Month: March 2011

Assorted links

To Reduce Bribery, Make it Legal

India’s chief economic adviser Kaushik Basu argues (pdf; WSJ report) that to reduce bribery we should make the paying of bribes (not the demanding!) legal.

Under the current law…the bribe giver and the bribe taker become partners in crime. It is in their joint interest to keep this fact hidden from the authorities and to be fugitives from the law, because, if caught, both expect to be punished. Under the kind of revised law that I am proposing here, once a bribe is given and the bribe giver collects whatever she is trying to acquire by giving the money, the interests of the bribe taker and bribe giver become completely orthogonal to each other. If caught, the bribe giver will go scot free and will be able to collect his bribe money back. The bribe taker, on the other hand, loses the booty of bribe and faces a hefty punishment.

Hence, in the post-bribe situation it is in the interest of the bribe giver to have the bribe taker caught….Since the bribe taker knows this, he will be much less inclined to take the bribe in the first place. This establishes that there will be a drop in the incidence of bribery.

Basu notes that he intends this to apply to bribes where the person paying the bribe is receiving only what they are entitled to receive, e.g. when you have to bribe to get a business license that you are entitled to or to get your rice rations or get an income tax refund.

Hat tip to Sanjiv.

The fallacy of mood affiliation

Recently I wrote:

It seems to me that people are first choosing a mood or attitude, and then finding the disparate views which match to that mood and, to themselves, justifying those views by the mood.  I call this the “fallacy of mood affiliation,” and it is one of the most underreported fallacies in human reasoning.  (In the context of economic growth debates, the underlying mood is often “optimism” or “pessimism” per se and then a bunch of ought-to-be-independent views fall out from the chosen mood.)

Here are some further examples:

1. People who strongly desire to refute those who predicted the world would run out of innovations in 1899 and thus who associate proponents of a growth slowdown with that far more extreme view.  There’s simply an urgent feeling that any “pessimistic” view needs to be countered.

2. People who see a lot of net environmental progress (air and water are cleaner, for instance) and thus dismiss or downgrade well-grounded accounts of particular environmental problems.  There’s simply an urgent feeling that any “pessimistic” view needs to be countered.

3. People who see a political war against the interests of the poor and thus who are reluctant to present or digest analyses which blame some of the problems of the poor on…the poor themselves. (Try bringing up “predatory borrowing” in any discussion of “predatory lending” and see what happens.)   There’s simply an urgent feeling that any negative or pessimistic or undeserving view of the poor needs to be countered.

4. People who see raising or lowering the relative status of Republicans (or some other group) as the main purpose of analysis, and thus who judge the dispassionate analysis of others, or for that matter the partisan analysis of others, by this standard.  There’s simply an urgent feeling that any positive or optimistic or deserving view of the Republicans needs to be countered.

In the blogosphere, the fallacy of mood affiliation is common.

Brasilia bleg

I’ll be there too, your recommendations are welcome.  Looking for a hotel there has been a side-splitting experience.  No one seems to mind that few of them are any good, and they’ll plunk perfectly good ones on the side of a lake, next to nothing, many miles from the city center.  Nonetheless visiting Brasilia has long been a dream of mine and I do have a room.  I’ve already read Shoumatoff’s excellent Capital of Hope.

Why so little gas station arbitrage?

RSaunders requests:

How does the Exxon at Virginia Ave [in DC] sustain gas prices that are $1 higher than anywhere else in DC (even Adams Morgan). Realize it’s only gas within 3mi and people probably don’t buy a full tank, but can there really be that many people about to run out of gas to buy 1 gal of gas at a time to sustain this differential?

This Exxon comes up right before the entrance ramps to the major highways, right before leaving the NW quadrant of the District for northern Virginia.  Some people simply need to fill up and they are intimidated by the notion of getting off the highway in the suburbs, finding a gas station on the right side of the road, making a subsequent U turn, and finding the entrance ramp back on to the highway they wanted.  They also may have memories of getting back on the Capital Beltway in the wrong direction, being confused by those ramps where going south is called “Baltimore” and going north is called “Richmond.”

If that ain’t worth $5 for America’s elite, I don’t know what is.

A fellow with almost the same name — rsanders — requested a book on Romanian political history.

Ireland fact of the day

Irish Life and Permanent is expected to require more than €3 billion – about 30 times its market value – to meet worst-case mortgage losses estimated in the tests.

Here is more.  Once the Irish government takes majority ownership in this company, virtually the entire Irish banking system will have been nationalized, with no prospect of re-privatization in sight.  Some of the stress tests, by the way, are based on data taken from Nevada.

In my pile and out the door

1. Emma Rothschild, The Inner Life of Empires, An Eighteenth Century History.  The story of the Johnstones, in Scotland and around the globe.  It appears to have lots of useful information, but it is too far from my current interests for me to read it now.

2. Robin Fox, The Tribal Imagination: Civilization and the Savage Mind.  Great themes, namely Hayek plus Levi-Strauss.  But it’s too diffuse for me to get a handle on.

3. John Gray, The Immortalization Commission: Science and the Strange Quest to Cheat Death.  A bunch of weird guys, in the early 20th century, thought they could cheat death but they couldn’t!  And it all has something to do with H.G. Wells and a Russian spy.  When is the cutting polemic against rationalism going to fall?  It doesn’t, and when the book ends it feels as if it is only one-third over.  The mood is wistful.  I recall once predicting to Jim Buchanan that Gray would someday end up converting to Roman Catholicism.  This one is now in the hands of Robin Hanson.

“Ethos of the Unit”

This is from a child and adolescent mental health group at University College London, but it could and should also count as “Ethos of the Blogger”:

•All research is provisional
•All research raises as many questions as it answers
•All research is difficult to interpret and to draw clear conclusions from
•Qualitative research may be vital to elaborate experience, suggest narratives for understanding phenomena and generate hypotheses but it can’t be taken to prove anything
•Quantitative research may be able to show hard findings but can rarely (never?) give clear answers to complex questions

And yet, despite all the challenges, it is still worth attempting to encourage an evidence-based approach, since the alternative is to continue to develop practice based only on assumption and belief.

For the pointer I thank Michelle Dawson.

Alan Greenspan does not like the Dodd-Frank Bill

Here is his FT Op-Ed, sure to draw fury from those who think he no longer has much cache as an expert on financial reform.  (Addendum: Henry comments.)  Here are the most interesting excerpt:

During the postwar years, the degree of financial complexity has appeared to grow with the rising division of labour, globalisation, and the level of technology. One measure of that complexity, the share of gross domestic product devoted to finance and insurance, has increased dramatically. In America for example, it rose from 2.4 per cent in 1947 to 7.4 per cent in 2008, and to a still larger 7.9 per cent during the severe contraction of 2009.

Increased financial shares are evident in the UK, the Netherlands, Japan, Korea, and Australia, among others. Even China has joined, its share rising from 1.6 per cent in 1981 to 5.2 per cent in 2009. Deregulation, especially in America during the 1980s, clearly accounts for part, but certainly not all, of the share rise.

“among others” is not especially satisfying — is it a general trend or not?  Here is a useful chart, showing the evolution of finance as a share of gdp in the United States (and many slides here).  It runs straight up from 1940 or so onwards.  That said, I am not sure this is grounds for optimism.  The share is very high in 1929, and does not re-achieve that height until the mid-1980s (an eyeball estimate).  Does the graph show a pattern of natural growth?  Or is excess finance like a tumor which must be periodically excised and can remain at lower levels, relative to gdp, for decades, with no apparent harm?

When does money help you remember?

In a new article, Kou Murayama and Christof Kuhbandner write:

Money’s ability to enhance memory has received increased attention in recent research. However, previous studies have not directly addressed the time-dependent nature of monetary effects on memory, which are suggested to exist by research in cognitive neuroscience, and the possible detrimental effects of monetary rewards on learning interesting material, as indicated by studies in motivational psychology. By utilizing a trivia question paradigm, the current study incorporated these perspectives and examined the effect of monetary rewards on immediate and delayed memory performance for answers to uninteresting and interesting questions. Results showed that monetary rewards promote memory performance only after a delay. In addition, the memory enhancement effect of monetary rewards was only observed for uninteresting questions. These results are consistent with both the hippocampus-dependent memory consolidation model of reward learning and previous findings documenting the ineffectiveness of monetary rewards on tasks that have intrinsic value.

The pointer is from Michael Rosenwald, who recently published The Silent Season of a Hero: The Sports Writing of Gay Talese.

How would the time-stream of humanity sort itself into coalitions?

Kevin Riste, a loyal MR reader, and perhaps a loyal Philip Jose Farmer reader, asks me:

…if all of the people in recent history (since, say, 10,000 BC or so?) through today were somehow gathered at a sort of “conference,” do you have any predictions for how they would align themselves over time? what distinctions would be most significant? assuming language barriers are overcome to an extent, since that seems most significant.. male/female? by decades? nerds/jocks?

Let’s assume that different eras send roughly equal numbers of people to the conference and let’s make the conference small enough to be manageable.  No one can bring weapons or iPhones.  I believe the most significant coalition would be “rulers vs. ruled.”  On one side of the banquet table would sit modern Americans, members of the Roman Senate and Imperium, Ghenghis Khan supporters, eighteenth century Brits, 15th century Nahuas, Song Dynasty fans, and so on.  They would commiserate over the plight of having to make all those tough militaristic decisions and how little they are appreciated for it.  They would have plenty of disagreements, but ultimately they could be unified if ever the other side threatened to take over.  The Albanians, Armenians, Angolans, Bolivians, the less powerful Native American groups, and others would show up on the other side and trade stories of commiseration.  They too would have plenty of disagreements, but with less underlying unity.

In fact there is a such a conference, in atemporal form, and it is called the United Nations.