This entry is cross-posted at orgtheory.net, the social science and management blog. Also, please check out my on book politics and universities, From Black Power to Black Studies. Thanks for reading!
We’ve reached the end of Logic of Life, Tim Harford’s engaging tour of economics and its lessons for everyday life. Harford ends the book on a highly speculative note about technology, economics, and growth. Tim does a good job summarizing the emerging consensus. The “normal” state of human life is poverty and near zero economic development. Once a community establishes reasonable institutions for commerce and trade, people can quickly produce and exploit technological advances. The effects are cumulative: once a nation allows markets to work beyond a certain threshold, the population experiences exponentially increasing benefits. The economists’ summary of world history is: “no capitalism = no growth, some capitalism = growth, growth, growth!!”
This discussion is interesting because of the connections to ideas outside the normal realm of economics, especially in areas like psychology and, my own area, sociology. Here’s just one example. Harford discusses the idea that population size should correlate with innovation. Simply put, if you have a hundred million people, you’ll get a least a few geniuses. The inventions of these geniuses can be mass marketed, which fuels later growth episodes. Fair enough.
But where do “geniuses” come from? Turns out, there is a fascinating literature on creativity and achievement. A few names: R. Keith Sawyer, a sociologist/psychologist, writes eloquently on the emergence of genius from networks and groups. Sociologist Randall Collins wrote a highly regarded book on prominent philosophers showing that “genius level” philosophers tended to be clustered in space and time, suggesting that genius is made possible by very specific kinds of “hot house” situations. Other research, pioneered by Florida State psychologist Anders Ericsson, shows that high level performance isn’t just a matter of talent. It’s also a matter of specific training techniques and immersion in a topic. Basically, it’s not just talent that leads to achievement, it’s also the right kind of social environment.*
What’s the point? It’s this: Economics, as understood for hundreds of years, has played out. The major problems of econ 101 have been solved. We know about supply and demand, marginal utility, choice under uncertainty, and budget constraints. We have a wide variety of tools, ranging from game theory to econometrics, that help us identify these processes in situations ranging from war, to car sales, to dating. We are also seeing how these processes plug into classic macroeconomic issues, such as growth and international trade.
However, the market system itself, as indicated by Tim’s concluding chapter, depends on population, innovation, and liberal economic institutions. These, in turn, depend on psychology, group culture, and networks, the domain of sociologists, psychologists, historians, and anthropologists. Economists have shown how the market system processes the inputs, but there’s still much, much more to be said about where the inputs come from. That’s what’s going to be exciting in the decades to come, and I can’t wait to see it.
* Author David Shenk nicely covers this research on his blog The Genius in All of Us.
In chapter three, "Divorce is Underrated," Tim Harford explores the economics of love, marriage, and divorce. It’s the kind of topic that makes people hate economists. Of all the subjects studied by economists, can’t love be spared the rational choice treatment? Of course not! If you spend a few moments thinking about how men and women scheme in the dating world, you’ll quickly see that a rational choice theory of relationships isn’t such a crazy idea after all.
Harford hits the major points you’d expect. People make substitutions, and they respond to supply and demand in dating and sex. One interesting section talks about the “optimal” divorce rate and how in the post-1970s era, we’re probably switching from a situation of many marriages with many divorces, to less frequent marriages and less frequent divorce. Harford quotes MR regular Justin Wolfers in saying that there is social learning and that we should appreciate that the optimal divorce rate is not zero, lest we believe in perfect marriages.
The average person probably hates this econo-talk because it seems to devalue love. Here’s where it helps to be a sociologist. Yes, from the bird’s eye view, there is a “love market” and you are just a love widget. But let’s take the symbolic interactionist perspective. Relationships are highly customizable. Once you bond with a person, you can make the relationship highly unique and hard to substitute. Even if two people are similar, they can form very different relationships with different histories. If you’ve done that, then you’ve created a fairly unique thing that’s hard to replace. By yourself you might be generic, but in a relationship you can be very special.
Translating back into econo-talk, people in loving relationships differentiate their “love product.” A person in a couple with a special history knows that there will never be another person who has lived the same life with them. That knowledge makes them stick it out. If you can do that in a way that improves both parties, then you won’t contribute to the optimal divorce rate.
This review is cross posted on orgtheory.net, the management & social science blog.
It’s a pleasure to be back at the Marginal Revolution. Let me start out by agreeing with Tyler and Bryan. Tim Harford is one of the leading popular social science writers and we’re lucky to have him.
Today, I’ll focus on Chapter Two of Tim’s book, "Las Vegas: The Edge of Reason." In this chapter, Harford describes game theory. In a nutshell, game theory studies any situation where (a) you have multiple people striving to achieve a goal and (b) your actions depend on the actions of the other people in the game. By most accounts, game theory is one of the great accomplishments of modern social science. Once you realize that people’s actions are both utility maximizing and interdependent, then game theory can help you model just about any form of cooperation or conflict.
Harford discusses the basic concepts of game theory with vivid examples ranging from poker, to nuclear war, to quitting smoking. And, as expected, game theory usually provides a great deal of insight. Harford shows how game theory can also be enormously useful, even life saving. Harford recounts how economist Thomas Schelling realized that some situations might encourage participants to jump the gun and initiate devastating conflict. What Schelling realized is that these dangerous games had low information, such as the US misunderstanding a Soviet action, and starting nuclear war. Schelling advocated increased communication between the US and Soviet leadership, including the creation of the hotline between Moscow and the US, which helped defuse tensions in later Cold War disputes.
I’ll finish this post with my one big criticism of game theory, at least the basic version described by Harford and taught in intro courses. In game theory 101, you assume that people develop optimal strategies in response to other rational actors. One huge problem with a lot of these models is that the games are very complicated. It’s hard to imagine most people perform the mental acrobatics of game theory actors.
One response is that game theory is empirically well supported, which suggests that some process drives people to the strategies described by game theory. For example, Harford describes how economists and mathematicians used game theory to sort through the insanely complex game of poker and that the optimal game theory strategy was actually fairly similar to what world class poker players do.
So game theory is supported, right? Not so fast. Game theory has two parts (a) a description of optimal strategies, and (b) a prediction that people will actually solve the game and find these strategies. In my view, game theory 101 is well supported, in poker at least, on point (a), but not (b). In other words, world class poker players rarely sit around and do backwards induction, or any other flavor of equilibrium analysis, but they still obtain strong strategies through trial and error.
What I suspect is that world class poker emerged from an evolutionary process. Very smart people can figure out certain strategies, but nobody can figure out the whole game by themselves, lest they become full time mathematicians. The typical world class poker player probably inherits a bunch of rules that were tested by earlier generations, and adds a few new twists. Competition weeds out bad rules. Even Steve Levitt, star economist, Harvard & MIT grad, developed his own idiosyncratic strategy, rather than solve the game himself.*
In the end, game theory is really a first step in understanding complex interactions. The next step is developing an evolutionary theory of games where actors inherit a tool box of strategies from previous generations of players. Already, there is a fairly well developed genre of game theory taking this approach, but I welcome the day when it becomes refined enough so that it can account not just the strategies of leading poker players, but how these strategies emerged from generations of competition.
*According to the news reports, he developed his own "weird style" rather than completely solve the poker game. But it works for him! What would Johnny von Neumann say?
Most people know that India and Pakistan have had many border wars since the 1940s. What few people realize is that India and Pakistan are still engaged in a 20 year war of attrition in the Himalayas. Since the early 1980s, both nations have wasted huge amounts of human and financial resources fighting over small ridges and icy glaciers over 17,000 feet above sea level, places most mountaineers would consider suicidal. About 4000 Indian and Pakistani soldiers have died, mainly because of the weather and the hostile environmental conditions. One officer says:
Ninety-seven per cent of casualties here are due to the extreme weather and altitude, rather than fighting. On the glacier you have to first survive the elements and then you fight the enemy.
Read more at Sepia Mutiny (click here and here) to learn about this unusual alpine stalemate. You’ll quickly see how bizarre and dangerous it is live and fight in such a place. Even using the latrine presents special challenges, such as what to do with piles of frozen human waste (answer: pulverize it with your machine gun). Time magazine Asia has a whole story (click here). You can also read Outdoor magazine’s account of the conflict.
A few days ago, I wrote about a paper by Ron Fryer and Paul
Torelli (click here for the post). To sum it up, they found that white student GPA correlates positively
with popularity, black student popularity peaks with a GPA of about 3.5 and
Hispanic popularity peaks at about 2 to 2.5 GPA. My question to the readers:
why the marked difference between Blacks and Latinos?
I was deluged with emails. So let me start by thanking all
the Marginal Revolution readers for sending their thoughts! Even if I haven’t
gotten around to responding to every email, please know that I read them all
and learned quite a bit.
In general, there were two sorts of emails – personal
recollections and attempts to explain the phenomena. Among the former, many support that for the idea that there is an acting white penalty. At the very least, the "acting white" accusation is very real for many people. One
person wrote that although s/he earned a modest 2.1 GPA in their final year in
high school, s/he was till accused of acting white by peers. A teacher in a
mainly Hispanic high school told me that success for many children of
immigrants is defined in rather modest terms, and that striving for college and
advanced education was out of the norm.
Now, let’s turn to some proposed explanations. One popular
answer was that each ethnic group has different GPA distributions and that
people become unpopular as they deviate from the group average. It is certainly
true that GPA varies from group to group, but the mean white GPA is not 4.0 –
the height of popularity for white students. It is also true that in data that
Fryer and Torelli use black and Hispanic GPA are about the same at 2.5 (check out page 51). So the “deviate from
the mean” explanation only fits Hispanics, but not the other groups examined.
Another batch of emails suggested that a shared Spanish
language, close social networks and tight families might mean that Hispanics
are better at monitoring each other than Blacks. If a Hispanic student wants to
do well in school, they have to master English. It’s pretty easy to know if
someone speaks English with any degree of fluency. OTOH, Black students already
know English. I can imagine that an ambitious Black student could do pretty
well in school and not attract attention. They “fly under the radar,” in the
words of one MR reader. However, once you get a super high GPA, you get lots of
public recognition in school (honor roll, advanced courses, etc.) and it’s
harder to evade the “acting white” tag.
A couple of readers felt that the statistical finding for
Hispanics was misleading. They suggested that it was important to discern
between fluent English speakers and mainly Spanish speakers. Assimilated
Hispanics, they thought, might resemble White students and what Fryer and
Torelli report only pertains the least assimilated, where there would of course
be unusually strong in-group pressures for conformity. There might be some
credence to this; Fryer and Torelli don’t include English fluency as control
So thank you to all who emailed! As you can see, I enjoyed
the email enormously and I think we have some tips on solving this puzzle.
Conservatives love to rant about the evils of Hollywood. Too much sex and violence. Inappropriate for the family. Religion gets short shrift. Fair enough, a lot of Hollywood fare isn’t fit for the 13 and under crowd. Here’s my question: why aren’t conservative media critics rushing en masse to sing the praises of Bollywood films? Michael Medved, where are you?
Consider the following Bollywood film conventions:
1. No sex. If you’re lucky, you might see some wet sari.
2. The films often revolve around finding a wonderful spouse and getting married.
3. The bigger the wedding, the better.
4. Lots of piety. Religion is *never* mocked or portrayed in a negative light.
5. Although the parents initially oppose the wedding, they usually come around and you get one big happy family.
6. The reigning queen of Bollywood, Aishwarya Rai, is such a down home gal, she still lives with her parents.
7. Lots of trips to Egypt and Switzerland. I have yet to understand this convention.
8. Cities are usually bad, twisted places with corrupt politicians. Country folk are usually more honest.
9. In more recent Bollywood films, coming to America is the way to success and is admired.
10. Tons and tons of song and dance, which is mostly about finding true love. Those who miss Broadway’s glory days have much to admire.
If you haven’t seen any Bollywood films, you might want to check out Lagaan, which is about resisting the British in India. It’s available at most chain video rental shops. But if you want the full experience, seek out the blockbuster Kabhi Khushi Kabhie Gham.
Attention baseball fans and vertical integration researchers: The Chicago Cubs scalp their own tickets. I was recently pointed to the web page of a disgruntled fan (click here) who found out that a ticket re-seller is owned by the same company that owns Wrigley Field, the Tribune Company. And of course, the ticket reseller charges much more than the face value.
Why? Some guesses: you get the extra income without the negative publicity of raising ticket prices. The Tribune Company also gets to hide income in a subsidiary, which might be useful when negotiating with Major League Baseball over revenue sharing issues. Regardless of the economic motivations, disgruntled fans filed a lawsuit, which the Tribune Company eventually won (click here to read about the verdict).
Fred Kaplan at Slate.com has a nice article on the combat capacity of the US armed forces. The key point is that only 40% of military personnel are combat troops. Right now, there are about 390,000 troops who are prepared to fight in Iraq or elsewhere, although the Army has nearly a million soldiers. The rest are in support roles like medicine and administration. Kaplan says this is good. Volunteer soldiers are better motivated and better trained. The draft requires the armed services to accept people who don’t want to be soldiers, or who simply don’t have the right personality or skills.
Although it comes at the end of the essay, Kaplan makes a deep observation about the volunteer Army and democratic politics:
“Does America want to be–can it be–the world’s policeman, colossus, liberator, call it what you will? If so, with what resources? By itself or with allies? Through international law or by whim?
Whatever the answers, there is a potentially calamitous mismatch between the Bush administration’s avowed intentions and its tangible means. They can print or borrow money to float the national debt. They can’t clone or borrow soldiers to float an imperial army.”
So there you have it. The volunteer army is a natural check and balance on the executive branch. There is nothing about the democratic process that will stop a popular leader from waging wars. Voters, courts and legislatures are willing to cut the executive branch a lot of slack when it comes to war. However, a volunteer army imposes a strict limit on how many wars the President can fight. Ask yourself this: Would Lyndon Johnson have pursued his relentless escalation of the Vietnam war if he had only 400,000 American combat troops to cover the entire world?
Last year, I ripped Dave Eggers when he complained about low teacher pay. But there he goes again – he was in last week’s New York Times lamenting the fact that teachers have to work in the summer! Dave might enjoy this debate between economists Michael Podgursky, from the University of Missouri-Columbia, and Lawrence Mishel, President of the Economic Policy Institute. They’ve spent the last couple of years figuring out how much teachers get paid when compared to other professionals. Click here to read a nice exchange between them. As you might imagine, it’s tricky. How should one account for summer vacation? Part time employment? Extra hours spent at home grading papers? How about fringe benefits and perks? It’s not a question for meek.
The key issue isn’t how much they get paid, or whether they get paid less than other people. It’s all about supply and demand. Just ask yourself: what’s the supply? What’s the demand? In a nutshell, teaching is a profession with modest to high demand but low barriers to entry. Eggers & co propose higher teacher pay. And, of course, higher pay will attract better applicants. But that’ll only go so far. Low barriers to entry will always produce downward pressure on wages.
As one skeptic pointed out, the real problem isn’t low pay. You don’t want to pay people just for being teachers. You want to pay good teachers. Even if you get good applicants, they could still flake once they get the job. So here’s my suggestion for the state governments and teacher’s associations:
Create a system of voluntary standardized tests in different subjects. Make ’em tough so you can really figure out who knows their subject.
Here’s my suggestion for teachers:
Create a teaching portfolio that shows what you’ve done. It could have syllabi, student projects, testimonials, standardized test scores, analyses of student performance, etc.
School districts should then demand portfolios and test scores from teachers and then pay them according to how well they do in these two tasks. Even if a math teacher isn’t a master of calculus, they could still show that they are really good at teaching basic math, or working with underprivileged children. A school district that publicizes teacher knowledge and abilities can then make informed judgments and come up with a decent strategy for hiring, given their budget. Maybe I’m misguided, but it’s probably a better approach than just raising everybody’s paycheck.
Steve Jobs, founder of Apple, NeXT and Pixar, recently gave
a most excellent speech at Stanford University (click here – it’s really good). Among other things, Jobs talks about what he learned
from his time at Reed College before dropping out to be an entrepreneur. Jobs’
speech made me think about my own undergraduate years at UC Berkeley, where I
made many lasting friendships and met my future spouse.
Berkeley is like a lot of state schools: massive classes
with atrocious instruction, poor facilities and the students are a little too
concerned about sports. However, Berkeley, at least during my time, had two
features that made it really stand out, even from other big public schools and
elite private schools.
First, Berkeley was a remarkably open institution in the
sense that most classes were open to most students. The advisors might try to
steer you one way or another. In practice they didn’t try very hard, so most
any student could take most any class. This meant that a student with a clear
sense of what they wanted could craft any sort of education they wanted. If
they so desired, they could skip to the most challenging classes and not waste
time. This also meant that you could avoid the classes taught by graduate
students and learn from the most talented scholars out there. I’ve discovered
that you can’t do this in many colleges because there aren’t enough students to
support lots of advanced courses, or the students aren’t talented enough to
support advanced classes in fields like foreign languages and the physical
sciences. For a determined student, Berkeley was an intellectual buffet.
Second, the student population was really unique because
anyone who worked hard enough could get in. This is not true for elite private
schools because they demand that students show “well roundedness,” often shown
through travel, violin playing and other expensive activities. And even if you play your cards right, tuition was really prohibitive. If you could score
high enough on the SAT and GPA, you would automatically get into Berkeley. The
fees were substantial but not prohibitive. As a result, you had a really
fascinating combination of students.
Of course, there were lots of folks who
spent four years wondering why they weren’t in Palo Alto or Cambridge. But you also had a lot of amazing students who were at
Berkeley because they were really smart and it was cheap, or they didn’t quite
fit the profile of a typical private school admit. There was a just a great
energy to be had from throwing these folks together. For these reasons, I tell
people that “Berkeley is the great walk-on team of American higher education.”
You don’t need $36,000/year to audition or a specific last name. Just get good
grades and SAT scores, and they’ll give you a shot to play with the pros. No
guarantees, but work hard, show up and you’ll get your chance.
Tyler recently mentioned a paper by Ronald Fryer and Paul Torelli that looked at the correlation between academic achievement and popularity among ethnic groups. Click here to read the original paper. Motivated by research claiming that academically successful black high school students are less popular with their peers, Fryer and Torelli crunch some numbers to figure out if it’s really true.
Here’s the main finding. For White students, the higher the grade the more popular the student. For Black students, the same holds true except for kids with GPA’s > 3.5, who experience decreases in popularity. For Hispanic kids, popularity starts to go down when they hit a GPA of 2.0 to 2.5. (This is from Figures 1A-4A listed after page 43).
Here’s the puzzle for Marginal Revolution readers: Why is the peak popularity so different for Black and Hispanic students? In other words, why is the "Acting white" penalty only relevant for high achieving black students while it kicks in at a meager 2.0 GPA for Hispanics?
Readers are invited to email me their thoughts on the topic (frojas at indiana dot edu). Fryer and Torelli allude to this Black/Hispanic difference, but they don’t really get into an explanation of it. Don’t quibble with the data – it’s from a high quality survey and popularity is objectively measured, rather than self-reported. I’ll post reader responses and my own thoughts in a few days.
The goal of Class Struggle is to teach people about how capitalism really works, at least according to Marxist theory. Each player plays a class (Workers, Capitalists, Farmers, etc.) because individuals aren’t the real players in capitalist societies. Each class moves towards the center of the board collecting assets and suffering penalties. The strategy is to accumulate as many assets as you can until the Revolution arrives. If you have the most assets when the Revolution comes, you win the game.
The game isn’t terribly fun to play, as one would expect from a game emphasizing oppression, unfairness and struggle. But much fun can be had reading the rules and the “chance” cards that give you assets. For example, the expanded “Full Rules” for deciding who gets to play the Capitalist class are designed to show players unfairness towards women and ethnic minorities: “Full Rules calls for the following: beginning with the lightest White male and ending with the darkest Black female, everyone takes turns with the Genetic die to see who throws capitalist class first.” I’m proud to say that I’ve won a few games, despite my modest disadvantage as a Latino male.
The chance cards are great fun. These two examples are for the Capitalist class:
“You are caught feeling sorry for the Workers. Victory in class struggle comes to people who think about their own class. Miss two turns at the dice.”
“Paperback edition of Marx/Engels Collected Writings (100 volumes) sweeps the country. Your days are numbered. 2 debits.”
These are for the Workers:
“Workers finally understand that with America’s wealth and democratic traditions, socialism here will be different than what exists in Russia and China. A biggie – worth 5 assets.”
“Together with your fellow workers, you have occupied your factory and locked your boss in the toilet. Capitalists miss 2 turns at the dice.”
These two chance cards are counter-Marginal Revolutionary:
“All your propaganda says a person is free when the Government lets him alone. But almost everything one wants to do or have costs money, so only Capitalists are really free.”
“You publish an ‘educational’ booklet to explain that in capitalism people – as consumers – vote for what they want with their dollars. You neglect to mention that in most industries, a few firms without any effective competition decide what to produce and what to charge, or that Capitalists who have the most dollars have the most votes. Give each class in the game 1 asset so they have money to buy your booklet.”
The game has other fun rules like the nuclear showdown option: if capitalists push the button, no one wins! Bertell Ollman might be interested in knowing copies are selling for about $15 on Ebay.
- Unsurprisingly, general criticisms of the current administration were the most common reasons offered for protest. About 44% of the demonstrators we surveyed expressed a general anti-Bush theme. Domestic policy issues (e.g., housing, welfare, etc.) were the second most common reason for participating in protest. 28% of respondents reported these issues as a motivation for participating in the rally.
- Surprisingly, the third most common reason for participating was for expressive reasons. 26% of respondents said they wanted to exercise their freedom of speech and assembly. Respondents said they wanted their voices to be heard.
- Even more surprising was that anti-war messages (which we coded as “foreign policy grievances”) came in fourth. About 20% of the people we surveyed listed the war, or other foreign policy issues, as a reason to protest. This may have been a function of the context. One point of our paper is that the group that organizes a rally has the biggest effect on what grievances are expressed by the participants. If we had targeted solely anti-war events, this number may have been higher.
- I found it interesting that only 1% expressed pro-Kerry reasons. My collaborator likes to say that the events were anti-Bush and not pro-Kerry. Very true. We wouldn’t expect an outpouring of pro-Kerry sentiment during a rally for housing rights. But on the other hand, pro-Kerry was less popular than “personal reasons,” the category we created for reasons involving meeting friends and members of the opposite sex. That’s got to say something about the Senator’s ability to appeal to his base!
What’s the take home message? Yes, the war is an important and crucial issue in the progressive movement, as it is for the rest of America, but respondents were more likely to be motivated by a general ideological disagreement with the administration and by domestic policies. Events such as the anti-GOP rallies are an opportunity to exercise free speech, express political values and lobby for domestic policy agendas. Once again, we return to Tip O’Neil’s adage: “all politics is local.”
Update: The following post contains a substantial error. I was under the mistaken impression from another news article that the Central Park installation involved many volunteers. At least two readers have pointed out this error. My apologies to anybody who was mislead by my statement. Question for art oriented readers: What is the largest or best public art installation assembled mainly by volunteers?
Original Post: Artists Christo and Jeanne-Claude have assembled a team of hundreds of volunteers to assemble what might be the largest art installation ever (click here for an account from the NY Times). Starting earlier this week, hundreds of volunteers showed up to assemble 7,500 orange gates in New York City’s Central Park. It was an outstanding show of volunteer work. I’ve never been a believer that the world’s problems can be solved through volunteers, but moments like this bring a smile to my face.
The Chronicle of Higher Education has a wonderful essay about the new frontiers of science. Nobel laureate Robert Laughlin states it well here (click here to read the entire essay):
"What physical science thus has to tell us is that the whole being more than the sum of its parts is not merely a concept but a physical phenomenon. Nature is regulated not only by a microscopic rule base but by powerful and general principles of organization. Some of these principles are known, but the vast majority are not. New ones are being discovered all the time. At higher levels of sophistication the cause-and-effect relationships are harder to document, but there is no evidence that the hierarchical descent of law found in the primitive world is superseded by anything else. Thus if a simple physical phenomenon can become effectively independent of the more fundamental laws from which it descends, so can we. I am carbon, but I need not have been. I have a meaning transcending the atoms from which I am made.
I am increasingly persuaded that all physical law we know about has collective origins, not just some of it. In other words, the distinction between fundamental laws and the laws descending from them is a myth — as is therefore the idea of mastery of the universe through mathematics solely. Physical law cannot generally be anticipated by pure thought, but must be discovered experimentally, because control of nature is achieved only when nature allows this through a principle of organization."
This is the path to the future and we see it all the time in the physical and social sciences. Whether it be the study of social networks, consciousness or phase transitions, researchers are discovering that the 19th century view that all science strictly emerge from fundamental law – whether it be atomic physics or decision theory – leads us away from the great discoveries of the future.