Month: June 2011

The Archimedean axiom

by  Tyler Cowen in

What else does one blog from Siracusa?

(A.3) Archimedean Axiom: if p, q, r Î D (X) such that p >h q >h r, then there is an a , b Î (0, 1) such that a p + (1-a )r >h q and q >h b p + (1-b )r.

…The Archimedean Axiom (A.3) works like a continuity axiom on preferences. It effectively states that given any three lotteries strictly preferred to each other, p >h q >h r, we can combine the most and least preferred lottery (p and r) via an a Î (0, 1) such that the compound of p and r is strictly preferred to the middling lottery q and we can combine p and r via a b Î (0, 1) so that the middling lottery q is strictly preferred to the compound of p and r. Notice that one really needs D (X) to be a linear, convex structure to have (A.3).

The full treatment is here.  In other words, the Archimedean Axiom means no lexicographic preferences for certainty.  For some expected reward, you will accept a very small chance of a very bad outcome.  Either extreme fear, or an extreme attachment to a symbolic value, or an extreme attachment to a “no stochastic trade-offs” principle can stop an Archimedean axiom from holding.  There is further analysis here.  Here is Wikipedia on Archimedes, a very impressive figure.

Markets in everything

by  Tyler Cowen in

The 10-employee park has five pieces of machinery, including a pair of Caterpillar D5 track-type bulldozers and three Caterpillar 315CL hydraulic excavators. Dig This sells three-hour packages that consist of a 30-minute safety and operation orientation followed by two hours of maneuvering either a bulldozer or excavator.

Guests can either dig a trench up to 10 ft deep or build an earthen mound; there are also skill tests like picking and moving 2,000-lb tires or scooping basketballs from atop safety cones. 

Packages are priced at $400, which reflects equipment maintenance and insurance costs. Patrons 14 and older can play in the dirt.

“Half of our customers are females, including housewives and grandmothers,” says company spokeswoman Cathy Wiedemer. “Throttling up a powerful engine and moving mounds of earth is very empowering.”

The full story is here and for the pointer I thank Chug.

David Henderson on Medicare price controls

by  Tyler Cowen in

It is often debated whether a cut in Medicare reimbursement rates should be counted as a “price control.”  David Henderson adds a valuable point:

…a year or two after I left the Council, the Reagan administration took the next step of imposing price controls on doctors under Medicare. Doctors were no longer allowed to do what was variously called “extra bill” or “balance bill.” They couldn’t charge even a penny more than Medicare paid. That’s what made it a system of price controls. Moreover, under later regulations, if a doctor takes even one Medicare patient, then he has to charge Medicare rates to all his Medicare patients even if those patients would rather ensure access by paying the whole bill (Medicare plus a doctor’s additional charge) out of their own pocket. It is this system of price controls that is causing many doctors to take no Medicare patients.

Here is more.  Bryan Caplan comments, and Greg Mankiw’s recent post is relevant too.

The laws and judgments that are French

by  Tyler Cowen in

In a controversial move the French government has said that it will enforce a law so that the words ‘Facebook’ and ‘Twitter’ will not be allowed to be spoken on the television or on the radio.

President Nicolas Sarkozy’s colleagues have agreed to uphold a 1992 decree which stipulates that commercial enterprises should not be promoted on news programs.

Broadcasting anchors from now on are forbidden to refer to the popular social networking site and the microblogging phenomenon, unless it is pivotal and relevant to a news item.

If you are not happy with links to The Daily Mail, here are other sources.  I thank a loyal MR reader for the pointer.

Peter Diamond withdraws his name

by  Tyler Cowen in

His statement is here.  There should be no doubt about Diamond’s qualifications as an economist, but oddly his parting statement makes him sound less qualified as a Fed candidate rather than more qualified.  It is not so much the case that further analytical expertise is needed, which is what Diamond seems to suggest.  What is needed is someone who can help push some fairly simple and already well-understood ideas through Congress.  Was Diamond that person?  From a distance it’s hard to say, and of course “parting shots” are strategic in their own right.  Still, the piece seems overly focused on technocratic issues and it is not obvious that he is the ideal ambassador to, say, Ron Paul.  In other words, there is a reasonable chance that this not unexpected development is a blessing in disguise.

For the pointer I thank Jeffrey Deutsch.

Pet markets in everything the value of affiliation

by  Tyler Cowen in

One vendor is offering treadmills and treadwheels — essentially oversize hamster wheels — that let dogs exercise indoors, without the indignities of cracked sidewalks or rain.

There are “eco-friendly” pieces of furniture, grooming products and wipes, the wipes made from organically grown bamboo. An Israeli firm hawks dog shampoo containing Dead Sea minerals. Another, Pet Pop of Australia, promotes a vitamin-infused “mountain-spring water” for dogs. The price: $3.30 a bottle, about as much as a gallon of milk.

“We actually saw that there was a gap in the market for beverages for dogs,” says Bonnie Senior, a manager at the company. Then there is Jenn Mohr, who says she combined her love of dogs and love of candles to create Sniff Pet Candles. Made of “100 percent organic natural ingredients,” the aromatherapy candles have names like “Day in the Hamptons” and “Field of Dreams” and “promote your dog’s optimum health and well-being,” her company says.

Ms. Mohr even designed a candle to address the flatulence of Rufus, her Rhodesian ridgeback. Made with floral ylang-ylang, white tea, myrtle and fennel, the “Fart & Away” candle “won’t completely stop them,” Ms. Mohr says. “But it will help.” The price: $28.

…Canine Caviar Foods says it makes “the only alkaline-based dog food in America that was specifically designed to prevent cancer.” The ingredients include canned beaver, duck and venison tripe for dogs and cats, as well as a variety of “free-range, grass fed buffalo” treats for dogs.

The Honest Kitchen is offering dog food with names like “Zeal” and “Verve” and lists the provenance of the ingredients. There is organic, fair-trade quinoa from Bolivia and “wild, line-caught Icelandic haddock.” Its food is “gently dehydrated” to preserve it.

Here is more, and the sector is booming.

Venezuela prison quotation of the day

by  Tyler Cowen in

The inmates’ chief, Mr. Rodríguez, interviewed as bodyguards shucked oysters for him, attributed these distinctions to his rule. A mural at the prison depicts Mr. Rodríguez as conductor of a train, accompanied by gun-wielding subordinates, barreling toward a snitch hanging from a noose.

“There’s more security in here than out on the street,” said Mr. Rodríguez, a thick-necked long-termer who barks orders into a cellphone. Asked about his ambitions after incarceration, he said he would consider politics.

Here is the article, interesting throughout, hat tip goes to Michael Rosenwald.

China at the frontier

by  Tyler Cowen in

Following previous efforts (http://www.genomics.cn/en/news_show.php?type=show&id=644 and http://www.genomics.cn/en/news_show.php?type=show&id=647), BGI, based in Shenzhen, China, and its collaborators at the University Medical Centre Hamburg-Eppendorf, as well as a growing number of researchers around the world “crowdsourcing” this data, are exploring in-depth the European disease outbreak helping trace the origin and spread of the lethal E. coli strain. Different sources have reported that two strains, 01-09591 from Germany isolated in 2001 and 55989 from Central Africa in 2002, are highly similar to the 2011 outbreak strain. Based on the most recently curated assembly publically released by BGI yesterday (ftp://ftp.genomics.org.cn/pub/Ecoli_TY-2482), these strains have an identical Multi Locus Sequence Typing (ST678) based on analysis of seven important “housekeeping” genes*.

BGI (formerly known as Beijing Genomics Institute) was founded in 1999 and has become the largest genomic organization in the world. With a focus on research and applications in the healthcare, agriculture, conservation and bio-energy fields, BGI has a proven track record of innovative, high-profile research which has generated over 178 publications in top-tier journals such as Nature and Science.

Bravo.

The North Korean global happiness index

by  Tyler Cowen in

Here at MR we are always keen to report dissenting viewpoints:

China is the happiest place on earth(!!) according to a new global happiness index released by North Korea’s Chosun Central Television. China earned 100 out of 100 points, followed closely by North Korea (98 points), then Cuba, Iran, and Venezuela. Coming in at 203rd place is America (or rather “the American Empire”, 美帝国), with only 3 happiness points. South Korea got a measly 18 points for 152nd place.

I cannot find the full rankings (which countries came between South Korea and the United States?) but here is a partial screen shot of the results, in Chinese.  For the pointer I thank Eapen Thampy.

A prediction market for climate outcomes?

by  Tyler Cowen in

From Shi-Ling Hsu:

This article proposes a way of introducing some organization and tractability in climate science, generating more widely credible evaluations of climate science, and imposing some discipline on the processing and interpretation of climate information. I propose a two-part policy instrument consisting of (1) a carbon tax that is indexed to a “basket” of climate outcomes, and (2) nested inside this carbon tax, a cap-and-trade system of emissions permits that can be redeemed in lieu of paying the carbon tax. The amount of the carbon tax in this proposal would be set each year on the basis of some objective, non-manipulable climate indices, such as temperature and mean sea level, and also on the number of certain climate events, such as hurricanes or droughts, that occurred in the previous year (or some moving average of previous years). In addition to setting a carbon tax rate each year, an auction would be held each year for tradeable permits to emit a ton of carbon dioxide in separate, specific, future years. That is, in the year 2012, a number of permits to emit in 2013 would be auctioned, as well as a number of permits to emit in 2014, in 2015, and so forth. In the year 2013, some more permits to emit in 2014 would be auctioned, as well as more permits to emit in 2015, 2016, and so forth.
The permits to emit in the future are essentially unitary exemptions from a future carbon tax: an emitter can either pay the carbon tax or surrender an emissions permit to emit in the specific vintage year. Because of this link between the carbon tax and the permit market, the trading price of the permits should reflect market expectations of what the carbon tax will be in the future, and concomitantly, expectations of future climate outcomes. The idea is to link the price of tradeable permits to future climate outcomes, so that a market is created in which accurate and credible information about future climate conditions are important inputs into the price of permits. The market for tradeable permits to emit in the future is essentially a prediction market for climate outcomes.

The rationale for this idea is clear, namely a desire to build consensus by getting agreement to a broader proposal ex ante.  Nonetheless I think of such fine-tuning as a misguided approach.  Is there such a good “basket” measure of climate outcomes with sufficiently low short-term volatility? (Or does the metric do econometrics on the higher-order polynomial?)  Should the tax be fine-tuned year-by-year when the lag times between energy inputs and climate outputs is thirty years or longer, possibly reaching up to one hundred years?  Still, I am happy to pass the idea along for consideration.

For the pointer I thank Chris Auld.