The Walrasian Auctioneer

Swaptree isn’t the first to try online bartering — Peerflix, Bookins, and La La help people trade movies, books, and CDs, respectively, while SwapThing lets users combine goods, cash, and services.

But it is, significantly, the first site to pull off direct trades between more than two people: Thanks to a nifty algorithm designed by Boesel, Swaptree can engineer three- and even four-way trades among users who want different things.

…For instance, one person sends a book to a second person, who sends a CD to a third, who sends a DVD to a fourth, who then sends the first person a videogame. Of course, ferreting out possible trades among tens of thousands of items requires intense computing. "The first four-way trade took 20 minutes to complete," Boesel says. His team has since squeezed the time down to one-fifth of a second.

Read more here.  If this kind of procedure is generalizable, what does it imply for the path of future money demand and the price level?  Of course it does require that everyone send what he or she promises to send…

The H Prize

Legislation creating the "H-Prize," modeled after the privately funded
Ansari X Prize that resulted last year in the first privately developed
manned rocket to reach space twice, passed the House Wednesday on a
416-6 vote. A companion bill is to be introduced in the Senate this
week….

The measure would award four prizes of up to $1 million every other
year for technological advances in hydrogen production, storage,
distribution and utilization. One prize of up to $4 million would be
awarded every second year for the creation of a working hydrogen
vehicle prototype.

The grand prize, to be awarded within the next 10 years, would go for breakthrough technology.

From CNN.

French Universities

The United State’s has one of the most admired university systems in the world and one of the most deplored k-12 systems.  Could the difference have something to do with the fact that universities operate in a competitive market with lots of private suppliers while k-12 is dominated by monopolistic, government provided schools?

What would our university system look like if it operated like the k-12 system?

Look to France for the answer.  The riots of 1968 forced the government to offer a virtually free university education to any student who passes an
exam but as a result the universities are woefully underfunded especially for the masses.  Amazingly, with just a few exceptions
for the elites, students are required to attend the universities closest to their
high schools.  Sound familiar?

The NYTimes sums up with a look at a typical university:

Only 30 of the library’s 100 computers have Internet access.

The
campus cafeterias close after lunch. Professors often do not have
office hours; many have no office. Some classrooms are so overcrowded
that at exam time many students have to find seats elsewhere. By late
afternoon every day the campus is largely empty.

Sandwiched
between a prison and an unemployment office just outside Paris, the
university here is neither the best nor the worst place to study in
this fairly wealthy country. Rather, it reflects the crisis of France’s
archaic state-owned university system: overcrowded, underfinanced,
disorganized and resistant to the changes demanded by the outside
world.

Thanks to Daniel Akst for the pointer.

Social signaling reductionism

Activity, or the fraction of time each person talks, is the simplest measurement. Not surprisingly, the more someone talks, the more interested in the conversation he or she is assumed to be. Engagement measures how the speakers influence one other. Are they talking in smooth succession, or are there long pauses between utterances? Does one speaker hesitate more often than another? Stress measures the variation in the pitch and volume of each speaker’s voice to determine whether his or her voice betrays any discomfort or anxiety. Mirroring, finally, is a measurement of the speaker’s empathy–how frequently he or she adopts the vocal intonations and inflections of the other, or repeats short phrases such as "uh huh" and "OK" if the other says them first.

Pentland then collaborated with other researchers in fields ranging from psychiatry to business in order to put his markers to the test. Could they be used to predict what would happen in various social situations, say, landing a date, or getting a job or a raise?

In most scenarios, the predictions that Pentland and his colleagues were able to make turned out to be shockingly accurate. Using nothing but these simple, nonlinguistic clues–and analyzing conversations that lasted between five minutes and just over an hour, depending on the experiment–the researchers were able to calculate the likelihood of a given outcome with an average accuracy rate of almost 90%.

If men engaged in mirroring, for example, women were more likely to be attracted to them. Men, by contrast, were more attracted to women who varied the tones of their voices. Pentland and several Media Lab graduate students used his markers to analyze more than 50 speed-dating sessions, where participants interacted with one another for five minutes before deciding if they wanted to contact the other person for an actual date. By the end of the analysis, the researchers could predict with 83% accuracy whether or not two people would exchange phone numbers.

Here is the full story.  Here is the researcher’s home page, which includes work on the concept of "smart rooms."  Read "About this Picture" on the home page.

What does Robin Hanson say?: "There must be some reason we are unconscious of these cues, even though our subconscious clearly notices and uses them.  So some sort of hell will probably break loose when tech makes it easier for us to see and publicize these cues."

China sentence of the day

"Everybody wants a good job after university life, but God knows what a guy with a brain of strange thoughts can do after graduation," said Yuan Chunfen, mother of a local high school boy.

This is referring to the growing number of Chinese who study philosophy.  Read more here, and thanks to Yan Li for the pointer.

By the way, if you were wondering my Shanghai trip was postponed for work reasons.  But I’ll have some more travel coming up soon.

Markets in everything, NOT

New Zealand is not for sale, despite somebody in neighboring
Australia trying to offload the nation of 4 million to the highest
online bidder.

With a starting offer of just one cent, brisk
bidding for the prime chunk of South Pacific real estate quickly
boosted the price to 3,000 Australian dollars (US$2,330) before eBay
pulled the plug on the auction this week.

"Clearly New Zealand is
not for sale," eBay Australia spokesman Daniel Feiler told the New
Zealand Press Association, adding that 22 bids had been made before the
company acted.

"It is mostly household items we have for sale,
but there are the occasional quirky items put up," he added. "We have a
look at them and if they are OK we leave them, but if it is something
that can’t be sold, we take them off."

Here is the full story.

Where does Wal-Mart put new stores?

Wal-Mart has an incentive to keep its stores close to each other so it
can economize on shipping. For example, to make this simple, just think
about a delivery truck: If Wal-Mart stores are relatively close
together, one truck can make numerous shipments; however, if the stores
are spread out, you wouldn’t have that benefit. So, I think that the
main thing Wal-Mart is getting by having a dense network of stores is
to facilitate the logistics of deliveries.

There are other benefits, too. Opening new stores near existing stores
makes it easier to transfer experienced managers and other personnel to
the new stores. The company routinely emphasizes the importance of
instilling in its workers the “Wal-Mart culture.” It would be hard to
do this from scratch, opening up a new store 500 miles from any
existing stores.

…Wal-Mart waited to get to the plum locations until it could build out
its store network to reach them. It never gave up on density.                   

The placement of Wal-Mart stores has followed a spatial diffusion model.  K-Mart, in contrast, scattered its stores across the country.  Here is more.  Here is a video showing the spread of Wal-Mart, well worth watching and short.  It is the best single lesson in economic geography you will receive.  Thanks to http://kottke.org for the pointer.

On Galbraith

Robert Frank quotes Galbraith from the Affluent Society:

The family which takes its mauve and cerise, air-conditioned,
power-steered, and power-braked automobile out for a tour passes
through cities that are badly paved, made hideous by litter, blighted
buildings, billboards, and posts for wires that should long since have
been put underground.

Frank’s take is that Galbraith was right for the wrong reasons (the correct reasons, coincidentally, are the ones that Frank pioneered.)  My take is that Galbraith had the right premises but the wrong conclusion.

Galbraith’s premise is correct.  The market does provide ever-better products at ever lower prices while the unproductive state forces us to buy its low-quality, high-priced junk.  Galbraith concluded that we need to expand the junk sector and contract the market sector.  Yeah, and Socrates is immortal.

Fortunately, Americans have been a lot wiser.  Since Galbraith wrote, for example, the number of privately owned communities has exploded.  Today some 55 million Americans live in a private community, many of which provide their own roads, garbage pickup, and aesthetic regulations. 

Greg Mankiw’s summer reading list

For his students, that is:

  • Milton Friedman, Capitalism and Freedom
  • Robert Heilbroner, The Worldly Philosophers
  • Paul Krugman, Peddling Prosperity
  • Steven Landsburg, The Armchair Economist
  • P.J. O’Rourke, Eat the Rich
  • Burton Malkiel, A Random Walk Down Wall Street
  • Avinash Dixit and Barry Nalebuff, Thinking Strategically
  • Steven Levitt and Stephen Dubner, Freakonomics
  • John McMillan, Reinventing the Bazaar
  • William Breit and Barry T. Hirsch, Lives of the Laureates

Very good picks, and here is the link.  How about a book on globalization (Martin Wolf) or economic development (John Kay)?  How about a book on China (????) or economic history (Robert Fogel)?

Addendum: Here is Arnold Kling’s addendum.

Beautiful People are Mean

Several year ago, I read about the experiment showing that average faces are judged more beautiful than non-average faces.  In Judith Rich Harris’s No Two Alike there is an arresting figure which demonstrates.  With a little search on the web I was able to duplicate the figure, which is based on the original research.  The top two pictures are the averages of two faces, the next two are averages of 4, 8, and 16 faces and the final picture is an average of 32 faces. 

Wow, now I will no longer be upset when people say I have average looks.

Average_1