Social signaling reductionism

by  Tyler Cowen in

Activity, or the fraction of time each person talks, is the simplest measurement. Not surprisingly, the more someone talks, the more interested in the conversation he or she is assumed to be. Engagement measures how the speakers influence one other. Are they talking in smooth succession, or are there long pauses between utterances? Does one speaker hesitate more often than another? Stress measures the variation in the pitch and volume of each speaker’s voice to determine whether his or her voice betrays any discomfort or anxiety. Mirroring, finally, is a measurement of the speaker’s empathy–how frequently he or she adopts the vocal intonations and inflections of the other, or repeats short phrases such as "uh huh" and "OK" if the other says them first.

Pentland then collaborated with other researchers in fields ranging from psychiatry to business in order to put his markers to the test. Could they be used to predict what would happen in various social situations, say, landing a date, or getting a job or a raise?

In most scenarios, the predictions that Pentland and his colleagues were able to make turned out to be shockingly accurate. Using nothing but these simple, nonlinguistic clues–and analyzing conversations that lasted between five minutes and just over an hour, depending on the experiment–the researchers were able to calculate the likelihood of a given outcome with an average accuracy rate of almost 90%.

If men engaged in mirroring, for example, women were more likely to be attracted to them. Men, by contrast, were more attracted to women who varied the tones of their voices. Pentland and several Media Lab graduate students used his markers to analyze more than 50 speed-dating sessions, where participants interacted with one another for five minutes before deciding if they wanted to contact the other person for an actual date. By the end of the analysis, the researchers could predict with 83% accuracy whether or not two people would exchange phone numbers.

Here is the full story.  Here is the researcher’s home page, which includes work on the concept of "smart rooms."  Read "About this Picture" on the home page.

What does Robin Hanson say?: "There must be some reason we are unconscious of these cues, even though our subconscious clearly notices and uses them.  So some sort of hell will probably break loose when tech makes it easier for us to see and publicize these cues."

China sentence of the day

by  Tyler Cowen in

"Everybody wants a good job after university life, but God knows what a guy with a brain of strange thoughts can do after graduation," said Yuan Chunfen, mother of a local high school boy.

This is referring to the growing number of Chinese who study philosophy.  Read more here, and thanks to Yan Li for the pointer.

By the way, if you were wondering my Shanghai trip was postponed for work reasons.  But I’ll have some more travel coming up soon.

Markets in everything, NOT

by  Tyler Cowen in

New Zealand is not for sale, despite somebody in neighboring
Australia trying to offload the nation of 4 million to the highest
online bidder.

With a starting offer of just one cent, brisk
bidding for the prime chunk of South Pacific real estate quickly
boosted the price to 3,000 Australian dollars (US$2,330) before eBay
pulled the plug on the auction this week.

"Clearly New Zealand is
not for sale," eBay Australia spokesman Daniel Feiler told the New
Zealand Press Association, adding that 22 bids had been made before the
company acted.

"It is mostly household items we have for sale,
but there are the occasional quirky items put up," he added. "We have a
look at them and if they are OK we leave them, but if it is something
that can’t be sold, we take them off."

Here is the full story.

Where does Wal-Mart put new stores?

by  Tyler Cowen in

Wal-Mart has an incentive to keep its stores close to each other so it
can economize on shipping. For example, to make this simple, just think
about a delivery truck: If Wal-Mart stores are relatively close
together, one truck can make numerous shipments; however, if the stores
are spread out, you wouldn’t have that benefit. So, I think that the
main thing Wal-Mart is getting by having a dense network of stores is
to facilitate the logistics of deliveries.

There are other benefits, too. Opening new stores near existing stores
makes it easier to transfer experienced managers and other personnel to
the new stores. The company routinely emphasizes the importance of
instilling in its workers the “Wal-Mart culture.” It would be hard to
do this from scratch, opening up a new store 500 miles from any
existing stores.

…Wal-Mart waited to get to the plum locations until it could build out
its store network to reach them. It never gave up on density.                   

The placement of Wal-Mart stores has followed a spatial diffusion model.  K-Mart, in contrast, scattered its stores across the country.  Here is more.  Here is a video showing the spread of Wal-Mart, well worth watching and short.  It is the best single lesson in economic geography you will receive.  Thanks to http://kottke.org for the pointer.

Greg Mankiw’s summer reading list

by  Tyler Cowen in

For his students, that is:

  • Milton Friedman, Capitalism and Freedom
  • Robert Heilbroner, The Worldly Philosophers
  • Paul Krugman, Peddling Prosperity
  • Steven Landsburg, The Armchair Economist
  • P.J. O’Rourke, Eat the Rich
  • Burton Malkiel, A Random Walk Down Wall Street
  • Avinash Dixit and Barry Nalebuff, Thinking Strategically
  • Steven Levitt and Stephen Dubner, Freakonomics
  • John McMillan, Reinventing the Bazaar
  • William Breit and Barry T. Hirsch, Lives of the Laureates

Very good picks, and here is the link.  How about a book on globalization (Martin Wolf) or economic development (John Kay)?  How about a book on China (????) or economic history (Robert Fogel)?

Addendum: Here is Arnold Kling’s addendum.

Ranking your friends on MySpace

by  Tyler Cowen in

There is a list for your top eight friends:

J.D. Funari is hoping that clarity prevents offense. A week after logging onto MySpace, the 24-year-old TV editor from Studio City posted a disclaimer above his Top 8: "Since this ‘preferred’ listing of friends can quickly become unnecessarily political, I’d like to briefly explain my sorting technique," he wrote.

"The first spot will always be my brother (for obvious reasons) and the second spot will always be my friend Katie (for reasons obvious to Katie and I). The third and fourth spots are reserved for music and movies of interest. Five and six are wild-cards which may be related to how well I know the person and/or if I’m dating them (opposite sex only) and/or if they’ve paid me for inclusion [emphasis added]. The final two spots are, to be perfectly honest, the two most attractive current female photos from my list of friends."

You also list whether you are attached or single.  The economic question is whether or not a more gradual series of categories — offered as an option — would raise or lower the value of the network.  The fraidy cats could go the ambiguous route, but of course that makes it less fun to read about them.  Here is the full story.  This week’s New Yorker (15 May) has the definitive article on the economics of MySpace and FaceBook, here is a brief summary.  The idea of constructing a broad network, but which also allows full privacy, is counterintuitive but the key to making FaceBook work.

The lies of (some) economists

by  Tyler Cowen in

Let’s start with five:

1. Believe in comparative statics, the income effects will wash out in the aggregate.  (Larry Summers once taught me: "Economics is a theory of substitution effects but we live in a world of income effects.")

2. The model predicts well, don’t worry about the assumptions.  (As Paul Samuelson pointed out, don’t false assumptions, by their nature, involve a very large number of (sometimes implicit) false predictions?)

3. People may make mistakes when the stakes are small, but as they become more decisive over larger prizes, the irrationality goes away.  (Name any major politician or how about Tom Cruise on Oprah?)

4. IS-LM models make sense.

5. There are many firms in the sector, they must be price-takers.  (Does demand go to zero when your local Chinese restaurant raises prices by a penny?  Or for that matter by a dollar?)

Do you wish to suggest other lies in the comments?

Here is Guy Kawasaki with The Top Ten Lies of Engineers.  The Top Ten Lies of Entrepreneurs.  The Top Ten Lies of Venture Capitalists.  Thanks to Chris F. Masse for the idea and the pointer to Kawasaki.

Cultural differences matter for behavioral biases

by  Tyler Cowen in

Behavioral economic research has tended
to ignore the role of cultural differences in economic decision-making.
The authors suggest that a systematic bias affects existing behavioral
economic theory – cognitive biases are often assumed to be universal.
To examine how cultural background informs economic decision-making,
and to test framing effects, morality effects, and out-group effects in
a cross-cultural study, the authors conducted an experiment in the
United States and China. The experiment was designed to test cultural
and cognitive effects on a fundamental economic phenomenon – how people
estimate the financial values of objects over time.
 
Results
of the experiment demonstrated dramatic cultural differences in
financial value estimations, as well as on the influence of variables
such as framing effects. Chinese participants made higher object value
estimates than Americans did, even when adjusting for differing
national inflation rates. In addition, the results showed that
contextual information, such as framing, morality information, and
group membership affected judgments of financial values in complex
ways, particularly for Chinese participants. The results underscore the
importance of understanding the influence of cultural background on
economic decision-making. The authors discuss the results in the
context of behavioral law and economics, and propose that importing
cultural competence into behavioral models can lead to cognitive
debiasing, both temporary and permanent.

Here is the link to the paper.  Bravo I say.  Have you heard of the phenomenon of "running amok"?  It is not rational in anything but the tautological Misesian sense.  And it happens at much higher rates in nations where it is culturally central, such as Malaysia.  Thanks to www.politicaltheory.info for the pointer.