Month: July 2006

How a proto-Economist Runs for Charity

Back in high school we had a run for charity, x laps around the track for so many dollars per lap.  I forget the charity but showing early signs of an economic mind, or perhaps a lazy body, I decided that it would be much more efficient to get the money and avoid the running (today, I would say avoid the rent seeking).   Thus, I solicited donations with the promise that I would run just one lap

Unsurprisingly, the other students were most displeased when I sauntered around the track finishing just as everyone else was beginning to work up a sweat.  More surprisingly, the charity organizers didn’t like my methods even though I raised a lot of money.

I had to go to graduate school in economics before I really began to understand why.  Eric Crampton, subbing for Bryan Caplan at EconLog, has the details.

By the way, its been said that crazy people go to graduate school in psychology in an effort to understand themselves.  Perhaps the socially obtuse go to graduate school in  economics for reasons that are somewhat similar.  See here on yours truly and also Greg Mankiw’s related comments.

How technology can mess up friendships

…communications technology may carry with it the danger of exacerbating neediness; it can potentially bring out the borderline personality in all of us–if
a friend could have called, then why didn’t he? Why doesn’t he pick up
when I call his cell phone? If she saw I was online, then why didn’t
she IM me? Why is it taking her so long to reply to my last IM? Is she
IMing with someone else right now? Is that person more important than
me? If I have so much access to everyone, then why do I feel ignored?

I admit, it takes special breed of paranoia to go down that avenue… In the meantime, while I mull that over,
I’ll keep paying my broadband bill.

That is Rob Horning, who more generally fears the effects of quantification on our personal lives.  There is much to be said for mystery.  In principal-agent lingo, a threshold standard may lead to more cooperation than a sliding scale for judging effort.  The extra noise involved in the sliding scale can increase signal extraction problems (also known as misunderstandings) and induce unneeded retaliations and manipulative strategies.

Here is a related post by Rob.  Here is Rob on how "The Long Tail" may destroy the cultural underground.  Thanks to Robin Hanson for the pointer to Rob’s writings.

Addendum: Sangho Yoon directs me to this article on how cellphones are changing social life; my favorite quotation from the article is the woman who says: "There are real people in there."

Papers I wish I had written

What is truly scarce inside the human mind?  Hayek (The Sensory Order) and the neuroeconomists have grasped this as a central question of economics.  Here is a new paper:

Common intuition and experimental psychology suggest that the ability
to self-regulate, willpower, is a depletable resource. We investigate
the behavior of an agent who optimally consumes a cake (or paycheck or
workload) over time and who recognizes that restraining his consumption
too much would exhaust his willpower and leave him unable to manage his
consumption. Unlike prior models of self-control, a model with
willpower depletion can explain the increasing consumption sequences
observable in high frequency data (and corresponding laboratory
findings), the apparent links between unrelated self-control behaviors,
and the altered economic behavior following imposition of cognitive
loads. At the same time, willpower depletion provides an alternative
explanation for a taste for commitment, intertemporal preference
reversals, and procrastination. Accounting for willpower depletion thus
provides a more unified theory of time preference. It also provides an
explanation for anomalous intratemporal behaviors such as low
correlations between health-related activities.

My approach to willpower deletion, of course, is to always leave oneself wanting to do a little more of the virtuous task, rather than to overdiscipline.  If you have promised yourself 200 push-ups, stop at 198.  Here is the link.

Scarcity, sexual seigniorage, and the optimal extraction thereof

"Eroticism is not only a desire for the body, but to an equal extent a desire for honor.  The partner you’ve won, who cares about you and loves you, becomes your mirror, the measure of your importance and your merits.  For my little tart, this was a difficult task.  When you go to bed with everyone you stop believing that such a commonplace thing as making love can still have any kind of importance.  And so you seek the true erotic honor in the opposite.  The only man who could provide that girl with a clear gauge of her worth was one who wanted her but whom she herself had rejected.  And because she understandably longed to verify to herself that she was the most beautiful and best of women, she went about choosing this one man, whom she would honor with her refusal, very strictly and captiously.  When in the end she chose me, I understood that this was an exceptional honor, and to this day I consider this my greatest erotic success."

That is from Milan Kundera, Laughable Loves, which was a fun read.

The economics of prescription drugs

Prescription drugs
currently account for well under 20 percent of the health-care budget. Within a
generation or two, they will undoubtedly account for most of it–which will be
another good thing. 
Pharma’s biochemical cures always
end up far cheaper than the people-centered services they ultimately displace.
Moreover, while much hands-on care only drags things out or soothes, the best
medicines really cure. It is true that, early on in the pharmacological assault
on a grave disease, drugs also stretch things out and can fail to beat the
disease, so we often end up buying more drug and more doctor, too. But
eventually drugs improve to the point where they beat the disease and thus lay off
both doctor and hospital.

The Commentary article is excellent, the pointer is from Craig Newmark.

Google Pork

Sometimes an idea comes along that is so neat you wonder why no one
thought of it before. In that vein, Sen. Tom Coburn, an Oklahoma
Republican and chair of the Homeland Security Subcommittee on Federal
Financial Management, has introduced a bipartisan bill to create a
Google-like online searchable database of all federal spending.
Currently, said Coburn, there is no way for taxpayers to find out what
the government is paying individuals, groups, localities, and
contractors. "This bill will empower citizen investigators to root out
waste, fraud, and abuse," said Coburn, a leading opponent of pork. The
bill has some heavyweight sponsors, including Republican Sens. John
McCain and Rick Santorum and Democrat Barack Obama.

From  Thanks to Carl Close for the pointer.

Der Besuch der Alten Dame

An wealthy old woman comes to a broken down old town and promises the community a large sum of money if they will assassinate her old beau; he had once spurned her.  At first the citizenry refuses.  But suddenly people start spending more and borrowing more.  The woman’s promise is like a strongly expansionary monetary policy.  The circulating debt becomes liquid.  Prices rise.  Output rises too.

But there is still a free rider problem.  Who will kill the old beau?  Let someone else do it.

The clock ticks and prices, expenditures, and debts all continue to rise (what game-theoretic solution concept brings this result?).

At some point personal indebtedness is so high that it becomes privately rational to kill the old beau.  Remember the 1984 Bliss and Nalebuff piece about dragonslaying?  Someone will be the least cost killer, relative to benefit.


Financial warfare

This sort of account is hard to verify, but here goes:

Military sources said [Israeli] warplanes attacked
structures in which Hizbullah stores its money; among the targets hit
were the four el-Mal (Money house) buildings in Bint Jbeil, Nabatiyeh,
Baalbek and the Tyre area. In addition, the “Shahid Fund” financial office in Beirut was
also attacked by IAF jets, as were buildings used for Hizbullah
financial operations in the capital.

The attacks are aimed at hindering Hizbullah’s ability to recuperate following the conclusion of the IDF operation in Lebanon.

On another front, the UK just made it easier to cancel the credit cards of paedophiles.

Heard in Riyadh, Teheran and Caracas

We have got to end our dependence on foreign dollars.  Their dollars are the lifeblood our economy.  Our standard of living is in the hands of the Great Satan!  This isn’t just an economic problem, it’s a political problem.  If they reduce their supply of dollars they could blackmail us.   We need to think about our future and that of our children.   We must embark immediately on a plan to increase our domestic consumption of oil.  Keep the oil at home and stop fueling our oppressors!