Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, May 21, 2005

Libertarian Party Convention

I will be off to Trono today to visit the Libertarian Party of Canada's Convention. I will probably join the party. Stephen Harper has moved the Conservative Party too far to the centre, and he engages in too much sophomoric point-scoring rather than concentrating on making the point that gubmnt should not be viewed as an unpaid insurer-of-last-resort for folks who lose money. Nor does he seem to think that gubmnt is too big. So I am examining the Libertarian Party, since that is where my sympathies tend to lie anyway.

I do this with some trepidation. Despite my libertarian instincts, I have met some libertarians in the past who are flat out wackos. I hope those folks are not out in big numbers at this convention.

If possible, I might be able to blog some impressions while I'm there.

Emiratization: The UAE is very different

Regular readers of The Eclectic Econoclast have seen many mentions of and references to The Emirates Economist. At this point, I would like to draw attention to a few things I think I have learned from him over the past six months:
  • The United Arab Emirates is more open than many other oil-rich (or poor, for that matter) Muslim states.
  • The economic growth and economic liberalization in the United Arab Emirates are a long way from laissez faire, but they are much closer than in many other predominately Arab countries.
  • The excitement and challenges of living in growing, modern cities is equaled by the awe of the dunes and deserts and history.
  • Rent-seeking is everywhere.

Major conclusion: do not assume that all oil-rich middle eastern Muslim countries are the same.

Update: for some different perspectives, see Secret Dubai or The Freaking Truth.

Friday, May 20, 2005

Americans Steal Water from Russia

Canadians have long feared that Americans would come up to Canada and steal our water. But I guess our strong national defence scared them off, so they went to Russia to steal water instead. [h/t to Canadian Econoview]

A Russian village has been left baffled after its lake disappeared overnight.

NTV television has shown pictures of a giant muddy hole bathed in summer sun, while fishermen from the village of Bolotnikovo look on disconsolately.

Dmitry Zaitsev, a local Emergencies Ministry official, says trees also disappeared under the ground as the lake emptied near the Volga river, east of Moscow.

"It is very dangerous. If a person had been in this disaster, he would have had almost no chance of survival," he said.

He says water in the lake might have been sucked into an underground water-course or cave system but some villagers have more sinister explanations.

One older woman has told NTV she believes the Americans have finally been able to hit them where it hurts.

"I am thinking, well, America has finally got to us," she said as she sat on the ground outside her house.

Age and Sex Discrimination in Auto Insurance Premiums

The usual argument made by economists for charging young men higher auto insurance premiums is that, on average, as a group, they tend to have more accidents than older drivers and female drivers; not charging them more means that older drivers and females would be subsidizing the insurance for these young males. A very sensible argument. Except in Newfoundland.

A driver's age, gender or marital status will not affect insurance premiums in Newfoundland and Labrador under new rules that the government wants in place by August. The province's Government Services Minister Dianne Whalen announced the changes on Thursday, saying they could save young drivers up to 46 per cent a year on insurance fees.

"It isn't fair: 85 per cent of young drivers who do not have accidents have to pay huge premiums for the 15 per cent who do," she said.
What a doink*. That happens with everyone who buys insurance but doesn't have a claim. And she says, "It isn't fair..."????

Who is going to pay the extra for insuring young people, keeping in mind that lower auto insurance rates mean that more young people will begin to drive and have even more accidents if their rates are lowered? Will everyone else's rates go up? Nope. In Newfoundland, auto insurance is akin to a regulated public utility:

Whalen said insurers will have to justify any future increases to Newfoundland's Public Utilities Board.

She said the alterations are based on profits the companies reported to the board.
"We see that they can afford these decreases," said Whalen.

Canadian insurance companies reported a $4.2 billion profit in 2004.

Several provinces have announced changes in the wake of public fury over the enormous earnings...

The Newfoundland government has already ordered reductions averaging 15 per cent.

There is another, much better solution. Let the market work.

Encourage entry by lots of different insurance companies. Invite foreign insurance companies to set up shop in the province. Competition between the companies will keep rates down near an actuarially fair level. They may earn large profits in some years but these windfalls will be offset, on average, by large losses in other years.

The only role for government in this industry might be to ensure the companies are on solid financial ground and do not engage in false advertising. That isn't the direction the provinces of Canada are headed, though.

My prediction: within ten years the gubmnt of Newfoundland will have taken over the auto insurance business, and general taxpayers will be subsidizing the driving by high-risk drivers by providing them insurance at less-than-actuarially-fair insurance premiums.

Update: Brian Ferguson has a much more detailed discussion of this article at A Canadian Econoview.

*Doink: someone who clearly has no idea about economics or probabilities; the de facto equivalent of socionomologist.

Men and Women ARE Different

Perhaps Larry Summers was right. Perhaps men and women are different in ways that affect their interest and ability in doing mathematics, physics, or economics. And perhaps they are different because of the impact of hormones on brain development in boys and girls when they are very young. That seems to be the implication of this article by Doreen Kimura (Professor Emerita from The University of Western Ontario) in Scientific American ($ required for the full article) [thanks to BenS for providing the link]:

Sex Differences in the Brain; Battle of the Sexes; by Doreen Kimura; 6 page(s)

Men and women differ not only in their physical attributes and reproductive function but also in many other characteristics, including the way they solve intellectual problems. For the past few decades, it has been ideologically fashionable to insist that these behavioral differences are minimal and are the consequence of variations in experience during development before and after adolescence. Evidence accumulated more recently, however, suggests that the effects of sex hormones on brain organization occur so early in life that from the start the environment is acting on differently wired brains in boys and girls. Such effects make evaluating the role of experience, independent of physiological predisposition, a difficult if not dubious task. The biological bases of sex differences in brain and behavior have become much better known through increasing numbers of behavioral, neurological and endocrinological studies.

We know, for instance, from observations of both humans and nonhumans that males are more aggressive than females, that young males engage in more rough-and-tumble play than females and that females are more nurturing. We also know that in general males are better at a variety of spatial or navigational tasks. How do these and other sex differences come about? Much of our information and many of our ideas about how sexual differentiation takes place derive from research on animals. From such investigations, it appears that perhaps the most important factor in the differentiation of males and females and indeed in differentiating individuals within a sex is the level of exposure to various sex hormones early in life.

So, on average, men and women are different.

So maybe Harvard just wasted $50m?

Also see The Hispanic Pundit's posting on this topic.

U.S. Productivity

There have been several recent items in the blogosphere about U.S. productivity.

First. If you haven't seen the graph at Macroblog, (from the Financial Times) comparing changes in productivity in the U.S. vs. several European countries, go look at it. Labour productivity in the U.S. has grown considerably since 1987. It has declined in France, Germany, and Italy (dramatically so). And in the UK, it has increased very slightly. [link via Tyler Cowen at Marginal Revolution].

Second. The Emirates Economist also links to the Financial Times article, quoting:

Only in Europe and Latin America has productivity growth slowed....An intensification of the competitive process is doing good to most regions of the world,” said Bart van Ark, a professor at the University of Groningen in the Netherlands and one of the authors of the report. “The number of countries that participate in the world economy is now higher than it has ever been and some of the lower income regions can now exploit their comparative advantages in world markets.”
Third. Thomas Siems at the Dallas Fed shows that the growth in U.S. productivity has been especially great since 1997:

He later presents some compelling evidence that one reason (among others) for the phenomenal growth in U.S. productivity has been improved supply chain management. For example, where inventories are concerned,

His conclusion is quite optimistic:

The Power of ProductivityFurther improvements are on the horizon. Other new information technologies, like the global positioning system (GPS) and radio frequency identification (RFID), will continue to improve supply chains. This is true not only in manufacturing, but also in retail, insurance, health care and other industries. We are just beginning to see the power of productivity as firms effectively implement these new technologies.

... In our increasingly interconnected and interdependent global economy, the processes involved in delivering supplies and finished goods—including information and other business services—from one place to another are mind-boggling. But through information engineering, supply chain improvements have resulted in a reduced bullwhip effect, lower inventory levels, reduced logistics costs and streamlined payments. These improvements have led to macroeconomic benefits such as more stable economic output and stronger productivity growth.

Thursday, May 19, 2005

Netscape 8: Bugs? Spyware?

Jack sent me this link describing the newest edition of Netscape.
I was thinking of giving it a try.
About an hour later, he wrote:
Hung my computer when I tried to load a feature! Also, unless you choose advanced settings when installing, it would load spyware.
I think I'll hold off for awhile....

Bribery Among Canadian Politicians

From the CBC:

Conservative MP Gurmant Grewal alleges that the Liberals offered him and his MP wife plum posts if he helped their minority government survive....

Grewal alleges he made an audio recording of the offer, which he said came from Dosanjh and Tim Murphy, Prime Minister Paul Martin's chief of staff.

In the tape recording the MP played for reporters, Murphy can be heard saying, "I think it's a bad idea to have any kind of commitment that involves a specific trade."

Murphy later says explicit discussions about a senate seat wouldn't be helpful and in fact could not take place until after Greywall abstained in the vote, expected at about 5:45 p.m. Thursday.
For crushing details of the accusations and how the media have handled them, read this on London Fog.

What Were the 10 Worst Jobs in History?

From the Canadian version of the History Channel,
In celebration of some of the worst jobs over the last 2000 years, we ask our viewers to test their knowledge of the worst jobs in history. Challenge yourself with our fun and interactive quiz.
I got an 8/10 and should have done better.

The problem I had with the quiz was I'm not convinced that, relative to feasible options at the time, these were the worst jobs in history.

Did people who did these jobs receive compensating variations in the wages? Would the greatest compensating variation indicate the "worst" job in the sense of the job needing the greatest extra pay to get people to do it? When you take the quiz, you realize they aren't talking about slaves, necessarily, and so we might expect some evidence exists somewhere on this question.

Probably Not a Good Case in Which to Apply the Rule of Reason

When is erotic dancing "art" and when is it just "dancing on a bar"? [h/t to BF]

The issue came to a head earlier this month when an Oslo court ruled that a local strip club was exempt from imposing a 25-percent value-added tax (VAT) on entry fees because it was an art form on a par with ballet and theatre.

"Striptease is an art just like any other dance on stage. It's sensual dance which is more tasteful than some drunk girls dancing on a bar on a night out," says Electra, a 23-year-old lightly-clad Swede who started go-go dancing -- with her clothes on -- when she was 14 using a fake ID.

... When the Oslo court granted the Diamond Go Go Bar the same tax exemption as theatre performances, the judge explained that there were two types of striptease: one that was artistic and the other vulgar.

The judge said that "to the court's knowledge", the shows in question were artistic.
Who will be qualified to determine what is art and what is vulgar?
At what cost would these determinations be made?

Why is it that too many judges seem to prefer solutions that increase legal determination costs and hence increase the derived demand for lawyers?

What a dumb and inefficient decision.

UWO Awards Honorary Degree to Abortionist

The University of Western Ontario will be awarding an honorary doctorate to Henry Morgentaler, a physician who was a pioneer campaigner for legalized abortion in Canada during the 1960s and early 1970s; in the process he performed many abortions himself. This decision has met with considerable opposition.

The most surprising opposition is that of Don McDougall, Chair of the UWO Board of Governors. He wrote an open letter saying,

It is my firm conviction that this decision will depreciate the honor, adversely affect fundraising, recruiting of students and faculty, relationships with the Affiliated Colleges and alumni and do irreparable harm to the reputation of the university. It is also completely out of step with the culture and positioning of our university.

We have generally avoided highly charged political and moral issues and certainly have never used our Honorary Degree program to position our university on an issue of such divisiveness with the public.

Nonsense. The University of Western Ontario has awarded numerous honorary degrees to controversial figures, some [e.g. Stephen Lewis] who were quite political and who definitely presented "highly charged political and moral" convocation addresses. The university has often given honorary degrees to people who are outstanding in their field, even if they have stirred up strong feelings, pro and con. Here is the response from the university's president, Paul Davenport (who, btw, is likely a Chet).

Because I must attend all the convocations [we now hold ten different ceremonies in June, six in October, plus a few others scattered around for good measure], I can attest to the fact that I have found some of the degree recipients less than worthy; and some addresses have sometimes been putrid or stupid or so left-wing as to have been both.

I personally do not like abortion, but then I'm not a woman, and I think that makes a difference. At the same time, I think late term and partial birth abortions should be illegal (with maybe some extremely rare exceptions). But I can accept a societal decision to legalize abortion during the first trimester.

Nevertheless, I applaud the university's decision to grant an honorary doctorate to Henry Morgentaler. He was clearly a pioneer and a champion for his cause. I don't agree with abortion, and in many ways I would rather he were not honoured. And yet I see granting him an honorary degree as being no worse than granting one to many others with whom I strongly disagreed.

In the end, I think the Chair of the Board of Governors has an obligation to resign. The Board had no official oversight for this decision, and he had no justification for publishing his open letter.

The one sad aspect of this particular case is that security will have to be very tight for the convocation. And it will be a big media show. All that is too bad, since it will detract from the graduation process for the students and their parents.

I nominated the Canadian writer, W. P. Kinsella. I hope he gets one sometime.

Wednesday, May 18, 2005

Capital-Labour Substitution:
Robotic Doctors

According to CNN [thanks to Jack for the link (and I just saw a similar piece on BBC)],

A London hospital has two new members of staff -- two robotic "doctors" that can carry out ward rounds in place of human physicians.

The robots will be trialed in a general surgery ward and the accident and emergency department at St Mary's Hospital. They will also be used for surgical training for junior doctors at London's Imperial College.
It looks pretty speculative so far, to be honest. The doctor gets to sit in some other room and control a robot rather than visit the patient. Maybe that would be useful for someone with SARS, but I really doubt it would be very valuable in this situation:

"If a specialist is at a conference in California but their medical opinion is needed for a St Mary's patient or to deliver a lecture to junior doctors, the RP6 robot provides an instant and global link at any time of the day or night."

... The specialist controls the robot off-site using a joystick, and is in full control of the robot's movements, head monitor and camera. The doctor can see the patient, ask questions, read patient records, view X-rays and test results from a console.
In some instances, having a physician familiar with a case use the robo-doc might be reassuring to a patient; but often the face-to-face contact with an on-call physician will be valuable, too.

The main problem, though, is that it does not really allow substitution of capital for labour, which is crucial in the Canadian and British health systems. Rather, it uses capital to permit the substitution of one form of labour for a different form. It doesn't really help provide more health care at lower costs for the society.

The one aspect I liked near the end of the story is the continued growth in the use of artificial intelligence to assist in diagnostics. This use of computers to assist diagnoses in medicine has been going on for over 30 years [I recall former colleague, Bob Woodward, telling us about it back in the mid 1970s]; surely it could be a valuable part of the robo-doc, increasing the speed and accuracy of diagnoses.

Who Says Romance Is Dead?
The Economics of Love and Marriage

Romance may not be dead, but it certainly does respond to incentives. This is from Tom Palmer [no relation]:

... The real romance behind the story, however, is surely the decision to marry “legally” in 2004, rather than in 2005. Guy called me last November to tell me that, with Bretigne’s parents in town, they’d gone to city hall and gotten married. I got a real tear in my eye when he told me that he had worked out the tax implications of marriage in 2004 vs. marriage in 2005, on the basis of which they decided to make it official with the tax authorities in 2004. And who says that romance is dead?
I wonder if Guy and Bretigne both consciously and explicitly assessed the expected incremental or marginal benefits vs. costs of additional search for a partner. After all, I tell my intro students that's what we mean when we tell someone we love them.

Sweetheart, I've evaluated the expected marginal benefits and costs of additional search for a mate, and I've decided to stop searching. You'll do.

Translation: I love you.

Further Evidence that Noam Chomsky Is a Fraud

I have never felt comfortable in the company of people who sing the praises of Noam Chomsky. I know I don't share their view of the universe or of humanity, but I never felt comfortable about his work, either. Perhaps with good reason.

His attacks on Alan Dershowitz' latest book, The Case for Israel, appear to be scurrilous at best [link via The Atlantic Blog]. Here are some excerpts from Dershowitz' response.

A systematic effort to discredit the book, and me, has been undertaken by a well-organized group of Israel bashers led by Noam Chomsky, Norman Finkelstein, and Alexander Cockburn.

... The mode of attack is consistent. Chomsky selects the target and directs Finkelstein to probe the writings in minute detail and conclude that the writer didn’t actually write the work, that it is plagiarized, that it is a hoax and a fraud. Cockburn publicizes these “findings,” and then a cadre of fellow travelers bombard the Internet with so many attacks on the target that these attacks jump to the top of Google. Because no one has thus far exposed the pattern, each attack may seem plausible on first impression. But when the pattern is examined and exposed, the entire enterprise becomes clear for what it is: a clear attempt to chill pro-Israel advocacy on university campuses by a form of literary McCarthyism.

... They first claimed—as they had with Peters—that I did not “write this book,” that I did not even “read it,” and that I “had no idea what was in the book.” Recently Finkelstein claimed that I don’t write any of my books: “[Dershowitz] has come to the point where he’s had so many people write so many of his books.… [I]t’s sort of like a Hallmark line for Nazis… [T]hey churn them out so fast that he has now reached a point where he doesn’t even read them.”[34]

... The problem for them is that I don’t type or use a computer, so that every word of the text was handwritten by me in my own handwriting—and I still have the manuscript. Even after I publicly offered to make the manuscript available for anyone to examine, Finkelstein repeated the false charge on a C-SPAN television broadcast.[35]

Well, if I did actually write it in my own hand, I must have copied it or plagiarized it. That was the next charge. And guess who I plagiarized it from? Joan Peters, according to Finkelstein, Chomsky, and Cockburn. The problem with their charge is that Peters’ book was entirely demographic and historical, whereas more than 90 percent of my book deals with contemporary events that took place after the publication of Peters’ book. The other, even more serious problem for them is that they could not come up with a single sentence, phrase or idea in my book that came from another source and was used without quotation marks, attribution, and citation.

... Finkelstein’s tiny accusation—that I cited Peters merely eight times instead of a dozen times in two small chapters totaling seven pages of my 264-page book—totally false as it is—has ballooned into a charge that I plagiarized “all” or “large parts” of my book from Peters, despite the fact that the majority of my book deals with events that occurred after the publication of Peter’s book. For example, here is what Chomsky has said: “large parts of the book were simply plagiarized from a well-known hoax….”

It sounds familiar, doesn’t it? The only new element in this tired tactic is the creative use of the Internet.Despite his demonstrable lies, Finkelstein is a popular speaker at anti-Israel events on university campuses around the world. He is not quite as popular as Chomsky and Cockburn, but he is paid handsomely by student groups anxious to promote his anti-Zionist rants. The members of the McCarthyite triumvirate are invited to campuses far more frequently than centrist, moderate pro-Israel speakers. There is something very wrong with this picture, but now that the pattern of literary McCarthyism has been exposed, perhaps the picture will change.

Dershowitz is a careful legal scholar; the C-F-C trio have more than met their match. His full piece is well-documented and carefully footnoted. I recommend reading it in its entirety.

Phil Miller Reviews Masked Rider

Phil Miller at Market Power has just put up a lengthy, informative review of Masked Rider, by Neil Peart, drummer and lyricist for Rush.

The tour is a rough one. Many of the main roads are bike paths, at best, and riding such roads in dry conditions with temperatures in the 80's and 90's can tax even the most experienced riders. In some instances, the "roads" were so bad that the riders had to walk their bikes.

Neil describes his relationship with his fellow riders. Although one might expect at least two of the riders to become friends, none do. Neil and Leonard seem to develop a mutual respect for one another, but the riders are too different from one-another that not even the toughness of the trip can bring them together as friends. It's not that they became enemies. Their shared experience neither brought them together nor drew them apart.
It's a captivating review that makes one want to read the book.

Tuesday, May 17, 2005

Caption Contest

Kent at Trolling in Shallow Water is having a caption contest. It ends on Wednesday evening, so enter early and often, but especially soon.

Is It Cheaper to Buy a Politician Than to Buy Votes?

Maybe so. Paul Martin has just made former Conservative leadership candidate [and rumoured one-time companion of Bill Clinton, to lay on the ad hominems] his minister of human resources and skills development in the Liberal cabinet. In doing so, he has taken one vote away from the opposition and increased the chances that his NDP (i.e. socialist)-driven budget will pass on Thursday and he will be able to keep his job. [thanks to Brian Ferguson of Canadian Econoview for the e-mailed tip]

Belinda Stronach, who ran for the leadership of the Conservative party in early 2004, has crossed the floor to the Liberal party and will sit in Paul Martin's cabinet.

The millionaire businesswoman becomes minister of human resources and skills development, the prime minister said Tuesday morning.

... Stronach is a small-L liberal who has not always been comfortable within the Conservative ranks, especially on the issue of same-sex marriage.

Last week, she said it would be unfortunate if the Liberal government fell before the 2005 budget was passed because it contained measures on municipal funding that were of great importance to her constituents in the Toronto-area riding of Newmarket-Aurora.
Recall that last month I posted that I really hate Liberal minority gubmnts because they spend a great deal, targeting specific ridings [election districts, for those unfamiliar with the Canadian political scene] and cave in to NDP pressure for more gubmnt intervention.

I confess I have not been terribly impressed with [conservative leader] Harper's persona during the past few months, but this budget is truly horrible. I'm disappointed to see that the odds of its passing are greater now that Martin has b(r)ought Stronach into the Liberal cabinet.

Update: by far, the best posting I've read on this topic is by Brian Ferguson at A Canadian Econoview.

U.S. Trade Policy:
Tax Consumers and Give the Proceeds to China?

That's what George Bush and the National Council of Textile Organizations want to do in the U.S. One by-product of the proposed quotas on imported textiles from China will also be to help keep inefficient textile manufacturers from losing their shirts. And it might even keep some people employed at wages greater than their opportunity costs.

But politically, the way the quotas are presented is that they will protect jobs.

"The fast action to reimpose quotas by the Bush administration today has saved thousands of textile jobs in this country and we are extremely grateful," said Cass Johnson, president of the National Council of Textile Organizations, a trade association.
I don't buy the argument. Quotas might save some jobs, in the short run, in inefficient firms and industries, but the major beneficiaries will be U.S. business owners and those few Chinese producers who obtain quota rights to export to the U.S. [yes, China is going to extract the rents; see here ($ required)].

China is considering raising export tariffs on certain categories of textiles in the hope of slowing a rapid growth in shipments to the US and Europe since the beginning of the year.

Gao Yong, deputy director of the China Textile Industry Association, said the idea was to raise the tariff on products that had sharply increased in export volume over the past two months, while maintaining or lowering the tariff on other items. A decision had not yet been taken on the extent of the rise, but Mr Gao said he expected one within the next month.
Remember that most labour is fairly mobile. Jobs lost in one industry often reappear in a wide variety of other industries. The adjustment may not be smooth and easy, but it occurs surprisingly rapidly.

Pascal Lamy, the former European trade commissioner who was picked on Friday to become the new head of the World Trade Organization, warned last week against imposing quotas.

Mr. Lamy said that the global trade body had been easing out the quota system over the last decade and that all countries had been given ample opportunity to prepare for the changes.
The argument in the U.S. is that China is subsidizing its textile producers with export tax rebates and by not revaluing their currency. That sounds pretty similar to the old tunes dragged out in the Canadian-U.S. softwood lumber dispute. It is a slick disguise for protectionism designed to get votes from textile workers. As Kevin at Always Low Prices says,

In other words, it's a unilateral imposition of a quota used to purchase the votes of textile employees in the U.S.
In the end, U.S. consumers will pay higher prices for their clothing. And, most likely, quotas on imported clothing from China will hurt poor consumers in the U.S. more than they will hurt rich folk.

Peter Mork [Economics with a Face] is pretty upset about the quotas, too.

Maybe we will get lucky in Canada, and Chinese producers will flood our markets even more and make our clothing even cheaper!

Update: also see what Ben Muse has to say about the quota.

GameTheory or Child's Play?
Rock, Paper, Scissors

We used to play "Rock, paper, scissors" often as youngsters. Whoever won got to punch or slap the loser(s) on the inner forearm. We would play for hours, and soon we could pick up tendencies of the other players, adjust our own, and adjust to their adjustments to our adjustments to... etc. In the end, we all had very red forearms and a sense of passage into manhood.

In the game, rocks break scissors, scissors cut paper, and paper covers rocks. There is no dominant strategy; but does that make it a perfect game of chance for determining who should receive a contract? [h/t to BrianF]

The Maspro Denkoh electronics corporation was selling its $20 million collection of Picassos and Van Goghs, but the director could not decide whether Sotheby's or Christie's should have the privilege of auctioning them.

So he announced that the deal would go to the winner of a single round of scissors, paper, stone - the children's game that relies on quick fire hand gestures, where stone beats scissors, scissors beat paper, and paper beats stone.

Sotheby's reluctantly accepted this as a 50/50 game of chance, but Christie's asked the experts...
No, they didn't hire McAfee and McMillan or other game-theory notables. They turned to

... Flora and Alice, 11-year-old daughters of the company's director of Impressionist and modern art, and aficionados of the game.

They explained their strategy:
1. Stone is the one that "feels" the strongest
2. Therefore a novice will expect their opponent to go for stone, and will go for paper to beat stone
3. Therefore go for scissors first

Sure enough, the novices at Sotheby's went for paper, and Christie's scissors got them an enormously lucrative cut.

I think that outcome was luck.

In our own versions of the game, the novice strategy worked, more often than not, but for different reasons. We had to bring our fists down three times, and, on the third, keep the fist for a rock, hold our hand flat for paper, or extend two fingers for scissors. I soon learned that most people had an inertia or indecision or something that kept their hands in the shape of fists more often than not, so I won more often playing paper ... ... until they caught on.

Advice for Game Theorists

Some time ago, Tyler Cowen linked to this interview with Thomas Schelling. In one part of the interview, Schelling was asked his opinion of modern game theory. He replied,

I would like to make the following broad claims: Economists who know some game theory are much better equipped to handle a lot of important questions than those who don't. But economists who are game theorists tend to be more interested in the mathematics aspect of the discipline than the social sciences aspect. Some economists of the latter group are good at using their theoretical work to examine policy issues. Still, many – and I think this is especially true of young game theorists – tend to think that what will make them famous is their mathematical sophistication, and integrating game theory with behavioral observations somehow will detract from the rigor of their work.
What he said.

I have attended far too many job interviews and recruiting seminars in which the candidate had a superb grasp of mathematically sophisticated game theory but little or no interest in integrating the models with any behavioural observations. The results were uninteresting.

At the same time, I have often argued that it is impossible to understand and appreciate the richness of modern economics without a basic grasp of game theory.

Monday, May 16, 2005

The "C - Rule":
Optimization Subject to a Space Constraint

My son was telling me the other day about a rule their family has. Their daughter may buy or otherwise acquire some new object only after she designates something of approximately the same size that she owns for removal from the house.

She has a tendency to collect things, and her room became fairly seriously cluttered before a major cleaning and the implementation of what we now call, "the C - Rule" [named for our granddaughter, Rule Ricardo Palmer].

This situation is becoming increasingly common in North America. The primary short-run constraint in the acquisition of stuff is not a budget constraint, but a space constraint [I said, "short-run" because I realize in the long-run, one can purchase more convenient storage by buying a bigger house].

In previous generations, the typical reponse from a parent to "Can I have....?" was "We can't afford it."

Nowadays many families are wealthy enough that I often hear, "But where will you put it?"

  • After cleaning out my mom's house ten years ago,
  • after seeing my sister's garage,
  • after trying to navigate in my in-laws former home,
  • after trying to get rid of stuff as Ms. Eclectic and I have down-sized twice in the past 8 years,

I have a deep appreciation of the "C-Rule".

[Update: mysister took exception to my inclusion of their garage in this list.]

I also understand that optimization subject to a budget constraint might have less relevance for some of our intro students, but optimization subject to a space constraint might be more meaningful. "What is the marginal utility per cubic inch of space devoted to an extra GameBoy game vs. the marginal utility per cubic inch of space devoted to an additional DVD?" Well, maybe...... read on....

To see truly scary, horrifying, evidence that the space consraint is far less binding than most of us might think, click here to read about a woman who has filled her house with boxes and boxes and boxes of stuff. Spend some time looking at and reading about the photos. It will make you shake your head in disbelief [thanks to JC for the link]. It is overwhelming.

A New Degree: The G.S.W.
Graduate in Sex Work

As I have noted several times before, there is some interest in Canada's Liberal Party in legalizing prostitution (see here, here, here, and here) . If prostitution is legalized, is it possible the workers in the trade will be required to attend school and earn a degree? [thanks to Alex for this link; he recommends that you check out the t-shirts].
It's higher education of the horizontal variety. About 25 sex workers went to a college of sorts, sitting through lectures on effective marketing, stress reduction and condom-application skills.

... Presented in conjunction with the San Francisco Sex Worker Film and Arts Festival, the class Wednesday at an erotic art gallery was billed as a way for working girls and guys to polish their skills in a supportive atmosphere.

... Participants who stuck it out for the whole day received diplomas certifying them as G.S.W — graduates in sex work.
It seems possible that prostitution in Canada could, over the years, follow the usual progression:
  1. legalize it
  2. license it
  3. regulate it
  4. tax it

And most of all,

5. make sure the gubmnt controls it.

And maybe next year this group will hold a weekend conference on the topic.

Mark Steyn Does the Paul Martin Smackdown

You gotta love this guy's stuff, especially if you share his perception of the universe. Here is an excerpt from one of his latest columns:

Bolton would have no problem getting nominated as U.N. ambassador if he were more like Paul Martin.

Who? Well, he's prime minister of Canada. And in January, after the tsunami hit, he flew into Sri Lanka to pledge millions and millions and millions in aid. Not like that heartless George W. Bush back at the ranch in Texas. Why, Prime Minister Martin walked along the ravaged coast of Kalumnai and was, reported Canada's CTV network, "visibly shaken." President Bush might well have been shaken, but he wasn't visible, and in the international compassion league, that's what counts. So Martin boldly committed Canada to giving $425 million to tsunami relief. "Mr. Paul Martin Has Set A Great Example For The Rest Of The World Leaders!" raved the LankaWeb news service.

You know how much of that $425 million has been spent so far? Fifty thousand dollars -- Canadian. That's about 40 grand in U.S. dollars. The rest isn't tied up in Indonesian bureaucracy, it's back in Ottawa. But, unlike horrible "unilateralist" America, Canada enjoys a reputation as the perfect global citizen, renowned for its commitment to the U.N. and multilateralism. And on the beaches of Sri Lanka, that and a buck'll get you a strawberry daiquiri. Canada's contribution to tsunami relief is objectively useless and rhetorically fraudulent.

.... John Bolton's sin is to have spoken the truth about the international system rather than the myths to which photo-oppers like the Canadian prime minister defer.
The rest of his column enumerates the many failures of international aid agencies, including the multitude of recent problems in getting aid to tsunami victims. [h/t to Jack for the link].

It seems as if Paul Martin has learned the lesson that in order to carry the day in Canada, one must emote better than the next guy.

Sunday, May 15, 2005

The Ultimate In Management Style

From the Emirates Economist:

Management, Saudi-Style - Arab News: "We have achieved what is considered by the experts in this field as the Holy Grail of management. The manager who has all the authority with absolutely none of the responsibilities that normally goes with it."

We've all known managers who strive for this ideal.

How Much Can He [Promise to] Give Away?

I was not upset when Paul Martin's Liberals won the last election. Martin had been something of a fiscal conservative as the Finance Minister during the previous near-decade, and he had clearly been held back by Jean Chretien.

But what the heck is he doing now? Is he under pressure because he is leading a minority gubmnt and, as happened in the mid-1970s, selling out to the socialists? Or is he just trying to buy votes to stay in power? His latest handout in Saskatchewan is just one of many examples.

I'm disappointed. The crazy thing is, I can't figure out how giving money to Saskatchewan will help Martin win votes anywhere else.

What Is the Difference between
Smoked Salmon and Lox?

In a comment to my recent posting about property rights and fish farms, Pooh writes

Do your taste buds a favour: next time you have smoked salmon with your bagels on Sunday morning, spring for the much more expensive wild variety. You will be amazed at the difference.
This comment prompted some e-discussion with BenS and Pooh about the differences between smoked salmon and lox. Here are some answers, courtesy of Pooh.

Here is one explanation

There is a difference between smoked salmon and lox. Smoked salmon is first cured in brine or with a dry rub, and then either cold- or hot-smoked. Fish smoked at a low temperature (cold-smoked) retains a silky texture like that of uncooked fish, while the hot-smoked type has the consistency of moist baked fish. Lox and gravlax (dill- flavored Scandinavian salmon) are not smoked, only cured in brine. The cold-smoked salmon favored by the French has a more subtle flavor than Jewish-style lox, and is therefore served on its own.
But for an even more-detailed discussion, see this site. Here is an excerpt:

Anne Willan, in the wonderful, encyclopedic La Varenne Pratique, says, "Smoked salmon is different from American lox (usually served with bagels and cream cheese) since lox is unsmoked, salted salmon." A pretty cheeky comment from a such a refined Englishwoman, even if she does spend part of each year in the US.

Actually, we had a hard time finding anyone on this side of the Atlantic who did not affirm that lox is smoked. Then we came across James McNair's Salmon Cookbook, in which the author says that lox is the most popular preserved salmon, that it is generally Pacific species that is cured in brine, soaked to remove the salt, then "sometimes still lightly smoked after soaking it, as it always was in the past."

But there is much more there, if you really want to know.

Pooh also provided a link for 5 thing to do with Lox.

And probably most informative of all is this link.

20 Questions

Alex Tabarrok, at Marginal Revolution, posted on Friday about the development and background of a captivating little toy called "20Q", an electronic artificial intelligence version of of the game, 20 questions. I was so intrigued, I went to to order one. Their price was $13+. Then I checked Wal-Mart; their price was under $11. These are U.S. prices, and there would be shipping plus, possibly, a customs hassle. So I decided to wait.

As coincidence would have it, on Friday evening, while Ms. Eclectic was shopping for some fabric before we attended a jazz concert, I wandered through a Giant Tiger ["We smell like plasticized rubber because that's mostly what we sell."], and to my joy found a 20Q there for under $15 Cdn, so I bought one.

For my first try with it, I took, "Our family's minivan". After 20 questions, the toy guessed "a van". Pretty damned good. And a little freaky.

It failed the next test, though. A Tim Horton's donut.

Overall, a 20Q is a neat toy, providing hours of fun; for lots of laughs, try it out with genitalia. There's a new version coming out in August that will be easier to read and to use in a group; I'm guessing its artificial intelligence will have been honed a bit since then, too. But the current version is enough fun that it's worth the price.

Update: Rodney Hide, New Zealand MP and leader of its ACT party, linked to this post. Be sure to check out some of the fun comments added by readers there, especially #9: "I am thinking of the Labour Party".

Update #2: Thaddeus, in the comments, mentions the website for 20Q. I just tried it, and I'm very impressed. It is much slicker, quicker, and easier to use than the hand-held game. It is more detailed, and the feedback is fascinating.
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