Duel!

A classmate put forth this conundrum in my Public Choice class this morning:

Let's say you are in a three-way duel, and all three of you have a gun with an unlimited amount of bullets. Your two opponents hit with an accuracy of 90% and 80%, and you shoot with a success rate of 50%. Sequential shooting rules apply, and it's your turn. What do you do? He was convinced of a set course of action that would emerge in the short-run; I'm not entirely sold on the idea. I'm curious what everyone else thinks. I also think the far more interesting scenario is if everyone has to choose at once, instead of sequentially.

I then got to thinking about a more general scenario-- a three-way duel, and everyone in the group has one bullet. Accuracy rates would matter at the limit, but anything away from that and I think risk preference plays a bigger role. Even more so in a four-person duel with one bullet apiece-- accuracy matters at the limit, but now you've got risk preferences mixed in with group sanction effects, though group sanction exists only insofar as there is more than one period to make decisions (all-at-once decision making with the option of inaction).

The War on Drugs

Since every Wednesday is humor day at CNN.com, I figure to add in a thought or two concerning their chief comedian's column today concerning the War on Drugs. (It's capitalized now, because it's not a war unless you capitalize the name like you would for the title of an essay.)

One of my professors, Russell Sobel, has a great comment whenever this topic comes up: Couldn't you categorize a number of the "costs" of the War on Drugs (or any of a number of government social programs) as benefits? Dobbs notes that nearly 8,000 people are trying drugs every day-- that's a cost? Do you think the people trying them view it as a cost? It's like writing a piece on the tragedy of teenage driving deaths and saying that it's a cost that 5,000 new teenagers get a driver's license every day.

Dobbs also reports that illicit drug use costs the U.S. nearly $200 billion dollars per year. No word on the breakdown of that, but I'd bet a healthy share of it is due to the fact that the U.S. chooses to define certain drugs as illegal and needs to enforce that. Fair enough-- not that it's just, but it is a cost to the American taxpayer. But how come we never see estimates of the benefits of drugs? There is surplus in every black market deal, right? Despite the vast inefficiency and outright liberty-crushing War on Drugs, couldn't it be that drug use still generates a net gain to society? I know benefits estimates have been put forth, but I don't have links to any of them at the moment. Feel free to pass them along.

With regards to drugs and crime, yes, reducing drug use reduces crime because the government has defined drug use as a crime. If we defined wearing blue shirts as a crime, we'd have a lot of people committing that crime tomorrow. Once we started enforcing the law, people would substitute away from them. Yay-- we've reduced crime! People then point to crime indirectly related to drugs, such as assault, but there have been studies that have shown that the net impact of declaring drugs illegal has increased crime, not decreased it. After all, without a sound court system to enforce contract disputes in drug transactions, groups must provide their own enforcement.

And to give you a good sense of the excess burden of all of this: the War on Drugs Clock.

Your daily nonsense

From CNN:

"Even with exports growing, the deficit was a drag on the economy, as it meant that every man, woman and child spent an average of about $7,300 on imported goods and services during the year, turning to factories overseas rather than U.S. producers for the products they wanted."

Yeah.

Dictatorship rankings

It's time for Parade's dictatorship rankings again! The top two are the same from last year, though the third, Sayyid Ali Khamenei of Iran, jumped up to #3 from #9 only a year ago. New to the rankings: Choummaly Sayasone of Loas (at #16), Hosni Mubarak of Egypt (#18), Paul Biya of Cameroon (#19) and Vladimir Putin of Russia (at #20). The above link, if you scroll to the bottom of the page, has the previous rankings since they started them in 2003. There's certainly a paper to be had there.

As I pointed out last year, the U.S. has given money to nearly all of these rulers, which is interesting in that the U.S. likes to further the belief that they procure aid only in the support of democracy. Aid clearly doesn't work, but it's here to stay, so the question is how to improve upon the situation. Part of me thinks bribing dictators to incorporate good policies might work, but if the bribes get high enough, it could turn into a one-shot game that wouldn't lead to any sort of long-run well-being.

The Trump Money Drop

Perhaps more WWE fans will watch The Apprentice now.

But did the prices at the concession stands rise? And did those closest to the aisles secure the biggest benefit?

I wonder what percentage of the money was saved. Did local interest rates fall?

Someone should be tracking this.

Incentives Matter

One of my favorite examples of this basic economic concept is that drivers can be made more cautious by placing daggers in their steering wheels. It's a powerful example because everyone can relate. It also has symmetry, which allows one to draw out the implications for increasing safety in cars - namely that seat belts may actually lead to more accidents. (Economists Russ Sobel and Todd Nesbit have a great paper on Nascar that investigates this concept.)

This post is not intended to teach about incentives. I'm actually petitioning all of my loyal readers for their help. I originally heard this example attributed to Gordon Tullock, but I've seen other authors cited for this creative tale as well. I'm collecting a list of people who this example has been attributed to. So, if you know of any citations, please post them in the comments or email me.

Don't tread on me!

This world could use a few more Ed Browns. Here he is in his own words.

In short, Ed Brown doesn't want to pay property taxes, so he went ahead and stopped paying them, and now the government wants his money. He's currently holed up in his evidently self-sufficient property, and what he doesn't have he gets from supporters who come and visit him every day. Both sides insist that this won't turn into another Waco, but I can't see this having any middle ground ending-- either a) the government leaves him be, or b) the government goes in a forcefully takes him. Cordial daily conversations can't be the long term solution. Sadly, I bet the second option will happen-- it sets too much of a precedent to let one person off the hook.

(Though at worst, I don't think it would end up being on the scale of what happened at Waco.)

A few thoughts:

- Though this a federal issue, the New Hampshire state motto is "Live free or die."

- Some people say "stuff your sorries in a sack," others say "social justice"-- this article contributes "Of course, any group of libertarians has a thousand different opinions." Guesses as to what this could be getting at are encouraged.

- Was Gandhi a libertarian? I've heard that he wasn't, but I don't have a solid hold on that one. If he wasn't, then the "Gandhi-admiring protesters" are really missing the boat. Nice of them to make some campfires, though.

Logical Global Warming Initiatives?

As I wallow in the pure, undriven West Virginia snow for the last few days, and likely for the foreseeable future, I wonder: Where have all the global warming alarmists gone?

Here they are! And what's this-- market-based solutions?! The group is USCAP, and their report is called A Call to Action, which focuses on, basically, creating tradeable pollution vouchers and encouraging exchange, "generating a price signal resulting in market incentives that stimulate investment and innovation in the technologies that will be necessary to achieve our environmental goal." No really-- people that care about the environment wrote this! Don't let the logical nature of it throw you off.

From a press release from USCAP: "USCAP consists of market leaders Alcoa, BP America, Caterpillar, Duke Energy, DuPont, FPL Group, General Electric, Lehman Brothers, PG&E, and PNM Resources, along with four leading non-governmental organizations -- Environmental Defense, Natural Resources Defense Council, Pew Center on Global Climate Change, and World Resources Institute."

Of interest in the CNN article from above-- all four companies listed were down about the same percentage in the market today.

Irony

Here’s an ironic line from Thomas Friedman’s 1989 book, From Beirut to Jerusalem:

"In my day, Abdul was the fixer for both Newsweek and UPI Television News, and he was the most delightful and lovable operator I have ever known. His long career as a fixer finally came to an abrupt close in 1985, when Newsweek and UPITN sent to Beirut some bureaucratic-minded reporters who did not understand that in Wild West Beirut one does not hold to the accounting standards of Arthur Andersen."

Anyone have a working definition of "Social Justice?"

When it comes to frustrating things in life, not much tops arguing with someone over economic policies and that "social justice" needs to be considered. Can someone tell me what the hell that means? To me, when I hear that, I think of the conversation between Jerry and George when George continues to use the phrase "You can stuff your sorries in a sack, mister!" and Jerry finally gives up trying to figure out what he's trying to express. I've yet to get the same definition of "social justice" twice, and I've gotten the most satisfying answers from people who don't support any explicit goal of "social justice" in economic policy making. As far as I'm concerned, unless anything changes, whenever anyone writes about "social justice," quotation marks should be mandatory.

Ultimately, I think people are confusing "social justice" as a preferred ends instead of a preferred means. By definition, equality in means will yield equitable results. The definition of "equality" and "equitable" can be as elusive as "social justice," but taking a snapshot of a social outcome and claiming a violation of "social justice" is completely missing the boat.

Here's what Wikipedia has to say about it. I love the first sentence: "Social justice refers to conceptions of justice applied to an entire society." Beautiful in its explanatory power, that's what that sentence is.

Turns out that there's a Centre for Social Justice, with the beautifully socialist tagline of "Narrowing the gap in income, wealth and power."

Here's a fun piece concerning Hayek and "social justice."

Here's a group of Social Justice Scholars.

And for what it's worth, I've been told that Milton Friedman "didn't do enough for 'social justice.'"

Quote of the day: Thomas Sowell

"The next time somebody says that the government is forced to intervene in the economy to protect the poor, ask why the government is forcing taxpayers to subsidize municipal golf courses, the ballet, opera and - the biggest subsidy of all - surrounding affluent communities with vast amounts of expensive 'open space.'"

Cannon fodder

If you need some ammunition against your state, this is a good place to look, courtesy of Joab Corey.

I can't help but to get the feeling that some of these are fictitious; nonetheless, how is reading about laws against chickens laying eggs ever a bad thing?

Your state legislatures at work

New state laws!

Some of my favorites:

- Alaska moving to prevent bullying in schools. A victory in lunch money property rights!

- Nurses from other countries must pass an English language proficiency requirement to practice in South Carolina. (They also moved to stop harrassment and intimidation in schools.) A victory for American nurses AND lunch money property rights!

- Live music cover acts in Illinois must be clearly not representing themselves as the originals. (The pros and cons...) A victory for the Styx of the world!

And, of course, the typical minimum wage nonsense...

Country for sale!

Just when you think there's no place in this world to hedge out your own existence, there comes this gem of a story.

Here's the official Sealand website; here's the Wikipedia workup.

In a world of vast international waters, could an entrepreneur begin building micronations of all variations, size and institution, and then sell them off? It could be like Tiebout on a country-wide scale. I'm sure existing countries wouldn't prefer it (or at least not the fair traders, anyway...), but which one would take up the collective torch, incur the public relations nightmare to try and stop this from happening?

As a currency collector, I think a Sealand dollar may now top the list. I wonder if there are any plans for PayPal to add that currency to their collection in the near future...

Minority Report and the Hand Formula

Tom Cruise's sci-fi film Minority Report portrays a world where murders can be seen in advance and prevented. Thanks to the "pre-cogs" who make this possible, Washington D.C. of 2052 has not had a murder in six years. The only attempted murders to occur now are those taking place in the heat of passion, for intentional planning to murder is easily identified and stopped. Individuals are arrested by the Department of Pre-Crime and punished with many years in a comatose state.

It seems that the disturbing twist to this film is that individuals are punished for horrible crimes that they had yet to commit. Murder should be punished, but should people be punished who have yet to murder but surely would? The movie attempts to draw forth insights about free-will and punishment of people's thoughts rather than actions. The more I think about it, however, the more disturbing twist to the story is the failure to heed the Hand Formula.

The Hand Formula is a calculus of negligence:

"The Hand Formula finds negligence when the actor's burden (B) is less than the probability (p) of harm, multiplied by the degree of loss (L). B < pL ."

Thus the Hand Formula provides a guide for punishing crimes. To dissuade a particular crime, the legal system can manipulate either the punishment when apprehended or the probability of apprehension to set an appropriate price for committing the crime.

The basis of Minority Report is that that the probability of apprehension for murder is 100%. But if murders of passion are stopped before they occur 100% of the time, then the punishment should approach zero.

Perhaps what is disturbing about Minority Report are not the questions of free-will and cognition that it raises, but the deviation from rules of efficiency that the lengthy punishment respresents.

Imagine a world where "pre-cogs" stop murders 100% of the time and the "pre-criminals" are put in a "kill-tank" (similar to a drunk-tank) for the duration of a day. Is this disturbing? I think not. The rare instances in people's lives when they lose control are stopped before serious damage is done. Repeat offenders may be forced to attend therapy of some sort. Murder does not occur. This sounds like a nice society indeed.

Correlation is not Causality

In their article "Economic Development and Reconstruction on the Gulf After Katrina", Waugh and Smith argue that:

The duration of closure is also negatively related to long-term recovery. The longer the business remains closed, the less likely it is to recover in the long term. This result suggests that businesses need to open as soon as possible after the disaster to have a better chance of recovery.

This conclusion may or may not be true, but it doesn't seem warranted. Couldn't there be a third factor that affects both the time to reopen and the long term success of a business? It seems likely that healthy businesses are able to rebound quicker. To implement a policy of encouraging all businesses to "open as soon as possible" will do little more than force weak businesses into the marketplace before they are ready. Correlation is not Causality.

School's out for...Election Day?

Schools are closed on Election Day here in West Virginia. No complaints here--it misses the days of the week in which I teach, but I do get a day off from Econometrics. When I first heard this, I chalked it up as yet another "only in West Virginia" phenomenon.

Not so. Nine other states (and D.C.) close all schools on Election Day, and another nine on top of that have laws that close some school to some degree.

What is the point of this? My officemates say it's because a lot of voting places happen to be at schools; I voted in the California recall election in 2003 in the midst of many vocal elementary school students. Municipalities in every state use schools as voting grounds since they are publicly owned and necessarily local to the majority of the population.

I suspected that these ten states probably have a lower economic freedom than the rest-- not that these laws create any sort of imposing regulatory environment, but instead show a willingness to pass foolish laws (or not to purge old ones from the books). Sure enough, the school-closure states come in around 6.4 on average (though Delaware is in this group), and the rest come in at about 6.7.

I wonder if this is related to school spending? Do schools get a lump sum from the state to host an election, from which they can siphon off excess funds for other purposes?

I wonder if this is related to voting rates? I wouldn't be surprised if this lowered voter turn out rates at all-- working parents probably wouldn't be too affected, but stay-at-home parents now have kids to deal with.

The Economics of Oprah

Oprah's back trying to save the world.

I've got nothing against charity, but I would love to see one of the audience members spend the entire $1,000 on something frivolous, say that the current expenditure creates a lot of good things for a lot of people, and then turn in a John Stossel video back to Oprah. But that's just me.

Survivor-nomics

If you're not a fan of Survivor, you can probably just skip this one.

We here in the Economics Department at West Virginia University are fans of Survivor. Big fans. Building voting coalitions is a crucial aspect to the game-- you certainly see the Groseclose supermajority come into play more often than not. Over the seasons, end-game strategies have migrated themselves to the beginning of the game.

In the last two seasons, CBS introduced the idea of an exile island-- at certain junctions in the game, players can be sent to this island for a couple of days. On the downside, there is no shelter on the island, you have to fend for yourself with regards to nourishment, and you are removed from the social doings of your tribe. There does exist, however, a hidden immunity idol on the island-- if you find it, you (or anyone you choose to give it to) basically have a get-out-of-being-voted-off-the-island free card. If you receive enough votes to be voted off the island, you present the idol, your votes become null, and the remaining votes then eliminate the next highest vote-getter from the game.

Here's the question: Do you reveal to anyone, or everyone, that you ever have the hidden immunity idol, and at what point do you do so?

I'm of the opinion that there does not exist any situation by which it would be strictly beneficial to withhold the information from the rest of the players that you have the coveted immunity idol. The only time that the immunity idol would become a factor is when your tribe wants to vote you out. (Let's assume for the time being that you are not considering giving it to someone else.) Should you choose not to tell your tribemates and they want you gone, they will vote accordingly, you will present the idol, and a surprised member of the tribe will be sent home. At this point, they know that the idol can't be played at any point in the game henceforth, and can move forward with confidence in pursuing your exit from the game.

Now let's consider that the tribe wants you out and you do choose to tell them that you have the idol. Knowing the voting rules, the majority faction looking to eliminate you from the game now knows that it is going to have to take one for the team this round in order to remove the immunity idol from the game, and then vote you out during the next meeting. Now, with payment redistribution from the winners to the "sacrificial lamb," an agreement could be reached to value the sacrifice. Survivor, however, expressly prohibits this-- so who would volunteer to be placed in the situation of being picked off for the good of those remaining in the game?

Of course, here's the kicker-- once the "sacrificial lamb" effect is strong enough to deter the voting, it only gets stronger in the next round, in the sense that each person would have a higher probability of becoming that "sacrificial lamb." It's not like the idol is good for only one round-- it is good every round as long as you don't have to use it. It would seem to me that once you could incorporate this effect, you could stroll well into the depths of the game without having to worry a large amount over coalition building. Any coalition looking to vote you off would necessarily have to lose one of its members before doing so.

Alternatively, the majority faction (and necessarily a supermajority greater than 2/3) could arrange a voting strategy such that two members of a minority faction receive enough votes to be voted off. In my example, it is known who has the immunity idol, and thus the other member could simply be targeted. However, if the immunity idol were suspected to be held by a minority faction, a spread voting strategy against the minority grouping could achieve the desired effects. And this is actually what happened in last week's episode-- or was attempted , anyway. Combined with the fact that the organizer of this voting theory was not in the entire tribe's best graces, the opportunities for shirking with this strategy are just too great. With trust being anything but a certainty on the island, I don't think it's a stretch to say that a two-pronged voting strategy, as such, will never likely be achieved in the game.

Anyway-- the lesson is: Let everyone know you have the hidden immunity idol, and ride the "sacrificial lamb" wave to the Final 3!

File this under: Seafood, government knowledge of

It turns out that seafood is fine to eat. This is a change from the stance that seafood shouldn't be consumed since it might contain unsafe levels of mercury, which was itself a change to the fact that fish is low in fat and so we should eat a lot of it, which, in turn, was a change in the fact that we shouldn't consume fish because...

Anyhow, you get the gist. A couple of choice lines:

"Even so, the government needs to help consumers figure out which seafood is safer, an Institute report said."

"Environmental and conservation groups said it should have listed 'good fish' and 'bad fish,' which the researchers said would be too difficult."

"They seem to be unaware that children are smaller than adults..."

And the coup de grace...

"In all seafood, levels of dioxin, PCBs and other contaminants do not pose health risks when eaten in government-recommended amounts."

Do you believe there exist people that actually adjust their food consumption according to government recommendations? Would these be the same people that check the Homeland Security terrorism level before they leave the house in the morning? The major impact of government food guidelines in my life is that until the FDA says raw spinach won't unleash hordes of predatory E. coli into society, our local Subway won't carry any. I'd imagine public schools have to follow some sort of health pointers as well-- just so long as there's no peanut butter.