Ten conspiracy theories for nerds (or conspiracy theory theory)

by  Tyler Cowen

Not your usual cup of tea, here is one of them:

The Simulation Argument. This is legion in popular culture from “The Matrix” and “Inception” and other sci-fi, so we’ll just refer you to Nick Bostrom’s formulation of it. In theory we could tell the difference if something happened in the manner of The Truman Show where a light labeled “Sirius” falls from the sky. But are there any such events?

We offer one complexity-related observation. Although it is routine to say that classes like {\mathsf{P}} and {\mathsf{BQP}} have universal simulation, this isn’t strictly true. The universal function for {\mathsf{P}} doesn’t belong to {\mathsf{P}}—if it did, then {\mathsf{P}} would be in some fixed polynomial time bound, which it isn’t. Although proving this is technically murkier for “random” or “promise” classes like {\mathsf{BQP}}, the essential idea holds for any reasonable complexity class. Thus a universal simulation involves dropping down to a lower grade than the resources on which you draw. If our universe is convincingly universal, perhaps this is a well-motivated reason to reject the argument.

Perhaps the conspiracy is that so many people are intent on getting us to believe the simulation hypothesis.  Here is another one:

{\bullet } Factoring Really Is Easy. This is similar to the last, but now they can factor in polynomial time on a laptop, rather than need a quantum computer. Ken and I think this one has a much higher prior, almost on the order of “Breaking Engima Really Is Easy” in 1939.

If I understand properly, that is from a collaborative post from Pip and Ken Regan.

The Supreme Court and ACA

by  Tyler Cowen in

I liked Will’s post, these comments from John Cochrane, Ross Douthat, Megan McArdle, and these remarks by Ezra, among others.  See also Krauthammer.  A few points:

1. Trust is higher now, and that is worth something, even if like me you never favored the mandate segment of ACA.

2. Implicit in some of these writings is the notion of “contingent on the fact that Roberts upheld ACA.”  You might have thought ex ante: “I don’t think Roberts should uphold ACA.”  But Roberts is a smart and savvy guy, smarter and savvier than most of us and of course better informed about the Court than just about anyone.  You could have held this view ex ante and still now hold: “Conditional on the fact that Roberts upheld ACA, I should think he did the right thing.”

Hardly anyone employs that line of reasoning, but that is a sign of our irrationality.

3. The Court maximizing or at least defending its prestige is sometimes necessary, even in a well-established constitutional democracy.  The Court is not there to do what you want it to, or even necessarily to do what is right.  Get used to that.

4. You may have noticed that I haven’t blogged the legal challenge to ACA all year.  I think that plenty of what our government does is unconstitutional; just remember back to when an amendment was considered necessary for “The War against Alcohol”.  But I’ve also long considered health care policy a matter to be settled by the legislature not the courts.  Those are the modern rules of the game, for better or worse, and all along I have thought that trying to live outside those rules was a fool’s errand of sorts.

5. The Republican Party, by the way, still doesn’t have a coherent alternative for health care reform, nor do they seem willing to embrace many of the better parts of ACA, such as (partially) deregulating dentistry or the Medicare Advisory Board.  Romney seems to want to replace the mandate with more expensive tax credits.  Furthermore, I believe that many Republican legislators would rather run against an unpopular Obamacare than to have to craft an actual, legislate-able alternative.

6. I still believe the mandate segment of ACA will prove unworkable, but I won’t be expecting the courts to fix that.

7. I don’t vouch for this, but it is an angle I had not considered: “Making the mandate a tax has at least one other effect. It makes repeal easier. Now that the mandate has been deemed taxation, it can likely be jettisoned through use of the reconciliation process — meaning the Senate will need to muster only a bare majority for repeal, not 60 votes.”

8. I do think the Medicaid alterations in the Court’s decision will prove a big deal.  I am well aware that the large federal subsidies mean it still makes financial sense for states to continue with the program and the various extensions embedded in ACA.  But overall the program is not popular, and bringing it into the limelight in this fashion will go a long way toward making that common knowledge.  Most of the coverage extension under ACA came through Medicaid, I saw that as in danger in the first place, and now all the more so.

Euro auction markets in everything (a good start)

by  Tyler Cowen in

…an entire Tuscan village has gone up for sale on eBay.

Nestled among oaks at 850 metres altitude and blessed with stunning views over the Casentino valley, the medieval village of Pratariccia has stood empty for 50 years, ever since its population of farmers and shepherds abandoned their stone cottages for factory jobs during Italy‘s economic boom.

Now the owners of the remote village – reportedly a religious order – are seeking to cash in with an online sale.

“They tried and failed to sell the village through agencies for years but have got a lot of attention by putting Pratariccia on eBay and should get a result,” said Luca Santini, mayor of nearby Stia, who walked in the woods around the village as a child picking mushrooms.

There is more information here, hat tip goes to @grahamfarmelow.

How should economists write code?

by  Tyler Cowen in

From Matt Gentzkower and Jesse Shapiro (pdf), addressed to their RAs:

Every step of every research project we do is written in code, from raw data to final paper. Doing research is therefore writing software.

Over time, people who write software for a living have learned a lot about how to write it well. We follow their lead. We aim to write code that would pass muster if we worked at Google or Microsoft.

For the pointer I thank Bo Cowgill.

“Star Wars: The Empirics Strike Back”

by  Tyler Cowen in

That is a new paper by Abel Brodeur, Mathias Lé, Marc Sangnier, and Yanos Zylberberg:

Abstract:

Journals favor rejections of the null hypothesis. This selection upon results may distort the behavior of researchers. Using 50,000 tests published between 2005 and 2011 in the AER, JPE and QJE, we identify a residual in the distribution of tests that cannot be explained by selection. The distribution of p-values exhibits a camel shape with abundant p-values above .25, a valley between .25 and .10 and a bump slightly under .05. Missing tests are those which would have been accepted but close to being rejected (p-values between .25 and .10). We show that this pattern corresponds to a shift in the distribution of p-values: between 10% and 20% of marginally rejected tests are misallocated. Our interpretation is that researchers might be tempted to inflate the value of their tests by choosing the specification that provides the highest statistics. Note that Inflation is larger in articles where stars are used in order to highlight statistical significance and lower in articles with theoretical models.

For the pointer I thank Michelle Dawson.

Addendum: Here is related commentary from Mark Thoma.

I answer food questions over at Freakonomics

by  Tyler Cowen in

I liked the whole interview, here is the concluding segment:

Q. What restaurant or food type would Tyler Cowen, Murray Rothbard and Ludwig von Mises enjoy for lunch? Why? –Bill N.

A. Rothbard was quite a conservative eater, but he loved the Bavarian culture of the Baroque.  Mises grew up in the Austro-Hungarian Empire.  So I suggest that we would all sit down and have a Wiener Schnitzel together.

You can buy An Economist Gets Lunch here.

The countercyclical asset? (a continuing series)

by  Tyler Cowen in

Highly speculative, but fun to think about:

Four separate experiments, along with real-world data, all say yes. Our findings consistently supported the lipstick effect, as college-age women, when primed with news of economic instability, reported an increased desire to buy attractiveness-enhancing goods, along with a decreased desire to purchase goods that do not enhance one’s physical appearance. Our experiments also found that this increased desire for beauty products, clothing and accessories was fully mediated by a heightened preference for mates with resources.

While many journalists who have written about the lipstick effect have theorized that it represents women’s therapeutic spending on cheap indulgences, we found that the lipstick effect applies specifically to products that enhance beauty, even when those products are more expensive. Recession cues increased women’s desire to buy high-end cosmetics and designer clothing, but not to buy budget-line beauty products, which were rated less effective at improving one’s appearance.

Furthermore, we discovered that the lipstick effect and a woman’s desire to attract a mate with resources are unrelated to her independent resource access. Women of both higher and lower socioeconomic status expressed an increased desire to buy luxury beauty products when primed with recession cues. This suggests that an uncertain economic climate leads women to heighten mate attraction effort irrespective of their own resource need.

The story is here, and I thank VS for the pointer.

The path forward

by  Tyler Cowen in

French Socialist President François Hollande is set to increase the minimum wage by more than inflation, betting consumers will help revive the country’s stalling economy, while his government levies more taxes on the wealthy and large corporations in a bid to reduce the budget deficit.

…The government also is preparing to unveil tax increases to make good on its pledge to reduce the budget deficit to 4.5% of yearly output this year and 3% in 2013. The list includes a new tax on dividends, a new top income-tax bracket of 75% for people earning more than €1 million a year, and increases in the wealth and inheritance taxes.

The government is hoping to achieve a nominal freeze in spending next year, but wants its citizens first to see that taxes have been raised on the rich.  As for the minimum wage increase, the unions are complaining that it is no more than “equivalent to an extra baguette per week.”

Here is more, “France to Lift Minimum Wage in Bid to Rev Up Economy.”

$100 Billion in Consumer Surplus from Fracking

by  Alex Tabarrok in

Energy production is one of the few bright spots in the American economy. A back of the envelope cost-benefit calculation from a Yale-associated group estimates that recent increases in shale gas production have been worth just over $100 billion annually to US consumers. In comparison, the authors estimates that groundwater contamination costs $250 million per year, a 400 to 1 benefit to cost ratio. The calculation is crude and the authors do not take into account environmental benefits from using natural gas over coal but the ratios are of interest.

Hat tip: Carpe Diem.

What kinds of financial risks do women prefer to take?

by  Tyler Cowen in

As mentioned, women make up about 5 percent of an average trading floor.  But these numbers change dramatically when we leave the banks and visit their clients, the asset-management companies.  Here we find a much higher percentage of women.  The absolute numbers are not large, because asset managers employ far fewer risk taker than banks, but at some of the big asset-management companies in the United Kingdom women make up as much as 60 percent of the risk takers.  This fact is, I believe, crucial to understanding the differences in risk taking between men and women.  Asset management is risk taking, so it is not the case that women do not take risks; it is just a different style of risk taking from the high-frequency variety so prevalent at the banks.  In asset management one can take time to analyze a security and then hold the resulting trade for days, weeks or years.  So the difference between men’s and women’s risk taking may be not so much the level of risk-aversion as it is the period of time over which they prefer to make their decisions.

Perhaps men have dominated the trading floors of banks because most of the trading done on them has traditionally been of the high-frequency variety.  Men love this quick decision-making, and the physical side of trading.

That is from The Hour Between Dog and Wolf.  The author is John Coates and you can buy the book here.  I would consider that hypothesis speculative, but nonetheless I found the passage of interest.