Cheap Talk

The freshly tenured Chris Berry has switched briefly from padding out his CV by publishing like crazy to padding out his belly.  Chris and his colleagues at the Harris School of Public Policy have an encyclopedic knowledge of fried products in the Chicago area, especially if they are fried in duck or pork fat.  But they keep an open mind and are accepting of all kinds of fat so I had the luck to enjoy a donut which Chris picked up at the Rise’ N Roll Amish Bakery.  Loaded with butter and dusted in cinnamon sugar, these donuts are treat not to be indulged in too often. But with New Year’s resolutions of exercise just over a week away, what better time than this to enjoy the cholesterol?

1. A winner is declared in the contest to smuggle the phrase “I smoke crack rocks” into a published article.
2. Surprisingly accurate account coupled with stunningly confused extrapolation of the Ellsberg ambiguity experiment.
3. Julian Assange’s OKCupid profile.
4. Salvia market boom after circulation of Miley Cyrus bong video.
5. Where are you in the income distribution?
6. FBI informant infiltrates Irvine, CA mosque.  Muslims are so alarmed at his violent provocations they get a restraining order against him.

Via MR, a wonderful profile and interview with the economist Avinash Dixit.  Avinash has made fundamental contributions to international trade, political economy and the theory of real options.  Avinash has a Schelling-esque style and has a great sense of humor.  It turns out that for many years he has kept hidden in his drawer an analysis of Elaine’s decision problem in an episode of Seinfeld:

Elaine Benes uses a contraceptive sponge that gets taken off the market. She scours pharmacies in the neighborhood to stock a large supply, but it is finite. So she must “re-evaluate her whole screening process.” Every time she dates a new man, which happens very frequently, she has to consider a new issue: Is he “spongeworthy”?

Avinash studies Elaine’s problem formally.  And his model displays all the great qualities one might expect.  First, simplifying assumptions: To get intuition for the key issue – how does the finite supply of sponges affect Elaine’s decision problem – it is good to make the rest of the model stationary.  Hence:

Suppose Elaine believes herself to be infinitely lived; this is a good approximation in relation to the number of sponges she has and her time-discount factor or impatience. She meets a new man every day.

Let Q be the “quality” of a man Elaine meets where Q is drawn from  the uniform distribution on [0,1].  Let Vm be Elaine’s expected utility when she has m sponges left.  Her per-day discount factor is b – Elaine lives in NYC and meets a lot of men! At her optimum, a man is spongeworthy iff

Q+bVm-1>bVm

Given the assumptions made, Avinash can actually explicitly work out the details of the solution to this problem by cranking out Vm. But here are some qualitative insights.

1. Elaine should have a threshold strategy: There is a threshold Qm where a man is spongeworthy iff his Q is greater than this threshold when Elaine has m sponges left.

2. Qm is decreasing: The more sponges Elaine has left, the lower her standards.

3. Vm is decreasing: As Elaine runs our of sponges, her expected utility declines as there are fewer “interactions” remaining.

There are other insights and extensions.  For those, I recommend Avinash’s lovely paper.

When you reach a certain age, your friends start getting honors and you are invited to polite soirees.  At aforementioned polite soirees, there are cheesy delights and sweet little dessert tarts.  The sweet little desert tarts are tastefully arrayed on silver platters and you can easily pick one up and pop it into your mouth without touching any neighboring tarts.  You daintily consume a little fruit tart.

The energizing sugar rush behind you, you turn to the cheesy delight. You are pleased that at this soiree, they have put out the delight out of all delights – the baked brie or the “brie en croute” as we call it at polite soirees.  You head over and shove your way into the line for the warm cheesy delight.  You are rather aggressive and push past a distinguished looking man that you recognize (too late!) as the new President of Northwestern University.  You grin sheepishly and say, “Hi.  I’m Rakesh Vohra.”  You hope this throws him off the scent – even though your colleague Rakesh is balding and white-haired, at least he has the right skin tone.  The President seems to make a mental note to dock your (or Rakesh’s) salary and turns away to talk to someone else.

You turn to the cheesy delight and as you pause to pick up bread your forward momentum, barely broken by the President, is brought to a grinding halt by a fundamental problem: To tong or not to tong.  That is the question.

In other words, should you use the tongs – always provided at polite soirees – to pick up the bread or just stick your grubby hand into the bread basket?  If you think like homoeconomicus, you decision is obvious: Unlike you, many other people followed the proper procedure and headed over to the cheesy delight before the little sweet dessert tarts. They have used the tongs before you and the supersized tweezers are covered in cheeky little germs just hopping with excitement at the prospect of giving you H1N1 for Christmas.  If you stick your grubby hand into the bread basket, you avoid the tong devils but deposit your own cooties on a baguette slice that someone else will pick up.  But you are homo economicus so you do not face any moral dilemma: Ignore the “negative externality” and stick your hand into the bread basket.

Then, you are brought to a stop again, this time by a major “Aha” moment.  Your shove into the line and all your procrastination is causing much grumbling in the cheesy delight queue. But you’re not even aware of this because you’ve had a huge epiphany: Following the recommendation of homo economicus is also the right thing to do from the perspective of society’s objective of minimizing germ transmission.  You guess that Adam Smith must have had a similar experience when the idea of the “invisible hand” hit him just before he was about to tuck into his haggis and scotch.

You reason as follows: When you stick your hand into the bread basket, you might not even hit another bit of bread other than your own.  Even if you aim misses because of the two glasses of champagne you drank on an empty stomach, you’re only going to hit a few other slices of ever staler bread.  While if you use the tong, you are guaranteeing that the long line of people behind you get to experience your lack of good hygiene.  It is better for everyone if you stick your hand in the bread basket.

Your face disfigured by an angelic smile, confident your are doing the right thing for once, you follow the route Immanuel Kant himself would take and finally consume some cheesy delight.  You turn around to see the President looking at you as if you’re some kind of animal.  You wipe your cheese covered hand on your jeans and grasp his.  You say, “Call me Ricky.”  You run out before your cover is broken.

1. Richard Dawkins reads his hate mail.
2. Mobius Bagel.
3. Recursive plagiarism.
4. Bartending injuries.

Congratulations Jeff!!!  NU is lucky to have you.

“Sometimes it seems that they only understand the language of force. We have learned from history that the appeasement of an aggressive adversary can be a disastrous mistake, with our concessions only encouraging further attacks on our communities. To deter them from attacking us, we need armed strength, and our leaders must demonstrate the resolve to use it when necessary.” What should we say to someone who describes the Israeli-Palestinian conflict in these terms?

A game theorist is trained to look at conflict problems from both sides, assuming that people on both sides are rational and intelligent. I have tried to write the above quote as one that many Israelis and Palestinians might consider a fair description of their situation, symmetrically identifying themselves as “we” and the other side as “they”, but the symmetry of this view is probably not common knowledge. In particular, many may not understand the other side’s fear of appeasing an aggressive adversary. Such misunderstanding can undermine hopes for peace.

In the above quote, the response to our armed strength that “we” seek from “them” is, in a word, appeasement. We want them to appease us. But why should they not fear that concessions to us could encourage our greater ambitions, inviting further invasion of their communities? And if the demand for armed vigilance on each side is matched by a fear of appeasement on the other side, how can the two sides ever escape from the long war of attrition?

We must think more carefully about the logic of deterrent strategies. Our strategy to deter potential adversaries must have two parts: a threat that we will fight them if they attack us, and a promise that we will be good restrained neighbors if they accommodate us. The difference between our threat and our promise is what encourages them toward accommodation. For our deterrent strategy to be effective, our potential adversaries must understand and believe both the threat and the promise.

Failing to credibly communicate the threat is naive appeasement. Our potential adversaries must not think that we are the weak type of people, who lack resolve to respond forcefully against aggression. To prove that we are not weak may require costly signals of our resolve, many of which have become too familiar: sending out young men on deadly missions against the other side.

But deterrence can fail also if we do not credibly communicate a promise that differs from the threat. If they believe that we are an aggressive type, who cannot restrain ourselves from invading their communities further at any feasible opportunity, then they will feel driven to seek militant leaders against us, and then we will be locked in conflict with them.

How can we demonstrate to them that we are not such an aggressive type? This is a very serious question, because everyone knows that aggressors may try to mask their intentions with honeyed words of peace. The point is not to convince ourselves of our own moral purity; the goal is to convince our adversaries that they can safely make peace with us.

We can effectively signal our restraint by articulating clear strategic limits that verifiably constrain our actions in the conflict, and by showing real understanding and respect for justice as our adversaries see it. Credibly communicating our promise of restraint to a suspicious adversary can be a long and difficult process, but it is an essential part of effective communication in the language of force.

That is the theory. Today we learned that Israel has resisted intense American pressure to freeze expansions of its settlements in the West Bank. It is hard to see this decision as a signal of restraint. Indeed, it seems just the opposite. In rejecting its strongest ally’s interpretation of the legal limits on its expansion, Israel seems to have given a costly signal of an inability to restrain expansionist forces in its political system. Nobody can enter into a treaty without confidence that the other side will accept a mutually agreed interpretation of its limits under the treaty. As a costly signal that reduces the other side’s willingness to make peace, this decision may be less stark than missiles from Gaza, but it is only a matter of degree.

1. Neologism of the moment:  gate rape.
2. When did you decide to be straight?
3. Transcription errors in the Yale Anthology of Rap.
4. Parkour for lazies.
5. Nativity on Google StreetView.
6. This just in: special bonus sordid link, courtesy of kottke.org.  Painful flashback inducement machine.

Part I of BBC program:

Obama’s favorite strategy is to be middle-of-the-road: don’t side with either Democrats or Republicans and hope both sides support a compromise plan.  To do this effectively, it is important not to reveal your true preferences and maintain “strategic ambiguity” as clarity risks alienating one audience or the other.  But if it is obvious that one side is not going to support you, you have to show your hand to get the other audience to buy in.  Otherwise, no-one will support your policy and it will never pass.  I mentioned that Obama already had to do this earlier this year with healthcare reform.  Now an interesting article by Matt Bai points out that he faces a similar dilemma over debt reduction.

Mr. Obama has almost invariably sought to position himself halfway between traditionalism and reform, just as his vague notions of “hope” and “change” during the 2008 campaign were meant to appeal simultaneously to both disaffected independent voters and core progressives. And in virtually every case, he has satisfied pretty much no one….Since he isn’t willing to break publicly with liberals, independent and conservative voters tend to see him as a tool of the left. And since he generally won’t do exactly what the left wants him to do, he ends up with very little gratitude from his own party.

This political no-man’s land, however, is about to become uninhabitable. The national debt is near the top of any list of voter concerns at the moment, and when his commission votes Friday on its final recommendations, Mr. Obama will be handed concrete and contrasting options for addressing it.