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        general >> truth >> Economics of love/marriage/sex
        
(Message started by: BenVitale on Jun 19^th, 2009, 2:29am)

Title: Economics of love/marriage/sex
Post by BenVitale on Jun 19^th, 2009, 2:29am

It's time to start a new thread for Economics.

I have no intention of becoming an economist. I enjoy reading articles about economics, especially Behavorial Economics ... I'm a big fan of Game theory.

Here are the sources of my information/reading:

- Dan Ariely's Predictably Irrational
- Freakonomics
- Tim Harford's Logic of Life

These books are hilarious, thought-provoking, and they offer an entertaining and provocative look at the logic behind the seemingly irrational.

Tim Harford, author of "The Logic of Life" and "The Undercover Economist", explains the economics of :

The Logic of Life -- WORK (http://www.youtube.com/watch?v=Ex-2LIyS6YI&NR=1)

The Logic of Life: Racial segregation (http://www.youtube.com/watch?v=JjfihtGefxk)

Thomas Schelling's chessboard model. Explained by Tim Harford

Why your boss is overpaid (http://www.youtube.com/watch?v=FZUqb5U_vSs&NR=1)

He explains the brutal economics of tournament theory - and why it leads to office politics
and overpaid bosses.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 19^th, 2009, 2:31am

How economics can get you a date (http://www.youtube.com/watch?v=JpU9XrQqYzc&NR=1)

Tim Harford on The Logic of Life (http://www.youtube.com/watch?v=Iif9sJrSIKk&feature=related)

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 19^th, 2009, 2:32am

Trust Me, I'm an Economist 1 (http://www.youtube.com/watch?v=iyDkl8PevSI&feature=related)

Trust Me, I'm an Economist 2 (http://www.youtube.com/watch?v=cYcsFyim_Cs&feature=related)

Trust Me, I'm an Economist 3 (http://www.youtube.com/watch?v=LIPdI0ego3Q&feature=related)

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 19^th, 2009, 2:33am

3 things We Know about Economics (Tim Harford 1/6) (http://www.youtube.com/watch?v=MdlrpCqdcVo&feature=related)

The Secret Cappuccino (Tim Harford 2/6) (http://www.youtube.com/watch?v=cuQUenY_dNg&feature=related)

Economics and the Big Problems (Tim Harford 3/6) (http://www.youtube.com/watch?v=iWgMGRHbytE&feature=related)

What Economists Don't Know (Tim Harford 4/6) (http://www.youtube.com/watch?v=wGQOb13bB7I&feature=related)

Connecting Economics to the Real World (Tim Harford 5/6) (http://www.youtube.com/watch?v=HIavO8jPgTo&feature=related)

Beyond the Equations (Tim Harford 6/6) (http://www.youtube.com/watch?v=tbF6Ik5RRhs&feature=related)

I hope that these videos will generate lots of discussions.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 19^th, 2009, 2:30pm

I' ll start with the logic (if any) of dating and speed dating.

In Chapter 3, Tim Harford discusses speed dating. He claims that ‘we, economists, cannot get enough of economists to show their faces at speed dating events. Economists at Columbia University even went to the trouble of organizing one. Ever since John von Neumann s game theory promised to help us understand love and marriage, economists have been interested in how people choose their partners and how relationships work.

Tim Harford claims that if you want to understand the way people choose their partners, a speed date is a great place to start.

At a speed date you can get information about each person responded to dozens of potential partners, something that would be impossible to collect in more traditional dating situations without binoculars, snooping devices, and a good private investigator.

You could have 20 men and 20 women gathered together for an evening. Everyone has a name badge, a pen, a list of check boxes, drinks. The women sitting at small tables dotted around the room. A host: a rep from the speed dating company that organizes the event. Then, the host will ring a littlt bell to prompt all the men to hurry to their assigned ‘dates’ Which would last 3 minutes. And when the time is up, the bell will ring, the daters will shake hands, and the men will hop to the next table and the next woman.

When everybody has met everybody else and ticked ‘date’ or ‘no date’ for each name on his list or her list. That info will not be revealed until the next day, or over the Internet, and the men and women could continue chatting in blissful ignorance.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 19^th, 2009, 2:58pm

on 06/19/09 at 14:30:16, BenVitale wrote:

I' ll start with the logic (if any) of dating and speed dating.

[Description of speed dating]

Where's the logic? You only gave a description of what it is.
Or do you want arguments for and against why it may not be a good model for mate selection?

- Results change dramatically if the men sit and the women move around
- Most people end up in relationships with people they know from their social networks (work, school, world of warcraft), not people they met at a single event and perhaps a few dates.
- participants are not a random sample of the (singles') population
- Do they even attempt to do controlled experiments, using control groups, and changing variables while keeping the rest constant?
- Do they make hypotheses first, then test them; or collect data first and fit a theory around it?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 20^th, 2009, 12:15am

I'll be able to continue the discussion tomorrow. The author does not address your questions in Chapter 3 ... I'll continue reading the chapter tomorrow.

The author asks, [i]"Do people spend their lives looking for "the one", the one person -- or less ambitiously, a particular type of person -- who is the perfect match for them temperamentally, socially, professionall, financially, and sexually? Or do people adjust their standards depending on what they can get? In other words, are the romantics right, or the cynics?

The author like to continue to believe that there is one special person out there, someone who is the perfect match for them?

Economists have realized that speed dates provide the sort of data about who likes whom ... and they persuaded speed dating companies to share their data.

The outcome of this research seems to suggest that if one asks, "Can he or she be the one?” ... The answer, I’m afraid, is “just about anyone, yes.”

................

There's more to love, dating, and marriage than rational choice theory, but rational
choices are an important part of the story.

A biologist or a poet can explain why we fall in love.

A historian or an anthropologist can trace the way the institution of marriage has started, can explain why and how it started, and how it has changed over the centuries.

But an economist can tell you something about the hidden logic that underlies love.

Tim Harford looks at competition, supply, and demand in the marriage market ... competition does apply to love.

He shows how rational people respond in places where there are imbalances between the numbers of men and women available.

I shall continue tomorrow ... and thanks for your interest.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 20^th, 2009, 5:18am

on 06/20/09 at 00:15:46, BenVitale wrote:

The author asks, "Do people spend their lives looking for "the one", the one person -- or less ambitiously, a particular type of person -- who is the perfect match for them temperamentally, socially, professionall, financially, and sexually? Or do people adjust their standards depending on what they can get?

What about a third option? Like one where people find 'love' without looking; which is pretty common.
Do people go around comparing potential mates to some sort of standard in the first place, or is this akin to asking what type of cheese the moon is made of? Sure, a rare few people do make up a list of what they would want in a partner, and then most of them end up with someone completely different anyway, because "it's just love".
There's nothing rational about it, just biology doing it's "magic". I really doubt most people have any standards; you just need to turn on the TV to see that.

Quote:

Economists have realized that speed dates provide the sort of data about who likes whom

You can't tell whether you like someone from talking 5 minutes. It's a very coarse selection process at best, based on nothing much that determines long term success in a relationship.

Quote:

There's more to love, dating, and marriage than rational choice theory, but rational
choices are an important part of the story.

I don't believe they are; for one thing nearly no one says to himself "Well, I'll just settle for her, because I can't do any better". They're all convinced they found the one, because that's what biology inclines them to think.

Quote:

But an economist can tell you something about the hidden logic that underlies love.

Not as well as a psychologist or biologist.
All the "hidden logic" has to be contingent on whether it is a behavioural "rule" that can evolve. Evolution doesn't promise to give you optimal rules as economic theory would. Even if there is some coarse-grained correspondence, it's simply the wrong language to use. You could also "economize" physics; for example framing entropy as cost, or anentropy as benefit, and then you can claim a stone chooses to fall down because it's most cost effective; but it's nonsense.
Much biological behaviour may appear rational from the gene's point of view, but it's not like genes actually choose. It's all causal. And the causal model fits much better to explain all the irrational behaviour display.

Quote:

Tim Harford looks at competition, supply, and demand in the marriage market

Oh, if only. The speed dating market is not model for the marriage market, it's a very small unrepresentative submarket.
Does he give any numbers on how many people from those speed dating sessions end up getting married? And whether [i]that is the same in the more vs less desirable groups? It would surprise if he did.

Quote:

competition does apply to love.

Rarely, I'd wager. Honestly, how often does either of two people dating have multiple suiters at the same time? Some empirical, quantitative evidence would be nice.

All I see are vapid claims that sell books.
But then that's books for you, a scientist would write a paper for a peer-reviewed journal; but then he'd actually have to do proper research and analysis, and he wouldn't make as much money.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 21^st, 2009, 12:03pm

Towr,

You have raised important questions. Please bear with me, I'm reading his book slowly and carefully... and doing research to find additional info. Why? Because the book raises more questions than answers ... it is insightful and entertaining book that would be of interest to anyone with a slight interest in economics and game theory.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 21^st, 2009, 12:08pm

Please read the book review by New York Times (http://www.nytimes.com/2008/01/25/books/25book.html?_r=1)

And I could add that the thesis of his book is that human beings are rational in everything we do, however illogical it might seem ... it is founded in cold hard reason, if only you look hard enough ...
from hookers to teenagers to criminals, everyone is endowed with a rational mind.

Tim Harford himself admits to is that rationality is accentuated by experience. This is similar to conditional learning : the more times you have done something, the more likely you are to know the likely effects of a wide range of your actions and you will pick the one most likely to lead to positive gains for you -- either now or in the future. Whether you call it good old common sense or logic, the end result remains the same, and can be explained rationally.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 21^st, 2009, 12:19pm

He opened chapter 3 with a quote from Carrie Bradshaw, the character from Sex and the City
which illustrates the difficulties facing single women when they outnumber single men in NYC

Carrie Bradshaw's quote 'Is divorce underrated?'
There are 1.3 million single men in New York City, 1.8 million single women, and of these
more than 3 million people, about 12 think they're having enough sex.
-- Carrie Bradshaw (Sarah Jessica Parker), Sex and the City --

Women outnumber men in NYC which suggests that the women lose their bargaining power.

Women outnumber men in the cities of almost every developed country.

The author states that even a small discrepancy between the sexes can have surprisingly far-reaching effects.'

How?

The author mentions the swedish economist Lena Edlund who did a study and wrote 2 important papers:

- Why Women Live in Cities (http://www.econometricsociety.org/meetings/wc00/pdf/1147.pdf)

each single man one counts three single women in Paris, and five single women in Manhattan.

- A Theory of Prostitution (http://the-idea-shop.com/papers/prostitution.pdf)

P.S. The author doesn't explain clearly how a discrepancy in the male-to-women ratio affect the bargaining power of women and how strategies are devised and adjusted.

I need to do some research to figure this out.

I have a question for you:

Are you familiar with Signalling (economics) (http://en.wikipedia.org/wiki/Signalling_(economics)) and Signaling games (http://en.wikipedia.org/wiki/Signaling_game) ?

And Cheap talk (http://en.wikipedia.org/wiki/Cheap_talk), which, in game theory, is communication between players which does not directly affect the payoffs of the game ... I'll need to figure how utlize it in order to affect the outcome of a game. The theory cannot guarantee an effect on equilibrium payoffs.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 21^st, 2009, 12:40pm

Quote:

Towr wrote:
The speed dating market is not model for the marriage market, it's a very small unrepresentative submarket.
Does he give any numbers on how many people from those speed dating sessions end up getting married? And whether [i]that is the same in the more vs less desirable groups? It would surprise if he did.

You're right to express reservations about 'Speed dating'

Researchers were able to find that courtships that take longer before mating will be more successful for the female. This is because good males are more willing to be patient during a longer courtship period, but bad males quit if they do not get their way.

According to research, good men are more likely to participate in a long courtship.

An extended courtship allows the male to signal the female that he is a suitable mate and gives the female time to screen out males who are not suitable

The strategic problem the female faces is how to screen out bad males, and this is where long courtship comes into play

"Flirting" is an important 'Signaling' tool in communicating with the opposite sex. And how does it change in 'Speed dating' is not clear to me.

Flirting is a way we signal our amorous interest and intent in each other.

Well, in normal dating, flirting is nature's solution to the problem every creature faces in a world full of potential mates-how to choose the right one.

Flirting is a negotiation process that takes place after there has been some initial attraction ...

In a normal date you'll reveal this and have this revealed to you in smaller doses, and incrementally ... little bit at a time.

You don't have that in 'Speed dating'

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 21^st, 2009, 2:52pm

Quote:

I need to add the following:

Tim Harford admits that he cannot answer that question definitely -- not even the most ingenious of today's new generation of economists has devised an experiment that will prove whether people lower their sights in response to market conditions when it comes to marriage. But there's some suggestive evidence from the study of speed dating, courtesy of the economists Michele Belot and Marco Francesconi.

Michele Belot and Marco Francesconi wrote a paper on 'Speed dating':

Can Anyone Be "The" One? Evidence on Mate Selection from Speed Dating (ftp://repec.iza.org/RePEc/Discussionpaper/dp2377.pdf)

Quote:

Towr wrote:

What about a third option? Like one where people find 'love' without looking; which is pretty common.
Do people go around comparing potential mates to some sort of standard in the first place, or is this akin to asking what type of cheese the moon is made of? Sure, a rare few people do make up a list of what they would want in a partner, and then most of them end up with someone completely different anyway, because "it's just love".
There's nothing rational about it, just biology doing it's "magic". I really doubt most people have any standards; you just need to turn on the TV to see that.

The 2 economists, Michele Belot and Marco Francesconi, found that there is no short cut to true love ...

They calculated that for every inch taller a man is than his speed-dating rivals, the number of women who want to meet him goes up by about five per cent.

Reducing the magical chemistry of love at first sight to a set of complicated equations, researchers Michele Belot and Marco Francesconi analysed the choices made by 1800 men and 1800 women at 84 speed-dating events across Britain.

The conclusion of the study was blunt and to the point: "Women prefer men who are young and tall, while men are more attracted to women who are young and thin ... What we try to show is that there is a pattern in how people choose each other," Ms Belot said.

But she readily conceded that science does not have the answer to all affairs of the heart.

"It is true we can explain quite a lot, but there is still a part that is unexplained. That is where love will play a role," she said.

But, in the unforgiving numbers game of love, age is crucial.

Each extra year, in comparison with others in the speed-dating group, reduces a man's chance of finding a partner by 4% and for women it is 5%.

Should a man of average height turn up at the speed-dating event?

Why not? All is not lost ... it's still, quite often, all about the luck of the draw ... the other male rivals could be of average height, or even shorter.

The book doesn't go into details in the "Speed dating Online" phenomena.

I found a site: Free Webcam Speed Dating Online (http://www.randomate.com/)

I did not find any research on this ... I'll look for it, though.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 23^rd, 2009, 12:15pm

on 06/21/09 at 12:08:04, BenVitale wrote:

And I could add that the thesis of his book is that human beings are rational in everything we do, however illogical it might seem ... it is founded in cold hard reason, if only you look hard enough ...

Yeah, if you look really, really hard and ignore all the more sensible explanations.
Which can be said for most pseudoscience. It always explains everything if you look hard enough. It also explains the opposite when it becomes apparent the initial evidence is mistake.

Quote:

from hookers to teenagers to criminals, everyone is endowed with a rational mind.

Only slightly more so than amoebas. Which also behave very rationally, from a certain point of view.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 23^rd, 2009, 12:36pm

on 06/21/09 at 12:19:10, BenVitale wrote:

Women outnumber men in NYC which suggests that the women lose their bargaining power.

That would require a) that bargaining takes place in a meaningful sense, b) that they are aware of the difference in available partner, c) that they all have an equal market value, d) that all singles want a partner; and probably a host of other factors.
At the very least it should be empirically verifiable if women in NYC are easier to seduce than an equivalent women*) in a smaller city with more favorable male/female ratios

*) Same approximate looks, same socio-economic status, same type of circle of friends, same type of education, same desire for a partner and same approximate desperation, etc.
Yes, that's a lot of variables to control. However I'd hazard to guess there is a difference in demographic make-up of the female population in a big city and the female population in a smaller cities, towns and villages.

Quote:

I have a question for you:

Are you familiar with Signalling (economics) (http://en.wikipedia.org/wiki/Signalling_(economics)) and Signaling games (http://en.wikipedia.org/wiki/Signaling_game) ?

Only slightly; in the context of evolutions and sexual selection. For example the way that a peacock's tail signals his fitness by being a huge burden.
For the less fit it is important to find ways to lie, for the fit it is important to find ways to prove that your signal is trustworthy. (So risking your survival is a good signal)

Title: Re: Economics: Erratic wisdom
Post by rmsgrey on Jun 24^th, 2009, 10:09am

I'd query whether approximate desperation should be included in the list of controlled variables - the theory is that the excess of women means that, all else being equal, they will tend to be more desperate, so easier to seduce...

You could also test to see whether equally seducible women are equally seducible, but I doubt the results would be particularly enlightening...

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 24^th, 2009, 11:42am

I have started to read this document:

The Eligible-Bachelor Paradox
How economics and game theory explain the shortage of available, appealing men.

http://www.slate.com/id/2188684/

And there is an interesting and tough discussion at

http://www2.wiwi.hu-berlin.de/wt1/staff/ivanova-stenzel/asym-finaleercorrected3.pdf

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 25^th, 2009, 8:24am

on 06/24/09 at 10:09:08, rmsgrey wrote:

The hypothesis is that they adapt to market conditions. The same amount of "desperation" may exist in different market conditions. In fact, you could just move a given woman around to different "markets" and see how that influences her suducebility.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 25^th, 2009, 8:27am

From xkcd (http://xkcd.com/)

Game Theory

http://imgs.xkcd.com/comics/game_theory.png (http://xkcd.com/601/)

Alt text: [hide]Wait, no, that one also loses. How about a nice game of chess?[/hide]

Title: Re: Economics: Erratic wisdom
Post by ima1trkpny on Jun 25^th, 2009, 10:22am

Wow... :o I give you lot credit... this is one of the funniest threads I've read in awhile.

I'm not sold at all on the idea of economics being able to really accurately predict the nature of dating. Sure there are some examples that will fit the bill supporting such an idea like people who choose to marry or date "sugar mommas/daddies", in which case the entire process is about money; but there are also some purely irrational cases where one partner is in all logical ways totally wrong but still someone is attracted to them even if they're unsupportive, unable to hold a job, murderer, sociopath, etc

Also, of course there will be a difference in behavior between the women in a small town/city and those in a big city. The fact that they are attracted to living in the areas they do is indicative of personality differences. Small towns/cities tend to be more "everyone knows everyone" (believe me... I grew up in one... everyone is in everyone else's business) while bigger cities, with the exception of one's close group of friends, has a more "everyone is a number" type feel where you can get lost in the sheer scale. I'm not saying this is always the case by any means, but in general I think the trends would vary in the direction that in a big city "seducebility" would be higher where reputation is less of an issue and lower in small towns where there are lots of watchful eyes to keep everyone else on the path of the straight and narrow.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 25^th, 2009, 3:46pm

on 06/25/09 at 08:27:19, towr wrote:

Alt text: [hide]Wait, no, that one also loses. How about a nice game of chess?[/hide][/center]

That's a quote from the movie War Games?
Have you seen it?

That's a cute comic!

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 25^th, 2009, 3:55pm

ima1trkpny,

Hi there! thanks for your input ... I'm trying to build a model as a game.

Please read: Why women outnumber men in Manhattan (http://women.timesonline.co.uk/tol/life_and_style/women/relationships/article3215913.ece)

and Love’s bottom line (http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/book_extracts/article3215911.ece)

In places where men are scarce, women respond by staying in school longer. In cities where men are particularly rich, women are particularly plentiful.

[Did Carrie Bradshaw (from Sex and the City show) ever stop to think that there's a reason so many women live in Manhattan?]

Love is not rational, but lovers are.

The rationality of lovers has surprisingly far-reaching effects when one sex outnumbers the other, even by a small margin. To see why, we need to visit a place that exists only in the curious imagination of economists: the Marriage Supermarket

My next post will be about the Marriage Supermarket

Title: Re: Economics: Erratic wisdom
Post by ima1trkpny on Jun 25^th, 2009, 5:27pm

on 06/25/09 at 15:46:57, BenVitale wrote:

That's a quote from the movie War Games?

haha yup that's the movie... "I would like to play global, thermo-nuclear war..." not too much different from dating in my book :P

And seriously... I've never watched any Sex and the City so congratulations on being more feminine than I am ::)

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 26^th, 2009, 10:20am

on 06/25/09 at 17:27:58, ima1trkpny wrote:

And seriously... I've never watched any Sex and the City so congratulations on being more feminine than I am ::)

Well, thanks ... if you live in NY, then you'll probably be tempted to watch that show ... I used to watch and talked about that show to impress the women ...

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 26^th, 2009, 2:19pm

on 06/26/09 at 10:20:02, BenVitale wrote:

I used to watch and talked about that show to impress the women ...

In retrospect, do you consider that to have been a good investment of your time, or would making a different allocation of that scarce resource have been a more rational choice?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 27^th, 2009, 10:32pm

on 06/26/09 at 14:19:46, towr wrote:

In retrospect, do you consider that to have been a good investment of your time, or would making a different allocation of that scarce resource have been a more rational choice?

It was not a total waste of my time. I did learn few things. The movie "Sex and the City" portray the worst stereotypes of single career women ... it downsizes the idea of women to just sex money and work.

'impressing a woman' is a concept that must be used with care, because it sends the wrong messages, and usually it produces the opposite effect.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 28^th, 2009, 7:13am

on 06/25/09 at 15:46:57, BenVitale wrote:

That's a quote from the movie War Games?

Well, the hidden text certainly isn't. But "the only way winning move is not to play" might well be.

Quote:

Have you seen it?

Yes, I have.
You'd hope nuclear weapons would be better secured though. It's a decidedly bad idea to give a computer launch authorization in the first place.

Title: Re: Economics: Erratic wisdom
Post by rmsgrey on Jun 28^th, 2009, 9:26am

on 06/28/09 at 07:13:09, towr wrote:

Well, the hidden text certainly isn't. But "the only way winning move is not to play" might well be.

Wikiquote quotes Joshua as saying "A strange game. The only winning move is not to play. How about a nice game of chess?"

Quote:

Yes, I have.
You'd hope nuclear weapons would be better secured though. It's a decidedly bad idea to give a computer launch authorization in the first place.

To what or whom would you give responsibility for executing the President's launch order? Part of the premise of the film was that local personnel in the silos were failing to launch in simulated nuclear exchanges - and in a real nuclear exchange, the computer would have been responsible for deciding which nukes get launched at which targets anyway (with high-level strategic input from the Joint Chiefs).

Giving the computer the capability to enter the authorization codes into itself through a brute-force search was seriously dodgy design, but for the rest, it seems like as reasonable a solution as any...

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 28^th, 2009, 12:20pm

on 06/28/09 at 09:26:56, rmsgrey wrote:

To what or whom would you give responsibility for executing the President's launch order?

Someone/something that can share some of the responsibility. I'm not fond of the idea where any one person or thing can by him or her or itself decide to kill millions upon millions of people.

Quote:

Part of the premise of the film was that local personnel in the silos were failing to launch in simulated nuclear exchanges

Seems like a good idea. There isn't any good reason to launch a counter-attack in an all-out nuclear war; it only make sense to threaten you will, so as to deter the other party from starting one. But once it's started, well, you've already lost, and you gain nothing by ensuring the other person also loses. In fact you merely diminish the chances of the human race to survive.

Quote:

Giving the computer the capability to enter the authorization codes into itself through a brute-force search was seriously dodgy design, but for the rest, it seems like as reasonable a solution as any...

Removing every means to double-check, and handing over every shred of control, doesn't seem like a very good idea to me.
The problem wasn't just that Joshua was brute-forcing the launch codes, but that he wasn't responding to his human masters anymore. You would have had the same problem if there had appeared to be a real threat and the president had given him the launch codes, and then minutes later after finding out the threat wasn't real after all tried to rescind the launch orders.
You need procedures in place to keep control of the situation. Someway to shut Joshua down would have been a very good idea, for example. That would have avoided the whole situation.

Title: Re: Economics: Erratic wisdom
Post by rmsgrey on Jun 29^th, 2009, 6:07am

The problem with introducing checks on the system is that it increases the number of ways to cripple your response capability - and makes it harder to respond quickly to an enemy strike...

Also, by introducing abort/final confirmation/whatever, you're not eliminating the point of no return - you're postponing it, making it psychologically easier to pass the old point of no return - depending on the nature of the new point of no return, it may also be easier to allow that to pass...

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 29^th, 2009, 7:30am

The point of no return should be when the nukes go off. At any time before you should be able to prevent them from detonating, and if they haven't launched yet prevent them from launching.

And I don't see a problem with crippling your response capability because, as I said, there's no point to it anyway. The only problem is your enemy thinking it is crippled, but that's just as true if it isn't.

The less checks there are, the more likely something will go wrong when you don't want it (which is most of the time), and the more likely that unauthorized people can breach security measures (since they're mostly absent).

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 29^th, 2009, 9:16am

Do you, guys, play video games?

Me?

I do. I'm on Second Life.

I'm not surprised to find out that despite economic downturn video game sales hit record ... the industry is doing well.

I wanted to find out why women in general don't like video games.

I read this document: Why Do Men Like Video Games So Much? (http://videoonlinegames.suite101.com/article.cfm/why_do_men_like_video_games_so_much#ixzz0JpswHun4&C)

it’s all about their urge to conquer and vanquish.

I was surprised to find out : 72% prefer gaming to girlfriends (http://www.pocket-lint.com/news/news.phtml/23352/72percent-prefer-gaming-to-girlfriends.phtml)

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 29^th, 2009, 12:39pm

on 06/29/09 at 09:16:56, BenVitale wrote:

I wanted to find out why women in general don't like video games.

Try playing the sims and say that.

Quote:

I read this document: Why Do Men Like Video Games So Much? (http://videoonlinegames.suite101.com/article.cfm/why_do_men_like_video_games_so_much#ixzz0JpswHun4&C)

it’s all about their urge to conquer and vanquish.

And yet, that's not what all games are about. What are you conquering and vanquishing in second life?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 29^th, 2009, 12:54pm

Second Life is different, though ... it's not like the traditional computer game. It's more about socializing ... I build objects, partecipate in events, I belong to groups ... and I go there to communicate in French and Italian, too.

Are u there in Second Life?

The name of my avatar is "Archimedes Tigerfish"

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 29^th, 2009, 1:05pm

on 06/29/09 at 12:54:24, BenVitale wrote:

Second Life is different, though ... it's not like the traditional computer game.

Many computer games aren't; or weren't. Once upon a time first-person shooters weren't like traditional computer games; not until everyone started copying wolfenstein. What is "the traditional computer game"? Pong? Pacman? Asteroids?

Quote:

It's more about socializing ... I build objects, partecipate in events, I belong to groups ... and I go there to communicate in French and Italian, too.

How's the male to female ratio?

Quote:

Are u there in Second Life?

No. I don't play any multi-player games at the moment. The last one I played was Ragnarok Online.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 29^th, 2009, 1:20pm

I think it's hard to tell, because a gamer could have more than one avatar of the two sexes ... a good friend of mine who is also a classmate has 3 avatars (1 female avatar, 2 male avatars) ... for the time being I have only one avatar, and I also partecipate in economics social experiments ...

According to this site: Key Second Life Statistics (http://www.micropersuasion.com/2006/11/key_second_life.html)

The male/female split is close to even -57 to 43%

And if you're interested to read : Virtual world experimentation: An exploratory study

Click link:

http://www.nottingham.ac.uk/~lizecon/RePEc/pdf/21.pdf

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 29^th, 2009, 2:28pm

I've just read an interesting article that I wish to share with this community:

some male animals economize on courting when the chance of success seems low (http://www.sciencedaily.com/releases/2005/02/050205075748.htm)

Even the birds are economists

Quote:

"Economic decisions of this sort are likely adaptive because males would not incur large costs on investments yielding low returns," he said. "Now the question is how, exactly, a male bird determines the fertility status of potential partners."

Yes, I would like to know : how does a male bird determine the fertility status of a female bird?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 30^th, 2009, 4:05pm

I'm back in Tim Harford's book. I'm still in chapter 3 ... there are 3 concepts that I want to share with you:

(1) The law of one price (applied to relationships), and
(2) bargaining power in relationships
(3) The Alchian-Allen theorem.

I'll start with the Alchian-Allen theorem.

Alchian-Allen theorem (http://en.wikipedia.org/wiki/Alchian-Allen_Theorem) applies to any long-distance relationship, aka “shipping the good apples out” theorem

Quote:

Suppose, for example, that high-grade coffee beans are $3/pound and low-grade beans $1.50/pound. Then high-grade beans cost twice as much as low-grade. But now add on a per-pound international shipping cost of $1. Now the effective prices are $4 and $2.50, so that high-grade beans cost only 1.6 times as much as low-grade. This difference will induce distant coffee-buyers to choose a higher ratio of high-to-low grade beans than local coffee-buyers.

It states that when the prices of two substitute goods, such as high and low grades of the same product, are both increased by a fixed per-unit amount such as a transportation cost or a lump-sum tax, consumption will shift toward the higher-grade product.

In the FT.com (http://www.ft.com/cms/s/2/87b47d38-79f8-11db-8d70-0000779e2340.html)

The theorem, briefly, implies that Australians drink higher-quality Californian wine than Californians, because it is only worth the transportation costs for the most expensive wine.

Similarly, there is no point in travelling to see your boyfriend (or girlfriend) for a take-away Chinese meal and an evening in front of the TV. To justify the trip’s fixed costs, you will require a nice (expensive) wine, homecooked meal, sparkling conversation and energetic sex. Insist on it.

Meanwhile, optimal-experimentation theory suggests that at this tender stage of life you are highly likely to meet someone even better. Socialize a lot while your boyfriend (or girlfriend) is not around.

Title: Re: Economics: Erratic wisdom
Post by pex on Jun 30^th, 2009, 4:19pm

If you feel that "there is no point in travelling to see your boyfriend (or girlfriend) for a take-away Chinese meal and an evening in front of the TV", IMHO, you're not much of a girlfriend (or boyfriend).

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jun 30^th, 2009, 4:37pm

This is how economists speculate. By applying the Alchian-Allen theorem, they claim that long-distance relationships tend to fail because of excess pressure on the relationships (overblown expectations).

There will trade-offs and people involved in this type of situation are more likely to make financial decisions based on emotional benefits, even if they can't necessarily afford it.

Title: Re: Economics: Erratic wisdom
Post by towr on Jun 30^th, 2009, 11:43pm

on 06/30/09 at 16:19:19, pex wrote:

I'd have to agree.

on 06/30/09 at 16:37:28, BenVitale wrote:

This is how economists speculate.

Maybe they should stop that nonsense and do actual research.

Quote:

By applying the Alchian-Allen theorem, they claim that long-distance relationships tend to fail because of excess pressure on the relationships (overblown expectations).

Yeah, I'm sure the lack of regular face to face contact has nothing to do with it ::)
I think research has shown that quantity of time beats quality in terms of importance.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 1^st, 2009, 10:47am

Could I still continue posting on this topic?

Sure. Frequent visits can strengthen a long distance relationship. But, not always.

There are ways people involved in a long-distance relationships can stay in touch ... and they don't have to be expensive: thru email, webcams, Skype

It takes dedication to the detriment of other things.

Then, how long is the distance are we talking?
How frequent are the visits?

What if it is ...
... NYC - Boston.?
... NYC - LA or SF?

Frequent visits may be prompted by irrational fears of infidelity or bouts of separation anxiety. That would put lots of pressure and friction on the relationship.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 10:31am

An example of bargaining power in a relationship

The author states that a relationship is just a social situation that involves two players.

Translating into econo-talk:

Relationships have heaps of co-operative advantages and can be used to build specific goods and services.

However, sometimes the surplus in a relationship has to be split between the partners –
creating a situation of conflict. Such a situation is complicated, with things like reputational capital, altrusim, and outside options playing a huge role in determining how the surplus is split.

Consider the couple (A, B), where A is the male and B is the female.

A goes to the gym everyday, he pushes himself to the limit. He's in top shape. He's got an incredibly muscular physique. He had to overhaul his diet ... which embarrassed his wife.

She was happy in the beginning, but was appalled by the way his body changed ... because he made her look bad. She got very annoyed. She thought that a husband's job is to be fat and flabby and make her look fabulous ... and he wasn't living up to her end of the bargain.

She felt threatened by her husband's "outside options."

The better shape a given player in the relationship is – the greater their outside option is. As a result, all other things equal they improve their bargaining position and can receive a greater share of the surplus.

The wife is complaining because of her husband's current buff and sexy figure ... he has increased his bargaining power and thereby hurt her bargaining position!

Question:

- Do you think that most women do consiously think of it this way at all?

The woman does not know she is improving her bargaining position by doing it – she just has to feel that it is the way of things. However, just because the intention isn’t there doesn’t invalidate the end result.

Do you agree?

Could you propose ways/schemes in determining how the surplus could be split?

Title: Re: Economics: Erratic wisdom
Post by pex on Jul 4^th, 2009, 11:11am

on 07/04/09 at 10:31:50, BenVitale wrote:

- Do you think that most women do consiously think of it this way at all?

No. Quite honestly, I don't believe that anyone consciously thinks of it this way at all.

on 07/04/09 at 10:31:50, BenVitale wrote:

Could you propose ways/schemes in determining how the surplus could be split?

Could you define what exactly the surplus is here, and why it should be split instead of enjoyed together (if possible)?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 11:35am

In our story, the husband did undergo an image makeover, thus improving his "outside options" ... the wife felt threatened by that.

Think of the cakecutting problem.

When we generalize this problem, then it is really about how we divide resources fairly between multiple parties. Be aware that the resource may be continuous or discrete. A continuous resource can be cut in any fashion, so that the ratio between portions can have any positive value. A discrete resource comes in indivisible portions, so that the ratio between portions is always a rational number.

The couple (A,B).
A may improve his looks, dress better, have a better job, get a promotion, enlarge his network of friends, or whatever else ... whereas B doesn't do as well. So, in this model, A has a surplus, B feels threatened

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 4^th, 2009, 11:37am

on 07/04/09 at 11:11:11, pex wrote:

No. Quite honestly, I don't believe that anyone consciously thinks of it this way at all.

And at most a few do so unconsciously.

Besides, if the man has increased his market position, shouldn't the woman be happy she has a better catch? Clearly, if she's an economically minded person, she would want to get the best catch on the market she could get; and because of his self-improvement streak she managed to get a catch above her own market position. Clearly, as an economic rational agent, this can't possibly make her unhappy.

Title: Re: Economics: Erratic wisdom
Post by pex on Jul 4^th, 2009, 11:41am

on 07/04/09 at 11:37:20, towr wrote:

And at most a few do so unconsciously.

I agree.

on 07/04/09 at 11:35:22, BenVitale wrote:

In our story, the husband did undergo an image makeover, thus improving his "outside options" ... the wife felt threatened by that.

I still don't see what sort of "surplus" you're trying to split. Is it a negative surplus in the form of the wife's feelings? If yes, how would you recommend splitting it?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 11:54am

on 07/04/09 at 11:41:32, pex wrote:

I still don't see what sort of "surplus" you're trying to split. Is it a negative surplus in the form of the wife's feelings?

Surplus can be tangible goods or intangible goods.

A higher salary, promotions, ...
a wider network of people, thus making him more desirable by other women ... other women will think he's hot ... he might get tempted to fall for other women, or have an intimate relationships with other women.

Quote:

If yes, how would you recommend splitting it?

It should be easier to explain this to couples if they read and study game theory.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 12:33pm

Quote:

It should be easier to explain this to couples if they read and study game theory

I take it back ... this is not realistic enough ... it may look okay on paper.

I've tried to explain this to my girlfriend ... she is not impressed with this stuff.

Title: Re: Economics: Erratic wisdom
Post by pex on Jul 4^th, 2009, 12:34pm

on 07/04/09 at 11:54:10, BenVitale wrote:

A higher salary, promotions, ...
a wider network of people, thus making him more desirable by other women ... other women will think he's hot ... he might get tempted to fall for other women, or have an intimate relationships with other women.

Aha. I thought you were referring to a surplus that arises from the mere fact that they are a couple (call it synergy, if you like). But I see now that you are talking about a surplus that one of them (or both) enjoys, and that should somehow be split because they are a couple.

In that case, I don't think most couples need (or should need) game theory here - they'll just figure out whatever irrational split they like best. It would be extremely complicated to adequately model such a situation in game-theoretic terms, because so many different factors are of influence, and we would need to assign a "value"/"utility"/whatever number to each of them to reach sensible conclusions.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 1:01pm

on 07/04/09 at 12:34:35, pex wrote:

Yeah, it's whatever increases the value or perceived value of a game player (A or B) in the relationship ... it could be intangible such as becoming more popular, famous, becoming admired and respected among his peers.

Women can also act strategically to get more attention, more "value"

Quote:

In that case, I don't think most couples need (or should need) game theory here - they'll just figure out whatever irrational split they like best. It would be extremely complicated to adequately model such a situation in game-theoretic terms, because so many different factors are of influence, and we would need to assign a "value"/"utility"/whatever number to each of them to reach sensible conclusions.

Yeah, I agree it is tough .... I thought of the Cakecutting problem ... but in the case of multiple-flavor cake, and have A and B quantify the different "flavors" of the cake.

Here's the problem I posted in another forum:

Suppose you and a friend have a cake that is half chocolate and half vanilla...To quantify how much you and your friend want chocolate or vanilla you have assigned monetary values in dollars to each section of the cake. You have assigned the values $2 for chocolate and $0.75 for vanilla. You friend has assigned the values $1 for chocolate and $1.25 for vanilla. Thus the chocolate part of the cake is worth $2 to you and $1 to your friend.

Division must be envy-free

And I thought of another Game theory problem:

The social norm of leaving the toilet seat down: A game theoretic analysis (http://mpra.ub.uni-muenchen.de/856/1/MPRA_paper_856.pdf)

Your thoughts, please.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 2:27pm

We could compare the division of "surpluses" to dividing a cake between two people. The obvious strategy is to cut it down the middle ... as with the "I cut, you choose" strategy.

However, with a cake which has different flavors, it gets more complicated. Suppose we have a chocolate cake with vanilla frosting.

You may have one person likes frosting more than the other, it may be that slices unequal in size actually create a fairer distribution.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 2:38pm

To figure out how to cut the cake, or how one person can cut the cake so that he can value the two pieces cut equally, we may use a concept from Calculus : the Intermediate Value Theorem.

This theorem states that for a function f that is continuous on the interval [a, b], if there exists a value d between f(a) and f(b), then there is a value of c in (a, b) such that f(c) = d. For example, if someone was 5 feet tall last year and is now 5 feet 2 inches tall, at some point that person was 5 feet 1 inch tall. With the same reasoning, there is at least one place a person can cut a cake to create two pieces of equal value.

The trick, of course, is to find that place. This theorem guarantees that a value exists, but it does not show how to find it.

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 4^th, 2009, 2:43pm

on 07/04/09 at 14:38:01, BenVitale wrote:

The trick, of course, is to find that place. This theorem guarantees that a value exists, but it does not show how to find it.

Do bear in mind the cake is getting stale while you spend days trying to find that optimal cut.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 3:13pm

on 07/04/09 at 14:43:57, towr wrote:

Do bear in mind the cake is getting stale while you spend days trying to find that optimal cut.

Yeah, no kidding! I have spent a lot of time thinking about dividing this cake ...

Intuitively, I can say that fairness does not equate to equal amounts ... it would depend on the other person.

I can be happy with a smaller portion, if the other person likes chocolate more the vanilla frosting.

OR

I'll be happy to take a smaller portion ....

... if the other person baked the cake
... if the other person bought the cake
... if it is his/her birthday or some other special occasion.

Intuitively, I know all that ... I'm just trying to quantify that in order to set up a matrix of payoffs.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 4^th, 2009, 8:08pm

I came across an article in Time Magazine

(1) A Bull Market for Online Dating (http://www.time.com/time/business/article/0,8599,1868694,00.html)

The article discusses the effect that economic downturns have on the online dating market during the recession

Quote:

When the going gets tough, the tough go online-dating. "I just got laid off, and it's the holiday season. The last thing I want right now is to be lonely ...

Along with getting a job, finding a boyfriend is definitely a top priority."
.........................

"People crave reassurance and comfort during stressful economic times like this,"
.........................
They are afraid of being alone even in good times, but that fear is especially heightened nowadays."

(2) Can Genetics Help You Find Love? (http://www.time.com/time/magazine/article/0,9171,1905505,00.html)

Remember the famous sweaty-T-shirt experiment? (http://en.wikipedia.org/wiki/Claus_Wedekind)

Title: Re: Economics: Erratic wisdom
Post by rmsgrey on Jul 7^th, 2009, 12:20pm

If I eat too much cake, I start feeling sick... and stale cake is horrible, so I'm not bothered if other people want seconds...

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 12^th, 2009, 12:57am

(1) The law of one price (applied to relationships), and
(2) bargaining power in relationships
(3) The Alchian-Allen theorem.

I've discussed items (2) and (3). I would like to discuss item (1).

Marriage and divorce :

To many the world may seem nuts! But to an economist or to a game theorist the world makes perfectly sense.

However, even though each person makes rational choices, the result / the outcome can be something that none of them wanted; we could say that rational behavior by individuals can produce irrational results for society.

Divorce is being underrated.

According to the author, divorce has pushed up women's increasing earning power, and domestic violence has fallen, and by offering women an exit option, the new laws gave men stronger incentives to behave well inside a marriage.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 12^th, 2009, 1:09am

men to women ratio USA (http://www.epodunk.com/county_data2/)

Key concept: law of one price (http://en.wikipedia.org/wiki/Law_of_one_price)

It takes two to tango, and it takes two to get married. Marriage therefore requires you that you go out and find someone you want to marry and persuade them to marry you. It's a matching problem, and it is not unique to marriage. Getting a job is emotionally a different proposition to finding a wife or a husband, but in some ways it's similar. You need to consider a range of jobs, work out which ones you prefer, and persuade the employer that he likes the match as much you do. And just as in the job market, who matches up with whom, and on what terms, will depend on what the competition is offering.

Imagine 20 single guys and 20 single women in a room. This is the marriage supermarket, so called because shopping is simple, there's nothing exciting about any of the products, and everything's under one roof. Getting "married" at the Marriage Supermarket is easy: Any man and woman who present themselves at the checkout can collect $100 (a simple way to represent the psychological or financial gains from getting married) and leave. Naturally, nobody agonizes about whether to get married in the Marriage Supermarket. It's a no-brainer, because any partner is equally good, and you get cash with no strings attached.

The Marriage Supermarket is a very simple model of marriage. Like all economic models, it leaves out many complicating details in an attempt to tease out something interesting about the core issues that remain.

And they are?

That most people would rather be married than remain single and your gains from getting married
depend on the supply of marriage partners. Of course, we know that in reality there are contented lifelong singletons and married people who curse the day they walked down the aisle. But to the extent that we accept these two premises as embodying a recognizable kernel of truth about the real world, the Marriage Supermarket can tell us something useful.

The gains from marriage in reality are not measured in dollars -- or at least, not in dollars alone. But for the purposes of this model, we do not need to know whether women (men) in reality are looking for men (women) who will give them money, orgasms, sparkling conversations, or a warm glow of security. All we need to know is that they would rather be married than single.

Since any couple can collect a hundred dollars to split between them, the only question is how to
divide the spoils. With equal numbers of men and women, we can expect 50-50 split. Yet it doesn't take much to change that conclusion utterly.

Imagine an unusual evening in the supermarket , when 20 single women show up but only 19 single me. What happened to the other guy? He's gay. Or dead. Or in prison. Or moved to Silicon Valley. Or is studying Game theory. For whatever reason he is not available -- like the half million single guys Carrie thinks have gone missing in Manhattan. You might think that the slight scarcity of men would cause the women some modest inconvenience, but in fact even this tiny imbalance ends up being very bad news for the women and very good news for the remaining men. Scarcity is power, and more power than you might have thought.

To be continued

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 12^th, 2009, 8:05am

on 07/12/09 at 00:57:48, BenVitale wrote:

(1) The law of one price (applied to relationships)

Where will you find people that are exactly the same? If the "goods" aren't identical, the "law of one price" doesn't apply.
And not rarely people's evaluation is non-transitive. I could think A is better than B, B better than C and C better than A. Because there isn't an objective measure, and the criteria depend on what's being compared.

Title: Re: Economics: Erratic wisdom
Post by Grimbal on Jul 12^th, 2009, 3:09pm

It even happens that A is better than B and B is better than A. The grass is greener on the other side. :D

More realistic would be that you are given a "menu" telling you how much you get when leaving with a given partner. The price list being different for everybody, and your preferred partner (the one that makes you earn the most) not necessarily having you as preferred partner. So you have to negotiate, either offer some money to a partner who is profitable to you or try to sell yourself to a less interesting partner but who would profit from leaving with you. You might also consider giving money to someone if he renounces being matched with a partner you are after.

It seems it takes more than 2 to tango, after all.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 13^th, 2009, 12:39pm

on 07/12/09 at 15:09:40, Grimbal wrote:

It even happens that A is better than B and B is better than A. The grass is greener on the other side. :D

Maybe the grass is greener! Please read this article (http://www.slate.com/id/22912/)

Quote:

More realistic would be that you are given a "menu" telling you how much you get when leaving with a given partner. The price list being different for everybody, and your preferred partner (the one that makes you earn the most) not necessarily having you as preferred partner. So you have to negotiate, either offer some money to a partner who is profitable to you or try to sell yourself to a less interesting partner but who would profit from leaving with you. You might also consider giving money to someone if he renounces being matched with a partner you are after.

It seems it takes more than 2 to tango, after all.

I need time to think about this ... I still have trouble accepting Tim Harford's claims. He made strong claims but he doesn't talk about any testing of the Law of One Price in marriages.

I may have to post 1 page from his chapter.

Is that Okay with you?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 13^th, 2009, 12:41pm

on 07/12/09 at 08:05:11, towr wrote:

Towr,

The Law of One Price (LOP) as described here (http://en.wikipedia.org/wiki/Law_of_one_price) and here (http://eh.net/encyclopedia/article/persson.LOOP)

I thought that this law could not be applied here, too.

I know that this law has been tested in Food Markets, and in commodity markets, but not in marriage supermarkets.

The Law of One Price (LOP) is a rule which states that in an efficient market, a security must have a single price, no matter how that security is created. For example, if an option can be created using two different sets of underlying securities, then the total price for each would be the same or else an arbitrage opportunity would exist.

where Arbitrage is the process of buying assets in one market and selling them in another to profit from unjustifiable price differences.

Could I post 1 page of his chapter so that we could all see it and discuss the Law of One Price in marriage supermarkets?

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 13^th, 2009, 1:47pm

on 07/13/09 at 12:41:34, BenVitale wrote:

The Law of One Price (LOP) as described here (http://en.wikipedia.org/wiki/Law_of_one_price) and here (http://eh.net/encyclopedia/article/persson.LOOP)

Yeah, and that first link says
"In an efficient market all identical goods must have only one price."
We're neither talking about goods, nor are they identical. And also consider teh give list of places where it doesn't apply.
I really don't know what you want to do with it here.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 13^th, 2009, 2:28pm

on 07/13/09 at 13:47:11, towr wrote:

I really don't know what you want to do with it here.

well, my aim is to build game theory models based on his book and on two other books written by behavorial economists.

I'm using this forum to deepen my understanding of economics and game theory, and test ideas and put together models.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 13^th, 2009, 2:38pm

In physics there are well-established laws., e.g. the law of gravity... Economists have been working hard to establish laws as physicists have done in their field.

So, what laws are there in economics? There are two of them:

(1) The Law of Supply and Demand
(2) The Law of One Price

I have trouble with the second law. Why? Because this law is quite often violated.
And, since it is too often violated, then, why is it a law?

We expect the same thing to sell for the same price. This is the Law of One Price.

Why should this be true?

Common sense dictates that if you could buy an apple for 25¢ and sell it for 50¢ across the street, everyone would want to buy apples where they are cheap and sell them where they are priced higher. Yet this price disparity will not last: As people take advantage, prices will adjust until apples of the same quality sell for the same price on both sides of the street. Furthermore, a basket of apples must be priced in light of the total cost of buying the fruit individually. Otherwise, people will make up their own baskets and sell them to take advantage of any mispricing.

Take the example of aspirin.

Suppose, for the sake of argument, that Bayer aspirin and store brand aspirin are identical products, but that Bayer costs twice as much because some consumers believe (falsely, in this example) that Bayer is better. Would we expect markets to eradicate this price difference? Since the Bayer brand name is trademarked, it is not (legally) possible to go into the business of buying the store brand aspirin and repackaging it in Bayer bottles. This inability to transform the store brand into Bayer prevents one method arbitrageurs might use to drive the two prices to equality. Another possibility for arbitrageurs would be to try to sell the more expensive Bayer aspirin short today, betting that the price discrepancy will narrow once the buyers of Bayer “come to their senses.” Short selling works like this: an arbitrageur would borrow some bottles from a cooperative owner, sell the bottles today and promise the owner to replace the borrowed bottles with equivalent Bayer bottles in the future. Notice that two problems impede this strategy. First, there is no practical way to sell a consumer product short, and second, there is no way to predict when consumers will see the error in their ways. These problems create limits to the forces of arbitrage, and in most consumer goods markets, the Law may be violated quite dramatically

Source: http://faculty.chicagobooth.edu/richard.thaler/research/lawof.pdf

Next: I'll post parts from Harford's book

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 13^th, 2009, 3:07pm

on 07/13/09 at 14:38:57, BenVitale wrote:

(2) The Law of One Price

I have trouble with the second law. Why? Because this law is quite often violated.

I think, that rather than being violated, it usually doesn't apply.

Quote:

And, since it is too often violated, then, why is it a law?

It is an ideal law. Drop a feather and a coin at the same time; the law of gravity tells you they should fall at the same rate, they don't. Why not? Because it is an ideal law, which doesn't apply under usual (non-vacuum) circumstances.

Quote:

We expect the same thing to sell for the same price. This is the Law of One Price.

But only under the condition we have one market, which has had time to reach equilibrium and where there is no difference in time or space between different parts of the market. And there are probably some other variables involved (such as convenience of buying all your goods at one place (comparing shops costs time and time is money).

Quote:

Suppose, for the sake of argument, that Bayer aspirin and store brand aspirin are identical products

They are chemically identical.

Quote:

but that Bayer costs twice as much because some consumers believe (falsely, in this example) that Bayer is better.

Then, thanks to the placebo effect, it will probably also work better.
Also, the mistaken beliefs mean that the law of one price doesn't apply, because it assumes consumers are completely informed.

Quote:

Would we expect markets to eradicate this price difference?

No. Not unless the consumers get the appropriate information and take it to heart.
And even then, there are advantages to buying merchandise from large companies; e.g. if the occasion arises where you can sue them over faulty products, there is more to be had (on the down side they will have better lawyers).

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 14^th, 2009, 11:13am

on 07/12/09 at 15:09:40, Grimbal wrote:

..................

More realistic would be that you are given a "menu" telling you how much you get when leaving with a given partner. The price list being different for everybody, and your preferred partner (the one that makes you earn the most) not necessarily having you as preferred partner. So you have to negotiate, either offer some money to a partner who is profitable to you or try to sell yourself to a less interesting partner but who would profit from leaving with you. You might also consider giving money to someone if he renounces being matched with a partner you are after.

It seems it takes more than 2 to tango, after all.

Wow! This could work in a classroom experiment ... but out there in the real world? I doubt it ...

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 14^th, 2009, 11:35am

Tim Harford writes:

One woman is going to go home with neither a spouse nor a check from the cashier. That's bad news for her. What is less immediately obvious is that women who do get a spouse are also going to be worse off -- and their loss is the men's gain. Remember that a couple gets to split a hundred dollars when they show up at the checkout; assume that the nineteen couples have provisionally agreed on a fifty-fifty split.

The odd woman out, contemplating going home empty-handed, will make the obviously rational decision to muscle in on an existing pairing. The unwanted woman could certainly offera better deal than a fifty-fifty split, perhaps agreeing to accept only 40 dollars. Her rival, being a similarly rational soul, won't want to lose out entirely, so she'll counterbid -- maybe offering to accept just 30 dollars. The bids will fall until the woman who faces leaving alone is offering to walk through the checkout with some lucky guy and accept just one cent as the price of doing so. He'll get $99.99; her one-cent profit is better than nothing.

This doesn't square with the empirical evidence of The Ultimatum game (http://en.wikipedia.org/wiki/Ultimatum_game)

In this game (the ultimatum game) test subjects respond to take-it-or-leave-it offers ... it's game that explores how humans handle issues like fairness and punishment. Test subjects will reject a proposed division of an amount of money, at a cost to themselves, if they perceive it as unfair.

So how can one get $99.99 leaving 1 cent to another test subject?

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 15^th, 2009, 8:45am

I'm trying to understand Herford's reasoning.

Continued

The law of one price (http://en.wikipedia.org/wiki/Law_of_one_price), which says that identical products on offer at the same time, in the same place, with the prices clearly visible will go for the same price. This is the Marriage Supermarket, so that's exactly the situation the women find themselves in. No matter what deals are agreed, there will always be on woman left over, offering to pair up for just one cent. The law of one price says one cent is what all of them will get: Anyone on the verge of getting a better offer will be undercut. The 19 men will each get $99.99. The 19 women will get a cent each , and the last woman will get nothing at all.

That's remarkable: A shortage of just one man gives all the other men massive scarcity power. The intuition is straightforward, though. Just one "leftover" woman can provide an outside option for every single man and spoil the bargaining position of every other woman.

That's how it would work in the Marriage Supermarket. You may have noticed some minor differences in reality. The conditions for the law of one price are never perfectly met. The bargaining process is not quite as calculating, although it is probably just as brutal. Most important, because the marriage supermarket measures the benefits of marriage in dollars, those benefits are easily transferred from one party to another. In reality, it's not as easy for suitors to bid against one another as marriage prospects ("I'll match Brian's guarantee of three orgasms per week, and add in at least one candlelit dinner") -- although the marriage of 26-year-old former Playboy centerfold Anna Nicole Smith to 89-year-old billionaire J.Howard Marshal II (both, sadly, now deceased) suggested there are some circumstances in which one potential marriage partner can compensate the other, at least tosome extent, for whatever shortcomings he or she might have.

Although the Supermarket produces overly stark conclusions, even in a more realistic setting the same underlying forces would be at play. A seemingly modest shortage of men leads to a surprisingly big disadvantage for women. The dramatic increase in the bargaining power of men doesn't harm merely the women who don't get to marry but also those who do. Their potential partners just have too many options to allow a fair bargain. Later in the chapter we'll see a striking example by looking at what happens to women when many of the young men they might have
married go to prison instead.

There is another big simplification involved in this thought experiment, which, when we shine the spotlight on it, tells us what strategiesthe real-world equivalents of women in the marriage supermarket can rationally pursue, given that offering cash to get a husband doesn't work so well. Outside the supermarket, you can go to college, set up a business, get plastic surgery or work out at the gym. In short, there are all sorts of ways you can make yourself a more attractive catch than the other guys and girls. This is indeed how rational women tend to respond to a shortage of women, as we shall see.

To take us there, though, let's take a step backward and ask why Carrie Bradshaw and the girls were facing such a shortage of eligible men in New York. There's a rational explanation for this, too.

Title: Re: Economics: Erratic wisdom
Post by towr on Jul 15^th, 2009, 9:36am

on 07/15/09 at 08:45:45, BenVitale wrote:

That's remarkable: A shortage of just one man gives all the other men massive scarcity power. The intuition is straightforward, though. Just one "leftover" woman can provide an outside option for every single man and spoil the bargaining position of every other woman.

Provided, of course, that all the women have not a shred of self-esteem.
I think you were right before, comparing it to the ultimatum game for which there is actual empirical evidence. If there is 100 dollar to be divided, then one cent is no cent, and one dollar is no dollar. People don't tend to think in exact terms, but rather in fuzzy terms like "all", "most", "half", "some", "nothing". So while in exact terms two dollars is better than one and one is better than none, in fuzzy terms it does not make a iota of difference.

Funnily enough, that's the same reason why pricing something as $9.99 instead of $10.00 works; the subjective (fuzzy) difference is much larger than the real (exact) difference. Where is the rationality in that?

(Hint: It lies in the fact that it's greatly simplifies the demands on our puny organic brains.)

As a corollary to that, I should also point out that the men and women will not notice the size difference between their two groups. A difference of one on group sizes of 20, is no difference. It won't affect negotiations until most people have paired off and left the market.

Quote:

You may have noticed some minor differences in reality.

That's the understatement of the year. It is nothing like reality at all.

Title: Re: Economics of dating, love and sex
Post by BenVitale on Jul 16^th, 2009, 12:03am

Key concept : Rational Choice Theory (RCT) :

in Wikipedia (http://en.wikipedia.org/wiki/Rational_choice_theory)

here (http://uregina.ca/~gingrich/f1000.htm)

here (http://privatewww.essex.ac.uk/~scottj/socscot7.htm)

Good points, towr!

Tim Harford's book offers many good insights... but it is not a university textbook.

His insights are useful, though.

Also. Tim's analytical shortcoming is that he says that these choices are all explicable using rational-choice theory.

But the problem with rational-choice theory is that it assumes that people always make rational choices.

I tend to believe that people are predictably irrational.

How can the Rational Choice Theory (RCT) apply in love and sex?

And, how about the Law of one price (LOP)?

LOP assumes frictionless markets, rational investors, and equal access to Market prices and information.

It's an ideal. In a perfect world we could have that.

Title: Re: Economics: Erratic wisdom
Post by BenVitale on Jul 16^th, 2009, 12:45pm

on 07/15/09 at 09:36:20, towr wrote:

Funnily enough, that's the same reason why pricing something as $9.99 instead of $10.00 works; the subjective (fuzzy) difference is much larger than the real (exact) difference. Where is the rationality in that?

(Hint: It lies in the fact that it's greatly simplifies the demands on our puny organic brains.)

......

An analysis of 840 advertisements revealed that odd prices, in particular prices ending in the digit 9, clearly outnumbered all other price endings.

The Widespread Use of Odd Pricing in the Retail Sector (http://marketing-bulletin.massey.ac.nz/V8/MB_V8_N1_Holdershaw.pdf)

Buyers believe that prices ending in uneven, rather than even numbers, (such as, $9.99, $199,999, etc.) are a better deal or a better price than even numbers (e.g. $10 or $200,000).

And, the price 'band' on Online auctions, e.g. eBay, if you list a product A at $10.00 as opposed to listing the same product at $9.00

if the listing price is in the odd range, say $199,000, it will appear in a lower price band than the $200,000 listing and will be viewed as better value.

At $199,000 the house will generate more interest than if it were listed at $200,000

The downside of this strategy is that houses ending in an odd number are also often perceived as being lower in value.

Title: Re: Economics of dating/love/marriage/sex
Post by BenVitale on Jul 17^th, 2009, 6:32pm

Tim Harford writes:

The ancestral environment, the African Savannah, a long time ago :

Males and females have different approaches to sex and marriage. This is because it takes a female
9 months to make a baby, while it takes a male about 2 minutes. This simple biological fact, allied
to the inexorable force of natural selection, lies behind the folk wisdom that males (not just human males) are always available for sex. Men typically do not need much persuading to invest a short amount of time in having sex, with the chance of spreading their genes as a result, because they are the sons of men who did not need much persuading. For females (not just human females) sex tends to lead to pregnancy, and pregnancy is a serious commitment of time and resources. It is best only to risk pregnancy when the time and the partner are right, so women have higher standards and take more persuading. Women are more cautious because they are the daughters of women who were cautious.

Title: Re: Economics of dating/love/marriage/sex
Post by towr on Jul 18^th, 2009, 2:53am

Isn't it wonderful when evolutionary psychology "confirms" our biases of human sexual roles. Yeah, nothing suspicious about that at all...
*cough* bullsh*t *cough* ::)

http://dx.doi.org/10.1016/j.tree.2009.02.005

Title: Re: Economics of dating/love/marriage/sex
Post by BenVitale on Jul 18^th, 2009, 10:12am

Thanks for mentioning Bateman's research.

I did a quick search on the net and found the following article on ScienceDaily:

A new study challenges long-standing expectations that men are promiscuous and women tend to be more particular when it comes to choosing a mate. The research suggests that human mating strategies are not likely to conform to a single universal pattern and provides important insights that may impact future investigations of human mating behaviors.

http://www.sciencedaily.com/releases/2009/04/090424122618.htm

Title: Re: Economics of dating/love/marriage/sex
Post by towr on Jul 18^th, 2009, 1:14pm

on 07/18/09 at 10:12:28, BenVitale wrote:

A new study challenges long-standing expectations that men are promiscuous and women tend to be more particular when it comes to choosing a mate. The research suggests that human mating strategies are not likely to conform to a single universal pattern and provides important insights that may impact future investigations of human mating behaviors.

Euhm, yeah, that study they speak of is the article I just linked to.. It even uses practically the same words in the abstract.

Title: Re: Economics of dating/love/marriage/sex
Post by Grimbal on Jul 18^th, 2009, 2:03pm

on 07/18/09 at 02:53:03, towr wrote:

It makes me think: the good thing with natural selection is that when women complain that men are ... well ... men and behave the way they do, we can justify it by noting that we are only like our fathers, which are the men to whom women decided to make children. So if we are what we are, in the end, it is the women's fault.
:P

Title: Re: Economics of dating/love/marriage/sex
Post by towr on Jul 18^th, 2009, 2:11pm

on 07/18/09 at 14:03:31, Grimbal wrote:

So if we are what we are, in the end, it is the woman's fault.
:P

Perhaps, but they'll still complain. And likely even moreso if you try to use this as an excuse. ::)
(And of course, it's our forefather's fault for settling for women prone to complaining. Oooh)

Title: Re: Economics of dating/love/marriage/sex
Post by pex on Jul 18^th, 2009, 2:18pm

on 07/18/09 at 14:11:50, towr wrote:

(And of course, it's our forefather's fault for settling for women prone to complaining.

Well, it was their foremothers' fault to fall for men who'd settle for women prone to complaining.

Title: Re: Economics of dating/love/marriage/sex
Post by BenVitale on Jul 18^th, 2009, 2:36pm

Tim Harford is an economist ... and his book is disappointing.

His book is a pop economics book.

What can we say about pop economics books?

Pop economics books are clearly good for those who write them; it is less clear that they are a
plus for the discipline ... maybe somebody will write a paper on the value of "pop economics books."

Tim Harford looks at a range of phenomena -— voter apathy, teenage oral sex, skyrocketing
CEO pay, high divorce rates, workplace discrimination, racial segregation—and argues that all reflect responses to incentives. He makes a bold claim: “People are motivated by all kinds of normal human emotions . . . but our responses to them are rational.”

Harford is upbeat and appealing, and an easy read. But in the end, his efforts to support such a sweeping thesis rest on one-sided, questionable interpretations that seriously undermine the integrity of his work.

The book is at its best when he's explaining how systemic biases can create large shifts in human behavior. For instance, a slight preference for having neighbors who are like oneself can lead to quite substantial segregation along race, religion, education, and economic lines.

He claims that he found that abortions may have contributed to lowering crime. So did Steven Levitt, an economist and author of "Freakonomics"

However the abortion-cut-crime theory did not come to meeting the burden of proof, much of America's intellectual elite fell head over heels for this theory.

Quote:

The theory: Unwanted children are more likely to become troubled adolescents, prone to crime and drug use, than are wanted children. When abortion was legalized in the 1970s, a whole generation of unwanted births were averted, leading to a drop in crime nearly two decades later when this phantom generation would have come of age.

http://online.wsj.com/public/article/SB113314261192407815-HLjarwtM95Erz45QPP0pDWul8rc_20061127.html?mod=tff_main_tff_top

Harford seems to argue beyond the limits of his evidence.

When he moves beyond being an observer into someone trying to convince you what people
are like, I found he was often offensive.

I found weird ... and insensitive when Tim Harford writes about how those who aren't native to Africa "solved" the problem of dying from malaria by transferring slaves from Africa to milder climates.

How weird is that!?

To Mr. Harford's eye, we are so much creatures of economics, comfort, and the pursuit of gain that there's no role for any other human motives.

I can see why many will dislike him, and will get turned off

That is a too limited view of people

Title: Re: Economics of dating/love/marriage/sex
Post by towr on Jul 19^th, 2009, 3:36am

on 07/18/09 at 14:36:14, BenVitale wrote:

What can we say about pop economics books?

Pop economics books are clearly good for those who write them; it is less clear that they are a plus for the discipline ... maybe somebody will write a paper on the value of "pop economics books."

The same is true for many popular science books. Especially in the social (and related) sciences, because the facts are simply less clear there.
And in general, the problem with books is that they're not subject to peer review in the way that articles are. If a peer does rip the book to shreds in a review, it won't affect its publication or, most likely, sales. And of course economics calls for books that sell, not books that are accurate ;)

Quote:

I found weird ... and insensitive when Tim Harford writes about how those who aren't native to Africa "solved" the problem of dying from malaria by transferring slaves from Africa to milder climates.

Considering the fact that the area in which malaria was prevalent was much larger in past centuries than it is now, it doesn't even make any sense.

Title: Re: Economics of dating/love/marriage/sex
Post by BenVitale on Jul 23^rd, 2009, 3:51pm

Here's a controversial question :

Are women better off 'downsizing' their ambitions and marrying for money?

Please read the following article (http://blogs.reuters.com/great-debate/2009/06/05/are-women-better-off-marrying-for-money/)

Share your thoughts