Tuesday, December 30, 2014

Surprising New TV Genres

This tv season has seen the introduction of two new tv genres, which is a bit surprising since it seems like the only genres that work on TV are law procedurals or medicine procedurals.

The first is the half an hour romantic comedy. I can't really think of previous examples. But there's  a ton this season. Manhattan Love Story is the most obvious (each episode feels like a Meg Ryan movie--the star is very Meg Ryan-ish), but also Selfie, Marry Me, A to Z.

The other new genre (which is not that surprising given the recent box office success) is the live action superhero show, which has always been around (notably the Adam West Batman), but there are like a dozen this year,  from recent years Arrow and Shield, to Gotham, Constantine, Daredevil, Flash, Powers (my favorite comic series)

Monday, October 13, 2014

Tirole - my intellectual hero - wins Nobel Prize

Impressive, a solo-win for Jean Tirole of the Nobel Prize. A bit surprising but I'm thrilled. Jean Tirole was my intellectual hero as a grad student. I did my best to model the papers I wrote after his. The Nobel committee cites his work on regulation (i/o) but its his latter day work; his pioneering approach to behavioral economics that attracted me (even though long before I even knew about behavioral economics, I was excited by and citing his work on open source software for my master's thesis in computer science). Using simple mathematical theory, (theory a high school student can understand as my adviser used to call it), he illuminated the subtleties in many psychological and social and political issues from social norms, to identity, to self confidence, to corporate social responsibility, to npr fund raising, to will-power, to expertise. Although this approach hasn't really caught on in mainstream behavioral economics, Tirole's work is still highly regarded.

My favorite paper of his with Roland Benabou, illuminated the Tom Sawyer effect. Tom Sawyer is famous for getting people to do his chores painting a fence, by instead of paying people to do it, *charging" them to do it.. This is echoed by psychology studies that find if you pay children to read books, they enjoy reading books less. Their argument was that before starting an activity that you are unfamiliar with, (like painting a fence) you aren't quite sure how fun it is. So if someone charges you to do it, you infer that it must be really fun, and therefore, you are now willing to pay.

I met him once at a conference in Toulouse and appreciated that he was warm and generous with his time. What a great choice!

Tuesday, September 16, 2014

How are Economic Reporters like Climate Deniers

While NPRs Planet money consistently produces the best in economics journalism Time's Curious Capitalist column, consistently produces the worst. In her latest column that advocates higher corporate taxes Fooroohar is like the climate deniers who ignore the scientific consensus about climate change because the science is inconvenient. Planet Money rightly pointed out (in Six Policies Economists Love (And Politicians Hate)) that the consensus opinion by economics science by economists of all political leanings is that corporate tax rates are too high in the US and arguably should be abolished. The US has one of the highest corporate tax rates in the world and progressive Europe taxes it's corporations less because economists know that taxing corporations destroys jobs and dissuades growth. Consumption taxes or even income taxes are better tools for addressing inequality. Bad economic reporting like this is what helps perpetuate bad polices. 

Sunday, September 14, 2014

Reviewlet: Bechel's Comic Fun Home

Vassar like many colleges assigns Freshman reading for the incoming year. This year's choice was the comic book, Fun Home, by Alison Bechdel (of the Bechdel test fame). Fun Home (short for Funeral Home) is the personal memoir of Bechdel who grew up the daughter of a small town mortician and english teacher in comic form. Her spare lines are very effective, and uses the media well, to play with non-linear narrative, and the flotsam nature of memory, which uses the comic form well to overlay narrative with cast off bits of remembered events.

My freshmen insisted on calling it a graphic novel, but I suppose old fashioned comic nerds find the euphemistic graphic novel condescending, in its suggestion that the word comic is somehow lesser. I asked if they were surprised Vassar chose a graphic novel, or if they are used to comics as being accepted as literature, and all of my advisees insisted that this is the first comic they had ever read!

I loved the book (reading its simple panel structure on the kindle app on my phone proved perfect); it dealt with themes of memory and sexuality and gender, its funeral home setting echoing the surreality of six feet under, but ultimately it is a family drama, and a daughter coming to grips with the father she grew up with. Each chapter felt like a tightly composed visual essay, and the whole, felt like a symphony with the recurring themes (of memory, of Joyce, of theater, of artifice, of fatherhood, of daughterhood, of sex) culminating in a thunderous conclusion that made me want to return to literary fiction/literary comic fiction (even though my recent reading has been Bendis' runs of X-men and Guardians of the Galaxy both of which are excellent, but ultimately still just genre fiction, albeit genre fiction at its best).

Friday, July 25, 2014

The Economics of Star Trek: Proto-Post-Scarcity?

This piece starts with two premises that really interest me 1) That the Federation in Star Trek doesn't use money (this bothers me) and 2) That technology will soon make us exponentially more productive (this I find plausible).

And tries to bring those two together. I don't like his conclusions though. I do like the line "The Federation seems a bit like Williamsburg — a lot of artists who don’t need to work." But his idea that food is apparently free because its so cheap (plausible) but that computers in the background keep track of how much you eat to make sure you don't eat too much (why bother). I do find it plausible that "cheap things" (anything that costs less than $1000) would be so insignificant, like pennies that people wouldn't bother keeping track of them. I also agree that expensive things, like starships, couldn't possibly be free.

But he calls Star Trek a post-scarcity economy and that just isn't possible. There will always be a scarcity of reservations at the hottest restaurants (ok, maybe that is allocated by lottery like we often do now), but other things like Jake and the antique baseball card (in the DS9 episode that showed the absurdity of a barter economy), or Picard's Chateau in France. We still need money (Federation credits) for that, not just as foreign exchange.

Wednesday, July 16, 2014

The true externalties of a burger?

I applaud Bittman's valiant effort to calculate the true externality cost of a burger. Too often people make a big deal of externalities that really only add up to pennies. However the numbers he comes up with is a vast over-estimate.

The numbers don't add up. First of all, counting burgers as 11% of the obesity epidemic is way too high. Burger calories is really only a small portion of fast food calories (soda and fries are greater). And not all calories contribute to obesity. Only surplus calories. Calories eaten to keep us at a healthy weight should not count. So really the obesity calculation is maybe 10 times too high. Similarly, I checked the math on the carbon calculations. The White house number is actually fairly middle of the road. A summary of the academic literature (see Tol 2008 and follows up) finds numbers much lower than the White house number (and much lower than those produced by special interests groups). So I'd call the 15 cents for the price of carbon an upper bound. But even using the White House number, the math seems off, a quarter pound of burger (the weight of cheese here is small) is 0.0028 metric tons * $37, that's only 10 cents of externality, not the 15 cents he states.

Friday, July 11, 2014

The perils of French Socialism : Bookstore edition

This article in the NY Times claims to refute caricatures of socialistic Paris, but seems to do the opposite. France has passed laws to keep book prices high, in a bid to save a handful of bookstore owners. While I too mourn the end of bookstores, as an economist, I feel for the millions of French book consumers forced to pay higher prices. It is basic supply and demand. In the US where books are cheap, lots of people read. 76% of Americans read a book last year which is higher that most countries in Europe .Although France is not in that dataset for some reason, I couldn't find the data on France specifically, but I wouldn't be surprised if the numbers of book readers are lower in France.

Tuesday, July 08, 2014

Is it time to give up on pricing Carbon?

I've been coming to this conclusion for a while (summarized in this Tech Review article), that a price on carbon while great and likely first best, is futile given the political constraints of our global democratic system and just wasting political capital. I think the Obama Administration has come to this conclusion as well.

Ever since being there for the breakdown in talks at Copenhagen, as well as having my RAs comprehensively surveying the existing policies pertaining to climate change back at the CEA, I have come to two conclusions:

1) The political constraints are intense and binding
2) The impact of the optimal carbon price is quite small relative to existing policies.

While 2nd best, I don't think the lack of a global carbon price would be so consequential. Instead of carbon prices, we have loads of other existing policies like tax credits and fuel economy standards and renewable power mandates that put a effective price of carbon in many cases about an order of magnitude HIGHER than they need to be.

It is hard to imagine that instituting the optimal carbon tax which would raise coal electricity prices by say about 10-20%, would have much more effect on our energy system compared to the wild price swings from natural gas, or the massive tax credits and renewable mandates that have much larger effects on prices and quantities.

Tuesday, June 10, 2014

Theater Reviewlet: My favorite theater experience in recent memory: The Mysteries - extended to July 14th

A six hour play, about the bible, with nudity, and dinner? It sounds like a jokey off-off-broadway romp, and it is, but its also something much more.

Six hours is a long time, but there were two breaks for dinner and dessert served by our concierges for the night, actors assigned to taking carae of our needs, (dinner was very tasty, falafel and baklava, which is fitting given most of the Bible takes place in Jerusalem). But the time passed swiftly (except maybe a little draggy near the end, as being faithful to the medieval source material, the play engages the self-contradictory muddle of the Appocrypha) it was eye opening, even life changing, to see the Bible told as a single cohesive story and re-imagined in such an engaging way.

We went because R- knew the director/conceiver, Ed Eskandar, from college, living in what my co-author's research has shown is the geekiest Stanford dorm. But also because the NY Times had a glowing review.

But it quickly became one of my favorite theater experiences ever. It made me really glimpse why people convert to Christianity for the first time and why the message of Christianity has been successful for 2000 years. You realize how the power of these biblical stories is interwoven into tapestry of western civilization. It was also neat to see the story as one coherent whole, as opposed to the bits and fragments you encounter your entire life.

It's quite the impressive ensemble cast, 50 playwrights (including luminaries like David Henry Hwang) and over 50 actors, for a theater that seated barely more than 50 people. The chorus fills the small space with unearthly sound, and while some of the devout may find much of this translation to be blasphemous: imagining a three way between Jesus, Judas and Mary Magdaleine; or the angelic Gabriel's (played by a vaguely asexual female actress) Bernini-esque ecstatic rape of the virgin Mary, or the portrayal of old testament God's childish petulant notion of love as mindless devotion, before Jesus taught God otherwise by living life as a human.

But really, believers should applaud, because in its irreverant, provocative style, the Mysteries finds the heart of Christianity for a hipster savvy audience, and shows Christianity's sense of compassion and belonging and awe and wonder and love.

Wednesday, May 28, 2014

Bad Data Science of Love

I was sorta shocked when I received an invitation to take a course on Data Science from the "data scientist" behind the OK Cupid blog. While the blog is whimsical and fun and was largely responsible it seems for Ok Cupid's popularity, the statistics were largely un-grounded and amateurish, which is fine for a blog, but now he's going to teach these methods.. as "science?!"

A good example of this junk data science was on this recent ted talk featured on npr. It starts with a common Fermi problem of estimating how many suitable partners there are in your city (so common, I stumbled into this conversation the one time I visited the Stanford physics lounge). Usually by adding more and more criteria (your age, right gender, right education, food tastes, physical attractiveness, height), you find there is only 1. But usually those estimates are exaggerations because they assume independence which is not true.

She then uses an arbitrary formula for optimizing her ideal mate.  She made uparbitrary weight to arbitrarily selected characteristics.  Much like the simple scoring systems my mom used to use to pick jobs or things growing up. A useful tip, but its not science.

She then collected data from OKCupid profiles to figure out which are most attractive, but again, did nothing to separate causality from correlation, and most of her conclusions were based on qualitative assessments. Again, interesting, but not science.

There was a recent Wired story of a recent math phd who at least used machine learning algorithms to construct the optimal profile. There was at least some science there. But still, mostly ad hoc assumptions not grounded by theory.

I guess all this reminds me of the difference between econometrics and statistics. I was recently interviewed for a consulting opportunity and was asked why should we hire you as opposed to a statistician.

I think the answer is that to really do "science" about behavior, you can't look at data alone, you need theory. You need theory to separate causation from correlation. And on questions of choice, economics have 100 years of thinking hard and formally on the axiomatic primitives behind how choices are made.

Tuesday, May 27, 2014

Cultural Replication of Food Trends: Next Big Thing

My institutional theorist professors would appreciate the global cultural replication of culture as evidenced by trends in fine dinnig. For better or worse, food trends in fine dining restaurants around the world seem to follow the same playbook, (perhaps just delayed by 1-20 years depending on restaurant and location). For better or worse, I've sat down in restaurants ranging from Vietnam to Budapest to Istanbul that all served menus that could easily have come off a Jean-George spinoff from the late 90's.

In my brief experience 15 years eating at fancy places, it started with the new international paradigm, (e.g. rare wasabi encrusted ahi tuna steak), that gradually shifted to farm to table (as pioneered by Chez Panisse), had a brief fling with molecular gastronomy (as pioneered by El Bulli) with such extravagant gestures like Moto's edible menu and laser vaporized orange peel, before those foams and liquid nitrogen shattered edible soils, got synthesized into the mainstream farm to table style that prizes locavore sourcing and parochial cultural authenticity which seems to be the existing dominant fine dining paradigm.

There has been rumblings of a new Kuhnian shift recently in the food world though, as heralded by Noma in Copenhagen ascension to the top of world league charts, that I hadn't quite been able to put a name to, until now, with all the buzz around Dan Barber's new Third Plate book. Barber, whose Blue Hill at Stone Barns is perhaps the apotheosis of farm to table, by literally being on a farm, calls farm to table 2nd plate, the new thing is 3rd plate.

I think of this as an off shoot of the Farm to Table idea of Nose to Tail, Snout to Hoof (e.g. fergus henderson). But instead of limited by all parts of an animal, instead we eat all parts of an eco-system (Fungus to Flora perhaps you could call it). Noma Redzepi's favors local fungi, wild roots, multi-year cured meats. Barber has been advocating eating what's good for the ecosystem, eating what is traditionally seen as weeds or animal feed, rather than eating foods based on habit or tradition, that developed at a time with different technologies and agricultural circumstances. Both hearken a bit to even earlier traditions, of hunting and gathering and somehow being in harmony with the environment.

I'm sort of excited. Farm to table has gotten a bit old. It's also neat to see paradigm shifts and cultural replication in action. As an economist, I'm a little bit skeptical of Barber's efficiency logic behind the third plate, but as an eater, I'm excited at the new prospects.

Thursday, May 15, 2014

Varys' Riddle - the game theory of game of thrones

In George RR Martin’s book of political intrigue one character poses the following riddle:

In a room sit three great men, a king, a priest, and a rich man with his gold. Between them stands a sellsword, a little man of common birth and no great mind. Each of the great ones bids him slay the other two. 'Do it,' says the king, 'for I am your lawful ruler.' 'Do it,' says the priest, 'for I command you in the names of the gods.' 'Do it,' says the rich man, 'and all this gold shall be yours.' So tell me- who lives and who dies?

Above is a link to the scene from the HBO tv show.

Game Theory, it turns out, has an answer. Consider what some call the repeated game of daily life. In each period, every member of society is randomly matched with someone else whereupon they play a Prisoner’s Dilemma. In each period, each player has two choices, either to be violent and slay the other, or to be peaceful, and cooperate. It is individually rational to be violent in any given period, but mutual cooperation is better for both than mutual violence.
In analyses of two player versions of this game, we see a wide variety of strategies can maintain mutual cooperation. For example grim-trigger or famously tit-for-tat. The common take away, people play nice in any given round for fear of being punished in the future.

In the large N versions, the problem becomes more difficult because you interact with somebody new each period. Thus in order to maintain cooperation you need some kind of social order. If somebody defects and decides to slay, we need to rely on somebody else to carry out the punishment.

Thus the answer to Varys' riddle depends on which equilibrium we are in, or perhaps if we are out of equilibrium, which sub-game of the current equilibrium.
Calvert (1992) finds an equilibrium of this game where players maintain equilibrium by choosing one member (a king) and using the king to collect information on who has defected, and thus giving the king power to decide who should be killed. Like in Hobbes’ Leviathan, we give the king power because he maintains order by punishing anyone who defects, thereby keeping everybody in line. Assuming this equilibrium is in play, the sell sword will listen to the king or risk being punished by whoever he encounters next.

Milgrom, North and Weingast (1990), find that merchants actually can maintain order without a government or king. By studying the “law merchants” of the Champagne trade fairs of medieval Europe (if you ever visit Paris, take a train to the town of Provins, today it’s basically a medieval times ren faire for French tourists, but you can still find the animatronic law merchants). Here, contracts were enforced by judges who kept a board that recorded the names of anyone who breaks a contract. In equilibrium, all merchants had to defect against anyone who ever violated a contract, or have their name recoded on the board as well (making sure the equilibrium is sub-game perfect, the judges themselves also would be punished if they were dishonest, ensuring sub-game perfection in their play as well). So long as this equilibrium of contract enforcement is in place, the merchant can credibly offer future money to the sell sword in exchange for his life.

Kandori (1993) gives conditions on when we can sustain cooperation based on some sense of moral authority alone that has a Kantian flavor. Consider a moral norm based on a grim trigger strategy where I cooperate in every period, unless I am ever wronged. However, if I am ever wronged, I will bring violence to everyone I encounter from here on out. Even though I may never see the person who wronged me ever again, if I start bringing violence to others, that should trigger a chain reaction where they start bringing violence to others, which brings down the entire system. Thus, people cooperate, to avoid setting off this chain reaction that brings down the system as a whole. A priest could appeal to the sellsword’s rational morality, that every act of violence has a chance of bringing down civilization as a whole.

Of course, all of these above institutions only work when we are on the equilibrium path. But when we are in an era when Winter is Coming, then we very well may fall out of equilibrium. In such conditions, Acemoglu and Robinson (2001) model the process where Latin American countries transition between cooperative behavior and a state of mutual violence, what Hobbes’ referred to as the “nasty, brutish and short” state of nature. In such a world, all that is left is violence, and whoever is best at violence, the sellsword, prevails. 

Tuesday, May 13, 2014

Tuesday, May 06, 2014

Thank you Professor Becker

Gary Becker was the biggest influence on my advisor, Eddie Lazear, and by transitivity, me. In terms of applying simple mathematical models based on the assumption that people take purposeful actions, motivated not just by money, but on things like values, emotion, and culture. I agree that he may have had the most profound influences on the social sciences in the past half century, where his work is routinely cited across the social science disciplines, and was fundamental to the economic imperialism into other disciplines that has let me study the economics of apologies and guilt and social identity. I was fortunate enough to get to have lunch with him just a few months ago so it is shocking to hear of his passing. Thank you, Professor Becker, and may he rest in peace.

Monday, April 28, 2014

Sunday, April 20, 2014

Thoughts on Picketty's Capital in the 21st Century

A friend of mine asked my opinion of Picketty's Capital in the 21st century. I haven't read it but have read a bunch of reviews and interviews (here's a nice review by Krugman). I guess I agree with the facts he presents that a lot of money these days is focused in the 1%, and I wouldn't be opposed to his recommendation that we have higher taxes on the rich, but I do have a problem with the tone of the book.

1) In my own research , we find that even though money is more and more concentrated, everything else we care about (things economists call utility), seems less so, health outcomes are more equal, so is happiness, so is a lot of things we consume--Bill gates eats at the same McDonalds, and uses the same iPhone and plays the same Xbox as those at the bottom,

2) His image of the 1% being a bunch of  spoiled children of plutocrats is wrong (a sorta Austen-era gentry who talk about inheritance rather than salary). Most of the richest in the US these days entrepreneurs (see Kling's note), or sports starts or movie stars, the rest of the 1% are people that studied in school and became doctors and lawyers and bankers and top economics professors like Thomas Picketty.

3) The implication that money buys political influence is largely unsupported by data. The studies are admittedly not iron clad--strong evidence does not exist--but most studies by the likes of Levitt and Ansolabehere-de Figuereido-Snyder, find that money doesn't really change how politicians vote, and has only minimal influence on voters, and actually corporations spend far more money on things like soup kitchens than campaigns, so corporations don't even care that much, so I think our democracy is safe.

Saturday, February 22, 2014

Time Warner and Whatsapp

Two big acquisitions in the past week caught my attention. Time Warner Cable for $45 billion and Whatsapp for $19 billion. What's striking is not the difference but how similar these numbers were. Those who fret about the cable monopolies and their excess profits, should acknowledge that the market expects to make about as much money from a company that sells a 99 cent iphone app that could be written by a high school student, as from owning a cable monopoly. Suggesting that costs are high in the cable market and that the threat of entry is high as well.

Tuesday, January 28, 2014

net neutrality and price discrimination

There is a misconception about net neutrality amongst the tech community. People cringe at the idea of essentially offering different prices for the same services and hence advocates want "net neutrality" or the ability to access everything on the internet for the same price.

Yet charging different prices is called price discrimination by economists, and for the most part, economists love price discrimination because it tends to make the market more efficient, and in the end, better for consumers.

The classic example of this is the market for airline tickets. Yes, it feels deeply unfair and arbitrary how prices for plane tickets vary by seat to seat, and minute to minute. Yet, the reasons for this is so that on average, this system allows the airline to charge low prices to low demand customers like tourists, and high prices to high demand customers like businesses.

If we imposed a "neutrality" rule that required airlines to charge the same price to everyone, that would force the airlines to charge an intermediate price. Businesses would see their prices go down, but everyday people like tourists would see their prices go up. And the loss of efficiency would lead to fewer airlines and fewer flights for everyone.Advocates of simple pricing are helping businesses at the expense of tourists.

Another example is the market for higher education, where financial aid allows universities to charge high prices to rich parents--to price discriminate--so that they can afford to charge low prices to the underprivileged. Those who want lower sticker prices for universities are only helping rich parents at the expense of the poor.

Net neutrality is the same. Allowing carriers to charge different prices for different content allows carriers to expand the range of services they offer to different demand levels. Prices will go up for some but prices will go down for others. The amount of shenanigans networks can try is constrained by the ability of consumers to turn off or switch away. Yes, living in New York, I understand that many people have little choice when it comes to internet carriers, but still if Time Warner doubled their prices, I would likely cancel service.

There are legitimate concerns about the impact of such contracts on monopolization. But there has been too little discussion about whether these rulings that end net neutrality will have big effects on competition. One need only look at the fierce competition amongst mobile networks which never had to abide by net neutrality rules for one example where competition lives on.

Thursday, January 02, 2014

Cryptnomicon: Wikileaks and BitCoin

One of my favorite novels of all time, Cryptonomicon published in 1999 (and one of my first blog posts back in 2001), by Neal Stephenson, has been on my mind a lot. The premise of the novel (that takes place concurrently during WWII and the dot-com boom of the 90's) is about how cryptography saved the world against Nazi Germany, and how it might save the world again from autocracy. The mechanism Stephenson imagined took 15 years to come to fruition, but basically was what wiki leaks and bitcoin turned out to be.

The idea is that cryptography will allow ways to sidestep the secrecy of autocrats, and create currencies (and economies) independent of governments.

Still, I think the hope is a bit exaggerated. Recent events show that no matter how good the cryptography, government will stil find ways to track and regulate it, whether it is the government take down of the drug site the Silk Road, or the Harvard fake bomb scare that used the same secret internet technology but was quickly caught anyway, or the Great Firewall of China.

For those interested in reading the novel, the novel reads like a Tom Clancy thriller, which is both good and bad. This is not literary fiction by any means. But the ideas are amazing.