Wednesday, April 27, 2011

the Inada cafe

This year's 1st year (Berkeley Econ PhD students) skit is hilarious... I didn't catch half the good lines the first time I saw it.



"The Inada Cafe: The less you eat the better it tastes."

Where'd you get that chloroform? It worked really well.
Berkeley Bowl. It's organic!

[laptop turns into notepad] What was that?
A negative technology shock!
[Berkeley t-shirt turns into Stanford t-shirt]

What's a Babbling equilibrium?
It's when I talk nonsense because I know you won't believe me and you don't believe me because I talk nonsense.
Oh, like macro.

Tuesday, April 26, 2011

happy things

You know you're a little bit of a nerd when your list of things that always make you smile goes:

1. My kitten waking up and stretching
2. Rainbows
3. Typesetting math in LaTeX

Monday, April 25, 2011

the brazilian Real

I had no idea about the origin of their current currency. Psych and econ FTW =)

Saturday, April 23, 2011

sociology, cont.

As I was saying...
"Sociology has had a substantial period of time within which to develop as a separate discipline, so one might expect a coherent sociological analysis of social interactions to have developed by now. Not so. Examination of recent sociological research does not reveal a shared, discipline-wide perspective. Some sociologists describe interactions in language that suggests economic thinking. Others give prominence to concepts that play little or no role in modern economics: class, community, culture, influence, status, gender roles, and so on. Indeed, an economist reading sociological research is struck by the sheer number of concepts that sociologists employ. Economics has sufficed with a remarkably small set of basic concepts: preferences, expectations, constraints and equilibrium. Why does sociology require so many more concepts? I believe that the abundance of concepts in sociology is connected closely to the dearth of formal analysis in the discipline. Whereas the typical research article in economic theory uses mathematical language to define concepts and then goes on to state and prove propositions, most articles in sociological theory begin and remain verbal throughout."

-Charles F. Manski, 2000, "Economic Analysis of Social Interactions"

Friday, April 22, 2011

conformity

This is the most bizarre paper I've read in a long time. As an economist I am usually really disturbingly good at inventing stories to justify observations, and in this case I have no earthly idea what is going on.

This is the experiment: There are two jars of marbles. One contains mostly red balls and a few blue balls, and the other is the opposite. One jar is chosen. Each person has to guess which of the two jars it is and they get paid if they guess right. The first three people have to guess without any information. They can see what the people before them guessed, but none of them get to draw a ball from the jar. After that, each person can either draw a ball or they can see what other people have guessed who didn't draw a ball. In other words, they can either get useful information or completely useless information about what their peers did.

No one in their right mind should choose to see what their peers did. Yet 34% do.

It gets even weirder when people aren't paid individually based on whether they guessed right, but instead everyone in the group gets paid the same amount if the majority guesses right, and nothing otherwise. In that case there is a danger that uninformed people will dominate the voting, so if you don't draw a ball, you should definitely vote against the uninformed people you find out about. Yet even more people (50%) choose not to draw a ball, and 60-70% of those vote with the crowd.

I would chalk it up to confusion but the authors make a pretty good effort to rule that out as the sole cause.

I can understand wanting to fit in when there's some social reason to, or no other reason not to, and of course I understand following the leader when you just don't want to bother thinking for yourself and that's a way to delegate logic. But these people are giving up significant amounts of money to follow random people they don't know who explicitly have no information!

I don't get it. I so thoroughly don't get it it's like an earthquake in the foundation of my understanding of psychology. Am I missing something obvious in my exhausted delirium right now?

I want the authors to run it again but explicitly ask people, afterwards, why they did what they did.

Thursday, April 21, 2011

piracy as yield management

It seems more and more likely to me that corporations are intentionally allowing their digital products to be pirated with some amount of effort, as a form of yield management.

Yield management (often referred to as price discrimination, but that phrase has a bad and inaccurate connotation) is the idea that businesses would like to charge different prices to different groups of people. The classic example is airline pricing. If airlines didn't have first class prices, they would have a hard time making enough money to fly the plane at all. And if they didn't have coach pricess, they wouldn't attract enough passengers. Having multiple price classes is extremely helpful in this case and everyone benefits.

The problem of yield management is that a business can't ask a person "how much are you willing to pay?" and then charge them that. They have to use some observable characteristic of their customer (that isn't illegal to use to determine prices, like race or religion...) to guess at their willingness to pay. For airlines, they use the time of purchase. People who purchase in advance tend to be planning vacations and are price sensitive, so tickets cost less then. At the last minute, most people booking flights are business executives charging the company credit card. So prices are higher then.

And there are tons of other examples that more obviously use the customer's characteristics to decide how much to charge them. Students and seniors get discounts all over the place. Some utilities goes straight to the source and give discounts if your tax returns reveal low enough income.

Anyway, back to software piracy. Obviously, if software companies gave their products away, they wouldn't be able to stay in business. But almost as obviously, if they charged the corporate price for their product to every person who used it (and piracy was impossible) they would have hardly any customers. Very few people would use Photoshop; they'd get by with open-source Gimp instead. Djvu might've become the standard over Adobe's pdf. Grad students would certainly never pay full price for Matlab or Stata; they'd be using R as much as possible.

That's a pretty crippling loss of market share. Those companies would probably rather charge a low price to people who can't afford it so that they get used to using it and pay full price years down the line when they can pay. Instead they seem to be making piracy just barely possible enough to keep that market share without losing their revenue from corporations and old rich people who don't know how to use bittorrent. Those "leaks" of new, pre-validated operating systems seem suspiciously intentional to me. The "register manually without using the internet" option in some software packages is just so convenient for hackers. And those little utilities that have dozens of free competitors are as easy to pirate as googling "[product name] serial".*

*So I hear. I would never try these things myself of course...

Tuesday, April 19, 2011

sociology

Reading sociology papers gives me one of two feelings.

Either economists are clearly superior academics because we use math to clearly define our ideas, to force us to infer results carefully and accurately, to find results that we wouldn't normally see without the equations, and to clarify the relationships between many concepts in a clear and simple manner.

Or, sociologists are clearly superior because they have so many concepts popping up everywhere and give a new name to each new idea and they can apparently keep these things straight in their heads without equations...

A single equation makes my brain hurt a lot less than a list of 8 concept definitions and pages of discussion on how they relate.

Monday, April 18, 2011

polite society

It is obligatory these days in a polite society to have a complicated attitude toward success. If you attend a prestigious college or professional school, you are supposed to struggle tirelessly for success while denying that you have much interest in it. If you do achieve it, you are expected to shroud your wealth in locally grown produce, understated luxury cars and nubby fabrics.

I thought Berkeley was an extreme in this spectrum, but maybe it was partially that I moved here at the same time I became aware of what polite successful society consists of. Are the upper middle class really like this everywhere...?

Sunday, April 17, 2011

euro zone

Very good article.

"[T]he euro, in retrospect, appears to have been a misguided attempt to equalize the values for some very unequal assets, namely the bank deposits of strong countries and those of weak countries."

In retrospect, it seems pretty obvious that unity in monetary policy also requires a degree of unity in fiscal policy. But then, since the United States is a collection of partially fiscally separated states as well, this makes me wonder how important psychology is in the equation.

The possibility of separate monetary policies among the states is completely off of anyone's radar in the U.S. But that was the norm until 1999 in Europe, so regardless of the political and legal feasibility of eurozone separation, it's most certainly not off the radar. A situation that makes the benefits of separation clear is an alarm bell in Europe. A bankrupt state of California would also love to inflate it's way to lower debt I'm sure, but no one is worrying about that possibility and moving their bank accounts to North Dakota.

Sure, the legal ties between the states are much stronger than between the countries of Europe, but legality is ultimately just a commitment to a common psychology. And legality, as made very clear by the European situation right now, can't trump reality, including contradictory psychology, forever. And it's also true that the federal budget dwarfs any differences in fiscal policy between the states, but this only reduces the magnitude of the issue, it doesn't negate it.

Maybe the eurozone is fragile because people expect it to be fragile. And the U.S. is strongly unified only because we expect it to be unified.

Thursday, April 14, 2011

bring back prop 19

Yet another reason to want to legalize marijuana.

New Department of Energy study finds that indoor marijuana growing accounts for a full 1 percent of the nation's electricity use, and a staggering 8% of household electricity use in the state of California.

Unfortunately I suspect most of the environmentalists who care about those numbers in California were already in favor of Prop 19 so I doubt that would be a deciding factor.

Tuesday, April 12, 2011

stolen from twitter

A German, a Greek, a Portuguese, and an Irishman walk into a bar. The German pays.

Tuesday, April 5, 2011

morality myth

Every single article on government debt laments the lack of courageous politicians willing to fight for unpopular reforms that are crucial in the long run. If only we could elect some politicians with integrity...

Blame the system, not the participants. The nature of public office is that it attracts those who want to hold public office, not necessarily those who want to save the country from fiscal ruin. And the nature of legislation is that even the politicians who truly want to do the right thing are immediately crucified and silenced, even when nearly everyone agrees that a particular action is required. And the nature of legislation is also that no matter how much agreement there is on the overarching issues, the hashing out details will divide and encourage finger-pointing and sabotage the larger goal. And the nature of government is that the short-term is more relevant, in terms of visibility and accountability and enforceability and CBO analysis and legislative commitment devices* and anything else you can think of pretty much, than the long term.

To reiterate an overused point as an analogy, soviet Russia did not fail because the wrong people were in charge and the wrong people participated. Politicians will always respond to political incentives: that power structure will always attract those who are most likely to abuse power and will systematically bring out the worst in the best of them. And citizens will always respond to economic incentives: communism will always lead to a collapse in production. Pining for more integrity is utterly beside the point.

Of course, I have no idea how to change the system to improve the incentives. But that's what we should be worrying about! Not the lack of political integrity.

*That is, why deal with a longterm problem when any agreement will be reneged by the next Congress? This destroys both political will (why kill myself for a futile cause) and feasibility (it might be politically much easier to legislate reform that takes effect tomorrow, which is what I mean by a commitment device, but it'll just be delayed again when we get there.)

Monday, April 4, 2011

literacy and reasoning skills

If you feel that your faith in humanity has reached unjustifiable heights and you need a way to let a little hot air out of your balloon, I have a simple suggestion. Go to target and engage the checkout girl in a discussion about coupon terms and conditions. Works wonders!
Me, upon approaching the checkout counter: "Hi, I have this coupon and I just wanted to make sure that I can use it to buy four of the item. It doesn't say 'limit 1 per customer' so I assume that is the case."

Checkout girl: Yeah that's fine. [She scans the items and the coupon]

Me: It looks like it only applied the discount to one item.

Checkout girl: Yeah that's because you can only use the coupon once.

Me: It doesn't say that though.

Checkout girl: "Yeah, see it says 'limit one coupon and one manufacturer's coupon per item".

Me: Yeah, but that means you can't use multiple discounts on the same item, not that you can't use the same coupon for multiple items.

Checkout girl, utterly baffled: Let me call the manager...

[Repeat exact same conversation with the manager]

Manager: I'm sorry, it says one coupon per item and I can't use it for all four, the computer won't let me.

Me: But one coupon per item isn't the same thing as one item per coupon.

[Repeat last two statements four or five more times.]

Manager, exasperated: Ok let's pull up your purchases again and try scanning the coupon three more times.

Me: See, it works! Thanks for your help and sorry to be a pain about it, it just doesn't say 'limit 1' anywhere on the coupon.

Manager [puzzled, and giving me a well-you-got-lucky-there's-a-computer-glitch-but-I'll-let-it-slide-to-get-rid-of-you look]: Glad we could work it out.
I really have no idea how you can be hired at Target before understanding the difference between the universal "limit one per customer" and "not valid with any other offers" terminologies on coupons...

Of course, my smugness about my basic literacy and reasoning skills was instantly diminished when I got to the parking lot and realized I'd gone grocery shopping before putting the saddle bags back on my motorcycle after changing the spark plugs and rear blinker. That was a precarious fun ride home...

Sunday, April 3, 2011

billboard

"Bank of America: ATMs where you need them. Parking spaces... not so much."

Only in Berkeley is it an advertisable asset to refuse to cater to automobile users...