Results for “age of em” 17234 found
Weight Loss and Incentives
Ted Frank reports on his 60k weight-loss bet with Ray Lehmann:
In late 2008, Ray Lehmann and I made an audacious bet: we would put up $60,000 that we would lose 60 pounds in nine months, and pay each other $1,000 for each pound the other lost.
…I lost 32 pounds, Ray lost 41, and we were on pace to lose 60 each. StickK.com was offering to make us their official spokespeople.
Then things fell apart. We couldn't negotiate an appropriate contract with StickK, which wanted exclusive rights to our story without any compensation. The delay caused us to stop writing about the diet while we had false dreams of fame and glory from StickK promotion, and then we both got distracted with starting new jobs and the disappointment of shattered expectations when StickK stopped returning our calls.
Alex Tabarrok correctly predicted that the danger of the two-person bet was that we would collude not to enforce it.
And, indeed that was what happened. We started gaining weight, and started pushing back the goal-line for the end of the bet…neither of us held the other's feet to the fire….
Professor Tabarrok's solution was to create a third-party Leviathan to enforce the bet: he facetiously offered to pay us $500 to be the collector [not facetious, Ted!, AT]. Of course, that was a negative-expectation transaction for each of us, unless we thought we had a 90%+ chance of succeeding…Even the threat of public humiliation on Marginal Revolution wasn't enough to stop us from colluding.
But Ted isn't giving up. He is looking for other people to take the bet to reduce the possibility of collusion or he would like to auction off leviathan rights.
Are there three other people out there willing to wager that they can lose 50 pounds over a reasonable amount of time? (Forty? Sixty?) Who's in, and under what conditions?
…In the alternative, how much is someone willing to pay to be Leviathan and have the opportunity to collect tens of thousands of dollars from me or Ray for failing to lose weight? I suppose I could put Leviathan rights up on eBay; if Marginal Revolution and a few other blogs publicized it, we could reach a good solid equilibrium price. What do people think?
I see this is as a good case study in the difficult of setting up an appropriate incentive scheme and also the difficulty of losing weight. When I put on my Tyler hat, however, I have to wonder whether all this effort put into clever incentive schemes is not a way of avoiding the real issues. "Less blogging, more jogging," my friends.
What Ted and Ray are trying to do is to sail between Scylla and Charybdis by offsetting the pull of food with the pull of lost money. Carrot cake versus stick. But in this tug of war, how long will the balance last? How permanent will the weight loss be?
The real trick in weight loss, as in other areas of life, is to change wants not oppose them. Unfortunately, Seth Roberts nothwithstanding, this is a struggle with no easy solutions.
Nevertheless, I have proudly helped others to lose weight with unusual incentives, and my $500 bid for leviathan rights over Ted and Ray still stands. Good luck guys.
Markets in Everything: Divorce Insurance
NYTimes–Here’s a new option for those worried they’ll end up on the wrong side of the statistics that show so many marriages ending over time: divorce insurance.
SafeGuard Guaranty Corp., an insurance start-up based in North Carolina, recently released what it’s billing as the first world’s first divorce insurance product. Here’s how its WedLock product works.
The casualty insurance is designed to provide financial assistance
in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.
My wife tells me she already has divorce insurance, it's called a job.
Hat tip Mark Perry.
Russian gypsy fortune teller loops
A man was jailed by a Kemerovo region court on Thursday for assaulting a Gypsy fortune teller who predicted that he would be jailed, the Investigative Committee said.
Gennady Osipovich tried to kill the unidentified female fortune teller, who told him she saw a “state-owned house” – a Russian euphemism for jail – in his future, the committee said in a statement on its web site.
The woman managed to escape, but Osipovich stabbed to death two unidentified witnesses of the assault, which took place in October. He was sentenced to 22 years in a maximum-security prison.
The link is here and hat tip goes to The Browser.
Advertising markets in everything
Goldman Sachs Group Inc., winning its first job managing a share sale by an Indian state-owned company, may earn next to nothing for the privilege.
The most profitable securities firm in Wall Street history tied for the lowest bid among 17 banks vying to manage the $1.8 billion offer by Power Grid Corporation of India Ltd., three people with knowledge of the matter said. Goldman Sachs and SBI Capital Markets Ltd. said they’d do the work for a fee equal to 0.00000001 percent of the sale proceeds. That means the firms stand to reap about 2 rupees (4 cents) each on the deal.
The full story is here and I thank Mehul Kamdar for the pointer. There were other low bidders, including JP Morgan. Why bid four cents I wonder, why not bid one cent?
Here is a related page, from what is propitiously called the Department of Disinvestment.
Is there a genetic component to varying degrees of cooperativeness?
I have thought about this question and now I see a new paper (ungated here) on the topic:
Genes and culture are often thought of as opposite ends of the nature–nurture spectrum, but here we examine possible interactions. Genetic association studies suggest that variation within the genes of central neurotransmitter systems, particularly the serotonin (5-HTTLPR, MAOA-uVNTR) and opioid (OPRM1 A118G), are associated with individual differences in social sensitivity, which reflects the degree of emotional responsivity to social events and experiences. Here, we review recent work that has demonstrated a robust cross-national correlation between the relative frequency of variants in these genes and the relative degree of individualism–collectivism in each population, suggesting that collectivism may have developed and persisted in populations with a high proportion of putative social sensitivity alleles because it was more compatible with such groups. Consistent with this notion, there was a correlation between the relative proportion of these alleles and lifetime prevalence of major depression across nations. The relationship between allele frequency and depression was partially mediated by individualism–collectivism, suggesting that reduced levels of depression in populations with a high proportion of social sensitivity alleles is due to greater collectivism. These results indicate that genetic variation may interact with ecological and social factors to influence psychocultural differences.
Still, I can't see the evidence. I don't see the case for causation. Let's say something about a group's serotonin level made it more susceptible to social stress: couldn't that lead to either greater individualism or greater collectivism? Is collectivism so calming and are social institutions so functional so as to respond to how stressed we feel from social interactions? If I were a very stressed out person (I'm not), wouldn't I prefer to live in or construct the social institutions of Sweden, which in this context counts as individualistic?
You might respond that the evolving alleles should be linked to earlier Swedish society and not Sweden today. But then one needs to measure collectivism vs. individualism at that earlier point in time. I wouldn't be surprised if China in the tenth century were "more individualistic" than Sweden in the age of the Vikings, and so on.
(By the way, Is "individualism vs. collectivism" the right spectrum? We individualistic Americans seem especially apt at being trained to kill people and fire when ordered. We also seem especially patriotic.)
If you pull out the strangely-placed Colombia from Figure 1 in the paper, it's basically a Europeans vs. Asians effect driving both the genetic contrasts and the collectivism vs. individualism contrasts. We're left with two quite general contrasts and no theory connecting the two or much of a good reason to think they should be connected.
Don't we just have two data points here — "Asia" and "Europe" — and the split of the data into countries is a phony way to boost apparent statistical significance?
It's a broader question what effects higher serotonin levels have. I've tried to read a few papers on this topic and I've seen high serotonin levels correlated with both anxiety and calm. To be sure, this may reflect the inability of this non-specialist to see through to the best and best understood results, but still the relevance of serotonin to human behavior hardly seems like an open and shut question. I'd sooner suggest that right now we don't understand serotonin very well, at least not as it shapes broader social interactions.
I thank RR for the relevant pointer.
Assorted links
1. Someone from London complains about the price system; some prices are high.
2. Further evidence on the German recovery.
3. Turing test for robot traders?
4. Hitchens writes about his cancer.
6. Paint it Black (fine music).
My 2010 Industrial Organization reading list
Industrial Organization I, Tyler Cowen (x2312, 4910), [email protected]
METHODS OF EVALUATION:
There will be weekly quizzes, a paper, and a final exam.
I. Firm behavior, antitrust, and vertical and horizontal control.
Asker, John, “A Study of the Internal Organization of a Bidding Cartel,” American Economic Review, (June 2010), 724-762.
Bresnahan, Timothy F. “Competition and Collusion in the American Automobile Industry: the 1955 Price War,” Journal of Industrial Economics, 1987, 35(4), 457-82.
Bresnahan, Timothy and Reiss, Peter C. “Entry and Competition in Concentrated Markets,” Journal of Political Economy, (1991), 99(5), 977-1009.
Timothy Bresnahan, “Empirical Studies of Industries with Concentrated Power,” Handbook of Industrial Organization, vol.II.
Tirole, Jean. “Vertical Control.” In Theory of Industrial Organization, Chapter 4.
Klein, Benjamin and Leffler, Keith. “The Role of Market Forces in Assuring Contractual Performance.” Journal of Political Economy 89 (1981): 615-641.
Breit, William. “Resale Price Maintenance: What do Economists Know and When Did They Know It?” Journal of Institutional and Theoretical Economics (1991).
McKenzie, Richard B. and Lee, Dwight, In Defense of Monopoly, chapter four, “Welfare-Enhancing Monopolies,” on reserve.
Tirole, Jean. “Information and Strategic Behavior: Reputation, Limit Pricing, and Predation.” In Theory of Industrial Organization, Chapter 9, on reserve.
Sproul, Michael. “Antitrust and Prices.” Journal of Political Economy (August 1993): 741-754.
McCutcheon, Barbara. “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?” Journal of Political Economy (April 1997): 336-350.
Hazlett, Thomas W. “Is Antitrust Anticompetitive?” Harvard Journal of Law and Public Policy, (Spring 1986).
Crandall, Robert and Whinston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,” Journal of Economic Perspectives (Fall 2003 ), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.
Holmstrom, Bengt and Tirole, Jean. “The Theory of the Firm,” in Handbook of Industrial Economics, vol.I.
Holmstrom, Bengt and Roberts, John. “The Boundaries of the Firm Revisited.” Journal of Economic Perspectives 12, 4 (Fall 1998): 73-94.
Gibbons, Robert. “Incentives in Organizations.” Journal of Economic Perspectives (Fall 1998): 115-132.
Montgomery, Cynthia. “Corporate Diversification,” Journal of Economic Perspectives (Summer 1994): 163-178.
Hansemann, Henry. “The Role of Non-Profit
Lazear, Edward P. “Leadership: A Personnel Economics Approach,” NBER Working Paper 15918, 2010.
Oyer, Paul and Schaefer, Scott, “Personnel Economics: Hiring and Incentives,” NBER Working Paper 15977, 2010.
Van den Steen, Eric, “Interpersonal Authority in a Theory of the Firm,” American Economic Review, 2010, 100:1, 466-490.
Ben-David, Itzhak, and John R. Graham and Campbell R. Harvey, “Managerial Miscalibration,” NBER working paper 16215, July 2010.
AER Symposium, May 2010, starts with “Why do Firms in Developing Countries Have Low Productivity?,” runs pp.620-633.
Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf
Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.
Charness,
Cowen,
III. Capital structure and control
Miller, Merton, and commentators. “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.
Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.
Hart, Oliver. “Financial Contracting.” Journal of Economic Literature (December 2001): 1079-1100.
Easterbrook, Frank H. “Two Agency-Cost Explanations of Dividends.” American Economic Review (September 1984).
Baker, Malcolm and Wurgler, Jeffrey. “A Catering Theory of Dividends,” Journal of Finance (2004), available at http://pages.stern.nyu.edu/~jwurgler/.
Baker, Malcolm and Ruback, Richard. “Behavioral Corporate Finance: A Survey,” found at http://www.wcfia.harvard.edu/seminars/pegroup/BakerRubackWurgler.pdf
MacKinlay, A.C. (1997), “Event Studies in Economics and Finance”, Journal of
Economic Literature 35(1), 13-39.
Andrade, Gregor, et. al. “New Evidence and Perspective on Mergers.” Journal of Economic Perspectives (Spring 2001): 103-120.
Holmstrom, Bengt and Kaplan, Steven. “Corporate Governance and Merger Activity in the
Gompers, Paul and Lerner, Josh. “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.
Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.” Quarterly Journal of Economics 104 (November 1989): 655-670.
Stein, Jeremy C. “Takeover Threats and Managerial Myopia.” Journal of Political Economy (1988): 61-80.
Scharfstein, David S. and Stein, Jeremy C. “Herd Behavior and Investment.” American Economic Review 80 (June 1990): 465-479.
Hall, Brian and Murphy, Kevin J, “The Trouble with Stock Options,” Journal of Economic Perspectives, Summer 2003, also at http://www-rcf.usc.edu/~kjmurphy/HMTrouble.pdf.
Murphy, Kevin J. and Zaboznik, Jan. “CEO Pay and Appointments,” American Economic Review, May 2004, also at http://www-rcf.usc.edu/~kjmurphy/CEOTrends.pdf
Jensen, Michael, Murphy, Kevin J., and Eric Wruck. “Remuneration: Where We've Been, How We Got to Here, What are the Problems, and How to Fix Them,” available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=561305#PaperDownload.
Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf
McKay, Alisdair and Reis, Ricardo, “The Brevity and Violence of Contractions and Expansions,” NBER Working Paper, 12400, 2010.
Gorton, Gary B. Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1401882, published on-line in 2009.
IV. Theory and Regulation of Natural Monopolies
pp. 21-275.
Demsetz, Harold. “Why Regulate Utilities?” Journal of Law and Economics (April 1968): 347-359.
Williamson, Oliver. “Franchise Bidding for Natural Monopolies – in General and with Respect to CATV.”
Crandall, Robert W. “An End to Economic Regulation?” available at http://www.brookings.org/views/papers/crandall/20030721.pdf.
Parente, Stephen L. and Prescott, Edward. “Monopoly Rights: A Barrier to Riches.” American Economic Review 89, 5 (December 1999): 1216-1233.
Shleifer, Andrei. “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.
Chang, Roberto, Constantino Hevia, and Norman Loayza, “Privatization and Nationalization Cycles,” NBER Working Paper 16126, June 2010.
Berg and Tschirhart, pp. 480-522.
Associated other topics in regulation, depending on your interests; reading suggestions will follow later in the semester.
*The Korean War*
That's the new book by Bruce Cumings and it is as good as the reviews indicate (criticisms here). Here are a few choice excerpts:
For decades the South Korean intelligence agencies put out the line that Kim Il Sung was an impostor, a Soviet stooge who stole the name of a famous Korean patriot. The real reason for this smoke screen was the pathetic truth that so many of its own leaders served the Japanese…
And:
…Two Koreas began to emerge in the early 1930s, one born of an unremittingly violent struggle in which neither side gave quarter; truths experienced in Manchukuo burned the souls of the North Korean leadership. The other truth is the palpable beginning of an urban middle class, as peole marched not to the bugle of anti-Japanese resistance but into the friendly confines of the Hwashin department store, movie theaters, and ubiquitous bars and tearooms.
And:
…Most Americans seem unaware that the United States occupied Korea just after the war with Japan ended, and set up a full military government that lasted for three years and deeply shaped postwar Korean history.
And:
What hardly any Americans know or remember, however, is that we carpet-bombed the North for three years with next to no concern for civilian casualties…The air assaults ranged from the widespread and continual use of firebombing (mainly with napalm), to threats to use nuclear and chemical weapons, finally to the destruction of huge North Korean dams in the last stages of the war.
And, from the entire war:
Perhaps as many as 3 million Koreans died, at least half of them civilians (Japan lost 2.3 million people in the Pacific War).
You can buy the book here.
Further assorted links
Sentences to ponder
A report from Harvard's Kennedy Center last year found that the world could cut global CO2 emissions by about 6 percent simply by scrapping price supports for fossil energy.
Hat tips go to Sullivan and Plumer.
Larry Kotlikoff responds on limited purpose banking
You can read his reply here. Note however that my criticisms explicitly are directed at narrow banking more generally, most of all my own (previous) version of the idea, not at the specific version of Kotlikoff's proposal. There is one particular topic I did not deal with, and on it I will quote Kotlikoff reproducing my critique and responding to it:
TC: A lot of what current banks do would be replicated by non-bank commercial lenders and the risk of the banking sector would be transferred somewhere else.
LK: You missed the key point that all incorporated financial intermediaries have to operate as mutual fund companies. There are no “non-bank commercial lenders” unless they operate as proprietorships and partnerships and their owners have their houses and yachts on the line. The risk of the banking sector is reduced because we set it up to eliminate any chance of bank runs and gambling by the banks with the taxpayers’ chips. Recall, the mutual funds are 100 percent equity financed at all times and in all situations.
TC: Ideally, these non-bank lenders would engage in greater “maturity-matching,” but if banks will exploit the moral hazard problem won’t these lenders exploit it too?
LK: The only financial intermediaries who can operate under Limited Purpose Banking according to the current rules of the road are private banks with no limited liability. The lack of limited liability will eliminate the moral hazard problem.
I am not inclined to see unlimited liability as a practical alternative. How many businesses supply commercial credit? Trade credit? Credit by any other name? — namely contracts involving derivatives, annuities, insurance, repurchase agreements, etc., with intertemporal payments and embedded interest rates in the prices. Would they all have to give up limited liability? Or would we end up channeling more financial intermediation through indirect credit transactions, while maintaining limited liability? A version of this dilemma is experienced regularly by systems of equity-based Islamic banking..
Second, unlimited liability creates a pecuniary externality across shareholders. Who wants to be the remaining "fat cat" shareholder? Why should Bill Gates ever invest? Non-mutual fund banks will end up owned by thinly capitalized individuals or entities, thereby defeating the purpose of unlimited liability while at the same time raising transactions costs. Walter Bagehot made this point, see also Joseph Grundfest, here is Hansmann and Kraakman with a reply. Alex very ably surveys the main arguments in an MR post.
Unlimited liability is fine for small-scale, private banking, especially in the international sector where tax evasion is a motive and the banks aren't fully part of any standard regulatory network. It doesn't work to force it on such a large sector of the economy as most commercial credit and non-bank lending.
In sum, I do not believe that narrow banking proposals benefit from being bundled with unlimited liability for other lenders.
Downward Revision in 2nd Quarter GDP?
Secretary of the Treasury Geithner in the NYTimes on August 2:
While the economy has a long way to go before reaching its full potential, last week’s data on economic growth show that large parts of the private sector continue to strengthen.
Catherine Rampell at the NYTimes blog Economix on August 3:
On Friday, in its preliminary estimate of gross domestic product, the Bureau of Economic Analysis said it believed the economy grew at an annual rate of 2.4 percent last quarter.
…G.D.P. numbers go through several revisions as the bureau receives more complete data, and it now looks as if the revisions may be significant. According to the June factory order data, released today, the number the bureau used to calculated the inventory component of G.D.P. was way off.
As a result, economists are predicting that the second quarter G.D.P. number will be revised downward from 2.4 percent to somewhere around 1.7 percent.
Previous revisions to GDP show the recession began earlier and had a deeper trough than first thought. Moreover, on balance, the previous revisions also suggest that the recovery has been even weaker than first thought. If the argument above holds up, that trend will continue. The news is not good.
GDP is lower today than it was at its peak in 2007.
Why does anyone support private macroeconomic forecasts?
This question has come up a few times lately in the blogosphere. I've long found the market for such forecasts to be a puzzling practice. Sometimes the forecasts are purchased and other times they are given away, but either way money is being spent.
The first question is whether those forecasts are more accurate than naive "random walk" models. On average probably not, although you could argue that in a recession mean-reversion gives an edge to structural models. Still, the forecasts are paid for in both good times and bad. Note also that those who predicted our last crisis were, for the most part, giving that knowledge away for free.
Second, there are many such forecasts. Even if some forecasts are quite useful, what's the value of supporting a marginal or additional forecast? Is the next forecast to come along so much better? Forecasts would seem to be the classic example of a public good.
I would explore other models. Under one possibility, outsiders pay for the forecast to join a more exclusive club of clients with other privileges. It's a bit like how art galleries won't sell their best pictures to complete outsiders but instead ask that you "pay your dues" by being a loyal customer for years. In other words, it's an arbitrary fee to enforce price discrimination, backed by some plausible pretext.
Under a related model, the firm pays for the forecast as a means of generating publicity, signaling its size, seriousness, and audience, and in general marketing itself to outside clients. It is unclear who bears the final incidence of these expenditures, the firm or the clients, but still "forecasting isn't about knowledge," as Robin Hanson would have said to the oracle at Delphi.
Either way, I do not put much credence in what the forecasts say. They do usually represent "standard macroeconomic knowledge" and in that sense they are not a complete fraud. But the fact that they are being paid for does not, in my eyes, mean they are passing a market test in the traditional sense.
If anything, the persistence of the market in such forecasts should make you wonder about many of the other functions of these banks.
What I’ve been reading
1. John Carey, William Golding: The Man Who Wrote Lord of the Flies. The subtitle gets at the point and I still can't finish his other books. Much of his life he wasted in a state of repression. Alcohol and boarding schools play roles in this story. Recommended.
2. Why Europe: The Medieval Origins of its Special Path, by Michael Mitterauer. How many of the preconditions for the European miracle were in place by the Middle Ages? This isn't a fun book (translated from the German), but specialists should pick it up. Here is one very serious review of the book (JSTOR).
3. Being Wrong: Adventuers in the Margin of Error, by Kathryn Schulz. Why do we so enjoy being right and thus so often end up being wrong? This is a good book for many people, but if you've been following Robin Hanson, you won't find it novel or rewarding.
4. Debra Satz, Why Some Things Should Not be for Sale: The Moral Limits of Markets. How many books are there now on this topic? Lots. How many of them take seriously the notion that our moral intuitions can be badly misguided for judging the operation of an impersonal market economy in the modern world? Not so many, though all seem to think they do.
5. Let me get this straight. You, the beautiful and brilliant
6. Super Sad True Love Story, by Gary Shteyngart. I didn't like his previous two books and I usually dislike pomo novels about cool-talking young people in major U.S. cities. Still, the flood of very good reviews nudged me to read this and I'm glad I did.
Health care and revenue competition in Britain
Elite NHS foundation trusts are gearing up to lure private patients from home and abroad as health budgets are squeezed – a decision made possible after health secretary Andrew Lansley said he would abolish the cap limiting the proportion of total income hospitals can earn from the paying sick…
With a £20bn black hole opening up in NHS budgets, a group of top performing trusts are seeking to profit from paying patients and use the money to fund public healthcare in Britain.
Previously,
Labour's cap had meant most hospitals were unable to generate more than 2% from private income.
Here is more, although full details are not yet clear, it seems doctors will be much more in charge, in a decentralized manner. Here's one opinion:
"What's to stop US healthcare companies coming over here to poach patients. Or GPs sending patients to India for cheap operations? Or English hospitals raiding Scotland for sick people?" said Alan Maynard, professor of health economics at the University of York. "It could be a real mess."
How long will it be before the entire NHS, as it was known, goes down as a collapsed model? What exactly caused the collapse? (I was surprised to read that Labour had tripled the budget since 1997.) Will "the line" be that evil ideologues are dismantling a working system? How will greater competition for patients alter our assessments of various national health care systems? Is empowering doctors going to cut costs? How much loyalty will patients, and voters, show to the old NHS model?