26 February 2006

The tricky new paternalists

Glen Whitman's recent article, Against the New Paternalism: Internalities and the Economics of Self-Control, offers a Coasean response to the paternalists' Pigouvian sin taxes (including fat taxes). Whereas the old paternalists argued

“We know what’s best for you, and we’ll make you
do it.” The new paternalism says, “You know
what’s best for you, and we’ll make you do it.”
The basic rationale of the paternalists is that your present self consumes more twinkies, cigarettes, and unsafe activites, yielding the benefits in the present, yet does not have to pay the costs of these activities. The costs are borne by the future self and as such, the present self "overconsumes" at the expense of the future self. A tax on the activity would reduce this consumption and thus benefit the future self.

The Coasean response is that there is no need for a tax. Indeed a tax may be inefficient if the reduction in benefits from reducing consumption are greater than the costs of employing counter-measures. Why should the future self get preferential treatment? By allowing the person most intimately aquainted with both parties involved, the individual making the decision, we allow her find the optimal balance between present, transient pleasures and the future costs of enduring or remedying the consequences.

This requires individuals to exercise responsibility of self, a necessary condition for self improvement.

25 February 2006

Add this to my birthday wish list

Too bad this doesn't come out until March 16th...

Add this to the things that make me mad


I think that movies "based on a true story" may mislead some to believe they are "a true story." But that is not what the subtitle says, nor is that what the movie is. In fact a true story, based on known and verifiable facts is almost never appropriate for a blockbuster type movie. The writers are always interpreting the lives of those they depict. All the non-public scenes probably never really happened, or if so, happened very differently from the way depicted.

That is all well and good except when these movies are the sole source of one's knowledge on the character. Indeed, without A Beautiful Mind, few non-economists would know about John Nash. And much of what I envision about Mozart comes from Amadeus. I don't see this as a huge problem as these movies are not a substitute for serious scholarship. But when people start talking about what some character did in his room years and years ago, I have shake my head at the faith placed in these entertainment industry films.

23 February 2006

What does Unlikely mean?

I don't pretend to have the definitive answer. My more capable predecessors, Reagan, Mosteller and Youtz (1989) decided to find out what probability terms actually mean to people. Here are their results (in % probability):

A couple points of interest to me.

1. The median lower bound for Almost Impossible is 0. Um... that makes no sense. 0 means impossible, no debate.

2. Possible has the largest range. Okay that is not exciting, but that the range is 40-70 is quite interesting. Possible overlaps with Probable, Likely and almost Very Possible.

3. I figured Very Possible and Very Probable wouldn't overlap so much.

4. The 90% lower bound on Almost Certain seems a little low. If it fails 1 time in 10 I wouldn't say it would almost certainly work.

Thinking abount big numbers

In class today, Professor Haimes mentioned a case involving the carcinogenicity of saccharin. Apparently depending on the assumptions used in the model, there could be a factor of 100 difference in the level of carcinogenicity for saccharin. Think about that! That is not a 10% difference, it's 10,000%! I don't know how carcinogenicity is defined, but let's say it refers to the average increase in probability of developing cancer due to a given exposure. So that would mean that using a different set of (reasonable) assumptions, we could go from saying a given exposure to saccharin leads to:

  • 100 extra deaths per year... or 10,000 deaths!
  • a .1% additional chance of contracting cancer... or a 10% chance!

Let that settle in for a second. Can you really visualize that difference? With all this variability in our certainty how can we make a good decision about the carcinogenicity of a given product? How come we aren't told about this variability... instead just getting "CDC finds product X may cause an increased risk of cancer." Seems awfully important to me to know they aren't all that certain of the actual effects!

Oh, wait, I messed up, that wasn't a factor of 100. In the real case, it was 10 orders of magnitude, or a factor of 10,000,000,000. Yeah, ten billion. Neither I nor you can comprehend this massive number correctly. Instead just think, WAAAAAY more variability than you were thinking about a second ago. So let's look at those numbers again,

  • 100 extra deaths per year... or 10,000,000,000,000 deaths (um, everyone in the world 1,700 times over)!
  • a .1% additional chance of contracting cancer... or a 1,000,000,000% chance!

Somebody tell me why I'm wrong about this, because this is kind of scary.

21 February 2006

I burn trees

For warmth. I am environmentally irresponsible, right?

Well considering last month's gas bill, we have decided to supplement gas heat with wood burning in our wood stove. It is easy to say, "use cleaner burning fuel sources," until you are stuck with the bill. And seeing as I am not forced to internalize the external costs my burning imposes on the rest of you all, I am going to burn more than the socially optimal amount of wood.

And as wood is a renewable resource (but of course not forest ecology), it will probably be an economically viable substitute for some time, especially if gas production doesn't expand. But just because I burn wood, does that mean I have thrown efficiency to the wind?

Of course not. In fact, we want to get the most out of our wood burning, if only to keep our house all that much warmer and spend less on heating. For example, we have a fan set up to blow heat away from the stove in the central room and down the hallway to the bedrooms. So while economic factors have caused me to be more polluting, they have also influenced me to pollute more efficiently.

14 February 2006

Interesting FAQ about the US Mint

Ever wonder why they still make the blasted penny? Well the U.S. mint claims it is the most used denomination of coin. Oh and it is still profitable to make, i.e., it cost 0.93 cents to make. Um... so! We use the dar-n thing because they make it, not because we need it. And
The profit goes to help fund the operation of the Mint and to help pay the public debt.
... hurray! The .07 cents they make for each "one-cent piece" goes to making ever more of the dastardly nuisances. And as for paying the public debt, um... I call that a tax. But only Congress can abolish a coin... but we've seen how effective they are with the student visas. Oh, maybe I am losing hope :(

13 February 2006

Tear down the Statue of Liberty

... or take

the student must have “nonimmigrant intent” – that is, an intention to return to their home county and not remain in the U.S.
out of the student visa process. I agree with Bryan Caplan from Econlog. Whoever let this pass without argument, either hates the U.S. or is stupid. Honestly, how are we better off by educating people in U.S. institutions and then kicking them out of the country. These are the immigrants we really really want to stay! As Caplan says, thank goodness for loopholes. It is just a shame we have the legislation in the first place... beginning to see why some people get a little angry with the U.S. I just scratch my head... for now.

06 February 2006

My 100th post: Working better alone?

This is my 100th post! Thanks for all the support *cough* *cough* ....

Anyway, this comes by way of MR (as always).

Time and again research has shown that people think of more new ideas on their own than they do in a group. The false belief that people are more creative in groups has been dubbed by psychologists the ‘illusion of group productivity”. But why does this illusion persist?

Bernard Nijstad and colleagues at the University of Amsterdam argue it’s because when we’re in a group, other people are talking, the pressure isn’t always on us and so we’re less aware of all the times that we fail to think of a new idea. By contrast, when we’re working alone and we can’t think of anything, there’s no avoiding the fact that we’re failing...

The researchers said “We suggest that working in a group may lead to a sense of continuous activity. This may provide group members with the idea that they are productive, because they feel that the group as a whole is making progress, even if they themselves are not contributing”.

Other possible reasons for why people think they work better in groups include ‘memory confusion’, the idea that after working in groups people subsequently mistake other people’s ideas for the own, and ‘social comparison’, the idea that in groups people are able to see how difficult everyone else has found it to come up with ideas too.

I have always (silently) thought I was more productive alone than in a group, but here are my list of reasons why group work can be beneficial.

  • As a catalyst to get one the members up to speed. I may spend hours trying to overcome a small setback, perhaps in a mathematical proof. But if somebody in the group can get me over the hump, I may be able to do the next part with ease.
  • When the task can obviously be processed parallel-ly. An oversimplified example would be if you had to solve 50 division problems. Splitting up the list will obviously be faster, even if you are typing them into Excel.
  • When you would quit as an individual and go on the facebook or *cough* blog. (Am I getting sick?) Something about having a buddy or coworker sticking it out -- though they may want to call it a night just as badly -- keeps you going. That and the red bull.
Then again my first two could be done without co-temporal collaboration. Comment on more if you got 'em, team :P.