Job Market Ideas That Can Be Explained In Words

December 4, 2011 in Uncategorized | Tags: , | by | 1 comment

(Regular readers of this blog will know I consider that a good thing.)

Market mechanisms of all sorts are plagued in practice by the problem of unraveling.  For example, well before completing law school, law students sign contracts to assume positions at established law firms.  Unraveling occurs when this early contracting motive causes market participants to compete by exiting the market earlier and earlier to the detriment of market efficiency.  An excellent summary of the problem and a slew of examples can be found in a paper by Roth and Xing.

One of the problems is that the formal market institutions were not designed to combat unraveling.  The adoption of stable matching mechanisms is often proposed as a solution.  A famous example is the National Medical Resident Matching program which matches residents to hospitals, a stable matching mechanism that is widely believed to have significantly curtailed unraveling in that market.

Nevertheless unraveling is a robust phenomenon and Songzi Du, in a joint paper with Yair Livne, from Stanford GSB has a very simple theoretical explanation.  Indeed, he shows that unraveling incentives are strong even in markets with a stable matching mechanism.  Moreover large market size seems only to make the problem worse.

Consider an employer and employee who are both highly ranked and suppose that they meet each other well before the matching process begins so that neither has learned anything about the quality of the rest of the market.  Let’s analyze their incentives to sign a contract now and exit the market before the formal matching process takes place.

The employee reasons that the mechanism is either going to give him a better match or its going to give the employer a better match. If he, the employee, gets a better match it is not likely to be that much better since the current employer is already highly ranked.  On the other hand, if the employer finds a better match then the employee is going to have to take his chances with the rest of the market.  Since the current employer is highly ranked, it is likely that whatever new employer he is matched with will be significantly worse.

On average going to the matching mechanism is a bad gamble.  And since the employer is in the exact same situation, they both prefer to exit than to take that gamble.

Du and Livne use this idea to quantify how large a problem unraveling is likely to be.  They takes the realistic position that participants are going to learn about the quality of close competitors prior to contracting. This gives them a rough sense of the possible matches they will get from the mechanism.  The previous intution translates naturally to this setting.  If the two potential early contractors are near the high end of this group, they will want to match early.  Du and Livne show that for any given similarly ranked pair, this will happen about 1/4 of the time, and this is true even when the market is very large.

Finally, once it is established that unraveling is the norm and not the exception, he uses a dynamic model to give a sense of what kind of equilibrium an unraveled market settles into.  And the news here is not good either.  No matter how you try to make the match work, by assigning some to match early and some to wait, there will always be some pairs that want to deviate from that plan.  That is, there is no equilibrium.

Sordid Links

December 2, 2011 in Uncategorized | by | 2 comments

  1. Every Beatles song played at the same time.
  2. I blame all of this on Regis Philbin.
  3. Forgery as performance art.
  4. Remember Rodney Bingenheimer?
  5. By a vote of 8-1, Steve Jobs was an asshole.
  6. Amazon reviews of Defense Technology Pepper Spray.

Really Great Essay By Raquel Fernandez On The Culture Of Economics

December 1, 2011 in Uncategorized | Tags: | by | 5 comments

Here is one choice passage.

Economists essentially have a sophisticated lack of understanding of economics, especially macroeconomics. I know it sounds ridiculous. But the reason why I tell people they should study economics is not so they’ll know something at the end—because I don’t think we know much—but because we’re good at thinking. Economics teaches you to think things through. What you see a lot of times in economics is disdain for other’s lack of thinking. You have to think about the ramifications of policies in the short run, the medium run, and the long run. Economists think they’re good at doing that, but they’re good at doing that in the sense that they can write down a model that will help them think about it—not in terms of empirically knowing what the answers are. And we have gotten so enamored of thinking things through that the fact that we don’t know anything needs to bother us more. So, yes, it’s true that the average guy on the street doesn’t understand economics, and it’s also true that we don’t understand economics. We just have a more sophisticated lack of understanding than the guy on the street.

Read the whole thing here.

Do You Want To See My Etchings? The Deliberate Use of Ambiguity In Language.

December 1, 2011 in Uncategorized | by | Leave a comment

Great talk by Steven Pinker.

Fez tip: Nuh Aygun Dalkiran, MEDS PhD student on job market

Drug Competition Mysteries

November 30, 2011 in economics, teaching | by | 8 comments

 

 

Pfizer’s Lipitor, which my doctor will prescribe for me one of these days, is going off patent and facing generic competition. This leads typically to intense price competition and collapsing sales for the brand name.  But Pfizer is trying to stave that off by offering deals such as a $4 co-pay rather than the $10 co-pay required with most generics. The mystery is why they are doing all this.

All the special discounts have the same impact as a price cut and the deals actually involve a price cut anyway.  So, what’s in it for Pfizer?

The only rationale I can think of is that there is something weird going on at the insurance company level.  That is, consumers are getting deep discounts and want to stick to their favored brand name product.  So that consumers can consume what they want, the insurance companies will be forced to pay for the drug at the back end. But this does not hold water either because the insurance companies can simply stipulate that only generics be prescribed.  hence, they have to be offered a deal to tick with Lipitor.

So, still the Pfizer strategy does not make sense because it replicates the Bertrand competition solution with funkier pricing schemes but no real advantage….

Arguments Made By Me, Possibly Wrong Possibly Right, Copied Here For Your Amusement

November 30, 2011 in Uncategorized | Tags: , , | by | 6 comments

I was talking to someone about matching mechanisms and the fact that strategy-proof incentives are often incompatible with efficiency.  The question came up as to why we insist upon strategy-proofness, i.e. dominant strategy incentives as a constraint.  If there is a trade-off between incentives and efficiency shouldn’t that tradeoff be in the objective function?  We could then talk about how much we are willing to compromise on incentives in order to get some marginal improvement in efficiency.

For example, we might think that agents are willing to tell the truth about their preferences as long as manipulating the mechanism doesn’t improve their utility by a large amount.  Then we should formalize a tradeoff between the epsilon slack in incentives and the welfare of the mechanism.  The usual method of maximizing welfare subject to an incentive constraint is flawed because it prevents us from thinking about the problem in this way.

That sounded sensible until I thought about it just a little bit longer.  If you are a social planner you have some welfare function, let’s say V.  You want to choose a mechanism so that the resulting outcome maximizes V.  And you have a theory about how agents will play any mechanism you choose.  Let’s say that for any mechanism M, O(M) describes the outcome or possible outcomes according to your theory.  This can be very general:  O(M) could be the set of outcomes that will occur when agents are epsilon-truth-tellers, it could be some probability distribution over outcomes reflecting that you acknowledge that your theory is not very precise.  And if you have the idea that incentives are flexible, O can capture that:  for mechanisms M that have very strong incentive properties, O(M) will be a small set, or a degenerate probability distribution, whereas for mechanisms M that compromise a bit on incentives O(M) will be a larger set or a more diffuse probability distribution.  And if you believe in a tradeoff between welfare and incentives, your V applied to O(M) can encode that by quantifying the loss associated with larger sets O(M) compared to smaller sets O(M).

But whatever your theory is you can represent it by some O(.) function.  Then the simplest formulation of your problem is:  choose M to maximize V(O(M)). And then we can equivalently express that problem in our standard way: choose an outcome (or set of outcomes, or probability distribution over outcomes ) O to maximize V(O) subject to the constraint that there exists some mechanism M for which O = O(M).  That constraint is called the incentive constraint.

Incentives appear as a constraint, not in the objective.  Once you have decided on your theory O, it makes no sense to talk about compromising on incentives and there is no meaningful tradeoff between incentives and welfare.  While we might, as a purely theoretical exercise, comment on the necessity of such a tradeoff, no social planner would ever care to plot a “frontier” of mechanisms whose slope quantifies a rate of substitution between incentives and welfare.

Moral Hazard and Lawyers

November 29, 2011 in economics, teaching | by | 3 comments

Q:  Why did ATT attempt to merge with T-Mobile when there were huge anti-trust issues?

A: Their lawyers encouraged them because they could make a lot of money in fees whether the merger went ahead or not:

But the advisers that AT&T’s board were listening to most intently were the lawyers who would be on the front lines of the battle: Arnold & Porter and Crowell & Moring, which worked the antitrust strategy in Washington. (Sullivan & Cromwell worked on the deal mechanics.)

Those firms all charge by the hour, so the cynic — or skeptic — might suggest they had every incentive to push the deal ahead.

According to people involved in the decision-making process, the lawyers put the chances of success at 60 to 70 percent.

For AT&T’s board, that was a chance worth taking. The question they now must ask themselves: would they use those lawyers again?

 

 

Thoughts Left Lying Around

November 28, 2011 in Uncategorized | by | 3 comments

  1. There is a conservation principle for laughter.  If I say something funny and sit stone-faced, you will laugh.  If I laugh, you probably won’t.  People in a room can be ranked by their laughter valence.  Any given joke gets a certain quantity of laughs and these come from those with the lowest valence.  Sandeep’s valence is minus infinity. This ignores social laughter where I laugh not because the joke is funny but just because everyone else is laughing.
  2. Women should be attracted to older men because survival to old age indicates good genes.  The effect is weaker in the other direction (men being attracted to older women) because the opportunity cost of another mate is zero for men.  This explains why men “age gracefully.”
  3. Skilled interrogators presumably are trained to understand and leverage the curse of knowledge:  the fact that you know something makes it very difficult to imitate the frame of mind you would have if you did not know it.
  4. The things gay men do to make themselves attractive to other men also makes them attractive to women.  Not so for lesbians vis a vis men.  I am not sure I have a good theory for this one.

Elvis Costello Urges You Not To Buy His New Record

November 28, 2011 in Uncategorized | Tags: , , | by | 2 comments

At elviscostello.com

The live recording finds the Imposters in rare form, while the accompanying motion picture blueprints the wilder possibilities of the show, as it made its acclaimed progress across the United States throughout the year.

Unfortunately, we at http://www.elviscostello.com find ourselves unable to recommend this lovely item to you as the price appears to be either a misprint or a satire.

All our attempts to have this number revised have been fruitless but rather than detain you with tedious arguments about morality, panache and book-keeping – when there are really bigger fish to filet these days – we are taking the following unusual step.

If you should really want to buy something special for your loved one at this time of seasonal giving, we can whole-heartedly recommend, “Ambassador Of Jazz” – a cute little imitation suitcase, covered in travel stickers and embossed with the name “Satchmo” but more importantly containing TEN re-mastered albums by one of the most beautiful and loving revolutionaries who ever lived – Louis Armstrong.

The box should be available for under one hundred and fifty American dollars and includes a number of other tricks and treats. Frankly, the music is vastly superior.

If on the other hand you should still want to hear and view the component parts of the above mentioned elaborate hoax, then those items will be available separately at a more affordable price in the New Year, assuming that you have not already obtained them by more unconventional means.

By now those means are in fact the conventional ones, but we get the point. Slouch slouch nimpupani.

Malice Creep

November 28, 2011 in Uncategorized | Tags: , , | by | 7 comments

“Corporations are evil” and we know this because they are always doing malicious things that are only later exposed. This often involves exploiting the complexity of transactions and the inability or unwillingness of consumers to wade through the thicket by surreptitiously ripping people off.  For example, unauthorized charges inserted into phone bills, in a practice known as “cramming”, cost Americans $2 billion dollars a year, according to this article.

When something like this is discovered, the automatic reaction is to assume that the malice was intentional. They were sticking those charges in there to squeeze money out of consumers. And its basic economics that if they can secretly insert charges and make money they will. On the other hand, such a theory would appear to require you to accept they hypothesis that “corporations are evil” or at least they are cold-hearted profit maximizers.

But you can believe that corporations are not intentionally malicious and still assume that whenever there is a cold-hearted way to steal money they will do it.    Because many malicious practices are not actively designed, rather they creep in and they are passively allowed to persist.

For example, those charges could have been legitimate under an outdated policy and when the policy was changed they forgot to remove them. Or some bumbling technician could have accidentally inserted them. Modern transactions are so complicated that random “mutations” are going to appear without any malicious intent and indeed without anyone noticing. This is a far more likely explanation than someone purposefully sticking them in there, especially if you doubt that “corporations are evil.”

Indeed, to have a conscious policy of ripping off unsuspecting customers requires instructing somebody to do that, and leaving a paper trail. Even a truly evil corporation understands that this is the wrong way to do it. The right way to do it is to structure the organization in a way that facilitates malice creep.

You don’t have to instruct anybody to allow mutant ripoffs to appear. They appear on their own, no paper trail required. All you need to do is to give weak incentives to the officers you have charged with making sure that you are not ripping anybody off.  Nobody in your organization will have any knowledge of all the ways you are cheating your clients, not even you. By design.

There is an art to the design of an organization that cultivates malice creep. Because at the same time you have to stop “virtue creep” in its tracks. You don’t want unintended credits to randomly get inserted into the phone bill. What you need is a one-sided monitoring program. You wait around for lots of mutations to appear, you know that some are virtuous and some are malicious. Now getting rid of the virtuous ones and keep the malicious ones is easily done, just announce that its time to do some “cost-cutting.” Form an ad hoc task force to go through and find ways to restructure billing in ways that save the company money. They’ll just look at the credits and ignore the charges.

In terms of the long-run bottom line, Darwinism and Lamarckism are almost indistinguishable, but Occam’s razor favors Darwin.  I would argue by the same principles that most of the malicious practices of organizations emerge by cultivated accident rather than by design.

 

Advice to Lost Graduate Students In Economics

November 22, 2011 in Uncategorized | Tags: , , | by | 3 comments

From Ariel Rubinstein of course, here’s his answer to question 5:

Q5. I have already written 30 pages. I have repeated myself several times and my proofs are much longer than necessary. I have added uncertainty wherever I could and I have moved from a discrete case to Banach spaces. My adviser still says I hardly even have enough for a note. How long should my paper be?

If you don’t have a good idea, then keep going. Don’t stop at less than 60 single-spaced pages. Nobody will read your paper in any case so at least you have a chance to publish the paper in QJE or Econometrica.

If you have a really good idea, my advice is to limit yourself to 15 double-spaced pages. I have not seen any paper in Economics which deserved more than that and yours is no exception. It is true that papers in Economics are long, but then almost all of then are deathly boring. Who can read a 50-page Econometica paper and remain sane? So make your contribution to the world by writing short papers — focus on new ideas, shorten proofs to the bare minimum (yes, that is possible!), avoid stupid extensions and write elegantly!

The rest is here, via Jakub Steiner on Facebook.

Sargent-Sims Celebration Dinner, UofC

November 22, 2011 in Uncategorized | by | 1 comment

I got to attend the Sargent-Sims Nobel Prize celebration dinner at the UofC thanks to my wife.  Feelings of alienation were dissipated by the sight of Marco Battaglini and Steve Coate who are pretending to be macroeconomists these days.  And Golosov was wearing his macro hat that night.   So, I began feeling comfortable, if not exactly at home.

Some of my wife’s grad student cohort were also attending. They turned out to be very nice and they all recalled friendly dinners and student group interactions from days of old. Harvard wasn’t so friendly. I wondered why supposedly cutthroat Chicago types weren’t as competitive as the Harvard pinko liberals. It turns out surviving the first year at Chicago was so hard – a substantial chunk of the class was kicked out (is this still the case?) – that they had to stick together to “beat the system”.  A sort of communism was the byproduct.  At Harvard, it was less draconian and the natural tendency of economists is to be competitive – we study the benefits of competition after all. We ended up as (over-)confident mini-entrepreneurs.

The dinner finished with a bunch of speeches. Marty Eichenbaum recalled the heady days as a grad student on the frontline of the Minnesota revolution.  Tao Zha described the bittersweet experience of working with both Sargent and Sims – Sargent withdrew their accepted joint paper at AER after it received withering criticism from Sims and Sims withdrew their nearly accepted joint paper at Econometrica. These guys have high standards.  Lucas identified the key scientific contributions made by Sims and Sargent. Ed Prescott gave a surreal speech comparing Prescott-Sargent-Sims-Wallace to the back line of some famous Notre Dame football team from the 1920s (the “Four Horsemen of Notre Dame”).  The front line, “the mules”, were the Minnesota grad students who actually fought in the Revolution. (Sidenote: It is better to be horseman than a mule – see Mort Kamien entry below).  Hansen’s speech started with the observation that he was a mule!

Finally, we had Sargent and Sims or rather Sims then Sargent.  Sims pointed out there were some earlier Horsemen of the Apocalypse.  He mapped the Minnesota four into their Biblical counterparts as follows: Sargent=Conquest, Sims=Pestilence, Prescott=War and Wallace=Death (I may have inverted these!).  Sargent had a second-mover advantage which he employed to great effect.  He recalled a conference at Urbana-Champaign organized by In-Koo Cho. Hansen and Sargent arrived at the airport at same time as Sims.  Sims had rented a car and went to get it while Hansen and Sargent wrote a couple of their joint papers in the airport.  He returned and went inside to get them, leaving the car running with key inside.  The doors had an  autolock feature and they couldn’t get back in!  Hansen and Sargent got a taxi and left Sims to deal with the mess on is own.  With that the dinner was over.

Mort Kamien

November 21, 2011 in Uncategorized | by | 2 comments

My colleague Mort Kamien passed away last week.

I first met Mort in 1997 when I was on the job market.  I had encountered his work much earlier as an undergraduate via his textbook Dynamic Optimization, co-authored with Nancy Schwartz. It is always a great event when you meets someone whose work  you know from undergraduate education – such work automatically rises to the classic level.  So, it was a privledge to meet Mort then and to become his colleague.

On a personal level, what I will remember about Mort is his humor.  He grew up in Brooklyn and I had only come across people like him in Woody Allen movies.  He was an exotic creature to someone who grew up in England.  He was always interested in what the young people were doing research-wise.  He would always ask me about my kids and how my wife, Anna, was doing in her work.

On the research side, Mort had great taste.  He could judge research and people very well.  He always wanted to hire according to the “best athlete” criterion rather than pick a field and then have that constrain your choices.  He valued creativity and said it was better to write the first paper in a field rather than the final word.  I guess I have these values because of him.

I an in England as I write this.  My thoughts are with his wife and son.

Why I Love New York

November 21, 2011 in Uncategorized | Tags: , | by | 20 comments

It’s for those days when you are supposed to be flying to Milan to give a talk, and you are connecting and when you are checking in to your connecting flight and you pull out your passport thinking wistfully about how much you love your wife for thoughtfully packing your passport for you and just generally breathing in the beautiful life you have to be able to take a little time away to fly to Milan, meet people, give a talk, do a little work on your laptop which is tucked away in your suitcase because you are getting on a redeye and you plan to sleep on the plane, you’ll get that work done while you are in your hotel in Milan, or maybe you won’t because you might just stroll the city and enjoy a little solitude, putting out of your mind the hundreds of job market letters of recommendation that you have to submit online to hundreds of distinct websites each with their own password amounting to about 3 hours of work just logging in, figuring out what to click, copying and pasting passwords, etc and also taking the opportunity to just let your mind wander and think abiut whatever, sorry hordes of coauthors whom I have left in the lurch I know I am already a maddeningly irresponsible partner but please permit me a couple more days after all I am in Europe and for all you know I don’t have Internet access or I am scheduled to be meeting with people all day long and wouldn’t have time to correct thirty pages of typos or rewrite the introduction for the third time because after being rejected at journals 1 and 2 we better write it in the way that journal 3’s referees are going to like; and anyway I need a little escape to get over the sting of those rejections and this time to myself in a faraway European city is just what the doctor ordered and that brings an extra smile to my face as I open up my passport to show to the friendly TSA agent and that smile and it’s associated feeling of intoxication explains why it’s the TSA agent who is the first to notice that the picture on the passport is of my lovely wife and not me.

And my passport is back home in chicago, and I am not getting on this plane and I am not going to Milan today and the only time I am going to be having by myself is stuck in this airport trying to figure out how I am going to get that passport to me from Chicago and all the while fighting back the relentless thoughts of what a ridiculous life I am living, flying to Europe for two days just to give a pointless talk wasting all this time while my students still don’t have their application letters uploaded and all those papers need to be revised and I am sure my coauthors think I am a useless primadonna, and after these recent rejections I know I will never have a top 5 publication again and I won’t even be getting any work done because my laptop is soon going to fly without me to Milan,

It’s for those days, you know those days, it’s for those days that you are so thankful that your connection was through Newark airport and Manhattan Penn Station is a 30 minute train ride away, and you have that favorite little hotel on midtown which has a room for $129 and so what you don’t have any clothes and you will have to buy a toothbrush for what like $30 at a pharmacy in the middle of manhattan but to make up for all of that when you wake up in the morning you will get your stroll and ok it’s smelly New York but look Milan was going to be smelly too you were just fantasizing that stroll anyway and 1 block into that stroll you stumble onto Cafe M, a tiny cafe’/bakery on 32nd and 5th avenue where the coffee is lovingly made one at a time the croissants are the best you have ever had, certainly in the US and arguably rivaling even Paris, beautiful oneofakind people come in and out as you sit each with their own unique beautiful lives and you can sit and enjoy that coffee and croissant and listen in on their lives as they pass through 5 minutes at a time and what better life can one person have than to sample the uncanny diversity of life and where else can you get such a sample as in New York City.

(blogged from my phone)

Sordid Links

November 18, 2011 in Uncategorized | by | Leave a comment

  1. Letters to photographs of yourself.
  2. And she thought they smelled bad from the outside.
  3. Not Iyengar.
  4. Music ngram search.
  5. Rejected R. Crumb New Yorker cover.
  6. Feel free to profit from this idea.

Bad Ideas In Blackmail

November 17, 2011 in Uncategorized | Tags: | by | 5 comments

Tyler Cowen passes along one:

A new technique of cybercrime is the taking hostage of data.  “I think it’s going to become a more common tactic for attackers,” says Karen Schuler, Senior Managing Director of Kroll.

If the hostage taker has any credible threat then it remains credible whether or not I pay him because there is no way to prevent him from making arbitrary copies of the data.  I can’t “buy them back” in any verifiable way.

The brochure (note that Kroll is a cybersecurity firm) talks about the threat of intellectual property data being stolen and the hostage taker threatening to sell it to my competitors.  If you receive a call with such a threat the first thing you should do is sell your intellectual property to your competitors.  There’s no way you are going to stop the thief from doing the same and you might as well get in on the profits.

On a similar note, these chartered jet passengers didn’t seem to understand the same point.  (Ayam ack:  Josh Gans)

Consider The Equilibrium

November 17, 2011 in Uncategorized | Tags: , | by | 4 comments

This is from an article in the New York Times.

When the taxi baron Robert Scull sold part of his art collection in a 1973 auction that helped inaugurate today’s money-soused contemporary-art market, several artists watched the proceedings from a standing-room-only section in the back. There, Robert Rauschenberg saw his 1958 painting “Thaw,” originally sold to Scull for $900, bring down the gavel at $85,000. At the end of the Sotheby Parke Bernet sale in New York, Rauschenberg shoved Scull and yelled that he didn’t work so hard “just for you to make that profit.”

The uproar that followed in part inspired the California Resale Royalties Act, requiring anyone reselling a piece of fine art who lives in the state, or who sells the art there for $1,000 or more, to pay the artist 5 percent of the resale price.

What Makes a Pun Funny

November 16, 2011 in Uncategorized | Tags: , , | by | 3 comments

A laudable use of brain scanner methodology.

Regular joke: Why did Cleopatra bathe in milk? Because she couldn’t find a cow tall enough for a shower.

Funny pun: Why were the teacher’s eyes crossed? Because she couldn’t control her pupils.

Unfunny pun: What was the problem with the other coat? It was difficult to put on with the paint-roller.

The regular joke and the funny pun are both amusing, but for different reasons: in the decidedly unfunny parlance of humor theorists, the pun has “semantic ambiguity” and the joke does not. Part of the fun in the funny pun, in other words, is thinking through the two meanings of pupil.

But now compare the funny pun and the unfunny pun. Both have semantic ambiguity. So why is the funny one funny? The researchers say it’s because both meanings of the ambiguous word (pupil) are true at the same time, whereas in the unfunny pun, only one of the meanings of the ambiguous word (coat) is true.

Read the article to find out why.

Why Deans Should Be Treated Badly

November 16, 2011 in art of office politics, economics | by | 5 comments

At  every OxBridge college, there is a Wine Committee. Many people want to get on it but first you have to serve on the Use of Space Committee.  It might be fun if the latter plotted how the College could go to Mars. But what the committee really does is meet bi-monthly to decide where to put the photocopier. You grumble and serve as there is a chance you get on the Wine Committee.

Kellogg, as far as I am aware (!), has no Wine Committee so this cannot be used to give incentives. Monetary incentives are weak. This leaves moral suasion as the main instrument. For example, if a Dean looks miserable when he or she asks you to do something, you are likely to say yes. They look very, very sad after all, and so you would feel terrible if you refused them. To make Deans credibly miserable, they should be treated badly. QED.

This leaves open the question of why anyone would then want to become Dean. No-one has asked me (and no-one ever will!) so I have no practical experience. I guess moral suasion and guilt also operate there but am less clear as to the exact mechanism (e.g. “This institution has done so much for me, I should serve.”).

But I do have a solution that could make everyone happy – start a Wine Committee. Regular visits and tastings with wine distributors are enough to make many of us serve on the “where should the photocopiers be in the new building committee”.  Then, we can treat the deans well, as they deserve, without unraveling incentives and run everything more efficiently.

Marginal And Infra-Marginal Meetings

November 15, 2011 in Uncategorized | Tags: , | by | 1 comment


If you have a meeting scheduled at 2 and you are worried its going to drag on too long, what do you do?  Here’s a confession:  Sometimes I lie and say I have an appointment and I have to leave at 3. But it’s a double-edged sword.

Because warning my friend that I will have to leave at 3 implies that I anticipate that the hour will be a binding constraint.   That would only be true if I expect the meeting to go that long.   My friend will therefore infer that the topic of our meeting is important enough to me to potentially warrant an hour of face time.

As far as I know, had I never said anything he might have kept the meeting to 30 minutes, but now that I capped it at 3:00, its a sure thing we are going to meet for the full hour.

The problem is that there is no way I can know how long he was planning to meet. If i knew he was planning to leave at 2:30 I wouldn’t say anything. But if he is actually planning to stay until 4:30 and I don’t invent a 3:00 appointment I am hosed.

Of course some meetings really need to take more than 30 minutes and often you only discover that in the course of the meeting.  The downside of the cap is that it commits you.  Unless you want to lose all credibility you are going to have to keep to your fictional meeting and cut those meetings shorter than they should be.

So what is the optimal cap? The tradeoffs are reminiscent of textbook monopoly pricing. You have your marginal and infra-marginal meetings. If i raise the cap by a minute then the marginal meeting gets the extra minute that it really needs but the infra-marginal meeting gets needlessly extended.

Its a complicated calculation that comes down to hazard rates, incentive constraints, etc. but I will save you the effort; I have done the integration by parts.  The optimal cap is exactly 37 minutes.  You can’t say that of course because your friend will know that nobody schedules appointments at 2:37, so you will have to round up or down to the half hour.

Or schedule all your meetings to start at 23 minutes past the hour.

The Grammar Distortion Field

November 15, 2011 in Uncategorized | Tags: | by | 3 comments

Here’s how Steve Jobs explains “Think Different” as quoted in Walter Isaacson’s biography (thanks to Mallesh Pai for the pointer.)

We discussed whether it was correct before we ran it.  It’s grammatical, if you think about what we’re trying to say.  It’s not think the same, it’s think different.  Think a little different, think a lot different, think different.  “Think differently” wouldn’t hit the same meaning for me.

I may have been taken in by the GDF but after thinking about this for a day or so I am convinced that I understand what he means, even if he didn’t explain it very well.  Constructions like “think X” are used all the time where X is a noun and what the writer really means is “think about X” or “consider X” and especially “join the X movement.”  (Think “Think Green”, a familiar slogan that is saying “be enviornmentally conscious.” )

“Eat Local” has a different interpretation than “Eat Locally” which would not make sense in its stead.  For that matter, “Think Locally, Act Globally” suffers from excessive adherence to grammatical rules.

What “Think Different” was supposed to convey is essentially “be a member of Team Different.”  But I am sure that was lost on most people and has nothing to do with why it was a successful campaign.

Ignorance of Crowds

November 14, 2011 in Uncategorized | Tags: , , , | by | 14 comments

I stopped following Justin Wolfers on Twitter.  Not because I don’t want his tweets, they are great,  but because everyone I follow also follows Justin. They all retweet his best tweets and I see those so I am not losing anything.

Which made me wonder how increasing density of the social network affects how informed people are. Suppose you are on a desert island but a special desert island which receives postal deliveries.  You can get informed by subscribing to newspapers but you can’t talk to anybody.  As long as the value v of being informed exceeds the cost c you will subscribe.

Compare that to an individual in a dense social network who can either pay for a subscription or wait around for his friends to get informed and find out from them.  It won’t be an equilibrium for everybody to subscribe.  You would do better by saving the cost and learning from your friends.  Likewise it can’t be that nobody subscribes.

Instead in equilibrium everybody will subscribe with some probability between 0 and 1.  And there is a simple way to compute that probability.  In such an equilibrium you must be indifferent between subscribing and not subscribing.  So the total probability that at least one of your friends subscribes must be the q that satisfies vq = v – c.  The probability of any one individual subscribing must of course be lower than q since q is the total probability that at least one subscribes.  So if you have n friends, then they each subscribe with the probability p(n) satisfiying 1 – [1 – p(n)]^n = q.

(Let’s pause while the network theorists all rush out of the room to their whiteboards to solve the combinatorial problem of making these balance out when you have an arbitrary network with different nodes having a different number of neighbors.)

This has some interesting implications.  Suppose that the network is very dense so that everybody has many friends.  Then everyone is less likely to subscribe. We only need a few people to be Justin Wolfers’ followers and retweet all of his best tweets.  Formally, p(n) is decreasing in n.

That by itself is not such a bad thing. Even though each of your friends subscribes with a lower probability, on the positive side you have more friends from whom you can indirectly get informed.  The net effect could be that you are more likely to be informed.

But in fact the net effect is that a denser network means that people are on average less informed, not more. Because if the network density is such that everyone has (on average) n friends, then everybody subscribes with probability p(n) and then the probability that you learn the information is q + (1-q)p(n). (With probability q one of your friends subscribes and you learn from them, and if you don’t learn from a friend then you become informed only if you have subscribed yourself which you do with probability p(n).) Since p(n) gets smaller with n, so does the total probability that you are informed.

Another way of saying this is that, contrary to intuition, if you compare two otherwise similar people, those who are well connected within the network have a tendency to be less informed than those who are in a relatively isolated part of the network.

All of this is based on a symmetric equilibrium.  So one way to think about this is as a theory for why we see hierachies in information transmission, as represented by an asymmetric equilibrium in which some people subscribe for sure and others are certain not to.  At the top of the hierarchy there is Justin Wolfers.  Just below him we have a few people who follow him.  They have a strict incentive to follow him because so few others follow him that the only way to be sure to get his tweets is to follow him directly.  Below them is a mass of people who follow these “retailers.”

Analysis of Golden Balls Data

November 14, 2011 in Uncategorized | Tags: , , | by | Leave a comment

Stefan Lauermann points me to a new paper, this is from the abstract:

Our analysis shows that both stake size and communication have a significant impact on the player’s likelihood to cooperate. In particular, we observe a negative correlation between stake size and cooperation. Also certain gestures, as handshakes, decrease the likelihood to cooperate. But, if players mutually promise each other to cooperate and in addition shake hands on it, the cooperation rate increases.

Michael Lewis, Daniel Kahnemann, Amos Tversky and “Moneyball”

November 13, 2011 in Uncategorized | by | 3 comments

Life follows art:

The paper ….“Prospect Theory”… spawned a sub-field of economics known as behavioral economics. This field attracted the interest of a Harvard undergraduate named Paul DePodesta. With a mind prepared to view markets and human decision-making as less than perfectly rational, DePodesta had gone into sports management, been hired by Billy Beane to work for the Oakland A’s, and proceeded to exploit the unreason of baseball experts. A dotted line connected the Israeli psychologists to what would become a revolution in sports management. ..

Spookier still:

I soon realized that Tversky’s son had been a student in a seminar I’d taught in the late 1990s at the University of California, Berkeley….My former student Oren Tversky put me in touch with his mother, Barbara, who put me onto the papers left behind by her husband…..Then one afternoon I came upon a letter dated June 4, 1985, from Bill James. The baseball analyst whose work was then being blithely ignored by professional baseball people had wanted help answering a question that vexed him: Why were baseball professionals forever attempting to explain essentially random and therefore inexplicable events? “Baseball men, living from day to day in the clutch of carefully metered chance occurrences, have developed an entire bestiary of imagined causes to tie together and thus make sense of patterns that are in truth entirely accidental,” James wrote. “They have an entire vocabulary of completely imaginary concepts used to tie together chance groupings. It includes ‘momentum,’ ‘confidence,’ ‘seeing the ball well,’ ‘slumps,’ ‘guts,’ ‘clutch ability,’ being ‘hot’ and ‘cold,’ ‘not being aggressive’ and my all time favorite the ‘intangibles.’ By such concepts, the baseball man gains a feeling of control over a universe that swings him up and down and tosses him from side to side like a yoyo in a high wind.” It wasn’t just baseball he was writing about, James continued. “I think that the randomness of fate applies to all of us as much as baseball men, though it might be exacerbated by the orderliness of their successes and failures.”

October Surprise

November 13, 2011 in Uncategorized | Tags: , | by | 3 comments

We had a spectacular Fall in Chicago with lots of sun and warm temperatures. Usually October is fried green tomatoes month for us, but this year after the leaves had fallen off the birch tree in our backyard they got a good couple weeks of sun and many of them ripened on the vine.  Here’s your picture of empty plates:

While on the subject here’s a trick for ripening your green tomatoes when the sun won’t do it for you.  Bring them inside and put then in a paper bag along with some bananas.  Ethylene gas stimulates the ripening process and bananas, the champions of ripening, put out a lot of it.

We enjoyed our tomatoes with this 2004 Bordeaux, Chateau Lascombes which I must say is drinking perfectly right now.

Things I Learned From Ethan Iverson’s Hiatus Post

November 12, 2011 in Uncategorized | Tags: | by | 2 comments

  1. The Bad Plus are going into the studio next week.
  2. The price of his masterclass is rising from Free to $20 per three-hour session.
  3. If you live in Seattle you can see The Bad Plus play with the Mark Morris Dance Group Dec 1-3

and more.

Pinot Noir, Methode L’Ancienne 2009, Navarro Vineyards, Anderson Valley, Mendocino

November 12, 2011 in Uncategorized | by | 1 comment

Got my new shipment of Navarro wines. I went straight to the Pinot Noir. Totally delicious. Usual cherry and fruit notes but there’s also some dryness that is Old World. Navarro hit a rough spot last year because forest fires tainted their crop.  The wines literally tasted smoky. They were interesting but the smokiness made the wines one dimensional. Navarro is back on peak form with this offering.

Sordid Links

November 11, 2011 in Uncategorized | by | Leave a comment

  1. David Lynch’s new album Crazy Clown Time.
  2. Dude surfs a 90 foot wave.
  3. Great photography blog.  (via CCK)
  4. If you have been known to entertain your cat by shining laser pointers at the ground and making them chase the red dot all around, then you better hurry up and claim prior art.
  5. Cormac McCarthy’s Yelp reviews.

Corduroy Appreciation Day

November 11, 2011 in Uncategorized | Tags: | by | Leave a comment

It’s 11/11/11, what else?

In some sense every day is a day to appreciate corduroy, but in another sense there is only one true Corduroy Appreciation Day, as declared by the venerable Corduroy Appreciation Club. That is 11|11, the date that most resembles corduroy. And this Friday being 11|11|11, it is the date that most resembles corduroy, ever. (Except for 11|11|1111, but I’m pretty sure the people of that time had yet to discover essential comforts like modern medicine, indoor plumbing, and finely waled fabrics.)

Portland seems to be the place to be.

Amazon Sells The Kindle As A Loss Leader?

November 11, 2011 in economics, teaching | by | 1 comment

A firm selling complementary products may cut the price of one to encourage sales of the other.  This effect can be so strong that one of the products is sold as a loss leader:

A recent analysis from IHS iSuppli determined that Amazon’s $79 Kindle e-reader, which is the online retailer’s cheapest Kindle thus far, costs $84.25 to make…..Even if Amazon pays more to build the $79 Kindle than it sells it for, the company has several other ways to bring in money from the device. This Kindle model includes ads that show up as screensavers and at the bottom of the device’s home screen. And Amazon sees all the devices in the Kindle family — and the free Kindle apps it offers for mobile devices and computers — as a way to spur more sales of its digital e-books, music, games and apps.