Monday, January 28, 2008

Gamblers' paradise

Want to bet on Super Bowl XLII? Yes you do. (That's a moderately sized .pdf, so be patient.) Courtesy of Rob Holub, who wants to emphasize that all wagers are for recreational purposes only. Naturally.

And if I had to pick 5-- for recreational purposes only, of course-- I'd go with:

Total Touchdowns scored in game: 6.5, under
Total Sacks by both teams: 4, over
Jersey number of player to score 1st touchdown: 43.5, over
Giants total rushing yards: 105.5, over
Eli Manning, what will he throw first (TD vs. INT): Interception, 115

Friday, January 25, 2008

Bill Gates and 'Creative Capitalism'

Bill Gates has put forth a new type of economic system that would battle world poverty and growing inequality in the world. Here is the CNN story, here is the actual text of what he said.

The way Gates sees it, everything should be based in incentives. For people who can pay for goods, we don't have an incentive problem-- trade occurs, and though voluntary exchange everyone is better off. For people who can't pay, businesses don't have the incentive to provide goods, as the profits are not there. We need to introduce a new incentive-- recognition. If companies "doing the right thing" can get recognition for being good, caring entities, then they'll attract better people to the organization and get more customers. For companies "doing the right thing" and making money...well, they get the benefit of both effects.

I'm happy Gates is thinking about changing the structure of the system. (I think the funniest part of the CNN article is when Bono "pushed the debate towards issues such as...poverty alleviation...") Forcing people to recognize "good" companies won't make them do so any more than they do now, and insofar as "good" companies profit in the manner that Gates described, the market will already have that covered. But kudos for thinking outside of the Bono-aid box.

Still, the big question is: Why are those in poor countries not able to compete in markets in the first place? Trade barriers? Low standards of living due to poor institutional environments? The answers are down these paths.

Tuesday, January 22, 2008

Thank you West Virginia Legislature for the high gas prices!

Many people like to complain that gas prices are too high and that they would like to see the price go down. I usually respond by asking for them to name a few goods which they wouldn't like to see the price go down. There seems to be a general feel that particular necessities (read: inelastic goods) shouldn't change in price by too much. Mind you, I speak (mostly) with West Virginia folk, and while gas prices across the country have certainly risen, there still remains a moderate amount of variance between states in average gas prices. I heard a radio spot recently that pinned West Virginia up near the top of average gas prices nationwide, so the question becomes: Why does West Virginia have relatively high gas prices? Greedy oil companies?

Nope-- greedy legislators. (More details.) West Virginia hovers around the top quartile when it comes to state gas taxes, and that translates directly into higher prices than our neighbors (none of which have higher gas taxes than West Virginia). So instead of bemoaning the capitalist system, fuel-guzzling SUV drivers or profit-driven oil companies, turn to your local representatives in Charleston and give them a big thumbs-up on your next trip to fill up.

Or you could try this.

Sunday, January 20, 2008

January 21 - Depression Day

So if you were to try to answer the question of "What is the most depressing day of the year?", how would you go about it? Personally, I think they answer the question of "What is the day in which people are the most depressed?"-- I think the day that would cause people to feel the most below what they otherwise would be feeling would be the most depressing day of the year. They are different questions.

Nonetheless, how would you tackle this problem? The initial investigator cites "weather, consumer debt from holiday spending and failed New Year's resolutions" in his formula towards finding the answer, and then the author of the linked article looks at search engine behavior. Google searches of "depression," websites of developers of anti-depressants...those are the only two he mentions, but you could generate an exhaustive list that's just as viable with little effort.

Why not alcohol sales? Dips in restaurant attendance? Cell phone usage? Airline travel? All different from cyclical predictions, of course...

I think I'm going to file this under "interesting to look at but impossible to make significant headway."

Saturday, January 19, 2008

Disappearing Hitchhikers

Where have all the hitchhikers gone? I rarely see anyone thumbing for a ride. Yet, according to my gray-haired father, everyone hitchhiked in the 60's. The most frequent answer seems to be that it is "too dangerous." The problem with this hypothesis is that violent crime is on the decline, and it has been for many years. This absence could just be explained by a change in prices. Transportation may have become less expensive or perhaps the internet has made arranging rides with strangers easier

My tentative explanation, though, is as follows: Its true that crime has fallen, but people who hitchhike today are more likely to be violent than people who hitchhiked in the 60's. The 60's and 70's saw relatively large numbers of young people due to the baby boomers. Normal young people were more likely to hitchhike. They don't have as much money, are less likely to be on strict schedules, and are possibly more risk taking. Drivers, consequently, are then more likely to pick up young hitchhikers. The more normal people hitchhiking encourages more people of all ages to participate. There is positive feedback.

As the number of young people has declined, the characteristics of people who hitchhike have made drivers less willing to give strangers a ride. At some tipping point, the equilibrium switched from "everyone participates" to "just the weirdos still do that." Now (perhaps for Akerlof-ish reasons) average quality is low and difficult to detect, and as a result, mutually beneficial exchanges do not take place.

Thursday, January 17, 2008

File this under: Twins, low probability occurrences

It would seem pretty unlikely, but if the N is large enough...I suppose you could marry your long lost twin who was adopted by a different family. Seriously, though-- this can't possibly have happened more than this time, could it?

Under the law, I don't think this is construed as illegal-- legally, they're not brother and sister. They might want to think twice about having kids with this new piece of information though...

In related news, Columbus brought syphilis back to Europe.

Thanks to Rachel Mathers (no relation to Eminem) for the picture idea.

Wednesday, January 16, 2008

Value Rankings of College Sports Teams

Forbes has ranked the top 20 most valuable college basketball and college football programs in the country (neither article has a concise 1-20 list, so you have to click through the in-pictures link to get your teams, though ESPN has the basketball rankings here), based on:
We base our valuations on what the basketball [football] programs contribute to four important beneficiaries: their university (money generated by basketball that goes to the institution for academic purposes, including scholarship payments for basketball players); athletic department (the net profit generated by the basketball program retained by the department); conference (the distribution of tournament revenue); and local communities (incremental spending by visitors to the county during the regular season that's attributable to the program).

An intriguing concept. The most valuable basketball team belongs to UNC-Chapel Hill ($26 million), based largely on an agreement with Nike, and football's most valuable to Notre Dame ($101 million), based largely on a TV contract with NBC. Football has a sizable advantage over basketball, and Notre Dame, while having a unique contract, is by no means an outlier-- #2 Texas ($92 million) and #3 Georgia ($90 million) are right behind. (Georgia surprised me.) In fact, #20 on the football list, Wisconsin, is still a good deal ahead of the top basketball school at $43 million.

More successful college teams make more money, both from being on TV more and getting richer payouts from better bowls (though conference tie-ins on both margins tend to create some grouping), but the correlation isn't perfect. Heritage, i.e. success in the past, plays a large role as well.

Why not sell these and let them be run for profit? Is there any illusion left that these are university funded programs provided for the benefit of the student-athelete?

Thursday, January 10, 2008

Unintended arson

I have to admit-- I hadn't thought of this, but there's no reason to believe that this won't happen.

I also like the line about fraud increasing when the economy is bad. Would increased government regulation come as a result of more fraud, furthering the economy's woes, and the cycle continues?

Monday, January 07, 2008

Fun vs. profits in predicting college football results

Tonight's BCS title game between LSU and Ohio State culminated the 2007 bowl season, a 19-day, 32-game college football bonanza that, though unsatisfying to the playoff-wanting populus, is nonetheless enjoyable. It's also a fun testing ground.

Yahoo! Sports offers a bowl pick-em contest that lets users choose the winners of each bowl game, and also lets you assign a confidence level to each game. Different bowl games are worth different amounts of your choosing, from 1 to 32 points. The idea is that the games in which you are most (least) confident you then assign the most (least) points. You must have a selection at every point level, so the final rundown of bowl selections is an ordinal listing of how confident you are in your picks for each and every bowl game.

This let me test the following: Does information with money behind it predict better than information without money behind it?

It worked as follows. Yahoo! provided information about the percentage of the country that selected each participant in each bowl game, so this could be construed as a decent measure of the aggregated non-money information (the game is free to play). The team receiving greater than 50% of the participant vote was selected as the winner (there were no 50%/50% ties), and confidence levels were attained by how much of favorite they were. For example, the highest confidence level was for the Hawaii Bowl-- 95% of those playing liked Boise State to defeat East Carolina. (They didn't.) The lowest confidence game was the Poinsettia Bowl-- 51% of the country liked Navy to defeat Utah. (Nor did they.)

The money information generated a set of picks and confidences from moneyline posts in Vegas. The selection came from the moneyline favorite, the confidence from the size of the line. It is the role of the bookie to place lines such that equal money falls on both sides-- that way, any bowl outcome yields a profit for the house. All votes are equal for non-money information; the same is not true for the money information.

The results?

Non-money: 21 of 32 correct, for 382 points

Money: 24 of 32 correct, for 381 points

(Both were around the 90th percentile of all picks submitted.)

I read this as saying the money information-- derived from moneylines-- did best in determining the higher percentage of winners, but the non-money information did a bit better in isolating with confidence those teams that would win. A thin line, nonetheless.

Perhaps more interestingly, there were some pretty sizable differences between the two sets of picks; Utah/Navy, for example, was given the least confidence on the non-money picks, the money picks put that game at 26 confidence points (out of 32)-- and picked the game correctly as well. Tennessee/Wisconsin was at 16 confidence points for the non-money and 4 for the money, though both correctly picked Tennessee as winner. The disparities go on and on. As the numbers bear out above, many of the picks with regards to team are similar, but confidence levels vary widely.

Some shortcomings: Picks were locked after the first bowl game was played, so for the championship game, there was 19 days worth of late information unincorporated into the rankings/choices. This probably would have a larger impact on the money information, if the "late-money-is-smart-money" adage is true, and moneylines could be adjusted (and therefore confidence levels) by small information changes (i.e., player X is now doubtful for bowl Y) whereas picking a different team to win might take a larger information shock (which is how the non-money information confidence levels would be affected).

Also, can the non-money information be trusted as a true reflection of public sentiment, i.e., are people playing the game seriously and not making ad hoc selections? I'm not certain this is a large concern. While it is impossible to believe that everyone who played the game played it seriously, there isn't a reason to believe this caused a bias in any direction. After all, people make bets on a whim as well.

Ah, the sheer bulk of gambling and sports data.

Tigers and Transaction Costs

On Christmas Day, a tiger escaped from its cage at the San Francisco Zoo. It killed one man and mauled two others. It turns out that these three people had been taunting the tiger; shooting rocks at it with a slingshot, dangling their feet into the cage, etc. Obviously, there has been quite an uproar about both the foolishness of these guys and of the animal security at the zoo. It turns out that the tiger's cage wall was several feet lower than recommended by some official zoo organization (not the law).

The two surviving hooligans have hired infamous law dog, Mark Geragos, who has represented the famous of all ilk, from Michael Jackson to Scott Peterson. Some social commentators have called for the zoo to fork over millions while others say those rowdy kids got what they deserved.

It seems to me that the zoo should pay big time for this fatal fiasco. My reason: transaction costs. The zoo can avoid this at a much lower cost than the random tourist. The zoo has expert information about the animals and the zoo facility, whereas the tourists usually don't know anything at all. It would be prohibitively expensive for a tourist to ensure his safety when entering a zoo. He would have to call/question countless people, inspect the cages, etc. In fact, a tourist would have to put himself into danger (in addition to bearing high costs) in order to ensure his safety. In short, those guys were probably being idiots, but the zoo should have realized this is a world full of knaves.

Saturday, January 05, 2008


A recent trip to Mexico got me thinking: If bartering for goods became a cultural norm in the U.S., would society be better off? You wouldn't make any less sales-- you'd just be scooting yourself down the demand curve. (Though I suppose prices in a barter scenario could be listed as higher in anticipation of a bargaining process, thus driving off potentially interested buyers, but then again prices oftentimes aren't listed at all.) None of the new sales would be involuntary, so there's surplus to be had on both sides. Granted, there would be transactions costs on both sides, probably more of a burden on the buyer. Information costs would be greater for the seller acting as an agent, and I suppose principal-agent problems would then come into play as well.

It seems that bartering isn't that common in the most highly developed countries...which is probably the most telling fact anyway.

(Edit: Sorry-- by bartering, I mean price negotiation, not "my four chickens for your three goats.")

Friday, January 04, 2008

And here I've been going to class all these years!

Did you know that if you recite the Koran in Iran, you automatically get a university degree? It's true. I wonder if there is a specific emphasis with the diploma...but in order for it to have the effect implied in the piece, wouldn't it have to be indistinguishable from a schooling-earned degree? (Unless you wanted it to imply religious superiority, of course...but then you could always just recite the Koran in your interview.)