Weight Loss and Incentives

by  Alex Tabarrok in

Ted Frank reports on his 60k weight-loss bet with Ray Lehmann:

In late 2008, Ray Lehmann and I made an audacious bet: we would put up $60,000 that we would lose 60 pounds in nine months, and pay each other $1,000 for each pound the other lost. 

…I lost 32 pounds, Ray lost 41, and we were on pace to lose 60 each. StickK.com was offering to make us their official spokespeople.

Then things fell apart. We couldn't negotiate an appropriate contract with StickK, which wanted exclusive rights to our story without any compensation. The delay caused us to stop writing about the diet while we had false dreams of fame and glory from StickK promotion, and then we both got distracted with starting new jobs and the disappointment of shattered expectations when StickK stopped returning our calls.

Alex Tabarrok correctly predicted that the danger of the two-person bet was that we would collude not to enforce it.

And, indeed that was what happened. We started gaining weight, and started pushing back the goal-line for the end of the bet…neither of us held the other's feet to the fire….

Professor Tabarrok's solution was to create a third-party Leviathan to enforce the bet: he facetiously offered to pay us $500 to be the collector [not facetious, Ted!, AT]. Of course, that was a negative-expectation transaction for each of us, unless we thought we had a 90%+ chance of succeeding…Even the threat of public humiliation on Marginal Revolution wasn't enough to stop us from colluding.

But Ted isn't giving up.  He is looking for other people to take the bet to reduce the possibility of collusion or he would like to auction off leviathan rights.

Are there three other people out there willing to wager that they can lose 50 pounds over a reasonable amount of time? (Forty? Sixty?) Who's in, and under what conditions?

…In the alternative, how much is someone willing to pay to be Leviathan and have the opportunity to collect tens of thousands of dollars from me or Ray for failing to lose weight? I suppose I could put Leviathan rights up on eBay; if Marginal Revolution and a few other blogs publicized it, we could reach a good solid equilibrium price. What do people think?

I see this is as a good case study in the difficult of setting up an appropriate incentive scheme and also the difficulty of losing weight. When I put on my Tyler hat, however, I have to wonder whether all this effort put into clever incentive schemes is not a way of avoiding the real issues.  "Less blogging, more jogging," my friends.

What Ted and Ray are trying to do is to sail between Scylla and Charybdis by offsetting the pull of food with the pull of lost money. Carrot cake versus stick. But in this tug of war, how long will the balance last? How permanent will the weight loss be?

The real trick in weight loss, as in other areas of life, is to change wants not oppose them. Unfortunately, Seth Roberts nothwithstanding, this is a struggle with no easy solutions.

Nevertheless, I have proudly helped others to lose weight with unusual incentives, and my $500 bid for leviathan rights over Ted and Ray still stands. Good luck guys.

*Winston’s War: Churchill 1940-1945*

by  Tyler Cowen in

The author of this book is Max Hastings.  Although this topic may seem like well-trodden ground, this is so far one of my favorite non-fiction books of the year.  Excerpt:

It was remarkable how much the mood in Washington had shifted since January.  This time, there was no adulation for Churchill the visitor.  "Anti-British feeling is still strong," the British embassy reported to London, "stronger than it was before Pearl Harbor…This state of affairs is partly due to the fact that whereas it was difficult to criticize Britain while the UK was being bombed, such criticism no longer carries the stigma of isolationist or pro-Nazi sympathies."  Senator Allen Ellender of Louisiana declared sourly there "there was little point in supplying the British with war material since they invariably lost it all."

Among other things, it is an excellent book for communicating how military alliances actually work and how much humiliation a nation feels if it keeps on losing military battles or is unable to fight in response.  I also had not realized what a folly British policy toward Singapore was.  Definitely recommended.  Here is one review of the book.  Here is an excerpt.

Not everyone in Australia likes Max Hastings.

View of Jimmy Carter and his Presidency

by  Tyler Cowen in

That was a reader request.  Matt Yglesias offers some background, as does Kevin Drum.  On the plus side there was airline deregulation, support for Volcker and disinflation (later), willingness to lose the Presidency to see disinflation through, and he didn't push for a large number of Democratic ideas that I would disagree with, though he did create the Department of Education.  Recall that he came from a party of McGovern and Kennedy and you can think of him as a precursor of the better side of the Clinton administration.  Price controls on energy were a big mistake and that idea is hard to justify.

I'll call his support for the Afghan rebels a plus, because it helped down the Soviet Union, but I can see how you could argue that one either way.  His conservation efforts could be called mamby-pamby but still they were a step in the right direction.  He gave amnesty to Vietnam draft dodgers, a plus in my book, as was giving away the Panama Canal and bribing Egypt into better behavior.

At the time I thought Carter was a reasonably good President and it was far from obvious to me that the election of Reagan would in net terms boost liberty or prosperity.

I do understand that he was a public relations disaster and he shouldn't have fired his entire Cabinet and that he botched the Iran invasion.

Still, I think of Carter as a President with some major pluses and overall I view his term as a step in the right direction.  He also seems to have been non-corrupt — important so soon after Watergate — and since leaving office he has behaved honorably and intelligently, for the most part.

Markets in Everything: Divorce Insurance

by  Alex Tabarrok in

NYTimes–Here’s a new option for those worried they’ll end up on the wrong side of the statistics that show so many marriages ending over time: divorce insurance.

SafeGuard Guaranty Corp., an insurance start-up based in North Carolina, recently released what it’s billing as the first world’s first divorce insurance product. Here’s how its WedLock product works.

The casualty insurance is designed to provide financial assistance
in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.

My wife tells me she already has divorce insurance, it's called a job.

Hat tip Mark Perry.

Confusions about the multiplier < 1 (me defending fiscal policy, sort of)

by  Tyler Cowen in

I've been having discussions with some associates about what it means when a measured short-run multiplier is positive yet less than one.  It is occasionally suggested that a multiplier less than one means that fiscal policy is necessarily a bad idea, but I don't see it that way. 

Keep in mind there is no a priori argument that the government purchases "don't count," even though sometimes they don't produce much value ex post.  And the borrowed dollar isn't "taken out" of the economy in a meaningful way.  It can come from abroad or it can accelerate velocity, at least potentially.

Let's say the multiplier is 1.0.  That typically means a dollar is spent on a road (or whatever), which is in the plus one column.  There is some crowding out of private investment but not usually one hundred percent.  Let's say that's minus 30 cents.  The spending on the road, and road workers, has some positive second-order effects.  Let's say those are plus thirty cents per dollar.

In that particular case, the multiplier ends up as equal to one and that is net, all things considered.  The spending still would yield a short-term positive for gdp if the multiplier were 0.5.

The case against fiscal policy should examine long-term budgetary costs, possible confidence factors, implementation lags, political economy problems, difficulties in targeting unemployed resources, and also the (underrated) notion that sometimes fiscal policy postpones problems into the medium run rather than solving them through jump-starting a recovery.  But it is difficult to deny that fiscal policy brings some economic benefits in the short run, or can brake an economic decline, even if the measured multiplier is less than one or for that matter well under one.  

As an aside, I do not prefer to emphasize the notion of "investment crowding out" for analyzing fiscal policy.  The notion is a coherent one, but frequently analysts, and audiences, end up confusing nominal flows of finance with real resource opportunity costs.  I instead prefer to ask how effectively the fiscal policy is targeting real unemployed resources and to deemphasize the financial angle, at least for the first-order analysis.

Russian gypsy fortune teller loops

by  Tyler Cowen in

A man was jailed by a Kemerovo region court on Thursday for assaulting a Gypsy fortune teller who predicted that he would be jailed, the Investigative Committee said.

Gennady Osipovich tried to kill the unidentified female fortune teller, who told him she saw a “state-owned house” – a Russian euphemism for jail – in his future, the committee said in a statement on its web site.

The woman managed to escape, but Osipovich stabbed to death two unidentified witnesses of the assault, which took place in October. He was sentenced to 22 years in a maximum-security prison.

The link is here and hat tip goes to The Browser.

The best sentence about Germany I read today

by  Tyler Cowen in

Government payments compensating hunters for lost income due to radioactive boar have quadrupled since 2007.

Here is more.  And this is a bit of explanation:

Wild boar are particularly susceptible to radioactive contamination due to their predilection for chomping on mushrooms and truffles, which are particularly efficient at absorbing radioactivity. Indeed, whereas radioactivity in some vegetation is expected to continue declining, the contamination of some types of mushrooms and truffles will likely remain the same, and may even rise slightly — even a quarter century after the Chernobyl accident.

Advertising markets in everything

by  Tyler Cowen in

Goldman Sachs Group Inc., winning its first job managing a share sale by an Indian state-owned company, may earn next to nothing for the privilege.

The most profitable securities firm in Wall Street history tied for the lowest bid among 17 banks vying to manage the $1.8 billion offer by Power Grid Corporation of India Ltd., three people with knowledge of the matter said. Goldman Sachs and SBI Capital Markets Ltd. said they’d do the work for a fee equal to 0.00000001 percent of the sale proceeds. That means the firms stand to reap about 2 rupees (4 cents) each on the deal.

The full story is here and I thank Mehul Kamdar for the pointer.  There were other low bidders, including JP Morgan.  Why bid four cents I wonder, why not bid one cent?

Here is a related page, from what is propitiously called the Department of Disinvestment.

Bruce Cumings and what he deserves

by  Tyler Cowen in

Many of you are objecting to my post on his book, either in the form of comments or emails.  You are objecting to his ideology and objecting that he does not denounce the North Korean regime with sufficient fervor and with sufficient recognition of its true awfulness, though he does denounce it, using the word "reprehensible."

On these points I (mostly) agree with you, the critics.  Yet it is still a good book and it should open many people's eyes to the history of the Korean War and the not always pretty American role in that war.  I haven't seen good comments or reviews finding fault with the book itself (but if I do I will pass them on).  The book, by the way, does not allege that South Korea started the war.

Keep in mind how many history or foreign policy books or essays are written by people who are essentially toadies to power or apologists for the U.S. government, or for some other foreign regime.  It is expected that we accept those problematic inclinations and affiliations without comment or condemnation.  In contrast to many of the works by establishment historians, Cumings is a breath of fresh air.

Overall I seek to narrow rather than widen the following category: "cannot be praised without accompanying symbolic denunciation."  If it turns out that, in the process, Cumings reaps more relative status than he deserves (and I am not very influential in shaping the reputations of historians), I'm not especially troubled by that.

In fact maybe I'm happy to see you squirm a bit.

One of my major purposes in writing this blog is to nudge people away from judging political issues, or for that matter books, by asking which groups or individuals rise or fall in relative status.

Wyclef Jean for President of Haiti?

by  Tyler Cowen in

Here is one response:

A sad day for Haiti. No experience. No plan. No education. Can’t speak the language let alone proper English plus a history of not being able manage his own personal affairs based on foreclosures, IRS tax liens and his nonprofit scandal.

Here is another:

Wyclef Jean owes the IRS 2.1 million dollars, had his house sold at auction and stole money from his own Haiti ‘charity’.

Those points would appear to be well-taken, but as an economist so often does, I would rephrase the question in terms of "how much" rather than "whether."  What is the probability that the "added media scrutiny and international attention" effect will create benefits which outweigh his other deficiencies for the job?  I say about ten percent.