So you think you know game theory?

Who is Julia Hall Bowman Robinson?

In fact she is the mother of evolutionary game theory. (No, that is not like being The Mother of All Wars.)

Who is Emile Borel?

Some easier questions are available too, including biograhies of the top game theorists and a good introductory guide to game theory concepts. I’ll be happier with game theory when Tom Schelling wins the Nobel Prize; in the meantime I use game-theoretic mechanisms in my thinking just about every day. It is hard to believe that game theory was a fringe topic as recently as the 1970s.

Why our world is not efficient

Dear Prudie,
I recently attended a bridal shower for a young lady who’s engaged to my cousin. I had never met the bride before and was looking forward to meeting her and her family at the shower. When we were all there, the hostess handed out envelopes to all of the guests and asked each person to address the envelope to herself, in order to receive her thank you note. As I had received my invitation in the mail, I could only assume that she already had my address. I was shocked at this rude gesture, which said to me that the bride couldn’t be bothered to write a thank you note after I had found the time to attend her event and purchase a gift. Is this a normal event at bridal showers, or am I just being picky?

–Wondering

“Why didn’t we do that?” was all I could think. But alas, here is Prudie’s response, and no she doesn’t cite the Coase Theorem or the notion of who is the least cost avoider.

Addendum: Hey you linkers, I was joking.

Why are some young boys myopic?

Contrary to popular belief, people in east Asia are no more genetically susceptible to short-sightedness than any other population group, according to researchers who have analysed past studies of the problem.

The epidemics of myopia in countries such as Singapore and Japan are due solely to changes in lifestyle, they say, and similar levels could soon be seen in many western countries as lifestyles there continue to change…

Myopia is on the increase in most places, but in countries such as Singapore it has reached extraordinary levels. There, 80 per cent of 18-year-old male army recruits are myopic, up from 25 per cent just 30 years ago.

Or how about these examples?

70 per cent of 18-year-old men of Indian origin living in Singapore have myopia, while in India itself the rate is roughly 10 per cent.

Another study found myopia rates of 80 per cent in 14 to 18-year-old boys studying in schools in Israel that emphasise reading religious texts. The rate for boys in state schools was just 30 per cent.

Here is the full story, and I will vouch that blogging has made me more myopic.

What is the most expensive substance?

Antimatter. According to one estimate (Discover magazine, August, p.68), it costs $1,750 trillion per ounce to produce; here is another cost estimate. Gold looks absolutely cheap by comparison, and who cares if a possibly fake Vermeer just sold for $30 million?

Here are some people who think antimatter will become cheaper. So perhaps you should sell your stockpile now…!

I have seen the future…

…and it is Wegmans. Natasha and I drove there last night. Here is one description. Quite simply, it makes your typical Whole Foods look like a dilapidated 7-11. It has a dozen ethnic food markets rolled into one, not to mention basic groceries, superb and varied produce, the best seafood around, various snack bars, and a cheese selection to die for. I would guess it is twice as large as a large Giant store and much prettier to boot; the atmosphere leaves you in the kind of glorious stupified daze that makes the Frankfurt School sound occasionally plausible. The fine things are not cheap but they are not overpriced relative to competitors.

Not surprisingly, there is already an anti-Wegmans movement afoot; the typical branch takes up around 15 to 18 acres; Giant and Safeway (!) are complaining about the “environmental impact” of the stores. Not that they’re afraid of the competition, or anything like that.

Given all this choice, why you can’t buy a healthy apple at the concession stands of most movie theaters? On the brighter side, they are starting to put healthy food into vending machines.

Is New Zealand backsliding?

Re the railways, the government has actually bought up only the track, while new private sector owners now own and run the operating company. It is probably a little unfair to suggest that the purchase was the (direct) result of widespread voter dissatisfaction – Tranzrail, the previous private sector owner, had almost ended up in liquidation. Without that trigger, this government would have had no great appetite for getting back into ownership of railways. Also, there is at least a case that the lines should always have been separated from the operating business.

As for whether rail should exist in New Zealand, I think that is still an open question (although, like everyone, I was surprised at what the original bidders paid at privatisation in 1993). The issue is not about passenger services, except, maybe commuter lines in Wellington – the population is too sparse for economic inter-city services – but about a limited network for freight needs (mainly bulk dairy and forestry). The very sparseness of the population, and the rugged terrain, also makes good quality roads a challenge to justify/maintain.

As for Air New Zealand, perhaps one can say only two things for the defence. First, late 2001 was the worst time to be relying on new operators to provide longhaul airline services (recession and 9/11) and, sensibly or not, almost any government in the world would have done the same thing at that time. And second, at least so far it looks to have been a good deal financially – Air NZ was sold for more than the government bought it back in 2001, and its market value is now above the latter price. As for the Qantas deal, the curent NZ government has actually been quite supportive of it, but the transaction was blocked by competition authorities on both sides of the Tasman (concerned about extreme market dominance on NZ domestic routes and most (non-auckland) trans-tasman routes.

Idea futures inside the corporation

Read this week’s Time magazine:

Once confined to research universities, the idea of markets working within companies has started to seep out into some of the nation’s largest corporations. Companies from Microsoft to Eli Lilly and Hewlett-Packard are bringing the market inside, with workers trading futures contracts on such “commodities” as sales, product success and supplier behavior. The concept: a work force contains vast amounts of untapped, useful information that a market can unlock. “Markets are likely to revolutionize corporate forecasting and decision making,” says Robin Hanson, an economist at George Mason University, in Virginia, who has researched and developed markets. “Strategic decisions, such as mergers, product introductions, regional expansions and changing CEOs, could be effectively delegated to people far down the corporate hierarchy, people not selected by or even known to top management.”

Here is an example:

Eli Lilly, one of the largest pharmaceutical companies in the world, which routinely places multimillion-dollar bets on drug candidates that face overwhelming odds of failure, wanted to see if it could get a better idea of which compounds would succeed. So last year Lilly ran an experiment in which about 50 employees involved in drug development – chemists, biologists, project managers – traded six mock drug candidates through an internal market. “We wanted to look at the way scattered bits of information are processed in the course of drug development,” says Alpheus Bingham, vice president for Lilly Research Laboratories strategy. The market brought together all the information, from toxicology reports to clinical results, and correctly predicted the three most successful drugs.

What’s more, the market data revealed shades of opinion that never would have shown up if the traders were, say, responding to a poll. A willingness to pay $70 for a particular drug showed greater confidence than a bid at $60, a spread that wouldn’t show if you simply asked, Will this drug succeed? “When we start trading stock, and I try buying your stock cheaper and cheaper, it forces us to a way of agreeing that never really occurs in any other kind of conversation,” says Bingham. “That is the power of the market.”

My take: The idea has most promise when lack of information is the relevant corporate problem. Look for this to be used when corporations must make high upfront investments, as in the drug development or music industries. Other times companies know what must be done, but simply cannot muster the will to do it. Perhaps then idea futures are useful to make this fact “common knowledge.”

The bottom line? Getting kicked out of The Pentagon was the best thing to ever happen to this innovation.

Here is the full story, and kudos to my colleague Robin Hanson, who set the whole thing in motion.

Addendum: Here are additional sources on the initial controversies.

What are the most popular library books?

65 percent of Americans use the nation’s 16,000 libraries, and those libraries spend almost $2 billion on books each year, about a fifth of the total market.

So which library books are most popular? And does it mirror the bestseller lists?

Here is the list of the top fifteen, an Adobe reader is required. Number one is The South Beach Diet, followed by some of the usual political books and Eats, Shoots and Leaves. The first book I enjoyed comes at number six with Brian Greene’s The Fabric of the Cosmos, here is my earlier summary.

My question is whether people are more likely to buy books and never read them, or take books out of the library and then never read them. The naive economist might think that you get more phoney-baloney behavior when the books are free. I suspect the opposite is true. If the book costs nothing, bringing it home involves little signaling or self-signaling. It might impress your neighbor to see a weighty tome on your bookshelves, but only if you had to spend money. So the good news would be that those people actually wanted to read the Greene book.

Here is the full story.

Genghis Khan and price discrimination

In twenty-five years, the Mongol army subjugated more lands and people than the Romans had conquered in four hundred years. Genghis Khan, together with his sons and grandsons, conquered the most densely populated civilization of the thirteenth century…Genghis Khan conquered more than twice as much as any other man in history…At its zenith, the empire covered between 11 and 12 million contiguous square miles, an area about the size of the African continent and considerably larger than North America…The majority of people today live in countries conquered by the Mongols; on the modern map Genghis Khan’s conquests include thirty countries with well over 3 billion people.

That’s from Jack Weatherford’s overstated but fascinating Genghis Khan and the Making of the Modern World.

By the way, the entire Mongol tribe was no more than one million people, with perhaps one hundred thousand warriors.

Today a Mongolian restaurant in London is offering free DNA testing. If you are verifiably a descendant of Genghis [what are you being tested against?], they will feed you a meal for free. The analysis takes two months, but supposedly you have a good chance of winning:

It is estimated that 17 million people worldwide, including the British Royal Family, Iranian Royalty, and the family of Dracula, are direct descendents of Genghis Khan.

Addendum: Read more here on the nature of the test.

John Edwards it is

Here’s Alex’s old post on John Edward’s career as a trial attorney, read Alex here too. Here is Professor Bainbridge on Edwards on tort reform. Here is National Review discussing John Edwards on trade.

My take: None of these links warms my heart, but at this point we don’t have much real information. I suspect that Edwards, if President, would rather be perceived as successful than pursue a particular ideology. And he almost certainly is better on the issues than Gephardt.

Where are tax disincentives highest?

It is common wisdom that universalist welfare states have especially high work disincentives. But matters are not so simple:

Just as the high-budget countries often have lower marginal tax rates at the top of the income spectrum, so too they can have lower marginal tax rates at the bottom, with high marginal tax rates only across the broad middle range of incomes [see further below for an explanation]. If that is true, then the debate over work incentives needs to be redirected. The net effect on labor supply and GDP may depend on something never researched, namely whether work and productivity respond more sensitively to marginal tax rates in the middle range or at the ends. If the response is greater in the middle range, then the welfare state indeed reduces work and GDP. But if conservative fears are correct in emphasizing that the supply of effort is most fragile at the two ends of the income spectrum, then it is possible that the pattern of marginal tax rates in the high-budget welfare states discourages work less than the pattern prevailing in low-budget countries.

That’s from Peter Lindert’s excellent Growing Public: Social Spending and Economic Growth Since the Eighteenth Century, which integrates readable economic history with public policy implications.

Now why might this be true? Keep in mind that some of the very features of universalist welfare states lower some marginal tax rates. The more universalistic the welfare state, the less likely that benefits will be means-tested. And of course “means-tested benefits” is just another name for a high marginal tax rate at some level. If you lose your benefit as you earn more, that is one reason not to work more or harder.

Here is a previous MR post on Lindert’s work.

Neuroeconomics and the sexes

Neuroeconomists let people play economic “games” while hooked up to MRI scanners. Here is one recent result:

The cingulate cortex, which processes both emotions and abstract thinking, becomes especially active after one player betrays the other by cutting back on how much he shares–as if the brain, or at least this crucial part of it, is “hypertuned” to detect betrayal. Quartz has also seen intriguing differences between men and women in the scanner. Men’s brains tend to shut down after they’ve made their decision, awaiting a reply from the other subject. But women don’t relax so easily; they show continued activity in at least three areas–the ventral striatum (the brain’s center for anticipating rewards), the ventral medial prefrontal cortex (which is involved with planning and organizing) and the caudate nucleus (a checking and monitoring region, sometimes associated with obsessive-compulsive disorder). Women, says Quartz, seem to obsess more over whether they did the right thing–and how the other subject will react to them [emphasis added].

There’s one other intriguing discovery coming out of this work, which has even the scientists baffled: with approximately 85 percent accuracy, the subjects, separated by the distance from Los Angeles to Texas, can guess whether they’re playing against a man or a woman. They appear to be picking up on subtle clues in the interactions that the scientists themselves haven’t identified.

Here is a recent MR post on neuroeconomics, citing the same link of relevance. This page offers a good introduction to neuroeconomics, including home pages for the authors cited above. Here is a course reading list for a neuroeconomics class. Here is a long essay on neuroscience and economics.

A comment I would never make on MarginalRevolution

Read Matthew Yglesias on the Endangered Species Act:

Did the president really gut the Endangered Species Act yesterday while no one was paying attention? So I’ve heard, at any rate. If so, good riddance. You’ll all yell at me, I suppose, but really: Who cares? Species die, shit happens, get over it. Clean air, clean water, and lower carbon emissions I’ll get behind that stuff impacts, you know, people.

Here are my more moderate comments from some time ago.

I should link to Matt more often, we share a Best Buy, plus he doesn’t want to worry about Iranian nukes. But when it comes to Dick Gephardt, however…read this.

Independence Day

A sign on the highway on the road to Toronto speaks volumes.

Remember, driving is a privilege not a right.

Despite the fact that I am Canadian, everytime I see this sign my stomach churns with anger and I must suppress a desire to turn back to the U.S. The sign is a reprimand from the rulers to the ruled reminding them of their place. I want to tear it from the ground but my fellow Canadians think my reaction odd. More Americans, I think, would understand and that I suppose is why I call America home.

Happy Independence Day.

Earthquake in Germany?

This week the German government is expected to pass a landmark immigration reform. The measure would allow migrants to work in Germany if they have skills if specified fields, such as engineering, information technology, or the sciences.

To be sure, the qualifications are many. It must be shown that no German can do the job. National security factors can be invoked to limit and restrict migrants. An earlier version of the bill would have let in lower and medium-skill migrants. Still, this is a long way from Helmut Kohl’s famous remark: “Germany is not a country of immigration.” Furthermore there would be no quotas under the proposed legislation.

For one summary of what is afoot, see the WSJ, 2 July, p.A9. Here is another summary of the proposed reforms. Here is some background context on the policy change. Note that the reforms attempt to manage immigration before EU constraints take over; in this regard also they fall short of a true liberalization.

So will this prove an earthquake in German politics? It depends how rigidly the entry standards are enforced. In any case the West European countries are badly in need of a basic model for greater immigration. Germany currently has many migrants but most are ethnic Germans and their flow has dried up. After all, there are only so many Volga Germans. This reform, however imperfect, should prove at least one step in the right direction.