1001. One to change the lightbulb; the other 1000 to hold everything else constant.
(hat tip: tomas sjostrom)
Legalization of marijuana has gained some momentum recently in terms of conspicuous support in the press, expansion of medical marijuana freedoms, and relaxation of enforcement (see especially this article.) The argument is often made that the tremendous expense in terms of lives and money of the war on drugs does not justify whatever moral benefit there is of minimizing drug use.
But legalization would only make the drug war more costly. The reason is simple. Legalized pot does not reduce the incentive of government and its lobbyists to fight back the illegal market, in fact it only adds to that incentive.
The effort spent prosecuting the war on drugs is determined by a balance between the marginal cost of additional enforcement and the marginal benefit of reduced consumption. When pot is illegal, that marginal benefit comes from the (perceived by lobbyists) moral and cultural virtue. When pot is legal, the marginal cost of enforcement is the same but to the moral benefit would be added the financial stake in licensing legal producers and taxing consumption.
The government’s revenue from licensing and taxation of marijuana sales relies on foreclosing the black market which would not be subject to taxation and therefore would clear at a lower price. Government policy under legalized marijuana would be shaped by basic economics. The effort in fighting the black market imposes a cost on illicit producers which acts effectively as a tax. The level of that tax determines the market price in the black market and this is the maximum price that the legal market can sustain. If we start with the level of enforcement currently in place, this translates to a certain tax revenue that the government would earn were it to legalize pot and keep enforcement at its current level.
But raising the level of enforcement would allow the government to raise taxes on the legal trade. Since the marginal cost of enforcement was already equal to the marginal benefit based on moral considerations, the additional marginal benefit from increased taxes means that the government will increase enforcement.*
If you favor legalization of marijuana for libertarian reasons (or if you are just hoping for cheaper weed), you should instead push for a relaxation of enforcement without decriminalization (as the Obama administration is reportedly acquiescing to.) Decriminalization would give the create a vested interest in the drug war that would be hard to undo.
(*Theoretically, it is possible that, say, excise tax revenue would be increased by increasing consumption at the margin rather than decreasing. This would be true only if the current level of enforcement is already holding the black market price above the monopoly price. It is hard to believe that this is true today. )
I learned to juggle 3 balls when I was about 10. Its a great trick when you are 10 but it really comes in handy when you are a parent as endless entertainment for your kids. But now mine are getting bored and they are demanding 5 balls. Juggling 5 balls is pretty close to impossible. But with a little technology, learning to juggle 5 could be easy.
What I want is a ball that is sturdy enough for juggling but can be filled with helium in varying concentrations. Juggling a helium-filled ball would be something like juggling in low gravity. Which means the balls would fall slowly and 5 balls would be easy. With just the right concentration of helium, anyone could do it. Then, the helium concentration is gradually reduced. At each step, the difficulty increases just a little bit making it easier to master juggling the heavier and heavier balls. Finally, its all atmospheric air, and you are juggling 5 balls in no time.
Mario Batali’s Simple Italian Cooking is not that simple. It’s usually way more time-consuming than he suggests. This turned out to be true of the Crespelles al Formaggio. They were delicious nonetheless and we will make them again. They went very well with this salad (we skipped the pomegranate!) and remnants of yesterday’s Pinot Noir.
Normally, my palette is not good enough to distinguish between the regular Pinot Noir and the Méthode à L’Ancienne (MA). But the 2006 MA vintage is so good that pretty much anyone can tell them apart! There’s lots of cherry, a slight acidity at the end and then the cherry comes back again. I couldn’t taste the bacon or strawberry the description mentions. Maybe I will after a few years in the bottle. It’s worth the extra ten bucks to get the MA over the regular. Navarro is one of my favorite vineyards for whites too. Check it out.
This article doesn’t answer that question, but it does explain why scratching relieves the itch. Check it out (via MindHacks). Apparently scratching turns off activity in nerve cells, but somehow the nerve cells knew you were itchy because they do not shut off in response to a scratch when you are not itchy.
Did you know that just reading about itchiness can make you itchy? Did you scratch while reading this?
Can you resist an itch until it goes away? Try it! (Deep breathing seems to make it go away faster.)
April 10 (Bloomberg) — The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.
The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.
Assuminng the stress tests were done, there now exists hard evidence of which banks are healthy and which are not. There is no more cheap talk. And once non-cheap talking begins, there is no option to remain silent:
“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.
All information would be revealed before the actual results are. Instead, Treasury wants to control the revelation of information. What could it have in mind? Wouldn’t investors see through any scheme to manipulate expectations by picking the order in which information is revealed? And isn’t pooling the original problem stress tests were supposed to solve?
Addendum: Calculated Risk infers that there must be some very bad news for the banks behind this. I tend to agree. One scenario is that the failing banks will be disposed of before revealing any results.
My post about poker was more about game THEORY than game PRACTICE, much to the disappointment of readers! Luckily for us, I have a great, interested student in my class Patrick Nyffeler. His brother, Andre, is an “avid, online poker player”. Andre was kind enough to send me the following information below via Patrick. Thanks Andre!
In the blog he alludes to the fact that there is a game theory optimal (GTO) strategy and an exploitive strategy. There’s a good article on it that’s on one of the instructional sites I used to subscribe to. Luckily, I found a copy of it,
http://forumserver.twoplustwo.com/94/stoxpoker-com/understanding-game-theory-holdem-245479/
Some quick thoughts on each:
GTO
There’s been a team of guys who for the last fifteen years have been working on solving GTO play for heads up limit holdem.
They’re getting really good now, as they won the last “man vs. machine” showdown which was against some elite HU LHE guys.
There is some fear bots could ruin online poker. The idea is that they wouldn’t have to be good enough to beat even good players at middle levels, just good enough to have a tiny edge at the smallest games. They would run 24/7 and take a ton of money out of the poker economy that normally would filter up to the higher limits. Luckily, the big sites (with the help of the pro online players) are good at identifying these bots quickly. Also, the current AIs for NLHE are terrible and it will be a long time before something close to GTO is achieved (although who knows, that could be within five or ten years)
There’s lots of talk about GTO and many solved “minigames” such as that in Mathematics of Poker by Bill Chen (the guy with two bracelets who works at Susquehanna). These give you a good intuition for different aspects of the game as well as a starting point of how to play before you know much about your opponents strategy.
Exploitive
This is what good poker players use 99% of the time. There’s no way a top poker player is using their watch to randomize his bluffing. He is using previous history with the opponent, game flow, and psychology to make/not make his bluff and outplay his opponent. Nobody plays near GTO in games like NLHE so to maximize profit, you adopt an exploitive approach.
If you have some interest/time, here’s two of the best general theory of poker articles I’ve read in the last five years.
Good Poker by Bryce Paradis
http://www.bluffmagazine.com/magazine/What%2Dis%2D%27Good%2DPoker%27%2DBryce%2DParadis-934.htm
G-Bucks by Phil Galfond (this is one kind of dense)
http://sports.espn.go.com/espn/poker/columns/story?columnist=bluff_magazine&id=2817110
Something I watched recently made me want to write on a topic that I have no interest in and only passing experience with, but which is intriguing once you think about it for a moment. I decided I would blog about the first such thing I could come up with. After thinking for more than a few moments the first thing I came up with fitting this description was:
Barbicide. It’s that blue liquid that every barber/hair salon uses to store combs and scissors, presumably to disinfect it in some way. Before reading that Wikipedia article, some obvious questions about Barbicide come to mind:
- Is there really no competition for Barbicide? How do they maintain their monopoly? There doesn’t seem to be a monopoly on the combs or the scissors, just the blue liquid that cleans them.
- Why always blue? Presumably it is some kind of branding. Does Barbicide have a patent/copyright on that particular shade of blue?
- The name suggests that it is a special chemical agent for killing some kind of mythical organism whose name has the root Barbi-. But I don’t believe that. In fact, I believe that Barbicide is just de-natured alcohol colored blue. But I must be wrong right?
- How often do you have to change a jar of Barbicide?
The wikipedia article didn’t answer many of these questions but it did say something about 3. In fact barbicide
… is a United States Environmental Protection Agency-approved hospital disinfectant. It is a germicide, pseudomonacide, fungicide, and viricide. In addition, it kills the HIV-1 virus (AIDS virus), Hepatitis B, and Hepatitis C.
And it raised new questions. Like, is it true as “Barbicide techinicians claim” that
it is the only disinfectant of its kind which holds its power and color over time; all of its competitors’ products eventually turn green or brown.
? That at least tells me that there are indeed competitors and presumably they are all blue (at first.) I checked the Barbicide Material Safety Data Sheet, a document prepared by OSHA and confirmed that alcohol is the primary active ingredient, although it also contains Dimethyl Benzyl Ammonium Chloride (DBAC), and Sodium Nitrite. I checked the Wikipedia page for DBAC and found some uninteresting (to me) facts like that it is a
nitrogenous cationic surface-acting agent belonging to the quaternary ammonium group
and some interesting facts like that it is toxic to fish. Apparently it is not patented. So Barbicide must be a patented formula combining these chemicals in some specific proportions with other, presumably blue, chemicals.
I went to the homepage for Barbicide. Did you know that a jar of Barbicide is in the permanent collection at the National Museum of American History at the Smithsonian Institution? Now you do. King Research, which produces Barbicide also makes other products, for example a drain cleaner that apparently excels at breaking down hair clogs. Natch.
I found this discussion forum where exactly my question 4 was raised and after many forum members professed ignorance, a call was placed directly to King Research who suggest replacing it every day, or when it gets cloudy. This surprised me because when you factor in the claims of the Barbicide technicians, it seems to suggest that the competitor’s product turns brown or green in less than a day. Well, no wonder they can’t compete.
Finally, I assumed that somewhere there must be a dark side to all of this, so I googled “Against Barbicide” and “Barbicide Controversies” and after many such attempts I finally came across the following transcript of a case from the Third Circuit Court of Appeal in which Barbicide was allegedly improperly used to sanitize a tub used in a pedicure:
Ms. Detraz demonstrated that Virgin Nails did not follow proper sanitization procedures when cleaning its equipment, specifically the pedicure tub in which Ms. Detraz immersed her feet and lower legs during the pedicure. Virgin Nails used Barbicide, a disinfectant, to clean the whirlpool tubs attached to the pedicure chairs.
So, I learned a lot and it is not all for naught. I think that I might actually have an interesting topic of conversation the next time I get my haircut.
In one study, college students were given one of two menus. One menu featured French fries, chicken nuggets and a baked potato; the other included those same items as well as a salad. The French fries, widely perceived as the least healthful option, were three times as popular with students selecting from the menu that had the salad as they were with the other group.
Its not clear from the article if they also ordered (or intended to order later) the salad (fedora flick: Lone Gunman.)
One of my favorite blogs, Mindhacks, has a post about perfectionism and depression. An article from the Boston Globe is quoted.
“Perfectionism is a phobia of mistake-making,” said Jeff Szymanski, executive director of the Obsessive Compulsive Foundation, which is based in Boston. “It is the feeling that ‘If I make a mistake, it will be catastrophic.’ ”
Striving for perfection is fine, said Smith College psychology professor Randy Frost, a leading researcher on perfectionism. The issue is how you interpret your own inevitable mistakes and failings. Do they make you feel bad about yourself in a global sense? Does a missed shot in tennis make you slam your racket to the ground? Do you think anything less than 100 percent might as well be zero?
I think this is a somewhat superficial interpretation of perfectionism. Its too easy to say that someone is a perfectionist because they are afraid of making mistakes. De Gustibus. I think the deeper source of perfectionism is more subtle and also easier to rehabilitate.
Ironically, perfectionists are not people who have high standards. Instead, I think a perfectionist is someone who doesn’t trust his own judgement. There is only one way to do something perfectly, but there are infintely many ways to do it imperfectly. Sacrificing perfection means making a decision about which imperfection to allow. So striving for perfection is just a cover for shrinking from decision.
On the other hand, people who are comfortable with imperfection are people who know what works. People who lack confidence in their judgement of what works insist on perfectionism because that covers all the bases. And these people never get the opportunity to learn what works because their perfectionism prevents them from experimenting.
Of course perfection is usually impossible but what happens in this case to the perfectionist is that their final product is what’s left when they give up rather than what they carefully planned. This usually doesn’t work and this further deteriorates the perfectionist’s confidence in his ability to do the second-best.
Smart classroom + YouTube + Golden Balls.
Golden balls indeed.
When my wife, a rational agent, is preparing to welcome our monthly visitor, she is confronted by a preliminary wave of unwelcome hormones. The proximate effect of these hormones is to make her a tad more grouchy than she normally is about otherwise mundane events. But because my wife is a rational agent, presumably she is able to forecast this effect and account for it. In other words, when she has the impulse to feel perturbed about some minor calamity she reasons that her impulse is likely an artificial response brought on by the fluctuating chemistry in her brain. And this reasoning would lead her to moderate her emotional response.
Indeed I have witnessed my dear wife execute exactly these calculations. When this happens, the household is always most appreciative. Sadly, it doesn’t always happen.
My theory therefore is that what is happening is not a uniform variation in the hormonal level, but rather a spike in hormonal volatility that forces my wife into a signal-extraction problem that is inherently prone to error. For example, when her absent-minded husband leaves the lights on in the kitchen and she detects, in response, an oncoming alteration in her mood, she must determine whether this minor offence is something she would ordinarily be upset about. My theory is that hormone volatility makes it hard to know exactly the current hormonal level and therefore difficult to back out the baseline appropriate degree of aggravation (in this case, i would argue, none at all.)
And thus hormones, an otherwise purely nominal variable, can have real (cyclical) effects.
Will Wilkinson smokes pot and he likes it. Bold. This does seem like the right time to go public, so here goes:
I practice yoga and I like it.
The most fundamental theory of economics is general equilibrium. Markets clear via the forces of demand and supply. Demand and supply in one market (e.g. cars) is affected by demand and supply in another (e.g. gas).
The forces of demand and supply can easily spillover into non-standard markets, especially in a recession. As evidence, see this interesting Wall Street Journal article about Indian bachelors in the U.S. having a hard time finding brides from back home. The problem is that parents are worried about the long term prospects of the potential husbands, facing unemployment at any time in cutthroat America. The demand for US-based grooms has gone down. The supply of grooms seems to be stable, at least that is what I infer from the WSJ article. This means the “price” of marriage must go down. The price of marriage is the dowry or more broadly the net transfer made to the groom.
First, the search services are charging more to Indian bachelors n the US. This means the net transfer to grooms has gone down. Second, resources should flow to the country where there are profits to be made. And it seems Indian bachelors are moving back to the home country to take advantage of the better bridal economy.
The article does not say anything about dowries: the money, house, fridges, big-screen TV, Wii….transferred to the husband. Dowries should get smaller or perhaps (finally!), there will be transfer from the husband to the wife’s parents. That would be a wonderful new phenomenon. But, since the supply of brides for Indian bachelors based in India has gone up, the dowries should be getting larger there. Darn it, change is never easy, as Barack Obama has found. (The only countervailing effect is that the supply of Indian bachelors in India has increased as some move back from US to India. Hence, the effect on the dowry is ambiguous.)
Empirical economists always benefit from change. The wordwide recession should generate exogenous change in many markets allowing estimation of elasticity of demand and supply. In the Indian bachelor market, as the demand curve for grooms moves, the elasticity of supply of grooms can be estimated (if there is good data!). How sensitive are grooms to the size of the dowry? If demand is elastic, very much so and money is paramount in marriage. If it is inelastic, can we interpret this as saying grooms are looking for brides for love not money? There’s a publication called the Economics of Jane Austen for someone willing to do the work. This the kind of thing Steve Levitt is so good at. But since he is moving to the Obama administration maybe some other bright young thing will write the paper.
Economists have many repositories of data and we are relatively good at sharing data we find. So it is easy to find out what data is available. It is not easy to find out what data is not available. If somebody goes looking for the ideal dataset for some question and discovers that it is unavailable, that result should be made public so that others don’t have to duplicate their efforts.
So we need a repository of non-existent data.
I always start my Competitive Strategy class by comparing economic games with real games, like poker. At the last minute, I found this great story in the New Yorker about a champion poker player, Chris Ferguson. Ferguson is a game theorist/computer scientist who took thirteen years to finish his PhD degree! In the end, it all worked out. The story reports that he has made about $7 million playing poker and at least that much through his website Fulltiltware.com.
How did Ferguson learn to play poker? There are two ways: experience at the poker table or using theory. Ferguson used theory, sitting at home, practicing and playing out different moves and counter moves in his head. He thinks both approaches lead to the same conclusion but his is less “arduous.” Using theory, he came up with his “optimal strategy” which involves playing hands to answer the question “How do I lose the least?”
What does Ferguson’s strategy have to do with game theory? That’s the topic of this post.
Poker is zero sum game: players wins and losses add up to zero. The most developed part of the theory of zero sum games is for the case of two players and most of our intuition about poker comes from this theory. The most famous result in this theory is the minimax theorem due to von Neumann and Morgenstern. I will attempt to explain the result though not the proof!
Ferguson’s optimal strategy seeks to maximize his minimum payoff – How do I lose the least? This is called a maximin strategy. Such a strategy is not optimal in typical games. But the minimax theorem says: No, in zero sum games the maximim strategy is a best-response to the other player’s strategy!
In fact, it tell you even more: the maximin payoff is the same as the minimax payoff. A minimax strategy maximizes payoffs under the assumption that other players are out to get you. So, it is like a typical optimal strategy that says “How do I maximize my payoffs?” rather than “How do I lose the least?” In two player zero-sum games, the two are the same so Ferguson has found the optimal strategy. Moreover, a minimax strategy has a cool property: If other players do not play optimally, you make even more. You are already maximizing your payoff under the assumption they are out to screw you. If they get confused and do not screw you, you must make even more than your minimax payoff.
Unfortunately, an optimal strategy does not mean you win all the time! Suppose two player who know the optimal strategy face each other. What expected value can they guarantee themselves using optimal strategies? As poker is a symmetric game, each player must be able to guarantee the same value v. But as values have to add to zero, as this is a zero sum game, we know we must have 2v=0. This can only hold if v=0.
If Ferguson played rational players all the time, he would make zero. Since he has made $7m, he must be meeting dumb players a lot. His optimal strategy since it has the minimax property works well against dumb players. Even better, if he can “read” dumb players he can play a best-response their dumbness!
This is why there is a second intuitive school of poker. This school is based on looking at people facial expressions and body movements. In looking at their betting to see if there are some weird regularities that help you predict their hand. That’s the whole issue: if you can deduce their hand, your strategy is simple – fold if you have a worse hand and bet if you have a better hand. Poker is all about bluffing and sandbagging to hide your hand. (This is a property of many “games” like some war games where to get an advantage you should keep your strategy secret. Saddam’s bluffing about WMDs has aspects of this.)
I wish I could end this with some mind-blowing practical takeaways but I can’t. The main thing I know from game theory is that people bluff and sandbag much less than theory says is optimal. Binmore’s Playing for Real book has a nice chapter on Nash and von Neumann’s poker models. Check it out if you want to know more. The second thing is that knowing how to read people is a key part of all this. I’m terrible at that. Maybe we will meet across the poker table one day and you’ll be able to take all my money.
We need a centralized market for matching co-authors. I want to be able to go there with an idea and find a co-author who has some expertise in the area. I guess there are some obvious difficulties. For one thing, the researcher with the idea would worry that his idea would get stolen if he went shopping it around publicly. Also, potential co-authors would have little incentive to invest in an idea brought to the market by someone else as it would be public knowledge who was the creative partner and who was the “research assistant.”
I suppose the second-best solution is a blog.
Why did we decide to do this blog? I’m not really sure. A creative outlet? A way to throw out random ideas? A vague hope that something fun might come out of it? A replacement for endless websurfing?
Well, the “vague hope” rationale has already worked out. Jeff and I had a wonderful time at our appearance on the Interview Show at the Hideout. There are a lot of dimensions to why we enjoyed it and I’m sure we’ll both blog about it. The thing I want to talk about now is the club itself and its owners. It is a little west of the big Home Depot on North Av. There is weird industrial stuff all around and a large filling station for trucks. And slap bang in the middle of all of it is a little house which has been turned into this club. I thought it would be full of truckers and instead it is weirdly middle class. I had a Bell’s Oberon, definitely in the microbrew category. I could have been ironically postmodern and had a Hamm’s but I did not spot it in time. I love the crappy end of American beer!
Jeff and I are too old to know about clubs but the Hideout gets rave reviews among the cognoscenti. The owners, Tim and Katie Tuten, are very interesting. You might expect some ex rockstar to own it. Maybe, Tim and Katie have this history in their deep, dark past. Now, they have regular day jobs – Tim works in the Chicago Public Schools and Katie for a charity. They’re also a little older than you might expect. (I hope they do not mind me saying this! ) They more than make up for it by having the extroversion and energy of twentysomethings. Tim did a little stand-up before Mark Bazer came on. They also have incredible taste in music – that night’s act Anni Rossi was transporting. Tim worked for Arne Duncan in Chicago and will join him in DC doing special events. As we left, Katie ran to the door and said all economist number-crunchers were welcome, except those from the University of Chicago. I’m sure if she met Phil Reny, Roger Myerson etc she would welcome them too.
And I’d never have met them if it weren’t for this blog! I also got to hang out with Jeff on his own, a rare thing as we’re so busy nowadays. I enjoyed his humor while he dealt with my depression with grace.
I should think about some clever econ thing to blog about and see if it leads anywhere.
Uber-twitterer and oenephile of the Proletariat Gary Vaynerchuck has just signed a million dollar deal with Harper Studio who will publish 10 (!) books by the hitherto unpublished, self-proclaimed non-reader. As reported here (bowlerbow: EatMeDaily), this represents an experiment in the terms of book contracts by the fledgling division of Harper Collins which was built on the premise that contracts delivering massive advances to the author and retaining sales revenue for the publisher are no longer part of a viable business model.
Publishing contracts must solve a thorny bilateral incentive problem which arises as a result of the timing of investment by author and publisher. The author commits effort up front writing the book and then the publisher is expected to commit resources editing and marketing the completed manuscript. The problem is to provide incentives for one party without dampening the incentives for the other. The traditional advance/residuals contract solves this problem because the residuals give the publisher incentive to market the book and maximize sales leaving the advance as the compensation for the author. The accompanying shift of risk from author to publisher is efficient because the publisher handles many books simultaneously, effectively creating a diversified portfolio.
The book market has famously weakened and it is becoming rarer and rarer for sales to justify the large advances that were hallmarks of existing contracts. This means that a larger fraction of the author’s compensation must come directly out of book royalties, undermining the incentive and risk-shifting benefits of the old structure. To adapt, publishers are seeking authors who already have an established “platform” such as a blog or other online community. Such authors are less averse to residuals because their ready-made audience makes the prospect less risky. Vaynerchuck would appear to fit the bill perfectly. His video blog, winelibrarytv attracts more than 80,000 viewers per day and as of today he has 177,000 followers on Twitter.
But when authors receive a large share of sales revenue, how can publishers be motivated to do the footwork of marketing the book to generate those sales? To some extent an author with a platform can do his own marketing but if word of mouth were all that was required to turn a book into a hit, there would be no reason for the publisher in the first place. Here is where the second novelty in the Vaynerchuck deal comes in: the long-term relationship. The contract marries Vaynerchuck and HarperStudio for 10 books. If HarperStudio can make his first book into a hit, it makes Gary into a star and it stands to reap the benefits on not just the first book but the 9 more to come.
“On the back end” as Gary would put it.
Sandro Brusco offers two additions to the Geithner plan to reduce the asymmetric information between owners of toxic assets and potential buyers. The basic idea is for banks to make their claim of the value of assets credible by suffering losses themselves should they over-value them. It’s a nice use of incentive theory.
My favorite region: the Rhone. But this wine was clearly aimed towards an American audience. Loads of fruit (cherry?) and too much alcohol (15%). But I could not taste oak at least. And the French just know what to do even when they look to sell abroad. It was three dimensional. Grass and hay on the nose and it went through three phases on the palette: fruit, barnyard and then acidity. They must have thrown in a smelly sock and a dead mouse in the barrel. It was really nice though I felt hung over this morning Would buy it again and drink less. Around $25-30.
If somebody looks better from the side than the front it is a good sign that they have a poorly calibrated self-image. Mirrors make it easy to manipulate the way we look from the front but it’s much harder to affect our appearance from the side.
For the game theorists in the room, the difference must boil down to whether we have random matching across populations (case 1) or within a single population (case 2.)
I vote for Michelle. After Barack, Michelle for President? People can keep their Obama for President Signs
The god of Competitive Strategy courses at B Schools is Michael Porter with his book Competitive Strategy. The god of terrorist strategy is Abu Bakr Naji with his treatise The Management of Savagery (MoS) Actually, Naji seems to be an amalgam of many strategic thinkers within Al Qaeda while there is only one Porter.
The Management of Savagery (MoS) is quite a read. It is an eyeopener for people who might think that terrorists are simply “crazy”. They have crazy and grandiose objectives – the overthrow of America. But they think about how to achieve their aims quite “rationally”. They make an analogy with the collapse of the Soviet Union, which they take credit for. They believe they caused it to fall by overstretching in Afghanistan. They seek to replicate it with America. The main idea is to trigger an extreme aggressive response from the U.S. and not the reverse, i.e. make America back off. American aggression will create a war that brings moderates to the side of extremists and America’s defeat the end of American hegemony:
Force America to abandon its war against Islam by proxy and force it to attack directly so that the noble ones among the masses….will see that their fear of deposing the regimes because America is their protector is misplaced and that when they depose the regimes, they are capable of opposing America if it interferes.
Abu Bakr Naji, The Management of Savagery ( p. 24)
It may be quite rational for us to respond to aggression with aggression but this creates an equilibrium which is damaging for America (notice that terrorists are well-read!):
It is just as the American author Paul Kennedy says: “If America ex-pands the use of its military power and strategically extends more than necessary, this will lead to its downfall.”(Naji, p. 18).
“[N]ote that the economic weakness resulting from the burdens of war or from aiming blows of vexation (al-nik¯aya) directly toward the economy is the most important element of cultural annihilation since it threatens the opulence and (worldly) pleasures which those societies thirst for. Then com-petition for these things begins after they grow scarce due to the weakness of the economy. Likewise, social iniquities rise to the surface on account of the economic stagnation, which ignites political opposition and disunity among the (various) sectors of society in the central country.”(Naji, p. 20).
There is a theory of terror and a strategy or terror. And, unfortunately, it does seem to all hang together.
With zero government spending, billions of dollars of stimulus could be created by an act of congress
…if Congressional Democrats succeed in lifting export controls that classify satellite technology as weapons and have handicapped American manufacturers since the last days of the Clinton administration. House hearings on the controls are to begin Thursday. Proponents of change are optimistic, pointing to a campaign pledge by President Obama and the support of respected figures like Brent Scowcroft, national security adviser to Presidents Gerald R. Ford and George Bush.
See the article here. Of course there are many illegal markets that would generate stimulus were they to be legalized. Here are some of the big ones.
- Drugs
- Guns
- Prostitution (except in Nevada)
- Gay prostitution (even in Nevada)
- Gambling
- Trade with Cuba
- Liberalized immigration
Al Roth calls these repugnant transactions and discusses them frequently on his blog. The demand for stimulus means that the cost of being morally opposed to these transactions increases and the margin between what is repugnant and what is not slides outward. (Tyler Cowen worries half-seriously that economists are evil when they try to persuade others to think in these terms.)
Food for thought here is how these are ordered on the repugnance margin. If the motive is stimulus then what matters is not just how repugnant they are but how repugnant in proportion to the untapped economic activity that would be unleashed. My guess is by that measure the ranking is (from first to be embraced to last) 6>2>5>3>7>1>4.
I suspect that repugnance has a ratchet effect in that if, say, prostitution is embraced for pragmatic reasons such as stimulus, it will never return to repugnancy even when those pragmatic motives fade away.
Cheap Talk 