Month: July 2008
Free Riding
Taking a cue from the publisher, Amazon.com reports:
[Richard] Tuck presents a bold challenge to the skeptical account of social
cooperation so widely held today. If accepted, his argument may over
time encourage more public-spirited behavior.
Richard Tuck, of course, is a Professor of Government and Harvard and a historian of early modern political thought. This book has many complicated philosophic arguments, here are bites of three of them:
1. If your cooperative behavior adds positively to a Sorites problem ("how many stones make a pile?"), it can be rational for a self-interested person to see good reason to contribute.
2. Under a properly sophisticated theory of causality (with or without Sorites), you might see your contribution as helping to cause a good end to come about, even if your contribution is not "necessary" for the good end to occur. The phrase "pre-emptive cooperation" is used.
3. Rule rather than act utilitarianism often has (rational) force on people’s behavior.
Since there is more cooperation than standard models would predict, we can’t dismiss these arguments, which by the way are used to claim that standard economic reasoning is historically contingent. By the end of the book we are told that perfect competition may operate as oligopoly and that — don’t be surprised — more government may be both necessary and desirable.
Think of this as a kind of verbal game theory, written for people who won’t read technical game theory or formulate a precise solution concept. I don’t think this looser approach is always worse, though the exposition could have been more to the point.
Here is a podcast for the book. Here are the first twenty pages.
Squib
Franny’s on Flatbush Avenue was possibly the best pizza I’ve had in the U.S., Gala Manor in Flushing was definitely the best dim sum I’ve eaten in this country, the projected fall in Wall-E box office is 61 percent (July 4th is a tough weekend but ouch!), and wars of independence are easiest to justify when the population is still relatively small and the nation state is not yet built. Call it investment. Quasi-independence or full independence was inevitable so the real question is whether North America would be better off if Florida remained a Spanish colony and the Louisiana Purchase had never happened. That said, American independence was probably very bad for native Americans and blacks and of course that rent transfer is part of what motivated independence. I am preparing a lecture on The Merchant of Venice and, via Eduardo Pegurier, here is All the Water in the World.
Very excellent sentences
Control systems and pecuniary incentives erode morale by signaling to the agent that the principal is not worth impressing.
Here is an earlier draft of the paper, "Pride and Prejudice: The Human Side of Incentive Theory," by Tore Ellingsen and Magnus Johannesson; a better version is in the June 2008 American Economic Review.
By the way, in my mental pantheon, "Very excellent sentences" are stacked somewhere above "Very good sentences."
The Gridlock Economy
How many popular economics books offer a message which is (mostly) true, non-trivial, and understandable? Michael Heller’s The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives satisfies that troika. The key message is that the "tragedy of the anti-commons" is often a bigger problem than the better-known tragedy of the commons. The tragedy of the anti-commons arises when too many veto rights are exercised. Here is one simple example:
Tarnation, a spunky documentary on growing up with a schizophrenic mother, originally cost $218 to make at home on the director’s laptop. It required an additional $230,000 for music clearances before it could be distributed.
Or try tracking down orphaned copyrights or proceeding without explicit permission. Furthermore many new drugs are more costly to market, or end up not being marketed, because there are so many possible patent infringement issues. By the way about half of the patents litigated to judgment are not upheld. Too many interest groups have veto power over infrastructure development, such as wind power or a new oil refinery (my examples). The U.S. allocates its spectrum far less efficiently than either Japan or South Korea. Holdouts lower the rate of property redevelopment; I learned that The New York Times used eminent domain to build its new headquarters because otherwise assembling such a large parcel of land in midtown Manhattan was very difficult. It all boils down to the story of too many tolls on the medieval Rhine.
Yes, the author does give full credit to Buchanan and Yoon for their work on the anti-commons.
Heller does not cover the deeper question of whether a society can respect minority rights to the desired degree without encountering too strong a problem of the anti-commons. Most of us are for the right to appeal, for the right to a fair trial, for various courses of redress, for the right to sue, for basic rights of intellectual property, and so on. Some set of interest groups has to support those regimes. Can those interest groups be so empowered without the excesses outlined in this book? Would we still want to abolish the anti-commons problems if it led to a more general weakening of minority rights?
The New Palgrave Dictionary of Economics
An overview is here, the list of contributors is very prestigious (disclaimer: I wrote the article on the social discount rate), and the Palgrave name is golden. The old Palgrave Dictionary of Political Economy still makes for fascinating browsing. Yet the price tag for the new edition is over $2000, $2500 on Amazon.
Not everyone is good at using Google and Wikipedia.
Sentences to ponder
The "likely consequence" of growing numbers of Chinese
learning English without "enough quality spoken practice" means that
"more and more spoken English will sound increasingly like Chinese."
Already, non-native speakers far outnumber native speakers, and in the
next decade, native speakers will make up only 15 percent of those who
use the language.
Here is the link, hat tip to Ben Casnocha.
How are wines arranged in the store?
The wine aisle in your grocery store is probably organized this way.
Yes, I know there is a California section and an Import section and
even a jug/box wine spot, but look within each wine display and you’ll
see the clear price stratification effect. The wines you have come to
buy are probably on the shelf just below your natural eye level, so
that you cannot help but see those special occasion wines just above
them (and the higher priced wines above them on the top shelf). Cheaper
wines are down below, near the floor, so that you have to stoop down to
choose them.The physical act of taking the wine from the shelf mirrors the
psychological choice you make – reach up for better (more expensive)
wines, stoop down for the cheaper products. The principle will be the
same in upscale supermarkets and discount stores but the choices (what
price wine will be at the bottom, middle and top) will differ as you
might expect.
Here is the full post, which includes a photo.
Markets in everything?
Who knows, but just maybe:
Doubts about the official version of the rescue surfaced in Switzerland
where a public radio station quoted an unidentified source – "close to
the events, reliable and tested many times in recent years" – saying
$20m was paid to the guerrillas. "It was not a negotiation with the
Farc directly but with a person who is very important in that
organisation, commander César," Frederich Blassel, a journalist with
the Swiss station, told Colombian radio. The reported suggested that a
wife of one of the guards – possibly César – had acted as a go-between
after being arrested by the security forces.
It’s in any case spectacular news and a major blow against terrorism. Colombia remains an underrated economy and tourist destination and I expect this to serve as a further tipping point toward good things.
The secrets of *Lost*, revealed
The Buddhist notion of "Dharma" refers to a state of affairs where people are liberated from the cycles of both birth and death. Babies cannot be born on the island and it is an open question whether one can really die there so the island is an attempt to realize this ideal. Of course the original project on the island is called The Dharma Initiative. The Buddhist notion of Bardo involves reviewing the major events of one’s previous life, as represented by the show’s frequent flashbacks. More generally the islanders are most likely experiencing a cycling of bardos and it is no accident that we are now peering into their futures. Ben and Widmore represent two evil spirits of the Buddhist pantheon, dueling for the power to corrupt and to control life and death. The numbers which reappear in various contexts, including 108, and the sequence of winning lottery numbers, are taken from Buddhist mythology (see the links). Desmond’s retreat from the world, and his ability to foresee Charlie’s death, are both very Buddhist themes. Claire’s baby is probably a reincarnation and John Locke is arguably a Tulku and he is explicitly tested as such in the last season. The names Rousseau, Hume, and Locke are used because one theme is Western philosophy confronting the truths of the East. Here is more and try this too though it is vague. Here’s the single best page. Aldous Huxley is an influence as well. The Buddhist interpretation isn’t new, but no one quite seems to have said "This is it." Toss in time travel, and a bunch of women who look like underwear models, and you can explain most of the apparent anomalies in the plot.
Mental activity halts some of your self-deception and hypocrisy
The main idea is that when you busy people’s minds with a routine task, they are less able to rationalize their own behavior and they are more likely to report the truth about what they are doing. The most quotable excerpt assumes a bit of context
To find out, he and Dr. Valdesolo brought more people into the lab
and watched them selfishly assign themselves the easy task. Then, at
the start of the subsequent questioning, some of these people were
asked to memorize a list of numbers and retain it in their heads as
they answered questions about the experiment and their actions.That
little bit of extra mental exertion was enough to eliminate hypocrisy.
These people judged their own actions [in assigning themselves the easy task] just as harshly as others did.
Their brains were apparently too busy to rationalize their selfishness,
so they fell back on their intuitive feelings about fairness.
If you wish, here is the whole piece.
How much do biofuels drive up food prices?
Biofuels have forced global food prices up by 75% – far more than
previously estimated – according to a confidential World Bank report
obtained by the Guardian.The damning unpublished assessment is
based on the most detailed analysis of the crisis so far, carried out
by an internationally-respected economist at global financial body.The
figure emphatically contradicts the US government’s claims that
plant-derived fuels contribute less than 3% to food-price rises. It
will add to pressure on governments in Washington and across Europe,
which have turned to plant-derived fuels to reduce emissions of
greenhouse gases and reduce their dependence on imported oil.
Here is the story, the report is not yet available, at least not to me. Seventy-five percent seems like a high estimate to me, especially since many foods are more expensive but they are not all used for biofuels. Still, the government’s estimate of three percent is surely way too low. Biofuels are maybe a good test case for various estimates of government quality: will the bad biofuels still be subsidized five years from now?
What I’ve Been Reading
1. Government and the American Economy: A New History, no editor but the book is dedicated to Bob Higgs by Price Fishback. Imagine essays by economic history luminaries, mostly classical liberals, covering many different eras of American economic history. For some this is a gold mine.
2. The Third Domain, by Tim Friend. An overview of archaea, those odd life forms that survive where nothing else can. A fascinating look at a still mysterious topic. It’s not as well written as the top-drawer popular science books but since you probably know little or nothing about the topic the amount you will learn is high.
3. Empires of Trust: How Rome Built — and America is Building — a New World, by Thomas F. Madden. This book is avowed pro-Roman, pro-American, and sees strong parallels across the two regimes; part of the thesis is that neither wanted to build an empire but had to.
4. The Power Makers: Steam, Electricity, and the Men Who Invented Modern America, by Maury Klein. This is a big, clunky book with lots of poor exposition. It also covers a vital era — the real Industrial Revolution — which has remained oddly neglected by too many economic historians.
5. The Race Between Education and Technology, by Claudia Goldin and Lawrence Katz. This is the most important book on modern U.S. inequality to date; here is my previous coverage of their ideas. I’m still waiting for Paul Krugman to write a critique but right now their core hypothesis is looking strong.
Detroit fact of the day
Among cities with more than 500,000 residents, Detroit has the
safest drivers, with accident rates that are 20 percent below the
national average.For cities with more than 1 million residents, Phoenix has the
safest big-city commuters, with accident rates about equal to the
national average.
Here is much more, Philadelphia is a disaster and L.A. isn’t so safe either. I wonder to what extent these rankings simply proxy for traffic density. Here are some charts. Overall Sioux Falls, Tucson, and El Paso seem to be relatively safe cities for driving.
Why Not?
I was just invited to a conference — a very good one in fact — where the price of registration rises by $150 for every week that passes. This encapsulates at least two principles of behavioral economics. First, it combats our natural tendency to procrastinate. Second, if you register early you feel you have won a bargain when in fact it still costs something. This is of course also a planning externality if they know the number and nature of attendees sooner rather than later.
The male and female privilege checklists
Here is the male privilege checklist. Here is the female privilege checklist. Robin Hanson, scientist, continues: "The next obvious step is to assign point values to such privileges, so we can add them up and compare totals." You can imagine how much fun we had at lunch on this topic and yes a woman was there too.