Month: April 2007

What is failure?

Robin Hanson writes:

I’ll take credit for creating some ideas the world has found useful, but I have completely failed both the market test and the academic test.  That is, I can’t convince any business to let me join them to deliver my ideas at scale, and I can’t convince any top journal to publish my ideas.

Prediction markets are now known by all the people who read the top journals, so the final complaint may reflect an underrewarded Robin but not a failure of Robin.  I also doubt if businesses will ever bite the bullet and adopt prediction markets on a large scale.  The very reason we resort to a firm, rather than the market, is to build consensus and morale, not to forecast the truth.  Prediction markets would tend to break down firms, but of course they still can flourish in Arrow-Hahn-Debreu space.  Here is my previous post on why businesses don’t leap on the bandwagon.  The pointer is from Chris Masse.

What I’ve been reading

1. Ghosts of Spain: Travels Through Spain and its Secret Past, by Giles Tremlett.  An engaging survey of contemporary Spain.

2. Untapped: The Scramble for Africa’s Oil, by John Ghazvinian.  Why Africa is even more messed up than you think; this book has lots of good economics.

3. Roberto Bolaño, The Savage Detectives.  I’ve gone on about him before, but this newly translated work (the translation gets an A+) is one of the major Latin American novels of the twentieth century. 

4. It’s enough to think you are exercising.

5. Persistence running.

6. Thomas McNamee, Alice Waters and Chez Panisse.  A good history of the restaurant, plus it makes you wonder what percent of the female population is motivated primarily by ***ual desire.

Questions about Sen

1. How has Sen’s thought changed traditional development?  We have a better sense of how real income measures don’t estimate capabilities very effectively in some cases, plus we’ve learned how much democracy holds famines at bay.  Sen also drew attention to the problem of "the missing women" in the Third World, namely the possibly tendency of families to take better care of sons than daughterse or to selectively abort.

2. How has his thought affected on development frameworks and fields?See #1.

3. How is his thought evaluated?  Sen has won a Nobel Prize in economics.  His writings have influenced the practice of development economics in the field, plus he had a big impact on "social choice theory," most of all showing how efficiency may conflict with key values of liberty and autonomy ("the Paretian Liberal Paradox")

4. Is Sen’s thought practical and feasible in the development projects? If it is not practical or feasible, what would be the cause?  Sen’s measure of capabilities — a kind of positive liberty — can be hard to make operational, but in the field boosting health and literacy first — and real income second — does have more than a theoretical meaning.  Try visiting Kerala.

5. If there any shortcoming of Sen’s thought or his theory, what would it be?  Sen does not place enough stress on the ability of large-scale commercial institutions or capitalism to elevate people from poverty.  He still has some of the socialist biases of the Bengali intelligentsia.

6. Will be it possible for Sen’s thought ( in particular, capability approach) to be accepted and adopted as the main concept in international development in the future?  It is already part of the mainstream.  But there is no "the main concept" in such a diverse field.

7. Is there any concept or thought which replaces Sen’s thought? Or is there any concept or thought which was affected by Sen’s thought and which has made Sen’s thought more effective?  Sen’s work, according to some, has been strengthened by incoporating the philosophical perspectives of Martha Nussbaum.  In my view Sen’s thought starts too much with his philosophical opponents (crude economism) and not enough with the poverty problem itself.  I’d like to see more analysis of trust and institutions, other than democracy and certain kinds of aid.  See also #5.  Emily Oster’s work is an important revision to Sen’s claims about the missing women.

I could say more, but I am at a Marriott in Indianapolis.  Here is Wikipedia on Sen.

Resale price maintenance

The Supreme Court will soon consider whether resale price maintenance (RPM) should be per se illegal.  Since we don’t understand price stickiness well, it is no surprise we also don’t understand RPM very well either.  My seat of the pants guess is that > 50% of RPM represents a desire to collude and raise prices. 

Market-oriented economists often exaggerate the "ancillary services" hypothesis developed by Lester Telser, namely that RPM keeps services flowing ("informative stereo salesman" is the paradigmatic example).  Supposedly, without RPM everyone would get sales help at the expensive store but buy at the discount store; in the equilibrium all stores would be discount stores and poor consumers would wander through the world without sales help.  In reality RPM has often been used for lots of the small, stupid items you see for sale in drugstores. 

I also attach greater credence to the Ben Klein hypothesis that RPM represents a kind of "efficiency wage" to discipline retailers and force them — through threat of product cut-off — to present the item in a desirable fashion.  (In Telser’s hypothesis the services flow automatically after RPM is instituted, through a desire to capture customers and extra profits, but why should the extra services supplied then be the ones subject to the free-rider problem, rather than some other side benefits?)

Even when cartellization is the motive, I do not worry that Colgate will manage to monopolize the market for toothpaste.  There just aren’t many retail products which don’t face lots of competition from alternative manufacturers.  I also don’t think that so many business decisions should become primarily legal decisions; our government has enough real crimes to look after.  So RPM should be close to per se legal (certainly not per se illegal), with some possible exceptions for resource-based monopolies, not that I can think of any offhand in the retail context.  Arguably government should not enforce RPM agreements, though product pulling is in any case the major means of implementation.

Here is Greg Mankiw on resale price maintenance.  Here is an Econoblog on resale price maintenance.  Here is Wikipedia.  Here is Aplia.  Here is some Supreme Court discussion.

Does self-citation pay?

in a word, yes:

Self-citations – those where authors cite their own works – account for a significant portion of all citations.  These self-references may result from the cumulative nature of individual research, the need for personal gratification, or the value of self-citation as a rhetorical and tactical tool in the struggle for visibility and scientific authority.  In this article we examine the incentives that underlie self-citation by studying how authors’ references to their own works affect the citations they receive from others. We report the results of a macro study of more than half a million citations to articles by Norwegian scientists that appeared in the Science Citation Index.  We show that the more one cites oneself the more one is cited by other scholars.  Controlling for numerous sources of variation in cumulative citations from others, our models suggest that each additional self-citation increases the number of citations from others by about one after one year, and by about three after five years.  Moreover, there is no significant penalty for the most frequent self-citers–the effect of self-citation remains positive even for very high rates of self-citation.  These results carry important policy implications for the use of citations to evaluate performance and distribute resources in science and they represent new information on the role and impact of self-citations in scientific communication.

Well, that explains some observations.  Here is the paper, indirectly the pointer is from Aleks.

Predictions about 2000 from 1900

Here is the list, via Kottke, and here.  My favorites:

Prediction #22: Store Purchases by Tube. Pneumatic tubes, instead of store wagons, will deliver packages and bundles. These tubes will collect, deliver and transport mail over certain distances, perhaps for hundreds of miles. They will at first connect with the private houses of the wealthy; then with all homes. Great business establishments will extend them to stations, similar to our branch post-offices of today, whence fast automobile vehicles will distribute purchases from house to house.

Prediction #23: Ready-cooked meals will be bought from establishments similar to our bakeries of today. They will purchase materials in tremendous wholesale quantities and sell the cooked foods at a price much lower than the cost of individual cooking. Food will be served hot or cold to private houses in pneumatic tubes or automobile wagons.

And strawberries will be as large as apples.

Markets in everything, family auction edition

David Altshuler recently bid at auction for a vintage necktie.

The event wasn’t set up by an auction house or to
benefit a charity. Instead, he was bidding against his two siblings in
a private, Web-based auction that they held to divvy up their late
father’s personal property.

Distributing a family’s tangible belongings — often
mundane knickknacks with far more sentimental value than monetary worth
— has long had the potential to ignite family feuds.  Divorce and
second marriages can add to the tension, as children and stepfamilies
vie for valued objects.

Now, families and estate planners increasingly are
turning to a number of novel strategies, including family auctions and
a round-robin selection strategy, to divide tangible property without
splitting families apart.  Recent online tools also can help family
members divide up a parent’s belongings.

Here is the (gated) article (WSJ).  For the pointer, thanks to both Don Boudreaux and a Sr. McKethan.

China fact of the day

Microsoft spent millions of dollars advertising its next generation OS ‘Windows Vista‘ in China, in fact the IT juggernaut threw up the biggest Vista Ad
on the 421 meter high Jin Mao tower in Shanghai China.  However after 2
weeks (Jan 19 to Feb 2) from launch Microsoft managed to sell a mere
244 copies of Windows Vista.  Software piracy is rampant in the middle kingdom and a pirated version of Vista sells for a mere $1 on the streets.

Here is the source.

Why divorce is good for marriage

Here is my latest New York Times column, featuring the work of Betsey Stevenson and Justin Wolfers (and here); excerpt:

In the United States, the availability of divorce has increased with
unilateral divorce, which allows either member of the couple to
dissolve the union.  The change has been associated with lower rates of
female suicide and domestic violence, and fewer wives murdered by their
husbands.  Unilateral divorce shifts the bargaining power to the person
who is getting less out of the marriage and thus is most likely to
leave.  The partner getting more from the marriage has to work harder to
keep the other person around, which can be good for the marriage and
good for the couple.  In other words, unilateral divorce benefits
victims and potential victims.

…Unilateral divorce does make for less committed marriages.  In states
that allow unilateral divorce, a spouse is 10 percent less likely to be
putting the partner through school.  The obvious fear is that once the
costly education is over, the beneficiary will leave the marriage. In
states with unilateral divorce, adjusting for the relevant
demographics, a couple is 6 percent less likely to have a child.  Again,
couples seem to be making decisions with the prospect of divorce in the
back (or the front) of their minds.

Health care: a science fiction story

We spend fifty percent of gdp on health care.

We spend most of the rest of gdp monitoring the quality of health care institutions, let’s call them clubs.

At birth your parents buy you membership in a highly capitalized health care club.  It takes very good care of you.  Some of them are set up as mutuals.

Your club monitors what you put in the toilet, feeds you drugs through your drinking water, and manipulates your DNA to counter incipient health care problems.

At some point the club refuses to spend any more money and it lets you die (kills you?), depending how costly it is to treat your ailments.  At some cost it could keep you alive forever, though not in a very happy state.  It won’t.

Society has two main issues: discovering new medical advances, and monitoring the performance of health care clubs.  For each individual a computer record is kept of his health, his ailments, and when and how he is killed.  Specialists judge the performance of the clubs in deciding when to kill people (oops, let them die), and in turn those specialists are judged by other specialists who in turn are judged by specialists as well.

Some dissidents won’t participate in this system at all.  They die natural deaths, and for a while are much wealthier than they otherwise would be. 

There is a lot of spying on health care clubs.  Some brave club members accept huge sums to be given fatal diseases, so that intermediaries may measure whether they are killed at the proper time and in the proper manner.  These voluntary victims often use the money to save hundreds of lives in India, where the standard of living is no higher than that of contemporary America.


When Tata made its vow to build a $2,500 car, many Western auto executives ridiculed the project, dubbing it a four-wheel bicycle.  They aren’t laughing anymore.  Tata’s model is a real car with four doors, a 33-horsepower engine, and a top speed of around 80 mph.  The automaker claims it will even pass a crash test.

That is from Business Week, p.45, 23 April 2007, here.  Here is another analysis, the car probably won’t be sold in America.  According to one estimate, meeting safety regulations would alone cost more than $4000.