an uninformed victim for many periods in return for only a small increase in the amount of information extracted from the informed. In fact we show that the principal starts to torture only after the game has reached the ticking time-bomb phase: the point in time after which the deadline becomes a binding constraint on the amount of information the victim can be induced to reveal. This limit on the duration of torture also limits the value of torture for the principal.
Because the principal must be willing to torture in every period, the informed victim concession probability in any given period is bounded, and this also bounds the principal’s payoff. In fact we obtain a strict upper bound on the principal’s equilibrium payoff by considering an alternative problem in which the victim’s concession probability is maximal subject to this incentive constraint. This bound turns out to be useful for a number of results. For example the bound enables us to derive an upper bound on the number of periods of torture that is independent of the total amount of information available. We use this result to show that the value of torture shrinks to zero when the period length, i.e. the time interval between torture decisions, shortens. In addition it implies that laws preventing indefinite detention of terrorist suspects entail no compromise in terms of the value of information that could be extracted in the intervening time.
He is the author who wrote this on his website:
Q. How can I get Neil Gaiman to make an appearance at my school/convention/event?
A. Contact Lisa Bransdorf at the Greater Talent Network. Tell her you want Neil to appear somewhere. Have her tell you how much it costs. Have her say it again in case you misheard it the first time. Tell her you could get Bill Clinton for that money. Have her tell you that you couldn’t even get ten minutes of Bill Clinton for that money but it’s true, he’s not cheap.On the other hand, I’m really busy, and I ought to be writing, so pricing appearances somewhere between ridiculously high and obscenely high helps to discourage most of the people who want me to come and talk to them.
He’s busy, for sure. Too busy to agree to every appearance request. And so he does need to discourage people who want him to come and talk to them. But does he have to use high prices to discourage them? He could always just decide how many appearances he is able to fit into his busy schedule and agree to that many, saying no to everybody else. No need for prices if he is just rationing his time.
But maybe he wants to make sure that his scarce time is allocated to the audiences that value it the most. That’s not greed, that’s efficiency. Then instead of rationing by saying no, he should hold an auction. He chooses the same number of appearances as in the rationing mechanism (just based on the cost of his time), but now those appearances go to the highest bidders.
But maybe his optimal quantity of appearances cannot be determined independently of demand. If the auction fetches a very high price then he knows that the marginal willingness to pay is much higher than his marginal opportunity cost and he should increase supply. As a result his marginal opportunity cost increases until it rises above willingness to pay and he stops there. Now he is even more busy. But that’s efficient. And the price is lower.
But opportunity cost is a slippery concept. Agreeing to additional appearances means lower prices. The lower price is therefore an opportunity cost of the marginal appearance. When Neil Gaiman takes this into account, equating his marginal opportunity costs to marginal willingness to pay means raising prices. Now that’s greedy. But on the other hand any way of increasing consumer surplus necessarily lowers Neil Gaiman’s profits, so its also (Pareto) efficient.
If doctors were to fine tune their prescriptions to take maximal advantage of the placebo effect, what would they do? It’s hard to answer this question even with existing data on the strength of the placebo effect because beliefs, presumably the key to the placebo effect, would adjust if placebo prescription were widespread.
Indeed, over the weekend I saw a paper presented by Emir Kamenica which strongly suggests that equilibrium beliefs matter for placebos. In an experiment on the effectiveness of anti-histamines, some subjects were shown drug ads at the same time they took the drug. The ads had an impact on the effectiveness of the drug but only for subjects with less prior experience with the same drug. The suggestion is that those with prior experience have already reached their equilibrium placebo effect. (It appears that the paper is not yet available for download.)
So we need a model of the placebo effect in equilibrium. Suppose that patients get a placebo a fraction 
This equilibrium condition implicitly defines a function
The benefit of the model is that it allows us to notice something that may not have been obvious before. If instead of using placebos by varying 
as the equilibrium condition which defines effectiveness 
The something to notice is that, if the function 
Now this is just a statement about the feasible set. The benefit of placebo may come from the ability to implement the same outcome but with lower cost. In terms of the model this would occur if the 
Does it ever happen to you that someone tells you something, then weeks or months pass, and the same person tells you the same thing again forgetting that they already told you before?
Why is it easier for the listener to remember than the speaker? Is there some fundamental difference in the way memory operates? Or is it that the memory is more evocative for the listener just because the fact being told is uniquely associated with the teller? For the person doing the telling you are just a generic listener. Or is it something else? Answer below.
Local surfers jealously guard the best breaks by intimidating non-local interlopers. Here is a paper by Daniel Kaffine that analyzes “localism” as a solution to a commons problem.
I use a unique cross-sectional data set covering 86 surf breaks along the California coast from San Diego to Big Sur to estimate the impact of exogenous wave quality on the strength of informal property rights. In the surfing context, groups of users known as “locals” enforce informal property rights, or localism, in order to reduce congestion from potential entrants, who are denoted “non- locals.” While not recognized legally, user-enforced informal property rights such as localism have features similar to those of formal property rights, such as rules on who may and may not have access to the resource. (“Localism” and “property rights” are used interchangeably throughout this paper.) Surfers in many loca- tions (including California) will tell visitors which breaks are open to anyone and which ones to steer clear of because of localism.
In theory, property rights raise the value of a common resource. But how can this theory be verified in data? The question is confounded by a reverse causality: property rights are more likely to emerge when the resource was already of high value. This data set solves the identification problem.
Unlike frequently studied resources such as fisheries, surf breaks (locations where waves are particularly conducive to surfing) have the feature that wave quality is exogenous with respect to property rights.4 The complex combination of tides, geology, and climatology that lead to high-quality waves would remain unchanged, even under private ownership. Waves do not care if they are ridden or not, which removes the feedback effects between the biophysical and social systems that are present in fisheries, for example. This natural exogeneity isolates the effect of quality in the estimation of its impact on property rights.
The finding is that higher-quality breaks are more likely to give rise to localism. The conclusion:
Thus, studies that attempt to infer the impact of property rights on quality must exercise caution in empirically attributing high resource quality to stronger prop- erty rights. The impact of property rights on resource quality may be overstated if the underlying differences in quality are not controlled for.
Panama pass: orgtheory.net
Affirmative action in hiring is more controversial than it has to be because of the way it is typically framed. People who agree with the general motivation object to specific implementations like racial preferences and quotas because of their blunt nature.
Any affirmative action hiring policy entails a compromise because it mandates a distortion away from the employer’s unconstrained optimal practice. We should look for ways that achieve the goals of affirmative action but with minimal distortions.
One simple idea is turn away from policies that incentivize hiring and instead incentivize search. Suppose that the employer believes that 10% of all candidates are qualified for the job but that only 5% of all minorities are qualified. Imposing a quota on the number of minority hires is less flexible than a quota on the number of minorities interviewed.
Requiring the employer to interview twice as many minority candidates equalizes the probability that the most qualified candidate is a minority or non-minority. Across all employers using this policy, the fraction of minority employees will hit the target. But each individual employer is free to hire the most qualified candidate among the candidates identified so the allocation of workers is more efficient than would be achieved with a straight hiring quota.
Lebanon strikes the latest blow in an escalating hummus war with Israel.
Earlier this year, Israelis, who are also passionate about the smooth chick-pea spread, produced the 4,090-kilogram portion of hummus made by 50 chefs and put in a six-meter satellite dish.
Lebanon fought back, as 300 chefs in white coats of the al-Kataaf cooking school mashed up 10-tons of a special recipe for the occasion.
They mean business.
Sous-chef Alain Abou says it is not just about quantity, it is important for the hummus to taste good as well, even better, of course, than the Israelis’ creation.
“All the recipes, we prepare it before, we make it, we check it, so it is very good recipes,” said Abou. “We will beat it not in the army, but in the hummus.”
Elena Kagan is 50 years old which is not much younger than the average age of newly appointed justices: 53. That average age upon entry has been relatively constant over time but with life expectancies steadily increasing, the average tenure on the court has increased from 15 to 25 years before and after 1970.
We could argue about the socially efficient entry age and tenure length but its more fun to think about strategy. As a President from The Democratic Party you are today’s player in the infinite-horizon alternating-move SCOTUS appointment game. It is essentially a game of tug-of-war: they will appoint conservatives to balance out the liberals that you will appoint in order to balance out their conservatives…
The younger your appointee the longer she will sit on the court. On the plus side this means she is less likely to die or retire early. On the down side you will have to live longer with a Justice whose views are harder to discern and are more likely to change.
Tradeoff? Less than it appears. It boils down to a comparison of two probabilities: the probability that the older Justice will step down in a year when the Republicans control the White House versus the probability that the younger Justice will switch teams. Unless there is a lot of uncertainty about the younger Justice, the second probability is smaller and you should appoint her.
How young should you go? As you consider younger and younger nominees the mid-tenure defection eventually becomes the dominant concern. The probability that a non-defector can retire under a Democrat administration reaches its maximum but the uncertainty surrounding a younger Justice steadily increases.
Tyler Cowen tweeted:
Why do chess players hold their heads hard, with their hands, when they are thinking? If it works, why don’t more thinkers do it?
To prevent overheating of course. You’ll notice that they typically extend their fingers and cover their foreheads which is the hottest part. They are maximizing surface area in order to increase heat dissipation.
Here is a suggestion for how to super-cool your cranium and over-clock your brain. On a more serious note, here is a pipe that is surgically implanted in the skull of epileptics to reduce the intensity of seizures.
Jonathan Weinstein is blogging now at The Leisure of the Theory Class. His first post is a nice one on a common fallacy in basketball strategy.
if a player has a dangerous number of fouls, the coach will voluntarily bench him for part of the game, to lessen the chance of fouling out. Coaches seem to roughly use the rule of thumb that a player with n fouls should sit until n/6 of the game has passed. Allowing a player to play with 3 fouls in the first half is a particular taboo. On rare occasions when this taboo is broken, the announcers will invariably say something like, “They’re taking a big risk here; you really don’t want him to get his 4th.”
The fallacy is that in trying to avoid the mere risk of losing minutes from fouling out the common strategy loses minutes for sure by benching him.
Jonathan discusses a couple of caveats in his post and here is another one. The best players rise to the occasion and overcome deficits as necessary. But they need to know how much of a deficit to overcome.
Suppose you know that a player will foul out in 1 minute. There are 5 minutes to go in the game. If you keep him in the game now he will have to guess how many points the opponents will score in the last 4 and try to beat that. This entails risk because the opponents might do better than expected.
If you bench him until there is 1 minute left then all the uncertainty is resolved by the time he comes back. Now he knows what needs to be done and he does it.
If Jonathan’s argument were correct then there would be no such thing as a “closer” in baseball. At any moment in the game you would field your most effective pitcher and remove him when he is tired. Instead there are pitchers who specialize in pitching the final innings of the game.
The role of a closer is indeed misunderstood in conventional accounts. Just as in Jonathan’s argument there is no reason to prefer having your best pitcher on the mound in later innings, other things equal. All innings are the same. But this doesn’t mean you shouldn’t save your best pitcher for the end of the game.
Suppose he can pitch for only one inning. If you use him in the 8th inning the opposition might win with a big 9th inning and then you’ve wasted your best pitcher. It would have been better to let them score their runs in the 8th. That way you know the game is lost before you have committed your best pitcher. You can save him for the next game.
Here is a wide-ranging article about proposals to utilize placebos as medicine.
But according to advocates, there’s enough data for doctors to start thinking of the placebo effect not as the opposite of medicine, but as a tool they can use in an evidence-based, conscientious manner. Broadly speaking, it seems sensible to make every effort to enlist the body’s own ability to heal itself–which is what, at bottom, placebos seem to do. And as researchers examine it more closely, the placebo is having another effect as well: it is revealing a great deal about the subtle and unexpected influences that medical care, as opposed to the medicine itself, has on patients.
The article never mentions it so I wonder if any consideration has been given to the equilibrium effects. Presumably the placebo effect requires the patient to believe that the drug is real. Then widespread use of true placebos will dilute the placebo effect. Since real drugs also contribute a placebo effect on top of any pharmacological effects, the placebo component of existing drugs will be reduced.
Does the benefit of using placebos outweigh the cost of reducing the effectiveness of non-placebos? If there is a complementarity between the placebo effect and real pharmacological effects it could be that zero is the optimal ratio of placebo to non-placebo treatments.
Note to my behavioral economics class: this is a good example of a topic that would require the tools of psychological game theory due to the direct payoff consequences of beliefs.
Native English speakers never have difficulty learning which prepositions to use. On the other hand I often hear even quite fluent second-languagers stumble over things like “Independent from, er… independent of.” (As in, X is independent of Y.) Is this just because children are better at learning language than adults? That probably explains a lot. But as I have speculated before I think there are some aspects of the difference between adults and children that don’t require an appeal to brain differences.
Adults are building on stuff they already know, children are learning for the first time. Adults know what a preposition is and that “from” and “of” are both prepositions. They know grammar and they think in terms of grammatical structure. So they search through the prepositions they know that would play the right grammatical role.
Children don’t think about language, they just copy what they hear. They don’t hear “independent from” so they never consider saying that. Of course adults learning English don’t hear “independent from” either. The fact that they still make the mistake means that they don’t learn purely by imitation like children. They make use of the rules they already know.
And yes, I am just making this up. Claire?
That’s the subject of a 2006 paper by Bo Honore and Adriana Lleras-Muney. From the abstract:
In 1971 President Nixon declared war on cancer. Thirty years later, many have declared the war a failure: the age-adjusted mortality rate from cancer in 2000 was essentially the same as in the early 1970s. Meanwhile the age-adjusted mortality rate from cardiovascular disease fell dramatically. Since the causes underlying cancer and cardiovascular disease are likely to be correlated, the decline in mortality rates from cardiovascular disease may in part explain the lack of progress in cancer mortality.
If more people are surviving cardiovascular disease then more will die of cancer. So if there were really no progress in cancer treatment then cancer mortality would in fact be increasing. By how much? That counterfactual question gets at the true benefits of the war on cancer.
In the case of white males, the probability of surviving past age 75 increased by about 19.5 percentage points, from 56.1% in 1970 to 75.6% in 2000. From row 3 [of table 4 in the paper] we see that, in the absence of cancer progress, this probability would have been between 66% and 73.8% in 2000. Therefore from this vantage point progress in cancer ranges from 2 to 10.6 percentage points and accounts for somewhere between 10% and 55% of the total increase in survival.
They identify bounds on cancer progress for other groups as well. The published paper is gated, here is a 2005 working paper version.
I coach my 7-year-old daughter’s soccer team. It’s been a tough Spring season so far: they lost the first three games by 1 goal margins. But this week they won something like 15-1.
I noticed something interesting. In all of the close games the girls were emotionally drained. By the end of the game they didn’t have much energy left. Many of them asked to be rotated out.
But this week nobody asked to be rotated out. In fact this week they had the minimum number of players so each of them played the whole game and still nobody complained of being tired. Obviously they were having fun running up the score but they didn’t get tired.
Incentives are about getting players to want conditions to improve. So incentives necessarily make them less happy about where they are now. Feeling good about winning means feeling bad about not winning. That’s the motivation.
But encouragement is about being happy about where you are now. And it has real effects: it energizes you. You don’t get tired so fast when you are having fun.
There is a clear conflict between incentives and encouragement. At the same time incentives motivate you to win, they discourage you because you are losing. A coach who fails to recognize this is making a big mistake.
And I am not giving a touchy-feely speech about “it’s not whether you win or lose…” I am saying that a cold-hearted coach who only cares about winning should, at the margin, put less weight on incentives to win.
If my daughter’s team loved losing, is it possible they would lose less often? Probably not. But that’s because the love of losing would give them an incentive to lose. They would be discouraged when they win but that would only help them to start losing. (Unless the opposing coach used equally insane incentives.)
Nevertheless, to love winning by 10 goals is a waste of incentive and is therefore a pure cost in terms of its effect on encouragement when the game is close. Think of it this way: you have a fixed budget of encouragement to spread across all states of the game. If you make your team happy about winning by 10 goals, that directly subtracts from their happiness about winning by only 1 goal.
My guess is that, against a typically incentivized opponent, the optimal incentive scheme is pretty flat over a broad range. That range might even include losing by one goal. Because when the team is losing by one goal, the positive attitude of being in the first-best equivalence class will keep them energized through the rest of the game and that’s a huge advantage.
The New York Post reports that the FTC and the Justice Department are deciding which of those two entities will conduct an inquiry into Apple’s ban on iPhone-iPad development using cross-platform tools such as Adobe’s Flash-to-iPhone.
An inquiry doesn’t necessarily mean action will be taken against Apple, which argues the rule is in place to ensure the quality of the apps it sells to customers. Typically, regulators initiate inquiries to determine whether a full-fledged investigation ought to be launched. If the inquiry escalates to an investigation, the agency handling the matter would issue Apple a subpoena seeking information about the policy.
An inquiry is harmless in theory, often a slippery slope in practice. While there is certainly much to complain about, the general principle of not meddling when the market is still in its fluid infancy is the dominant consideration here. Remember the Microsoft case?
From The McKinsey Quarterly:
Long before behavioral economics had a name, marketers were using it. “Three for the price of two” offers and extended-payment layaway plans became widespread because they worked—not because marketers had run scientific studies showing that people prefer a supposedly free incentive to an equivalent price discount or that people often behave irrationally when thinking about future consequences. Yet despite marketing’s inadvertent leadership in using principles of behavioral economics, few companies use them in a systematic way. In this article, we highlight four practical techniques that should be part of every marketer’s tool kit.
Among the key points, the one that stands out is “Make a product’s price less painful.” This includes profiting from hyperbolic discounting and exploiting mental accounting. Manipulating default options and harnessing choice-set-dependent preferences also figure prominently.
Evidently marketing will soon supplant finance as the relevant outside option for new Economics PhD’s bargaining over academic salaries.
Cheap Talk 
