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Evolutionary Psychology and, increasingly, behavioral economics spin a lot of intriguing stories explaining foibles and otherwise mysterious behaviors as the byproduct of various tricks nature utilizes to get us to do her bidding. I am on record in this blog as being a fan of this methodology. But I also maintain a healthy skepticism and not just at the tendency to concoct “just-so” stories that often ask us to reformulate our theories of huge chunks of evolutionary history just to explain some nano-economic peculiarity.
Instead, when evaluating some theory of how emotions have evolved to induce us to behave in certain ways, skepticism should be aimed squarely at the basic premise. The theory must come with a convincing explanation why nature would rely on a blunt instrument like emotions as opposed to all of the other tools at her disposal. These questions seemed especially pressing when I read the following article about depression as a tool to blunt ambitions:
Dr Nesse’s hypothesis is that, as pain stops you doing damaging physical things, so low mood stops you doing damaging mental ones—in particular, pursuing unreachable goals. Pursuing such goals is a waste of energy and resources. Therefore, he argues, there is likely to be an evolved mechanism that identifies certain goals as unattainable and inhibits their pursuit—and he believes that low mood is at least part of that mechanism.
Why not a simpler mechanism: just have us figure out that the goal is unattainable and (happily) go do something else? Don’t answer by saying that this emotional incentive mechanism evolved before our brains were advanced enough to do the calculation because the existence of an emotional response indicating the right course of action presupposes that this calculation is being made somewhere in the system.
Even granting that nature finds it convenient to do the calculation sub-(or un-)consciously and then communicate only the results to us, why using emotions? Plants respond to incentives in the environment and they don’t need emotions to do it, presumably they are just programmed to change their “behavior” when conditions dictate. Why would nature bother with such a messy, noisy, and indirect system of incentives rather than just give us neutral impulses?
Finally, you could try answering with the argument that evolution does not find optimal solutions, just solutions that work. But that argument by itself can be made into a defense of everything and we are back to just-so stories.
How often does your mind wander?
Some of the most striking evidence comes from Jonathan Schooler, a psychologist at the University of California at Santa Barbara who is one of the leading researchers on mind wandering. In 2005 he and his colleagues told a group of undergraduates to read the opening chapters of War and Peace on a computer monitor and then to tap a key whenever they realized they were not thinking about what they were reading. On average, the students reported that their minds wandered 5.4 times in a 45-minute session. Other researchers have gotten similar results with simpler tasks, such as pronouncing words or pressing a button in response to seeing particular letters and numbers. Depending on the experiment, people spend up to half their time not thinking about the task at hand—even when they’ve been told explicitly to pay attention.
When I was a kid I thought there was something wrong with me because I would “read” pages at a time without paying attention to what I was reading. My eyes would crawl over the words and move from line to line and in a certain real sense I was reading but my conscious mind was completely uninvolved. After a few pages I would notice that I had absorbed nothing.
I still have a wandering mind but over time I have come to view it as a net asset. The key is learning to teach your wandering mind to leave breadcrumbs. Because it knows how to get to places that your conscious mind doesn’t.
Because a fair amount of mind wandering happens without our ever noticing, the solutions it lets us reach may come as a surprise. There are many stories in the history of science of great discoveries occurring to people out of the blue. The French mathematician Henri Poincaré once wrote about how he struggled for two weeks with a difficult mathematical proof. He set it aside to take a bus to a geology conference, and the moment he stepped on the bus, the solution came to him. It is possible that mind wandering led him to the solution. John Kounios of Drexel University and his colleagues have done brain scans that capture the moment when people have a sudden insight that lets them solve a word puzzle. Many of the regions that become active during those creative flashes belong to the default network and the executive control system as well.
The article is worth a read. (akubura ack: Mindhacks)
I came across this philosophy paper (miter missive: The Browser) which ponders whether the hypothesis of an omnipotent and omniscient God is any more likely to imply that God is good rather than God is evil.
Suppose, for example, that the universe shows clear evidence of having been designed. To conclude, solely on that basis, that the designer is supremely benevolent would be about as unjustified as it would be to conclude that it is, say, supremely malevolent, which clearly would not be justified at all.
The problem always appears at a much more basic level for me. Suppose you are an omnipotent God. What do you do? Obviously to answer that question you should start by identifying all of the feasible alternatives (ok that one is easy, everything is feasible because you are omnipotent), rank them according to your preferences, and do the one that ranks at the top. Wait a minute. What are your preferences?
You are omnipotent remember. Its not just that you get to choose your preferences. Your preferences do not exist until you create them. Ok. So first you choose your preferences then solve the problem of what to do given those preferences. How do you choose your preferences? It is no help trying to choose the preferences that are easiest to satisfy blissfully because you are omnipotent. All preferences are trivial to satisfy blissfully. But why do you want to want that anyway? How do you even know what you want to want? You don’t have any preferences yet right?
So I think that an omnipotent God would be too neruotic to even get out of bed and decide whether to be good or evil.
Should texting, emailing and browsing be banned in meetings? This article discusses the current climate.
Despite resistance, the etiquette debate seems to be tilting in the favor of smartphone use, many executives said. Managing directors do it. Summer associates do it. It spans gender and generation, private and public sectors.
A few years ago, only “the investment banker types” would use BlackBerrys in meetings, said Frank Kneller, the chief executive of a company in Elk Grove Village, Ill., that makes water-treatment systems. “Now it’s everybody.” He said that if he spotted 6 of 10 colleagues tapping away, he knew he had to speed up his presentation.
While I would always prefer to have my iPhone handy, I would volunteer to keep the meeting smartphone free. And that is not because I want the undivided attention of my colleagues. If we all deprive ourselves we create high-powered incentives to keep the meeting as short as possible. That sentiment is echoed here:
Mr. Brotherton, the consultant, wrote in an e-mail message that it was customary now for professionals to lay BlackBerrys or iPhones on a conference table before a meeting — like gunfighters placing their Colt revolvers on the card tables in a saloon. “It’s a not-so-subtle way of signaling ‘I’m connected. I’m busy. I’m important. And if this meeting doesn’t hold my interest, I’ve got 10 other things I can do instead.’ ”
Wimbledon, which has just gotten underway today, is a seeded tournament, like all major tennis events and other elimination tournaments. Competitors are ranked according to strength and placed into the elimination bracket in a way that matches the strongest against the weakest. For example, seeding is designed so that when the quarter-finals are reached, the top seed (the strongest player) will face the 8th seed, the 2nd seed will face the 7th seed, etc. From the blog Straight Sets:
When Rafael Nadal withdrew from Wimbledon on Friday, there was a reshuffling of the seeds that may have raised a few eyebrows. Here is how it was explained on Wimbledon.org:
The hole at the top of the men’s draw left by Nadal will be filled by the fifth seed, Juan Martin del Potro. Del Potro’s place will be taken by the 17th seed James Blake of the USA. The next to be seeded, Nicolas Kiefer moves to line 56 to take Blake’s position as the 33rd seed. Thiago Alves takes Kiefer’s position on line 61 and is a lucky loser.
Was this simply Wimbledon tweaking the draw at their whim or was there some method to the madness?
Presumably tournaments are seeded in order to make them as exciting as possible for the spectators. One plausible goal is to maximize the chances that the top two players meet in the final, since viewership peaks considerably for the final. But the standard seeding is not obviously the optimal one for this objective: it makes it easy for the top seed to make the final but hard for the second seed. Switching the positions of the top ranked and second ranked players might increase the chances of having a 1-2 final.
You would also expect that early round matches would be more competitive. Competitiveness in contests, like tennis matches, is determined by the relative strength of the opponents. Switching the position of 1 and 2 would even out the matches played by the top player at the expense of unbalancing the matches played by the second player, the average balance across matches would be unchanged. If effort is concave in the relative strength of the opponents then the total effect would be to increase competitiveness.
When you start thinking about the game theory of tournaments, your first thought is what has Benny Moldovanu said on the subject. And sure enough, google turns up this paper by Groh, Moldovanu, Sela, and Sunde which seems to have all the answers. Incidentally, Benny will be visiting Northwestern next fall and I expect that he will be bringing his tennis racket…
One of the highly touted features of the iPhone is the abundance of applications available for near-instantaneous download and seamless installation. In traditional Apple fashion, in order to keep full control of the software environmnet and maintain this seamless experience, Apple exercises strict control over which apps are made available through the app store. Short of jailbreaking your phone, there is no other way to install third-party software.
The process by which apps are submitted and reviewed strikes many as highly inefficient. (It also strikes many as anti-competitive, but that is not the subject of this post. There are legitimate economic arguments supporting Apple’s control of the platform and for my purposes here I will take those as given, although for now I remain agnostic on the question.) Developers sink significant investment producing launch-ready versions of their software and only then learn definitively whether the app can be sold. There is no recourse if the submission is denied.
(Just recently, we witnessed an extreme example of the kind of deadweight loss that can result. A fully licensed, full-featured Commodore64 Operating System emulator, 1 year in the making, was just rejected from the app store. )
Unfortunately, this is an inevitable inefficiency due to the ubiquitous problem of incomplete contracting. In a first-best world, Apple would publicize an all-encompassing set of rules outlining exactly what software would be accepted and what would be rejected. In this imaginary world of complete contracts, any developer would know in advance whether his software would be accepted and no effort would be wasted.
In reality it is impossible to conceive of all of the possibilities, let alone describe them in a contract. Therefore, in this second-best world, at best Apple can publish a broad set of guidelines and then decide on a case-by-case basis when the final product is submitted. This introduces inefficiencies at two levels. First, the direct effect is that developers face uncertainty whether their software will pass muster and this is a disincentive to undertake the costly investment at the beginning.
But the more subtle inefficiency arises due to the incentive for gamesmanship that the imperfect contract creates. First, Apple’s incentive in constructing guidelines ex ante is to err on the side of appearing more permissive than they intend to be. Apple knows even less than the developers what the final product will look like and Apple values the option to bend the (unwritten) rules a bit when a good product materializes. While it is true that Apple’s desire to keep a reputation for transparent guidelines mitigates this problem to some extent, the fact remains that Apple does not internalize all the costs of software development.
Second, because Apple cannot predict what software will appear it cannot make binding commitments to reject software that is good but erodes slightly their standards. This gives developers an incentive to engage in a form of brinkmanship: sink the cost to create a product highly valued by end users but which is questionable from Apple’s perspective. By submitting this software the developer puts Apple in the difficult position of publicly rejecting software that end users want and the fear of bad publicity may lead Apple to accept software that they would have like to commit in advance to reject.
The iPhone app store is only a year old and many observers think of it as a short-run system that is quickly becoming overwhelmed by the surprising explosion of iPhone software. When the app store is reinvented, it will be interesting to see how they approach this unique two-sided incentive problem.
Update: Mark Thoma further develops here. He didn’t ask in advance for permission to do that, but if he did I would have given encouraging signals but then rejected it ex post.
That’s the title of a new essay by the omnipresent David Levine. An excerpt:
The key difference between psychologists and economists is that psychologists are interested in individual behavior while economists are interested in explaining the results of groups of people interacting. Psychologists also are focused on human dysfunction – much of the goal of psychology (the bulk of psychologists are in clinical practices) is to help people become more functional. In fact, most people are quite functional most of the time. Hence the focus of economists on people who are “rational.” Certain kinds of events – panics, for example – that are of interest to economist no doubt will benefit from understanding human dysfunctionality. But the balancing of portfolios by mutual fund managers, for example, is not such an obvious candidate. Indeed one of the themes of this essay is that in the experimental lab the simplest model of human behavior – selfish rationality with imperfect learning – does an outstanding job of explaining the bulk of behavior.
Jonah Lehrer suggests leveraging “mental accounting” to create a free lunch by imposing a tax on homeowners to pay for energy retro-fitting that they won’t notice because of its small size relative to the price of the house:
But I can already hear the naysayers: Won’t homeowners object? Won’t that just add thousands of dollars to the cost of buying a home?Enter mental accounting, an irrational bias that can be tweaked to produce positive outcomes. Because a home is already such a gigantic purchase, and because the home buying process is already so saturated in peculiar fees (inspection charges, loan points, escrow fees, mortgage broker expenses, etc.) I’d argue that consumers will be much less sensitive to the cost of a home renovation. They’ll barely even notice the $5000 “energy efficiency charge” when it appears on their massive bill from the real estate agent. (Besides, they’ll get a big chunk of the money back as a tax credit.) In other words, they’ll act just like me the last time I stayed at a fancy hotel, when I ordered the internet and ate the peanuts.
I have always preferred Guinness at the warmer temperatures I have had it served to me in Britain. And I always assumed that 45-50F was the recommended serving temperature. That is why I was surprised to see this:
I assume that this is US-specific marketing. In the US, beer is always served ice cold and the marketing around this fact can be hysterical. I once remember an advertisement for Miller Genuine Draft which claimed that it was the “coldest.”
Anyway, does anybody know what temperature Guinness is served, say in Ireland? And on these new bottles with the “widget” and the nitrogen, does it also read “Serve Extra Cold” where you live?
(In the background is guacamole made in a molcajete. Grind 1/2 white onion, chopped, one jalapeno diced, and a small handful of cilantro in the bottom of the molcajete, with some kosher salt. 2 ripe avocados and the juice of one lime. Mash the avocado with the onion/cilantro/chile using a plastic fork. top with some more diced white onion and chopped cilantro. no tomatoes! Pair with… well duh.)
It is well-known that when you ask a person to construct a random sequence, say of zeroes and ones, the sequence they create differs in systematic ways from a “truly random” sequence. For example, they exhibit regression to the mean: the person constructing the sequence is too careful to make sure that the short-run averages are 50-50 resulting in too-frequent alternations between zero and one.
Knowing this, here is a simple bet you can use as a money pump at parties. Tell someone to write down a random sequence of heads and tails, and bet them that you can guess the numbers in their seqeunce. A simple strategy that correctly predicts more than 50% of the time is to randomly guess the first number and then guess that each subsequent number is the opposite of the previous. But if you study this article (and its links), you can refine your strategy and do even better.
And soon, as icing on the cake, you can offer your victim favorable odds, say you pay $1.10 every time you are wrong and she pays you $1.00 every time you are right. You will still make money.
Then after you have relieved your fellow revelers of their pocket cash, and they want to turn the tables on you, remember to use one of the coins you have just won to construct your sequence in a truly random fashion.
I’ve had a couple of excellent bottles of Coltassala in the past. Definitely had to try it again. Came away it a bit disappointed. It was very heavy. Quite bitter. May have drunk it about 10 years too early in my attempt to recreate old memories. Its almost 100% Sangiovese. I’ve never liked Chianti which is also Sangiovese. I think it needs to be blended with another grape.
Whic brings me to ….Balifico which was very delicious. It’s a Cabernet/Sangiovese blend. Very smooth. Lots of fruit, deep red color.
The Chianti from Castello di Volpaia is quite easy to get hold in the States. I have found Coltassala in the past. Hope I can get hold of Balifico somehow.
As you can guess from my earlier post, I totally love Volpaia. Castello di Volpaia has a tasting room and what looks like a restaurant under construction. There are at least two other places to eat, including the wonderful Bottega. Not sure what would keep the Euros rolling in but I would love to move here. It’s a cliche.
Q: How do you prove the existence of Spring in Chicago?
A: By continuity.
In February it was zero Farenheit. Today it is muggy and approaching 90. By continuity, Spring happened somewhere in between. But note that this existence proof is not constructive. It is of no help in telling us exactly when it was that Spring fluttered by. I must have been sleeping at the time.
List the different varieties of animal meat that are sold at a typical grocery. Then ask for each item on that list what is the fraction of the US population that finds it acceptable to eat it. The distribution you will map out is not at all smooth. Most people will either find it acceptable to eat everything on the list or unacceptable to eat anything on the list.
I believe that both mass points are a result of the same phenomenon: the slippery slope. Moral rules are vulnerable to creeping margins and unraveling. If I want to argue that people should not eat meat it is easier to make that argument if I take an absolute stand. Absolute rules are easier to defend then nuanced rules that define some interior boundary (it is ok to eat animals if and only if they have no feelings) because nuanced rules admit cases that are very similar but fall on opposite sides of the boundary (you mean its ok to eat squid but not octopus?)
Likewise, people who insist that it is ok to eat all meat are usually painted into that corner for similar reasons. To accept that it is not ok to eat veal makes your filet mignon vulnerable.
So the slippery slope of moral negotiation pushes us to extremes where we are on firmer footing. All sides lose as a result. Especially those of us who would prefer that fewer animals are eaten. I was reminded of this point by an article from the Atlantic about “semitarianism:” proudly taking the middle ground. Here is an effective passage:
…, recall that even the most fervently ethics-based vegetarianism isn’t really about an ideological purity of all-or-nothing, us-versus-them purism activist groups foster. It’s about reducing animal suffering. Whether one person gives up meat or three people cut out a third, it’s all the same to the cow, and it should be the same to us.
(a little shout-out to Sandeep who is in Tuscany exercising his finnochiana option.)
In an old post, I half-jokingly suggested that the rules of scrabble should be changed to allow the values of tiles to be determined endogenously by competitive bidding. PhD students, thankfully, are not known for their sense of humor and two of Northwestern’s best, Mallesh Pai and Ben Handel, took me seriously and drafted a set of rules. Today we played the game for the first time. (Mallesh couldn’t play because he is traveling and Kane Sweeney joined Ben and me.)
Scrabble normally bores me to tears but I must say this was really fun. The game works roughly as follows. At the beginning of the game tiles are turned over in sequence and the players bid on them in a fixed order. The high bidder gets the tile and subtracts his bid from his total score. (We started with a score of 100 and ruled out going negative, but this was never binding. An alternative is to start at zero and allow negative scores.) After all players have 7 tiles the game begins. In each round, each player takes a turn but does not draw any tiles at the end of his turn. At the end of the round, tiles are again turned over in sequence and bidding works just as at the beginning until all players have 7 tiles again, and the next round begins. Apart from this, the rules are essentially the standard scrabble rules.
Since each players’ tiles are public information, we decided to take memory out of the game and have the players keep their tiles face up. It also makes for fun kibbitzing. The complete rules are here. Share and enjoy! Here are some notes from our first experiment:
- The relative (nominal) values of tiles are way out of line of their true value. The way to measure this is to compare the “market” price to the nominal value. If the market price is higher that means that players are willing to give up more points to get the tile than that tile will give them back when played (ignoring tile-multipliers on the board.) That means that the nominal score is too high. For example, blanks have a nominal score of zero. But the market price of a blank in our play was about 20 points. This is because blanks are “team players:” very valuable in terms of helping you build words. So, playing by standard scrabble rules with no bidding, if the value of a blank was to be on equal terms with the value of other tiles, blanks should score negative: you should have to pay to use them. Other tiles whose value is out of line: s (too high, should be negative), u(too low), v(too low.) On the other hand, the rare letters, like X, J, Z, seem to be reasonably scored.
- Defense is much more a part of the game. This is partly because there is more scope for defense by buying tiles to keep them from the opponent, but also in terms of the play because you see the tiles of the opponents.
- It is much easier to build 7/8 letter words and use all your tiles. This should be factored into the bidding.
- There are a few elements of bidding strategy that you learn pretty quickly. They all have to do with comparing the nominal value of the tile up for auction with the option value of losing the current auction and bidding on the next, randomly determined, tile. This strategy becomes especially interesting when your opponent will win his 7th tile, forcing you the next tile(s) but at a price of zero.
- Because the game has much less luck than standard scrabble, differences in ability are amplified. This explains why Ben kicked our asses. But with three players, there is an effect which keeps it close: the bidding tends to favor the player who is behind because the leaders are more willing to allow the trailer to win a key tile than the other leader.
Finally, we have some theoretical questions. First, suppose there is no lower bound to your score, so that you are never constrained from bidding as much as you value for a tile, the initial score is zero, and there are two players playing optimal strategies. Is the expected value of the final score equal to zero? In other words, will all scoring be bid away on average? Second, to what extent do the nominal values of the tiles matter for the play of the game. For example, if all values are multiplied by a constant does this leave the optimal strategy unchanged?
I’m visiting my sister in Tuscany on my way to a conference. She runs a cooking school, Organic Tuscany. The students are all housed in an 18th century villa near Certaldo. We’re staying here too because the villa is huge and has a swimming pool. The students seem to be having a great time. They cook from 10.30-1.30. and then eat what they made for lunch. The incentives are place to pay attention in class! In the afternoon, they go somewhere for an organized trip – today Siena, yesterday San Gimignano. My sister has set this up. I’m very impressed as I could never pull off something like this.
We didn’t want to disturb her this morning during class so we did our own disorganized trip to Volpaia. We went there ten (!) years ago before we had kids. We had a nice, semi-challenging hike to the hill-top where Volpaia sits prettily. I remember it well as my pre-made boring pecorino sandwich looked much less interesting that by wife’s finnochiana. That’s where the salami-exception to my “vegetarianism” began. The beginning of a key hypocrisy is always memorable, however many mild hypocrisies you commit daily.
I indulged the big one again at La Bottega di Volpaia where we shared a salami plate. I followed this with spectacular potato tortelli in a fresh porchini sauce. My wife enjoyed her classic ricotta ravioli in a butter and sage sauce and the kids even ate their spaghetti with pesto.
The drive up there is great too as long as your stomach can withstand the hair-raising near-crashes with Italians speeding in the other direction while hogging the middle of small, windy roads. The lunch was so good and the drive so picturesque that we might risk it again.
Behavioral economists Devin Pope and Maurice Schweitzer have a new paper showing that professional golfers perform differently on putts that are identical in all respects except that one is for par and one is for birdie. What does “identical in all respects mean?” From a summary in the New York Times:
The professors, Devin Pope and Maurice Schweitzer, seemingly anticipated every “But what about?” reflex from golf experts. The tendency to miss birdie putts more often existed regardless of the player’s general putting or overall skill; round or hole number; putt length; position with respect to the lead or cut; and more.
They find that par putts are made more often than birdie putts. One natural response might be the following. If the putt is for par, then the golfer is, on average, farther behind than if the putt is for birdie. And when you are farther behind you have an incentive to take greater risk. In putting, you can increase the chance of making a putt at the expense of a more difficult next putt if you miss (by say using a firmer stroke.) You would have more incentive to do this when you are farther behind. (Then you care less about the consequences in the event of missing since in that event you are even further behind.)
But they apparently control for this by matching par putts with birdie putts that are identical in terms of the total score that would result from sinking them. They find the bias is still there. (See Column 8 of Table 3 in their paper.)
However, you might say that this means that the bias is not due to loss aversion. Because in these two matched settings the golfer is at the same point relative to any reference point. And if you appeal to “narrow framing” by saying that the players are using a hole-by-hole reference point of par, then the same narrow framing makes it rational to take risks when the putt is for par and play it safe when the putt is for birdie.
A real smoking gun would be the following. Take the birdie and par putts matched in terms of score conditional on sinking the putt. Now ask what is the expected final score, or tournament rank, or prize money, or other measure of success, conditional on whether the putt was for birdie or bogey. The null hypothesis is that these would be the same. Loss aversion would imply that they are not the same, although it is not obvious which direction it would go. (The authors do a back of the envelope calculation to address a related question in their concluding section. They find that the apparent loss aversion matters for final scores but they don’t seem to include any of the controls from the earlier parts of the paper in this calculation.)
(Gatsby greeting: kottke.org)
Iran’s political system is complex and confusing. But the basic point is that it is a form of dictatorship with Supreme Leader Khamenei in charge. The protests on the street suggest it is weaker than ever before. My research with David Lucca and Tomas Sjöström suggests regimes which are neither democracies nor dictatorships but something in between can be the most aggressive of all.
I used this idea for an opinion piece in the New York Times. Here it is:
A stolen election, and what it reveals about the security of Iran’s ruling elite, means that it is more important than ever to engage with Iran.
So far the signs from the Obama administration are encouraging: “The administration will deal with the situation we have, not what we wish it to be,” one senior official said. Let’s hope the administration understands what that situation is.
President Obama is in a difficult position. He under pressure to speak out more and take a tougher line with Iran, as Senator McCain has. But the main issue is not whether the election was stolen or not, but what it reveals about Ayatollah Khamenei’s hold on power.
If we respond with our own saber-rattling, this is more likely to inflame the situation than ever before.
Under Khamenei’s leadership, the Revolutionary Guard has become more powerful and taken over parts of the economy. The disputed election suggests that Khamanei’s position has become weaker as the public distaste for Ahmadinejad’s policies has grown. If we respond with our own saber-rattling, this is more likely to inflame the situation than ever before. A strong dictator can be passive in the face of aggression and still survive in power. But a weak dictator must respond forcibly to every threat to his rule.
The key question is whether Khamenei will ratchet up aggression to survive in power. One way to consolidate power is to win a war. If the regime’s survival is in question, it may destabilize the region and pursue nuclear weapons in a bid to consolidate internal support. A democratic leader may also try to use aggression to drum up support for re-election.
A careful study of history finds that weak dictatorships like Iran, that lie in between full democracy or strong dictatorships, can be the most warlike of all.
I might add one more point: I would love for the Obama administration to “help the demonstrators” somehow. But making a statement in their support will backfire as it will give an excuse to display demonstrations as American sponsored. Iranian TV can just run footage of Obama making the statement, translate it and interpret it in a biased way and literally beat protesters over the head with it.
Now we have set the stage. We are considering social choice problems with transferrable utility. We want to achieve Pareto efficient outcomes which in this context is equivalent to utilitarianism.
Now we face the next problem. How do we know what the efficient policy is? It of course depends on the preferences of individuals and any institution must implicitly involve providing a medium through which preferences are communicated and mediated. In this lecture I introduce this idea in the context of a simple example.
Two roomates are condering purchasing an espresso machine. The machine costs $50. Each has a maximum willingness to pay, but each knows only his own willingness to pay and not the others. It is efficient to buy the machine if and only if the sum exceeds $50. They have to decide two things: whether or not to buy the machine and how to share the cost. I ask the class what they would do in this situation.
A natural proposal is to share the cost equally. I show that this is inefficient because it may be that one roomate has a high willingness to pay, say $40, and the other has a low willingness to pay, say $20. The sum exceeds $50 but one roomate will reject splitting the cost. This leads to discussion of how to improve the mechanism. Students propose clever mechanisms and we work out how each of them can be manipulated and we discover the conflict between efficiency and incentive-compatibility. There is scope for some very engaging class discussions here that create a good mindset for the coming more careful treatment.
At this stage I tell the students that these mechanisms create something like a game played by the roomates and if we are going to get a good handle on how institutions perform we need to start by developing a theory of how people play games like this. So we will take a quick detour into game theory.
For most of this class, very little game theory is necessary. So I begin by giving the basic notation and defining dominated and dominant strategies. I introduce all of these concepts through a hilarious video: The Golden Balls Split or Steal Game (which I have blogged here before.) I play the beginning video to setup the situation, then pause it and show how the game described in the video can be formally captured in our notation. Next I play the middle of the video where the two players engage in “pre-play communication.” I pause the video and have a discussion about what the players should do and whether they think that communication should matter. I poll the class on what they would do and what they predict the two players will do. Then I show them the dominant strategies.
Finally I play the conclusion of the video. Its a pretty fun moment. I conclude with a game to play in class. This year I had just started using Twitter and I came up with a fun game to play on Twitter. I blogged about this game previously.
(By the way this game is extremely interesting theoretically. I am pretty confident that this game would always succeed in implementing the desired outcome: getting the target number of players to sign up, but it is not easy to analyze because of the continuous time nature. The basic logic is this: if you think that the target will not be met, then you should sign up immediately. But then the target will be met.)
Here are the lecture slides.
Apparently the price you are quoted when you search for fares on Spain’s high-speed railway depends on whether you search in English or Spanish:
When I searched the site earlier that day from my office, I searched in Spanish. A one-way ticket from Barcelona to Madrid could be had for around 44 euros on a “tarifa Web,” their Internet special fare with 30 day advance purchase.
When I was at home, ready to finalize my purchase, I opted to search with the site language set to English. The price was nearly 110 euros.
The economic logic is standard: language is a way to segment the market and this segmentation is profitable if the two markets have a large difference in price-sensitivity. Presumably if you are searching in English then you are a tourist and you have fewer alternative modes of transportation. This makes you less price-sensitive.
I thank the well-travelled and multi-lingual Mallesh Pai for the pointer.
Much as I’d like to rationalize alcohol consumption, it seems the studies showing moderate drinking leads to better health have the usual problem according to the New York Times:
No study….. has ever proved a causal relationship between moderate drinking and lower risk of death — only that the two often go together. It may be that moderate drinking is just something healthy people tend to do, not something that makes people healthy.
Health economics might provide a treasure trove for economists well-versed in the techniques of “instrumental variables” typically used to determine causation.
There is a summary of the research in the New York Times:
In those families, if the first child was a girl, it was more likely that a second child would be a boy, according to recent studies of census data. If the first two children were girls, it was even more likely that a third child would be male.
Demographers say the statistical deviation among Asian-American families is significant, and they believe it reflects not only a preference for male children, but a growing tendency for these families to embrace sex-selection techniques, like in vitro fertilization and sperm sorting, or abortion.
Here is the source article. There is one small problem with the conclusion:
To reduce the probability that there was an eldest child not in the household, we also restricted our sample to families where the oldest child was 12 years or younger.
Here is the problem. Let’s suppose that Asian-American parents have a preference for boys but do not engage in any manipulation, except that they keep trying until they get one boy. Consider two families. Both families have kids spaced 3 years apart. The first family has a girl and then a boy and stops. The second family has 4 girls before the first boy is born. The first family is included in the sample, the second is not. More generally, families whose first two children are girls are less likely to be included in the sample than the boy-girl families. This statistical selection makes it look as if the parents are actively engaged in selection.
The 12 year cap may exclude very few families and so this selection effect may be too small to generate the statistics they are reporting, but it’s hard to know for sure. The sample sizes are not large. Here is a graph showing large and overlapping confidence intervals.
It is worth acknowledging that even my alternative story relies on Asian-American parents having a stronger preference for boys than the American population as a whole. However, it doesn’t require the assumption that they engage in pre-natal sex selection.
Update: The ever-vigilant Marit Hinnosaar (are you noticing a pattern here?) has pointed out to me that I mis-interpreted their sample selection criterion. As she puts it:
The situation you discribed would create a problem if their sampling method was: include in the sample each household iff the age difference of the children is no more than 12 years. But that is not what they did. With the sampling method they used, they included households, where the oldest child in the household was born not earlier than in 1988 (they used 2000 census data and excluded households that had a child older than 12). This does not lead to the biased sample that you described, since for the researchers these two households that you described are equivalent in terms of whether to include in the sample.
This is not one of those arrangements where donors can sponsor a needy child or a sorghum farmer in the developing world. The person asking for help is a 21-year-old neurobiology major at Harvard, and she is requesting a loan from Harvard alumni.
The service, Unithrive, resembles micro-lending in a number of ways (except perhaps the sticker.)
Unithrive, which made its debut last month, matches alumni lenders and cash-strapped students, who post photographs and biographical information and can request up to $2,000. The loans are interest-free and payable within five years of graduation.
See the article in the New York Times.
When groups wanting to establish different political structures compete, who will win? Here is a simple model. Let’s say one group wants (full) democracy and one group wants a theo-autocracy. The winner will be determined in large part by the costs these groups are willing to incur. That is limited by the long run benefit of keeping the winning system in place.
When both groups are strong, the value of democracy is handicapped by the fact that the authoritarians will be granted participation in the process and this will be a constant threat to the system. By constrast the authoritarians internalize more of the benefits from winning the struggle because it is a defining feature of that system that the supporters of democracy will be excluded.
This means that the incentives of even a small minority of authoritarians may outweigh a majority who seek democracy.
Iran is clearly not a full democracy like the United States – there is a Supreme Leader, currently Ayatollah Khamenei, who controls foreign and nuclear policy and is not subject to general election. There is a President who is (or was?) elected and controls domestic policy. There is a council, the Assembly of Experts, that ostensibly determines who is Supreme Leader. However, they have never acted to remove anyone! Moreover, the Supreme Leader via the Guardian Council can veto candidates who stand for election for President or the Assembly of Experts! Confused? I am. But here are three excellent depictions of the political systems.
– Jeff found this one
– The prettiest but most confusing is from the UK Guardian news paper, above.
Once you work it all out it boils down to one thing – Khamenei is the man in charge and always has been (Ahmadinejad is more colorful and has a bigger press presence but he is just the face of the regime).
What is still not clear is whether the election was stolen removing even the veneer of democracy or whether there is a vocal minority in Tehran that does not support Ahmadinejad but Ahmadinejad actually won.
In the past, Khamenei has managed to live with a reformist President, Ayatollah Khatami, by sabotaging his policies behind the scenes. If he can no longer do that and is behind the stolen election, it means Khamenei is weaker than before. Weak dictators or even democratic leaders with a weak hold on power do crazier things that a strong dictator because they need some support, e.g. from the army, to survive in power. Starting a war is one way to try to generate enough support to survive. (E.g. Galtieri in Argentina). Drumming up popular hatred of an enemy the country must oppose is another related strategy. So if Khamenei is weaker than before, Iran just got more dangerous. This means Obama must not give Khamenei/Ahmadinejad an excuse to increase their hold on power by taking bellicose actions that allow them to weaken internal opposition. For example, making pro-democracy statements can be made to seem like outside interference. This will lead to people “rallying around the flag” and hence lead to less chance of democracy flowering.
Obama does seem to be keeping a low profile so far. Let’s wait and see what happens.
From an excellent article in the Washington Post:
The election results in Iran may reflect the will of the Iranian people. Many experts are claiming that the margin of victory of incumbent President Mahmoud Ahmadinejad was the result of fraud or manipulation, but our nationwide public opinion survey of Iranians three weeks before the vote showed Ahmadinejad leading by a more than 2 to 1 margin — greater than his actual apparent margin of victory in Friday’s election.
The fact that, in the run-up to the election, expectations were low for any change in Iran is also pretty good evidence that what we are seeing is, sadly, less a reflection of majority opinion than a vocal, and highly motivated minority. The implications are a little scary just weeks after the anniversary of Tiananmen…
The article concludes with some political dangers:
Allegations of fraud and electoral manipulation will serve to further isolate Iran and are likely to increase its belligerence and intransigence against the outside world. Before other countries, including the United States, jump to the conclusion that the Iranian presidential elections were fraudulent, with the grave consequences such charges could bring, they should consider all independent information. The fact may simply be that the reelection of President Ahmadinejad is what the Iranian people wanted.
Update: There may be reason to remain suspicious even in light of this poll. See Marciano’s comment below.
Suspicious graph of Ahmadinejad’s vote share? No, says Nate Silver
An excellent analysis from a former National Security Council member.
Where did I find all these? Huffington Post.
The possibility is nearing that you can take a pill and remove some memories. (This evening I opened a nice bottle of Yangarra Old Vine Grenache 2005 and removed some memories but that doesn’t count because they will come back tomorrow.)
Media treatment of these advances always focuses on enabling us to erase bad memories. But its not so obvious that bad memories are the ones you want to lose. Bad memories often serve an important purpose. They record a lesson learned. It may be a lesson about what not to do (memories of car accidents after opening a nice bottle of…) It may be a lesson about people not to trust (memories of abuse.)
On the other hand, many good memories just get in the way. I remember vividly the film Leolo. But because of that memory I will never get to enjoy that film again. Likewise I remember the first time I heard Chick Corea’s Children’s Song #6, how to juggle, the end of The Naked and the Dead and the smell of my wife. These are all novelties that are no longer available to me, unless I could erase some good memories.
The good/bad distinction is less important than the following distinction. Is the memory affecting my decisions or not? Whether the memory is good or bad, I want to keep it if it encodes an important lesson helping me continue to make good decisions and avoid bad ones. And I want to erase it if its function is pure consumption. The bad memories I want to lose forever, the good memories I want to repeat.
Thursday night we had another overtime game in the NBA finals. For the sake of context, here is a plot of the time series of point differential. Orlando minus LA.
A few of the commenters on the previous post nailed the late-game strategy behind the eye-popping animation. First, at the end of the game, the team that is currently behind will intentionally foul in order to prevent the opponent running out the clock. The effect of this in terms of the histogram is that it throws mass out away from zero. But the ensuing free-throws might be missed and this gives the trailing team a chance to close the gap. So the total effect of this strategy is to throw mass in both directions.
If the trailing team is really lucky both free throws will be missed and they will score on the subsequent possession and take the lead. Now the other team is trailing and they will do the same. So we see that at the end of the game, no matter where we are on that histogram, mass will be thrown in both directions, until either the lead is insurmountable, or we land right at zero, a tie game.
Once the game is tied there is no more incentive to foul. But there is also no incentive to shoot (assuming less than 24 seconds to go.) The leading team will run the clock as far as possible before taking one last shot.
So there are two reasons for the spike: risk-taking strategy by the trailing team increases the chance of landing at a tie game, and then conservative strategy keeps us there. The following graphic (again due to the excellent Toomas Hinnosaar) illustrates this pretty clearly.
In blue you have the distribution of point differences that we would get if we pretented that the teams’ scoring was uncorrelated. This is what I referred to as the crude hypothesis in the previous post. In red you see the extra mass from the actual distribution and in white you see the smaller mass from the actual distribution. We see that the actual distribution is more concentrated in the tails (because there is less incentive to keep scoring when you are already very far ahead), less concentrated around zero (because of risk-taking by the trailing team) and much more concentrated at the point zero (because of conservative play when the game is tied.)
Now, this is all qualitatively consistent with the end-of-regulation histogram and with the animation. The big question is whether it can explain the size of that spike quantitatively. Obviously, not all games that go into overtime follow this pattern. For example, Thursday’s game did not feature intentional fouling at the end. How can we assess whether sound strategy alone is enough to explain the frequency of overtime?
David Pogue does not call it demand elasticity but that is what he’s talking about when he explains why Apple is selling it’s new OS upgrade for $29 rather than the usual $130:
The App Store Effect says this: if you cut a software program’s price in half, you sell far more than twice as many copies.
If he had only said something like this ten weeks ago, I would have had a great example for class!
We used to be in denial that there were any bubbles, now everything is a bubble. This article in the Chronicle of Higher Education sounds the alarm on higher education (tassle twirl: lone gunman.)
Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could be.
With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain private higher education for all but the very well-heeled is questionable. According to the National Center for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent — more than four times the rate of inflation and almost twice the rate of medical care. Patrick M. Callan, the center’s president, has warned that low-income students will find college unaffordable.
Meanwhile, the middle class, which has paid for higher education in the past mainly by taking out loans, may now be precluded from doing so as the private student-loan market has all but dried up.
The analogy to the housing bubble is certainly tempting. Pell grants and Stafford Loans are to Colleges what Fannie and Freddie are to housing. It is undeniable that easy access to credit fueled rises in tuition. It is not a stretch to think of these loan programs as essentially subsidies to Universities as they raise tuition dollar for every dollar of loans that are essentially forgiven.
But the analogy doesn’t go any farther than that. There is no speculation fueling demand for higher education. There is a permanent and measurable difference in earnings for college graduates. There will continue to be a robust market for credit to students because, to borrow a phrase, consumption wants to be smoothed. And unlike subsidized loans for housing, there is a real externality that justifies continued federal presence in the student loan market.
Cheap Talk 
