Re: Regulating Positional Goods
I thought of one more positional-goods related policy: limiting the number of hours in a work week. In other words, forced spending on leisure, which as this survey indicates is non-positional: Do You Enjoy Having More Than Others? Survey Evidence of Positional Goods http://www.handels.gu.se/epc/archive/2855/01/gunwpe0100.pdf In a personal reply Robin suggested that the lack of heavier regulation on positional goods may have to do with issues he wrote about in this article: http://hanson.gmu.edu/fairgene.html. While not disagreeing with that, I suggest another reason may be that if we didn't have to spend money on positional goods, the most productive among us might choose to work 1/2 or even 1/10 the number of hours we do currently. A majority of voters would lose because of reduction of income redistribution and positive externalities from science and art.
Re: Regulating Positional Goods
On Sun, Nov 28, 2004 at 02:24:18PM -0500, rex wrote: > Wouldn't it make more sense to tax or "punish" the people who don't enhance > their kids to be taller or better? Part of the advantage of being taller is social. Because making your kids taller confers a social advantage on them while simultaneously disadvantaging other people's kids, genetic enchancement for tallness is considered a "positional good". Here are a couple of articles you can read about positional goods, if you're interested: "Why Does Growth Fail to Make Us Happier? ? Some Mechanisms Behind The Paradox of Happiness", at http://dipeco.economia.unimib.it/happiness/accepted_papers/binswanger.pdf "Status Effects and Negative Utility Growth", at http://www.nuff.ox.ac.uk/economics/papers/1998/w22/futilegrowth5.pdf.
DIY dividend tax cut
(Is it appropriate to discuss finance on this mailing list? If not, perhaps someone can point me to a more appropriate forum.) It annoys me that the dividend tax has been cut for stocks, but not bonds. So here's a way that you can (legally, I think, but I'm not a lawyer) cut your own tax on bond dividends. The trick is to first convert those dividends into short-term capital gains, and then convert the short-term capital gains into long-term capital gains. This trick also works with stock dividends so keep it in mind in case the stock dividend tax cut is ever rescinded. (For those not familiar with the US tax system, the simplified version is that for most people, bond dividends and short-term capital gains are taxed at 25-33%, while stock dividends and long-term capital gains are taxed at 15%.) The first part is pretty easy. Just sell your bonds before the ex-dividend dates, and buy them back afterwards. This will be easier if you hold your bonds in an exchanged traded mutual fund. For the second part, construct two non-overlapping baskets of stocks, both of which will track the stock market as a whole. Then short one basket and use the proceeds to long the other one. Finally close all positions that have lost money just before one year expires (so they count as short-term capital loses) and close all positions that have gained just after one year expires (so they count as long-term capital gains). The loses and gains should be approximately equal. Now the short-term loses in stocks will cancel out the short-term gains in bonds, and you're left with an overall long-term gain approximately equal to the dividends you would have received. Besides the obvious one of trading costs, does anyone see a problem with this strategy?
Re: Regulating Positional Goods
On Sun, Nov 21, 2004 at 07:27:32AM -0500, Robin Hanson wrote: > I was at a workshop this weekend where we discussed the possibility of > regulating human genetic enhancements, and it was suggested that positional > goods were a valid reason for regulation. It might make sense, for > example, to tax the act of enhancing your kids to be taller than other > folks' kids. That seems similar to wearing high heels, which according to this page: http://podiatry.curtin.edu.au/sump.html, was regulated in 1430 Venice but in the modern age only during national emergencies. Some schools do have dress codes that forbid high heels. I think dress codes are enacted at least partly for positional reasons. Many positional goods are positional because they are used to attract mates. Perhaps banning polygamy was done partly for positional reasons? I can't think of anything else besides these rather weak examples. It's a bit puzzling why positional goods are not more heavily regulated.
Re: contents coverage
Maybe the kind of customers a lower minimum of contents coverage would attract are not good insurance risks. What kind of person would buy an expensive house and then fail to properly furnish it? It shows lack of planning or a declining financial situation. On Mon, Nov 15, 2004 at 04:27:12PM -0500, Bryan Caplan wrote: > Homeowners' Insurance normally covers the contents of your home as well > as the structure. Strange feature: Your contents coverage normally have > to be AT LEAST 50% of your structure coverage. If you have 500k worth > of structure insurance, you also have to buy at least 250k of contents > coverage. Why is this? Moral hazard problems should definitely be > stronger for someone with more contents coverage. So why can't you get > a discount by cutting back? > -- > Prof. Bryan Caplan > Department of Economics George Mason University > http://www.bcaplan.com [EMAIL PROTECTED] > > "But we must deplore and, so far as possible, overcome the evils of > habitual newspaper reading. These evils are, chiefly, three: first, > the waste of much time and mental energy in reading unimportant news > and opinions, and premature, untrue, or imperfect accounts of > important matters; second, the awakening of prejudices and the > enkindling of passions through the partisan bias or commercial greed > of newspaper managers; third, the loading of the mind with cheap > literature and the development of an aversion for books and > sustained thought." > >--Delos Wilcox, "The American Newspaper" (1900)
1% per day return
According to page 18 of http://www.stern.nyu.edu/~adamodar/pdfiles/cfovhds/divid.pdf, for tax reasons, the average price drop of a stock on the ex-dividend day is only 90% of the dividend. Microsoft has declared a $3 per share special dividend, with the ex-dividend day being November 15, 2004 (see http://www.microsoft.com/msft/FAQ/faqdividend.mspx#Question9). This is about 10% of the share price. So if you have a tax-exempt (e.g., retirement) brokerage account, you can buy Microsoft stock one day before the ex-dividend day, then sell it on the ex-dividend day, and receive a 1% return (10% of the 10% dividend). I'm curious how commonly known this was. Did anyone else know about this trick before reading this post? Are there other investment tricks like this?
Re: another use for idea futures (fwd)
On Wed, Oct 20, 2004 at 02:13:23AM -0400, Robert A. Book wrote: > I think what you want is the Banzhaf Power Index, developed by Banzhaf > (surprise!) in the 1960s. I forwarded your post to a friend of mine > who's done some work on this, and discovered he's giving a talk on > this very topic on Friday at the GWU math department. > > His summary, with a link to a more detailed web page, is below. I read his web page quickly, but did not find it particularly relevant. The Banzhaf Power Index is apparently about figuring out how much power each voter has in a block voting system, where everyone is not equal in the sense that your vote has a different probability of influencing the election depending on where you live. But he starts off by assuming that every voter has an independent .5 probability of voting for each candidate. That makes the analysis useless for the purpose of computing the expected utility of voting, because it ignores all of the relevant information that we actually have about the likely outcome of the election, such as the IEM market data.
Re: another use for idea futures
On Tue, Oct 19, 2004 at 11:32:16AM -0700, Peter C. McCluskey wrote: > I think it's harder than this to adequately model p(x), because it acts > differently in close races because the incentive for the losing side to > cheat is highest when it's most likely to change the result. Yes, to be more realistic, we need to compute the probability that my vote discourages the non-preferred candidate from cheating, or encourages the preferred candidate to cheat. I think it can be argued that after taking this into account, the probability of my vote deciding the outcome is still close to p(0), where p is the probability function for the actual vote without cheating (presumably with a normal distribution), not the final certified result. > What I really want is something which would quantify the probability my > vote will affect what interest groups future candidates pander to. I suspect > this is higher than the chance of affecting the identity of the winner. The probability of that is zero, because election results are not broken down by interest groups. (Am I missing something?) I'd think that politicans instead decide which groups to pander to based on their own polling.
another use for idea futures
I think I finally solved a problem that's been bugging me since high school: how do you actually compute the probability that your vote will be decisive, in other words, the probability that without your vote the election will be a tie or your side will lose by one vote? (Well, solved if we ignore the electoral college and assume that only the popular vote matters.) This number is of course needed to compute an expected utility of voting. We all know it's small, but how small? Slate magazine published two recent attempts at this calculation: http://www.slate.com/id/2107240/ by Stephen E. Landsburg and http://www.slate.com/id/2108029/ by Jordan Ellenberg. Both attempts are very much flawed. The second article says what's wrong with the first one, and it should be pretty obvious what the second article's own problem is. (And although the two authors don't mention it, both of their approaches can be found in the academic literature, starting in 1975. See http://www.independent.org/pdf/tir/tir_06_4_bohanon.pdf for the references. I think these professors need to be more careful about giving proper attribution when writing popular articles.) Here's my approach, which hopefully is novel. Let n be the number of people who will vote for either Bush or Kerry, and assume that it's even. Let p(x) be the probability that Bush receives exactly n/2 + x votes. We want to compute p(0). It's well known that the the Iowa Electronic Markets runs a futures market (with real money) on US presidential elections, but perhaps it's less well known that it has separate bets on whether each candidate will win over 52% of the two-party popular vote. This gives us s = sum of p(x) for x > .02n and x < -.02n. Now if we assume that p(x) is more or less flat in the range -.02n <= x <= .02n, then p(0) must be approximately (1-s) / (.04n). Using s = .488 (IEM averages on 10/16), and n = 105586274 (turnout for the 2000 election), p(0) is about 1.2e-7. To handle the case when it's not good enough to assume that p(x) is flat in the range -.02n to .02n, for example when one candidate has a clear lead, we can instead assume that p(x) has a normal distribution, and find the normal distribution that best fits the 4 data points offered by IEM.
Re: lotteries and elections
In other words, what you're suggesting is that for some, lotteries and voting are like candy, pornography, birth control, or narcotics, i.e., a legitimate way (in some cultures) for a person to deliberately subvert his own genetic programming and obtain pleasure that he doesn't "deserve". Ok, I can buy that, but I still think there must be a large fraction of lottery players and voters who don't know, even intellectually, that their chances of winning or changing the election outcome are tiny. But it doesn't look like enough data exist to settle the matter either way. On Wed, Sep 01, 2004 at 10:07:00PM -0400, Robert A. Book wrote: > Whenever I ask seemingly intelligent lottery players why they play, > the answer is usually something along the lines of "I know they > chances of winning are tiny, but for a dollar I get to dream of > winning for a whole week." In other words, they (may) know the > probability is extremely small, but that extremely small probability > has a utility value beyond value the chance of dollars that goes with > it. This is analogous to the entertainment value of playing Las Vegas > style gambling games like cards, roulette, and slot machines. > > Something similar may apply to voting -- everyone knows the chances of > an election being decided by a single vote are miniscule, but they get > some satisfaction from participating in the process, and maybe even > from knowing that they made the total for their candidate in their > county printed in the newspaper the next day from "138,298" to > "138,299." > > --Robert Book
Re: lotteries and elections
On Tue, Aug 31, 2004 at 07:50:08PM -0400, [EMAIL PROTECTED] wrote: > I've been discussing with my undergradute students the rationality of voting. What about the possibility that many people do not deal well with with small probabilities, and mistakenly think that their votes matter? Why have economists latched onto the idea of "expressive voting", when a much simpler explanation is that most apparently irrational voting really is irrational? Of course "expressive voting" preserves the assumption of rationality, but there is still the problem of participation in lotteries with negative expected payoffs. Is that just to be ignored, or will someone come up with a theory of "expressive lottery ticket purchase"?
Re: lotteries and elections
On Tue, Aug 31, 2004 at 08:25:16PM -0500, Jeffrey Rous wrote: > When people ask me why I vote, my standard answer is "because I can." Voting simply > reminds me that we have something special going here in the free world. I do a > decent job of learning about the candidates and issues not because I think my single > vote matters, but because, overall, voting does matter and I get a kick out of being > part of the process. Maybe you know that your vote doesn't matter and still vote anyway, but I bet there is a high positive correlation among the general population between the belief that one's vote matters, and willingness to vote. Using ourselves for anecdotes in this case is a bad idea. We as a self-selected group of armchair economists already know that the probability that one's vote will make a difference in the outcome is tiny, so of course anybody who still votes will be voting for other reasons.
lotteries and elections
Does anyone know if there is a correlation between a person's willingness to buy lottery tickets, and his willingness to vote in large elections (where the chances of any vote being pivotal is tiny)? A simple explanation for both of these phenomena, where people choose to do things with apparently negative expected payoff, is misunderstanding or miscalculation of probabilities. This theory would predict a positive correlation. I'm curious if anyone has done a survey or experiment to test this.
Re: the sea-change of military competition
On Thu, May 27, 2004 at 09:17:41AM -0400, Robin Hanson wrote: > None of these have obviously improved the abilities of insurgency > *relative* to anti-insurgency, as far as I can see. Both sides have > better weapons, propaganda, and communications. The gap between farm instruments and car bombs seem bigger than the gap between rifles and smart bombs. The gap between speech (200 years ago a typical insurgent was probably illiterate) and the Internet seem bigger than the gap between print and satellite radio. And what new propaganda do the anti-insurgents have that is comparable in potency to nationalism? I'm puzzled that you'd argue over this particular point. That occupation is not profitable anymore seems indisputable in light of recent events - the U.S. has not yet pacified a country with GDP of less than $60 billion after spending more than $100 billion on the effort. How would you explain this, if you don't think insurgency techniques have improved relative to counter-insurgency techniques?
Re: the sea-change of military competition
On Tue, May 25, 2004 at 09:01:57AM -0400, Robin Hanson wrote: > This is important if true. Which techniques of today were not > available 200 years ago? I'm not a military expert, but these improvements are apparent to me: - mature anti-colonial propaganda programs such as nationalism and communism. - use of automatic weapons, high explosives and related tactics - use of news media to conduct information and psychological warfare. (If we consider the news media as an intelligence service for the voting public, it clearly has many serious vulnerabilities with regard to counter-intelligence operations. See http://belmontclub.blogspot.com/2004_05_01_belmontclub_archive.html#108557152205455635 for some examples.) - use of modern communications technologies (print, radio, Internet, satellite TV, etc.) for financing, recruitment and coordination.
Re: the sea-change of military competition
> But despite this widening gap, the idea that the weakest countries are > going to be recolonized is now laughable. What in the world is going > on? Are we in a weird fluke? Are there any parallels? The benefits of colonization have decreased relative to the costs. Here are the traditional reasons why weak countries have been colonized, and why they no longer apply: 1. Obtain land to support a growing population - fertility rates in developed countries have fallen below replacement level. 2. Increase tax revenues - occupation is no longer profitable because of improvements in insurgency techniques. 3. Improve trade positions (i.e., try to build monopolies and break other counties' monopolies) - less useful under a global free trade regime, although this one still applies to some extent with oil. I'd argue that this state of affairs won't continue forever. Fertility rates will increase once our genes adapt to the availability of birth control. Occupation could become profitable again with improvement of surveilance or mind control technology. (Imagine tiny cameras covering every square inch of living space and computers analyzing all footage for weapons and suspicious activities, or drugs that break one's will to resist.) Free trade is based on an expectation of peace (otherwise by trading you're helping your potential enemies), and could collapse if people lose confidence in the ultimate guarantor of that peace (e.g., the United States military).
Re: oil trade policies
On Tue, Apr 20, 2004 at 08:25:49AM -0500, Gil Guillory wrote: > An import tariff will make the price of the good to consumers higher > than it would otherwise be. What the paper at this link argues is, in > effect, that the amount of money the government will collect with the > tariff may be (consider all of the simplifying assumptions) of greater > utility than the utility lost by consumers who now purchase less of the > good at higher prices. But even with all the assumptions, the author > gets it wrong. Given the subjectivity of value, we can only say that a > tariff benefits the government coffers and hurts the individual > consumer. And if you believe that taxes will be reduced because of this > influx of tariff revenue... This may all be true, but it doesn't expain why the government isn't exploiting this potential source of revenue. > However, in this latter case, the price ceiling functions as a type of > collective bargaining. But there are professionals in oil companies that > study the oil market and do their very best to pay as little as possible > for the oil that they buy. The purchasing power of many of these > companies quite large, so they already act like international > Wal-Mart's, buying in bulk and having significant bargaining power. It > is reasonable to conclude that the government price-ceiling-setters will > be in no better position to "negotiate" a good price than will be the > oil company buyers. There are reasons to think that the oil company > buyers will be in a better position. Nonetheless, even if it's a > toss-up, the presumption should be in favor of economic liberty. I don't see how an individual oil company could have more bargaining power than the U.S. government. Can you please explain? Oil companies could increase their bargaining power if they formed a purchasing cartel, but they have no incentive to do so since competition would force them to pass any savings resulting from a lower oil price on to their customers, and antitrust laws prevent them for cartelizing the output markets.
Re: oil trade policies
On Mon, Apr 19, 2004 at 04:05:19PM -0400, Rodney F Weiher wrote: > We did this in the 70's with disastrous results. Ok, but why? According to this online textbook on international economics, http://internationalecon.com/v1.0/ch100/100c060.html, an import tariff can raise national welfare when the market is supplied by a foreign monopolist, and a price ceiling could theoretically be used to obtain a first-best outcome in this case. What's wrong with the theory, when applied to the oil market?
oil trade policies
Can anyone explain why oil exporting countries are much more strategic with their oil trade policies than oil importing countries? While exporting countries actively collaborate through OPEC to set and enforce quotas, importing countries seem content with just buying oil at the prevailing market price. Why don't the oil importing countries use tariffs, price ceilings, or other trade policies to improve their terms of trade?
Re: insanity vs. irrationality
On Wed, Mar 24, 2004 at 10:54:25AM -0500, Stephen Miller wrote: > I'm confused. How does one decide whether the younger version's > preferences are more "right" than the elder's? When considering whether or not to return stolen goods to its original owner, how does one decide whether the original owner's preferences are more "right" than the thief's? In this case, the elder (mentally ill) version is an interloper who has stolen the younger version's body, so involuntary treatment just returns the body back to its rightful owner. Economically, this can be justified by the argument that people would be more likely to invest in the future if we reduce their risk of losing that investment to someone with radically different preferences.
Re: new paper
On Thu, Mar 11, 2004 at 01:44:42PM -0500, Bryan Caplan wrote: > My new paper on the economics of mental illness, entitled "The Economics > of Szasz" can now be downloaded from my webpage at: > > http://www.gmu.edu/departments/economics/bcaplan/szaszjhe.doc The paper makes the point that what psychology views as mental diseases in many cases can be interpreted simply as extreme or unusual preferences, and in those cases involuntary psychiatric treatment can not be justified as a benefit for the patient. This makes sense to me, but perhaps involuntary psychiatric treatment can still be justified as a benefit for the younger version of the patient (i.e., before he became "sick") who presumably had more normal preferences, and who would have prefered that he be given treatment to reverse any radical preference changes. Unlike with intra-family externality, the Coasean argument doesn't seem to apply here -- how would you negotiate side payments with your past self?
Re: sex selection
Someone wrote to me privately: > the theory is the richer (in the most general definition) one is the > more they favor boys. the idea is average (median) boys are not as > successful as average girls, but successful males are more successful > than successful girls means are equal variance is not. According to this theory, poorer than average people should favor girls, so it doesn't explain why more boys than girls are being selected for overall. Here are my theories: 1. Boys make a bigger contribution to household income than girls, therefore it does take more *net* parental investment in a girl to get the same expected number of grandchildren. But this happened only recently (after the invention of agriculture?) so our genes haven't had time to evolve a mechanism for unequal sex ratio. 2. In China (and maybe India?) a wife tends to move in with the husband's family (parents and siblings) after marriage. So having boys means capturing the benefits (economy of scale) of a larger household for yourself. Again if this is true it must have happened only recently. 3. It's a case of selfish memes trumping selfish genes. "Select for male children" could have a greater memetic fitness than "select for female children" or "select children's sex randomly" even if it has a smaller genetic fitness. This would be the case if one of the following is true: a) boys learn more memes from their parents than girls do, b) children learn more memes from their fathers than from their mothers, or c) grandparents can better directly transmit their memes to the children of their sons than the children of daughters (e.g., because they live together with their sons's families but not their daughters').
sex selection
Are there any theories why parents in India and China favor boys over girls when practicing sex selection? From an evolutionary perspective, you'd expect this if it takes more parental investment in a girl than in a boy to get the same expected number of grandchildren, but then why aren't more boys conceived naturally?
Re: why aren't we smarter?
On Sun, Dec 07, 2003 at 12:37:53PM -0500, Robin Hanson wrote: > Your story does have a certain plausibility. But you'd need to argue that > the huge increase in IQ that has been documented during this last century > isn't really an increase in intelligence. And doing that makes it harder > to take Jewish IQ as relevant data. My original game example had multiple equilibria. The "smart" players could be either "tolerated" (marked as "good" at the start) or "persecuted" (marked as "bad"). Given this, genes might adopt a conditional development plan--grow a smart brain if the current environment is one of toleration (based on cues from parents and peers during childhood), otherwise grow a dumb brain. This may be a novel explanation of the Flynn effect (but of course only contributes to it along with other factors such as the greater complexity of modern life).
Re: why aren't we smarter?
On Sun, Nov 30, 2003 at 11:18:21AM -0500, Robin Hanson wrote: > That and the difficulty of creating intelligence. It can't be the latter, because the intelligence that already exist was not selected for. Consider again the fact that Jews have an average IQ that is about one standard deviation higher than non-Jewish whites. This clearly shows that the potential for higher intelligence is already in our gene pool. How would you explain why the IQ distribution of the general population does not look more like that of Jews? (BTW, imagine what that would be like. America would have 13 times the number of Nobel-level (by our standards) scientists as it actually does.) > I argue that (a) can be an equilibrium. We are rather smart in some areas, > but the mechanisms in us that allow that are not up to the task of faking > being dumb in other areas - we are actually dumb in those other areas. This > is/was an equilibrium because people who tried to fake often got caught. I don't disagree that this occurs to some degree. But there must be a limit to how smart you can be in one area and still be dumb in another. I suggest we have already reached it, because otherwise the facts are hard to explain.
comic strip
Here's a funny comic strip about using game theory for dating: http://www.otherpeoplesstories.com/061.html You might also want to check out the blog it was based on: http://www.livejournal.com/users/shiga/
Re: why aren't we smarter?
On Sat, Nov 29, 2003 at 02:15:54PM -0500, Robin Hanson wrote: > That's pretty weak evidence, compared to the vast experience each of us has > in using cleverness to better get along in the world. Using ourselves as samples suffers from a selection bias. We don't live in a time and place where smart people are being severely persecuted, but if we did, we wouldn't have the opportunity to have this discussion. I'm not saying that intelligence is not useful, just that its social costs can help explain why we're not smarter. Of course intelligence seems extremely useful, which is what makes our dumbness puzzling. Is your position that the other known costs of intelligence (more energy use, more difficult births, what else?) are sufficient to explain this? > If you can fake being dumb in particular areas, why can't you fake being > dumb in all areas? If you have to consistently fake being dumb in all areas, that greatly lessens the benefits of being intelligent, since you can't apply it to solve problems any time somebody can see either your efforts or the results. > Perhaps sufficiently general intelligences can fake anything, but if so > humans do not seem to be sufficiently general. Humans give off all sorts > of subconscious clues about whether they are faking, and they are adept at > detecting those clues in others. Humans cannot lie with impunity. I was saying that *if* we had sufficient general intelligence, we would be able to fake being dumb in particular areas, therefore it is not an evolutionary option to have high general intelligence and still be convincingly dumb in areas where being seen as dumb is beneficial. The fact that we don't actually have sufficient general intelligence to flawlessly fake being dumb doesn't affect the logic of my argument. To make sure we're not misunderstanding each other, you're says that having higher intelligence is not so bad, because one can either (a) still be dumb in certain areas, or (b) fake being dumb in all areas, right? I'm arguing that (a) is not an equilibrium, and (b) reduces the benefits of intelligence too much.
Re: why aren't we smarter?
On Wed, Nov 26, 2003 at 04:47:17PM -0500, Robin Hanson wrote: > There certainly do seem to be some situations in which it can pay not be > seen as "too clever by half". But of course there are many other situations > in which being clever pays well. So unless the first set of situations are > more important than the second, it seems unlikely that evolution makes us > dumb in general on purpose. Perhaps the first set of situations is more important than you think. For example, could the Holocaust (and anti-semitism in general) fall into that category, given that Jews have a higher average IQ than gentiles? (116 vs 100, according to http://www.lagriffedulion.f2s.com/ashkenaz.htm.) > The question instead is whether evolution > was able to identify the particular topic areas where we were better off > being dumber, so as to tailor our minds to be dumber mainly in those areas. I'd argue no, at least beyond a certain degree, because if you have sufficient general intelligence, you can apply it to any area but still fake being dumb in particular areas. The only way to convince others of actually being dumb in those areas is to be dumb in general. > Yet most educated people actually seem > to understand physics better than economics. Do you have any evidence for this? At least personally I find economics easier to understand than, say, string theory, or even electromagnetism.
why aren't we smarter?
Given that there is significant existing variation in human intelligence, it's curious that we are not all much smarter than we actually are. Besides the well-known costs of higher intelligence (e.g., more energy use, bigger heads causing more difficult births), it seems that being smart can be a disadvantage when playing some non-zero-sum games. Here is one example. How often do these games occur in real life, I wonder? Consider an infinitely repeated game with 2n players, where in each round all players are randomly matched against each other in n seperate prisoner's dillema stage games. After each round is finished, the outcomes are recorded and published. One plausible outcome of this game is for everyone to follow this strategy (let's call it A): Initially mark all players as "good". If anyone defects against a player who is marked as "good", mark him as "bad". Play "cooperate" against "good" players, "defect" against "bad" players. Now suppose in each stage game, there is probability p that the outcome is not made public. Also assume that n is large enough so that we can disregard the possibility that two players might face each other again in the future and remember a previous non-published outcome. Now depending on p, the discount factor, and the actual payoffs, it can still be an equilibrium for everyone to follow strategy A. For example, suppose the payoffs are 2,2/3,-10/-10,3/0,0, and p=0.5. If a player deviates from the above strategy and plays "defect" against a "good" player, he gains 1 utility (compared to strategy A) for the current round, but has a probability of 0.5 of losing 2 utility in each future round. Now further suppose that the random number generator used to decide whether each outcome is published or not is only pseudorandom, and there are some "smart" players who are able to recognize the pattern and predict whether a given stage game's outcome will be published. And suppose it's public knowledge who these "smart" players are. In this third game, its no longer an equilibrium for everyone to follow strategy A, because a "smart" player should always play "defect" in any round in which he predicts the outcome won't be published. The "normal" players can follow strategy A, or they can follow a modified strategy (B) which starts by marking all "smart" players as "bad", in which case the "smart" players should also start by marking all "normal" players as "bad". In either case the total surplus is less than if there were no "smart" players. But with some game parameters, only the latter is an equilibria, in which case "smart" players actually end up worse off than "normal" players. (Note that even when the first outcome is an equlibrium, it is not coalition-proof. I.e., the "normal" players have an incentive to collectively switch to strategy B.) For example, consider the above payoffs again. When a "normal" player faces a "smart" player, he knows there is .5 probability that the "smart" player will defect. If he deviates from strategy A to play "defect", there is .5 probability that he gains 10 utility, and .5 probability that he gains 1 utility in the current round and loses no more than 2 utilities in each future round. Therefore depending on the time discount factor he may have an incentive to play "defect".
Re: reproductive subsidies
On Fri, Aug 22, 2003 at 10:55:07AM -0700, Fred Foldvary wrote: > What, briefly, is the argument that there are net positive externalities? It's a good question, because the author doesn't try to argue that the externalities are net positive, only that some externalities are positive. If you count the benefits to the child, the externalities of child raising are almost certainly net positive. But it's not clear to me whether they are net positive when excluding benefits to the child. If not, then I don't see why the rest of us should pay for the subsidies.
Re: Economics and E.T.s
On Fri, Aug 22, 2003 at 10:50:35AM -0700, Fred Foldvary wrote: > However, the earth is not a closed system, as we continually get energy > from the sun, so even if we use up some resources, solar radiation will > supply energy, and technologicalp progress will make ever more efficient > use of it. The total amount of energy within the solar system is limited, so it's not possible to recycle resources indefinitely. Or to think of it another way, the ultimate resource is negentropy (i.e., maximium entropy minus current entropy) which is finite and must be used up to do anything at all, including to recycle other resources. Technological progress that allow more efficient use of resources in the future will not cause prices to drop on average, because the progress should already be expected and taken into account in current market prices. Only progress that lowers the cost of *mining* will cause price drops, but these can't continue forever because the cost of mining can't drop below zero.
Re: Economics and E.T.s
On Fri, Aug 22, 2003 at 12:18:26AM -0700, Anton Sherwood wrote: > And industry gets cleverer about using less. > I heard once* that there is practically no market for tin anymore. Suppose the cost of mining resources is already zero. If the owners of a resource predict that industries using that resource will become more efficient in the future, then they should lower the price now so they can sell more of it right away. And they should lower the price until the present price equals the discounted value of the future price. If their predictions are perfect, the prices of resources should rise at a rate equal to the interest rate. If their predictions are not perfect, then prices may fluctate but still rise on average.
reproductive subsidies
James Surowiecki has an article in the New Yorker (available at http://www.newyorker.com/talk/content/?030818ta_talk_surowiecki) arguing in favor of child tax credits, on the grounds that raising children produces positive externalities. My question is, has anyone done a study that quantifies how much social benefit (or cost?) is produced by raising a child? Another question is that the child himself captures most of the benefits external to the parents, so why not fund most of the subsidy out of the child's future income, rather than from general tax revenues?
Re: Economics and E.T.s
On Mon, Aug 18, 2003 at 05:28:34PM -0400, Bryan Caplan wrote: > One idea he did not explore: Maybe there is no inter-stellar travel > because the benefits almost never exceed the costs. It takes years to > get anywhere, and at best you find some unused natural resources. If > Julian Simon's observation about declining resource scarcity holds, then > as inter-stellar travel gets cheaper with technological progress, it > also gets less beneficial because resources are getting cheaper at a > faster rate. Given that the amount of natural resources in the solar system is finite, I don't see how resources could continue to get cheaper forever. The reason natural resources are getting cheaper is that the cost of mining resources is droping, right? But suppose the cost of mining were to drop to zero and no inter-stellar travel occurs. Then shouldn't the prices of natural resources rise at a rate equal to the interest rate until they're all used up?
