Results for “prizes” 226 found
What do prize committees maximize?
Corruption aside, which is certainly not the case in Sweden, a Nobel committee can:
a) promote a political agenda,
b) further its own reputation, the reputation of the associated prizes, and the reputation of the science under consideration, or
c) criticism minimization, which is close to b) but looks at the left-hand tail of the opinion distribution rather than the mean.
I favor a mix of b) and c), at least for the economics prize; for more detail see my book What Price Fame?
Factor c) decreases the chance of Paul Krugman and also, I am sorry to say, Gordon Tullock, who is more than willing to say what he thinks. b) decreases the chance of Oliver Hart and many other theorists. Wilson and Milgrom, whose work has been used to design auctions, stand a better chance. The work of Hart and Tirole is of very high quality but I am not sure it would add luster to the prize. How many people can understand it, and has it influenced policy? And has the work of Paul Romer, and associated ideas of increasing returns, stood the test of time? If we remove Africa from the data set, the world appears to exhibit growth convergence over time.
I’ve already picked Fama and Thaler as my prediction for this year. I also think Oliver Williamson is more likely to get it than most top economists think. Bhagwati fits the bill, but it brings up the awkward question of whether he should be bundled with Krugman (trade theory) or Tullock (rent-seeking). Keep in mind that the Nobel Committee members are not Harvard-MIT insiders, and they have more of an outsider’s perspective on what is likely to endure.
Greg Mankiw considers what a prize committee should maximize. Does the prize encourage swinging for "home runs" when more people should be hitting for "singles"? I don’t think Nobel Prize prospects spur many great contributions to economics in the first place; the best scientists have strong internal and external motivations in any case. Nobel Prizes do motivate lobbying trips to Sweden; one Harvard economist in particular is well-known for these "vacations."
I see the welfare-maximizing use of the Nobel Prize as generating more publicity for economics, attracting more people to study the science, and giving the science greater credibility in the eyes of politicians, the public, and media. That means the committee should give prizes to economists who are articulate, intelligible, scholarly, and work on topics of real world interest. So far they have done a great job; let’s hope for another first-rate pick.
It is also Gerard Debreu’s birthday
Remember Theory of Value, that elegant 128 pp. book which summed up general equilibrium theory? Here is a brief bio of Debreu, courtesy of Liberty Fund. Here is Debreu’s own autobiography. Here is Wikipedia.
I recall Debreu once saying he took his inspiration from Proust. To what extent is time a dimension just like space in its effects on human organization? Debreu solved for those conditions, with of course assistance from Arrow, Hurwicz, Wald, and others.
And by the way, Yana just got her bag, so I feel Debreu’s model is just a little less unrealistic than it was appearing last night.
Get Lucky or Get Rich Trying
The Why Not? guys, Ian Ayres and Barry Nalebuff, have another great idea (Forbes, reg. req.). Instead of earmarking lottery revenues to education (which is mostly a charade since money is fungible), why not earmark the revenues to private retirement accounts?
A lottery savings ticket would look just like
a lotto ticket, scratch like a lotto ticket, cost a buck and pay out
the same prizes. The only difference would be that half the revenue
would be earmarked for a personal retirement savings account rather
than for education. There would still be about a third for prizes and
the remainder for administering the game.Setting up a personal retirement account would
be no more difficult than setting up a mutual fund. Players would
receive a swipeable card that would automatically credit a portion of
each losing ticket to the player’s retirement account…Some 20 million Americans spend at least
$1,000 a year on lottery tickets. For these heavy purchasers the new
tickets would increase their personal savings by $500 a year. Invested
over 40 years, these savings tickets would generate an expected
retirement nest egg of $200,000. This is a lot of money for the mostly
not very prosperous crowd who buy lottery tickets every week.
The biggest defect of the idea is that by lowering the price of lottery tickets it will increase the quantity demanded. Nevertheless, I don’t think the elasticity is that high and I am confident that savings would go up.
It is incredible that many poor people spend more on lottery tickets than on retirement. My non-bleeding heart libertarian friend would point out that this shows how much poverty is due to irresponsibility and he would probably be right.
Nevertheless, Adam Smith said the goal of social policy is to create institutions like the market that channel self-interest in ways that redound to the social interest. Call me a libertarian paternalist, if you must, but I like how lottery savings tickets channel failures of reason and prudence in ways that redound to the individual’s self-interest.
Thanks to Carl Close for the pointer.
The H Prize
Legislation creating the "H-Prize," modeled after the privately funded
Ansari X Prize that resulted last year in the first privately developed
manned rocket to reach space twice, passed the House Wednesday on a
416-6 vote. A companion bill is to be introduced in the Senate this
week….The measure would award four prizes of up to $1 million every other
year for technological advances in hydrogen production, storage,
distribution and utilization. One prize of up to $4 million would be
awarded every second year for the creation of a working hydrogen
vehicle prototype.The grand prize, to be awarded within the next 10 years, would go for breakthrough technology.
The lies of (some) economists
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?)
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.
The Tyranny of the Alphabet
In economics there is a norm that authors are listed alphabetically. The norm is surprisingly strong and deviations are punished. On my first paper with Eric Helland we tossed for first authorship, I won, and we noted the names were listed in random order. Believe it or not, Helland’s tenure committee grilled him on this point and as a result we switched to alphabetical ordering on all our subsequent papers. Citation counts, however, are historically assigned only to the first listed author and later listed authors are often buried under the et al. monster.
Do you think these effects are too tiny to matter? Take a look at the Yellow Pages and see how many firms choose A-names, AA-names, and AAA-names. Even more surprisingly, a new paper (free, working version, Winter 06, JEP) demonstrates that these effects have important consequences for careers in economics. Faculty members in top departments with surnames beginning with letters earlier in the alphabet are substantially more likely to be tenured, be fellows of the Econometrics Society, and even win Nobel prizes (let’s see, Arrow, Buchanan Coase…hmmm). No such effects are found in psychology where the alphabetical norm is not followed.
I’m delighted that my young co-author, Amanda Agan, has a great career ahead of her but if Helland wins the Nobel I am going to be very annoyed.
It’s time to end the tyranny of the alphabet! The AER should announce a name randomization policy unless authors otherwise instruct. Barring that, I wish henceforth be known as Alex Abarrok.
Why don’t more businesses use prediction markets?
Last week in The New York Times (TimesSelect), Joseph Nocera quoted Robin Hanson as saying private businesses had not made a breakthrough with the use of idea futures. It seems natural to let your employees bet on future business conditions, the success of product lines, or broader questions of corporate strategy. Microsoft and Google and a few other companies have played with the idea, but it does not (yet?) seem to be taking off. Why not?
1. Prediction markets threaten the hierarchical control of top managers. It would become too obvious that most managers are idiots, unable to predict the future.
2. Prediction markets make a big chunk of the bettors into "losers." Yet within a company morale is all-important. Businesses proceed by soliciting feedback, and by reshaping their plans to pretend that everyone is on board and has an ego stake in the final outcome. Prediction markets make this coordination more difficult. Once people make bets, they start rooting for their bet to win and for the other bet to lose. They move away from maximizing the value of the firm and develop an oppositional mentality vis-a-vis other employees. Furthermore it is disruptive to have a running tally on who are the winners and losers each day.
3. No matter what they pretend, businesses are not much interested in forecasting many future variables. Successful businesses find product markets they can control for long periods of time. They do a few things really well, and let a surprisingly large number of tasks slide.
4. We already have implicit betting markets in the form of resource prices. When the information contained in those prices is sufficiently important, institutions will be organized in terms of "markets," rather than "firms." Or firms can look at resource prices in outside markets for the information they need.
5. Most employees have no rational basis on which to bet. If someone knows the truth, but is otherwise locked out from credibly signaling that knowledge to management, something is wrong with the organization of the company. The small prizes from corporate prediction markets won’t be enough to elicit that knowledge from him in any case.
6. The corporate beast is far more constrained than most outsiders imagine. Interest groups must be courted, coordinated, and sometimes fought every step of the way. When it comes to choice, there are fewer degrees of freedom than one might think. The real question is not what to do, but rather having the will and effectiveness to do it. A bit like international free trade, no? Prediction markets don’t help much in this regard.
7. When reward systems are created, employees view them as a means to distribute further privileges to insiders and favorites. Prediction markets would be viewed the same way and in fact this might be true. Who else is going to win all those bets? Do corporations really need more insider favoritism?
Your thoughts? Here are five open questions about prediction markets.
Private vs. government funding of science
Arthur Diamond offers this abstract:
Regression analysis is used to test the effects of funding source (and of various control variables) on the importance of the article, as measured by the number of citations that the article receives. Funding source is measured by the number of prizes and the number of government grants mentioned in the acknowledgements section. The importance of an article is measured by an "early" count of citations…and a "late" count. Using either measure of article importance, the evidence suggests that private funders are more successful than the government at identifying important research.
This paper is worth a look, but I have some worries. First, private funding may have a better chance of picking the "cream" of private researchers, but without helping them much. Second, if you are famous it is easier to run up your number of private funders than to run up your number of government funders. Third, even most cited research has no real impact. We should be concerned with the extremes of the distribution, not mean citations. Fourth, private foundations may take greater care to seek out measurable outputs. Whether this helps or harms the quest for the extreme successes is hard to say.
A separate question is not which form of science funding is better, but rather how the two can best fit together. I put this and related questions into the "grossly underexplored but extremely important" category.
Here is the paper, and thanks to Daniel Klein for the pointer. Here is Art Diamond’s blog.
Addendum: Jonathan van Parys recommends this paper on the topic; the abstract is right on the mark and the authors are excellent.
My avian flu policy paper
The piece is about forty pages, here is the pdf link. Your comments are welcome, either below or by email. You already have heard bits and pieces of this: pro-intellectual property, pro-decentralization, and skeptical of quarantine and centralized stockpiles. A good plan also should prove useful for catastrophes other than avian flu. Here is the Executive Summary of the piece:
To combat a possible avian flu pandemic, we should consider the following:
1. The single most important thing we can do for a pandemic–whether
avian flu or not–is to have well-prepared local health care systems. We
should prepare for pandemics in ways that are politically sustainable
and remain useful even if an avian flu pandemic does not occur.2. Prepare social norms and emergency procedures which would limit
or delay the spread of a pandemic. Regular hand washing, and other
beneficial public customs, may save more lives than a Tamiflu stockpile.3. Decentralize our supplies of anti-virals and treat timely distribution as more important than simply creating a stockpile.
4. Institute prizes for effective vaccines and relax liability laws
for vaccine makers. Our government has been discouraging what it should
be encouraging.5. Respect intellectual property by buying the relevant drugs and
vaccines at fair prices. Confiscating property rights would reduce the
incentive for innovation the next time around.6. Make economic preparations to ensure the continuity of food and
power supplies. The relevant “choke points” may include the check
clearing system and the use of mass transit to deliver food supply
workers to their jobs.7. Realize that the federal government will be largely powerless in
the worst stages of a pandemic and make appropriate local plans.8. Encourage the formation of prediction markets in an avian flu
pandemic. This will give us a better idea of the probability of
widespread human-to-human transmission.9. Provide incentives for Asian countries to improve their
surveillance. Tie foreign aid to the receipt of useful information
about the progress of avian flu.10. Reform the World Health Organization and give it greater autonomy from its government funders.
We should not do the following:
1. Tamiflu and vaccine stockpiling have their roles but they should
not form the centerpiece of a plan. In addition to the medical
limitations of these investments, institutional factors will restrict
our ability to allocate these supplies promptly to their proper uses.2. We should not rely on quarantines and mass isolations. Both tend
to be counterproductive and could spread rather than limit a pandemic.3. We should not expect the Army or Armed Forces to be part of a useful response plan.
4. We should not expect to choke off a pandemic in its country of
origin. Once a pandemic has started abroad, we should shut schools and
many public places immediately.5. We should not obsess over avian flu at the expense of other
medical issues. The next pandemic or public health crisis could come
from any number of sources. By focusing on local preparedness and
decentralized responses, this plan is robust to surprise and will also
prove useful for responding to terrorism or natural catastrophes.
Tyler Cowen pretends he is a Democrat
If I were a Democrat…
First, I would not cite evidence about how Western European countries spend less on health and are healthier than U.S. citizens. This data set, if you take it seriously, also implies that the marginal product of more health care, adjusting for income and a few other variables, is zero. Expanding health care would not be important. Now I believe this is an incorrect conclusion, but that is what shows up in this data. We should not invoke this data selectively.
Second, I would recognize that American policy generally works (or doesn’t work) by building upon existing institutions. The most likely form of national health care — for better or worse — would extend a version of Medicare to more people. This would not lower health care costs, whether in gross or quality-adjusted terms. Keep in mind that negotiating price reductions does not per se lower real resource costs at all.
I would disaggregate health care systems and see where we could do the most good:
1. Step up R&D subsidies through the NIH and our university system, both high quality institutions. Their autonomy and micro-fiefdoms provide a good framework for risk-taking and innovation. The returns to medical R&D are extremely high. Furthermore the case for market failure, based on the inability to capture the full social gains from a new idea, is simple.
2. Redo the Medicare drug bill so that people can understand it (even I can’t, nor does my mother), and so more people benefit. If need be, we can do this in budget-neutral fashion. The Bush plan is a mess.
3. Invest in local public health systems. Preventive care is important, especially for the poor. Price can be an obstacle but often the relevant constraints are behavioral in nature. Public health care systems should be easy and inviting, and they have to become part of life routines. Government can be part of the solution. Strong local public health care also will improve surveillance and later surge capacity if a pandemic comes along; this added benefit is significant.
4. Borrow a page from the libertarian litany about the FDA.
5. Institute prizes for successful vaccines. We have been discouraging vaccine production when we should be encouraging it; Michael Kremer has some intriguing proposals.
All those options are doable. All would save lives. None are fiscal disasters. They offer something for both rich and poor. They lay out a positive and constructive role for government, while keeping room for the private sector. None raise the prospect of excess bureaucracy or discourage innovation. None rest on the questionable belief that government as single supplier or payer would improve efficiency. And they are all areas where the Republicans are dropping the ball.
I would cut talk of national health insurance. I would cease obsessing over the number of "40 million uninsured," however good a debating point it may be. Many of these people are either linked to immigration or get decent medical coverage in any case. I would admit that we cannot take care of everyone and that we face tough trade-offs.
Hmmm…these counterfactuals are fun. What should I try next? Pretending I am a Republican? But for now, it is back to normal life…and so we return to your regularly scheduled programming. But comments are open, in case Kevin Drum’s readers wish to pretend they are libertarians…
Is game theory a dead end?
Writing about the new Nobel Prizes, Michael Mandel argues:
Game theory is no doubt wonderful for telling stories. However, it flunks the main test of any scientific theory: The ability to make empirically testable predictions. In most real-life situations, many different outcomes — from full cooperation to near-disastrous conflict — are consistent with the game-theory version of rationality.
To put it a different way: If the world had been blown up during the Cuban Missile Crisis of 1962, game theorists could have explained that as an unfortunate outcome — but one that was just as rational as what actually happened. Similarly, an industry that collapses into run-amok competition, like the airlines, can be explained rationally by game theorists as easily as one where cooperation is the norm.
I can think of possible responses:
1. Behavioral approaches will flesh out how humans actually behave. Game theory will end up with clear predictions, just give it time.
2. Computational approaches will flesh out how humans actually behave. Game theory will end up with clear predictions, just give it time.
3. Evolutionary approaches will flesh out how humans actually behave. Game theory will end up with clear predictions, just give it time.
4. Experimental approaches will flesh out how humans actually behave. Game theory will end up with clear predictions, just give it time.
5. The real world is in fact indeterminate or close to indeterminate. The indeterminacy and multiple equilibria of game theory are not a problem, but rather reflect how closely the theory mirrors reality. Yes you might prefer sharp, clear predictions, but tough tiddlywinks, you’re not going to get them. Faithfulness to reality is more important than fulfilling abstract methodological strictures.
Any one of these answers would suffice and allow us to push full steam ahead, or in the case of #5 declare victory and go home. The problem is that we don’t know which one is true.
The bottom line: Like so much of economics, the strongest argument for game theory is simply to chat with someone who doesn’t know any.
Equity shares in everything
If the new Internet venture succeeds, it will be a whole new ballgame for the gambling-driven pastime of fantasy sports, which already has up to 20 million players.
ProTrade, which opened for business yesterday, will treat professional athletes like stocks to be bought and sold, initially in a theoretical currency. Cash prizes will be awarded to the most successful investors.
The value of a blue-chip quarterback such as Peyton Manning of the Indianapolis Colts will be determined by a community of traders competing to identify players most likely to contribute to the success of their real-life teams.
In this bottom-line approach to sports, teams are known as investment portfolios and the real-life athletes get their own ticker symbols. Manning’s symbol is PMANN…
ProTrade initially will be confined to trading NFL players, but the San Mateo, Calif., company expects to add the NBA and Major League Baseball after working out licensing agreements.
Is it real money?
At the outset, basically for the first half of the NFL season, no actual money will be exchanged in ProTrade’s market; each participant will get a virtual stake of 25,000 coins to invest.
But capitalism will fuel the market’s activity, with weekly prizes awarded to the portfolios with the best investment returns. Later this year, traders will be allowed to create their own competitive leagues and set their own entry fees, with a $5 minimum per entrant.
ProTrade will hold all the entry fees in escrow and then distribute jackpots, minus a 2 percent to 3 percent commission, to league participants who generate the best investment return. ProTrade hopes to make money from those commissions and advertising on the site.
Here is the story. Comments are open, in case you know more about this than I do. I like this part of the story:
Former San Francisco 49ers tight end Brent Jones, a member of ProTrade’s advisory board, believes most players will stay away from the site.
"There are a lot of guys out there who aren’t going to want to see what they’re really worth," he said.
Rogue Economist!
A famous economist is trying to capture terrorists by combing through data on banking records. Wimpy. Wimpy. Wimpy. A real rogue economist would go after them with his bare hands. Grrrrr! 🙂
Today, I am in Baltimore, one of the roughest cities in the United States. Not content to study bounty hunters from the safe confines of my desk I am going hunting with the real thing. Is this my dangerous summer? Nah, that is next summer!
I am really going to Baltimore to learn. Tyler writes on development and globalization and spends a lot of time traveling and living in poor countries. It’s a good model to emulate. Blackboard economics can only get you so far. I am working on a book about bounty hunting but also about bounties and prizes more generally. I figure one less equation and one more story about Doc Rock and the Fugitive will double my sales.
Two of my favorite things
NASA, in partnership with the Spaceward Foundation, will offer prizes for advances in strong lightweight tethers and for methods of transmitting power wirelessly, both key aspects of a space elevator. More from the NYTimes.
Brain Drain at the NIH?
Last week the NIH announced drastic new rules restricting employees, and their spouses and dependents, from stock holdings in drug, biotech and other companies with significant medical divisions. Consulting, lecturing and other outside income is also severely restricted. Even most prizes and awards with money are now forbidden (the Nobel is an exception). NIH employees are furious.
Word on the street is that universities, including GMU, are receiving a flood of applications from talented scientists. (Perhaps the NIH should have consulted with some economists who might have explained the concepts of opportunity costs and compensating differentials).
No doubt there were some conflicts of interest and some abuses but there were also virtues in the old system. The free flow of scientists to and from commercial and government research is a key part of what made Washington and Maryland’s biotech sector succesful. Moreover, as Steve Pearlstein notes, it wasn’t that long ago that this free flow of people, ideas and money was encouraged, precisely in order to get the scientists out of their ivory tower and into the real world of medical need. Expect less from the NIH in the future.