Month: August 2012

Raghu Rajan update

Finance minister P Chidambaram is learnt to have cleared the appointment of noted economist Raghuram G Rajan as the chief economic advisor.

The approval from the finance minister will pave the way for the government to complete the appointment process although Rajan, who is a professor at the Chicago University Booth School of Business, is unlikely to take up the assignment for the next few months given his academic commitments.

Here is more, hat tip goes to James Crabtree.  Here is further detail.

The forward march of progress takes another step

Google announced a new phase of its self-driving car project Tuesday. The test vehicles, of which there are “about a dozen on the road at any given time,” have so far logged 300,000 miles of road testing without a single accident under computer control. In the next phase of testing, team members will start commuting to work solo, with the robot at the wheel.

The link is here, hat tip to @PaymonFarazi.

My departure from Manila was a timely one

At least a third of this overpopulated capital and its suburbs were submerged on Tuesday as torrential rains battered the city and floodwaters poured in from almost all sides. An overflowing lake in the south sent water coursing into a river that slices through Manila; water poured from the open floodgates of a dam to the north, and high tide brought flooding from the bay to the west.

“It’s like Waterworld,” said Benito Ramos, who heads the government’s disaster relief agency, referring to the movie with Kevin Costner depicting a submerged earth.

Here is more, and I wish the best to all those left behind.

A Spontaneous Order Firm

Valve’s Chief Economist tries to explain the Valve Model:

A corporation that tries to function as a type of ‘spontaneous order’ (i.e. without an internal system of command/hierarchy) seems like a contradiction in terms. Smith’s and Hayek’s spontaneous orders turn on price signals. As Coase et al explained in the previous section, the whole point about a corporation is that its internal organisation cannot turn on price signals (for if it could, it would not exist as a corporation but would, instead, contract out all the goods and services internally produced). So, if Valve’s own spontaneous order does not turn on price signals, what does it turn on?

The answer is: on time and team allocations. Each employee chooses (a) her partners (or team with which she wants to work) and (b) how much time she wants to devote to various competing projects. In making this decision, each Valve employee takes into account not only the attractiveness of projects and teams competing for their time but, also, the decisions of others. The reason is that, especially when insufficiently informed about projects and teams (e.g. when an employee has recently joined Valve), an employee can gather much useful information about projects and teams simple by observing how popular different projects and teams are (a) with others in general, (b) with others whose interests/talents are closer to their own.

Just like in a marketplace, everything in Valve is in flux. People move about (making use of their desk’s wheels), new teams are formed, new projects are concocted. All this information is observable by the naked eye (one notices an empty spot where David’s desk used to be, and then finds out that David moved to the 4th floor to work with Tom, Dick and Harriet), on the company’s intranet, in cross-team meetings where teams inform each other on what they are working on). People learn constantly, both by observing and by doing, the value to them of different projects and teams. These subjective values keep changing, as the time and team formation signals that are emitted by everyone else are updated.

The idea here is that, through this ever-evolving process, people’s capacities, talents and ideas are given the best chance possible to develop and produce synergies that promote the Common Good. It is as if an invisible hand guides Valve’s individual members to decisions that both unleash each person’s potential and serve the company’s collective interest (which does not necessarily coincide with profit maximisation).

It’s an interesting post, much longer than I have quoted here, although no evidence is given that the time allocation system works anything like an invisible hand–a few good games do not a social revolution make.

Coase’s islands of conscious decision are also often misunderstood. The islands are not cut off from the market sea but are permeated by the sea. Everything that goes on within the firm does so in light of the shadow prices projected from outside. Absent those prices the firm fails into socialist miscalculation.

Still, there is something to be said for how modern technology can coordinate mass action. The phenomena is perhaps most evident in the way that distributed computing coordinates the actions of thousands of computers to solve various problems, each day and each hour drawing on a different set of computers. Coordinating people in this way allows them to quickly participate in joint actions, such as a flash mob. (See also anonymous). Indeed, silicon Valley writ large is not that different from internal Valve, people end and form new firms all the time.

Capitalism allows within itself many alternative social arrangements, to think, however, that one particular such arrangement is the one that must govern the whole is badly to miss the point.

The Medicaid wars continue

From Sarah Kliff:

Sandra Decker, an economist with the Center for Disease Controls, recently poured over the 2011 National Ambulatory Medical Care Survey, which asks doctors whether they would accept new Medicaid patients.

What she found could spell trouble for the health care law: More than three in ten doctors – 31 percent – said no, they would not.

Her research, published this afternoon in the journal Health Affairs, is the first that has ever given a state-by-state look at doctors’ willingness to accept Medicaid.

The problem, of course, is that higher demand will be pressing against a relatively fixed supply.

What predicts when an Olympic record will fall?

It turns out that if the current holder also set the record in the past, the record is more likely to be broken at the next games.

If the current Olympic record is also the world record, it is less likely to be broken in the next games.

A change in the number of countries competing in an event  is also an important indicator of whether the record will fall.

And most surprising of all, the percentage by which the existing record improved on the first Olympic record, is also a significant indicator.

There is more here, and the original paper is here.  For the pointer I thank Michelle Dawson.

Twenty questions?

Or forty questions, as the case may be.  One of my favorite methods of giving a talk is to have the audience write out questions in advance, and then during the talk I have to try to answer them (without peeking at them beforehand).  The goal is not only to address the queries, but also to weave the answers together into the form of a broader talk with underlying themes.

I did this recently, and I thought the best question was something like this:

“If you were designing a ten question True-False test to fool the American public and induce the greatest number of wrong answers, which questions should go on the test?  Which question would people get wrong the most often?  How many questions of the ten would the American public get right on average?”

I also was asked which of my habitual errors I would most want to change, looking forward in life.

I was asked about Jeremy Lin, and whether he or LeBron James did more to maximize global wealth.  I suggested that Lin did more to maximize utility, as his fame in Asia did not much detract from the fame of any other NBA player, but that LeBron did more to maximize wealth, in part through endorsement income.

Another good question was “How far do you think real interest rates will fall into negative territory?”, or something like that.

Can you pass this Turing test?

What did they think about the weather that morning?

Three different responses came from a male human, a female human and a machine. Which is which? Keep in mind that the event was held in October 2008 and they all knew it was autumn/fall in England. The responses were:

A.”I do tend to like a nice foggy morning, as it adds a certain mystery.”
B. “Not the best, expecting pirates to come out of the fog.”
C. “The weather is not nice at the moment, unless you like fog.”
So which is which?

That is from a paper by Kevin Warwick, “Not Another Look at the Turing Test.”  I will offer the answer when I get back home.  For the pointer I thank Michelle Dawson.

Has India solved the problem of banking regulation?

Forget Glass-Steagall:

The branches are run almost entirely by and for the children, with account holders electing two volunteer managers from the group every six months.

“Children who make money by begging or selling drugs are not allowed to open an account. This bank is only for children who believe in hard work,” said Karan, a 14-year-old “manager”.

During the day, Karan earns a pittance washing up at wedding banquets or other events. In the evening, he sits at his desk to collect money from his friends, update their pass books and close the bank.

“Some account holders want to withdraw their money. I ask them why and give it to them if other children approve. Everyone earns five per cent interest on their savings.”

This system now has over two hundred branches in half a dozen countries.  The article is here, hat tip goes to Kottke.  If I understand the account correctly, it is also run largely by street children.

Manila notes

How the mothers talk to, smile at, and elevate their small children reminds me uncannily of Mexico.  It was actually Mexico, not Spain, that ruled the Philippines for centuries.  You can tell how bad the traffic or the flooding is by the clucking sounds made by the taxi drivers.  There is a lot of boxing on TV, and you will regularly be surprised by which food items turn out to taste the best.  Don’t rule out the baked goods or the chicken minestrone soup.

This is a surrealistic dream country, combining fractured elements of an earlier global economy in strange and unpredictable ways.  If you’re not paying attention you can think you are somewhere else — Acapulco?  Lima?  Los Angeles? but in which years? — and yet you are regularly pulled back to the Filipino reality, if only by seeing the Chinese dragons perched in front of the Spanish colonial church.  “My Favorite Things Filipino” would all be moments of disorientation.  The traditional exotic spots now seem pseudo-exotic to me, at least compared to Manila, which forces you to rethink everywhere else you have visited.

Someone should write a New Yorker article about how Filipinos use music in public spaces.  The mango is superb, even by the standards of tropical countries.  If I lived here, I would learn how to talk with my eyebrows.  They don’t like to criticize each other.  Martha Stewart is brought up and discussed by high status Filipinos without irony.

The ability to appreciate the Philippines is a Turing test of some sort, but I am not yet sure for what.