Restricted purchases as signaling, a proposal from Geoffrey Miller

by  Tyler Cowen in

Geoffrey Miller, in his new book Spent, suggests an intriguing but I think absurd idea:

For example, companies could sell certain products only to consumers who have a certain minimum or maximum score on one or more of the certain Central Six [personality] traits.  Hummer dealers could advertise that the "Party Animal Red Pearl" paint color is available only to customers who score in the top 5 percent for extraversion.  Customers who want to display their unusually high extraversion through that bright red color would have to electronically validate their extraversion score at the dealership before they could sign the purchase agreement.  In this way, Hummer could guarantee that Party Animal Red Pearl becomes a reliable signal of friendliness, self-confidence, and ambition.  Or Lexus could sell the "Mensa Quartz Medallic" color of the LS 460 only to customers whose validated intelligence scores are high enough for them to join Mensa International (IQ 130+ or the top one in fifty).  The more exclusive "Prometheus Glacier Pearl" color could indicate an IQ above 160 (the top one in thirty thousand) — the qualification for joining the Prometheus Society.

But why those proposals are so absurd — that is harder to answer.  What are your thoughts?  Can it be that people ought not to be seen as signaling too purposively?  Maybe, but if so, that would seem to rule out so much — too much — of the marketplace signaling which we in fact observe.

Does the U.S. need an auto industry?

by  Tyler Cowen in

Here is the symposium, I was in a Bryan Caplan and Don Boudreaux sort of mood when I emailed in my answer:

I’m an economist not a business forecaster, so I don’t have any particular predictions about Chrysler and G.M. We do know that Ford is likely to survive.

More important, there are some very efficient Toyota plants in the United States. That too is part of our domestic automobile industry and those plants employ a large number of American workers.

You might think that Toyota is different because it is a Japanese company rather than an American one. But in fact Toyota is a publicly traded company, as are most of the other major automobile makers. That means any American can, any time he or she wants, buy some Toyota shares and make Toyota more of an “American company” and less of a “Japanese company.”

Have you gone out and bought those shares? Maybe not. Maybe that means you don’t really care about whether Toyota is a Japanese or an American company. If you have bought Toyota shares, maybe it is simply because you thought that the company was a good investment. That’s O.K., there is nothing wrong with those attitudes. In fact those attitudes are a sign of your rationality.

Our automobile industry could be much more “American” if we really cared to make it so. But we don’t. Our behavior as investors and consumers is usually more rational than the claims we offer up in politics and in public discourse.

The Twitter barrage

by  Tyler Cowen in

In the last forty-eight hours I have acquired many hundreds of new Twitter followers for my Twitter posts, yet for no apparent reason.  I've probably doubled my number of followers over the last two days and that includes a concentrated swarm of followers with Russian or Ukrainian names (what about Belarus?).  Today I can click on my email every few minutes and have a bunch of new followers.

Yet I have done nothing notable over that same time period nor have I received significant media coverage.  What accounts for this equilibrium?  What is the underlying model of social contagion?  One model is simply that these followers have been queued for weeks by Twitter and the notices are being released only now; does that accord with your experience as a Twitter user?

Flu fact of the day

by  Tyler Cowen in

Here is Revere at Effect Measure:

We currently have fewer staffed hospital beds per capita than we did in the last pandemic, 1968 (the "Hong Kong flu").

He offers further wise words and note that this hypothetical projection is one of the better case, mutation-free scenarios:

Now take a bad flu season and double it. To each individual it's the
same disease but now everybody is getting it at once, in every
community and all over the world. In terms of virulence, it's a mild
pandemic. It's not a lethal virus like 1918. But in terms of social
disruption it could be very bad. If twice as many people get sick, the
number of deaths could be 80,000 in the US instead of 40,000. Gurneys
would line the hallways of hospitals and clinics. And absenteeism
amongst health care workers would compound the problem. Infrastructure
would probably survive intact. No need to have your own water supply or
electricity generator. But it would be a very rough ride.

All of this could plausibly happen from this virus without it causing anything more than the usual case of influenza.

Old people love Kindle

by  Tyler Cowen in

Citing this Amazon forum, Publishers Lunch Deluxe reports:

We extracted about 75 percent of the responses on age (representing about
700 responses, taking equally from the earliest and most recent postings,
which show very similar age distributions). Per John Makinson's quip at an
LBF panel, over half of reporting Kindle owners are 50 or older, and 70
percent are 40 or older. Here is the full age bracket distribution:

0 – 19: 5%
20 – 29: 10%
30 – 39: 15%
40 – 49: 19.5%
50 – 59: 23%
60 – 69: 19.5%
70 – 79: 6%
80+: 2%

The comments themselves are as illuminating as the numbers. So many users
said they like Kindle because they suffer from some form of arthritis that
multiple posters indicate that they do or do not have arthritis as a matter
of course. A variety of other impairments, from weakening eyes and carpal-tunnel-like
syndromes to more exotic disabilities dominate the purchase rationales of
these posters. Which in turn explains Amazon's pseudo-statistical case that
e-book purchases are incremental/additive, rather than cannibalistic of
their print sales. Countless people report being able to read much more
with Kindle because it overcomes physical obstacles or limitations that had
made reading difficult for them previously.

I thank S. for the pointer.

Keynes’s *General Theory*, chapter 12

by  Tyler Cowen in

In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention. The
essence of this convention — though it does not, of course, work out
quite so simply — lies in assuming that the existing state of affairs
will continue indefinitely, except in so far as we have specific
reasons to expect a change. This does not mean that we really believe
that the existing state of affairs will continue indefinitely. We know
from extensive experience that this is most unlikely. The actual
results of an investment over a long term of years very seldom agree
with the initial expectation. Nor can we rationalise our behaviour by
arguing that to a man in a state of ignorance errors in either
direction are equally probable, so that there remains a mean actuarial
expectation based on equi-probabilities. For it can easily be shown
that the assumption of arithmetically equal probabilities based on a
state of ignorance leads to absurdities. We are assuming, in effect,
that the existing market valuation, however arrived at, is uniquely correct in
relation to our existing knowledge of the facts which will influence
the yield of the investment, and that it will only change in proportion
to changes in this knowledge; though, philosophically speaking it
cannot be uniquely correct, since our existing knowledge does not
provide a sufficient basis for a calculated mathematical expectation.
In point of fact, all sorts of considerations enter into the market
valuation which are in no way relevant to the prospective yield.

Nevertheless the above conventional method of calculation will be
compatible with a considerable measure of continuity and stability in
our affairs, so long as we can rely on the maintenance of the convention.

For if there exist organised investment markets and if we can rely
on the maintenance of the convention, an investor can legitimately
encourage himself with the idea that the only risk he runs is that of a
genuine change in the news over the near future, as to the
likelihood of which he can attempt to form his own judgment, and which
is unlikely to be very large. For, assuming that the convention holds
good, it is only these changes which can affect the value of his
investment, and he need not lose his sleep merely because he has not
any notion what his investment will be worth ten years hence. Thus
investment becomes reasonably “safe” for the individual investor over
short periods, and hence over a succession of short periods however
many, if he can fairly rely on there being no breakdown in the
convention and on his therefore having an opportunity to revise his
judgment and change his investment, before there has been time for much
to happen. Investments which are “fixed” for the community are thus
made “liquid” for the individual.

It has been, I am sure, on the basis of some such procedure as this
that our leading investment markets have been developed. But it is not
surprising that a convention, in an absolute view of things so
arbitrary, should have its weak points. It is its precariousness which
creates no small part of our contemporary problem of securing
sufficient investment.

The insights here have yet to be fully mined.

Spent: Sex, Evolution, and Consumer Behavior

by  Tyler Cowen in

That's the new book by Geoffrey Miller, of The Mating Mind fame.  The exposition is a bit of a sprawling mess but the best pages of content are fascinating.  I recommend it and I am glad that I started reading it the moment I got my hands on it.

The core thesis is the Veblenesque point that marketing plays upon our weaknesses as evolved, biological creatures, obsessed with signaling:

From my perspective as an evolutionary psychologist, this is how consumerist capitalism really works: it makes us forget our natural adaptations for showing off desirable fitness-related traits.  It deludes us into thinking that artificial products work much better than they really do for showing off these traits.  It confuses us about the traits we are trying to display by harping on vague terms at the wrong levels of description (wealth, status, taste), and by obfuscating the most stable, heritable, and predictive traits discovered by individual differences research.  It hints coyly at the possible status and sexual payoffs for buying and displaying premium products, but refuses to make such claims explicit, lest consumer watchdogs find those claims empirically false, and lest significant others get upset by the personal motives they reveal.  The net result could be called the fundamental consumerist delusion — that other people care more about the artificial products you display through consumerist spending than about the natural traits you display through normal conversation, cooperation, and cuddling.

I very much agree.  Miller also tells us that we can do better and offers us some (non-regulatory) proposals for lowering the cost of our signaling.  (Don't buy a luxury car!)  Would it be cheaper and more effective to wear credible, verifiable tattoos of our personality types from the six-factor model?

I'll be considering more from this book soon.