Month: September 2003

An even shorter introduction to intelligence

I recommend Ian Deary’s Intelligence: A Very Short Introduction. I am going to buy more books in this Oxford series. We at Marginal Revolution aim to provide value for attention, however, so here is an even shorter introduction.

1) Almost all measures of intelligence correlate with one another and quite a few measures of different aspects of intelligence are highly correlated. It is thus meaningful to talk about general intelligence, g. Howard Gardner’s work on “multiple intelligences” is on the fringes of scientific psychology.

2) Intelligence rankings are stable with age but fluid intelligence, meaning something like pure reasoning power, as opposed to crystalized intelligence peaks in the 20-30s and then declines with age.

3) Connecting IQ scores to brain morphology and activity is still in its infancy but there are modest, but well established, correlations between brain size and IQ (psychometric intelligence) and measures of reaction time (which plausibly measure brain speed) and IQ.

4) Intelligence is in large part genetic and that which is due to environment is primarily not due to the obvious possibilities such as family upbringing.

5) Intelligence matters for work performance and education. IQ is a better forecaster of work performance than just about any other test short of a trial run on the actual work to be performed.

6) IQ has been rising, the Flynn effect. No one knows why.

7) None of the above points are controversial among intelligence researchers.

Aside from Dreary’s book another useful introduction to intelligence research is the authoritative consensus report from the American Psychological Assocation, Intelligence: Knowns and Unknowns, summary here.

Why don’t we see more price gouging?

I survived hurricane Isabel, but couldn’t buy a flashlight or the right size batteries, the night before the storm was to come. Merchants let supply run out rather than raise the prices. C.C. Kraemer at tells us that half of all states have anti-gouging laws. More significantly, merchants fear that customers will resent price increases during times of trouble. The testable prediction is that wandering “umbrella merchants,” as I have encountered in Manhattan, will raise their prices when it is raining. They have little reason to fear long-run negative effects on their reputation. I have found this to be true but can cite only two data points in its favor. Twice, when it was raining, I bought umbrellas for $10 rather than for the usual price of $5.

Kraemer suggests that we should allow price gouging in times of emergencies. This policy conclusion need not follow. Since supply is constant in the short-run, higher prices won’t give more flashlights to more people, although in the long run the economy will stand readier with emergency flashlights. Higher prices will allocate flashlights to those people most willing to bid for them, but at the cost of all buyers feeling gouged. After all, not wanting to be gouged is a preference too. And the subsequent decline in trust will eliminate other potential gains from trade.

Arguments by N. Gregory Mankiw and George Akerlof suggest that small costs of changing prices can have large macroeconomic effects. They focus on cases where prices remain too high and output is restricted as a consequence. In contrast, if a firm refuses to raise its prices, presumably it feels that the resulting “resentment costs” are higher than the extra revenue it would reap. First, the price changing costs are not small. Second, if the firm had initial monopoly power, as the Mankiw argument requires, keeping prices lower will not in general lower consumer welfare. (It is a tricky intertemporal problem, there can be cases where contrived ex post shortages pump up ex ante demand for the good, to the benefit of the monopolist and to the detriment of social welfare.)

I would repeal the anti-gouging laws, on libertarian freedom grounds, but I don’t welcome more price gouging as a means of making us better off. Markets are quite willing to gouge us in a wide variety of instances, just try hearing a good jazz show on New Year’s Eve. We should take it seriously when markets are not willing to gouge us. We can also ask whether people would be better off if they had weaker fairness norms, or better fairness norms, that is the next relevant question for assessing the costs and benefits of price stickiness. Just keep in mind that our current norms help keep our suppliers in line and limit their ability to defraud us.

Addendum: I’ve made some slight re-edits in the interests of clarity.

What liberal media?

Eric Alterman’s What Liberal Media? attempted to rebut charges that American mass media have a left-leaning bias. Conservative pundits dominate talk radio, many liberal outlets carry conservative commentators, market-oriented ideas are ascendant in the think tank world, and, I might add, many bloggers have a libertarian orientation. So Alterman’s response has some punch. Anna Schwarz offers a good review of the book, in Jeffrey Friedman’s on-line The Dissident, you might know Jeff from his editorship of and writings in Critical Review, he is an impressive intellectual polyglot.

Schwarz concedes many of Alterman’s points, but does not believe that Alterman has dismissed the charge of liberal media bias. She writes:

Alterman never comes to grips with the fact that the people who cover the news are overwhelmingly liberal. In 1992, an astonishing 89 percent of Washington correspondents and editors voted for Bill Clinton…Alterman acknowledges midway through the book that there might be some merit to his opponents’ arguments: “the overall flavor of the elite media reporting favors gun control, campaign finance reform, gay rights and the environmental movement,” he writes…These are distinctly liberal stances and this admission, by itself, pokes a gaping hole into Alterman’s argument…

My (partial) take: TV broadcasters need a good story, which leads to an emphasis on visible victims who can be interviewed. Media will neglect unseen opportunity costs. This bias often supports a “left-wing” perspective, but not always out of design. The bias also gives extra attention to crime victims. Members of the public often think crime is worse than it truly is, arguably a “right-wing” bias, crime victims get on the news because they make for good stories. We should not forget that media output is demand-driven, and people do not always want their media to reflect their politics.

My question: It is not obvious that reporters have been especially left-wing throughout the history of the American republic. When and how did this start to change?

See also an excellent earlier post by co-blogger Alex.

Recall Scheduled for Oct. 7

The LA Times reports that the full 9th circuit court has ordered that the California recall occur as planned. In their decision, the court says that the potential damage to the plaintiffs does not outweigh the costs already invested in the election, which presumably might include thousands of votes already cast. The decision states that courts should only intervene in elections in exceptional circumstances and, while vote counting errors are a serious concern, the potential miscount is not so strong a possibility that the election will with certainty be damaged.

Tom Peters where are you?

Remember Tom Peters? The 1996 Guinness Book of World Records listed him as the world’s most highly paid management consultant. His In Search of Excellence was one of the earliest mega-hits among management books, you might recall that he flirted with various Hayekian ideas about the market as a discovery mechanism. Today’s Financial Times looks at Peters today and asks, quite literally, whether he has lost his mind. It describes a Tom Peters seminar as “a combination of Billy Graham and Sid Vicious.” Peters admits to being proud of the inconsistencies in his thoughts, but to my mind the FT evinces no evidence of real craziness. Several years ago Fortune magazine raised the same issue, I cannot find an on-line copy but again I am waiting for the smoking gun.

Make up your own mind, visit Tom’s web site. Be warned that not all of it is rigorous, consider the following:

An Aussie reporter asked me recently about the origins of “Re-imagine.” I answered in terms of war & peace & commercial effectiveness alike. The following leapt from my lips, and I was intrigued by what I’d said. Dangerous, I well know; and it may wear off. But herewith, not a bad rationale, at the highest level of abstraction, for what we’re about and the possible importance thereof…

Tom admits that he was overoptimistic about Silicon Valley — at least he will admit he was wrong — and says that the increased difficulty of valuing intangible assets is behind the recent corporate scandals.

Race, Crime and Job Discrimination

Devah Pager’s article in the latest American Journal of Sociology demonstrates an important relationship between race, criminal record and employment. She sent out pairs of black and white young men to apply for entry level jobs, gave them similar records except that one was randomly selected to have a criminal background. She then analyzed who was called back for an interview and got some interesting results:

1. Unsurprisingly, for both blacks and whites, reporting a criminal record drastically reduced the chances of a call back.

2. Black men *without* the criminal history were less likely to be called back than white men *with* criminal records.

3. Having a criminal record is more damaging for black applicants than for white applicants.

This, I think, is a nice challenge to the whole statistical discrimination thesis, where employers use race as a proxy for other unmeasured variables. The Pager study shows that even when employers have full information on their applicants, they often prefer a white ex-convict than a similar black man without a criminal record.

Update: Dmitri Masterov writes to tell me about point #2 – Pager showed that the difference between the two groups was not statistically significant.

File sharing helps some music labels

No, I am not one of those people who thinks you can fund an entire music industry through the sale of T-shirts. But file-sharing appears to have been a boon for some indepedent labels, which otherwise have a hard time getting their music to customers. Here is a money quote:

Today he [Mr. Egan] says – seemingly counterintuitively – his label simply would not exist without file-sharing services like Napster and its successors KaZaA and Morpheus.

Even as the major labels of the music industry pursue file traders for copyright infringement through lawsuits and the court of public opinion, Vagrant and many other independent label owners cheer them on. File sharing, these owners say, helps their small companies compete against conglomerates with deeper pockets for advertising and greater access to radio programmers.

“Our music, by and large, when kids listen to it, they share it with their friends,” Mr. Egan said. “Then they go buy the record; they take ownership of it.”

The New York Times offers the full account (registration required).

Smuggling amongst the Amish

“A smuggling ring operated for several months in Ohio’s largest Amish community, transporting hundreds of illegal immigrants from Mexico and Guatemala, investigators said.” So notes It says something about the power of good institutions that it still makes economic sense to smuggle workers into a community that limits its use of modern technology.

One man’s vice…

Here is a new blog devoted to the economics of public policy for the vices, namely the regulation of drugs, gambling, and prostitution, see I am reading a bit in here, but overall the perspective rings sympathetic toward various methods of legalization or decriminalization. Click here if you wish to read about the attempt of Los Angeles to ban lap dancing.

Here is the blogmeister’s self-description: “My name is Jim Leitzel and I am an economist and co-chair of the public policy concentration in the undergraduate college at the University of Chicago. For the past five years I have taught a course on vice policy, and I have recently started to write a secondary text for the class.”

Thanks for Peter Boettke for the pointer.

The new Robert Putnam book

Robert Putnam has a new book out, with Lewis Feldstein, Better Together: Restoring the American Community. I started writing a short review of it, which ended up morphing into a look at Putnam’s oeuvre more generally, most of all his renowned Bowling Alone. The bottom line: I admire the quality of Putnam’s work, but am not convinced by his arguments that “bowling alone” is a growing problem. Click here to read my piece.

Herd behavior and dominant strategies for mice

Mice, taken collectively, are not very good at escaping from a crowded room. They act pretty much as humans do, namely they all crowd toward the door and few get out very quickly. Each individual mouse appears to make a rational calculation of a sort. The mice do best, and adopt some form of queuing behavior, when the door is large enough to let only one mouse through at a time. Researchers suggest that humans may exit a crowded more quickly, the smaller the door, which limits the crush toward the exit. For more information read this article from New Scientist.

Presidential Voices and Electoral Victory

A nice article in the Sept. 2002 Social Psychology Quarterly documents an interesting fact: the presidential candidate who has the right tone of voice tends to win the election.

According to “communication accommodation theory,” low status people change their voices to accommodate high status people. The presidential candidate who more frequently changes the “F_0” range of his voice (which is a very low hum) during a debate signals that he is in the low-status position. The authors believe that voters respond strongly to this non-verbal, but strongly emotional, cue. The authors note that George W. Bush may have “won” the 2000 debate with Gore because he signaled his dominance in this fashion, although Gore was perceived by journalists to have won through superior rhetoric. The results of voice analysis correlate well with electoral outcomes and polls.

Is love predictable?

The advent of Internet dating has led rapidly to a search for better matching results, as detailed by a recent story. After all, reductionists may wonder just how many dimensions the problem can have. Consider the following:

[Researchers] decided to employ computer technology to find a few “simple, logical rules” that make up, well, the recipe for love. For help on the technical side, they turned to Michael Georgeff, director of the Australian Artificial Intelligence Institute. During his work on a NASA project at Stanford Research Institute, Georgeff had developed a methodology to teach Space Shuttle Discovery computers how to anticipate unexpected problems. Working with Thompson and Hutchinson, he applied the same principles to the design of dating software, employing many of the statistical methods common to social science research. “Say you score a 3 on the introvert scale, and a 6 on touchy-feely. Will you tend to like somebody who’s practical?” Using Georgeff’s software, Thompson and Hutchinson then developed an online quiz., the highly popular online dating site, began using’s software this year to give users a rough sense of what proportion of the dating population might be attracted to their particular array of personality traits.

The new algorithms are designed to measure not only initial attraction, but also how well the would-be couple can live in harmony. Ten thousand people a day are signing up for, which also tries to do some simple lie-detecting. According to some accounts 30 percent of on-line daters are in fact married, and often lying about that fact.

Meredith Hanrahan, at, invokes a market metaphor:

If you want to buy a car, you get a lot of information before you even test-drive,” she says. “There hasn’t been a way to do that with relationships.”

Perhaps one web-dating entrepreneur put it best:

“Everyone is high maintenance. The trick is finding the precise sort of maintenance you need.”