Saturday, March 15, 2008

Literature Update: Planning, Pricing, and Pissing Off

Do people plan?

John Bone, John Hey & John Suckling
Experimental Economics, forthcoming

Abstract:
We report the results of an experimental investigation of a key axiom of economic theories of dynamic decision making-namely, that agents plan. Inferences from previous investigations have been confounded with issues concerning the preference functionals of the agents. Here, we present an innovative experimental design which is driven purely by dominance: if preferences satisfy dominance, we can infer whether subjects are planning or not. We implement three sets of experiments: the first two (the Individual Treatments) in which the same player takes decisions both in the present and the future; and the third (the Pairs Treatment) in which different players take decisions at different times. The two Individual treatments differed in that, in one, the subjects played sequentially, while, in the other, the subjects had to pre-commit to their future move. In all contexts, according to economic theory, the players in the present should anticipate the decision of the player in the future. We find that over half the participants in all three experimental treatments do not appear to be planning ahead; moreover, their ability to plan ahead does not improve with experience, except possibly when we force subjects to pre-commit to their future decision. These findings identify an important lacuna in economic theories, both for individual behaviour and for behaviour in games.

-------------------------------

Zero as a special price: The true value of free products

Kristina Shampan'er, Nina Mazar, & Dan Ariely
Marketing Science, forthcoming

Abstract:
When faced with a choice of selecting one of several available products (or possibly buying nothing), according to standard theoretical perspectives, people will choose the option with the highest cost-benefit difference. However, we propose that decisions about free (zero price) products differ, in that people do not simply subtract costs from benefits and perceive the benefits associated with free products as higher. We test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods, but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price. In contrast with a standard cost-benefit perspective, in the zero price
condition, dramatically more participants choose the cheaper option, whereas
dramatically fewer participants choose the more expensive option. Thus, people appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits. After documenting this basic effect, we propose and test several psychological antecedents of the effect, including social norms, mapping difficulty, and affect. Affect emerges as the most likely account for the effect.

------------------------------

Thinking Straight While Seeing Red: The Influence of Anger on Information
Processing


Wesley Moons & Diane Mackie
Personality and Social Psychology Bulletin, May 2007, Pages 706-720

Abstract:
Because angry people apparently rely on heuristic cues when making
judgments, anger has been claimed to trigger superficial, nonanalytic
information processing. In three studies, the authors found that induced
anger promoted analytic processing. Experiment 1 showed that angry
participants were more likely to discriminate between weak and strong
arguments than participants in neutral moods. Experiment 2 demonstrated that
anger overrode dispositional preferences not to process, causing even those
low in need for cognition to process analytically. Experiment 3 reconciled
these findings with previous work by showing that angry people used
accessible, valid, and relevant heuristics but otherwise processed
analytically, as indicated by attitude change and elaboration data.
Together, these experiments showed that angry people can have both the
capacity and motivation to process and that their selective use of
heuristics reflects the cue's perceived validity and not the failure to
process analytically.

-----------------------------

Can an Angry Woman Get Ahead? Status Conferral, Gender, and Expression of
Emotion in the Workplace


Victoria Brescoll & Eric Luis Uhlmann
Psychological Science, March 2008, Pages 268-275

Abstract:
Three studies examined the relationships among anger, gender, and status conferral. As in prior research, men who expressed anger in a professional context were conferred higher status than men who expressed sadness. However, both male and female evaluators conferred lower status on angry female professionals than on angry male professionals. This was the case regardless of the actual occupational rank of the target, such that both a female trainee and a female CEO were given lower status if they expressed anger than if they did not. Whereas women's emotional reactions were
attributed to internal characteristics (e.g., "she is an angry person," "she is out of control"), men's emotional reactions were attributed to external circumstances. Providing an external attribution for the target person's anger eliminated the gender bias. Theoretical implications and practical applications are discussed.


*******************************

Three comments: a shame that John Hey is a co-author on the first paper. I would love to cite the "Bone-Suckling paper." It would clearly be semenal. (Okay, I'm already sorry I said that. You won't tell anyone, right? That was just juvenile.)

Second: On the "free" paper: The point is that people underestimate the true costs of "free" stuff. And that's interesting. But I think it is safe to say that Elliott Spitzer would have been MUCH better off with what he was getting for free, from his wife, instead of what he was paying for, from Kristen.
In that case, at least, free really, really is better.

Third, Dan Ariely is a colleague of mine here at Duke. And he is doing some of the coolest stuff around.

(Nod to KL)

Ebay makes Okie life sweet

A pair of antique vacuum tubes (from the 1930s I believe) that I bought off Ebay arrived in today's mail. I had never seen engraved base, globe glass, mesh plate 56 triodes before and when I did, I had to get them. They test fantastically strong, just as the seller advertised and they are going in my soon to be finished homemade preamp.

Feast your eyes people:


OKC Sonics....has a nice ring to it, eh?

Well at least it won't be as weird as the Utah Jazz!

Anyway my neighbors up in Oak City have agreed to tax themselves to provide $120 million plus to renovate the Ford Center for the Sonics and now the city has agreed to terms on a 15 year lease with the team. The Sonics' request to move will be voted on by the NBA next month, and David Stern is on record that if Seattle hadn't done anything the request would be approved. Well Seattle has talked about doing something, but has not actually done anything.

Plus, we Okies have a built in corporate sponsor for the team.

Mrs. Angus is already worried about me blowing the family budget on tickets.

Friday, March 14, 2008

Fundmania

Mr. and Ms. Fundman visited the Mungowitz house.

First, we had fun with firearms. Fundman chose the AK, while Ms. Fundman chose the 8mm Mauser K98 with fixed bayonet, always popular with the ladies.


Then, played some Rock Band. Younger younger Munger on drums, Ms. Fundman on guitar, and Fundman himself on vocals. Ms. Fundman was quite a good guitar player. I'm going to leave it at that. Here is Fundman, singing "Black Hole Sun." video

And Don't Forget the Press Gangs

Organization and incentives in the age of sail

Daniel Benjamin & Christopher Thornberg
Explorations in Economic History, April 2007, Pages 317-341

Abstract:
The British Navy in the age of sail was the most successful bureaucracy of
its time. Its organization and incentive structures differed importantly
from contemporaneous private sailing ventures, but closely resembled those
of today's large corporations. To induce efficient effort, the navy used a
hierarchical tournament, in which sailors competed for higher pay that came
with promotions based on relative performance. Promotion probabilities, the
option value of future promotions, and the higher effort required of men in
higher ranks and on larger vessels, combined to yield a highly skewed pay
structure.


Of course, you could also be "impressed" with the navy's recruiting program....

(Nod to KL)

A Fine Start

David Paterson just gave his first public address since Eliot Spitzer's resignation yesterday. He made noises about "getting back to work" and the budget, talked about being black and blind, indicated he wasn't planning any major changes to his predecessors more controversial policies, and became the first human being in government to express sympathy for Spitzer himself. "My heart goes out to Eliot Spitzer, his wife Silda, his daughters," he said. "I know what he's gone through this week. In my heart, I think he's suffered enough." Paterson also displayed a rather awesome sense of humor. "Just so we don't have to go through this whole resignation thing again," one ballsy reporter asked, "have you ever patronized a prostitute?" Patterson thought for a minute. "Only the lobbyists," he said.

ATSRTWT

(Nod to Anonyman)

Thursday, March 13, 2008

I commit

I commit to....wondering why this works.

But it may.

(Nod to Anonyman, who is not from the "Spitzer School" of commitment)

What?

It's possible the editing cut out the parts that made sense.

But there was still quite a bit that....didn't.

Tom's documentary debut: not good.

(Nod to Bayou Jack)

Marginal Revolution Watch

MR is my second favorite blog and the source of much KPC traffic, but I have to take a bit of issue with a couple of their recent posts:

(1) First, Tyler, quoting himself, says that Wikipedia is more likely to be true than the "median refereed journal article on economics" and that this should "give us pause".

Well, I think so too (but didn't give myself pause in doing so), but that's mainly because few journal articles are about people's life histories or historical events or giving definitions of well established concepts. The median refereed journal article in economics is almost surely empirical which means it is making a probabilistic argument based on inductive reasoning from a sample. By definition it's not "true".

Now if the question is whether there are more active attempts to deceive in econ journals vs. Wikipedia, I think that is less of a sure thing but even there the basic fact that we are comparing apples to oranges makes it problematic to say anything definitive.

(2) Meanwhile, Alex presents a curious defense of swinging ex-Gov. Spitzer:

"If Governor Spitzer wanted to have sex with a younger woman then instead of hiring a prostitute he could have gotten a divorce and remarried, just like so many other rich and powerful men. Or he could have had an affair. Of these options hiring a prostitute is the least threatening to marriage but it's the only option which is illegal. In contrast, getting a divorce and remarrying a younger woman is so common it doesn't even stop a man from running for President."

Now, I favor legalized prostitution and I found Dershowitz's WSJ editorial convincing in its arguments that the case against Spitzer is most probably an example of prosecutorial abuse of power, but I do not agree that divorce is more harmful to the institution of marriage than cheating and lying. That is pretty much like saying staying with an abusive spouse is less harmful to "marriage" than leaving her and starting over. I guess the best way to say this is that I reject "protecting marriage" as some kind of gold standard by which to judge the morality or correctness of people's actions. Being honest, getting a divorce and then taking up with someone else is clearly a morally preferable course of action to secret affairs or secret expenditures.

Wednesday, March 12, 2008

Moko for President

From New Zealand comes the story of Moko the rescue dolphin. Two "pygmy sperm whales" repeatedly grounded themselves on a sandbar and rescuers couldn't seem to get them turned around and out to sea. It seemed like curtains for the hapless cetaceans. Then along came Moko:

Rescuers worked for more than one hour to get the whales back into the water, only to see them strand themselves four times on a sandbar slightly out to sea. It looked likely the whales would have to be euthanized to prevent them suffering a prolonged death, Smith said.

"They kept getting disorientated and stranding again," said Smith, who was among the rescuers. "They obviously couldn't find their way back past (the sandbar) to the sea."

Along came Moko, who approached the whales and led them 200 meters (yards) along the beach and through a channel out to the open sea.

"Moko just came flying through the water and pushed in between us and the whales," Juanita Symes, another rescuer, told The Associated Press. "She got them to head toward the hill, where the channel is. It was an amazing experience. The best day of my life."

Anton van Helden, a marine mammals expert at New Zealand's national museum, Te Papa Tongarewa, said the reports of Moko's rescue were "fantastic" but believable because the dolphins have "a great capacity for altruistic activities."

And when his work was done??

After the rescue, Moko returned to the beach and joined in games with local residents.

Wow!


This is the best of all possible Campaigns....

....because you get to see stuff like this:

Sinbad Unloads on Hillary Clinton


The only thing funnier than Hillary claiming to have vast foreign policy experience is Obama digging up Sinbad to slap her down on the particulars of her mission to Bosnia.

Some highlights:

Sinbad, along with singer Sheryl Crow, was on that 1996 trip to Bosnia that Clinton has described as a harrowing international experience that makes her tested and ready to answer a 3 a.m. phone call at the White House on day one, a claim for which she's taking much grief on the campaign trail.Harrowing? Not that Sinbad recalls. He just remembers it being a USO tour to buck up the troops amid a much worse situation than he had imagined between the Bosnians and Serbs.

In an interview with the Sleuth Monday, he said the "scariest" part of the trip was wondering where he'd eat next. "I think the only 'red-phone' moment was: 'Do we eat here or at the next place.'"

and then there's this:

In her Iowa stump speech, Clinton also said, "We used to say in the White House that if a place is too dangerous, too small or too poor, send the First Lady."

Say what? As Sinbad put it: "What kind of president would say, 'Hey, man, I can't go 'cause I might get shot so I'm going to send my wife...oh, and take a guitar player and a comedian with you.'"

Well, Sinbad, off the top of my head, I'd say an intern-diddling chicken-$%$# president like Bill Clinton would be the kind of president who'd say something like that.

Huge hat tip to Betsy!

A forecast to believe in?

The UCLA Anderson Forecast group headed by Ed Leamer sez NO RECESSION.

People this is Ed Freakin' Leamer. This is Mr. "Lets take the Con out of Econometrics", Mr. Extreme Bounds Analysis. This is not some third rate analyst at a bank or a political hack or a creepy blogger broadcasting from their mom's basement. He's for realz, so you gotta take it pretty seriously.

They are predicting one negative quarter (-.4% in the second quarter of 08) with the growth rate up to 2.5% by the end of the year.

Here is a clip from the article:

In staking out the contrarian position, Leamer noted that UCLA bucked other forecasters in 2001 by correctly predicting that year's recession.

"We got it right, and we stood alone back then," he said. In jest, he added later that he had "submitted my resignation letter, in the event I am wrong."

Whether truly in recession or not, Leamer said the economy would be sputtering. It remains so fragile that "if there is a quick halt to consumer spending, we will for sure have a recession in 2008," he added.

"The question is whether [2008] will be disappointing or horrible; our forecast is disappointing," he said in an interview.

The Anderson forecasters contend that the economy has been wounded mainly by the collapse of residential real estate. The number of jobs overall will continue to increase, but not at a pace fast enough to employ the growing numbers of people seeking work.

National unemployment will peak at 5.6% at the beginning of 2009, according to the forecast, from 4.8% currently.

My Wife's Solution: LB

I was working on a letter of recommendation last night, about 9 pm.

Hadn't noticed that my wife had walked into my office behind me.

Suddenly, she makes this announcement, startling me first with the sound,
and then with the content.

Her announcement: "If I ever catch YOU with a prostitute, remember two words: 'Lorena Bobbitt.'"

Then, she walks out.

If you marry an Italian woman, there are certain consequences, costs to be paid.

But at least one always knows where one stands. Because she'll tell you.

Tuesday, March 11, 2008

Markets in Everything: Yer Doin' it Rong!

Special Swedish Edition!!

The Swedes are selling a $120 million (aka 47 euro) Rembrandt painting for only $49 million. Closer inspection reveals however, that they are actually trying to sell a plaque with someone's name on it for $49 million. Confused? Don't be. They will sell you the painting on the condition that you give it right back to them. Really, I am not making this up. It will hang in the same place in the same museum for perpetuity (it's not you loaning it to them, you are giving it). Thus your $49 million buys you a mention on the plaque next to the painting: "gift of Mr Bigdummy McDummyius".

Here, let the Associated Press try to explain it:

The arts academy that owns Rembrandt's "Conspiracy of the Batavians Under Claudius Civilis" said Tuesday that it is willing to let the work go for $49 million, less than half its estimated value.

The buyer, however, must agree to donate the masterpiece to Stockholm's Nationalmuseum, where it is one of the main attractions, said Olle Granath, permanent secretary of the Royal Swedish Academy of Fine Arts.

"It has hung at the Nationalmuseum since 1866. That's where it's going to stay," Granath told The Associated Press, adding that the cash-strapped academy is selling the painting to raise money for exhibitions and other activities.

The Rembrandt was valued at $120 million, but the academy was ready to offer a 60 percent discount because of the condition to donate it to the waterfront museum.

By the way, over at MR, Tyler has another Yer doin' it Rong edition of markets in everything up, though he neglected to label it as such. His is from the Netherlands.

If just saying Barack's middle name is a no-no, what about this??

On the cover of the latest "National Enquirer". Below Patrick Swayze, to the right of Britney and above Starr Jones sits BHO:



Here is a link to the article in the Enquirer and here is a link to Brendan Nyhan's analysis.

Holy Crap people.

Will the last Republicans left please turn off the lights?

I have been told that one definition of insanity is doing the same thing over and over while always expecting a different outcome. On these grounds, much of the Republican Congressional delegation is clearly insane. They still seem to believe that anti-immigrant nativist bilge is a big vote winner for them:

WASHINGTON - House Republicans are trying to force action on a Democratic-written immigration enforcement measure, the latest GOP attempt to elevate the volatile issue into an election-year wedge.Republican leaders hope that by pushing the bill — endorsed by 48 centrist Democrats and 94 Republicans — they can drive Democrats into a politically painful choice: Backing a tough immigration measure that could alienate their base, including Hispanic voters, or being painted as soft on border security in conservative-leaning districts.

The plan is fraught with political risks for both parties. A full-blown immigration debate could call attention to Republicans' divisions at a time when their expected presidential nominee, Sen. John McCain, is fighting to gain the trust of the GOP base.


Since Tancredo and his posse did so well in the Republican primaries, I guess this really is a good idea, eh??

Monday, March 10, 2008

Elliott Sptizer Plays Claude Frollo, All Too Well

Gov. Elliot Spitzer (D-N.Y.) acknowledged in a very brief statement, Monday, that he had violated the obligations he had to his family and the public, though he offered no specific comments about a report that he was involved in a prostitution ring.

"I am disappointed that I failed to live up to the standard I set for myself," Spitzer said. "I must now dedicate some time to regain the trust of my family."
(ATSRTWT)

The "standard"? You mean, like, the LAW? You mean, like, the marriage promises he made to his wife to be faithful, which certainly imply NOT PAYING HIGH PRICED CALL GIRLS TO SLIDE UP AND DOWN HIS NYFD-APPROVED FIRE POLE?

Spitzer is a guy who really went out of his day to do the sanctimonious thing. This call-girl admission by Marse Elliot is every bit as big as Jimmy Swaggart, and for the same reason. If you worship at the secular church of the law, you have to obey the law.

Two thoughts:
"Take the Money and Run," Steve Miller. Spitzer is Billy Mac
Billy Mac, is a detective down in Texas
And though he knows just exactly what the fact is
He ain't gonna let those two escape justice
He makes his livin' off of other people's taxes

Mr. Spitzer used tax money, paid to him to run a protection racket ("pay me, or I'll sic the LAW on ya, boy!") to pay hookers and cheat on his wife. Isn't that a problem, for a prosecutor? I know, sure, I think prostitution should be legal. But I think cheating on your wife is immoral, and breaking the law means you can't be a prosecutor.(corrected; I put "prostitute" at first. A Freudian slip...)


Thought the second: "Hunchback of Notre Dame," Victor Hugo.
Claude Frollo, the sex-obsessed prosecutor/priest, wants the girl Esmerelda hung. Why? Because Frollo can't control his sexual urges for her. It CAN'T be anyone's fault but ...hers, right? And Frollo-Spitzer says so: "Oh, it was she! still and forever she!—that fixed idea that haunted him incessantly, that tortured him, gnawed his brain, wrung his very vitals! He regretted nothing, he repented of nothing; all that he had done he was ready to do again..." (Hunchback, Book IX, Chapter 1, "Delirium.")

KPC Board Meeting! A Feast in Two Parts

Angus, the lovely Ms. Angus, and KG Mungowitz met for two very nice meals in San Antonio. Dirty Davey had asked, and I wanted to echo Angus's recommendation in comments.

Two fine restaurants in San Antonio.

Biga on the Banks. Very fine. And accommodating. Ms. Angus had a request "Give me the duck, only substitute chicken, and then hold the chicken" (you'd have to know her, it made sense at the time, it really did), and the waiter didn't flinch. Angus, having a touch of a food allergy (if he touches this food, it makes him really sick), had some requests that were handled deftly. And the food was terrific. We talked for an hour after paying the bill, on a pretty busy night, and they didn't bother us at all. Quite an upscale place, with nice atmosphere, on the River Walk, but not really pricey for all that.

Acenar. Angus heaven. Perfectly good food, better than good, in fact. Very fresh, very Mexican, right on the River Walk, moderate prices. And the colors and furniture all look as if they were designed by Dr. Seuss. I really, really liked their grilled fish tacos. But it looked like everything was good.

Colombia is winning their battle against the FARC

It was a bad week for the FARC. First Paul Reyes was killed in his Ecuadorian sanctuary (just like on "The Wire", his cell phone gave him away). Second, even though Chavez rattled sabers, mobilized troops and got his pals to do the same, the Colombians pretty much got away with it. Sure, they apologized and said they'd not do it again, but there was also anti-harboring language in the agreement and then there was this too:



Third, FARC honcho, Ivan Rios was killed by his own people and his body (or parts of it) turned over the the Colombian Government. Fourth, FARC topdog Manuel Marulanda is reported to be gravely ill and under medical care somewhere in Venezuela. Fifth, the info on the laptops found at Reyes' camp in Ecuador show the FARC admitting to atrocities they'd denied publically. Sixth, arms dealing pariah Viktor Bout (what a great name; it's like a wrestling ring name) was arrested in Thailand in a sting operation and stands accused of supplying weapons to the FARC.

So after over 40 years of fighting the FARC, two top leaders are killed in a week, international repercussions from the cross-border raid were minimal, the FARC supreme commander is gravely ill, more damaging info about the FARC is coming to light, and one of their main arms dealers is well and truly busted. Ouch.