Month: September 2005

The economics of seduction?

by  Tyler Cowen in

Are there secrets of seduction, drawn from (gasp) social science?  In his new book Neil Strauss says yes.  Here is an interview.  He recommends playing hard-to-get, perhaps he has read signaling theory:

I learned that the more unavailable you make yourself, the more people would want you. The more you say ‘stop touching me’ or ‘I’m taken’ or ‘you’re just not my type,’ the more people would actually chase you…A small example would be — this sounds awful to say, but it’s true — if, say I tried to kiss someone and got rejected. I found that if I just turned my head away and ignored them for about five seconds, then turn back and say the same thing, most of the time they’d then go ahead and kiss me. I could be a punishment-reward thing, or it could be that people’s first reaction is no, but once they’ve had a moment to think about it, they think, ‘Well maybe this guy’s alright.’

And yes there are workshops for pick-up artists.  Here is a website on how to act like an alpha male.

I can only wonder: What would Barbara Ehrenreich do with this material?

My second question, which perhaps an alpha male would never ask, is how the hard-to-get strategy is an equilibrium, equating returns on all margins for all players (no pun intended) in the repeated game.  Isn’t "hard-to-get" too easy to mimic? 

And don’t you have to be noticed in the first place?  I never came on to Salma Hayek (unlike Daniel Drezner, who courted her repeatedly on his blog), yet this reticence paid few dividends, not even a courtesy trackback or link.  So how do you know when to back off, isn’t this like forecasting when the real estate bubble will crash?

Of course this point about timing addresses whether the strategy is easy to mimic.  A proper application of hard-to-get is well…hard to get right.  Plus some women are shrewd, which means you actually have to be hard-to-get, which is no fun at all, just remember the movie about that forty-year-old guy with all the action figures.

Thanks to Michael at www.2blowhards.com for the pointer.

Bait and Switch: final installment

by  Tyler Cowen in

I talk about labor markets and public policy, here is one nibble from my final Slate.com piece:

…displaced white-collar workers do not lead my list of victims deserving compensation. It is unfair that a 56-year-old is now expected to compete in a world for which he was never prepared. But we ought to be realistic. These transitional costs are borne by a class that has been about the richest and freest human history has seen. Let us say that you, Alan, could design a public policy to ease their readjustment. I probably would zero out that budget line and spend those funds in Niger, or on boosting the Earned Income Tax Credit, or paying for future Medicare benefits, or, dare I say it, lowering the corporate income tax as a means of encouraging white-collar re-employment.

Essays on Cost

by  Alex Tabarrok in

For those further interested in the opportunity cost question, the Library of Economics and Liberty is featuring this month L.S.E. Essays on Cost edited by James Buchanan and George F. Thirlby and including essays by Hayek, Coase and others.

This sentence from Buchanan’s preface caught my eye:

In any general theory of choice cost must be reckoned in a utility rather than in a commodity dimension.

Buchanan’s short book Cost and Choice is also available.

The public choice economics of crisis management

by  Tyler Cowen in

Why don’t governments handle all crises well?  Read Brad DeLong’s catalog of charges on Katrina.  I can think of a few systematic reasons for institutional failure:

1. The event is often small-probability in nature.

2. The event has very negative consequences, and we don’t have optimal punishments for those who get it wrong.

3. Many crisis-related events and required decisions happen quickly in immediate sequence.  First, it is hard to get the decisions right, second it is even harder to look good, given some inevitable mistakes.

4. Media scrutiny is intense, and voters care about the issue.  This encourages ex post overreactions and overinvestments in symbolic fixes, especially when combined with #1.

5. A crisis is, by definition, large.  This puts federalism, whatever its other merits, at a disadvantage.  No one is sure who is responsible for what, or how a chain of command should operate.

All of these seem to have operated in New Orleans, plus they were combined with one of our worst-functioning local governments and an administration especially weak on the issue of accountability.  My colleague Roger Congleton has a paper on the public choice of crisis management.  This is an underexplored topic, so feel free to suggest other readings in the comments.

Not Just Low Prices

by  Alex Tabarrok in

From the Washington Post:

While state and federal officials have come under harsh
criticism for their handling of the storm’s aftermath, Wal-Mart is
being held up as a model for logistical efficiency and nimble disaster
planning, which have allowed it to quickly deliver staples such as
water, fuel and toilet paper to thousands of evacuees.

In
Brookhaven, Miss., for example, where Wal-Mart operates a vast
distribution center, the company had 45 trucks full of goods loaded and
ready for delivery before Katrina made landfall.  (emphasis added).

Bait and Switch

by  Tyler Cowen in

Here is my not-so-positive review of the new Barbara Ehrenreich book, courtesy of Slate.com.  Here is her basic premise:

Ehrenreich gives up her identity and sends around a vita for media/public relations work. After a year of looking–with comic adventures along the way–she has no serious offer. She concludes that the white-collar world is one of "economic cruelty."

There will be further installments, including a response from Alan Wolfe, stay tuned…

The tragedy of Jonathan Kozol

by  Alex Tabarrok in

Jonathan Kozol has spent a good deal of his life writing eloquently and passionately about children and the sad state of education in America.  The depths of his passion and caring are to be admired and applauded.  The tragedy is that his eloquence has often been put to ill use attacking the one reform that would really help – private schools and school choice.  Kozol’s good intentions, therefore, earn him no free pass from me.

In a recent interview he said:

[Private schools] starve the public school system of the presence of well-educated,
politically effective parents to fight for equity for all kids.

Kozol’s argument can be summed up thusly:

Letting people escape over the Berlin Wall starves the East German system of the presence of well-educated,
politically effective people to fight for the equity of all East Germans.

Barricading parents into the poor schools their government offers them is like barricading people into communist East Germany.  People, even well-educated, politically effective people, should not be used as tools to further some social engineering scheme.

But is the argument even true?  Kozol, draws on Hirschman’s great book Exit, Voice and Loyalty, but like many who read that book he shows no sign of understanding any of its subtleties.

Yes, exit and voice can be substitutes and reducing exit may increase voice.  But more often than not, voice and exits are complements.  When you complain of delay where is your voice more likely to be heard; at a restaurant or at the department of motor vehicles?

It’s the threat of exit that makes people listen.

Moreover, shutting down exit does not guarantee that voice will arise.  The people whose children are stuck in the worst-performing schools have neither voice nor exit – they are like the people of New Orleans who did not have the means to escape nor the political power to compel help from others.

Finally, we go to the data.  Kozol’s argument implies that places with more exit should have worse public schools.  But in fact a large body of research shows that the opposite is true.  Places with more choice – whether that choice comes from private schools, charter schools, or even choice among public schools – have better schools.  Exit and the threat of exit makes educators listen.

But will Kozol listen?  Sadly, I think not because his fundamental opposition to vouchers is not economic but aesthetic.  He says:

Vouchers elevate the lowest instincts of humanity over the most beautiful instincts.

Need I quote Adam Smith in response?

What went wrong, in general terms

by  Tyler Cowen in

Matthew Kahn asks:

1. How much did the people of the New Orleans metro area invest in their own levees? Given that property owners and public safety in this metro area are the main beneficiary of such investments, why wasn’t this sufficient incentive for the Mayor and the metro area’s other political leaders to tax citizens collect the money and invest in better, more modern levees?

Here is the full post, which includes three other to-the-point questions.  I am not into the blame game, but Randall Parker’s recent post also raises questions about the underfunding of New Orleans local government.  Of course the Feds messed up too.

Are democratic governments simply not very risk averse when it comes to very bad, low probability events?  The model behind this conclusion is simple.  Politicians would have to spend the money on protection no matter what, and lose the benefits of spending that cash elsewhere with p = 1.  The chance of reelection goes up only with a small probability, namely if the bad event happens and voters can tell their representatives were suitably cautious.  Why not instead spend the money with a higher chance of boosting reelection prospects?  The key stylized fact is that if a politician messes up very badly, there is no penalty worse than removal from office, which is a penalty (roughly) fixed in value.  And since the value of holding office may not fall in proportion to the suffering caused by the disaster, politicians’ utility maximization will not bring optimal spending either.

Addendum: David Bernstein has some good information on federal spending cuts.  And there is also a complicated story about overreaction ex post, although without necessarily doing much useful, read Daniel Drezner.

Taxes and Prices

by  Alex Tabarrok in

Suppose there is an
auction for a pearl.  The person with the highest demand is willing to
pay $5000 the person with the next highest demand is willing to pay
$4999.  The winner must pay a tax of $1000 to the government.

With
the tax the two bidders bid until the price reaches $4000 at $4000
(note that $3999+$1000 tax= net of $4999) the low bidder drops out and
the high bidder wins.  Total price to the high bidder is $5000, $4000
to the seller and $1000 to the government.

Now with no tax a
price of $4000 leaves two bidders in the ring so the price must rise
higher.  In fact, the price must now rise to $5000 to get the second bidder
to drop out.  Final price to the high bidder is $5000 – the seller gets
$1000 more in revenues and the government gets nothing.

If one wants to challenge the gas-tax argument then to place to do so is to argue that a temporary reduction in the tax, leading to more profits for the oil companies, will stimulate supply enough to have a significant effect on reducing price.  Any other argument is incorrect.

Marshall and Shackle on opportunity cost

by  Tyler Cowen in

…or forget all the fancy talk of "opportunity cost."  Let’s say you ask, "how much does that apple cost"?

The correct answer is $1.00, the price (gross).

The correct answer is not "the consumer surplus on what the dollar could buy elsewhere" (a net concept).

You can still figure in information about price to get both consumer surpluses and the correct decision.

"*Opportunity* cost" is a means of saying that we don’t just stop at the money ($1.00), but rather we think in terms of a foregone good or service (perhaps a pear, etc.).

But just as "cost" was a gross term, so does "opportunity cost" stay a gross term, it does not become a net one.  Only the word "opportunity" has been added to "cost," so why leap from gross to net thinking?

Buchanan and others blur all this when they start talking about the value dimension of opportunity cost.  On one hand this is properly subjectivist.  But it also encourages people to move to the "net" dimension, and notions of consumer surplus, rather than focusing on the *opportunity*.

G.L.S. Shackle wrote about a "skein of imagined alternatives."  This captures the "gross" idea properly, and remains subjectivist, but it doesn’t encourage the leap into the mix of net thinking and consumer surplus, which remains a separate concept.

I don’t have any quarrel with Alex’s economics; as far as I can see this point is semantic.  (I’ll also admit that my gross perspective on opportunity cost is somewhat anachronistic; it is one reason why mainstream economists work directly with consumer surplus.)  What disturbs me is how few economists gave $50 or $40 as the right answer; the actual answers were close to randomly distributed.  Most Web-based sources appear confused on the net vs. gross issue, but at least they hover across the $40 and $50 options.