Open entry schools, the university as forum
I’ve been reading the fascinating A Pattern Language: Towns, Buildings, Construction by Christopher Alexander et.al., a book which I recommend to all urbanists, all architecture fans, Jane Jacobs fans, and Hayekians. In passing, the authors toss out a proposal for reorganizing modern universities. It has two simple principles:
1. Anyone can take a course…
2. Anyone can give a course…
Maybe that would make Peter Thiel happy. The authors also believe that a university should consist of a series of relatively low buildings, with a lot of pedestrian pathways, with the buildings at fifty foot intervals. (The book is in large part about how the organization of space and construction shapes spontaneous orders.)
It sounds a bit outrageous to turn Harvard into Hyde Park Speaker’s Corner, but Harvard admin. could publish a list of approved courses, all other courses you take your chances. There still could be a “Harvard admin.-approved degree,” based on those courses, even if not everyone goes that route. (How many current Harvard classes could keep reasonably high enrollments in the face of such competition?) If you still find this proposal either unpalatable or commercially unpersuasive, are you prepared to admit how much the current university model is based on the idea of exclusion? And how would you square that emphasis with university ideals more generally?
The Spencer Scholarship plan
For months, Fitzsimmons gave each of the women $200 weekly, promised to pay for their college tuition, treated them to lavish nights on the town and even bought one a car as part of his so-called Spencer Scholarship Plan. They were spanked if they violated rules, such as failing to call Fitzsimmons or drinking too much alcohol…
The Spencer Plan started in the 1930s as a form of “carefully regulated corporal punishment” between husband and wife. Couples agreed to a list of things the wife needed to change, such as not spending money frivolously. If the rules were broken, the husband punished her by spanking and it was put behind them. It has expanded through the years.
One 21-year-old woman testified Thursday that the day she joined the program in November, Fitzsimmons spanked her and gave her $300. He paid for her to live in an oceanfront suite and gave her a $200 weekly allowance. In return, she was required to walk 20 blocks each day, keep a log of her meals and spending and refrain from drugs. When she didn’t, she was spanked.
Fitzsimmons took it further, she said, when on three occasions he sexually assaulted her with a curtain rod, a hairbrush and a horse riding crop. When asked by attorneys why she allowed it to happen, she replied: “I’m not allowed to tell him no.”
I can’t bring myself to file this one under “Markets in Everything,” though read the last line of the piece. For the pointer I thank DL.
Assorted links
1. The wisdom of Garett Jones and Reihan Salam.
2. Are they raising a gender-free baby?
3. The story of economics, a three-minute video, via Tim Harford, quite good I thought and also pleasingly philosophical.
4. Thwarted markets in everything: Denmark bans Marmite.
5. Do medical patients have an excess status quo bias?
What if all the HFTers run away from the market?
That’s a common criticism of high-frequency traders, or for that matter of the older specialist system, or of some other trading practices; many MR readers make that point in these comments.
But is that a problem with uninternalized, Pareto-relevant externalities?
Let’s say many men visit a bar for its beautiful women. That said, if the women, on a given evening, don’t see enough desirable men, they go home. The beautiful women run away, but the plain women stick in the other bar, across the street, no matter what. Men choose between bars, knowing that the one bar will often be very crowded, but sometimes empty.
The negative externality from the beautiful women, if there is one at all, is on the bar with the plain women. That bar might find it harder to achieve critical mass and get off the ground. But the first bar is not made worse off by the possibility that beautiful women might show up or instead might “flake.” Men internalize that knowledge when deciding whether or not to visit that bar.
In other words, potential negative externalities from HFT (or other culprit trading strategies) are on the markets where HFT is not very active. Yet the complaints you hear are about the markets where HFT is very active, and those complaints don’t correspond to the theoretical argument which might make sense. They are wishing for the beautiful woman who sticks around at the bar no matter what.
The high-frequency traders are like the beautiful women. If their biggest “threat” is to stay home, we are not worse off for their existence. If we fear their flaky departures enough, we may prefer to trade in other markets or at other time horizons, namely very long.
All this is assuming that such flaky departures occur — relative to the relevant alternatives — and that point can be debated.
John Delaney passes away
He was 42, climbing Mount Everest (more here), and he was best known for his role in running InTrade.com. He was also an MR reader and sometimes he wrote to me. He will be missed.
The very sad pointer is from Chris F. Masse.
Assorted links
Questions that are rarely asked
If people really fell in love for non-superficial reasons, shouldn’t we expect to see more couples who don’t match on superficial criteria such as age?
That is from Katja Grace. Which observable characteristic of a relationship is the best predictor of its expected depth and non-superficiality?
The Brazil-Bolivia border
Who thinks of that region as having been important for the technological progression of mankind? Yet it was, as Charles Mann explains:
Agricultural geneticists have long argued that the area around the railroad route — the Brazil-Bolivia border — was the development ground for peanuts, Brazilian broad beans…, and two species of chili pepper… But in recent years evidence has accumulated that the area was also the domestication site for tobacco, chocolate, peach palm (Bactris gasipaes, a major Amazonian tree crop), and most important, the worldwide staple manioc (Manihot esculenta, also known as cassava or yuca).
That is from Mann’s forthcoming book 1493: Uncovering the New World Columbus Created, reviewed enthusiastically here.
Crime is falling, still
The number of violent crimes in the United States dropped significantly last year, to what appeared to be the lowest rate in nearly 40 years, a development that was considered puzzling partly because it ran counter to the prevailing expectation that crime would increase during a recession.
In all regions, the country appears to be safer. The odds of being murdered or robbed are now less than half of what they were in the early 1990s, when violent crime peaked in the United States. Small towns, especially, are seeing far fewer murders: In cities with populations under 10,000, the number plunged by more than 25 percent last year.
This development reminds me of a fallacy committed by (some) intellectuals. Occasionally you will read it insinuated that if inequality continues, or continues to rise, “the public will take matters into its own hands,” or something like that. Apart from being potentially factually false, such an outcome is neither endorsed nor condemned by the intellectual. The writer is hinting that the losers from such a rebellion would deserve what is coming to them, without having to say so. Least of all is the writer willing to throw his or her efforts behind dissuading or criticizing such a public response (is it so hard to write “don’t bring out the guillotine”?). The ostensibly “positive” description of what the public will do is used as a veiled threat, to be enacted if the warnings of the supposedly smarter intellectual are not heeded, yet without the intellectual having to make the threat himself.
A similar issue comes up in some discussions of free trade. It is sometimes hinted that if more is not done to help victims of free trade, the public will turn against free trade and force through extreme populist anti-trade measures. Again, the writer is playing on mood affiliation rather than analyzing such an outcome dispassionately and then evaluating the behavior of the public and trying to prevent it by framing the issue in a different manner.
The reality is that the public does not respond to most events, or most changes in the income distribution, as the intelligentsia likes to think it should, or will.
Maybe I will call this “the public as billy club” fallacy. I have a low opinion of sentences in which this fallacy is committed.
Bob Dylan’s 70th birthday
It is today, here are a few underrated highlights of his career:
1. No Direction Home, the biopic directed by Martin Scorsese. It’s one of the best documentaries on American music more generally, and a superb albeit hagiographic portrait of Dylan and his music.
2. The Freewheelin’ Bob Dylan and Another Side of Bob Dylan and Blood on the Tracks and most of all Bob Dylan’s Greatest Hits volume II are the albums I listen to most often. The last one sounds horrible from its name, but it was conceived conceptually, avoids the traditional problems of greatest hits albums (unlike Vol. I), and has some not otherwise available tracks; highly recommended. Then comes Time Out of Mind. I think of Bringing it All Back Home as the “best” Dylan album, but I enjoyed it so much at age fifteen that I don’t listen to it much today. Blonde on Blonde is overreaching and Highway 61 Revisited is half wonderful, half embarrassment in the lyrics.
3. Dylan as disc jockey is first-rate, and you can buy his XM Satellite Radio selections of early American music. He has an encyclopaedic knowledge of the period.
4. As a singer Dylan is influenced by Al Jolson and Bing Crosby, as an acoustic guitarist he remains underrated.
5. Dylan once said that Barry Goldwater was his favorite politician.
Sentences to ponder
Despite the length of On What Matters, we glean little of its author’s view on what really does matter.
That’s Peter Singer reviewing the new Derek Parfit, in the new TLS, never to come on-line. In fact what really matters is that the books are finally coming out! Singer claims, probably with justification, that the two-volume set will prove the most important works on ethics since Sidgwick in 1873.
Just “The Seen,” not The Unseen — how well did the fiscal stimulus do?
This is not, not, not a blog post about the economic efficacy of fiscal stimulus, rather think of it as an analysis of the public relations of the stimulus.
I ask myself a simple question: have I seen any completed benefits from ARRA, which now passed into law well over two years ago? I drive around all the time and I see ARRA-funded projects which are not yet finished. The lane closures make my life worse, although the new lanes might eventually lower traffic congestion. I wish I could say these projects will be done soon, but that is not obvious.
My “grandma test” for a big spending program on infrastructure would be:
1) Has it fixed the mess at LaGuardia airport?
2) Does the DC Metro run any better?
Again, that’s PR, not analytics about the net return of the program, but I believe the answer to both 1) and 2) is “no.” The DC Metro seems to run worse each year.
I find this all remarkable, if only as viewed through the light of public choice economics. More useful monuments might have been expected.
There is no need to list the not-so-easily-seen benefits of ARRA in the comments; doing so would suggest you were not paying attention. This is a post about the easily seen benefits and how remarkably unpersuasive they have proven.
Assorted links
Do our intuitions about deadweight loss break down at very small scales?
I’ve been thinking about high-frequency trading again. Some of the issues surrounding HFT may come from whether our intuitions break down at very small scales.
Take the ordinary arbitrage of bananas. If one banana sells for $1 and another for $2, no one worries that the arbitrageurs, who push the two prices together, are wasting social resources. We need the right price signal in place and the elimination of deadweight loss is not in general “too small” to be happy about.
But at tiny enough scales, we stop being able to see why the correct price is the “better” price, from a social point of view. Think of the marginal HFT act as bringing the correct price a millisecond earlier, so quickly that no human outside the process notices, much less changes an investment decision on the basis of the better price coming more quickly. (Will we ever use equally fast computers to make non-financial, real investment decisions in equally small shreds of time? Would that boost the case for HFT? Is HFT “too early to the party”? If so, does it get credit for starting the party and eventually accelerating the reactions on the real investment side?)
HFT also lowers liquidity risk in many cases (it is easier to resell a holding, especially for long-term investors, as day churners can get caught in the froth), and thereby improving the steady-state market price, again especially for long-term investors. That too could improve investment decisions, even if the improvement in the price is small in absolute terms.
Some decisions based on prices have to rely on very particular thresholds. If no tiny price change stands a chance of triggering that threshold, we encounter the absurdity of there being no threshold at all. We fall into the paradoxes of the intransitivity of indifference and you end up with too many small grains of sugar in your coffee.
So maybe a tiny price improvement, across a very small area of the price space, carries a small chance of prompting a very large corrective adjustment, with a comparably large social gain. Yet we never know when we are seeing the adjustment. The smaller the scale of the price improvement, the less frequently the real economy gains come, but in expected value terms those gains remain large relative to the resources used for arbitrage, just as in the bananas case. It’s not obvious why operating on a smaller scale of price changes should change this familiar logic. Is the key difference of smaller scales, combined with lumpy real economy adjustments, a greater infrequency of benefit but intact expected gains?
In this model the HFTers labor, perhaps blind to their own virtues, and bring one big grand social benefit, invisibly, every now and then. Occasionally, for real investors, their trades help the market cross a threshold which matters.
I am reminded of vegetarians. Say you stop eating chickens. You are small relative to the market. Does your behavior ever prompt the supermarket to order a smaller number of chickens based on a changed inventory count? Or are all the small rebellions simply lost in a broader froth?
What is the mean expected time that HFT must run before it triggers a threshold significant for the real economy?
Aren’t the rent-seeking costs of HFT near zero? Long-term investors do not have to buy and sell into the possible froth. HFTers thus “tax” the traders who were previously the quickest to respond, discourage their trading, and push the rent-seeking costs of those traders out of the picture. More fast computers, fewer carrier pigeons. Are there models in which total rent-seeking costs can fall, as a result of HFT? Does it depend on whether fast computers or pigeons are more subject to production economies of scale?
Opportunity cost
I then wrote to a number of well-known philosophers, asking each of them if they would supervise a course-by-mail, consisting of my writing letters to them about their work, getting responses from them, and ultimately providing comments on a paper I wrote. Nancy Cartwright, Lynne Rudder Baker and Nathan Oaklander agreed to do this for me. They were all extremely generous with their time, and I owe all three of them, along with Quentin, an enormous debt.
That is from LA Paul, who has since become a very accomplished philosopher. How many economists would help out in the same way? Hat tip goes to Kieran Healy.