A taxi driver has a fixed cost: he has to get out of bed, get into his cab and start roaming the streets. He is compensated by a fixed rate per mile. The combination of these two creates a basic incentive problem which explains a lot of common frustration with cab rides. In order for the fixed rate to compensate the cab driver for his fixed costs, it must be set above the flow marginal cost of driving. The implication is that the cab driver always has an incentive to extend your trip longer than is necessary. And he has an incentive to reject short trips. And they saturate airports but you can’t find them in your neighborhood, etc, etc…
Senator Kaufman from Delaware asked Judge Sotomayor about the Leegin case which overturned the per se illegality of resale price maintanence.
Senator Kaufman: But what’s the role of the court in using economic theory to interpret acts of Congress?
SOTOMAYOR: Well, you don’t use economic theory to determine the constitutionality of congressional action. That is a different question, I think, than the one that Leegin addressed.
What Leegin addressed was how the court would apply congressional act, the antitrust laws, to a factual question before it. And that’s a different issue, because that doesn’t do with questioning the economic choices of Congress. That goes to whether or not, in reviewing the action of a particular defendant, what view the court is going to apply to that activity.
SOTOMAYOR: In the Leegin case, the court’s decision was, “Look, we have prior case law that says that this type of activity is always anti-competitive,” and the court, in reconsidering that issue in the Leegin case, said, “Well, there’s been enough presented in the courts below to show that maybe it’s not in — some activities anti- competitive. And so we’re not going to subject it to an absolute bar; we’re going to subject it to a review under rule of reason.”
That’s why I said it’s not a question of questioning Congress’ economic choices or the economic theories that underlay its decisions in a legislation. They weren’t striking down the antitrust laws. What the Court was trying to do was it figure out how it would apply that law to particular set of facts before it.
Remember the joke about the man who asks a woman if she would have sex with him for a million dollars? She reflects for a few moments and then answers that she would. “So,” he says, “would you have sex with me for $50?” Indignantly, she exclaims, “What kind of a woman do you think I am?” He replies: “We’ve already established that. Now we’re just haggling about the price.” The man’s response implies that if a woman will sell herself at any price, she is a prostitute. The way we regard rationing in health care seems to rest on a similar assumption, that it’s immoral to apply monetary considerations to saving lives — but is that stance tenable?
A brilliant article on the basic economics of scarcity, with a focus on the current health care debate.
The Starbucks index suggests that, as a rough rule of thumb, to get the Swiss price for something, double the US price i.e. a tall latte in Switzerland is twice the price of one in the US. This rule works for concerts too meaning I paid a huge amount to see the Keith Jarrett Trio in Lucerne.
But it was worth it. The concert hall itself, KKL Lucerne, is amazing. The views of snow-capped mountains from the roof terrace creates just the right buzz for a concert. The huge roof which overhangs the fountain reflects the lake and the boats as they come in or leave at the dock. It’s a great place to have your beer before you head to your expensive seat.
And I’ve always found Keith Jarrett to be more compelling live than on CD. There’s a warmth to his tone live that is missing in the excellent but cold ECM recordings, even of the live performances. They ended with a song I did not recognize. Jarrett played a repetitive and hypnotic four note theme with his left hand while improvising wildly with his right. Peacock kept up a steady rhythm on the bass and De Johnette improvised with beats and sounds that you would never guess could come from a drumset. I would love to identify the song but I can’t find a playlist on the web! Do this article or this one contain the playlist?
The anti-trust division of the Justice Department and FTC are reviewing potentially anti-competitive practices by the dominant providers of wireless services. In my previous post on the subject I discussed the theory of exclusive contracts as illegal barriers to entry. In this post I will take up the conventional argument that an exclusive agreement can spur investment by providing a guaranteed return.
AT&T absorbed significant upfront costs by developing and expanding their 3G network at a time when only the Apple iPhone was capable of using its higher speeds and advanced capabilities. AT&T and Apple entered into a relationship in which AT&T would be the exclusive provider of 3G wireless services for the iPhone and this guarantees AT&T a stream of revenue which would eventually recoup their investment and turn a profit. If this exclusive contract were to be scrutinized by anti-trust authorities, AT&T could be expected to argue that without protection from future competition these revenues would not be guaranteed and they would not have been able to make the investment in the first place.
Putting this argument in its proper light requires paying close attention to the distinction between total profits and incentives at the margin. To justify an exclusive contract on efficiency grounds it is not enough to show that exclusivity raises total profits, it must be shown that in addition it adds to the marginal incentives to invest in the new technology.
Imagine that AT&T has no contract with Apple. The worry is that a competitor will develop a rival 3G network and compete with AT&T for Apple’s business. If this happens, AT&T is left out in the cold and makes a loss on its investment. On the other hand, if AT&T has a contract to be the exclusive iPhone 3G provider, then Apple cannot unilateraly break this contract and deal with the new entrant. Of course if the new provider was a more attractive partner, perhaps because of lower costs or a better technology, Apple could try to buy out of the contract, but AT&T would not accept any payment less than what it would get from insisting on the exclusive contract.
Thus, with an exclusive contract, when a competitor appears AT&T is guaranteed a minimal payoff equal to the total revenue it would earn if it rejected any buyout and insisted on the exclusive deal. This is the basis of the conventional intuition supporting exclusive dealing. But what exactly determines this payoff?
The key to understanding this is to consider that once the contract is in place and AT&T’s investment is sunk, the two parties are in a situation of bilateral monopoly. There is some total surplus that will be generated from their mutual agreement and this surplus will be divided between the two through some bargaining. The exclusive contract determines the status quo from which they will bargain and the amount of surplus to divided is the gain from Apple switching to the new rival. Investment by AT&T improves the value to Apple from dealing with AT&T and while this raises AT&T’s status quo it also reduces the gain to switching to the new rival, and hence the bargaining surplus, by exactly the same amount. In the resulting bilateral monopoly bargaining, these effects exactly counteract one another and the net result is that the contract adds nothing to AT&T’s marginal incentives to invest.
This is the insight of Segal and Whinston in their RAND paper “Eclusive Contracts and Protection of Investment.”
Ultimately, an exclusive contract only shifts surplus to the investing party in a lump sum, independent of the level of investment. There are two implications of this.
- It cannot be argued that exclusive contracts are necessary for protection of investments. The shifting of surplus could be just as easily achieved by replacing the exclusive contract with a lump-sum cash payment to AT&T.
- However, the argument described here cannot be the decisive plank in any anti-trust litigation. If an anti-trust investigation were to go forward, AT&T/Apple could argue that instead of using the lump-sum payment (which may have been complicated if the size of the payment required is large) they chose to use an exclusive contract to do the surplus shifting. That is, just noticing that exclusive contracts are not necessary, does not imply that they are not useful. At best, there would have to be a finding that the exclusive contract had some other anti-competitive intent, and the arguments here would just be used to disarm any defense on the basis of necessity.
In Japan, robots makeup a measurable fraction of the manufacturing workforce:
In 2005, more than 370,000 robots worked at factories across Japan, about 40 percent of the global total, representing 32 robots for every 1,000 manufacturing employees, according to a report by Macquarie Bank. A 2007 government plan for technology policy called for one million industrial robots to be installed by 2025. That will almost certainly not happen.
Robots are apparently the first to be let go in Japan in a recession. And the cuts go even deeper.
Roborior by Tmsuk — a watermelon-shape house sitter on wheels that rolls around a home and uses infrared sensors to detect suspicious movement and a video camera to transmit images to absent residents — has struggled to find new users. A rental program was scrapped in April because of lack of interest.
Here is the story from the New York Times.
kwik, serv, kleen, EZ, FasTrak, thru, etc.
There are certain words in certain contexts that Americans purposefully misspell in a way that is half ingratiating, half condescending. I am not talking about txting where the purpose of the misspelling is to economize on characters. Instead these words are usually associated with low-end commercial products and the misspellings predate the internet.
Here’s what you get when you search google maps for the word “kwik” (and you happen to be in Stony Brook, NY.) My favorite: Kwik Ezee.
It has always fascinated me. There seems to be a common theme. It is not a movement toward phonetic spelling. Is it an attempt to be kool? Is it a way of saying “Come to KwikiMart and get your Cheezits. And don’t worry we won’t judge you for it, hey, we can’t even spell!!” The letter k apparently has a special attraction.
Sandeep says that this doesn’t happen in Britain and I believe him, but here is a google maps search that says otherwise.
Does this happen in your language? Is your language phonetically challenged like English? What’s your theory of kwaint misspellings? Any good examples (English or otherwise)?
I will be traveling this week so my blogging will be unusually light sound.
CAPTCHAs are everywhere on the web now. They are the distorted text that you are asked to identify before being allowed to register for an account. The purpose is to prevent computer programs from gaining quick access to many accounts for nefarious purposes (spam for example.)
reCAPTCHA piggy-backs on CAPTCHA. You are asked to identify two words. The first is a standard CAPTCHA. If you enter the correct word you identify yourself as a human. The second is a word that has been optically scanned from a book that is being digitized. It has found its way into this reCAPTCHA because the computer doing the optical character recognition was not able to identify it. If you have identified yourself as a human via the first CAPTCHA, your answer to the second word is assumed to be correct and used in the digital translation. You are digitizing the book.
According to Wikipedia 20 years of the New York Times archive has been digitized with the help of reCAPTCHA. And, “provides about the equivalent of 160 books per day, or 12,000 manhours per day of free labor.”
The first reaction to this is obvious. The labor is not free. In fact it costs exactly 12,000 man hours. Lots of things can be produced with 12,000 man hours. Lots of leisure can be consumed in 12,000 hours. Is digitizing the New York Times the best use of this people-time? On top of that the reCAPTCHA is a tax which reduces the quantity of online accounts transacted and that is a deadweight loss.
But it is just a few seconds of your time right? Something about that seems to change the calculation. I bet most people would say that they don’t mind giving away two seconds of their time. Part of this is due to an illusion of marginal vs total. People are tempted to treat the act as a gift of two seconds of their time in return for a whole digitized library. But in fact they are giving away two seconds of their time for one digitized word.
A second part of this is due to a scale illusion. You may successfully convince said reCAPTHArer that she is just getting a tiny fraction of the book for her two seconds but she will probably still say that she is happy with that. But if you ask her whether she is willing to contribute 1000 seconds for 500 words, probably not. And, to take increasing marginal costs out of the question, if you asked her whether she thought digitizing the New York Times is worth how many thousands of woman-hours of (dispersed) ucompensated labor she again might start to see the point.
But still, not everybody. And I think there must be some sound rationale underneath this. I would not argue that digitizing books is the necessarily the highest priority public good, but the mechanism is inherently linked to deciphering words. True, we could require everyone who signs up at Facebook to donate 1 penny to fight global warming but A) it is never possible to know exactly what “1 penny toward fighting global warming” means whereas there is no way to redirect my contribution if I decipher a word. That is not a liquid asset. And B) two seconds of most people’s time is worth less than 1 penny (we are talking about Facebook users remember) and we don’t have a micro-payments system in place to go down to fractions of pennies.
Perhaps what we have here is a unique opportunity to utilize a public-goods contribution mechanism that transparent and non-manipulable and guarantees to each contributor that he will not be free-ridden on: everyone else is committed to the same contribution.
The first photo shows a bike which has a lock but is not tied to a lamppost or bike rack. The second shows a whole row of bikes, some locked as in the first photo, and some totally unlocked. Some of the bikes look old but all are perfectly serviceable.
Why go abroad and go to Starbucks? Well, this view from the branch on the river in Lucerne is pretty spectacular. ( This is the Chapel Bridge which runs diagonally across the river. ) But beware: the coffee at Starbucks still sucks and it’s even more expensive in Switzerland than the U.S. While there are no coffeeshops, some of the bars on the river open early, serve coffee and have the same view.
He writes the blog Game Theorist and he is the author of the book Parentonomics. Here he is on the BBC sharing his wisdom on potty training and peas. (About 2/3 of the way in.)
Consider a hierarchical organization which promotes to level n+1 the most competent worker in level n. In the organization’s steady state the workers will be sorted into the jobs where they are least competent. (Porkpie ping: Mindhacks)
You need a lot of chessboards for this one, but on top of winning some money you will impress your pals. Challenge a large even number of people to play chess simultaneously and blindfolded. Ask for 2-1 odds against each opponent. Play White against half and Black against the other half. Even if your chess is crap, you are guaranteed to make money.
Here’s how. You mentally associate each game you are playing White with a game in which you are playing Black. You start with the opponents against whom you are playing Black and you remember their moves. Then when you arrive at the associated board in which you are playing White, you just copy the move from the other board. Wait for the response and then copy that move on the associated board in which you are playing Black. Keep doing this. You are effectively making each associated pair play each other. You will average a draw on each pair and so with 2-1 odds you will make money.
All that is required from this is to be able to keep a few moves in your head. If you can do that, you can do this blindfolded and really make an impression. If your memory isn’t up to that, you can skip the blindfold and use the board positions as a mnemonic to help you remember.
Here is a video of this trick in action from Derren Brown.
See the press release here. The practical significance of this is that trade in IOUs is subject to standard regulation. Brokers or other intermediaries facilitating trade between buyers and sellers must be registered as exchanges with the SEC. In related news, the three largest banks in California will stop redeeming IOUs tomorrow. Its going to be a nice summer for the Check Cashers. Note that the IOUs pay 3.75% interest, tax free.
Obama is considering a “public option” in healthcare reform. The idea is that everyone will have the right to sign up with a public non-profit entrant in the health insurance market. This is meant into create more competition in the marketplace and drive down premiums for private health plans. The case for the public option is more subtle than I initially thought.
Here is my argument:
(1) Suppose there is free entry into the healthcare market. Then prices are close to marginal cost for private healthcare organizations so the public option only increases welfare if it has a lower cost. This means in this case the public option has to be more cost effective than the private firms to make the case for entry. There is some lively debate about whether this is actually the case!
But one might say there are entry barriers as a new firm would have to set up a network of doctors, hospitals etc which will be costly and hence prohibit entry. So:
(2) Suppose there are entry barriers and existing firms are playing an oligopolistic equilibrium. This equilibrium might even include implicit collusion at prices well above cost. Even if firms make profits, there will have to ensure that a new entrant cannot enter and make profits. There are two subcases
(a) The costs of the potential entrant put an upper bound on profits that can be made by the incumbents. Then, the public option has to have lower costs than the potential entrant for it to make sense. This cost is higher than that of incumbents but still has to be lower than potential entrants – so there is still has to be some efficiency advantage to the public option.
(b) The costs of the potential entrant do not put an upper bound on the prices charged by incumbents. This is because incumbents are deterring entry by the threat of a price war should entry occur. So quite efficient potential entrants are staying out – they could make profits if entry leads to a non-price-war equilibrium but not otherwise. In this case, the public option can be more inefficient even than the potential entrant, price at its costs and act as an upper bound on the prices that can be charged by incumbents.
Is there any evidence we are in case 2b rather than 2a? Also, the public option effectively acts as a price ceiling on incumbents. A price ceiling can be implemented without the public option. Not sure which intervention is more politically feasible.
After showing how the Vickrey auction efficiently allocates a private good we revisit some of the other social choice problems discussed at the beginning and speculate how to extend the Vickrey logic to those problems. We look at the auction with externalities and see how the rules of the Vickrey auction can be modified to achieve efficiency. At first the modification seems strange, but then we see a theme emerge. Agents should pay the negative externalities they impose on the rest of society (and receive payment in compensation for the postive externalities.
We distill this idea into a general formula which measures these externalities and define a transfer function according to that formula. The resulting efficient mechanism is called the Vickrey-Clarke-Groves mechanism. We show that the VCG mechanism is dominant-strategy incentive compatible and we show how it works in a few examples.
We conclude by returning to the roomate/espresso machine example. Here we explicitly calculate the contributions each roomate should make when the espresso machine is purchased. We remind ourselves of the constraint that the total contributions should cover the cost of the machine and we see that the VCG mechanism falls short. Next we show that in fact the VCG mechanism is the only dominant-strategy efficient mechanism for this problem and arrive at this lecture’s punch line.
There is no efficient, budget-balanced, dominant-strategy mechanism.
Here are the slides.
The Unbundled Economy: It’s one of the implications of (my guess at, given that I haven’t actually read) Free, its apparently what Tyler Cowen is talking about in his new book. As the price of transmitting small chunks of information crashes to zero, the efficient market structure no longer involves assembly and sale of bundles of chunks, but instead sale of the chunks themselves and after-market assembly.
Case in point, the porn industry (which is pretty much always at the leading edge of structural change.)
Vivid, one of the most prominent pornography studios, makes 60 films a year. Three years ago, almost all of them were feature-length films with story lines. Today, more than half are a series of sex scenes, loosely connected by some thread — “vignettes” in the industry vernacular — that can be presented separately online. Other major studios are making similar shifts.
…
In lieu of plot, there are themes. Among the new releases from New Sensations, a studio that makes 24 movies a month, is “Girls ’n Glasses,” made up of scenes of women having sex while wearing glasses.
But old habits die hard, even in the porn world:
“The feature is not as big a part of the industry today,” Mr. Orenstein said. But he says he still plans two to three bigger-budget releases each year, including the recently shot “2040,” which is about the pornography business of the future. Mr. Orenstein described the movie as “an almost Romeo-and-Juliet story between an aging porn star and a cyborg.”
As a part of a broader revival of Section 2 of the Sherman Act, the anti-trust division of the Department of Justice, under Obama appointee Christine Varney, has opened a review of potentially anti-competitive practices by the dominant telcom providers. One specific issue that has received attention is exclusionary contracting between wireless carriers (AT&T) and handset manufacturers (Apple iPhone.) The FTC is reportedly also exploring these contracts. Exclusive contracts bind a manufacturer’s handsets to specific carriers thereby hindering or preventing end-users from migrating to other carriers. The widespread nature of these contracts may create a barrier against entry by new, smaller wireless providers who cannot offer their users handsets that compete with the top models.
The review is reported to be at an early stage and may not lead to a formal investigation, but as this develops there are a few basic economic arguments to keep in mind. To start with, there is the benchmark “Chicago School” view which starts with the observation that exclusionary contracts require the voluntary agreement of the handset manufacturers. The manufacturers internalize the costs of the entry barrier because without entry they will have fewer competitive carriers to sell their phones to. Therefore, exclusive contracts must compensate manufacturers for this loss impying that these contracts will be in place only when the total surplus from exclusion exceeds the cost, i.e. when it is efficient. The Chicago argument is a longstanding pillar of regulatory policy that still holds sway today. From the article:
Jon Muleta, former wireless bureau chief of the FCC, said exclusive handset deals won’t be an issue the government can pursue on antitrust grounds unless major handset makers say they’re being forced into the deals. “The equipment providers enter into these deals willingly,” Mr. Muleta said.
The Chicago argument ignores the costs to end users from reduced competition in wireless service. It would apply only if manufacturers internalize all of the benefits to consumers from increased competition. But under any reasonable model of the wireless market structure, end-user consumer surplus would increase with more competition for wireless service and this becomes an externality relative to the parties in the Chicago bargain.
Secondly, the Chicago argument has been discredited as it takes a naive view of the way contract negotiation would work. Implicitly, the Chicago argument assumes that handset manufacturers must be compensated at least what they would earn if entry were to occur. But scale economies imply that a new carrier will enter only if sufficiently many, or sufficiently large, manufacturers remain free of exclusive deals. The dominant carriers can use a “divide and conquer” strategy which exploits the difficulty for handset manufacturers to coordinate severing their exclusive deals. Without this coordinated threat, manufacturers cannot extract the compensation envisioned in the Chicago argument, and again efficiency breaks down.
The definitive references here are Rasmusen, Rasmeyer, and Wiley “Naked Exclusion” and a follow-on comment by Segal and Whinston, both in the American Economic Review.
There is a separate defense of exclusive contracts, often cited and also reflected in the article.
Paul Roth, AT&T’s president of retail sales and service, told Congress last month that the billions of dollars the company invests in its network and services would be put at risk if government were to “impose intrusive restrictions on these services or the way that service providers and manufacturers collaborate on next-generation devices.” Mr. Roth said there is plenty of competition and innovation in the wireless industry.
AT&T’s tremendous investment in its 3G network will pay off only because of its exclusive deal with Apple to market the iPhone. Thus, it is often argued that exclusive contracts are in fact pro-competitive as they reward investment with profits that would otherwise be subject to hold-up or competed away. I will take up this argument in a subsequent post.
Love that sushi from Popeye’s. (toque tilt: kottke.)
Here is an excellent example of social choice paradoxes in practice: the voting system for the Olympic Venue. The article illustrates cycles, failure of unanimity and violations of independence of irrelevant alternatives. A great teaching aid, I will certainly be using it next time I teach my intermediate micro course. I thank Taresh Batra for the pointer.
By the way, there is another perfect social choice example from the olympics. In the 2002 women’s figure skating competition, Michelle Kwan was leading Sarah Hughes when the final skater, Irina Slutskaya took the ice. Slutskaya put in a sub-par performance which was nevertheless good enough to surpass Kwan. But the real suprise was that this performance by Slutskaya reversed the ranking of Kwan and Hughes so that Hughes leaped ahead of both Kwan and Slutskaya and won the gold. In the end, Hughes took the gold, Slutskaya took silver, and Kwan went home with the bronze medal. Here is a an old story.
This article (wig wiggle: The Browser) discusses various ways the Chinese judicial system differs from Western courts. One significant difference is summarized by Columbia Law Professor Benjamin Liebman:
Yet China’s courts are as deeply committed to populism as they are to professionalism. If Chinese judges decide to ignore a law in order to preserve thousands of jobs, they aren’t violating a sacred legal precept. “They’re supposed to take into account popular interests,” Liebman explains.
The article presents this in a way that presupposes that it will be obvious to us that this is a bad approach to judging. Indeed, public debate in the US about “judicial philosophy” also takes for granted that judges should base their opinions on the law, and not on popular opinion. But why is this so obvious? Why shouldn’t the job of a judge be to decide on a case-by-case basis what is in the public interest?
Put aside the obvious reasons. Popular opinion may be hard to read and political voice may not be equally allocated. Judges are administering justice, especially for those without political voice. Popular opinion may be short-sighted and judges are expected to be immune to short-run pressures and make decisions with better long-run consequences.
But even in cases where it is transparent and uncontroversial what the public interest is and there is no short-run/long-run trade-off, judges still should not decide cases on that basis alone. In fact, one of the most important functions of the court is to act against the public interest. Because incentives to make good decisions typically require that we expect a bad outcome if instead we make bad decisions. And ex post that bad outcome is typically not in the public interest. A court that is committed to uphold the law and act against the public interest ex post advances the public interest ex ante.
An interesting New Yorker article outlines, Operation Ceasefire, an anti-gang violence program in Cincinnati:
“David Kennedy, a professor from John Jay College of Criminal Justice, went to Cincinnati in the fall of 2006 to pitch his program, which is sometimes known as Ceasefire. Ceasefire begins with the fact that a small number of hardened criminals commit a hugely disproportionate number of serious violent crimes. Kennedy explained that, in Cincinnati, the police would identify gang members who were on parole or probation and compel them to attend a meeting. There, the cops would demand that the shootings end, and promise that, if they did not, the punishment would be swift and severe and target the entire gang. The city would also make life coaching and job counseling available to those who wanted out of the thug life.”
It seems the economic logic is this: You might not have the evidence or ability to punish only the few hardened criminals. If you punish the entire gang, they have good incentives to monitor the guy doing the violent crime. On the face of it, it seems as if it is futile to punish the innocent gang members but if they have a monitoring role they become like extra police officers. It’s hard and dangerous to reward them for turning in fellow gang members so carrot incentives are impossible. But stick incentives are not.
I enjoyed this article in the Boston Globe which surveys a variety of theories for the (mostly anectodal) tendency for the most vocal moralizers to be the most prone to vice. When you read an article like this you have to start with simple null hypothesis that, other things equal, making a person more concerned about moral behavior will make them inclined to act morally. Many of the stories in this article are tempting, mostly because we want to hate hypocrites, but ultimately don’t put up a good counterargument to this benchmark view. However the following excerpt is more subtle and in my opinion the most robust story offered.
When asked about the phenomenon of the hypocritical moralizer, psychologists will often point to “projection,” an idea inherited from Freud. What it means – and there is a large literature to back it up – is that if someone is fixated on a particular worry or goal, they assume that everyone else is driven by that same worry or goal. Someone who covets his neighbor’s wife, in other words, would tend, rightly or wrongly, to see wife-coveting as a widespread phenomenon, and if that person were a politician or preacher, he might spend a lot of his time spreading the word about the dangers of adultery.
I wanted to find my way to the famous pizzerias of Naples. But with two kids and luggage in tow, it was too daunting. If only I’d known about this service I might have done it:
“It seemed like a great idea at the time: hire ex-convicts to escort tourists through seedy Neapolitan streets. Who better to explain to the uninitiated the potential dangers lying in wait?
But after less than a month, the experiment has already run into trouble. The former convicts recently staged a wildcat strike after one worker was taken to police headquarters over a verbal altercation with a traffic officer.
The argument was about a fine issued the day before to a worker with the group, who had crossed the street just a few steps from a crosswalk. “The first jaywalking fine issued in Naples in 200 years,” Corrado Gabriele, the program’s main institutional sponsor, said dryly.”
We should replicate this program in Chicago.
At a mafia trial in 1969:
There were sixty-four defendants, all from the
town of Corleone. The charges related to a mafi a war in Corleone that started in 1958,
and resulting in over fifty murders. There was signifi cant evidence tampering during the
trial, which experienced the rst public intimidation act. In fact, as the jury retired in
July, they and the judge received an anonymous note that read: To the President of the
Court of Assise, and members of the Jury: You have not understood, or rather, you don’t
want to understand, what Corleone means. You are judging honest gentlemen of Corleone,
denounced through caprice by the Carabinieri and Police. We simply want to warn you
that if a single gentleman from Corleone is convicted, you will be blown sky high, you will
be wiped out, you will be butchered and so will every member of your family. We think
we’ve been clear. Nobody must be convicted. Otherwise you will be condemned to death
– you and your families. A Sicilian proverb says: A man warned is a man saved. It’s up
to you. Be wise.” All sixty-four defendants were acquitted. Whilst there was undoubtedly
witness intimidation and evidence tampering, a lot of the evidence was fairly thin.
This is from the paper “Accomplice Witnesses, Organized Crime and Corruption: Theory and Evidence from Italy” by Antonio Acconcia, Giovanni Immordino, Salvatore Piccolo and Patrick Rey. As I told Salvatore in Anacapri, with more data and a bit of work, this will be a cool paper.
There has been a run on one of the largest banks in an economics-themed online role-playing game called Eve. The event merited an article at the BBC. The run was triggered when Ricdic, an executive of the bank made off with a large sum of virtual lucre and exchanged it for real-world cash.
Eve Online has about 300,000 players all of whom inhabit the same online universe. The game revolves around trade, mining asteroids and the efforts of different player-controlled corporations to take control of swathes of virtual space.
It has now emerged that Ricdic used the cash to put down a deposit on a house and to pay medical bills.
“I’m not proud of it at all, that’s why I didn’t brag about it,” Ricdic told Reuters. “But you know, if I had to do it again, I probably would’ve chosen the same path based on the same situation.”
Apparently, the bank had tremendous reserves and has so far withstood the run. Here is more information. Either real-world bank regulators have something to learn from Eve or the other way around because here is Ricdic’s comeuppance:
Ricdic has now been thrown out of the game as trading in-game cash for real money is against Eve Online’s terms and conditions.
The rules governing play within Eve would not have sanctioned Ricdic if he had simply stolen the cash and used it in the game, nor if he had bought kredits with real dollars.
Fedora Flourish: BoingBoing
A few years ago, we had breakfast at Sandeep’s house and he made us a delicious breakfast. One of the dishes was a strange egg and tortilla chip creation that everybody loved. I got the recipe from Sandeep and it has become part of our regular rotation ever since. We never knew what to call it so in my house it has always been known as Sandeep’s Special Breakfast. (I since had breakfast in Mexico City and I noticed a resemblance to something called Chilaquiles, so I guess that is what it must be.) It’s extremely simple to make and super yummy. It works great for lunch or dinner too.
1 yellow onion, sliced into wedges.
1 bag of Whole Foods restaurant style tortilla chips. (Whole Foods is not important but you want the chips that are made from tortillas, not the denser chips that are made directly from masa.)
8 eggs, lightly beaten
1 jar of tomatillo salsa. Anything is fine here, but this stuff called Xochitl
works really well. It has a smoky flavor that makes your Special Breakfast extra special. You can get it at Chicago-area Whole Foods.
Over high heat, add olive oil to a large saute pan and saute/fry the onions. You want them to brown and then soften a little. Turn down the heat and add a few handfuls of tortilla chips to the pan, breaking them with your hands into medium sized pieces. Toss them around in the pan to get them coated with the oil. Then add the eggs. Let them sit in the pan for a minute to cook a bit and then break the whole mass up and turn it over to cook some more. When the eggs are not quite completely done, pour in some of the salsa. The right quantity is something you figure out form experience. It should not be drenched in salsa. If the salsa is watery you should raise the heat and cook off some of the water.
You are done. It looks something like this on the plate.
(Until you serve the plate that is. Not long after that the plate is empty.)
Paul Krugman songs continue:
Paul may have the blues but we don’t: Happy 4th of July!
(Hat tip: Our music correspondent, Tomas Sjostrom)
Via Robin Goldstein, the work of Coco Krumme who analyzed wine reviews and classified words according to whether they are typically used to describe expensive or inexpensive wines.
She found that “about 65% of commonly occurring words are non-overlapping.” Words like “old,” “elegant,” “intense,” “supple,” “velvety,” “smoky,” “tobacco,” and “chocolate” predict expensive wines; “pleasing,” “refreshing,” “value,” “enjoy,” “bright,” “light,” “fresh, “tropical,” “pink,” “fruity,” “good,” “clean,” “tasty,” and “juicy” predict cheap wines. As for suggested pairings, “steak” and “shellfish” predict expensive wines; “chicken” predicts cheap wines.
As Robin points out it matters whether the reviews were based on blind tastings. If so, then the choice of word is in response to the taste of the wine and the correlation with price just tells us which words reviewers use to convey good taste. (Assuming you think that price is correlated with taste.) If the tastings were not blind then it is more likely that reviewers are responding to the label and are choosing words in response to the price.
Cheap Talk 
