Cheap Talk

In the National Interest, they make an explicit link between the Prisoner’s Dilemma and environmental degradation:

HOW DOES one escape a dilemma in which multiple individuals acting in their own rational self-interest can ultimately destroy a shared limited resource—even when it is clear this serves no one in the long run?

In 1968, Science published Garrett Hardin’s landmark article “The Tragedy of the Commons.” Hardin relied on the metaphor of a small English village in the eighteenth century. Each family has a house with a small plot of land for growing vegetables. In addition, there is a large, common area used by all the villagers to graze their livestock. Each villager has a cow or two that provide the family with its milk. The common area is large enough to support the entire village. Then the village begins to grow. Families get larger, and procure an extra cow. New families move in. Suddenly, the common is threatened; it is being overgrazed. Grass is consumed so fast that there is not enough time for it to replenish itself before rains erode the topsoil. Each cow no longer has quite enough to eat, and thus yields less milk than it did before. If the overuse of the common continues, there will be a slow but sure decrease in the number of animals it can support until, finally, it becomes useless for grazing.

We are now dealing with a tragedy of the global commons. There is one earth, one atmosphere and one water supply, and 6 billion people are sharing it. Badly. The wealthy are overgrazing, and the poor can’t wait to join them. Examples are plentiful: the overharvesting of trees by lumber companies; the overplanting of land by farmers; the overdevelopment of suburban communities; the extraction of petroleum from a common pool by oil companies; and the overcrowding of highways and other public facilities. These behaviors make whatever benefits users derive from those resources vanishingly small. The issues are as far ranging as contamination of water by toxic wastes, pollution of the atmosphere by carbon dioxide and various particulates, and profligate use of water and energy.

(HT: Shimi Lin)

The new Miyazaki film, distributed by Disney. I recommend it whether or not you go with small children, but be prepared. The animation is beautiful as usual, although it won’t stand out alongside Spirited Away or Tortoro. At times it looks like Yellow Submarine which is an interesting departure.

No, what’s really intriguing about this film, despite what some critics are saying is the plot. There is a very creative and wonderful plot. Astounding things happen. And yet at the end it feels empty and unfulfilled. You will notice the reason. There are no bad guys, no conflict, no tension, and almost no uncertainty about the conclusion.

I don’t expect a film like that, even (especially?) one for small children to do well with an American audience. It’s natural to compare with the Pixar films because Pixar is heavily influenced by Miyazaki and John Lasseter is involved with marketing Miyazaki in the US.

Up was 40% Miyazaki and 40% Murakami. But the other 20% was Stephen J Cannell. Even that 20% was barely enough to sell an otherwise epic film.

1. Performance degrading drugs.  Also, how to make love and not war.
2. A book on wine to retail for $1 million.  (Comes with wine.)
3. Inkonomics.

I teach a class at Kellogg on “Strategic Crisis Management”.  It deals with crises that are triggered by a conflict between moral values and profit-maximization.  A student from a class I taught earlier this year, Jason Gilroy, told me about the song United Breaks Guitars by Dave Carroll:

Five million hits later, United is making amends.  If you search YouTube you’ll find further videos by Dave and various responses.

My favorite reality show Top Chef is back and this time it’s in Vegas.  Sin City is not known for any special cuisine so the producers have opted to stir in the town’s most famous ingredient – gambling.  In each episode one chef is eliminated and we get to watch them fight and flirt till one is left standing many, many weeks from now.  So it’s a pretty big deal if you get a pass to the next round.  Because of the Vegas setting, one chef won this great prize by drawing a “gold chip”.  In the previous shows, you had to cook your way into this advantage in the “quickfire” round.  This round still remains but, at least in the first show, there is now the second random route into the next round.

What effect will this have?

As randomization is not a function of the ability of the contestants but winning the quickfire is, the average quality of the chefs in future rounds will go down compared to the previous series.  That’s the statistics angle.  The game theory angle is the impact on incentives.  The good chefs are going to find it easier than before as only the worst chef is eliminated. If a lower quality chef makes it via randomization, the others can slack off in the next round and conserve their energy and best dishes for the future.  The cooking will get worse.  The producers should drop the randomization trick if they want to see the best possible cooking.

The thing with having a blog is that it affects the way you see everything.  You can’t just let go and enjoy a movie, T.V. etc without the odd idea for a post popping into the back of your mind….So, last night I settled down to watch the first episode of “Mad Men” and I thought I concentrated fully and followed the plot. But now all I remember is that the new evil British guy (the Principal) appointed two people, Pete and Ken (the Agents) , “Head of Accounts” after sacking the sole previous incumbent.

This the classic incentive scheme recommended by the tournaments literature in contract theory. The main idea is that you get both Pete and Ken to work hard because if one underperforms relative to the other, he gets punished by lower wages, sacking etc.  Of course this transfers risk onto the agents and Pete particularly looked discomfited by the arrangement even though he got a promotion.  In fact, a classic paper by Bengt Holmstrom (which I already blogged about), recommends that this relative performance evaluation only be done if one agent’s output gives information about the other’s effort, otherwise you are just imposing risk without any incentive benefits.  So, if Pete and Ken were doing totally different jobs, the incentive scheme does not make any sense.  But since they are both working in Accounts if one, say Pete, does well and the other, Ken, does badly it signals that Ken might not have worked as hard as Pete.  If both do badly, it signals that the economy is bad and no-one shirked etc…So, it fits the theory.

One problem with relative performance evaluation is that Pete and Ken have an incentive to collude (Dilip Mookherjee pointed this out in his research).  Ken realizes this and suggests it to Pete but Pete turns him down.  Maybe there’s  a Prisoner’s Dilemma aspect to the collusion game or Pete was too emotional to get it.

Thought you were secure in a tenured job?  I guess if your whole department is eliminated, so are you:  The University of Southern Mississippi is getting rid of its economics department in its entirety:

The elimination of economics, along with five tenured and four tenure-track faculty positions, is part of a plan to reduce spending by $11 to $12 million, universitywide, within a year. While university officials stress the plan isn’t yet final, they are slated to decide by September 1 whether to go forward with the proposed cuts, according to a news release. Tenured and tenure-track faculty are legally required to a year’s notice prior to termination, and economics faculty say they’ve already received such notice.

It seems they are not producing enough graduates.

(HT: Tomas Sjostrom)

1. In Rhode Island, happy endings but no beginnings.
2. Your food is trying to kill you.
3. University of California professors furloughed.

Cheney is spilling the beans on “soft” Bush:

Cheney’s imprint on law and policy, achieved during the first term at the peak of his influence, had faded considerably by the time he and Bush left office. Bush halted the waterboarding of accused terrorists, closed secret CIA prisons, sought congressional blessing for domestic surveillance, and reached out diplomatically to Iran and North Korea, which Cheney believed to be ripe for “regime change.”

And

It was clear that Cheney’s doctrine was cast-iron strength at all times — never apologize, never explain — and Bush moved toward the conciliatory.