Tuesday, October 31, 2006

The Chronicles of Six

Tyler Cowen continues his epic reading of six word stories. Here are some of my favorites from Wired:

Computer, did we bring batteries? Computer?
- Eileen Gunnr

Gown removed carelessly. Head, less so.
- Joss Whedon

Kirby had never eaten toes befoe.
- Kevin Smith

We went solar; sun went nova.
- Ken MacLeod

- Harry Harrison

Tick tock tick tock tick tick.
- Neal Stephenson

Heaven falls. Details at eleven.
- Robert Jordan

God to Earth: “Cry more, noobs!”
- Marc Laidlaw

Always a fun time.

Only Seven Days Until People Stop Trying to Shame Me Into Voting

I had a conversation with an old friend from high school the other day and naturally, with the elections looming, our conversation turned to politics. This is about when I told him I don't vote.

Why don't I vote? There are three common reasons why people would engage in this democratic ritual: (1) they enjoy partaking in the democratic process; (2) they like expressing their support for a candidate through voting (no doubt because the candidate tells them that is how they like having support be expressed); and (3) they think their vote will make the difference in the election (thus gaining benefits from that outcome).

I gain nothing from (1) or (2) and I know (3) is about as likely as a jellyfish making me dinner. My friend had trouble relating to my position and told me a story that for this election he convinced people in his office to vote his way and brought in absentee ballots for them to fill out.

I have no problem with people voting. There are clear reasons to do so (like to shut up people who want you to vote). I only have a problem when politicians lie, saying people that their vote matters. That's different from being counted--the vast majority of votes are counted. But most don't matter because most don't decide the election. Telling people their vote will matter is like telling people Creationism made life on this planet. It's possible but not really.

In the end I'm tired of this discussion. It's not really a puzzle why some people vote, nor why others don't. It's just a heated debate between those passionate individuals who can't stand that the other side exists. I don't care which you do next Tuesday, just leave me out of it.

Friday, October 27, 2006

Living In an Immaterial World

A myriad of obligations deny me from watching Real Time with Bill Maher when it airs on Friday night. Additional distractions have prevented me from commenting on last Friday's episode and I feel I should post before the next installment.

The episode featured Congressman Barney Frank, Jason Alexander, Stephen Moore. Bill Maher and two others spent part of the show lamenting that the average wage was going down while the DOW grew. I'll give one guess which two were on Maher's side (and Moore got a masters in economics from Mason). Moore brought up good points but it mostly consisted of pointing out Maher was rich, too. What he should've pointed out is that the data didn't matter in the first place.

Wage data can be immaterial in two basic ways and which way depends on how much time the analysis covers: did wages drop base on last year's wages or last decade's? If it's last year's wages, then it is just a tick in the market. The lastest adjustment does not allow for sweeping conclusions about the nature of the economy. (See earlier post here.) Imagine a great but developing relationship and then your date says something stupid. Do you end it based on that? Of course not; you are still getting to know one another and mistakes will be made. The economy is similarly in a constant state of adaptation. There are rigidities and there are errors. The lastest tick means little.

If the data is last decade's it avoids the minor change problem but it eases to a different, more subtle problem. As people enter the bottom of the work force (immigrants, new adults) and people leave from the top (retiries), there's downward pressure on average wages even if everyone's getting richer. The better measure is income mobility over long spans of time. (See Steve Horwitz's myths page; the third item has an excellent discussion of the topic.)

So even if we set aside other problems with real wage data (inflation's over estimated, there's no inclusion of product quality, there's no inclusion of job quality), the data doesn't matter.

Wednesday, October 25, 2006

Wikipedia: How to Teach It and What It Can Teach You

I love referencing Wikipedia. Whenever I have a random trivia question, it's the first place I check. It may not be accurate all the time, but for what I use it for, it's accurate enough. And I love editing Wikipedia. Economic topics are far too rare (though becoming more common) and it's fun adding new articles and contributing (or cleaning up) old ones.

For the October 27, 2006 issue, the Chronicle of Higher Education noted many scholars in academia don't feel this way. Wikipedia isn't something to be edited or referenced, it's something students should be warned about. There is logic to this reasoning: an expert has as much authority as a schoolboy, a stark contrast from a classroom or journal. At the same time, that can be good because experts aren't always the clearest, most concise people. I've had many knowledgable professors that couldn't pass on that information to the class.

Scholars argue that Wikipedia lacks control but I see that as a good thing. At worst, it is an option to be ignored. Professors who are frightened of undoing damage caused by fallacies of wikiality should remember that problem has always existed. Most economic professors start each semester not only assuming their students know nothing but that they are also certain of blantantly false things.

But at best, Wikipedia is a tool for professors to teach their students and the public at large. My advice to academics (and the world at large) is to...

-Remember the best way to understand something is to try to explain it to others. Encourage students to edit Wikipedia and they will better understand the material.

-Edit Wikipedia yourself; you'll become that much better at lecturing and your students will thank you for it (and it'll make it easier to see how they edit).

-Talk to others. You'll also have to encounter people that disagree with you and will be forced to talk to them on their level. Another good teaching skill (I think economists could benefit a lot from this; we bemoan the fact that the public doesn't listen to us though at the same time we have a hard time talking to the public.)

-Recall how academic papers work: cite sources and peer review. These things are not requirements on Wikipedia but they are strongly encouraged; pointing out wrongs in the talk page and adding sources will improve the quality of articles that is unlikely to be undone.

-Understand that in practice, it is not as chaotic as you might think. The Wiki cultural is certainly more ungoverned compared to ivied halls but even in this free-for-all, academic credentials hold more authority (call it social capital) than no credentials. For the most part, you will be welcomed and you will be respected, so long as you do the same.

Sunday, October 22, 2006

The Efficiency of Innocence

When economists talk about efficiency we are usually talking about the costs and benefits for all society. Benefits minus costs are the "social totals" and the most efficient items are those that maximize these totals. Doing this type of analysis can be difficult because one must include all costs and benefits for everyone. It's usually impossible to get an exact figure so an estimation works pretty well. Still, it can be a daunting task.

I've decided that the "innocent until proven guilty" reasoning in US legal courts is efficient so, briefly, I'm going to demonstrate my logic. (If you don't want to go through all the assumptions and logic, skip to the conclusion at the end of the post.) Assume a crime, such as rape or murder, and a trial of an accused, the police's chief suspect. Assume that the police stop investigating the crime when the court finds a guilty party and the police keep investigating otherwise--not completely true but true enough for our analysis. Assume all third parties are treated equal--one family's feelings aren't inherently more valuable than anothers'--and the pain of seeing a family member go to jail is roughly equal to the pain of having a crime against a family member go unsolved. Assume the court is wrong by an even-handed chance (see below).

We have four scenarios to consider based on if the accused is actually innocent or guilty and what the courts find him as:
-declared Innocent if actually Innocent (IiI)
-declared Innocent if actually Guilty (IiG)
-declared Guilty if actually Guilty (GiG)
-declared Guilty if actually Innocent (GiI)

The first two represent the current legal system which favors claiming someone is innocent. The second pair represent an alternative system: "guilty until proven innocent" where guilty is the more likely verdict. Because these will chiefly determine what kind of error is most popular in a given legal system, this divide is how we will make our analysis.

IiI and GiG cancel each other out. In both cases the system did exactly what was most efficient to do. Social totals were maximized. It's the errors that are interesting.

Most of IiG and GiI cancel. The victim's family will suffer and the accused family will celebrate for IiG and the reverse is true for GiI. Similarly, effort needed for the case is on the state for IiG because they have the burden of proof; that effort transfers to the defense in GiI so once again we see a canceling out. The moral pain of sending a good man to prison is roughly balanced by an equal level of pain of letting a killer free. In both cases, the crime can be repeated as the bad guy still roams.

This is where we see the difference. In IiG, the crime is unsolved. Not only are people more alert because that crime could be repeated but police are still investigating the crime. The liklihood of correcting the error is much higher than in GiI where the crime could occur again but people's guards are down and the police aren't on alert. (In fact, in GiI it's more likely the bad guy will get away because everyone will be caught off guard.) Because everything else is a wash, this edge--which is by no means minor--demonstrates "innocent until proven guilty" better serves society.

For those that didn't read the whole post it is better for the law to assume people are innocent because the bad guy getting away is easier to correct than the good guy going to jail. In the former, society knows there's a problem still out there and thus makes it cheaper to correct. In the latter, the problem can occur with greater liklihood (or much longer) without it being stopped. We can see this in immigration policy: society never misses the good people rejected from the US so that drop in social totals would persist for a long time but accepting the bad guys allows us to kick them out when they prove themselves as the bad guys. Alex Tabarrok and Dan Klein make a similar arguement about the FDA: if a bad drug gets passed, society knows it and can remove it before too many people die. If a good drug is rejected, people can be dying for years and no steps taken to correct the problem.

This is ultimately the old distinction between the seen and the unseen. People focus on what they can witness first hand. They tend to ignore the unseen costs because the never were even aware of them. Sending the innocent to jail, rejecting a promising citizen and never benefiting from a great drug are treated as non-losses to society and so they are rarely corrected for even if they are just as damaging as their obvious counterpart.

Friday, October 20, 2006

The Most American of Us

The US was founded and built on the capacity of the individual and the dangers of centralized power. These basic sentiments run counter to the politicians' popular view of the illegal immigrant, claiming they leach off the American people and drag down the economy.

But a Washington Post article notes that the average Mexican immigrant is more like an entrepreneur, working hard, risking much and doing what it takes to get by (even leaving behind family members when they immigrate). They really do pull themselves up by their bootstraps. These tempest-tost stretch their budgets in virtually every dimension allowing them to purchase cars and homes, a testament not only to the wealth created in a free society but their determination to take full opportunity of its advantages.

When I see the average immigrant working as hard as our heroic pioneers and entrepreneurs while native-borns repeat claims of victimhood and accusations of theft, it is clear that this generation's foreign population are our next great citizens. Risking everything so they have a chance to risk everything once more, they are clearly more American than virtually every soul fortunate to be born here.

Friday, October 13, 2006

Dating for Nerds

Economics is an amazing discipline because it has widespread applications in so many other fields (such as politics, science, history, religion, psychology and sociology). One of my favorites is dating. I have done some field research and while I'm no expert at dating I've learned some things over the years (and in one or two of Bryan Caplan's lectures) that I think could prove useful (or at least interesting) to L3 readers.

At its core, dating is a way to correct for asymmetrical information (you know yourself, but not her and vice versa). Many normal dating activities that some people find worthless or immaterial (holding the door open, paying for dinner, buying flowers) are actually vital. They are what economists call signaling.

Signaling is an activity where its value lies in demonstrating a fact even if the activity itself is immaterial. What you learn in an advanced mathematics course will probably never come up again but doing well in it demonstrates you are an intelligent person. Instead of merely declaring you are smart, you can show it and that is much more convincing. (An actor that doesn't not cry but merely says he is sad is a particularly vivid example.) The lesson is that small stuff matters.

Signaling is a complicated thing because you can do it too much and thus send other, unintended, signals. If you are applying for a job and you agree with those around you all the time, you might appear too eager to please even if you are easy to work with. In dating, asking about a woman's job or family is a signal that he's interested in her as a person. Asking a string of unconnected questions about her life shows he's not really interested in her, he just wants her to think that.

There is generally a clear interaction between firm and candidate where one tries to impress the other and then the roles switch and then they switch again. In all cases, it is clear who should be doing most, if not all, of the signaling. Thus the danger of over-signaling is smaller than it would be. But with dating, transitions between who is "dominate" is continuous and rarely clear. This is particularly common in the initial dates an so are the occurrences of over-signaling. Avoiding questions she asks about him so he can ask her more questions makes him appear overeager; he didn't see that at that point she was now sending signals to him that she was interested. He didn't open up, which can also send signals that are not good.

Signaling is a very hard concept to master (I'm still learning myself) unless you are a person that has an intuitive grasp of it. Though signaling is not all of dating (getting to know people directly without signaling is important, too; that's what all that talking is about) it's still more significant than many people think. While it's important to relax, it's equally important to be aware that you could be sending bad signals. Finding that balance between alertness and being yourself is the essential learning process.

Word, Word, Word

I subscribe to dictionary.com's word of the day as a fun way to increase my vocabulary. Sadly my memory is not that great so progress is slow but yesterday I was sent a word I'm sure to remember:
concinnity (kuhn-SIN-uh-tee): Internal harmony or fitness in the adaptation of parts to a whole or to each other

What a wonderful way to describe so much of economic activity! Firms adapting to people, organizations dove-tailing with other organizations. The extended order created endogenously. People talk about how economics is all about competition but they fail to realize it is at least as much as about harmony.

Author's note: The title is based on the quote by Shakespeare: "Words, words, words." I never understood the appeal though my high school English teacher always loved it. I guess that's what happens when your last name is Shakespeare: everything you write becomes art.

Wednesday, October 11, 2006

Raising Awareness About Raising Awareness

Logging on to Wikipedia, I discovered that today is National Coming Out Day. Like every other National Group Day, NCOD aims to raise awareness of the LGBT community. It's gotten to the point where I'm losing track of what "raising awareness" means and I doubt groups that use it to justify their events have a much better idea.

So I started a Wikipedia article: raising awareness. In the article I suggest some groups become more interested in raising awareness than actually doing something about it simply because the former is easy to do. In undergrad every student organization seemed to be built around this concept and did nothing more. This even extends to our local chapter of the LGBT Alliance which was located on the most liberal campuses in the country. (Those from my old stomping grounds--Beloit College--might point out there were some activities the Alliance did that were not "raising awareness." This might be true, but most of what they did involved parties and papering the campus with fliers about yet another LGBT issue.)

I think the drive to spend so much time raising awareness comes from our democratic system. If we merely "raise awareness," then our representative will change things. We don't have to take action; the how is someone else's problem. Now it's true that getting people to pay attention to something is a critical first step (a lot of economics is in this stage as most people don't know certain laws are tremendous problems). But when we pass the point, the next step is do something about it, even if that doing something is writing to a congressman or proposing a plan of action. The obsession of only pointing out all that is wrong is a tremdenous problem and people need to be made aware of it.

Tuesday, October 10, 2006

Yes Logo

It's been a while since I posted and recent discussions and thoughts I've had has led me to the desire to defend on of my favorite captialist institutions: advertising.

Advertising's an amazing invention. It creates an incentive for people to provide a quality service without charging people who use it. It's free. Okay, it's not completely free as I have to watch it (though even here there's a strong pressure to make ads more entertaining) but as a poor grad student, I'd rather have an opportunity to take a bathroom break than open my wallet. Even something as simple as the brand itself offers massive bonuses to the consumer.

A random walk on Wikipedia today reminded me that there exists people like Naomi Klein who think branding creates a harmful consumer culture. Her book (No Logo) mostly focuses on the plight of the worker in developing countries and the evils of when firms concentrate into corporations. But let's not forget that because large companies exist, their brand becomes paramount and they gladly sacrifice short-run profit for long-run gain.

Our consumer culture is awash with examples. Google is my favorite (I use several of their products every day--including Blogger--and I have never paid the company one penny) but we see others. NBC now offers some of its primetime shows for free online. (Yes, there's advertising for these episodes but also note there is much less.) Phillip Morris advertises that they give advice on how to quit smoking on their website. Microsoft gives away some of its software. Nike sponsors athletic teams. When a company becomes very large, its brand becomes much more valuable and the firm will take more care to defend it.

This is not a perfect process and some might complain that the corporations' motivations are merely to help itself. They would be right but so what? Does it matter if they are more concerned about make profit than doing good when both are accomplished at the same time? I doubt the hungry care why Kraft Foods donates meals.

Friday, October 06, 2006

Contest of Wills

Protests serve two purposes: to generate change and to make the protestors feel good because they think they are generating change. Often there is the latter without the former.

While heading to my car after class last night, I passed one of the campus quads which was crowded with protestors. There was no event in particular they were protesting, except perhaps the protest of another group. (It's hard to tell who was protesting whom.) On one side was a crowd of about thirty student insisting homosexual marriage should be legal (Virginians will vote on this issue in November). On the other side was an equally large crowd of people arguing marriage should only be between a man and a woman. There was one police officer walking between them, though actively restraining no one.

Each side seemed intent on making sure the other side could see their posters, as if pictures and slogans would change the mind of anyone who is already participating in a protest. They seemed far more interested in their opponents than the trickle of passing students who had no clear allegiance. Neither side talked to each other.

There's politics and there's the real world. This is a clear demonstration that the two rarely have anything to do with one another.

Tuesday, October 03, 2006

Unintended Consequences

My father recently worked in Afghanistan doing USAID. In Pakistan they drive on the left hand side of the road, like England, but in Afghanistan they drive on the right hand side. The Pakistani cars have the steering wheel on the right side of the car, which the Afghanis import. Due to driving on different sides of the road my dad said that there are accidents and deaths caused by people not being able to see well while driving a car that wasn’t made to be driven on the right side of the road.

Sunday, October 01, 2006

October's Most Random Wikipedia Page Is...

Alternate spellings of "the". I didn't want to have another list for October but come on, "alternate spellings of the word 'the'"? The fact that the first item on the list is "teh" as a common typo is really why this page gets the award this month. The article gives details as to why its a common typo and which programs autocorrect the mistake. It even offers instances where this typo--because it's often a mistake--is actually a "correct" spelling.