by Tyler Cowen
on September 4, 2013 at 12:17 pm
in Uncategorized |
1. Do markets care who chairs the central bank? (pdf)
2. Indian banks are possibly in trouble.
3. al Qaeda is looking for ways to counter drone attacks.
4. Urbanization and China’s unbalanced growth.
5. Perry Mehrling’s Coursera course on money and banking.
6. How lucky are chess world champions? (this research is done by an economist, by the way).
7. Why Ronald Coase was chased out of UVA.
7. Got tenure?
#7: I’m a huge fan of Coase, but aren’t environmental problems, especially global ones, impossible to solve without govt intervention? If Coase’s attack was on taxation alone, then I agree, but surely bilateral negotiation is impossible. As a matter of fact, if you read his 1960 article, he expressly allows for govt regulation(but not taxation). The correct tax, after all, can only be computed under the assumption of friction free markets.
Sounds good. Can his ass.
“I’m a huge fan of Coase, but aren’t environmental problems, especially global ones, impossible to solve without govt intervention?”
Negotiations that involve a large number of parties are harder to manage, but certainly not impossible. Alex recently discussed an innovation of his called Dominant Assurance Contracts (link below). This arrangement would go along way towards allowing a very large class of people to effectively bargain like a single entity in a Coasian framework. We shouldn’t have knee-jerk reactions to saying that it’s “impossible” for markets to do something, even if we identify specific market failures. It may be difficult, but there’s often elegant technological solutions out there that trump the blunt fist of government intervention.
“blunt fist” I like that, yes, I read that post, didn’t link it with a Coasian bargain.
I am also aware of Gary Libecap’s work on farmer cooperatives following the dust bowl, which can also be interpreted as a non-government solution to a “global” problem.
Heh. Reminds me of the Argument From Personal Incredulity lampooned by Richard Dawkins et al in re: Darwinism.
Actually, the analogy is quite apt.
“Negotiations that involve a large number of parties are harder to manage, but certainly not impossible. ”
Yes. The process is called politics because that’s the only process that takes in everyone with a stake. And the agreements developed are called laws and regulations.
7. My understanding is UVA chased out both Coase and Buchanan.
7. The description of those who wanted him out was rather mild. In those days there really were Reds under the bed.
7. Funny the reversal since. If you say something like “externality” in some places, you face giggles.
It’s not Coase’s idea that is absurd; it’s the way it’s interpreted by market fundamentalists that is.
The chess analysis is undermined by the author’s failure to account for the advantage of playing white. These matches are not N bernoulli trials with win probability p. They are N/2 bernoulli trials as white with win probability p_white, and N/2 as black with win probability p_black. The greater the difference between p_white and p_black, the more impressive it is to win a match, even by a modest margin. There is no comment section on that page so I’ll air the complaint here.
At the master level there is very little advantage with white (“black is OK”) and anyway in a long match the black and white sides balance, as each side has an equal number.
No, the kurtosis of the compound distribution is different, extreme results become less likely.
Beat me to it, +1
I find the assumption of independence (each game’s probability being unconnected to other games) an unconvincing assumption.
Strategy, and your odds of winning, vary depending on where you are in a match. I’m going to switch contexts to make this clear. A football team with one play left in the game, down 5 points, will throw a Hail Mary pass. This is unlikely to work and reasonably likely to be intercepted (which is why such passes are seldom thrown in other circumstances), but provides the best nonzero probability of winning the game — and if you lose by 5 or lose by 11 it doesn’t really matter.
In chess, unusual openings like 1. b3 are thought to provide complicated, nonstandard middle games that provide better chances for a win — but they aren’t played as often because they provide more opportunity for a loss as well.
It also seems to me that Elo ratings (which are just transformed probabilties) would provide a better basis for judging the unusualness of a result. I think these have been applied posthac to gauge the relative strength of old-era players relative to their contemporaries.
The chess study has a mistake in its assumption of colour symmetry for p(win). It ascribes a player 66% chance of draw and 17% chance of winning regardless of the player being black or white. In practise, the W-D-L probailities will 22%/66%/12% or whatever.
Summing the resuklts of alternate games with the latter distribution will yield a compound distribution with much higher kurtosis than the one generated: the p-values will be more extreme. Fewer results will be fairly attributable to luck (Alekhine gets his fair accolade).
Comments on this entry are closed.
Previous post: It’s the success stories that worry me
Next post: My TechCrunch interview about *Average is Over*
Email Tyler Cowen
Follow Tyler on Twitter
Email Alex Tabarrok
Follow Alex on Twitter
Subscribe in a reader
Follow Us on Twitter
Marginal Revolution on Twitter Counter.com
Get smart with the Thesis WordPress Theme from DIYthemes.