Iraqi oil industry to remain socialized

The U.S. is no longer pushing privatization of the Iraqi oil industry primarily because the Iraqi’s presently in control don’t want it privatized for “nationalistic” reasons. This is bad news for the Iraqi people. Even putting aside bold plans for returning the oil to the people it’s an important check on government that they must tax to spend. It’s hard enough to make the State respect the rights of the people even when it relies on them for its funding but when the people rely on the State for their funding its even worse. Call this the “no representation without taxation” principle.

Mall facts

1. At last count there were 1,175 large regional enclosed malls in the United States. Such malls account for about 14 percent of all U.S. retailing, or about $308 billion in sales.

2. The average mall customer spends 22 seconds looking at a mall map, and often leaves the map baffled.

3. The spaces near mall entrances typically yield lower rents and lower valued items. The shopper, upon entering the mall, is still disoriented and is not yet ready to buy something. That is why hair cutteries are so commonly found near mall entrances.

4. Men are more interested in people watching at malls, whereas women are more interested in shopping. Men also like the non-retail parts of malls, such as food courts, which do not require them to price shop or try on anything.

5. Bookstores have much higher “conversion rates” when they are outside of malls. Bookshops in malls are thought of as places to browse while waiting or marking time, but not places to buy books. Plus it is harder to bundle a mall bookshop with a cafe, which is often the most profitable place in the bookshop. For these reasons, bookshops are leaving malls in droves.

These assessments are from Paco Underhill’s new Call of the Mall. Underhill is arguably the leading expert in the anthropology of shopping, also read his views on selling real estate. This interview presents his views on web retailing.

How it is for me: To enjoy a mall trip, I need one fixed destination, combined with a firm plan to buy something. Add on a free hour to spare, and the desire to eat somewhere in the area or in the mall. The new Chipotle at Tysons Corner Mall is a big draw for me, since they have the freshest Mexican food in my rather sorry neighborhood. I would love a movie theatre at my mall but civilization in Northern Virginia is not yet so advanced. Beyond that, I want enough space in the mall to stretch my legs freely when walking. Given those preconditions, I will buy something for sure, once I have gone. Unlike Alex, I don’t treat sunk costs as sunk. Once I decide to do something I follow through, if only to discipline my choice of original commitments. That is how I make my highly rational, economically calculated, expected utility-maximizing shopping decisions.

The Illusions of Egalitarianism

Here is a consequence of egalitarianism. According to the Statistical Abstract of the United States, men’s life expectancy is on the average about 7 years less than women’s. There is thus an inequality between men and women….Egalitarians, thus must see it as a requirement of justice to equalize the life expectancy of men and women. This can be done, for instance, by men having more and better health care than women; by employing fewer men and more women in stressful or hazardous jobs; and by men having shorter work days and longer vacations than women…There remains the question of how to compensate the present generation of men for the injustice of having shorter lives than women. No compensation can undo the damage, but it may make it easier to bear. The obvious policy is to set up preferential treatment programs designed to provide for men at least some of the benefits they would have enjoyed had their life expectancy been equal to women’s. There is a lot of pleasure that could be had in those 7 years that men are not going to have. And since those years would have come at the end of their lives, when they are more likely to know their minds, their loss affects not only the quantity but also the quality of their not-to-be-had pleasures. One efficient way of compensating them for their loss is to set up government sponsored pleasure centers in which men may spend the hours and days gained from having shorter working days and longer vacations.

Read the whole post, taken from John Kekes’s new book The Illusions of Egalitarianism. I have long felt that egalitarianism makes no sense. I can understand assigning a priority to the interests of the poor. Donate a dollar to an orphan, not to Bill Gates. But the plight of the orphan is not worse because Gates exists (in practical terms quite the contrary). Nor do we worry about the “inequality” between the millionaires and the billionaires in Beverly Hills. Let’s not confuse egalitarianism with benevolence toward the needy.

Wikis: The private production of public goods

Sometime in the next few days or weeks, one of the world’s most comprehensive online reference sites will publish its 200,000th article. More accurately, one of the site’s contributors will publish the article.

Wikipedia, an encyclopedia created and operated by volunteers, is one of the most fascinating developments of the Digital Age. In just over three years of existence, it has become a valuable resource and an example of how the grass roots in today’s interconnected world can do extraordinary things.

Almost anyone can be a contributor to the Wikipedia. Almost anyone can edit almost any page. (Only serious misbehavior gets people banned.) Thousands of people around the world have added their expertise, and new volunteers show up every day.

It defies first-glance assumptions. After all, one might imagine, if anyone can edit anything, surely cyber-vandals will wreck it. Surely flame wars over article content will stymie good intentions. And, of course, the articles will all be amateurish nonsense. Right?

Well, no.

Wikipedia does have its flaws — including recent hardware problems that have made the site hard to use pending the installation of new server computers. But its very nature protects it from some of those other woes, and it has emerged as a credible resource.

Wikipedia is based on a kind of software called Wiki. A Wiki allows any user to edit any page. It keeps track of every change. Anyone can follow the changes in detail.

A Wiki engenders a community when it works correctly. And a community that has the right tools can take care of itself.

The Wikipedia articles tend to be neutral in tone, and when the topic is controversial, they will explain the varying viewpoints in addition to offering the basic facts. When anyone can edit what you’ve just posted, such fairness becomes essential.

“The only way you can write something that survives is that someone who’s your diametrical opposite can agree with it,” says Jimmy Wales, a founder of Wikipedia…

Wikipedia has about 200 truly hard-core users who show up daily, or almost daily, to work on the site, Wales says. He estimates that an additional 1,000 or so are regular contributors. Tens of thousands more are occasional or one-time contributors.

Read the whole story. Note also that the Wikipedia is only the beginning:

The Wikipedia is the biggest public Wiki, but far from the only one. There are Wikis covering travel, food and a variety of other topics. You can find a Wiki category page on Cunningham’s site.

Wikis are going private, too. They’re increasingly being used behind corporate firewalls as planning and collaboration tools.

Entrepreneurs are even starting to form companies around the technology, extending it for wider uses. One is SocialText in Palo Alto, which has been selling its software and services to some major companies, says Ross Mayfield, the company’s founder and chief executive.

My take: We’re just seeing the beginning of this innovation. Thanks to the ever-interesting www.geekpress.com for the link.

Taking expected utility theory seriously, or, A story about Tyler

In the post immediately below, Tyler writes that Robert Rubin sounds like a brilliant person whom he would like to meet. He especially likes the description of how Rubin thinks probabilistically. Readers may like this story:

I once had to choose between two different career paths and I was torn about what to do. I asked Tyler for his advice and he turned to me and said “calculate the expected utility of both choices.” At first, I was flabbergasted. Was he joking? I’d always thought of expected utility theory as a descriptive theory of how people behave not as a normative theory of how they should behave. Certainly, I’d never tried to use the theory to guide my own choices. Tyler remarked that even most economists don’t take expected utility theory seriously but most people could nevertheless benefit by quantifying their choices. So I took his advice and sat down to think hard about the probabilities and utilities. Surprisingly, I found this very helpful. Once I had some numbers on paper it became clear which was the better choice and I made that choice confidently and without feeling conflicted. As it turned out, the choice was good ex-post as well as ex-ante. Thanks Tyler!

Addendum: As you may recall, I now take sunk costs seriously too.

Robert Rubin

Brad DeLong reviews the new Robert Rubin book In An Uncertain World. Rubin sounds like a brilliant guy, and I am sorry never to have met him. I like this description:

I have never seen anyone else able to guide a meeting to the consensus he wanted by occasionally raising his eyebrows and saying little other than, “That’s very interesting, very important. Now I think we should hear what X has to say.”

Rubin himself emphasizes his habit of “probabilistic thinking,” always asking such questions as, “What else might happen?” and, “What if we’re wrong?”; looking at the full range of possible outcomes rather than the most likely or the most comfortable; and recognizing that just because things came out well in one case, you didn’t necessarily make a good decision, or that just because things turned out badly, you didn’t necessarily make a bad one.

Patent theory versus patent law

According to the economic theory of patents, patents are needed so that pioneer firms have time to recoup their sunk costs of research and development. The key element in the economic theory is that pioneer firms have large, hard to recoup, sunk costs. Yet patents are not awarded on the basis of a firm’s sunk costs. Patent law says the subject of a patent should be novel, useful and non-obvious but nowhere does it say the original idea should have required extensive costs of research and development as the economic theory would predict.

The disconnect between the economic theory and what patent law actually requires suggests that patent law could be improved by bringing it into greater conformity with economic theory. Why, for example, should every patent get 20 years of protection regardless of costs? Why not have patents of shorter length for those ideas that required little R&D? (Amazon’s one-click shopping patent comes to mind). I think that such a system is possible and discuss it further in the following paper.

Tabarrok, Alexander. 2002. Patent Theory versus Patent Law (subs. required or email me). Contributions to Economic Analysis & Policy 1 (1), Article 9.

In defense of choice

Here are some brickbats for my economist and libertarian readers:

†¢ Sheena Iyengar and Mark Lepper, psychologists at Columbia and Stanford respectively, have shown that as the number of flavors of jam or varieties of chocolate available to shoppers is increased, the likelihood that they will leave the store without buying either jam or chocolate goes up. According to their 2000 study, Ms. Iyengar and Mr. Lepper found that shoppers are 10 times more likely to buy jam when six varieties are on display as when 24 are on the shelf.

†¢ In a study that Ms. Iyengar, Rachel Elwork of Columbia and I are working on, we found that as the number of job possibilities available to college graduates goes up, applicants’ satisfaction with the job search process goes down. This is particularly true for job seekers whose aim is to get the “best possible” job – while people in this group receive more and better job offers than those who are aiming for “good enough” jobs, they also tend to be less satisfied with their career decisions than their less demanding counterparts. They are also more anxious, pessimistic, disappointed, frustrated and depressed.

†¢ In another study under way, Ms. Iyengar found that as the number of mutual funds in a 401(k) plan offered to employees goes up, the likelihood that they will choose a fund – any fund – goes down. For every 10 funds added to the array of options, the rate of participation drops 2 percent. And for those who do invest, added fund options increase the chances that employees will invest in ultraconservative money-market funds.

†¢ Carl Schneider, a law professor at the University of Michigan who specializes in medical ethics, has reported that patient satisfaction goes down when the choice of pharmaceutical and medical treatment goes up.

One illustration of the mismatch between how choice appears in theory and how it feels in daily life comes from a 1992 study by Lesley F. Degner and Jeffrey A. Sloan in The Journal of Clinical Epidemiology. People were asked if they would want to be in charge of their treatment plan if they had cancer. For those who had never had cancer, 65 percent answered “yes.” For those who had already had cancer, only 12 percent said that they would want to oversee their own treatment.

Here are eight letters in response. Consider this one:

As a neophyte shoe salesman, I was told never to show customers more than three pairs of shoes. If they saw more, they would not be able to decide on any of them.

My take: No doubt, choice confuses the hell out of us, much of the time. That being said, the question is not whether more or less choice is good. Instead the question is what kind of choice-restricting and choice-regulating institutions we wish to have. Markets, in reality, are the best known institutions for limiting our choices as well as expanding them. When I go into a (good) restaurant, I like to simply tell the waiter that I don’t want to look much at the menu, and he should simply bring me what is best. If he asks what that means by “best,” I (sometimes) respond by telling him I am an aesthetic Platonist and that best is best. Or I will ask the waiter to imagine it is his last meal on earth and to bring me the relevant dishes he would order. Other times, such as when I am buying classical compact discs, I wish to survey all the available information before buying Freddy Kempf’s stunning Transcendental Etudes, composed by Franz Liszt. Have I mentioned it is the sixth recording of those pieces in my collection?

What if you asked people the following: do you wish to choose your own means of limiting your (subsequent) choices, or do you wish to let someone else, perhaps the government, do the work? I suspect the answers would overwhelmingly favor the former option, namely voluntary choice at the meta-level. And if you reexamine the experiments mentioned above, they are all about ways in which people voluntarily limit their own choices. Maybe you don’t wish to run your own cancer treatments, but you wish to choose the doctor who will.

I am indebted to Daniel Akst for the pointer to the link and topic. By the way, check out his old Slate.com column on whether you are free-riding if you buy and hold a broad stock index. He is one of the most interesting financial journalists around, in addition to being an accomplished novelist.

New requirements for government lab scientists?

Under new plans to reorganize the Commissioned Corps of the U.S. Public Health Service, some 6,000 scientists and other public health experts–including not only emergency responders but also laboratory scientists–would have to pass an “Annual Fitness Test.” The test would measure not their research prowess, but rather their abilities in the 1.5 mile walk, 500 yard swim, and at push-ups and sit ups.

Of course these measures may well not go through. But there is a precedent of sorts, do we not require our Presidents to be tall and (relatively) good-looking?

The link is from Chris Mooney, who recently has geared up his blog to be even better than before. Chris is the guy who keeps us all honest when it comes to politics and science, right-wingers won’t always find it comforting reading.

Are test-tube mice different?

They are bolder and more confident, but have poorer memories, here is the story.

And humans?

Studies are needed to see if test-tube humans are similarly affected, he says…In the Western world, around 1% of children are conceived through assisted reproductive technologies. In one common method known as in vitro fertilization, eggs are fertilized in a test tube, cultured for a short while and then returned to the womb. Over a million ‘test-tube’ babies have been born worldwide. But little is known about the long-term effects of culturing embryos. The world’s first test-tube baby, Louise Brown, was born just 26 years ago. There have been few systematic attempts so far to assess the long-term health and behaviour of these children.

Food for thought, perhaps we are engaging in social experimentation here without knowing it.

Can climate engineering limit global warming?

Maybe so, according to Futurepundit. Here are some options (not all of this represents Futurepundit’s words, some is from his links):

Proposed options for reducing carbon dioxide pollution currently include underground burying of liquefied carbon dioxide; disposal in the sea; fertilising its absorption by marine algae; reflecting the sun’s rays in the atmosphere; and stabilizing sea-level rise. These and other macro-engineering ideas will be evaluated against a strict set of criteria, including effectiveness, environmental impacts, cost, public acceptability, and reversibility. All of these options go beyond the conventional approaches of improving energy efficiency and reducing carbon intensity by using more renewable energy sources, and may be needed in addition to these conventional approaches.

And further out on the limb:

… the scientists backed more way-out systems for reflecting the sun’s rays back into space. Plan A would float thousands of bubble-making machines across the world’s oceans to send huge amounts of salt spray into the atmosphere. The trillions of tiny droplets would make the clouds bigger, whiter, and more reflective — enough, in theory, to shut down several decades worth of global warming.

Plan B would flood the stratosphere with billions of tiny metal-coated balloons, “optical chaff” to backscatter the sun’s rays. Most sophisticated of all, Plan C would assemble giant mirrors in orbit, ready to be positioned at will by a global climate controller.

The BBC reports on 4 major categories of conceivable climate engineering approaches.

* “sequestering” (storing) carbon dioxide, for example in the oceans, by removing it from the air for storage, or by improved ways of locking it up in forests
* “insolation management” – modifying the albedo (reflectivity) of clouds and other surfaces to affect the amount of the Sun’s energy reaching the Earth
* climate design, for example by long-term management of carbon for photosynthesis, or by glaciation control
* impacts reduction, which includes stabilising ocean currents by river deviation, and providing large-scale migration corridors for wildlife.

Here is another article on the topic. I’ll never be competent to assess these proposals, but they could be among the most important scientific innovations we come up with. Global warming may well be real and the result of human activity, follow Chris Mooney. For better or worse I’ll predict the world won’t much cut its CO2 omissions in the near future, so we need to look toward other solutions.

A famous economist paints

Here are some paintings by economist William Baumol. Baumol has done much notable work, my personal favorite is his recent The Free-Market Innovation Machine on how oligopolistic competition drove the innovation behind the Industrial Revolution. Unlike many others, Baumol has never called it quits. He is still going strong at 81 years of age and producing some of his best work.

Thanks to Greg Delemeester for the pointer.

Are blogs now hurting Howard Dean’s chances?

Dean did poorly because not enough people voted for him, and the usual explanations — potential voters changed their minds because of his character or whatever — seem inadequate to explain the Iowa results. What I wonder is whether Dean has accidentally created a movement (where what counts is believing) instead of a campaign (where what counts is voting.)…

…participation in online communities often provides a sense of satisfaction that actually dampens a willingness to interact with the real world. When you’re communing with like-minded souls, you feel like you’re accomplishing something by arguing out the smallest details of your perfect future world, while the imperfect and actual world takes no notice, as is its custom.

There are many reasons for this, but the main one seems to be that the pleasures of life online are precisely the way they provide a respite from the vagaries of the real world. Both the way the online environment flattens interaction and the way everything gets arranged for the convenience of the user makes the threshold between talking about changing the world and changing the world even steeper than usual.

The bottom line:

“Would you vote for Howard Dean?” and “Will you vote for Howard Dean?” are two different questions…

Not to mention “Did you vote for Howard Dean?”

The quotations are from Clay Shirky, here is the permalink. Shirky concludes: “Voting, the heart of the matter, is both dull and depressing.”

Econometric Poetry!

I am teaching econometrics this semester and am thinking about putting the following poem by the American poet, J.V. Cunnigham on the final exam and asking students to prove. Yes, it is fun being a professor! 🙂 Hat tip to Aaron Haspel at God of the Machine.

Meditation on Statistical Method

Plato, despair!
We prove by norms
How numbers bear
Empiric forms,

How random wrong
Will average right
If time be long
And error slight;

But in our hearts
Hyperbole
Curves and departs
To infinity.

Error is boundless.
Nor hope nor doubt,
Though both be groundless,
Will average out.

–J.V. Cunningham

Blackjack and haystacks

The Boston Museum of Fine Arts is sending 21 Monet masterworks to the Bellagio Casino in Las Vegas, in return for a payment of at least $1 million. Here is some promotional material, here is another account.

From my point of view this is good news. The museum has 36 Monet paintings (an MFA curator tells me 80 but I cannot confirm this in print), and they cannot be displayed all at once. Only five Monets will be taken down from the walls to run the show. The Casino brings in more customers, and more people will see the art of Monet. The Bellagio Gallery is run by international art dealers Pace Wildenstein, who have expertise in displaying quality paintings. The casinos themselves are masters of security and climate control, two important factors in any art show. On top of everything, the MFA is not a major recipient of state and federal grants, so now it has more revenue to stage future shows.

What then is the problem? Art world critics charge that the museum is “selling out,” by lending art in return for money. But surely blatant commercialism has a long and often noble history in the artistic world. Most of the notable artists of the Italian Renaissance were consummate businessmen, and they produced for patrons who had their own motives of power, profit, and status. Furthermore few museums predate the nineteenth century. Before that time commercially (or politically) motivated collectors played a primary role in producing artistic publicity.

The real issue: Many people in the museum world are afraid this venture will succeed. If a museum can make money lending pictures to a casino, why do such institutions need explicit government support? Right now museums. for better or worse, are often the major artistic agenda setters. Greater commercialization threatens to take this role away from museums and place it in the hands of the greater public. People will pay $15 to see Monets in a casino, but not to see Robert Gober.

Have you noticed that Clear Channel, the media company and Rush Limbaugh promoters, is now in the business of organizing art exhibits on a for-profit basis.? This too is unpopular with the traditional museum crowd, for competitive, aesthetic, and political reasons. Clear Channel plays commercial hardball with the display sites and puts the exhibit together in a year or two. A non-profit museum, in contrast, will invest in greater scholarship and perhaps take ten years or more to put together an exhibit. This market is starting to change rapidly, and museum curators are scared. Unlike most Americans, I prefer to see Gober over Monet. But at the same time I wish that museums enter and master the future to come, rather than running away from it.