Re: Senators Denounce Policy Analysis Markets
On 2003-07-28, Robin Hanson uttered: >FYI, our DARPA project (www.policyanalysismarket.com) has just been >denounced by two senators: >http://wyden.senate.gov/media/2003/07282003_terrormarket.html It's still a nice plan. Much like Brunner's delphi pools in Shockwave Rider. (BTW, if anybody ever tried to patent artificial markets like these, it'd be highly interesting to know whether sufficiently exacting scifi qualifies as prior art.) What I'm wondering, though, is asymmetric information. General contingent markets are basically complicated markets in risk, and the claims traded a form of insurance based on risk sharing. So the same problems apply to them that do to insurance. If we're betting on diffuse, difficult to influence risks, there's no problem. But if we bet on something individual market participants can change, we have to consider things like moral hazard and adverse selection. I mean, because of the efficient market hypothesis, the ideal contingent market only allows profits to someone bringing in new information. That's why betting on whether someone will be assassinated will give an unreasonable edge in information to an assassin, and will actually spawn assassinations. (Assassinations are probably cheaper than defending against them if true anonymity is present.) That's also why the market could turn into a twisted incarnation of Assassination Politics (http://jya.com/ap.htm). Furthermore -- unlike the original AP proposal -- these are futures markets where you can speculate and win without pulling the trigger. Rational bubbles can form, and those will in case turn the bet on an assassination into a self-fulfilling prophecy (early investors will have an incentive to rig the wheel, so to speak). When this happens, the ill effects of moral hazard will be amplified, and we can't rely on the resulting assassinations being reasonable even to the degree we can with garden variety AP. To someone with a penchant for conspiracy theories, then, all this would probably count as one of DARPA's tacit aims. -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: fertility and government
On 2003-07-14, Wei Dai uttered: >1. Why is fertility higher in dictatorships? Do dictators like bigger >populations, and democrats like smaller populations? Maybe they're poorer in aggregate? I mean, sustenance-level poverty is one of the prime causal precedents of high fertility, and most dictatorships are poor ones, because of ineffective rule of law and wide-spread corruption. Sure, there are a few wealthy dictatorships (Saudi Arabia comes to mind), but that's because of independent factors (which usually do not touch the entire population). >Does population growth influence choice of government? Under extreme poverty, likely not -- poverty would drive people to take care of their own business, not politics. Under other conditions, probably yes -- relative poverty and the greed thereoff is how we got the welfare state. We would expect the per capita lack of income in young generations induced by population growth to affect at least redistributive policy. For example, I wouldn't be surprised if that was the precise description of how politics in India works right now. If the latter hypothesis pans out, we have to be real grateful that industrialisation proceeded so rapidly in the West, unhindered by full-grown democracy. Otherwise we never would have tunneled onto the level of wealth which throttles population growth, without bumping into a democratic political wall with the working class requiring income transfers -- the latter slows growth, so we could well have become stuck in between. >2. Should economists try to maximize GDP, or per capita GDP? Neither, I think. Maximizing GDP would not be conducive to general welfare. Maximizing per capita GDP today would also violate individual choice, if we also take into account individuals' time preferences. I would take full heed of the principle of revealed preference, and just let people choose. >Another interesting piece of information in this article is that >democratic regimes are more frequent in more developed countries, but >it's not because those countries are more likely to become democracies. >Rather it's because they are less likely to revert back to dictatorships. >Among democracies that have collapsed, the one with the highest per >capita income is Argentina in 1975 -- US$6055. I would side with Robert Kaplan (http://www.theatlantic.com/issues/97dec/democ.htm) and conjecture that democracy can only survive in a relatively homogeneous population, constrained by the rule of law. Secondarily I would claim that democracy can only survive where its transaction costs and the steadily increasing dead weight it produces can be absorbed by economic growth. Such conditions seem to sweep most of the unsuccessful democracies from the picture. They might sweep us under the rug as well. The conjecture might be false, but at least it supplies some basis for the claim that growth is "necessary" (which it of course isn't in any purely economic framework). -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: "Family" Businesses and Licensing
On 2003-07-10, John Perich uttered to [EMAIL PROTECTED]: >In my informal experience, fathers and sons tend to work together >full-time only in professions with strict licensing or training >requirements. That's an interesting one. My first stab is that we might go about it the other way. Why do such professions need strict licencing? One explanation would be that these professions are crafts where the best way to learn the job is to do it. In such professions we wouldn't expect there to be strict outcome based criteria on what one needs to know, but we do know that a certain learning process is more successful than others. So, if we want to assure safety and efficiency, we can't just test for an applicant's skills -- there'd be a problem with information. Thus the market orients itself along the learning process, the uncertainty about the outcomes makes the professions more amenable to legislative intervention, and the eventual legislation then follows the process oriented reasoning. >Also - why is it more often "father/son," and not "mother/daughter" or >"mother/son"? Or "father/daughter"? Perhaps self-selection in occupations, so that parent/child combinations with different sexes do not benefit from intergenerational knowledge transfer? That leaves the mother/daughter pairing. Perhaps that's because of self-selection into lines of work which are less "crafty"? -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: Russia Needs More Inequality
On 2003-07-07, Bryan Caplan uttered to [EMAIL PROTECTED] and Tyler Cowen: >But I can't remember hearing anyone drawing the obvious lesson: Russia >needs more inequality to persuade the brains to stay. It doesn't. Just as you say, it needs "better inequality", which in this case most likely means "less inequality". The point is, the distribution shouldn't be forced. It should be let to evolve. Until now, it hasn't been, because of all the rent-seeking and corruption you mentioned. Thus, equality vs. inequality isn't the right basis in which to analyse Russia's situation. The right basis, as always, is rule of law vs. no rule of law, or efficient law vs. inefficient law. >As Alex Tabarrok pointed out to me, even Rawlsians should embrace this >conclusion. This sounds interesting and I might not have been present at the time. Could you perhaps provide me with a cite? -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: some people are optimizers
On 2003-07-01, Marko Paunovic uttered to [EMAIL PROTECTED]:
>However, I don't think that there is any evidence, except in social
>insects, for this kind of specialization that you are suggesting.
The existence of two sexes appears an obvious counter-example. There are
also some reasons to expect that the principle might work at a
finer-grained level. I don't have a reference at hand, but I've once read
a highly interesting sociobiology account of why homosexuality might be
one such specialisation (that's where the childcare idea came from). I've
also heard some speculation about the possibility of "warrior genes" (i.e.
genes which cause aggression bordering on self-sacrifice). The same goes
for novelty seeking ("troubled youth"), which I understand has been
extensively studied. From the economic standpoint the ratio between
novelty seekers and steady people determines the community's collective
risk profile.
So I wouldn't dismiss the possibility of genetic occupations (a wonderful
term, BTW) just yet. Otherwise we're in vigorous agreement.
--
Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111
student/math+cs/helsinki university, http://www.iki.fi/~decoy/front
openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: some people are optimizers
On 2003-07-01, Marko Paunovic uttered to [EMAIL PROTECTED]: >Because gene for "not wanting children" will not be around for too long, >but only for one generation. Not true. For instance, such a gene could have positive effects on the other people in your tribe (say, added time for common childcare, which is quite common in orang-outang communities), so the gene might well be self-propagating in the social evolutionary sense. I mean, you only need trivial economic analysis to show that specialisation is useful, and so having a percentage of individuals who do not breed but do some other useful work for the community could prove very advantageous. Why on earth should we presume evolution couldn't take advantage of basic economics, when it has lead to far more nontrivial consequences? Genes do not care about individuals. They only care about their own survival. Why should we presume individuals have some special place in the theory of evolution? >It might be good for your genes to "invest" all your time and money in >one child or two children. But historically they haven't, just as they don't in less developed countries today. Thanks to our knowledge of biology we also see that the genes in those surroundings are pretty much the same as ours. So where's the difference? The real difference is that there are other forces at work here besides Darwinian evolution. Cultural evolution is the prime one -- it has long since overtaken its biological counterpart, just about everywhere. To put it bluntly, if you can at least farm, you're no longer guided solely by biological dictates. Instead it's information which guides your life. Economics still applies, but it isn't as trivial as in the simple case of evolutionary biology. >> Human genes endow people with the intelligence to choose not to have >> children when the cost and risk are high. Precisely. >I can't really see a situation where decision not to have children is >good for your genes. Okay. Say you have faulty genes which do not affect your basic reproductive ability? Like when you're stupid but oh-so-horny? That isn't a trait that would directly interconnect with your ability to breed (your groin ain't your brain), so a naive analysis would suggest stupidity is irrelevant. But we all know painfully well it ain't. The example goes to show that the link between your genotype and your ability to breed isn't a direct one. Nowadays I wouldn't actually expect any precise, scientific model to be able to capture the precise dynamics of mating and procreation. In the stone age, maybe, but not today -- since then we did invent nylon, lubrication, lipstick, fermented beverages and industrial strength black clothing. It's the same with not having kids. Biological principles alone fail to explain that. I'm also pretty sure this disconnect is what makes us talk about evolution on lists having to do with economics. -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: Marketing vs. Economics
On 2003-06-30, fabio guillermo rojas uttered to [EMAIL PROTECTED]:
>Chess games seem to be a combination of rule behavior ("try top control
>the center board," "castle early as you can") with a little bit of search
>through a gigantic strategy space.
True, but how are those rules generated? They are generated as local
heuristics conducive to maximum utility at the end of the game. Why isn't
the conventional, full solution being used? Because of computational
constraints -- we can't search through the whole game tree. So this would
suggest the problem is indeed a one of utility maximization, only this
time with resource bounded rationality.
Still it's an interesting example, because there is a tradeoff between
payoffs from computation and its cost. You wouldn't want to ruin the
utility you get from the game by planning each move for 10 years. It
becomes still more interesting when you go to speed chess. The first
interesting thing is that, generally, the computational cost in
combinatorial problems rises exponentially with lookahead, so there might
actually be a way to sort-of quantify the utility in this case. (Aye, that
becomes perilously close to cardinal utility.) Second, I think we would
also expect less experienced players to prefer speed chess -- ceteris
paribus, knowing the right heuristics is less important in speed chess
because the other player's actions can always stall a long strategy.
That means everybody's constrained to simpler play, and so the
considerable intuition and long-term strategic talent of a grandmaster
would be wasted. (The argument isn't watertight, of course.)
--
Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111
student/math+cs/helsinki university, http://www.iki.fi/~decoy/front
openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
Re: Marketing vs. Economics
On 2003-06-29, alypius skinner uttered to [EMAIL PROTECTED]: >But would this really give us economic models more useful than the >simplified ones currently used? Taking more factors into account may make >the models so hard to maximize that there is no net gain in predictive >accuracy. Thoughts, anyone? I think rules are already a large part of economic reasoning. I mean, what are game theory and institutional economics if not rule based econ? Also, there are plenty of mathematical tools which can be used to maximize even hugely complicated rule based models -- there's a lot of theory and software for finite automata, Markov models and the like. (Presuming maximization is a concept which fits easily with rules.) Even if solving such systems exactly is infeasible, numerical solutions would appear tractable across the board. So yes, I think rules might have their place. It's just that they probably won't be needed in "easy", more or less competitive markets with money, but in inconventional ones like the marriage or public choice ones. (My first post, so I should probably introduce myself. I'm a 24-year old Finnish student of math and computer science. Economics is more or less a hobby to me, largely thanks to my libertarian political background. Armchair economics describes my interests perfectly: institutional econ, black markets, voting theory, market failures, the complications with IP rights, transaction cost economics, and so on. I'm looking forward to some interesting discussions.) -- Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 student/math+cs/helsinki university, http://www.iki.fi/~decoy/front openpgp: 050985C2/025E D175 ABE5 027C 9494 EEB0 E090 8BA9 0509 85C2
