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From the blog of The Socialist Party of Great Britain, via Markus Mobius:
What Shapley and Roth had in fact worked on was how to allocate resources to needs in a non-market context. As the Times went on to say, they worked out in theory (Shapley) and practice (Roth) how to match ‘doctors to hospitals, students to dorm rooms and organs to transplant patients,’ adding ‘such matching arrangements are essential in most Western countries where organ-selling is illegal, and the free market cannot do the normal work of resource allocation’ (like allocating organs to those who can pay the most).
And this:
So, we really are talking about a non-market way of allocating resources. As socialism will be a non-market society where the price mechanism won’t apply to anything, the winners’ research will be able to be used for certain purposes even after the end of capitalism; which is not something that can be said of the work of most winners of the Nobel Prize for Economics.
No doubt it would continue to be used to allocate organs to transplant patients and students to rooms. In fact, this last could be extended to allocating housing to people living in a particular area. While they may not get their first choice, people would get something for which they had expressed some preference and that corresponded to their needs and circumstances. It might even help answer Bernard Shaw’s question, ‘Who will live on Richmond Hill in socialism?’ Since socialism will be a non-market society the answer can’t be, as it is under capitalism today, ‘those who want to and who can afford to.’ This would not only be ‘repugnant’ but impossible.
From the blog (?) notes.unwieldy.net:
The average New York City taxi cab driver makes $90,747 in revenue per year. There are roughly 13,267 cabs in the city. In 2007, NYC forced cab drivers to begin taking credit cards, which involved installing a touch screen system for payment.
During payment, the user is presented with three default buttons for tipping: 20%, 25%, and 30%. When cabs were cash only, the average tip was roughly 10%. After the introduction of this system, the tip percentage jumped to 22%.
He calculates that the tip nudge increased cab revenues by $144,146,165 per year.
For law journals at least:
IT IS A COMMON PRACTICE among law review editors to demand that authors support every claim with a citation. These de- mands can cause major headaches for legal scholars. Some claims are so obvious or obscure that they have not been made before. Other claims are made up or false, making them more diffi- cult to support using references to the existing literature.
Legal scholars need a source they can cite when confronted with these challenges. It should be something with an impressive but ge- neric title. I offer this page, with the following conclusion: If you have been directed to this page by a citation elsewhere, it is plainly true that the author’s claim is correct. For further support, consult the extensive scholarship on the point.1
The footnote, of course points to the article itself.
Mortarboard motion: Justin Wolfers
Because talking takes time. And how much time it takes to talk depends in large part on how much time it takes to think of what you are going to say. The time spent reveals how much thinking you did. Here’s where truthtelling distinguishes itself. The time it takes to tell the truth is just the time it takes to remember what actually happened.
The time it takes to lie is the time it takes to invent a lie, check that its consistent with the facts, and invent all of the subsequent lies you are going to have to tell in order for your whole story to hang together.
By Ivo Welch. Here is the abstract:
This paper analyzes referee recommendations in two settings: The first setting is a prestigious finance conference, in which a computer algorithm matched referees to papers based only on shared expertise. The second setting is the standard journal process, with data from eight prominent economics and finance journals (ECMTA, JEEA, JET, QJE, IER, RAND, JF, RFS). Despite referee selection differences, the data suggest similar referee behavior in both settings. First, referees display only modest consensus. Second, referees disagree not only about scales (a referee mean effect), but also about the relative ordering of papers. Third, the bias measured by the average generosity of the referee on other papers is about as important in predicting a referee’s recommendation as the opinion of another referee on the same paper.
In sum, the typical referee report consists roughly of one part signal of some referee- agreeable objective attribute of the paper and two parts (referee-specific) noise. In turn, the noise itself consists roughly of one part referee-mean effect (bias) and two parts unidentified effects or noise.
The random selection of referees removes this potential objection.
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.
- 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.
- 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.
- 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.
- 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.
The self-correcting ticket price.
It’s clear that lots of sports franchises suffer from suboptimal ticket-pricing schemes. Between games that feature many empty seats, games that sell out entirely, and the ability of scalpers to obtain profits on the secondary market, money is obviously being left on the table. The University of Minnesota is trying an interesting idea with its new Golden Ticket pricing concept that for $75 lets you attend all nine Big Ten men’s basketball matchups.
But with a catch.
The catch is that if you go to a game and Minnesota loses, then your pass expires.
The idea is that demand is low for games against weak opponents so Golden Ticket holders will fill the empty seats. They will find it too risky to attend the games against strong opponents freeing up supply to accomodate the increased demand for those games.
Coonskin curl: Mark Witte.
Kunz was a sociologist at Brigham Young University. Earlier that year he’d decided to do an experiment to see what would happen if he sent Christmas cards to total strangers.
And so he went out and collected directories for some nearby towns and picked out around 600 names. “I started out at a random number and then skipped so many and got to the next one,” he says.
To these 600 strangers, Kunz sent his Christmas greetings: handwritten notes or a card with a photo of him and his family. And then Kunz waited to see what would happen.
But about five days later, responses started filtering back — slowly at first and then more, until eventually they were coming 12, 15 at a time. Eventually Kunz got more than 200 replies. “I was really surprised by how many responses there were,” he says. “And I was surprised by the number of letters that were written, some of them three, four pages long.”
The premise of this article is that people feel compelled to reciprocate your generosity. And once you know that, you can take advantage of it.
Exhibit A: those little pre-printed address labels that come to us in the mail this time of year along with letters asking for donations.
Those labels seem innocent enough, but they often trigger a small but very real dilemma. “I can’t send it back to them because it’s got my name on it,” Cialdini says. “But as soon as I’ve decided to keep that packet of labels, I’m in the jaws of the rule.”
The packet of labels costs roughly 9 cents, Cialdini says, but it dramatically increases the number of people who give to the charities that send them. “The hit rate goes from 18 to 35 percent,” he says. In other words, the number of people who donate almost doubles.
The article also touches on doctors, waiters, and Hare Krishnas.
Watching the Olympic Games this Summer I noticed that the volleyball competition has changed the scoring system from the old “sideout” system to what used to be called “quick score.” (This change may have happened a long time ago, I don’t watch much volleyball.) The traditional sideout scoring method increments the score only when the serving team wins a point. When the serving team loses the point the serve is awarded to the other team (a “sideout”) but the score is unchanged. This can lead to long drawn out games with repeated sideouts and little scoring. As a stopgap, in the old days, volleyball matches would switch to the quick score system after a certain amount of time has elapsed. In quick scoring a sideout earns a point for the team that gains the serve.
I always liked the sideout system, thinking of it as a characteristic volleyball rule that is compromised for expediency by the switch to quick score. Instinctively it seemed that the fact you could only score when you are serving played a big role in volleyball strategy. But when I was watching this summer it occurred to me that the two scoring systems are less different than it appeared at first.
The basic observation is that at any stage of the game sideout scores are just quick scores minus the number of sideouts. And sideouts necessarily alternate between teams so the number you are subtracting differs by at most one across the two teams. So I started to think if there was a way to characterize the mapping between scoring systems that would clarify precisely the strategic impact of the switch. And I think I figured it out.
Quick scoring is defined as follows. The team who wins a point has its score incremented by one, regardless of who was serving that point. (The serve switches when the receiving team wins a point just as in the sideout system.) The winner of the game is the first team to have a score of at least 15 (or 25 in other cases) and at least a 2 point lead. (I.e. the game continues past 15 if neither team has a two point lead.)
Quick scoring is equivalent to the following system: 28 points will be played. After 28 points (let’s call it regulation) if the score is tied (14-14) then they continue to play until some team has a 2 point advantage.
This is in turn equivalent to side-out scoring with the following amended rules. Lets refer to the team that receives serve in the first point of the game as the receiving team.
- A total of 28 ponts is played in regulation.
- At the end of play if either team is ahead by 2 points then that team wins except if
- the receiving team either scored the last point or earned a side-out in the last point and the receiving team is ahead by 1 point. In this case the receiving team wins.
If none of these conditions are met then the game continues past regulation. We define the team that has the serve in the first point past regulation as team 1 and the other team as team 2. The score is reset to 0-0. Play continues (with side-out scoring) until the first moment at which one of the following occurs.
- Team 1 has a 2 point lead, in which case team 1 is the winner.
- Team 2 has a 1 point lead, in which case team 2 is the winner.
The proof of this equivalence is below the jump. Here’s what it means. Quick scoring is not an innoccuous change in the rules to speed up play but its pretty close. Because a near identical outcome would obtain if instead of switching to quick score, we keep sideout scoring but cap the number of regulation points at 28. Its nearly, but not exactly identical because of the two scoring “epicycles” that have to be appended, namely #3 in regulation and #2 in overtime. Note that both of these wrinkles tend to benefit the receiving team. I don’t know the stats (anybody?) but it appears to me that the receiving team already has a large advantage in volleyball at the level of an individual point. You could say that an effect of sideout scoring is that it levels the playing field by giving a small overall advantage to the serving team. The switch to quick scoring eliminates that.
I wonder if there is a noticeable difference in the frequency with which the (initially) receiving team wins a volleyball game after the switch to quick scoring.
- 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.
- 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.”
- In chess, kids are taught never to move a piece twice in the opening. This is a clear sunk cost fallacy.
- 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?
- “Loss aversion” is a dumb terminology. At least risk aversion means something: you can be either risk averse or risk loving. Who likes losses?
All working for tech companies and all profiled in this article in The Economist.
ON THE face of it, economics has had a dreadful decade: it offered no prediction of the subprime or euro crises, and only bitter arguments over how to solve them. But alongside these failures, a small group of the world’s top microeconomists are quietly revolutionising the discipline. Working for big technology firms such as Google, Microsoft and eBay, they are changing the way business decisions are made and markets work.
A monopolist considers whether to disclose some information about its product. The information will affect how the consumer values the product but its impossible to predict in advance how the consumer will react. With probability q the consumer will view it as good news and he would be willing to pay a high price V for the product. But with probability 1-q it will be viewed as bad news and the consumer would only be willing to pay a low price v where 0 < v < V.
The consumer’s reaction to the information is subjective and cannot be observed by the monopolist. That is, after disclosing the information, the monopolist can’t tell whether the consumer’s willingness to pay has risen to V or fallen to v.
In the absence of disclosure, the consumer is uncertain whether his the value is V or v and so his willingness to pay is equal to the expected value of the product, i.e. qV + (1-q)v. This is therefore the price the monopolist can earn.
Supposing that the monopolist can costlessly disclose the information, what would its profits be then? It won’t continue to charge the same price. Because with probability (1-q) the consumer’s willingness to pay has dropped to v and he would refuse to buy at a price of qV +(1-q)v. At that price he will buy only with probability q and since that would be true at any price up to V, the monopolist would do better setting a price of V and earning expected profit qV.
Alternatively he could set a price of v. For sure the consumer would agree to that price (whether his willingness to pay is V or v) and so profits will be v. And since this is the highest price that would be agreed to for sure, v and V are the only prices the monopoly would consider. The choice will depend on which is larger qV or v.
But note that both qV and v are smaller than qV +(1-q)v. Disclosing information lowers monopoly profits and so the information will be kept hidden.
This little model can play a role in the debate about mandatory calorie labeling.
David McAdams sends this along:
I’ve created a fun and simple game-theory problem that I thought you might enjoy … This is the sort of problem you could give undergrads to find out who are the really bright ones. It might also be fun to mention (or play) in class.Problem: Find the (unique) symmetic equilibrium of “The World’s Simplest Poker Game”, played as follows:**0** two players**1** each player pays ante of $100**2** each player receives ONE card, which we can think of as independent random numbers on [0,1]**3** each player SIMULTANEOUSLY decides whether to “raise” $100 or “stay”**4A** if one player raises and the other stays, the raiser wins the pot, for net gain +$100**4B** if both raise, the players show their cards and whoever has the highest card wins for net gain +$200
**4C** if both stay, the players show their cards and whoever has the highest card wins for net gain +$100If you decide to solve this problem, please let me know how long it takes you … I’m curious how immediately obvious the answer is to you 🙂 I have solved it myself and, I can tell you, the answer is simple and elegant.Cheers,David
N.B. My answer based on 5 minutes of thinking was wrong. I will post David’s solution over the weekend.
Update: As promised, here is David’s solution. Looks like Keith was the first to post the correct answer in the comments and thanks to Nicolas for pointing out that this example appeared in von Neumann and Morgenstern.
Cuckoos lay their eggs in other birds’ nests and when the cuckoo chick is born it kicks all of the eggs out of the nest and monopolizes the care and attention of the cuckolded parent. Fairy wrens have evidently evolved a countermeasure:
Diane Colombelli-Negrel from Flinders University in Australia has shown that mothers sing a special tune to their eggs before they’ve hatched. This “incubation call” contains a special note that acts like a familial password. The embryonic chicks learn it, and when they hatch, they incorporate it into their begging calls. Horsfield’s bronze-cuckoos lay their eggs too late in the breeding cycle for their chicks to pick up the same notes. They can’t learn the password in time, and their identities can be rumbled.
Which is incredibly cool. An ingenious solution and a testament to the resourcefulness of the evolutionary invisible hand. Especially when you notice that the cuckoo chick “is a huge, grey monster that looks completely unlike a warbler chick.” Apparently evolution favors the complex system of teaching and repeating a singing password rather than the boring solution of just staring at the invader and noticing that he looks nothing like a cute little fairy wren.
The remaining videos for my Intermediate Microeconomics course have been uploaded for your viewing pleasure. Here’s a sample, and the rest are all at the link.
Announced yesterday. The main points seem to be: enrollment for credit, a coalition of schools merging curriculum in some way, and some kind of real-time virtual classroom.
“Students from all over the country, or even from abroad, will be able to attend these online classes in real time — classes of about 15 to 20 students taught by professors at some of the nation’s leading universities,” said Daniel Linzer, Northwestern University provost.
Besides Northwestern, consortium members include Brandeis University, Duke University, Emory University, The University of North Carolina at Chapel Hill, University of Notre Dame, University of Rochester, Vanderbilt University, Wake Forest University and Washington University in St. Louis.
“These courses will expand curricular options for students and will enable consortium schools to work collaboratively to develop the most innovative and successful ways to utilize new learning technologies,” Northwestern Provost Linzer said.
Initial Semester Online courses will feature primarily the same faculty and curricula as their brick-and-mortar counterparts, with additional courses designed for the online format to be included in the future. Through a state-of-the-art virtual classroom, students will participate in discussions and exercises, attend lectures and collaborate with peers while guided by renowned professors — engaging in as close to the on-campus class experience that is currently possible online.
Beginning in the fall of 2013, Semester Online will be available to academically qualified students attending consortium schools as well as other top schools across the country. Information about Semester Online courses and the application process will be available in early 2013. The consortium anticipates adding a small number of institutions prior to next year’s launch.
The website for Semester Online is back there.
A new paper by Lionel Page and David Savage. The abstract:
This study explores people’s risk attitudes after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble – a scratch card giving a small chance of a large gain ($500,000) – than for a sure amount of comparable value ($10). This finding is consistent with prospect theory predictions of the adoption of a risk-seeking attitude after a loss.
As usual Ethan Iverson gets his subject to talk about music at an accessible but still sophisticated level and also to open up about some really interesting stuff.
FH: There were many more of them. And then there were some Chick Corea clones — the big three. But the Herbie clone thing lasted longer. I was listening on the radio on WBGO the other day, and it was some singer, and the piano player sounded so much like Herbie. It was like, he lifted all of Herbie’s greatest licks, and I thought, “Oh, that’s sad, just sad.”
Chick: I happened by Now He Sings Now He Sobs; I had never heard of it, and that was another “Jesus, what was that?” record. Like, “whoa.” I mean, I heard Light as a Featherand I heard that, and that was like, “That was the same guy?” And I got one calledInner Space, a two CD set, which is a really nice set and on there is a piece for flute, bassoon and piano, like a classical piece, which is really kind of nice. And you know, I certainly followed him a lot for a while, but certainly only to the point that he started going into the Elektric band and the Akoustic band, and “Captain Marvel” and “Leprechaun” whatever… and I haven’t bought a Chick record in 30 years.
He’s in there somewhere. But I hear Chick’s influence more in, like you said, Richie Beirach, or Joanne Brackeen, than myself.
EI: It’s funny. Chick’s lines are thornier than McCoy’s, but paradoxically squarer than McCoy’s, do you know what I mean?
FH: Chick is basically early McCoy, a bit of Bud Powell and a lot of Latin music, if you have to reduce it.
EI: He has this truly incredible facility at the instrument.
FH: Oh, he does.
EI: Unbelievable facility. But even when he plays out, I hear the grids going along in a way that I don’t hear when I hear McCoy.
FH: He’s never had a touch or a sound that invited me in. Some people’s sounds I just connect with, and I find him more admirable than enjoyable, whereas Herbie I can really enjoy, and early McCoy I can really enjoy, and a lot of Keith, if I put aside who he is, I can really enjoy it. But other than those first early records that I bought, I don’t find Chick particularly enjoyable.
EI: There’s something off-putting there, I agree. But he’s one of those guys who is the quintessential jam musician, who can show up and play with anybody.
FH: And sound great.
EI: And sound great. Despite the Akoustic band and everything else, he has something where he could show up anywhere in the world at a jam session, and not only would he play incredible, everyone else would play better too.
Here’s the explainer.
As budget negotiations get underway with the threat of sequestration looming, it’s worth recalling a basic lesson from game theory.
Consider two parties in the same vehicle speeding towards a cliff. The one who concedes, i.e. chickens out and steers the car out of danger, is the loser. Winning is better than losing but either is better than driving off the cliff. Finally, time is valuable: if you are going to concede, you prefer to do it earlier rather than later. Still you are prepared to wait if you expect your rival will concede first.
In equilibrium of this game, unless someone concedes right away there is necessarily a positive probability that they will go over the cliff.
The proof is simple. Consider player 1 and suppose his strategy is not to concede immediately. Then we will show 1’s strategy is such that if 2 never concedes there is a positive probability that 1 will also never concede and they will drive off the cliff together. To prove it, suppose the contrary: that 1’s strategy will eventually concede with probability 1 (if 2 doesn’t concede first). If that is 1’s strategy then 2’s best reply is to wait for 1 to concede. In equilibrium 2 will play such a strategy and the outcome will therefore be that 1 is the loser with probability 1. But if 1 is going to be the loser for sure anyway he should have conceded immediately. That’s a contradiction. We have shown that if 1 does not concede immediately then his strategy will allow the car to drive off the cliff with positive probability. The exact same argument applies to 2. Thus in equilibrium, if the game begins without an immediate concession there is a positive probability they will plunge from the cliff.
If you are a parent you probably know of a few kids who have life-threatening allergies. And if you are forty-something like me you probably didn’t know anybody with life-threatening food allergies when you were a kid. It seems like the prevalence of food allergies have increased ten-fold in the last thirty years. Which seems impossible.
Here’s one potential explanation. Suppose that a small percentage of people have a life-threatening allergy to, say, peanuts. And suppose that doctors begin more carefully screening kids for potential food allergies. For example, a kid who gets a rash after eating something is given a skin test or blood test. A positive test correlates with food allergy but does not conclusively demonstrate it. In addition the test cannot distinguish a mild allergy from one that is life threatening.
But life-threatening food allergies are life threatening. The risk is so great that any child with a non-negligible probability of having it should be restricted from eating peanuts. Such a child will return to school with a note from the doctor that there should be no peanuts in class because of the risk of a life-threatening allergic reaction. This is what’s knows as “being allergic to peanuts.”
This is all unassailable behavior on everybody’s part. And note that what it means is that while there continues to be just a small percentage of people who are deathly allergic to peanuts, there is a much larger percentage of people who, perfectly rightly, avoid peanuts because of the significant chance it could give them a life-threatening allergic reaction.
Remember how baffled Kasparov was about Deep Blue’s play in their famous match? It gets interesting.
Earlier this year, IBM celebrated the 15-year anniversary of its supercomputer Deep Blue beating chess champion Garry Kasparov. According to a new book, however, it may have been an accidental glitch rather than computing firepower that gave Deep Blue the win.
At the Washington Post, Brad Plumer highlights a passage from Nate Silver’s The Signal and the Noise. Silver interviewed Murray Campbell, a computer scientist that worked on Deep Blue, who explained that during the 1997 tournament the supercomputer suffered from a bug in the first game. Unable to pick a strategic move because of the glitch, it resorted to its fall-back mechanism: choosing a play at random. “A bug occurred in the game and it may have made Kasparov misunderstand the capabilities of Deep Blue,” Campbell tells Silver in the book. “He didn’t come up with the theory that the move it played was a bug.”
As Silver explains it, Kasparov may have taken his own inability to understand the logic of Deep Blue’s buggy move as a sign of the computer’s superiority. Sure enough, Kasparov began having difficulty in the second game of the tournament — and Deep Blue ended up winning in the end.
Visor volley: Mallesh Pai.
Suppose that what makes a person happy is when their fortunes exceed expectations by a discrete amount (and that falling short of expectations is what makes you unhappy.) Then simply because of convergence of expectations:
- People will have few really happy phases in their lives.
- Indeed even if you lived forever you would have only finitely many spells of happiness.
- Most of the happy moments will come when you are young.
- Happiness will be short-lived.
- The biggest cross-sectional variance in happiness will be among the young.
- When expectations adjust to the rate at which your fortunes improve, chasing further happiness requires improving your fortunes at an accelerating rate.
- If life expectancy is increasing and we simply extrapolate expectations into later stages of life we are likely to be increasingly depressed when we are old.
- There could easily be an inverse relationship between intelligence and happiness.
The last of Strogatz’ series blog entries on mathematics and it may be the best one:
For the Hilbert Hotel doesn’t merely have hundreds of rooms — it has an infinite number of them. Whenever a new guest arrives, the manager shifts the occupant of room 1 to room 2, room 2 to room 3, and so on. That frees up room 1 for the newcomer, and accommodates everyone else as well (though inconveniencing them by the move).
Now suppose infinitely many new guests arrive, sweaty and short-tempered. No problem. The unflappable manager moves the occupant of room 1 to room 2, room 2 to room 4, room 3 to room 6, and so on. This doubling trick opens up all the odd-numbered rooms — infinitely many of them — for the new guests.
Later that night, an endless convoy of buses rumbles up to reception. There are infinitely many buses, and worse still, each one is loaded with an infinity of crabby people demanding that the hotel live up to its motto, “There’s always room at the Hilbert Hotel.”
The manager has faced this challenge before and takes it in stride.
Read on for more highly accessible writing on Cantor’s infinities.
My daughter was learning about prime numbers and she had an exercise to identify all the prime numbers less than 100. I made a little game out of it with her by offering her 10 cents for each number correctly categorized as prime or composite within a fixed total time.
As she progressed through the numbers I noticed a pattern. It took her less time to guess that a number was composite than it took her to guess that it was prime. And of course there is a simple reason: you know that a number is composite once you find a proper factor, you know that a number is prime only when you are convinced that a proper factor does not exist.
But this was a timed-constrained task and waiting until she knows for sure that the number is prime is not an optimal strategy. She should guess that the number is prime once she thinks it is sufficiently likely that she won’t find any proper factor. And how long that will take depends on the average time it takes to find a proper factor.
In particular, if the average time before she guesses prime is larger than the average time before she guesses composite then she is not optimizing. Because if that were the case she should infer that the number is likely to be prime simply from the fact that she has spent more than the average time looking for a proper factor. At an optimum, any such introspective inference should be arbitraged away.
The average voter’s prior belief is that the incumbent is better than the challenger. Because without knowing anything more about either candidate, you know that the incumbent defeated a previous opponent. To the extent that the previous electoral outcome was based on the voters’ information about the candidates this is good news about the current incumbent. No such inference can be made about the challenger.
Headline events that occurred during the current incumbent’s term were likely to generate additional information about the incumbent’s fitness for office. The bigger the headline the more correlated that information is going to be among the voters. For example, a significant natural disaster such as Hurricane Katrina or Hurricane Sandy is likely to have a large common effect on how voters’ evaluate the incumbent’s ability to manage a crisis.
For exactly this reason, an event like that is bad for the incumbent on average. Because the incumbent begins with the advantage of the prior. The upside benefit of a good signal is therefore much smaller than the downside risk of a bad signal.
As I understand it, this is the theory developed in a paper by Ethan Bueno de Mesquita and Scott Ashworth, who use it to explain how events outside of the control of political leaders (like natural disasters) seem, empirically, to be blamed on incumbents. This pattern emerges in their model not because voters are confused about political accountability, but instead through the informational channel outlined above.
It occurs to me that such a model also explains the benefit of saturation advertising. The incumbent unleashes a barrage of ads to drive voters away from their televisions thus cutting them off from information and blunting the associated risks. Note that after the first Obama-Romney debate, Obama’s national poll numbers went south but they held steady in most of the battleground states where voters had already been subjected to weeks of wall-to-wall advertising.
In 1797 Johann Wolfgang von Goethe had completed a new poem Hermann and Dorothea, and he was interested in knowing and publicizing its “true worth.” So he concocted a scheme with his lawyer Mr. Bottiger and wrote this in a letter to his publisher:
I am inclined to offer Mr. Vieweg from Berlin an epic poem, Hermann and Dorothea, which will have approximately 2000 hexameters…. Concerning the royalty we will proceed as follows: I will hand over to Mr. Counsel B6ttiger a sealed note which contains my demand, and I wait for what Mr. Vieweg will suggest to offer for my work. If his offer is lower than my demand, then I take my note back, unopened, and the negotiation is broken. If, however, his offer is higher, then I will not ask for more than what is written in the note to be opened by Mr. Bottiger.
To understand this scheme first consider the alternative scenario where the publisher is told the amount demanded. Then the publisher will say yes or no depending on whether his willingness to pay (the poem’s “true worth”) exceeds or falls short of the demand. But then Goethe would never know exactly the poem’s true worth, just an upper or lower bound for it.
With the demand kept secret, the publisher’s incentives remain the same: he wants to agree to a demand that is below his willingness to pay and refuse a demand that exceeds it. Without knowing what that demand is, there is one and only one way to ensure this. The publisher should offer exactly the poem’s true worth.
Goethe had devised what is apparently the first dominant-strategy incentive compatible truthful revelation mechanism. The Vickrey auction is based on exactly this principle and so Goethe’s mechanism makes for a great starting point for teaching efficient auctions.
(quote is from “Goethe’s Second-Price Auction” by Moldovanu and Tietzel. Mortarboard mosey: Markus Mobius.)
This is kinda gross:
In a new paper published online Oct. 8 in the journal Cell, Breslin and colleagues propose a theory of food pairings that explains for the first time how astringent and fatty foods oppose one another to create a balanced “mouthfeel.”
Because fat is oily, eating it lubricates the mouth, making it feel slick or even slimy, Breslin said. Meanwhile, astringents, chemical compounds such as the tannins in wine and green tea, make the mouth feel dry and rough. They do this by chemically binding with lubricant proteins present in saliva, causing the proteins to clump together and solidify, and leaving the surface of the tongue and gums without their usual coating of lubrication. [Tip of the Tongue: The 7 (Other) Flavors Humans May Taste]
We don’t like slimy, but we don’t like puckered up, either. “We want our mouth to be lubricated but not overly lubricated,” Breslin told LiveScience. “In our study, we show that astringents reduce the lubricants in the mouth during a fatty meal and return balance.”
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