Month: November 2006

The power of suggestion?

According to Patric Bach and Steven Tipper of Bangor University, the mere sight of Wayne Rooney
[a soccer player] inhibits the control you have over your feet.  Apparently, looking at
Rooney automatically triggers football-related activity in the movement
control parts of your brain, leading to the paradoxical effect of
impairing your own foot control.  By contrast, Bach and Tipper found the
sight of the British tennis player Tim Henman impairs observers’ hand
control, but not their foot control.

Here is the full story.

Banishment II

The Washington Post has an article today on sex offenders and banishment.  Georgia is again the focus where a new law forbids offenders to live within 1,000 feet of a school, playground, church or school bus stop.  As a result, there are many counties where not a single house meets the requirements.  The sponsor of the bill is clear about his goals:

My intent personally is to make it so onerous on those that are convicted of these offenses…they will want to move to another state.

See my previous post on negative spillovers and federalism.  And for those whose first thought is to roast sex offenders in hell it should be noted that the list includes "a 26-year-old woman who was caught engaging in oral sex when she was in
high school, and a mother of five who was convicted of being a party to
a crime of statutory rape because, her indictment alleged, she did not
do enough to stop her 15-year-old daughter’s sexual activity."

Trudie on kids and career

Trudie can think of a few approaches:

1. Practice major life shifts, so you get used to regret and thus can bear it more easily.  In other words, try to make the costs of regret smaller. 

2. Hire eminent psychotherapists to administer electric shocks every time you feel regret.  Try to make the costs of regret higher, so that you won’t regret so much.

3. Drink yourself senseless after making life commitments.  Attack your memory.

4. Have so many kids there will be no time or energy for regret.  One should suffice.

5. Hire someone to force the choice upon you, whether by posting a bond with a friendly blogger or approaching the Russian Mafia.  Or, once you get pregnant, do something unpardonable and post it on YouTube, being sure to alert your blogger enemies.

6. Realize that you value control more than any of these options for overcoming regret, so live with the regret and enjoy that sense of control for all it is worth.

7. Get over #6 by studying Leibniz, Holbach, and other determinists.

Trudie believes that Tyler is good at managing regret.  Surely we shouldn’t just let regret manage us.  But what is best to do?

How to get your kids to eat their vegetables

Incentives are useful everywhere, but sometimes the correct application is counterintuitive.  Yesterday’s Wall Street Journal offered the following tips from the experts:

1. Try many times — fifteen or more — to get your kids to eat their vegetables.  Most parents give up too soon.

2. Bribing, punishing, and celebrating when the kid eats the vegetables are all counterproductive.

3. "Use tasty toppings."

4. If the kid doesn’t eat the vegetables, grab them from his plate and gobble them up yourself.

5. Eat your own vegetables in great quantity and with great delight.

Some of the U.S. external imbalance is good

America has done so well, we need less in the way of precautionary savings, and so we spend more on imports:

The early 1980s marked the onset of two striking features of the
current world macro-economy: the fall in US business cycle volatility
(the "great moderation") and the large and persistent US external
imbalance.  In this paper we argue that an external imbalance is a
natural consequence of the great moderation.  If a country experiences a
fall in volatility greater than that of its partners, its relative
incentives to accumulate precautionary savings fall and this results in
an equilibrium permanent deterioration of its external balance.  To
assess how much of the current US imbalance can be explained by this
channel, we consider a standard two country business cycle model in
which households are subject to country specific shocks they cannot
perfectly insure against.  The model suggests that a fall in business
cycle volatility like the one observed for the US relatively to other
major economies can account for about 20% of the current total US
external imbalance.

Here is more.  Here is a non-gated version.  Of course the risk here is that if things finally do go bad, the ex post costs are especially bad, even if the lack of insurance was ex ante optimal.

Markets in everything, even if they don’t quite clear

This was on ebay:

You are bidding on the contact information for my friend who acquired a PS3 by waiting  in line outside Best Buy for two days in advance. I was there with him the entire time, but already sold mine. He has in his posession a PS3, extra controller, extra charger, three games (Resistance, Madden, and Ridge Racer), and a 2 year replacement plan. Keep in mind that you are not bidding on an actual system, but only the information where you might obtain one. You will be able to contact him and he is very willing to sell if the price is right. The unit is in the Atlanta, GA area and he would be willing to deliver in person if close by. PayPal is the only payment form accepted.

There were 20 bids and the final price was $1,100.

Earnings inequality and academia

I’ve observed the economics job market for the last twenty years or so, and I’ve noticed a marked increase in earnings inequality in the last ten or so years.  The mega-stars get paid lots more, yet many other wages stagnate.  I’ve heard of economist salaries of $400,000 and above, plus perks and benefits, but in 1990 almost any salary in six figures was a big deal.

This change is not because the union was broken, not because of the Bush tax cuts, and not because of growing globalization.

What then?

Markets seem more interested in measuring, bidding for, and rewarding quality.  The academic world is also far more competitive than before.  Many more institutions have the resources, and the will, to make a run at the big name players and bid up their salaries.  Just look at, say, NYU or Washington University.  The Internet means those same professors don’t feel a compelling need to have their collaborators right next door.

I conclude that the academic world, ten or fifteen years ago, was much less competitive than today.  It was also less of a meritocracy (I mean that in the Clarkian W=MP sense, not the moral sense), and we were more likely to observe a "pooling equilibrium" when it came to salaries.

I also conclude that many apparently competitive sectors aren’t nearly as competitive as they look at first glance.

Now I don’t have any evidence that this same trend explains the growth of wage inequality in the broader economy.  But it would be wrong to dismiss that possibility out of hand.

The Friedman-Savage Utility Function

The Friedman-Savage piece starts with an obvious puzzle: why do people both buy lottery tickets and insurance against losses?  That would seem to make them both risk-loving and risk-averse at the same time.  The proffered answer is simple: part of the utility function is concave, and part is convex.  Across the lower range we wish to play it safe, but above a certain margina we are willing to take gambles (by the way, here is some evidence, and why it might follow from market constraints).

For years this approach rubbed the "foundationalist Tyler" the wrong way.  "Surely there is a more general approach which will allow us to derive both behaviors from a few axioms concerning risk and utility.  We can’t just postulate arbitrary shifts in the curve across the utility space.  Maybe both parts of the curve follow from the "temporal resolution of uncertainty," that missing variable from so much of expected utility theory.  The Friedman-Savage approach will someday be seen as a diversion from the path which led to truth."

Many articles explored these routes, most notably Mark Machina’s 1982 piece on generalized expected utility theory.  None of them caught on.  A subsequent dose of empirical and experimental work indicated that behavior toward risk is strongly context-dependent.  Neuroeconomics implied that different decisions in fact may stem from different parts of our brain, thereby challenging the assumption of a unified agent.  Probably there is no overarching approach to all of the so-called violations of expected utility theory.  People simply behave differently toward risk in different situations.

In other words, Friedman and Savage were ahead of their time.  This is no accident, but rather it stems from Milton’s wise pragmatism, and from his general lack of interest in foundations.  He also never explained "why people hold money," or "what money really is," yet he charged ahead with monetary theory and indeed monetary policy.  The monetary foundationalists have been just as unsuccessful as the utility foundationalists.

Markets in everything

Wuhan, my hometown in Central China, plans to sell the right to name streets, bridges, public plazas and high-rise buildings to businesses in exchange for money the municipal government desperately needs to make up for a "funding shortage in government operations."

Here is the story, and thanks to Petras Kudaras for the pointer.

Robert Tagorda sends along a story of governments doing the buying rather than the selling:

State leaders have tried for years to get more minority and low-income high school students to take tougher classes. One group Thursday proposed an eye-opening idea: Pay students to take the classes.  The Minnesota Private College Council called on the state to spend $50 million a year to pay eligible high school students who take and pass college-prep classes.

Alex once blogged on Roland Fryer, and paying students to get better grades.

Which posts attract the most comments?

Some posts attract many more comments than others. Holding constant the general level of readership, I believe the following features predict higher numbers of comments:

1) If a post sits at the top of a page for a long time

2) If the post invokes a sense of moral outrage

3) If many readers feel they can bring facts or personal experience to bear on the question

4) If the post simply asks for comments or feedback

What do you all think?

Robin Hanson is blogging

Sort of, check out, an on-line forum with posts on how to enhance our orientation toward truth-seeking.  Contributors include Robin and also Nick Bostrom, my favorite young philosopher.

This is a noble endeavor.  Virtually everyone thinks that the thought processes of others are laden with fallacies and bias.  Yet most of us — once you get past the obligatory lip service to self-doubt — believe that our epistemic procedures are relatively immune from such problems.  That can’t be right.

That said, I do not go as far as Robin in my desire to preach truth-seeking.  With all due respect to the truth, I find something Quixotic in such a quest.  I view Robin as believing in a kind of Archimedean point, from which we could be objective truth-seekers if only we had the will.  My view is closer to that of Pascal.  Yes we should seek self-improvement, but we are weak and in the dark no matter what.  An excessive attachment to "truth-seeking," might even divert us from the pragmatic, skeptical pluralism — laden with a healthy dose of ego to get the work done — most likely to lead society closer to truth.