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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
Is the marginal incentive to become a terrorist increasing or decreasing in the level of drone strikes? In the former case, terrorist activity is a strategic complement to drone strikes and, in the latter, a strategic substitute. Of course, the relationship may change sign with the level of strikes , e.g. at a medium level of drone strikes, terrorist activity is a complement but at very high levels it is a substitute (as we kill terrorists more quickly than they can be created!).
This issue lies at the heart of the optimal policy of drone strikes. Robert Wright asks whether hawkish policies:
“have, while killing terrorists abroad, created terrorists both abroad and — more disturbingly — at home.
These possibly counterproductive hawkish policies go beyond drone strikes — a fact that is unwittingly underscored by the hawks themselves. They’re the first to highlight the role played by that imam in Yemen, Anwar al-Awlaki, in inspiring Shahzad and other terrorists. But look at the jihadist recruiting narrative al-Awlaki’s peddling. He says America is at war with Islam, and to make this case he recites the greatest hits of hawkish policy: the invasion of Iraq, the troop escalation in Afghanistan, drone strikes in Pakistan, etc.”
Wright adds:
“Unfortunately, President Obama isn’t discarding the Bush-Cheney playbook that has given jihadist recruiters such effective talking points. Quite the contrary: the White House thinks the moral of the Shahzad story may be that we should get more aggressive in Pakistan,possibly putting more boots on the ground. And already Obama has authorized the assassination of al-Awlaki.
Even leaving aside the constitutional questions (al-Awlaki is an American citizen), doesn’t Obama see what a gift the killing of this imam would be to his cause? Just ask the Romans how their anti-Jesus-movement strategy worked out. (And Jesus’s followers didn’t have their leader’s sermons saved in ready-to-go video and audio files; al-Awlaki’s resurrection would be vivid indeed.)”
David Jaeger and Daniele Paserman have done empirical work on this issue in the context of the Israeli-Palestinian conflict. In one paper they find that Israeli fatalities in the last period are a good predictor of Palestinian fatalities the next (strategic complements) but Palestinian fatalities last period are not related significantly to Israeli fatalities the next. It is not clear whether this translates to the Al Qaeda/Taliban context. Surely the data is there somewhere to do the analysis. Is Obama’s policy evidence-based or is he, as Wright suggests, just copying the Bush-Cheney playbook?
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.
The Liberal Democrats have played the Conservatives and the Labour Party off against each other brilliantly. While negotiating openly with the Conservatives, the Liberal Democrats were secretly talking to the Labour Party.
It was always clear that the game resembles an auction with two bidders, the Conservatives and Labour, and one object for sale, the Liberal Democrats. The value that can be extracted by the Liberal Democrats as in classical auction theory depends on the bid of the second-highest bidder. As I suggested in an earlier post, the Labour Party is the weak bidder as it got less votes in the General Election. But Clegg’s masterstroke has been to strengthen the value of Labour by pressuring Brown to step aside, which he did today. This immediately led to a stronger bid by the Conservatives: they are open to allowing a referendum on a change in the voting procedure used to elect Members of Parliament. This is a cause dear to the hearts of the Liberal Democrats who cannot get many seats in parliament otherwise.
Has Labour leap-frogged the Conservatives as the strong bidder? At least pretending this is the case is the next stratagem available to the Liberal Democrats to extract maximum concessions from the Conservatives. The Conservatives will send out their right-wingers to show they won’t offer any more and the Liberal Democrats will send out their left-wingers to signal a better offer is necessary. Some members of Labour may prefer to be in opposition. The next government will have to make huge cuts in spending to rein in the deficit. Better to wait on the sidelines and pick up the pieces in a few years. There are so many layers to this it is hard to keep up!
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.
Neither the Labour Party nor the Conservative Party has won an absolute majority in the British elections. Each can try to rule as a minority government. This means roughly that each policy proposal would be voted on in an ad hoc fashion. If a key vote fails to win majority support, the minority government would fall and there would be another round of jostling for position. An alternative is to form a coalition with another party to form a government with majority support. This would mean the large party in the coalition would have to compromise on its ideal policy positions.
Both Labour and the Conservatives need the Liberal Democrats if they are to go the latter route. The Liberal Democrats suffer under the British electoral system where power is related to seats won in Parliament not total vote won across districts. Hence, they support “proportional representation”. Can the Liberal Democrats play the two parties off against each other to win this prize?
The difficulty for the Liberal Democrats is that the other two parties are in an asymmetric situation. The Conservatives are in better shape for running a minority government than Labour because they won more seats in Parliament. They are willing to offer less than Labour. Labour is willing to offer more but even the total number of seats held by the Liberal Democrats and Labour is not enough to form a majority coalition government. Plus it would involve a deal with a party mired in scandal and win a dark, brooding unpopular leader who refuses to step aside. Neither option looks good.
Hence, the real issue is the next election which may happen in days not years. The Liberal Democrats had great hopes of breaking out of their third party status and replacing the Labour party as the alternative to the Conservatives. It seems that in the end, voters were too worried about putting their faith in an unknown unknown. To break out of this hole, the Liberal Democrats have to look statesmanlike and work in the national interest not party interest. If neither party offers them a solid commitment to electoral reform, the Liberal Democrats should stay out of any coalition and maximize influence and publicity in Parliament. They can support sensible common values policy proposals put forward by the minority government and build themselves up in the eyes of the electorate. Only if they win significantly more seats in the next election will the Liberal Democrats get electoral reform
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?
Interesting conference at BU and view from conference room
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.
Via Barker, a pointer to a theory from evolutionary psychology that tears are a true signal that the person crying is vulnerable and in need.
Emotional tears are more likely, however, to function as handicaps. By blurring vision, they handicap aggressive or defensive actions, and may function as reliable signals of appeasement, need or attachment.
Usually you should be skeptical that signaling is evolutionarily stable. For example if tears convince another that you are defenseless then there is an evolutionary incentive to manipulate the signal. Convince someone you are defenseless and then take advantage of them.
A typical exception is when the signal is primarily directed toward a family member. Family members have common interests because they share genes. Less incentive to manipulate the signal means that the signal has a better chance of being stable. And babies of course have few other ways of communicating needs.
Of course children eventually do start manipulating the signal. They learn before their parents do that they are becoming self-sufficient but they still have an incentive to free-ride on the parents’ care. Fake tears appear. But this is a temporary phase until the parents figure it out. Not surprisingly, once the child reaches adulthood, crying mostly stops: Nature takes away a still-costly but now-useless signal.
What is the point of a big speech outlining your intentions when everybody already knows that when push comes to shove you are just going to do what’s in your interest? Usually such a speech is all about the reasons for your stated intentions. If you can change people’s minds about the facts then you can change their minds about your intentions.
But the public facts are already that, public. There’s no changing minds about those. At best you can change minds about how you perceive the public facts or about facts that only you know. But here we are in the realm of private, unverifiable information and any speech about that is pure cheap talk. You will invent facts to support whatever intentions you would like people to believe.
Except for two wrinkles.
- Making up a coherent set of facts that support your case and survive scrutiny is not easy. On the other hand, the truth is always a coherent set of facts.
- You can only say things that you can think of. That’s a small subset of the set of all things that could possibly be true and the truth is always in that subset.
Together these imply that cheap talk always reveals information. It reveals that the story you are telling is one of the few coherent stories you could think of. And if that story is complicated enough it becomes more and more likely that this is the only story that complicated that a) is coherent and b) you could think of. Since the truth always satisfies a) and b), this makes it ever more likely that what you are saying is the truth.
This is why when we want to change minds we make elaborate speeches full of detail. It convinces the listener that we are telling the truth. And this is why when we want to be inscrutable the listener will pepper us with questions in order to require so much detail that only the truth will work.
About twice a year the Chicago “classic rock” station does something strange. Instead of its regular programming sequence, it sets aside about a week to play through all the greatest songs in alphabetical order. And this is advertised as a big event, a restoration of order out of chaos that the audience has apparently been desperate for since the last time they did it. They are at it again this week and in between “Boys of Summer” and “Brain Damage/Eclipse” I started to wonder why this was thought to be a good marketing strategy.
- There is the possibility of coordination failure between audience and programmer at certain time slots. If everybody tuning in at noon is expecting late 70’s prog rock then they better play that or lose their audience. The A to Z is a way to break the trap.
- It works as a commitment not to repeat a song for a whole week.
- It’s really just a negotiation tactic with the program director. The station proves publicly that the program director’s choice of playlist on a daily basis is completely irrelevant to the listeners.
- The station is just pruning its library and it takes a week to do that every 6 months. While they are at it, they might as well play the songs that made the cut.
- It gets the listeners into the game of predicting the next song. (They just played “Back Door Man” by the doors. We know “Back in the USSR” is coming soon. Is there anything in between that we are forgetting? Let’s stay tuned and find out!)
If it is any one of the demand-side explanations (like 2 and 5) there is a residual puzzle. Presumably listeners have some given satiation point for classic rock and this trick is just getting them to inter-temporally substitute their listening. They listen more now, less later. Why is that good for the station?
I think the answer has to do with the convex value of advertising. Advertisers’ willingness to pay increases more than proportionally with the size of the audience. This is due to “bandwagon” and “water cooler” effects. (Michael Chwe has a paper about this.) With that in mind the station would prefer everyone listen this week and nobody listen next week rather than half and half.
You can see the whole list (up to now) here.
Here’s an interesting experiment I would like to see. Look at adults who learned a second language as a child from one of their parents. For example, the father speaks only English but the mother speaks English and Hungarian. English is the standard language outside of the home.
Profile the personalities of the parents. Now have a Hungarian speaker interview the subject and profile his personality and separately have an English speaker profile the subject’s personality. Is the subject’s personality different in the two languages and is he more like his mother when speaking Hungarian?
Round the corner from where we live right now but as we are closer to Anna’s Taqueria we never ventured the extra couple of blocks. When we decided Anna’s offerings were limited and greasy, we did eventually go in to Dorado.
It was great and very reasonable. The cemitas are particularly good. Burger style bread with a black bean paste, chipotle salsa, guacamole and you filling of choice – I’m partial to the spicy mushrooms. All for $6. The yucca chips are great. You can ask for the super-hot sauce if you dare. Other things we like: the steak cemita, the quesadilla and shrimp taco. Get the frequent buyer card as you’ll be going twice a week if you live nearby.
1. Market Design meets the N.F.L. draft.
2. Gaming the credit rating agencies.
From Barking Up The Wrong Tree:
What determines reciprocity in employment relations? We conducted a controlled field experiment and tested the extent to which cash and non-monetary gifts affect workers’ productivity. Our main finding is that the nature of the gift, not its monetary value, determines the prevalence of reciprocal reactions. A gift in-kind results in a signicant and substantial increase in workers’ productivity. An equivalent cash gift, on the other hand, is largely ineffective or even though an additional experiment showed that workers would strongly favor the gift’s cash equivalent.
It probably has nothing to do with reciprocity. If I pay you money you have to share it with your family and then buy a car out of your share. If I give you a car it is all yours.
This logic also often provides a psychology-free explanation of the endowment effect. You are willing to pay at most $10,000 for a car. But if I give you that car for free and offer to buy it back from you, you require $20,000, because you will get to keep only half of that money.
(inspired by discussions with my Behavioral Economics class.)
Update: See Ben’s comment below for another variation on the theme which also came up in class. If you have present-biased preferences you have an endowment effect because cash will be shared with future selves, whereas instantaneous consumption is all for your present self.
Tyler (you can call him T, you can call him C, you can call him TC, you can call him Professor TC, you can call him Dr. Ty, you can call him Ty Cow, you can call him Tyce, you can call him T-Dice, you can call him Dr. T Dice Disco Dorang…) asks how California might redesign its constitution.
The underlying problem here is that California is simply a beautiful place to live. It’s not just the climate, or the people, or the geography. It’s that something floating around in the air that just makes you happy all the time you are there. And then the second problem is that there is free entry.
So it really doesn’t matter what you do with the constitution. You can fix the referendum system, you could change the budget process, you could turn the government into Singapore. But that only means that something else has to get hosed to bring the quality of life again back down to the level that maintains the zero-rent equilibrium condition with free entry.
Given that the question boils down to which part of California do you want to screw up in order to achieve that? This is mostly a distributional question. Bad state government saps rents in one way. Give those back and bad local governments will do just fine to take up the slack.
Of course all that is really required for equilibrium is that the quality of life of the marginal resident (or resident-to-be) is sufficiently low. This is completely consistent with high average quality of life but its not clear to me why a well-functioning government would be better at achieving such a distribution than the one they’ve got now. That is, who but the marginal resident is more affected by high taxes and dysfunctional government?
(The cheapest way to target the marginal resident is to make it infinitely costly to enter. But that gives huge rents to those lucky enough to live there already and the temptation to take those away would be too great for any government.)
People have analyzed strategic thinking long before the academic field of game theory started in the 1950s. I argue that Jane Austen’s six novels, among the most widely beloved in the English language, can be understood as a systematic analysis of strategic thinking. Austen’s novels do not simply provide interesting “case material” for the game theorist to analyze, but are themselves very ambitious and wide-ranging theoretically, providing insights not yet superseded by modern social science.
That is the abstract of a talk that Michael Chwe will give at UCLA on April 23. Unfortunately for those of us who can’t attend, there doesn’t seem to be a paper available. But Michael Chwe is an extremely creative and broad-minded theorist so you can bet that it’s going to be good. And if we can’t read his thoughts on Jane Austen, there’s always Michael’s paper “Why Were the Workers Whipped? Pain in a Principal-Agent Model.”
You are an ambitious, young Presidential-wannabe. This makes you a trifle immodest and you decide to write an autobiography, Volume 1. It’s going to set the stage for your Presidential bid. Some may say you have yet to do anything so said volume may not sell too well, even though you have an exotic cocktail of a family background and were President of Harvard Law Review. They may be right so you are not willing to pay a lump sum fee to employ an agent to sell your manuscript: not only might your book not work out, you would be stuck with a bill from an agent to add to your law school debts.
Luckily for you, pretty much every guy who writes a book is in the same position as you: immodest enough to write a book and yet knowing that it might not sell. So, there is a standard contract that is signed with a book agent: they work for you to get you a contract and if the book actually sells they get 15%. This way you share the risk: if the book fails, at least you do not also lose the amount you paid the agent; in return, if it succeeds, you do not get to keep all the benefits. The 15% contract gives you a form of insurance. Plus, it gives the agent the incentive to work hard, helping to alleviate the moral hazard problem.
Miracle of miracles, the book does actually sell eventually. It lies ignored but you become kind of famous anyway and then people buy it. Now you’re ready for Volume 2. Is the old book agent contract still the best option for you?
Well, Volume 2 is almost certainly going to fly off the shelves. You do not need to share the risk. All you care about is the getting the best price and you don’t need protection in case of failure as it ain’t going to fail. Best just to go with a great negotiator. In fact, a well-connected Washington lawyer might be just the thing. You just pay him upfront and he calls his contacts. And he’s done it before. It’s expensive if your book fails and you don’t get the rest of your advance or even have to give back the chunk they gave you. But Volume 2 is your road to the Presidency, Volume 1 was just laying the foundation. Everyone will read it as you’re intriguing and you’ll get to keep your advance and even get royalties. Now, you can afford to be President as your law school debts are paid and you can even send your kids to a spiffy private school.
Cheap Talk 