Sunday, November 3, 2013

Brandon Meriweather Gets Externalities

The Washington Redskins defensiveback on the result ir the NFL's attempt to limit concussions:

Sunday, January 20, 2013

Thinking Beyond Stage One

Today, I saw an advertisement that Kwikfill ( only supplies North American gas, implying that buying their gas is better for American jobs than buying from its competitors.

How is this a failure to think beyond stage one?

Friday, January 11, 2013

We Cannot Rob Ourselves Rich

This video is a great lesson in social norms:

A man parks in front of a pharmacy and goes in to rob the register.  While he is inside, a second robber steals his car.  As the first man leaves the pharmacy to discover his car has been robbed, a third man holds him up and takes his loot.

Frustrated, the man went to the police station to report the theft of his car - where he ran into and was identified by the owner of the pharmacy.  Remarkably, while interviewed the man who held up the pharmacy admitted that the car was not actually his, he had stolen it the previous day. 

One person can steal for personal gain, but what if that leads to an equilibrium where everyone steals nobody can win.  Decision trees between acting in short term personal interest vs long term group interest are called prisoner's dilemmas.  This video demonstrates that the problem is not limited to the inside of prison walls.

Thursday, August 23, 2012

Restaurant Pricing

I just stumbled upon, which is a clever platform for variable pricing at restaurants. Table space has different values on different days and at different times: more people go out on the weekends, so demand for fine dinning is higher on a Friday at 7:00pm than on a Tuesday at 3:45pm. Savored allows restaurants to adjust for this by discounting reservations based on the hour of the reservation. This price discrimination enables bargain hunters to get lower prices by making reservations at times when the table space is less valuable. Listing discounts on the Savored website allow the restaurant to advertise to those bargain hunters. Lunch and dinner menus also accomplish this, as do happy hours. How else do restaurants price discriminate?

Monday, July 2, 2012

On Libertarianism and Workplace Regulations

Crooked Timber writes an extended post about libertarianism and the workplace. If you have the time, it's definitely an interesting read.

I have many reactions. I admit that I did not page through the entire conversation referenced between CT and BHL. I want to begin by saying I don't believe the workplace restrictions cited are efficient, and in some cases they are not even defensible. I also have a general critique: Chris tends to set up a straw man libertarian argument, knock it down, then acknowledge that BHL have a much more nuanced view.

  1. The first reaction is a comparison to Ronald Coase's famous paper The Nature of the Firm. As Eli Dourado nicely summarizes: there are two ways of coordinating activity. One is command-and-control, and the other is the price system. It is not costless to use either system. In society writ large, the benefits of the price system far outweigh the costs, so that is the main organizing principle of the market. However, at the firm level, the costs of using the price system often outweigh the benefits; entrepreneurs use command-and-control to economize on costs and generate significant benefits. Advocating the use of both systems in these different situations is perfectly consistent theory. Chris complains that libertarians are not sensitive to the limited amount of freedom given in the workplace. I see this as a parallel complaint to the idea that there are not enough prices within a firm. Giving everyone infinite freedom is not costless; within a firm, an entrepreneur is using a different organizing principle because there are significant benefits to doing so.
  2. Where there is power, there is the possibility of coercion. Whether the power is held privately or by the state, coercion is possible. That's the nature of power. Most libertarians are concerned with state power because, as Hayek explains in chapter 10 of The Road to Serfdom, the worst inevitably rise to the top of a state system. Employee exit options are a much better check on private power than anything we have to check state power, which is why most libertarians are less concerned with private power than state power.
  3. Chris states that the exit option would be much more feasible if the Universal Basic Income (UBI) provided by society would allow more than an impoverished subsistence. I counter that a UBI that was a pleasant alternative to work would make me quit my job, where I suffer no serious workplace injustices. I'd much rather read, write some thoughts, and sleep a lot than commute to work every day, and I assume many people feel that way. Providing a UBI that allows freedom of movement between jobs but does not encourage people to spend significant periods of time not working is a serious challenge and Chris doesn't ever acknowledge this opposing side when advocating an expanded UBI.
  4. Freedom of movement between jobs, says Chris, is restricted by "sunk costs" such as long-term financial commitments, children, co-worker relations, etc. All of these, however, are voluntary restrictions a person imposes on himself. If the person does not believe his workplace is a healthy place where he is willing to spend an extended period, he should not take on these responsibilities.
  5. I will add that bosses are humans, too, something that Chris fails to acknowledge. Many (most) bosses do not take pleasure in imposing unreasonable restrictions on their workers, nor do they want the majority of their staff to quit every few months. Human relationships work surprisingly well in lieu of formal contracts.

I could keep going, but this post is already too long. The disagreement, as I see it, is this: libertarians fear abuse of power. They prefer a world with the bare minimum number of power structures, because where there are few power relations there are limited opportunities for power to be abused. Chris seems to prefer a world where power relations are checked by parallel power relations (in this case, private power relations checked by a powerful state). I think this is a fundamental disagreement and it won't be solved anytime soon.

Friday, June 29, 2012

A Theory of Optimal Retweeting

Tyler Cowen complains on Twitter:

New idea: retweeting is unethical, inefficient intellectual pollution, you already decided not to follow them,  (non-endorser)

Can't say I agree. 

1. I agree with @TJ_Lynn saying that retweets give new ideas for followers. For most people, it's hard to know who to follow without some information and retweets are a good way to provide that information.

2. I DON'T follow the prolific Matt Yglesias because of how much he tweets. Instead, I rely on the couple hundred people I am following to RT his best thoughts (and he has plenty that are great!).

3. A RT can serve as a "Like" (Facebook) or "+1" (Google+); Twitter doesn't have any other equivalent. Yes, I can favorite tweets, but that is personal. If I want to publicly affirm my agreement with an idea or interest in a link, the RT is the most efficient way to do it.

4. If you take breaks from Twitter lasting longer than an hour, there are often hundreds of tweets clogging your timeline. A RT can draw your attention to an interesting link that you miss when skimming old tweets - if you skim them at all. It helps links transcend time, which is a non-trivial issue in the Twitterverse.

5. Every RT does impose an externality on all of your followers (which is, I think, the basis of Tyler's complaint). However, the externality is very small (140 characters) and you have a simple exit option: Unfollow! As long as there's an exit option, I can't fret over externalities.

How to determine the optimal amount of retweets?

1. Use the market test. Retweet everything interesting until you lose a follower or a few, then back it down a notch.

2. Set limits on how often you RT the same person. Assume that after 5-10 RTs, your followers get the point and will follow the person if they find the links interesting. Note: This undermines my strategy of not following prolific tweeters and using others as my filter. Furthermore, it assumes that your pool of followers is relatively stable over time, which it probably is not.

3. Only RT with commentary; use the quote tweet feature and RT only if you have something to add.

How do you handle retweets?

EDIT 10:00 AM: My friend Ravi offers the solution to excess retweets: Turn them off for specific users.

Sunday, June 24, 2012

$5000 Bullets

Nick O'Boyle asks on Twitter: What are the unintended consequences of $5,000 bullets? I guess the inspiration is here.

1. Crime scene investigation gets harder. Bullets are more likely to be removed by a perpetrator, and that leaves less evidence available for investigating violence. Corollary: violent crime is still committed, but with other weapons which are harder to track. I'm thinking immediately of knives, but there are plenty of items that can be converted into weapons.

2. A black market in bullets develops. This is no good, because black markets are often marred by low quality standards (note illegal markets for drugs, which are rarely pure). Bullets are sold which backfire more often, making it more dangerous for a shooter to wield a gun.

3. Sportsmen are "protected" by allowing bullets to be sold at minimal cost at rifle ranges for use at the range only. Working at a range suddenly becomes very dangerous.

4. What about hunters? Game hunting becomes a much less popular hobby because it is suddenly ridiculously expensive. Many hunters take up the crossbow as an alternative.

There's probably more, but that's what I have for now.

Rational Ignorants

Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty