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Thanks to Jeroen for being our first guest blogger. His posts were as fun and insightful as we expected. What a surprise to find our shared admiration for all things Tito. I am sure he regrets the association with us Palin-baiters and Asian-sweet-dissers, but if he is in the mood for some pinball, now he knows where to go.
Obama is close to a decision on the U.S. strategy is Afghanistan. What is the rational way to approach this decision assuming the U.S. is maximizing its own payoff? This is the “realist” assumption rather than one incorporating a moral component, though it is not too hard to jazz up some of the analysis to deal with this objective function too.
First, think through whether we should be there in the first place. What is the threat to the U.S. if Afghanistan falls to the Taliban? Will Al Qaeda move back in or not? If the belief is that the Taliban is not a threat to the U.S. and Al Qaeda will not move in, the realist conclusion is to withdraw and focus on counterterrorism. This is the debate taking place within the Obama adminstration
Second, what if the Taliban is a threat and/or Al Qaeda will flourish in a Taliban-led Afghanistan? This is the more interesting case from the strategic perspective and an analysis has been provided by Nolan Miller. He applies it to Iraq as his paper was written during the election but it could equally be applied to Afghanistan.
The U.S. strategy affects two other players, Karzai and the Taliban. If the U.S. adopts an aggressive approach and commits to a large military presence, this reduces the incentive of the Taliban to be aggressive and their effort is more likely to be futile. But equally there is a free rider problem for Karzai: if the U.S. is exerting effort anyway, this reduces the incentive of Karzai to do so.
These two effects go in opposite directions. If Karzai is weaker than the Taliban in the absence of intervention, the reduction in his effort after U.S. intervention is outweighed by the reduction in the effort of the Taliban. In that case, it is better to adopt an “output-based” strategy where the U.S. commits to a security level that it tries to achieve regardless of the Karzai government’s and insurgent’s effort.
This appears to be the pertinent case if the belief is that we should pursue counterinsurgency rather than counterterrorism. Miller also explores more complex solutions.
The full title of the Dylan tune is “Stuck Inside of Mobile With the Memphis Blues Again.” When you have listened to that song as much as I have you start to notice the patterns. Check out the lyrics.
- Two four-line verses with xAyA rhyme scheme, followed by the chorus “Oh Mama, can this really be the end?…”
- The first verse in the pair introduces a character and a scene and there is some hint of strangeness about it. As with a lot of Dylan tunes the character is often a vague literary reference or some generic symbol of authority. Sometimes both.
- The narrator usually first appears in the second verse of the pair, possibly alongside a new character.
- In the second half the narrator has some sense of disconnection with the scene/character and
- It resolves in the last line with the narrator being tricked and we are left with a feeling of hopelessness or isolation. (the notable exception to this is the 6th verse were the narrator turns the tables on the character, the preacher. still this somehow makes for even more hopelessness.)
For example, the last verse in the song:
Now the bricks lay on Grand Street
Where the neon madmen climb. (#2a)
They all fall there so perfectly,
It all seems so well timed. (#2b)
An’ here I sit so patiently (#3) (#4)
Waiting to find out what price
You have to pay to get out of
Going through all these things twice. (#5)
You can almost use this as a recipe and write verse after verse of your own. I have some kind of strange disease that makes me like to do stuff like that, so here goes. My very own Memphis Blues verse:
Well the barrister wrote to Ahab
Pleading for his vote
And offering to serenade
At the launching of his boatAnd the rickshaw driver said to me
Speeding to the dock
“They’ll tempt you with blue oysters
But serve you Brighton Rock.”
Oh, Mama…
In his first study, each year, for four years, Mr. Hodgson served actual panels of California State Fair Wine Competition judges—some 70 judges each year—about 100 wines over a two-day period. He employed the same blind tasting process as the actual competition. In Mr. Hodgson’s study, however, every wine was presented to each judge three different times, each time drawn from the same bottle.
The results astonished Mr. Hodgson. The judges’ wine ratings typically varied by ±4 points on a standard ratings scale running from 80 to 100. A wine rated 91 on one tasting would often be rated an 87 or 95 on the next. Some of the judges did much worse, and only about one in 10 regularly rated the same wine within a range of ±2 points.
The article was published in the January issue of the Journal of Wine Economics. The Wall Street Journal has a fun writeup. The same researcher showed that the distribution of medal winners in a sample of wine competitions matched what you would get if the medal was awarded by a fair lottery.
Will…You…Play…Black Knight Again??
There is a reason I live in Winnetka and not in Evanston. And it’s not because, as Sandeep would put it, I like to get up 30 minutes earlier than otherwise so that my daughters can put their hair up and dress like beautiful little dolls to match all the other dolls in their classes. No, its because after all the dolls are asleep we get to go to their parents’ mansions for parties and there’s always at least one parent who makes a living doing something incredibly interesting.
Tonight I met the guy who once made a living designing the classic pinball machines. And he designed the two pinball machines, Black Knight in 1980 and High Speed in 1986 that are bookends for a period when the most important stuff I was learning about life was learned within a few feet of at least one of these machines.
It turns out these were also major turning points in the history of pinball itself. In 1980, pinball went digital, multi-ball, and multi-media starting with the game Black Knight. Black Knight brought pinball to a new level, literally speaking because it was among the first games with ramps and elevated flippers, but even more importantly because it brought a new challenge that drew in and solidified a pinball crowd. In doing so it also set the pinball market on a path that would eventually lead to its demise.
In 1986, Williams High Speed changed the economics of pinball forever. Pinball developers began to see how they could take advantage of programmable software to monitor, incentivize, and ultimately exploit the players. They had two instruments at their disposal: the score required for a free game, and the match probability. All pinball machines offer a replay to a player who beats some specified score. Pre-1986, the replay score was hard wired into the game unless the operator manually re-programmed the software. High Speed changed all that. It was pre-loaded with an algorithm that adjusted the replay score according to the distribution of scores on the specified machine over a specific time interval.
The early versions of this algorithm were crude, essentially targeting a weighted moving average. But later implementations were more sophisticated. The goal was to ensure that a fixed percentage, say the top 5% of all scores would win a free game. The score level that would implement this varies with the machine, location, and time. The algorithm would compute a histogram of scores and set the replay threshold at the empirical cutoff of 5%. Later designs would allow the threshold to rise quickly to combat the wizard-goes-to-the-cinema problem. The WGTTC problem is where a machine has adjusted down to a low replay score because it is mostly played by novices. Then anytime an above average player gets on the machine, he’s getting free games all day long.
The other tool is the match probability: you win a free game if the last two digits of your score match an apparently random draw. While adjustments to the high-score threshold is textbook price theory, the adjustments to the match probability is pure behavioral economics. Let’s clear this up right away. No, the match probability is not uniform and yes, it is strategically manipulated depending on who is playing and when. For example, if the machine has been idle for more than three minutes, the match probability is boosted upward. You will never match if you won a free game by high score. And it gets more complicated than that. Any time there are two or more players and they finish a game with no credits left, one player (but only one) is very likely to match. Empirically, the other players will more often than not put in another quarter to play again.
(The tilt tolerance, by contrast has always been controlled by a physical device which is adjusted manually and rarely in response to user habits.)
Pinball attracted a different crowd than video games like Defender (my new pal designed Defender and Stargate too,) and this is the fundamental theorem of pinball economics. Pinball skill is transferrable. If you can pass, stall, nudge, and aim on one machine you can do it on any machine. This is both a blessing and a curse for pinball developers. The blessing is that pinball players were a captive market. The curse was that to keep the pinball players interested the games had to get more and more intricate and challenging.
Pinball developers struggled with this problem as pinball was slowly losing to video games. Video games competed by adding levels of play with increasing difficulty. Any new player could quickly get chops on a new game because the low levels were easy. This ensured that new players were drawn in easily, but still they were continually challenged because the higher levels got harder and harder. By contrast, the physical nature of pinball, its main attraction to hardcore players, meant that there was no way to have it both ways.
Eventually, to keep the pinballers playing, the games became so advanced that entry-level players faced an impossible barrier. High-schoolers in 1986 were either dropouts or professionals in 1992 and without inflow of new players that year essentially marked the end of pinball. In 1992 The Addams Family was the last machine to sell big. By this time, pinball machines used a free-game system called replay boost. After any replay, the score required was increased by some increment. Apparently, only hardcore pinballers were left and this was the only way to prevent them playing indefinitely for free.
Today Williams owns Bally but they make slot machines and video poker. There currently exists one botique manufacturer of pinball machines but its fair to say that innovation stopped in 1992.
My new best friend has a basement full of Black Knight, High Speed, Defender, Pac Man, Asteroids, and everything else you inserted quarters into when you were 16. Now I just have to find a supplier of C45, Djarums, and gooney-birds and I’ll be ditching class to hear sirens and “Pull Over Buddy.”
I haven’t pre-ordered the Saran Palin “Going Rogue”. Many of the juicy details have already leaked out. She did the disastrous Katie Couric interview because she “felt sorry” for her. The McCain campaign manager Steve Schmidt gets slammed for shouting at her over the phone after Palin gets tricked into taking a fake call from Nicolas Sarkozy etc. etc.
In fact, according to the Times:
The most sustained and vehement barbs in this book are directed not at Democrats or liberals or the news media, but at the McCain campaign. The very campaign that plucked her out of Alaska, anointed her the Republican vice-presidential nominee and made her one of the most talked about women on the planet — someone who could command a reported $5 million advance for writing this book.
It all smacks of paranoid high school behavior. Tina Fey not only did a great Palin on SNL but also the sense of Palin we see in the book reviews was captured in Fey’s movie “Mean Girls”. This Venn Diagram captures it all:
News Corp., parent company of Fox News is reported to have made an offer for NBC Universal in competition with Comcast. Who should be willing to pay more for an upstream supplier (NBC), the downstream monopolist (Comcast), or an upstream competitor (News Corp.)?
There were no fire engines, horse-drawn or otherwise. The citizens were the fire department. Each house had its own firebuckets and in the event of a fire, everyone was meant to pitch in. That meant taking your firebucket and joining the line of people from the water tank to the fire.
Does the story so far give you a warm, fuzzy feeling? Friendly folk working together, helping each other out and living by the Kantian categorical imperative. Let me rain on your parade – I am an economist after all. The private provision of public goods is subject to a free-rider problem: The costs of helping someone else outweigh the direct benefits to me so I don’t do it. Everyone reasons the same way so we get the good old Prisoner’s Dilemma and a collectively worse equilibrium outcome.
People have to come up with some other mechanism to mitigate these incentives. In Concord, they chose a contractual solution. Each fire-bucket had the owner’s name and address on it. If any were missing from the fire, you could identify the free-rider and they were fined.
This is the story we got from the excellent tour guide at the Old Manse house in Concord. Home to William Emerson, rented by Nathaniel Hawthorne and overlooking the North Bridge, the location of the first battle of the American Revolution. (We were carefully told that earlier that same historic day in Lexington, although the Redcoats fired, the Minutemen did not fire back so that was not a real battle.) The house has the old firebuckets hanging up by the staircase.
I assume that “dessert” in the sweet-stuff-eaten-after-the-meal sense is not a regular part of Chinese and Indian cuisines. So in some ways this is not a fair question, but they have sweets and they are generally uninspiring and often downright gross. My caricature, not too much of a stretch, is that at the end of a meal in a Chinese restaurant, the leftovers are brought back into the kitchen where they are mixed with sugar and possibly liquified or gelatenized before being returned to the table as dessert. Here is the very popular Cantonese dessert, red bean soup.
Mmmm… . Variations of this dessert appear in many East Asian cuisines. Indian sweets, in my limited experience, are similar.
The few exceptions I have encountered are Vietnamese and Cambodian where the desserts are essentially French.
It’s been a pretty darn good research week, and so there hasn’t been the time to think of something with real economic content. So, instead, something close to my heart. Tito’s claims to make the best vodka in America. Based on fairly extensive research, I agree. It’s also half the price of other premium vodkas.
It is a puzzle to me exactly why one vodka is better than another (my tongue certainly agrees). The claim is typically made that the purer the better. Tito’s tells us that the secret to their vodka is the precise control offered by their pot still (a batch production process), the fact that they run it through the still 6 times, and their charcoal filtering.
It happens that I know a very good chemical engineer (my father, to be precise). He tells me that if you want incredibly pure flavorless alcohol, getting to it on an industrial level is not very hard: you run down the street to a your local oil refinery, borrow their fractioning column, and get as precise a cut as you want.
In fact, one feature of the pot still used by the vaunted small batch vodka producers is that the temperature rises a bit from one end of the run to the other, and so some things can get through. In the end, it seems likely to my consultant and I that the key to a really good vodka is in fact having some good stuff survive the process. This can happen, because some flavor components have boiling temperatures near those of the right alcohol, and so will survive even multiple distilings. Even charcoal filtration, which only absorbs some flavor components, can leave some of this behind.
In any event, though, Tito’s is incredibly good. Our guess: very pure ingredients, meticulously clean equipment, and lots of attention to temperature control and cut off points.
We have spent most of the course using the tools of dominant-strategy mechanism design to understand efficient institutions and second-best tradeoffs. These topics have a normative flavor: they describe the limits of what could be achieved if institutions were designed with efficiency as the goal.
But most economic activity is regulated not by efficieny-motivated planners but by self-interested agents. This adds an additional friction which potentially moves us even further from the first-best. Self-interested mechanism designers will probably introduce new distortions into their mechanisms because as they try to tilt the distribution of surplus their way.
In this lecture we use the model of an auction to see the simplest version of this. We consider the problem of designing an auction for two bidders with the goal of maximizing revenue rather than efficiency. We do not have the tools necessary to do the full-blown optimal auction problem but we can get intuition by studying a narrower problem: find an optimal reserve price in an English auction.
With a diagram we can see the tradeoffs arising from adjusting the reserve price above the efficient level. The seller loses because sometimes the good will go unsold but in return he gains from receiving a higher price when the good is sold. The size and shape of the regions where these gains and losses occur suggest that it should be profitable to raise the reserve price above cost.
Without solving explicitly for the optimal reserve price we can give a pretty compelling, albeit not 100% formal, argument that this is indeed the case. At the efficient reserve price (equal to the cost of selling) total surplus is maximized. A graph of total expected surplus as a function of the reserve price should be locally flat at the efficient point. (We are implicitly assuming differentiability of total expected surplus which holds if the distribution of bidder values is nice.) Buyers’ utility is unambigously declining when the reserve price increases. Since total surplus is by definition the sum of buyers’ utility and seller profit, it follows that seller profit is locally increasing as the reserve price is raised above the efficient level.
Thus, while we know that in principle this allocation problem can be solved efficiently, when the allocation is controlled by a profit maximizer, there is a new source of inefficiency. The natural next question is whether competition among profit-maximizing sellers will mitigate this.
The sandwiches at the Kellogg cafe come with a choice of homemade chips or an apple. Perhaps reflecting an overdose during my summers picking fruit in the Okanagon valley, the apple typically ends up sitting un-eaten.
There are better and worse home-made potato chips, but even the worst of them push many of my buttons. It thus marks a true culinary achievement that when I choose the chips, I typically eat a couple of them, and then throw the rest away. And, it turns out, I derive a lot of pleasure from this! It makes me feel all self-controlly and healthy.
Given a choice between not eating something you will feel guilty about, and not eating something that suffuses you with a feeling of virtue, I strongly recommend the second.
I am atingle to think what I shall non-consume next.
Karthik Shashidar writes to us:
I am a regular reader of your blog, and like most of the stuff that you guys put there. Yesterday while blogging, I came across something which I thought might interest you people, hence I’m writing to you.
Recently my girlfriend and I realized that we were spending way too much time talking to and thinking about each other, and that we needed to scale down in order to give us time to do other things that we want to do. Both of us are in extremely busy jobs and hence time available for other things (including each other) is very limited, and hence the need to scale down.
I was wondering why this is not a widespread phenomenon and why more couples don’t do this “scaling down”
His analysis is here.
There is a natural force pushing couples toward too much engagement. Unilateral escalations make your partner feel good. Even if you internalize the long-run cost due to the inevitable following-suit, the slightest bit of discounting means that the equilibrium level will be above the social optimum. The usual dynamic game logic seems especially perverse here. If I am extra sweet to my sweet does she punish me for that? And what form does the punishment take, even further escalation?
Negotiating down from these heights is indeed tricky. Unilateral de-escalation is risky as Karthik discusses on his blog. The proposal could easily be read as a cold shoulder. Even assuming that both agree to scale down, how do you decide where to go? It is not easy to describe in words a precise level of interaction and this ambiguity leads to the potential for hurt feelings, if there is mis-coordination.
Some dimensions are easier to contract on. It’s easy to commit to go out only on Tuesday nights. However, text messages are impossible to count and the distortions due to overcompensation on these slippery-slope dimensions may turn out even worse than the original state of affairs.
But even setting aside all of these problems, what mechanism can you use to coordinate on a lower scale? If we both make offers and split-the-difference, then the one asking for a higher scale is going to feel hurt. Any mechanism has got to be noisy enough to hide such inequities without being totally random. The trick may be to short-circuit common knowledge. For example we could have a third party make a take-it-or-leave-it proposal and then the two partners secretly reject (if too low) or accept (if not.) The proposal is enacted only if both accept.
This ensures that when the offer is accepted, both parties learn only that each was willing to scale down to at least the same level. And when the offer is rejected, the one who was not willing to go that low will never know whether the other was, i.e. no hurt feelings.
(dinner conversation with Utku, Samson, and Hideo.)
Independent Joe Lieberman is driving Gail Collins and the progressive left crazy. He caucuses with the Democrats and holds a plum committee chairmanship on the strength of largely voting with the Democrats. But he is threatening to filibuster the healthcare reform vote in the Senate. The only way to give him the incentive to drop this threat is to threaten him in turn – strip him of his chairmanship if he filibusters the vote.
The problem is that Lieberman knows that if he filibusters, the Democrats do not have the incentive to carry out their threat because they need his vote in the future. Their threat to strip him of his chairmanship is not credible. This is a classic issue in deterrence theory: how can we make our threat to bomb the Soviets if they bomb us credible? Many of the strategies do not transfer (e.g. the automated response à la Doomsday machine in Dr. Strangelove), but one does: the Democratic leadership has to rely on reputational devices to incentivize Lieberman.
Forgiving Lieberman may create future defections as the Democratic leadership shows they are wimps. Carrying out the threat shows that Reid and Obama are tough and signals they will be tough in the future. This is the slippery slope argument and the classic “act crazy to get a reputation for toughness” strategy. Dick Cheney gets this strategy (though it seems to be the only strategy in his arsenal).
If Lieberman finds the threat credible, the Democrats do not even have to carry it out because he will not filibuster. But if he does not find it credible, he will filibuster. Then you face the problem of losing his vote in the future if you accept the slippery slope argument and feel you must punish Lieberman for his treachery.
To evaluate this possibility, we have to consider the credibility of Lieberman’s threat to vote Republican in the future if he stripped of his chairmanship. The Republicans are too extreme for the Connecticut voter. If Lieberman votes with them or switches parties, he is in trouble at home. So you can rely on his reelection motive to discipline him and get his vote on some mainstream Democratic issues.
There is also a subtle way to give Lieberman the incentive to go along with his punishment without ganging up with the Republicans. It is a “penal code” to design dynamic incentives and it was discovered by Dilip Abreu. The penal code boils down to forgiving Lieberman gradually over time to get his cooperation in the future. In this scenario, this requires some deviation from standard seniority principles for allocation of committee chairs. Put a stopgap person, Al Franken, in charge of Lieberman’s committee. Tell Lieberman that Franken will step down if Lieberman is on board in future. Otherwise, goodbye chairmanship forever. If this subgame is triggered as Lieberman is bloody minded, Franken should step down in favor of whoever is in line for the chairmanship now if Lieberman is ejected. This might be necessary to get this person on board with the plan to deviate from the status quo procedure for allocation of committee chairs.
And if all this Machiavellian structure falls apart, Al Franken is Chair of an important committee. He is a professional comedian while the rest of the Senate are amateurs. That seems like an improvement to me.
He is the singer and songwriter for The Mr. T Experience and he wrote King Dork. His new book, Andromeda Klein is not as great but still good. His next book is a King Dork sequel called King Dork, Approximately. And a film adaptation of King Dork is in development with Will Ferrell producing.
Here is the inteview. And here is Frank Portman’s blog.
Let me begin by saying that I’m with the new Keynesians on the central issue here. I believe real world markets break down. A stunning point for me is the juxtaposition between the fact that much of modern macro began by trying to incorporate micro foundations into their models, but in the end, many of the proponents of the extreme version of fresh-water economics have ignored 30 years of micro that is pretty specific on all sorts of ways that markets can fail to clear.
That said, one can argue about the role of government on many levels. I take a variety of positions on these issues. I’m a deficit hawk, but a big believer in well-timed intervention. I’m in sympathy with the comment from our treasury secretary that we need to pay serious attention to the deficit, just not this year. I sure as heck hope he means the second part, though. The long chain of budget deficits forecast by the CBO scares the heck out of me.
Today, however, I want to make two reflections on the right form of stimulus.
The first is an easy one. In talking about the purported wastefulness of direct stimulus spending, I think it is well worth noting that very few people would argue that this country has been spending too much on infrastructure. Clearing up a lot of deferred maintenance seems like a fine idea to me, and getting our transportation system back up to something approaching the quality viewed as normal in much of the developed (and developing) world a pretty good idea too. For much the same reason, I get less worked up than many about “pork-barrel” spending; sure, it would be nice to have a more transparent process, and maybe doing a little better on allocating scarce resources on the margin, but we seem so far from a sensible amount of public goods in this country that I’m doubtful that much of the spending is truly a waste.
Now to my second, and maybe less trivial point about stimulus spending. One theme that has recurred in left-of-center blog land of late is that if only we could have another round of “real” stimulus, we wouldn’t need to be doing back door stuff like cash for clunkers and the tax subsidy for home purchasers. I disagree! If one wants to stimulate economic activity at reasonable cost, this seems like a good way to go. Why? Because it is pulling exactly the right lever if you think hard about why spending has fallen in the first place.
One reason, of course, is because some people have less money. Extending unemployment insurance benefits seems a good idea in this context. State governments, many of which have mandatory budget balance mechanisms, are also in the class of entities to which a direct cash transfer is likely to stimulate spending.
But, the bulk of the reduction in spending, by both firms and consumers, is not “we have no money to spend, or nothing worth spending it on”. Rather, they are properly exercising option value in a setting of wildly increased uncertainty. In the months after the financial meltdown, a new TV suddenly needs to meet a much higher hurdle: the question is not “do I think the flow of services from the TV over the next 8 years is more than worth the cost”, but “do I expect to derive enough value from owning this TV now instead of 3 months from now that I wouldn’t rather wait a bit, and see how the situation develops.” If things look less apocalyptic in three months, one can always buy the TV then, having foregone only a few months of HDTV heaven. On the flip side, if in three months the situation has shifted for the worse, then one has avoided being saddled with a TV/car/house/factory that does not make sense in the new environment.
If I’m waiting to buy a new house because I’m waiting to see if I get tenure, this delay is economically efficient. But, if the uncertainty is aggregate and extreme, so the we all want to exercise the option value of delay, and if one believes that markets don’t always clear, then if we all start delaying economic activity because we want to see if the future is bad, the future has a decent chance of being just that.
In such a context, a tax cut, or a check from the government, is likely to have very little effect. I’m a little more flush than I was (although I’m also guessing that my future tax liability is going to be higher), but heck, I had money to spend before anyway. If the issue is uncertainty, then the right thing to do with extra money that appears is to simply stick it in the bank.
On the other hand, if the choice is “new car today at huge discount” vs. car in 3 months at normal prices, then I may well pull the trigger even if I face a moderate degree of uncertainty. Note then, though, that cash for clunkers and the housing subsidy are particularly effective precisely to the extent that people think they will end. If I am pretty sure the program will be renewed, then the original calculation is back in effect, and waiting is probably the right thing to do.
This brings us to one of the most important points made by Lucas, Phelps, and company: economic policy based on consistently fooling people is unlikely to be a great idea. Here, the problem is to avoid the temptation to go back and re-new each program as it nears expiration. If people grow to expect this, they lose their oomph.
This has been illustrated in a paper by Megan Busse, Duncan Simester, and Florian Zettelmeyer. In the wake of 9/11, GM ran “The best deal you’ll ever get.” Precisely because it had a well-defined end date, and one that seemed credible given the extraordinary circumstances, the program was extremely effective in raising sales for GM despite the uncertainty rampant that fall. But, when GM renewed it, the effect was much smaller, probably because people no longer saw the cost of delay as being large.
Our youngest son went to a preschool in Evanston and goes halfday to a nursery school here. The kids muck about with Lego, go to a playground in both settings and the only difference is that the nursery school has an all day option which some kids in the morning class (or their parents!) take up. Therein lies the rub.
Anyone who values the all day option uses the nursery school as daycare as both spouses work and do not have a nanny. The parents’ are sometimes forced to drop off a child with a cold or the beginnings of flu. On the other hand, if your child goes to preschool you must have some afternoon solution, a solution you can employ if your child is sick. So, halfday nursery school leads to more infections than preschool, as we are finding out.
Computer scientists study game theory from the perspective of computability.
Daskalakis, working with Christos Papadimitriou of the University of California, Berkeley, and the University of Liverpool’s Paul Goldberg, has shown that for some games, the Nash equilibrium is so hard to calculate that all the computers in the world couldn’t find it in the lifetime of the universe. And in those cases, Daskalakis believes, human beings playing the game probably haven’t found it either.
Solving the n-body problem is beyond the capabilities of the world’s smartest mathematicians. How do those rocks-for-brains planets manage to do pull it off?
We are officially big-time bloggers now because today we have our first guest blogger. This week Jeroen Swinkels will be shirking sharing his thoughts with us and you and we are really looking forward to it.
Jeroen is a Northwestern guy so we are keeping it in the family and he is forty-something too (albeit a tad more “something” than Sandeep and I.) In case you don’t already know, Jeroen is a game/auction/micro/evolution-theorist who teaches in the Management and Strategy department in Kellogg. I like all of his work but I am especially fond of a somewhat idiosyncratic paper he wrote with Larry Samuelson on evolution and behavioral biases and I blogged about it here before. He’s got lots of ideas on lots of subjects so he is going to be a blogging natural. So thanks Jeroen and welcome.
I have a student who is in charge of Northwestern’s Undergraduate Economics Society and he is planning an event in the Spring. They have some money and they want to organize an activity for their membership that will be fun and economics-oriented. Think of this as an opportunity to design an experiment involving any number of students (up to hundreds of students), but it should be fun as well as educational. I know that our readers will have some good ideas for them. Please share them in the comments.
Not exactly. But the story is about the same guy who I blogged about before (United Breaks Guitars):
After baggage handlers at United broke his guitar last summer and the airline refused to pay for the $1,200 repair, Mr. Carroll, a Canadian singer, created a music video titled “United Breaks Guitars” that has been viewed more than 5.8 million times. United executives met with him and promised to do better.
So how was Mr. Carroll’s most recent flight on United?
Same as usual:
This Everyman symbol of the aggrieved traveler was treated, well, like just another customer. United lost his bag.
In an interview, Mr. Carroll said that for more than an hour on Sunday, he was told he could not leave the international baggage claim area at Denver International Airport, where he had flown from Saskatchewan. He said he had been told to stay because his bag was delayed, not lost, and he had to be there to claim it when it came down the conveyor belt.
“I’m the only person pacing around this room,” Mr. Carroll said, recalling how he was caught between an order from United staff members to stay and collect his bag, and a federal customs official telling him he had to leave the baggage claim area. The bag never showed.
As we say in MBA world, Carroll has “turned a crisis into an opportunity” – he has a business speaking to customer service reps:
This latest episode provided him with fresh material for his most recent performance, which was why he was flying on United — to speak to a group of customer service executives on Tuesday (though without his best shoes and “United Breaks Guitars” CDs that were in his still missing suitcase).
Shows that are widely time-shifted are not losing money due to skipped commercials.
Against almost every expectation, nearly half of all people watching delayed shows are still slouching on their couches watching messages about movies, cars and beer. According to Nielsen, 46 percent of viewers 18 to 49 years old for all four networks taken together are watching the commercials during playback, up slightly from last year.
On net, the gain in viewership from time-shifted shows often more than compensates for the few who skip ads.
When NBC added the “The Jay Leno Show” at 10 each weeknight, it boasted that the show would be “DVR proof,” meaning that because the humor was topical, viewers were more likely to watch it live, avoiding much of the commercial-skipping that was expected to plague recorded shows.
Now being “DVR proof” looks like a disadvantage. Mr. Leno’s shows were among the few with three-day commercial ratings lower than their live ratings. Not enough people have been recording the show and playing it back to overcome the commercial-skipping being done by a percentage of its live viewers.
From the NY Times.
Three very nice Pinot Noirs, all under $25.
First, Martinborough Vineyards Russian Jack, NZ 2008: $19 from Wine Bottega in the North End of Boston. Best wine for everyone but me. Cherries, floral nose and very smooth. Coconut taste at end suggests oak. My second best.
Second, A to Z Pinot Noir, Oregon 2007: Widely available. But rough to begin with. Still classic cherry. Consensus worst of three. But I would buy it and drink it again as it was quite good nevertheless.
Third, Soris Pere and Fils, Santenay, 2006: $25 at Formaggio Kitchen. Multi-layered. Stinky barnyard and hay as well as cherry. But tannic. My favorite, everyone else’s number two.
Overall, very good wines at this price. Had some Vin Santo (Allegrini 1999) as well that our guests brought. Four bottles of wine between four people at one sitting! Didn’t feel worse for wear the next day. Either liver is in trouble or the wines were good. Hope it is the latter.
Japanese scientists asked study subjects to try 38 red wines and 26 whites while eating scallops. Some of the wines contained small amounts of iron, which varied by country of origin, variety and vintage. The tasters noted which wines really didn’t work with scallops. And the researchers found that those wines all had high levels of iron. So they doctored the wine with a substance that binds iron, keeping it away from the tasters’ tongues. And voila, the bad taste became a bad memory. The study appears in the Journal of Agricultural and Food Chemistry.
With that knowledge in hand, wine lovers should be able to find reds that taste terrific with tilapia. So look for red wines with low iron.
From a Scientific American podcast. Transcript here.
Big events at Northwestern this weekend, including Paul Milgrom’s Nemmers’ Prize lecture and a conference in his honor. (My relative status was microscopic.) A major theme of the conference was market design and I heard a story repeated a few times by participants connected with research and implementation of online ad auctions.
Ads served by Yahoo!, Google and others are sold to advertisers using auctions. These auctions are run at very high frequencies. Advertisers bid for space on specific pages at specific times and served to users which are carefully profiled by their search behavior. This enables advertisers to target users by location, revealed interests, and other characteristics.
Not content with these instruments, McDonalds is alleged to have proposed to Yahoo! a unique way to target their ads and their proposal has come to be known as The Happy Contract. Instead of linking their bids to personal profiles of users, they asked to link their bids to weather reports. McDonalds would bid for ad space only when and where the sun was shining. That way sunshine-induced good moods would be associated with impressions of Big Macs, and (here’s the winner’s curse) the foul-weather moods would get lumped with the Whopper.
I can relate to this.
For most of history, almost everything people did was forgotten because it was so hard to record and retrieve things. But this had a benefit: “social forgetting” allowed us to move on from embarrassing moments. Digital tools have eliminated this: Google caches copies of blog posts; networking sites thrive by archiving our daily dish. Society defaults to a relentless Proustian remembrance of all things past.
From an article in Wired.
Extremely simple and good. You need corn tortillas, some kind of meaty fish, some kind of salsa. I like guacamole. I wouldn’t use anything more than this. Store bought corn tortillas are dry but you can steam them and then keep them in a damp kitchen towel and they will work great. Or you can try making your own. It takes some practice, but it pays off.
Mahi Mahi works great. Just squeeze some lime on it, then coat with light oil and let it marinate for about 15 minutes. (Much longer and the acid in the lime will make the fish too flaky and the next step won’t work.) Cut into small pieces and grill. Get yourself a cast-iron grill pan and you can do this indoors.
Put it all together and eat. With store-bought tortillas the whole preparation takes no more than 1/2 hour.
- A long interview with R. Crumb.
- Leaving it all on the field.
- Stay away from 2007 Bordeaux. (the whites may be fine though.)
- Fruit Bat Foreplay.
Sex is a puzzle for evolutionary biologists. It seems to be a waste of reproductive output. A population of a fixed size which requires two members to produce offspring reproduces, and therefore grows, at half the rate of the same sized asexsual population (which requires only one member to produce one offspring.)
So to explain the prevalence of sexual reproduction in nature we need to find some advantage to offset this so-called two-fold cost of sex. There are two prominent theories. The first is that sexual reproduction allows a species to shed disadvantageous mutations. Sexual reproduction thus ensures that offspring loses any harmful mutation with probability 1/2 (we are assuming that the parents do not have mutations of the same gene, a good approximation when there are many genes.) But with asexual reproduction, these mutations just accumulate.
Another theory is that sexual reproduction, by mixing around genes, ensures genetic diversity which enables a species to survive changes in the environment.
Not Exactly Rocket Science reports on an experiment designed to test these theories.
Like humans, C.elegans has two sexes but unlike us, they are males and hermaphrodites (with males making up just one in every two thousand individuals). Equipped with both sets of genitals, hermaphrodites worms can fertilise themselves without male help – far from being rude, telling C.elegans to go &$&! itself is a feasible lifestyle suggestion. Hermaphrodites could also mate with males, but they do that on less than one in 20 occasions.
The biologists manipulated the genetics of a population of these worms so that half would always mate with themselves and the others would always mate sexually. Next, they exposed the worms to a chemical that raised their rate of mutations. As the theory predicts, the sexually reproducing worms were more successful.
Next, they exposed the worms to a deadly bacterium. Consistent with the second theory, the sexually reproducing worms also fared better in this experiment.
Now the big puzzle. If sexual reproduction is beneficial, why do all sexually reproducing species in nature do it in pairs? This paper by economists Motty Perry, Phil Reny, and Arthur Robson proves that, at least with respect to the harmful mutation theory, a particular form of tri-parental sex dominates bi-parental sex. In the Perry-Reny-Robson world, reproduction requires two males and one female. The offspring receives genes with half-probability from the mother and 1/4-probability from each of the fathers.
(With this particular menagerie, in every reproductive cycle each female gets two partners per encounter but each male gets two encounters. Not only does this ensure that the “cost of sex” is again two-fold and not three-fold, but it also maintains equity in the gettin’ busy department. Only fair.)
Cheap Talk 