Mexico, Land of Internet Cafes

Blogging from Mexico is made easier by the large number of cybercafes here. Even a town of 50,000 might have a dozen or more places with decent connections. Population density is high, most people are literate, few have access at home, and the demographics favor the young. The main problem is that not all the keyboards have the appropriate slashes for html links. I thank Alex for filling in the gaps in my posts.

On the issue of Internet access, I was struck by this story from rural India:

For 12-year-old Anju Sharma, hope for a better life arrives in her poor farming village three days a week on a bicycle rickshaw that carries a computer with a high-speed, wireless Internet connection.

Designed like temple carriages that bear Hindu deities during festivals, the brightly painted pedal-cart rolls into her village in India’s most populous state, accompanied by a computer instructor who gives classes to young and old, students and teachers alike.

Can you think of a better way to bridge the digital divide?

With only 12 computers and four Internet connections per 1,000 people, India has one of the world’s lowest Internet usage rates and much of rural India remains oblivious to the sweep of technology. But the villages involved in Infothela all lie within a 50-mile wireless corridor created by the Institute of Technology and linked by high-rise Wi-Fi antennae and amplifiers along the highway.

Until recently, such technology was the privilege of a tiny section of Indians – engineers in the country’s software hubs who earn more money while in their twenties than Bithoor farmers do in a lifetime.

Here is the full story. Here is another version.

Here is a company that uses rickshaws to take cell phones to India´s poor.

Addendum: I am updating this post from a hook-up in a Mexican Wal-Mart, the quickest connection and best keyboard I have had to date.

Darwin and Vitamin D

Brad DeLong shows how productive a little evolutionary theory can be in the right hands. Brilliant.

Amanda Schaffer writes in Slate about how a surprisingly large number of people who live here in the northlands far from the equator need more vitamin D. I am very surprised that this is controversial. When we Cro-Magnon types came out of Africa 60,000-100,000 years ago, none of us were white. Now practically all of us, the bulk of whose ancestors stopped for long in northern Europe or northern China, are remarkably pale indeed. I have heard no reason advanced for this other than that melanin in your skin blocks some vitamin D creation. If true, then there must have been a hell of a lot of selection pressure for low-melanin skin, which implies a hell of a large health cost to blocking even a small amount of sun-mediated vitamin D creation.

Addendum: The ever-intelligent Randall Parker points me to this link with further information on Vitamin D, folate and ultraviolet light.

Until the 1980s, researchers could only estimate how much ultraviolet radiation reaches Earth’s surface. But in 1978, NASA launched the Total Ozone Mapping Spectrometer. Three years ago, Jablonski and Chaplin took the spectrometer’s global ultraviolet measurements and compared them with published data on skin color in indigenous populations from more than 50 countries. To their delight, there was an unmistakable correlation: The weaker the ultraviolet light, the fairer the skin. Jablonski went on to show that people living above 50 degrees latitude have the highest risk of vitamin D deficiency. “This was one of the last barriers in the history of human settlement,” Jablonski says. “Only after humans learned fishing, and therefore had access to food rich in vitamin D, could they settle these regions.”

Tagline borrowing

Alex’s mention of Richard Posner’s blogging at Larry Lessig’s blog gives me an excuse to bring up one of the stranger examples of intellectual-property appropriation I’ve ever come across. With the exception perhaps of the first two Batman movies, I think the best superhero film ever is Alex Proyas’ brilliant Gothic fable The Crow. The movie’s plot is completely straightforward — it’s a revenge tale — but it’s visually overpowering, and Brandon Lee (who died near the end of filming) is great to watch. Anyway, the basic narrative conceit of the movie is that, after having been murdered, Lee has been brought back to life in order to hunt down the killers. As one of the characters explains, when a person dies, a crow carries away his soul. But if the death needs to be avenged, “Then sometimes, just sometimes, the crow can bring that soul back to make the wrong things right.” It’s hardly T.S. Eliot, but the coda is memorable enough.

I was, then, a little disconcerted earlier this summer to see the trailer for Catwoman — a movie about a woman who, after having been murdered, is brought back to life to hunt down her killers — and hear this: “It’s been said that when a person dies, a cat can bring back their soul to make the wrong things right.” And things got even weirder last week when, watching the trailer for the Zhang Yimou film Hero — which Miramax has finally gotten around to releasing here two years after it came out in China — I heard the the voiceover describing Jet Li’s character as a hero who has returned — you guessed it — “to make the wrong things right.”

Now, I tend to be in the Lessig/Posner camp when it comes to intellectual property, so I’m not suggesting that anyone start talking about legal remedies here. And, to be fair, “make the wrong things right” may not be the most unusual sequence of words imaginable. But is it too much to ask for at least a cursory effort at originality from studios, and perhaps a less blatant lifting of others’ words? On the other hand, maybe the references were intended as clever homages to Proyas’ masterpiece, and I just missed it.

What is valid in Marxism?

Brad DeLong offers a scathing and accurate critique of Marxism. He then asks for five valid points in Marxist doctrine. Who better to have a go at this than I?

I am translating all arguments into a modern context and modern analytical terms. Marx as we know him did not write as such. And yes, I do know that you can find many of these ideas in Smith and others.

1. Capitalist systems, especially before reaching contemporary times, can produce less autonomy than small scale production. Standards of living do rise from industrialization. But I look at many of my rural Mexican friends. They could earn somewhat higher wages in factories, but they prefer to paint ceramics at home. It is more fun and they control their time to a large degree. At some point industrialization can undercut the cultures and networks of suppliers that makes such a choice possible. Marx directs our attention to a certain indivisibility of systems.

2. Marxism promotes an alternative idea of freedom, namely freedom from the market. Anyone who has chosen life as a tenured university professor should not claim that such an idea is complete nonsense. Smith thought in terms of marginal tradeoffs. Marx, above all, focused on inframarginal and systematic effects.

3. The benefits of industrialization take a long time to kick in. Reforming postcommunist economies took fifteen years or more. Poland did most things right and people there are still unhappy. So how long should it take to reform feudalism or other preindustrial structures? Forty years? I take seriously the idea that the industrial revolution did not make people better off right away, so did Marx.

4. Being happy at work is one of the most important things in life. Marx saw the importance of this more clearly than did many of the classical economists. And he saw the importance of inframarginal systemic factors.

5. A growing division of labor can make some people unhappier at their jobs.

To sum up, we all know that capitalism brings a “creative destruction,” to use the phrase of Schumpeter. This is all for the better, but Marx saw how strong both the positive and negative sides of this process would be. And he knew that the relevant problems went deeper than just looking at whether people make rational tradeoffs at the margin. That being said, he overestimated the negative side of the market and underestimated how well capitalism could solve its problems concerning the distribution of income.

Of course marxism, as a political program, remains dangerous nonsense. Marx’s blind spots were enormous, and I still cannot understand how generations of the intelligentsia were taken in by the whole thing.

Addendum: The link to Brad´s post has been corrected.

Another proof that .999…=1

Jim Ward sends this nice proof:

1/3=.3333333…

  .33333333333333333333...
+ .33333333333333333333...
+ .33333333333333333333...
------------------------------------------
= .99999999999999999999....

but 1/3 + 1/3 + 1/3 = 1

Of course this proof requires that we understand that 1/3=.333… but that at least can be shown by long-division. Steve Landsburg, who has a PhD in mathematics in addition to being a brilliant economist, writes to warn, however, that we haven’t defined what we mean by an infinite series like .999… nor have we proven that multipying by 10 (in the earlier proof) is equivalent to moving the decimal point. These are all valid points. As a lay consumer of mathematics, rather than a producer, I find these “proofs” helpful but do take them with a grain of salt.

Addendum: Here is more on Kakutani’s theorem for the mathematically strong of heart.

Congressional Investigation Starting Soon

I await the outrage. The Economist recently noted that…

“According to army figures dug up by the New Yorker, over the past three-and-a-half years military surgeons have performed 556 breast enhancements and 1,592 liposuction procedures on soldiers and their close relatives. Soldiers have to pay only the cost of their breast or, potentially, buttock implants; family members must cover other expenses. Face-lifts and nose jobs are also available.”

My take: The military provides lots of valuable training to soldiers in exchange for which soldiers take a pay cut. It is even possible the practice is efficient. Unlike private employers the military can force those it provides a valuable skill to continue working at a wage below their current market wage. I suspect most doctors enter the military to receive a medical education. If that education is more valuable because they can perform plastic surgery and military doctors’ wages are low enough, the service may be beneficial to tax payers as well as the doctors, and one assumes, the soldiers.

Candidate Public Good

A colleague of mine at CMC is valiantly continuing his crusade against the notion of public goods (A public good is not rival in consumption; my using it does not diminish your use of the good and not excludable). My colleague has two issues. First, he has never come across a good that fits the description well enough to deserve the label and second, almost any discussion of public goods inevitably leads to a discussion of the need for government provision. I find his argument persuasive. It doesn’t take long in government to hear about countless public goods crying out for government provision.

Thus it is with some trepidation that I mention a candidate for the textbook public good. The Global Positioning System, GPS, which provides location information for both military and civilian uses, is currently provided by the US government at no direct cost to users. GPS was constructed to be non-rival and non-excludable. The way the GPS system works is that a series of signals allow a receiver to triangulate the user’s location without the user needing to communicate back to the satellite. The military nature of the system means that users do not actually want to be found; hence GPS is designed for passive use only. It also makes it very difficult to charge end users for using the signals.

The US government has picked up the cost of providing the system and, according to the Economist

“…after spending $20 billion, the Pentagon has built a global system that is a key ingredient of NATO defense. But it is also an essential prop to countless civil applications: for every military user, there are now 100 civilian users. GPS provides not only satellite-navigation systems in cars and boats; it is used by internet service providers, by banks and by surveyors. One day it might be used by air traffic control systems to permit “free flight”, in which pilots of commercial aircraft find their own route and stay clear of other aircraft, without the cumbersome business of radio telephone contact with controllers on the ground.”

So is this a lighthouse or not? The debate is currently more than academic. The Economist details the European Union’s solution to the provision of position navigation and timing services. The EU’s proposed system,

“…will be in part a commercial system. A concessionaire will get the right to operate the system for a fixed period in return for plunking down two-thirds of the deployment costs–around $2.8 billion.”

I look forward to the day when a Principles of Economics textbook uses GPS as an example of public good. Whether Pigou or Coase wins this one I cannot predict.

Google makes money managers work for a living

In the weeks leading up to Google’s IPO, few people had anything good to say about the company or its decision to go public using a modified Dutch auction. (Here’s one notable exception.) But now we’re seeing a welcome backlash to the anti-Google backlash, with a host of articles arguing that, glitches notwithstanding, the IPO worked. (My take is here, but unfortunately you need to subscribe to the Financial Times to read it.)

Most discussions of the IPO have focused, appropriately, on the fact that Google maximized the amount of money it raised by reducing the commissions it paid its investment bankers and by getting itself a fairer price than it would have under the traditional system. (Even though Google’s price did jump 18% on the first day, that was a relatively reasonable discount given all the fear and uncertainty Wall Street had tried to sow about the company and the offering.) As Alex wrote last week, the true test of the success of an IPO is the “cost per dollar of raised funds,” and by that standard Google did well.

But the offering was also a success for another reason, which is that it forced institutional investors to compete, for once, on a level playing field. The problem with the current IPO system isn’t just that companies end up leaving billions of dollars on the table when they go public, but that select mutual-fund and hedge-fund managers (as well as well-connected individuals) are handed what amounts to free money. In a traditional IPO, the investment bank underwriting the offering controls the allocation of shares. In the late 1990s in particular, that allocation process became a way of doling out favors and securing future business. For instance, if you were a mutual-fund manager who funneled a lot of trades through an investment bank — or who agreed to do so — then you were more likely to get a hefty allocation of IPO shares.

This made money managers look a lot smarter than they were — even if you set the bubble aside, there are lots of fund managers whose returns from the late nineties need an asterisk next to them — and it wrecked the price-setting process, since there was no real attempt to let the price reflect the real demand for a stock. It also sabotaged one of the best things about capital markets, which is that in theory they aggregate the opinions of anyone with enough capital and enough risk tolerance to participate, and not just the opinions of those with the right connections. (There should be no velvet ropes in capital markets: if you can pay, you can play.) Google turned all this around: the only way to get shares in the Dutch auction was to do the valuation work and make a reasonable bid. The traditional IPO relies on the power of cronyism. Google’s IPO, flawed as it was, relied on the power of markets. Bad for the Street, good for everyone else.

Randomness in Venezuela

At this point, it seems clear that Venezuelan president Hugo Chavez won a definitive victory in the recall referendum that the country held a week ago Sunday. The opposition, though, continues to insist that there was massive fraud. There doesn’t seem to be any proof of this, but one piece of evidence that Chavez’s opponents seized on almost immediately was the curious fact that at hundreds of polling stations around the country more than one voting machine recorded the exact same number of “yes” votes (“yes” was a vote for Chavez’s removal). For instance, the Wall Street Journal reported that at one polling station in Bolivar, two machines each recorded 153 “yes” votes while recording 215 and 237 “no” votes.

The opposition argued that this was proof that the number of “yes” votes had been “capped,” so that after a certain number of votes had been recorded, every additional “yes” vote was changed to a “no” vote instead. (Venezuela uses computerized touch-screen voting machines.) And at first glance, this might seem suspicious. But at second glance, it seems like a simple product of chance, as the Journal pointed out:

Aviel Rubin, a computer-science professor at Johns Hopkins University, said he calculated odds of roughly one in 17 that two of three computers at a voting table would have identical results. That compares to about one in 15 that so far have shown similar results in Venezuela’s referendum.

In other words, with twelve thousand voting “tables,” many with multiple machines, it was inevitable that some would end up with matching scores. (It’s similar to the fact that if there are 23 people in a room, the chances are 50-50 that two of them have the same birthday.) Not surprisingly, then, when international observers audited a sample of the results, they found that while there were 402 tables with matching anti-Chavez votes, there were 311 tables with matching pro-Chavez votes, too. What seemed to be proof of fraud was most likely just a statistical artifact.

This is a classic example of what Nassim Taleb calls being “fooled by randomness,” in his intriguing book of the same name. We think that randomness means there will be no clusters or sequences of similar behavior, and therefore when we see them we assume they’re evidence of some hidden pattern. (You can see this in the way people interpret everything from clusters of cancer cases to hitting streaks in baseball.) But they’re really just evidence of the numbers working themselves out.

QED

QED: Beauty in Mathematical Proof by Burkard Polster is a short book with some elegant proofs (about 1 per page) from elementary geometry and number theory. Here are two that caught my eye. I know that .999…. =1 but I have always thought of this as something like a convention. Not so. Here is the proof.

Let x=.999…
then 10x=9.999…
now subtract x from both sides and we get
9x=9 or x=1

QED

And here is a just too lovely proof for the sum of the first n natural numbers.

GaussProof

Our crowd gets wiser

This week James Surowiecki will join Marginal Revolution as a guest blogger! James is one of the few journalists who really “gets economics,” which is why he has been called the “best business journalist in America.” He has written for Slate, Wired, has a regular slot at the New Yorker and is the author of the highly acclaimed new book The Wisdom of Crowds. We are looking forward to his insights!

The economics of Mexican kidnapping

The following is based on hearsay from Mexicans:

1. Many people of means in Mexico City buy kidnapping insurance.

2. If you are taken, the kidnappers and the insurance companies have a close working relationship. The kidnappers and the company will speak, and a mutual transfer will be arranged. No one need send a chopped off ear to establish that they have you.

3. Most kidnappers much prefer to kidnap someone with insurance. The transaction runs more smoothly and everyone behaves professionally. (There are, by the way, some “rogue” kidnapppers who behave in nasty ways and spoil the market for everybody.)

4. Didn’t Yoram Barzel and Eugene Fama, among others, teach us that the limits of the firm are arbitrary? If the kidnappers and the companies trade with such low transaction costs, can we not think of the kidnappers as part of the firm, in some sense? Or shall I say that the insurance company is part of the kidnappers?

5. Can we not think of the insurance company as an institution that helps the kidnappers make credible commitments? The company certifies which kidnappers will in fact return a live body in return for the money. The company is a kind of Better Business Bureau for the kidnappers.

6. The victims pay the nominal costs of this service. You might think this a coup for the kidnappers, but of course the long-term incidence of the charge is less clear. In any case, it is more important to have the insurance company pay greater immediate heed to what the potential victims want.

7. The general presence of kidnapping insurance may make the potential victims worse off. True, if you are kidnapped you much prefer to have the insurance. But if no insurance were possible, the costs of kidnapping would be much higher to the kidnappers. Kidnappings would be less frequent, albeit more costly for the victim.

8. The insurance confers positive externalities on those, such as myself, who are obviously uninsured [hey, kidnappers, if it is not obvious, here’s hoping you read MR!]. Presumably I am seen as a tourist, not as a local CEO of a wealthy American multinational. My chance of being kidnapped is much lower, as in relative terms I am a difficult target to extract wealth from. It is much more likely that I am robbed.

Here is an earlier MR post on the economics of kidnapping; it also includes some simple data.

How to spot a liar

By studying large groups of participants, researchers have identified certain general behaviors that liars are more likely to exhibit than are people telling the truth. Fibbers tend to move their arms, hands, and fingers less and blink less than people telling the truth do, and liars’ voices can become more tense or high-pitched. The extra effort needed to remember what they’ve already said and to keep their stories consistent may cause liars to restrain their movements and fill their speech with pauses. People shading the truth tend to make fewer speech errors than truth tellers do, and they rarely backtrack to fill in forgotten or incorrect details. [emphasis added]

“Their stories are too good to be true,” says Bella DePaulo of the University of California, Santa Barbara, who has written several reviews of the field of deception research.

Liars may also feel fear and guilt or delight at fooling people. Such emotions can trigger a change in facial expression so brief that most observers never notice. Paul Ekman, a retired psychologist from the University of California, San Francisco, terms these split-second phenomena “microexpressions.” He says these emotional clues are as important as gestures, voice, and speech patterns in uncovering deceitfulness.

And a (scant) few people can serve as super lie-detectors:

O’Sullivan now says that her further studies of federal agents, forensic psychologists, and other groups of professionals indicate that a very small percentage of people are extremely good at spotting a phony. “We always found one or two people who were very good,” she says.

Here is the full story.

Heidegger on the screen

[The movie] is more than three hours long and explores the theories of a German philosopher while wending its way up a European river.

A challenging package, you might think, even by the relatively adventurous standards of a film festival audience.

Yet this film, called The Ister, has been playing to packed houses everywhere from Rotterdam to Sydney and Melbourne. Few people have seen anything like it before.

Made by a pair of Melburnians armed with little more than a digital camera and a sense of inquiry, The Ister is loosely based on a wartime lecture delivered by ex-Nazi Martin Heidegger on one of Germany’s most celebrated poets, Friedrich Holderlin, whose poem The Ister (an old Roman name for the Danube river) is another source of inspiration for the documentary.

It is a movie made with great care:

Ross [the filmmaker] was concerned that it be intellectually coherent.

“In the back of his mind was, ‘What if Jacques Derrida sees this?”‘ Barison says.

Here is the full story.