The Oncoming Trit Bubble

About a week ago, I found myself back in a game I hadn't played in years: EVE Online, an MMORPG. It has the most sophisticated economy I've seen in a game with tens of thousands of people buying and selling hundreds of goods.

On April 24th, EVE will alter the rules of the game (a "patch" as they call it) which will radically change the economy. Basically it means players will have to create more things themselves, rather than just getting it from killing computer characters. This increased focus on player production (and it is already quite focused) will increase the demand for the game key mineral: tritanium, or trit.

When the patch notes came out earlier this month, trit prices exploded, along with veldspar (an ore that's refined into trit) and hulks (a ship that's really good at mining veldspar). (All screen shots were taken on April 19 at about 19:45 EVE time, or 3:45 EST, in the game region of Verge Vendor.)







(That recent dip in hulks is interesting; I'll get to that in a sec.)

As predicted by basic economics, the price is rising. If the demand shifts out (more people want something), the price will rise. This is why I, and many people in EVE, are mining. Prices are really high. But a friend of mine who plays insists I shouldn't sell my veldspar now. I should sell it after the patch is released because then the price is even higher.

But if the price is over-inflated, as I think it is, then this is a horrible decision. I should sell while the price is high. Like a house in 2007, get out while the getting's good.

It's hard to tell if something is a bubble or not. Is this price increase just the beginning? Or are people holding on to the veldspar and trit because everyone assumes the price will rise, only to find it dropping when they want to sell. I'm inclined to believe the latter for the following reasons:

Elasticity. This is the measure of how sensitive the supply and demand curves are to price changes. It's really easy to mine veldspar. Thus the supply of veldspar is elastic: a small change in price will radically increase how much people will bring to market. This price increase will be small.



But the price increase isn't small. It's gone from from 4.50 to 5.75, a 27.8% increase. The price is probably too high.

Quantity. According to the little model up there, quantity should be off the charts. But the amount of trit sold (seen as the green bars) is (slightly) falling. Hulk sales, on the other hand, saw a jump in quantity when the patch was first release. They're the first thing you'd buy if you're a semi-experienced player (thus able to fly one and can afford one) and want to respond to veldspar prices. But we're not seeing veldspar and trit quantities rising. People are holding onto them. And now that the hulks have been bought, quantity's fallen and price is beginning to, as well. (Though I don't want to read too much into a short-run dip in a price.)

The Winner's Curse. Estimations are normally distributed. Some people will overestimate the future price of trit and others will underestimate it. The person who over estimates the most will pay the most. They will win the bid and they will regret it. Prices are driven by the winning bid so things will seem more valuable than they are. And this is made worse because...

Prices are correlated. EVE uses an English auction: if you're buying you place your bid and the high bid will buy the auction. You can up your bid if you want. But people tend to use other people's prices as information. If someone keeps outbidding me, then I might think that they know something important I don't so I outbid them. They then use my bid to think I know something they don't so they outbid me. Around and around we go until we wise up and the market crashes.

This prediction comes with caveats. (1) I may know that the supply curve is elastic, but I don't know how elastic. I may know the demand will shift, but I don't know how far. It's entirely possible that a 27.8% increase is modest and this is just the beginning. (2) If players can't sell their trit at a price they want, they will probably just hold on it. You don't have to pay a store fee after all. Thus prices might not crash. But if they don't, quantity sold will.

So I could be wrong--I'm not selling all my veldspar now--but I'm selling most of it. In less than a week, I'm going to look either really smart or really dumb. C'est la vie.

The Capitalist Philosophy of the Muppets

The Muppets is about a dilapidated LA Muppet theater, an business tycoon looking to tear it down to drill for oil, and a familiar cast of characters trying to raise the money to save it. Last week Eric Bolling at Fox News claimed the movie is "brainwashing kids against capitalism" because the villain was a business man.

But The Muppets is the most capitalist movies this year. When they found out that their theater was in danger of being torn down they didn't lobby the California Historical Society to outlaw demolition. They didn't threaten to contact the EPA about the (admittedly real) problem of putting an oil well in downtown LA. They didn't head to Washington to seek a subsidy or add to construction regulations. They didn't even engage in California's infamous referendum system. In fact, none of these ideas ever occurred to them.

No, they did what every good capitalist does when someone tries to buy something they want: they outbid him.

Favorite Jokes About Qwickster

Netflix's making a separate company to handle sending off DVDs called Qwickster. Twitter's all a flutter about the name:

hunterwalk Hunter Walk
If you work for Qwikster, does that make you a Qwikee?

Gartenberg Michael Gartenberg
Ugh. Who thinks up these names? Qwikster? Sounds like streaming chocolate milk.

RGA R/GA
I'll get behind Qwikster if they choose Apu from the 'Simpsons' as their spokesman. It's the logical choice, on many levels.

misterpatches Matt Patches
Elmo smoking a spliff is a fine logo for your new service

liliales Mer
Netflix is about as perfect a name as could have been created. But Qwikster sounds like a weight-loss powder sold by The Onion.

And my personal favorite:

developer Aaron Draczynski
Qwikster sounds like the name of a 24-hour convenience store. Or, a service performed in the alley next to a 24-hour convenience store.

Where Was This Picture Taken?

Answer in the comments.

Santa the Slaver

In countless Christmas movies, we get the impression that the elves of Santa's workshop are happy, joyful people who do all their work for fun. It's part of the myth: who would want toys from a man who forces elfin creatures to do his bidding only to then give away all of their hard work to strangers and force them to start all over? The more you think about Santa, the more I realize those elves are his slaves.

(1) Santa has no income. Maybe all those fake Santas which crowd the malls bump up part of their paycheck to the big man (think of it like a franchise), but that wouldn't be enough to cover the cost of materials, let alone labor.

(2) There's no way that the North Pole is the elves' natural habitat. They don't have the fur needed comfortable survive there. Typically elves live in the forest. Now, obviously, Santa wants to be isolated from the humans which is why he lives in the North Pole. But there are plenty of other places he could be, places more hospitable for his elves (here's a map of the world based on how long it takes to get to a major city). The Amazon is quite isolated, as is the Sahara Desert. The Himalayas are warmer than the North Pole if you don't go too high. All are viable candidates. But Santa picked one of the most inhospitable places on the planet for one reason: to keep the elves indoors. If he was in the Amazon, in a place they were comfortable in, they might run outside instead of working. Not only did Santa kidnap them, he's trapped them in a work camp.

(3) But if they like to work, then it's ok, right? Well, if they like to work, why do they need Santa? Why not just stay in their natural habitat and send toys out into the world? Hauling cargo is work, too. Yes, they won't have Santa's magical powers to deliver them all on Christmas Eve, but so what? Unless you're talking about something that could spoil or die (which accounts for a tiny fraction of presents), they can be delivered weeks or even months in advance. It's more likely that after Santa kidnapped them, he lied, claiming the presents had to come out on the 24th and only the 24th, thus "justifying" the kidnapping.

(4) But what about all the shots from movies and television with the happy elves? For one, that's fantasy and you're mistaking what's fake for what's real. (Grow up, seriously.) Besides, Santa's an all powerful being (which brings up the question of why he doesn't make the toys himself): he brain-washes them.

Thin Film of Life

This one ranks high as my favorite YouTube video:

Consider the words Carl Sagan used: "a thin film of life." Exactly how thin are we talking about? I did a simple calculation and it's quite humbling.

Suppose we consider the thickness of the film of human life on Earth to range from the Dead Sea to Mount Everest (the lowest and highest point on land, respectively). That comes to 9,226 meters. The average diameter of the planet is 12,742,000 meters: a ratio of 1:1,381. In other words, if we inflated a beach ball four feet across (large by beach ball standards) and painted it, the thickness of the paint would encompass the whole of human civilizations: every monument, empire, family, and philosophy (save satellites and other space artifacts, of course). A thin film, indeed.

The Economics of Alien Conquest

My cousin, Brendon, and his girlfriend, Jenna, were in town this weekend. Both of them read my blog and Jenna told me I'm clearly knowledgeable about what I'm talking about, but still wrong. That response in itself deserves a post, which I may or may not get around to. Still, it would be fun to deviate a bit away from controversial topics and I thought of alien invasion. If aliens invaded, what would be their motivation?

Natural resources is a favorite Hollywood staple. Aliens will destroy our planet to take our stuff, likely minerals (Independence Day comes to mind but the physical land might be valuable, too (in The Day the Earth Stood Still, alien invaders attempted to terraformed our planet).

This is quite possibly the least likely reason aliens would go through the trouble of global conquest. The universe is filled with minerals and other resources that no one's using and are much easier to get to than stuff on an occupied planet. Maybe other extraterrestrials make harvesting Vega asteroids difficult, but even in the boundaries of our solar system there's still quite a lot to draw on.

Unless aliens are after biomass (i.e. living things). Perhaps there's some technology or feeding requirement that requires biomass (or they just want us as slaves), and Earth is the best place to get it. Lots of biomass with little ability to defend it. In that case, the best strategy probably wouldn't be a messy mass attack on the resource you're trying to harvest. Aliens would likely be much more insidious with probably a pathogen--killing everyone or knocking us all out while leaving the bodies around for collection later.

Racism is a likely motivation. This pops up in a lot of Sci-Fi television shows (Star Trek, Stargate, Babylon 5). A similar train of thought is a concern for humanity and a fear of what will happen if we're allowed to continue to live. Given many humans mistakenly fall into one of these two categories, I'd like it's a reasonable motivation for aliens to kill us.

Technology is a justification that's rarely explored. This is understandable but not for the reasons you probably think. Most assume that if aliens know how to travel faster than light, they are clearly more advanced than us on all other levels. That is far from certain, especially since an alien brain will probably not be wired the same way as a human one. As Richard Dawkins suggests, it is entirely possible there's a group of extraterrestrial life who intuitively understand the theory of relativity but have difficulties grasping principles of air resistance and other "slow" speed phenomena.

But it would be rather clear that the easiest way to get technology is to trade for it, not to take it by force. If such aliens were interested in our technology, they would more likely be peaceful. The one exception to this rule is if they discover it's easier to kill us than to learn a single human language. That would certainly be a sad state of affairs for us.

Then there's the possibility that aliens need to build a intergalactic superhighway along a path that intersects with Earth's orbit. That's a bit unlikely given how big space is ("Really big," according to Douglas Adams) but it could still be true. And if galactic eminent domain is as potent as our terrestrial version, then considered us conquered.

A Debate Worth Watching

Was There Too Much Sex And Profanity In The HBO Presidential Debate?
HT: Mike Mills

The Joker's Lesson on Free Trade

When I saw the midnight showing of The Dark Knight I doubt my fellow moviegoers were learning something about free trade. I didn't see the lesson at first but once I noticed it, it became painfully obvious.

***Spoiler Alert***

At the climax of the movie the Joker scares the population of Gotham to evacuate, leading to two ferries packed with people trying to escape the city. The Joker places a bomb on each ferry and then gives the two captains the detonation device for the other bomb. Ferry A can blow up Ferry B and vice versa. They have fifteen minutes to decide what to do or the Joker will blow them both up.

This is obviously a prisoner's dilemma game with the standard Nash equilibrium (the captains pull the triggers at the same time, killing each other). But that's not what happened. Each crew was overwhelming in favor of blowing the other up (confirmed by a vote), but no one was willing to actually do the deed. In other words, there's a very real morality cost that altered the payoffs. People would rather die than kill someone but they would rather have someone else kill than die.

If you look at polls Americans are mostly against free trade. (Last week's Economist cited only 33% of Americans think free trade is good for the economy.) Yet that's not how they act at the market. A choice between a cheap import and a more expensive domestic leads to people favoring the import. We don't of course need government action to limit free trade--people could just refuse to buy imports. But, as in the ferries, no one is willing to shoulder the cost of doing it themselves. They want someone else to do the deed.

Bryan Caplan notes there's a big difference between voting and buying. In buying you internalize all the costs and benefits of your actions. In voting such considerations are externalized onto someone else. Your gut feelings of xenophobia, survival, or old ideas are a lot easier to hold on to. But when faced with the true costs of your action, revealed preferences are quite different than the cheap talk from a voting booth.

Pachelbel For the Modern Rocker

Art Carden wonders if this is art. I bet it is, but I ultimately don't care. It rocks.

Jobs Americans Won't Do: Win Oscars

All acting Oscars went to foreigners this year, and foreigners also won various other awards. I'm waiting for some nonsensical rant from an anti-immigrant zealot to declare the end of the American film industry since non-Americans are doing so well.

Al Zubarah

My parents moved to Doha, Qatar and for Christmas I have come to visit. And so channeling my inner King Holler, here's what I did my first full functional day in the country.

I went to the west side of the country with my mom and two other people she knows. We were going west across the country on a highway, and stopped to look at some camels on the side of the road.


They were behind a fence, and were being raised the way Americans raise horses. The desert isn’t sand like I expected, it is mostly hard ground and rock.


We then went to the al Zubarah fort. It was built in 1938 on the ruins of a destroyed castle and used as a defense against Bahrain. The holes in the building were meant for guns to shoot out at intruders. The fort was then used as a jail as late as the 1970s, and as a Coast Guard place until the 1980s. It was then turned into a museum.

When we got there, there was no one there. We just walked on in and went around. After a while some other people arrived.



After going around the fort, we went to the Arabian Gulf. I waded out, it is really shallow and I couldn’t really go swimming.



Then we went to al Zubarah town. It was build in the late 1600s, and most of it has not been unearthed. In its day it was huge – some European maps called all of Qatar Zubarah after the town.



Coins from India, China, and European Africa have been found there. The city is estimated to be 2,000 by 800 meters. It will be much more impressive if it is ever fully excavated. Like the fort, we just walked on in. There wasn’t a place for anything official, it was completely self guided.



On our way home we stopped by the Emir's personal zoo, and could look in through the fence. He had various animals (mostly African) including the oryx - the national animal of Qatar.



The animals were hunted to extinction in the wild, but the Emir's herd was so successful that some were reintroduced back into the desert.

TV Online

When I was home a friend pointed me in the direction of TV Links. Check it out, especially when you just have to watch TV.

Is Modern Society More or Less Violent?

Before the tragedy at Virginia Tech I was discussing with friends on whether society is more violent now or in the past. I am inclined to think that despite the violence we hear about and the violent movies and video games, we are a much more benign people today.

While our entertainment in movies and games can be violent, it is better than older forms. From the cultured French:

In 16th century Paris, a popular form of entertainment was cat-burning, in which a cat was hoisted on a stage and was slowly lowered into a fire. According to the historian Norman Davies, "the spectators, including kings and queens, shrieked with laughter as the animals, howling with pain, were singed, roasted, and finally carbonized."

Not to be out done, the British engaged in bear baiting. Bears were chained in a pit, and hunting dogs would be set on it until it was killed. A variation on this was whipping a blinded bear. A Spanish nobleman was taken to a show where an ape was tied to the back of a pony. He commented "to see the animal kicking amongst the dogs, with the screaming of the ape, beholding the curs hanging from the ears and neck of the pony, is very laughable."

More primitive societies today seem to be more violent. If you think football, boxing and cock fighting are violent, you should avoid kok-boru. This game is popular in Central Asia. A goat is decapitated and the legs are cut off at the knee. Eight players ride on horses and try to grab the goat and toss it through a stone ring. Whipping and punching other players are part of the game, and the only protective gear are World War II Soviet tank helmets. China, Kazakhstan, Russia, Tajikistan and Uzbekistan all have national teams.

Edward Miguel of Berkeley did a fascinating study on modern witches in Tanzania. Families take care of the older relatives. When extreme rainfall is experienced (drought or flood) it becomes more expensive to feed the family. When these extreme events occur, older women are accused of being witches and killed by family members. In other words, when it gets to expensive to take care of the elderly they are branded as witches so as to justify their murder.

The Economist recently ran an article on honour killings in Turkey. The opening story was of a man who killed his sister because she eloped. He resisted killing her for three months because he loved her, "but then neighbours stopped talking to him, the grocer refused to sell him bread, the local imam said he was disobeying Allah, and his mother threatened to curse the milk she had breast-fed him." And so he put 7 bullets in her. A report that came out last August found that almost 1,100 honor killings happened in the previous five years, over four a week. Fifty-one of the killers were interviewed, and only three expressed regret.

While modern society is far from perfect, I feel that things are getting better. Though some of our entertainment is violent, it is fake. We don’t have social norms to kill family members if they do something disgraceful. If it becomes expensive to take care of someone, we don’t murder them in the name of witchery. While incidents such as Virginia Tech are tragic, the fact that it is so tragic shows how far our society has progressed.

The Absurdity of It All

Economists often convey a problem with conveying their ideas to a general audience. In a very real sense, all economists are teachers running a class of students who don't want to be there, but are still paradoxically interested in understanding economics. (Or, more likely, want to talk so that they sound like they understand economics.)

Enter Yoram Bauman who translates Mankiw's ten principles of economics in a way everyone can enjoy. Well, I know economists will enjoy it, but I wonder what non-economists will say. (In the YouTube comments section, one person who was apparently studying for their econ final is "now confused.")

Billy Bob in Space

In about a month, I'll be travelling to Amsterdam to present my paper, One Giant Leap for Bureaucracy. The piece is about how NASA is more concerned with maintain its authorative position in space travel than allowing private citizens to enter space. NASA's just like any other bureaucracy, more concerned with its public image than bringing humanity into space.

Enter The Astronaut Farmer, a movie about Charlie Farmer (Billy Bob Thorton) building a rocket on his Texas ranch. When he tries to buy rocket fuel for his launch, FBI and a smattering of other government agencies find out and try to shut him down, notably NASA and the FAA. The overarching sentiment on why they don't want him to launch: they don't want to be embarassed.

It was a pretty good movie, though sometimes overdone and scientifically shaky. But the theme is disturbingly accurate.

Rolling the Loaded Dice

While taking a break from the sudden list of eighty-three things I've had piling up, I watched a bit of a Star Trek: Enterprise episode, of which the Sci-Fi Channel has been rerunning. In the episode, the Captain decides to give the ship a major weapons overhaul instead of returning to Earth's solar system so they can better defend themselves against a virtually invincible foe.

Later, the Captain regrets a decision to rush this new ship out of space dock, before these weapon enhancements were complete. His chief engineer reminds him that he had to accept that risk because the reason it was rushed out was to complete an important mission. He finishes his little lecture by noting that other pioneers of space (notably the ones of our era) sat on millions of liters of rocket fuel--they took on great risks too. That's what it means to do amazing things.

He was clearly talking about NASA, which I found strange. There is no doubt that the astronauts are brave, but the risks they take are not the seat-of-your-pants, on the fly, kind of risks. Those are best left for true revolutionaries, like when the Enterprise left space dock incomplete. The risks NASA astronauts take are calculated risks. Extremely calculated. NASA astronauts are not some "space cowboys," living by their wits alone, bravely the blackness of space like a rugged invididual. They are arms of a bureaucracy. Risk takers? Yes. Legendary heroes? Not quite.

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

TIME MACHINE REACHES FUTURE!!! … nobody there …
- 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.

The Lost Wisdom

Last night I watched a sci-fi classic Jurassic Park with some friends. If you've never seen it, stop reading this and go watch it. Overwise, I ask you to remember the story, and thus the message of the movie.

The company InGen develops a way to clone dinosaurs which they do with great enthusiasim. Ian Malcolm (Jeff Goldbloom) plays a mathmatician specializing in chaotic systems (better known as dynamic systems). He argues InGene is getting into nasty territory. Nature cannot be controlled and those that lack humility for natural forces will regret it. Malcolm's prophecies come true, not because the dinosaurs rebel against man but because the computer programmer--Dennis Nedry (Wayne Knight)--shuts down the park so he can steal important research to sell to InGen's competition. Havoc ensues.

The movie implies scientists should have a moral code, asking not just if something is possible but if they should even try to make it happen. (See earlier post on the subject here.) Dinosaurs, being seperated by humanity for 65 million years, should not be cloned because "nature" never intended the two species to intermingle. Over and over, we here the characters say this is "too much" and "too far" and the chaos that follows seems to prove their concerns.

But wasn't really cloning dinosaurs that was dangerous. It was cloning agressive dinosaurs while, at the same time, giving one person the power to shut down all security measures if he wished. If there were only herbivores on the island, it wouldn't be much of a deal that Nedry shut down the park. Hammond built so much in such a way that collapse was inevitable and so everyone else then makes the mistaken conclusion that we shouldn't build at all.

Justice For All

Right now I'm watching Law and Order, one of the great dramatic shows on television. I enjoy taking the journey of the case with the characters. The twists and turns. But then there's that turnabout where the guy everyone knows is guilty gains some kind of advantage usually because the main characters, the protagonists, extended themselves a little bit beyond the law. Perhaps if the cops or lawyers had more discretionary power, our world will be better.

Enter last night's premiere of Justice. Instead of following the state, the viewer sees the action from the defense's point of view. Special emphasis is placed on the advantages the DA's side has in prosecution. The research before the arrest. The first crack at the crime scene, evidence and/or body(ies). The complete dependence the defense has on the prosecution to provide this information. Instead of the defense lawyer concocting a desperate insanity or self-defense plea, we see government lawyers building a story to prosecute an innocent man.

The messages are clear. Law and order are for statists. Justice is for libertarians.