Results for “solve for equilibrium”
197 found

Most Grand Princess passengers not tested

They solved for the equilibrium:

Despite assurances from Vice President Mike Pence that all Grand Princess cruise ship passengers quarantined at Travis Air Force Base would be tested for COVID-19, The Chronicle has learned that two-thirds of them have declined, often at the encouragement of federal health officials.

As of Wednesday, 568 of the 858 passengers screened while confined turned down the test, a federal official familiar with the Travis quarantine and testing told The Chronicle. The low testing numbers align with what passengers were told by officials during a Tuesday afternoon teleconference, citing a 30% acceptance rate for the novel coronavirus test, several passengers told The Chronicle.

“These folks know they are in a 14-day quarantine, if they test positive they are further delayed until they test negative,” said the official, who The Chronicle agreed not to name because they were not authorized to speak to the media, in accordance with the paper’s ethics policy. “They don’t want to stay. They want to be released.”

Interpret the resulting data accordingly, of course.  Here is the full story, via Anecdotal.

*Very Important People*

The author is Ashley Mears and the subtitle is Status and Beauty in the Global Party Circuit.  I loved this book, my favorite of the year so far.

Haven’t you ever wondered why more books shouldn’t just take social phenomena and explain them, rather than preening their academic feathers with a lot of non-committal dense information?  Well, this book tries to explain the Miami club where renting an ordinary table for the night costs 2k, with some spending up to 250k, along with the underlying sociological, economic, and anthropological mechanisms behind these arrangements.  Here is just a start on the matter:

Any club, whether in a New York City basement or on a Saint-Tropez beach, is always shaped by a clear hierarchy.  Fashion models signal the “A-list,” but girls are only half of the business model.  There are a few different categories of men that every club owner wants inside, and there is a much larger category of men they aim to keep out.

Or this:

Bridge and tunnel, goons, and ghetto.  These are men whose money can’t compensate for their perceived status inadequacies.  The marks of their marginal class positions are written on their bodies, flagging an automatic reject at the door.

A clever man can try to use models as leverage to gain entry and discounts at clubs.  A man surrounded by models will not have to spend as much on bottles.  I interviewed clients who talked explicitly about girls as bargaining chips they could use at the door.

The older, uglier men may have to pay 2k to rent a table for the evening, whereas “decent-looking guys with three or four models” will be let in for free with no required minimum.  And:

Men familiar with the scene make these calculations even if they have money to spend: How many beautiful girls can I get to offset how I look?  How many beautiful girls will it take to offset the men with me?  How much money am I willing to spend for the night in the absence of quality girls?

How is this for a brutal sentence?:

Girls determine hierarchies of clubs, the quality of people inside, and how much money is spent.

Here is another ouch moment:

…I revisit a second critical insight of Veblen’s on the role of women in communicating men’s status.  In this world, girls function as a form of capital.  Their beauty generates enormous symbolic and economic resources for the men in their presence, but that capital is worth far more to men than to the girls who embody it.

if you ever needed to be convinced not to eat out at places with beautiful women, this book will do the trick.  Solve for the equilibrium, people…

You can pre-order here.  (By the way, I’ve been thinking of writing more about “lookism,” and why opponents of various other bad “isms” have such a hard time extending the campaign to that front.)

Monday assorted links

1. New book on Never Trumpers by Robert Saldin and Steve Teles.  And should a Fields medalist be mayor of Paris? (NYT)

2. A dollarized and somewhat deregulated Caracas is booming, sort of, at least relative to the immediate past (NYT).

3. Jennifer Doleac on Thomas Sowell.

4. Interns: “A résumé audit study with more than 11,500 applications reveals that employers are more likely to respond positively when internship applicants have previous internship experience. Employers are also less likely to respond to applicants with black-sounding names and when the applicant is more distant from the firm.”

5. “The criminal activity around avocados bears striking similarities to “conflict minerals” such as tantalum, tin, tungsten and gold…

6. Solve for the equilibrium.

Thursday assorted links

1. A Bayesian approach to Bernie Sanders (show your work).

2. Should libertarians ally with Bolsonaro?

3. In which I interview Tom Kalil, Chief Innovation Officer at Schmidt Futures (other sessions too, scroll down for mine).  And Phantom Tyler says solve for the equilibrium.

4. New British fast-track visa, aimed especially at scientists.

5. Taste for Indian food predicts Bernie Sanders support (NYT).  But what does an interest in Pakistani food correlate with?  In the United States, Pakistani food usually is better than Indian.

6. “A professor at one of China’s top universities has quit what many academics would regard as a dream job after he gained celebrity status through an online “knowledge-sharing” platform.”  (former GMU student, 2008 Ph.d)

Vancouver vending machine markets in everything

Health advocates say a safe supply of opioids is critical to help prevent people from overdosing on tainted street drugs.

Now, a pilot project in Vancouver’s Downtown Eastside provides some high-risk users with access to an automated machine that dispenses opioids prescribed by a doctor…

The machine, called MySafe, is stocked with hydromorphone tablets that are released on a pre-determined schedule to high-risk opioid users. A user must scan their palm on the machine to identify themselves. The machine recognizes each individual by verifying the vein pattern in their hand and then dispenses their prescription.

Made of steel and bolted to the floor, MySafe resembles an ATM or vending machine. It logs every package that is released and sends that information to a web feed that only program administrators can access.

Here is the full article, please solve for the equilibrium.  Via Michelle Dawson.

How fake news will alter foreign policy

That is the topic of my latest Bloomberg column:

Just hours after Iran’s missile strike this week on U.S.-Iraqi bases in Iraq, the Iranian government made an incredible claim: The attack, it said, had killed 80 Americans and wounded about 200, all of whom were immediately removed from the site by helicopter. U.S. officials, meanwhile, said that there were no U.S. casualties

U.S. officials may be quite happy that Iran is claiming this “victory” without any Americans having to die. In essence, manufactured casualties may now be able to substitute for actual casualties, at least for some limited purposes.

The most likely purveyors of these fake-news casualties are the weaker sides in military conflicts. They can use fake news reports of revenge to pacify their populations. And the prouder a nation’s citizens are, the more useful such fake-news casualties will be. Fake-news casualties are also easier to fabricate in countries with censorship of the press, such as Iran.

To use the game-theoretic language of deterrence: Threats to retaliate in a painful way are now less credible because lying about retaliation is now an alternative.

Note that the U.S. does not have a comparable ability to invoke fake-news casualties….

But not all is rosy:

The possibility of fake news means that when more powerful countries wish to take action, they need to do something quite vivid and dramatic. There is no doubt — in either the U.S. or Iran — that America did in fact kill Soleimani.

All in the tradition of Thomas Schelling of course.  Solve for the equilibrium!

Abhijit Banerjee reminiscenses

Abhijit and I were in the same first year class at Harvard, and I have two especially strong memories of him from that time.

First, he was always willing to help out those who were not as advanced in the class work as he was.  Furthermore, that was literally everyone else.  He was very generous with his time.

Second, when it came to the first-year Macro final (I don’t mean the comprehensive exams), Andy Abel wrote a problem with dynamic programming, which was Andy’s main research area at the time.  Abhijit showed that the supposed correct answer was in fact wrong, that the equilibrium upon testing was degenerate, and he re-solved the problem correctly, finding some multiple equilibria if I recall correctly, all more than what Abel had seen and Abel wrote the problem.  Abhijit got an A+ (Abel, to his credit, was not shy about reporting this).

One of my favorite Abhijit papers is “On Frequent Flyer Programs and other Loyalty-Inducing Economic Arrangements,” with Larry Summers.  I believe it was published QJE 1987, but somehow the jstor link does not show up from google searches.  This was one of the first papers to show how consumer loyalty programs could segment the market and have collusive effects.

Another favorite Abjihit paper of mine is his job market paper, “The Economics of Rumours,” later published in ReStud 1993.  Have you ever wondered “if this rumor is true, why haven’t I heard it before?”  Abhijit works through the logic of the model on that one, in a scintillating performance.  It turns out this paper is now highly relevant for analyzing information transmission through social media.

Abhijit is the clearest case I know of a brilliant theorist who decided the future was with empirical work — he was right.  Nonetheless his early theory papers are still worthy of attention.  When Abhijit went on the job market, his letter writers suggested he might someday win a Nobel Prize, so strong were his talents.  They were right, but I suspect they had no idea for what the prize in fact would turn out to be.

Brexit update (POTMR)

Boris Johnson is planning to force a new Brexit deal through parliament in just 10 days — including holding late-night and weekend sittings — in a further sign of Downing Street’s determination to negotiate an orderly exit from the EU. According to Number 10 officials, Mr Johnson’s team has drawn up detailed plans under which the prime minister would secure a deal with the EU at a Brussels summit on October 17-18, before pushing the new withdrawal deal through parliament at breakneck speed.

The pound rose 1.1 per cent against the US dollar to $1.247 on Friday amid growing optimism that Mr Johnson has now decisively shifted away from the prospect of a no-deal exit and is focused on a compromise largely based on Theresa May’s withdrawal agreement.

That is new from the FT, here is part of my Brexit post from August 29:

I would sooner think that Boris Johnson wishes to see through a relabeled version of the Teresa May deal, perhaps with an extra concession from the EU tacked on.  His dramatic precommitment raises the costs to the Tories of not supporting such a deal, and it also may induce slight additional EU concessions.  The narrower time window forces the recalcitrants who would not sign the May deal to get their act together and fall into line, more or less now.

Uncertainty is high, but the smart money says the Parliamentary suspension is more of a stage play, and a move toward an actual deal, than a leap to authoritarian government.

This remains very much an open question, but if you “solve for the equilibrium,” that is indeed what you get.

Tuesday assorted links

1. Solve for the equilibrium price of real estate.

2. Kanye + Star Wars vs. NIMBY.

3. Reputation markets in everything: “The Wall Street Journal’s Erich Schwartzel recently wrote a story revealing that none of these tough-guy actors likes it very much when the characters they play get pummeled on screen. One of them even negotiated limits on how much his character can get beat up. Another has his sister, a producer, count how many times his character gets punched, to make sure he gives as good as he gets.

Today, Erich joins us to talk about the lengths these actors have gone to preserve their ever-so-fragile reputations for macho toughness. And the incentives they have for doing so.”

4. A Straussian take on Kenyan rebellion (song, The Rivingtons, 1962).  This was the recording that prompted Dave Marsh to describe Bob Dylan’s “The Times They Are a Changin'” as a “dull diatribe.”

5. A new piece on Harriet Martineau.

6. Stephen Williamson on the Fed.

Highly decentralized solar geoengineering

Nonstate actors appear to have increasing power, in part due to new technologies that alter actors’ capacities and incentives. Although solar geoengineering is typically conceived of as centralized and state-deployed, we explore highly decentralized solar geoengineering. Done perhaps through numerous small high-altitude balloons, it could be provided by nonstate actors such as environmentally motivated nongovernmental organizations or individuals. Conceivably tolerated or even covertly sponsored by states, highly decentralized solar geoengineering could move presumed action from the state arena to that of direct intervention by nonstate actors, which could in turn, disrupt international politics and pose novel challenges for technology and environmental policy. We conclude that this method appears technically possible, economically feasible, and potentially politically disruptive. Decentralization could, in principle, make control by states difficult, perhaps even rendering such control prohibitively costly and complex.

That is from Jesse L. Reynolds & Gernot Wagner, and injecting fine aerosols into the air, as if to mimic some features of volcanic eruptions, seems to be one of the major possible approaches.  I am not able to judge the scientific merits of their claims, but it has long seemed to me evident that some version of this idea would prove possible.

Solve for the equilibrium!  What is it?  Too much enthusiasm for correction and thus disastrous climate cooling?  Preemptive government regulation?  It requires government subsidy?  It becomes controlled by concerned philanthropists?  It starts a climate war between America/Vietnam and Russia/Greenland?  Goldilocks?  I wonder if we will get to find out.

Via the excellent Kevin Lewis.

Han Kuo-yu has won the Kuomintang primary in Taiwan

So yes, Taiwan does have the weirdest politics in the world right now.  Here is a reprise from my Bloomberg column last week:

Another candidate vying for the KMT nomination is Han Kuo-yu, mayor of Kaohsiung and a blunt-speaking outsider populist. He has called for closer ties with China and is believed to be China’s favored candidate, calling China and Taiwan “two individuals madly in love.” It is believed that Chinese cyber-operatives have been working to promote his candidacy. He might be more interesting yet.

What if Han wins the general election and calls for “peaceful reunification” of the two Chinas, based on “one country, two systems”?  Solve for the equilibrium!  I see the following options:

1. They go ahead with the deal, and voila, one China!

2. The system as a whole knows in advance if this is going to happen, and if it will another candidate runs in the general election, splitting the KMT-friendly vote, and Han never wins.

2b. Han just doesn’t win anyway, even though his margin in the primary was considerable and larger than expected.

3. The current president Tsai Ing-wen learns from Taiwanese intelligence that there are Chinese agents in the KMT and she suspends the general election and calls a kind of lukewarm martial law.

4. Han calls for reunification and is deposed by his own military, or a civil war within the government ensues.

5. Han foresees 2-4 and never calls for reunification in the first place.

Well people, which of these would it be?  Here is general background (NYT) on the new primary results.

Biblical Adverse Selection

And Jesus said, Behold, two men went forth each to buy a new car.

And the car of the first man was good and served its owner well; but the second man’s was like unto a lemon, and worked not.

But in time both men grew tired of their cars, and wished to be rid of them. Thus the two men went down unto the market, to sell their cars.

The first spoke to the crowd that had gathered there, saying honestly, My car is good, and you should pay well for it;

But the second man went alongside him, and bearing false witness, said also, My car is good, and you should pay well for it.

Then the crowd looked between the cars, and said unto them, How can we know which of ye telleth the truth, and which wisheth falsely to pass on his lemon?

And they resolved themselves not to pay for either car as if it were good, but to pay a little less than this price.

Now the man with a good car, hearing this, took his car away from the market, saying to the crowd, If ye will not pay full price for my good car, then I wish not to sell it to you;

But the man with a bad car said, I will sell you my car for this price; for he knew that his car was bad and was worth less than this price.

But as the first man left, the crowd returned to the second man and said, If thy car is good, why then dost thou not leave to keep the car, when we will pay less than it is worth? Thy car must be a lemon, and we will pay only the price of a lemon.

The second man was upset that his deception had been uncovered; but he could not gainsay the conclusion of the market, and so he sold his car for just the price of a lemon.

And the crowd reasoned, If any man cometh now to sell his car unto us, that car must be a lemon; since we will pay only the price of a lemon.

And Lo, the market reached its Nash equilibrium.

From username42 on Reddit. Hat tip: Michael Lane.

Your challenge: Explain an economics principle the King James Way.

Bitcoin is Less Secure than Most People Think

I spent part of the holidays poring over Eric Budish’s important paper, The Economic Limits of Bitcoin and the BlockChain. Using a few equilibrium conditions and some simulations, Budish shows that Bitcoin is vulnerable to a double spending attack.

In a double spending attack, the attacker sells say bitcoin for dollars. The bitcoin transfer is registered on the blockchain and then, perhaps after some escrow period, the dollars are received by the attacker. As soon as the bitcoin transfer is registered in a block–call this block 1–the attacker starts to mine his own blocks which do not include the bitcoin transfer. Suppose there is no escrow period then the best case for the attacker is that they mine two blocks 1′ and 2′ before the honest nodes mine block 2. In this case, the attacker’s chain–0,1′,2′–is the longest chain and so miners will add to this chain and not the 0,1… chain which becomes orphaned. The attacker’s chain does not include the bitcoin transfer so the attacker still has the bitcoins and they have the dollars! Also, remember, even though it is called a double-spend attack it’s actually an n-spend attack so the gains from attack could be very large. But what happens if the honest nodes mine a new block before the attacker mines 2′? Then the honest chain is 0,1,2 but the attacker still has block 1′ mined and after some time they will have 2′, then they have another chance. If the attacker can mine 3′ before the honest nodes mine block 3 then the new longest chain becomes 0,1′,2′,3′ and the honest nodes start mining on this chain rather than on 0,1,2. It can take time for the attacker to produce the longest chain but if the attacker has more computational power than the honest nodes, even just a little more, then with probability 1 the attacker will end up producing the longest chain.

As an example, Budish shows that if the attacker has just 5% more computational power than the honest nodes then on average it takes 26.5 blocks (a little over 4 hours) for the attacker to have the longest chain. (Most of the time it takes far fewer blocks but occasionally it takes hundreds of blocks for the attacker to produce the longest chain.) The attack will always be successful eventually, the key question is what is the cost of the attack?

The net cost of a double-spend attack is low because attackers also earn block rewards. For example, in the case above it might take 26 blocks for the attacker to substitute its longer chain for the honest chain but when it does so it earns 26 block rewards. The rewards were enough to cover the costs of the honest miners and so they are more or less enough to cover the costs of the attacker. The key point is that attacking is the same thing as mining. Budish assumes that attackers add to the computation power of the network which pushes returns down (for both the attacker and interestingly the honest nodes) but if we assume that the attacker starts out as honest–a Manchurian Candidate attack–then there is essentially zero cost to attacking.

It’s often said that Bitcoin creates security with math. That’s only partially true. The security behind avoiding the double spend attack is not cryptographic but economic, it’s really just the cost of coordinating to achieve a majority of the computational power. Satoshi assumed ‘one-CPU, one-vote’ which made it plausible that it would be costly to coordinate millions of miners. In the centralized ASIC world, coordination is much less costly. Consider, for example, that the top 4 mining pools today account for nearly 50% of the total computational power of the network. An attack would simply mean that these miners agree to mine slightly different blocks than they otherwise would.

Aside from the cost of coordination, a small group of large miners might not want to run a double spending attack because if Bitcoin is destroyed it will reduce the value of their capital investments in mining equipment (Budish analyzes several scenarios in this context). Call that the Too Big to Cheat argument. Sound familiar? The Too Big to Cheat argument, however, is a poor foundation for Bitcoin as a store of value because the more common it is to hold billions in Bitcoin the greater the value of an attack. Moreover, we are in especially dangerous territory today because bitcoin’s recent fall in price means that there is currently an overhang of computing power which has made some mining unprofitable, so miners may feel this a good time to get out.

The Too Big to Cheat argument suggests that coins are vulnerable to centralized computation power easily repurposed. The tricky part is that the efficiencies created by specialization–as for example in application-specific integrated circuits–tend to lead to centralization but by definition make repurposing more difficult.  CPUs, in contrast, tend to lead to decentralization but are easily repurposed. It’s hard to know where safety lies. But what we can say is that any alt-coin that uses a proof of work algorithm that can be solved using ASICs is especially vulnerable because miners could run a double spend attack on that coin and then shift over to mining bitcoin if the value of that coin is destroyed.

What can help? Ironically, traditional law and governance might help. A double spend attack would be clear in the data and at least in general terms so would the attackers. An attack involving dollars and transfers from banks would be potentially prosecutable, greatly raising the cost of an attack. Governance might help as well. Would a majority of miners (not including the attacker) be willing to fork Bitcoin to avoid the attack, much as was done with The DAO? Even the possibility of a hardfork would reduce the expected value of an attack. More generally, all of these mechanisms are a way of enforcing some stake loss or capital loss on dishonest miners. In theory, therefore, proof of stake should be less vulnerable to 51% attacks but proof of stake is much more complicated to make incentive-compatible than proof of work.

All of this is a far cry from money without the state. Trust doesn’t have the solidity of math but we are learning that it is more robust.

Hat tip to Joshua Gans and especially to Eric Budish for extensive conversation on these issues.

Addendum: See here for more on the Ethereum Classic double spend attack.

Christmas assorted links

1. 99 good news stories from 2018.  p.s. not all of them are good, though most of them are.  But prices going to zero for normal market goods and services usually is a mistake.

2. The seasonal business cycle in camel rentals.

3. David Brooks’s Sidney Awards, part I (NYT).

4. Should credit card companies be required to monitor or limit weapons purchases? (NYT, I say no and view this as a dangerous trend).

5. Should the EU enforce content regulations on streaming services?  (I say no and view this as a dangerous trend).

6. Solve for the equilibrium.