Porto Alegre, the “slice house”
A Rubinstein bargaining model with a finite time horizon
Not something I’ve studied in any depth, but there is this paper by Randolph Sloof:
We characterize equilibrium behavior in a finite horizon multiple-pie alternating
offer bargaining game in which both agents have outside options and threat points. In contrast to the infinite horizon case the strength of the threat to delay agreement is non-stationary and decreases over time. Typically the delay threat determines proposals in early periods, while the threat to opt out characterizes those in later ones. Owing to this nonstationarity both threats may appear in the equilibrium shares agreed upon. When the threat to opt out is empty for both agents, the outcome corresponds exactly with the (generalized) Nash bargaining solution. The latter observation may prove useful for designing experiments that are meant to test economic models that include a bargaining stage.
In other words, I am not surprised they are on the verge of reaching a deal. The features determining behavior in the earlier periods are not the same as the features determining behavior toward the end. Low “delay costs” do not mean low “no deal at all” costs, especially for the Republicans.
Assorted links
1. More non-Keynesian labor market results.
2. Purple Health Care Plan (endorsed by five Nobelists).
3. Bangladesh blog, with lots on economics, and a related and more personal Bangladesh blog here.
4. What happens to Danish brains when they watch money being destroyed?
5. Do people want stores to be and look more packed with stuff?
Relativistic statistical arbitrage
I haven’t read this paper (pdf) yet, but the abstract is already a winner:
Recent advances in high-frequency financial trading have made light propagation delays between geographically separated exchanges relevant. Here we show that there exist optimal locations from which to coordinate the statistical arbitrage of pairs of spacelike separated securities, and calculate a representative map of such locations on Earth. Furthermore, trading local securities along chains of such intermediate locations results in a novel econophysical effect, in which the relativistic propagation of tradable information is effectively slowed or stopped by arbitrage.
Hat tip goes to Robert Cottrell, and Kevin Drum pulls the map out.
David Brooks nails it
The Democrats are on defense because they are unwilling to ask voters to confront the implications of their choices. Democrats seem to believe that most Americans want to preserve the 20th-century welfare state programs. But they are unwilling to ask voters to pay for them, and they are unwilling to describe the tax increases that would be required to cover their exploding future costs.
…Until they find a way to pay for the programs they support, they will not be serious players in this game. They will have no credible plans and will be in an angry but permanent retreat.
Here is the full column (NYT), worth one of your twenty. As this is the blogosphere, it’s worth noting that many bloggers, including many of the best ones, will come right out and advocate higher taxes on the middle class. But the Democrats more generally have painted themselves into a corner on this issue. People will look back and see the non-expiration of the Bush tax cuts as a turning point.
Vaclav Smil
His books are excellent, you probably should read them all.
His Energy Myths and Realities: Bringing Science to the Energy Policy Debate is depressing, excerpt:
A world without fossil fuel combustion is highly desirable, and, to be optimistic, our collective determination, commitment, and persistence could accelerate its arrival. But getting there will be expensive and will require considerable patience. Coming energy transitions will unfold, as the past ones have done, across decades, not years.
And this:
…do not underestimate the persistence and adaptability of old resources (remember that coal is still more important globally than natural gas) and established prime movers, particularly those that have been around for more than a century, including steam turbines and internal combustion engines. Recall that the latest incarnations of the internal combustion engine, the new DiesOtto machines, have the potential to be more efficient than the best hybrid drives on today’s market.
My favorite book by him is Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines, a better title and subtitle there never was.
China (future) markets in everything thwarted markets in everything
Via Ryan Jones, Ping pong paddle hotel, on the drawing board.
Via Daniel Lippman, you can now burn a paper iPad to honor the dead.
Moving in the other direction, the authorities are calling for a halt to the making of time travel dramas, because they “are treating the serious history in a frivolous way…” (via Chris F. Masse).
The wit and wisdom of Garett Jones
Questions that are rarely asked
By email, from Joshua Miller:
Do you think there is an audience for a public policy game show? The idea would be to ask contestants to solve policy problems instead of asking them to navigate obstacle courses or eat spiders.
Much of my research is on deliberative democracy and civic engagement, but though Obama used that rhetoric in his campaign there haven’t been any major policy moves to increase civic engagement. So I wondered:
If you have any comments, I’d appreciate them. I don’t imagine this as some sort of televised town hall meeting; rather, I envision judging contestants’ policy choices according to realistic projections of their impact.
Here is Alex’s proposal for, So You Think You Can Be President?
Brazil fact of the day
In absolute terms, Brazilian elections are second only to America’s in their costs, and relative to national income can exceed them by a wide margin. In 1996, Clinton spent $43 million to take the White House; in 1994 Cardoso laid out $41 million to secure the Palacio de Planalto, in a country with a per capita GDP less than a sixth that of the US.
That is from Perry Anderson, “Lula’s Brazil,” The London Review of Books, 31 March 2011.
Judging by review quality
Matthew Johnson directs my attention to the following:
In our recent (award-winning) WWW2011 paper “Towards a Theory Model for Product Search”, we noticed that demand for a hotel increases if the online reviews on TripAdvisor and Travelocity are well-written, without spelling errors; this holds no matter if the review is positive or negative. In our TKDE paper “Estimating the Helpfulness and Economic Impact of Product Reviews: Mining Text and Reviewer Characteristics“, we observed similar trends for products sold and reviewed on Amazon.com.
Agricultural Extortion and Terrorism
Single bottles of wine from La Romanée-Conti, the legendary vineyard of Burgundy, sell for upwards of $10,000. In 2010 the owner received a threat, the vineyard would be poisoned unless the owner paid one million euro. When the owner didn’t pay a map was delivered that identified several vines that had already been poisoned by drill and syringe. The French don’t want to talk about this and for good reason, agricultural extortion is very easy and they fear copycats.
I have thought about this issue on and off for many years beginning with the Chilean grape scare of 1989. In that scare an anonymous caller to the US Embassy in Chile announced that Chilean fruit had been injected with cyanide. The FDA found two grapes with evidence of cyanide poisoning. Exports of fruit from Chile were temporarily banned, millions of pounds of fruit were destroyed and the Chilean fruit industry lost millions of dollars. Many people now think the call was a hoax and the FDA evidence mistaken but either way the point was demonstrated, it’s easy to create millions of dollars worth of damage.
A few other lesser known cases are even more concerning. In 1996, for example, the police were tipped off that liquid fat at a Wisconsin rendering plant had been contaminated doing some $250 million dollars worth of damage. The criminal probably would never have been caught had not more threatening letters and further contamination followed. Eventually a competitor was charged with the crime.
It would be easy to do billions of dollars worth of damage to crops and animals with little risk of being caught. As the Chilean case indicates, even a hoax can damage. Fortunately, criminals usually aren’t very smart. The vine poisoner mentioned earlier, for example, was caught trying to collect the money. A little bit of economics would have taught him that you can make lots of money from agricultural extortion without ever having to collect from the victim (and no, I am not saying how although it won’t be a mystery to most readers of this blog). Of course, a terrorist doesn’t even have to collect damages to succeed–just a bit of mad cow or corn rust and we are in trouble (and those aren’t even the biggest threats.)
I worry that this one of those dangers that is so threatening we are afraid to worry about it.
*Before the Revolution*
The author is Daniel K. Richter and the subtitle is America’s Ancient Pasts. I admit I am a sucker for books on this topic, but so far it is one of my two or three favorite non-fiction titles of the year. Excerpt:
The end of the Chesapeake chiefs’ efforts to use prestige goods to build power in the traditional way resulted from a more basic factor than the violent refusal of the English to play along. Once substantial numbers of European and Native people began living near each other, it became virtually impossible for any chief to control the flow of goods to his people, even if, as Powhatan apparently tried to do, he redefined prestige in ever more esoteric directions. As early as January 1608 — only a few months after the establishment of Jamestown — Smith complained that ordinary colonists and visiting sailors were trading so much metal to ordinary Indians that corn and furs “could not be had for a pound of copper, which before was sold for an ounce.” Archaeological excavations confirm that the jewelers and metalworkers textbooks have long derided as useless appendages to the lazy Jamestown colonists worked busily to make copper and other metal items to trade with Native people. This might have been the colony’s only productive enterprise in its earliest years. All along the costs — and soon along the interior rivers — of eastern North America, this kind of unregulated trade between commoners was bad news for chiefs like Powhatan, whose power depended on European goods remaining rare and under their personal control. But the opportunities that such trade represented — for both Europeans and Native people — were enormous. Some chiefs found ways to turn the new conditions to their advantage. Others did not.
Definitely recommended. My favorite parts are about the agricultural revolutions experienced in native American societies, before the arrival of the colonists. Here is part of the Amazon summary:
Richter recovers the lives of a stunning array of peoples—Indians, Spaniards, French, Dutch, Africans, English—as they struggled with one another and with their own people for control of land and resources. Their struggles occurred in a global context and built upon the remains of what came before. Gradually and unpredictably, distinctive patterns of North American culture took shape on a continent where no one yet imagined there would be nations called the United States, Canada, or Mexico.
China arbitrage story of the day German flight attendants arrested in quantitative easing scheme
Six Lufthansa employees, including four flight attendants, have been arrested after sneaking in more than 63,000 pounds of out-of-circulation, €1 and €2 coins from China back to Germany over the last four years.
Euro coins have two color tones, gold and silver, and when the German Central Bank takes the coins out of circulation, the two colors (see picture to the left) are separated then sent to China to be melted down into scrap metal.
A wily group in China reassembled the coins rather melting them, then sent them back to Germany with four LH flight attendants serving as “mules.”…The FAs would then take the coins to the Bundesbank (only the central bank in Germany accepts damaged coins) and turn them in for bills.
The story is humorous throughout, and for the pointer I thank none other than Air Genius Gary Leff. Here is further detail (NYT) as to how the arbitrage worked and relied on low Chinese wages to reassemble the coins in a cost effective manner.
China Grave Bubble
I cannot afford to buy a house while I’m alive and now cannot afford to buy a grave for when I’m dead.
The soaring price of land in China is spreading to burial plots which now can cost more per square foot than luxury homes. And here:
Some Chinese call themselves fen nu (grave slaves), derived from fang nu (housing slaves) – those burdened with huge housing mortgages.
Hat tip: Helen Yang.