speech of freedom

From firstpost.com:

"The Prophet, Lord Rama, Shivaji, Bal Thackeray, Sonia Gandhi…a pantheon of gods installed on a lofty pedestal beyond reproach. To speak against any is to invite the equivalent of an online fatwa."

Is that right? Good ol' google says:

I'm sure Ms. Gandhi is not amused.

Indian writing

...or rather, the writing of reviews of Indian writing. The question is why, saar, why it be so poor?

Let me explain here. Someone I know wrote a book and it's won awards, got the author interviews on television, print etc the whole kitchen, sink and everything included. Now, I've never been too much in awe of the guy's writing although he has (probably) done his research well. (This is not an area I am aware of so I can't really comment on the quality of background work).

The frustrating thing is I am unable to find a single review that isn't collapsing under the weight of cliches, turns of phrase used ad infinitum, ad nauseum. The characters are "navigating the sharp curves that life threw at them" or falling from "heights of glory" or the subject of "vile rumours".

Boring, boring, tired. Is it too much too ask for a little per-so-na-lity? Strangely, Hindustan Times book reviews are usually quite okay. But no sugar here, they didn't bother. Even the Hindu's review informs us that the author had to "overcome all sorts of stumbling blocks". What, pray, is the meaning of a stumbling block?

From Wikipedia: "In an idiomatic usage in the Hebrew Bible and the New Testament, a stumbling block is a behavior or attitude that leads another to sin."

I am quite sure that is not what the reviewer intended. The meaning of the phrase and its use clash and we are left with something devoid of information.

(No, this is not in reference to Aman Sethi, whatever excerpts I've read of his book, reads just fine).

I don't get it

Why this Kolaveri indeed. I wonder what the impact would have been without the video. Perhaps there is something about the popularity of the song that tells us something about how human beings behave.

Here are a bunch of "Japanese" women dancing to it:

Will rock and roll ever die?

Yes, if it stops being fun.

Arguably, it does not look like fun anymore. On a long timeline from Chuck Berry and Little Richard right up to the times of Guns and Roses and (eek) Poison; despite what one may think of the music, at least it was fun. Sure, you had your ballads ("Wild Horses") but we all need a little loving. Without fun, rock music gets to be pointless.

Grunge wrecked that. Kurt Cobain, I'm looking at you. Unfortunately, this means Alice in Chains too. I like them though, so I make an exception.

Prog rock in the mid to late 70s is similarly accused of taking out the fun. Punk took care of that.

Despite some good bands these days none of them look like they're having fun. The best band is probably Radiohead, and they make rock and roll as attractive as cleaning sewers. Possibly less so.

I guess that's why rave music is popular. *Sigh*. It's all soulless electronic stuff but at least the DJs look like they enjoy what they're doing.

Very (?) Good Sentences

"Although parties to a transaction are intelligent enough to foresee that adaptation will be required, they are not hyper-rational in their abilities to foresee exactly the form these adaptations will take."

Judge-mental

"You have to have men who are moral and at the same time were able to utilize their primordial instincts to kill without feeling, without passion, without judgment--without judgment.

Because it's judgment that defeats us."

from the movie Apocalypse Now

Are empty stands in cricket a problem?

I wanted some data to get some clue to an answer. I decided to use the World Cup 2011. Although there will be some upward bias, the bias ought to be somewhat similar across the two categories (TV rights versus Ticket Revenue).

I wonder where the advertisement money goes though, and how that affects things, also how does ESPN share the matches with the other broadcasters.

5 minutes googling and here's the breakdown:

Ticket revenue : 1.5 billion Indian Rupees

TV rights: 2 billion US $ = 2*(10^6) US $ = 2*50*(10^6) Indian Rupees = 100 billion Indian rupees.

I don't think we ought to be waiting for the administration to be worrying about attendance anytime soon. One must expect TV rights > Ticket Revenue, but the question is how large should the difference be?

The origins of MTV Unplugged

Everyone, I am sure, has heard of Alice in Chains and Nirvana's unplugged albums, which launched the MTV unplugged stuff. Soon, everyone and their aunt was doing unplugged stuff.

Of course, the question is how did any of this originate?

Tesla, a middle-class band if ever there was one - 3 of the members drove trucks - was the first band to suggest an unplugged album. It was quite an experiment, but their album "5 man acoustical Jam" is, in my opinion, hard to beat. Playing acoustic is a true test of the ability of a band, and they pull it off superbly.

Tesla are often put in the same category as some of the far inferior hair metal bands - Poison, Motley Crue - now these bands wrote a couple of okay songs, but for sheer talent, Tesla was far and above anything else.

But then, if "It's my life" can have 32 million hits what do I know.

The thing to listen to is how the sound of the album is very organic, you can feel this stuff being played live. There is almost no hint of production, and indeed such was the case. This is as good proof as any as to how good the band was. Yet, because they had long hair, they were labelled a hair metal band and that music was crap wasn't it. Honestly this stuff really amazes me, how shallow people could get.

Plus, they wrote a song about the feud between Nikola Tesla and Thomas Edison. Some might say how could that be rock and roll, but the amazing thing is it is. I appreciate the chicks-drugs-booze songs but we need a few things different now and then.

Of course, it must rock, which "Edison's Medicine" does. Sample lyric:

"All that he saw, all he conceived,
They just could not believe.
Steinmetz and Twain were friends that remained,
Along with number three.
He was electromagnetic, completely kinetic,
"New Wizard of the West."
But they swindled and whined that he wasn't our kind,
And said Edison knew best.

You took a shot and it did you in.
Edison's medicine!
You played your cards, but you couldn't win.
Edison's medicine!"

Fun fact: Tesla's most popular song was, wait for it, yes a ballad, "Love song". The version of it on the acoustic CD isn't bad, but the original is a paint-by-numbers thing. Thus, if you only heard that song, which most people probably have, it isn't what they were about. Yet another instant of record companies muscling in.

And, they had a sense of humor, a great video that lists every cliche a rock video is subject to. That's all folks.

De Gustibus Non Est Disputadum

why it be so damned?

if plant and page can get away with it, if jethro tull can get away with it, if pink floyd can get away with it, if the stones can get away with it, if aerosmith can get away with it

...acting like jerks that is, and pretty much jerking off in their albums...

in any case, at least there's still some debate about it, albeit most people are happy enough to say there was nothing good in it, nothing musically important.

well, excuse me, but what a crock of shit. When was rock and roll meant to be important? You mean to tell me there was more to Jimmy Page than a couple of interesting improvisations?

In any case, it would be absolutely incredible that this stuff sucks so much, and yet, some of the bands remain alive to this day.

And here's my little thesis: it isn't the music, because if you sit down to listen to it, it is as good as anything - the riffs, the melodies, the bass - it is the sound of it all. This is an overproduced, overly clinical sound, the attempt by music companies to put gloss over what is a warts included package - and it is that, my dear friends, that people associate with 80s rock. They don't look at the music much because the sound of it is fake, through no fault other than sheer stupidity of the bands - although I wonder how stupid they really were. The music companies had a certain *idea* of what a band ought to look like - and they certainly didn't look like Iron Maiden or Motorhead! Any band therefore either acceded to this or got kicked out. In a vastly uncertain business like music, I cannot - and nor should you - blame any band for cashing in for all they are worth.

Now once you have this, you have a certain loss of control already built in, and that simply propogates through the system to end up with a music that sounds non-vital. I submit that it is that property that people realize as being vulgar; once you hear Robert Plant wail away, Sebastian Bach doing the same is simply going to sound foolish. Importantly it has nothing much to do with the quality of the music, music defined by what the guys are doing not how they are sounding. Which is how I hear it. That is, technically, this was good rock and roll. But that very statement tells all.

It is a great tragedy because some of those guys could really play...it would seem odd would it not that suddenly we have a great sprouting of no-talents? Talent is more or less uniformly distributed.

And who do we blame for this? It is the very same bands everyone revers and loves - the 80s was really the attempt by record companies to create a market out of what existed before, when in fact a market must be allowed to evolve. The truly great tragedy is the fact that some of these bands actually went on to make decent albums - Skid Row made Slave to the Grind; Winger made Pull; Warrant made Dog Eat Dog - the songs off of these are raw, driving, not necessarily pretty, and somewhat cruel. Imagine the waste, all by a foolish attempt to define something that should never be allowed to be controlled. Apart from the mostly unfair criticism that these guys didnt know what they were doing, or that what they were doing was worthless.

They were led by the nose, allowed to break free far too late in their careers - Cherry Pie is a puerile song, but the same band wrote Uncle Tom's Cabin, and how many people have heard that? It is not without reason that Jani Layne regretted that he would always be known as the Cherry Pie guy. "Uncle Tom's Cabin" has 1.5 million views and"Cherry Pie" has 2.5 million. Between the two, musically the former is superior. But that isn't the population people sample from when damning the bands.

The truly awful result of all of this was the rise of grunge, not that grunge was bad, it was quite good, but in making rock and roll as "dead" as possible, i.e. rebel against the hair metal stuff by muting your music, although you wanted to rock out...it pretty much finished things off. We now have close to 2 decades of mostly pointless rock music, and where are the shows the magic and light? It's all over now, baby blue.

eargasm

Listening to Maiden's "Phantom of the Opera", live with Bruce Dickinson on vocals in the Hammersmith

it's absolutely perfect, the mood, the music, the beginning of a tuesday to one of the all time greatest collection of riffs written. yes they don't stop at one, they keep going, a constant shape shifting song. The song is best live, where the energy gets multiplied.

By the way, the last post highlights the following

(a) law is a public good

(b) to bring about efficient law, one needs more than just a police force

(c) self-control is as important

(d) such self-control can be induced through the use of placing threats and commitment through posting hostages

"Law is a public good" said Buchanan; "Yes" replies Kilmister

This has a core truth behind it, can you tell what it is?

time for love

So I decided to use facebook to go through my list of friends and plot a distribution of their months of birth...it speaks for itself. There's a bias here since I'm from India, but I'm willing to bet the same distribution works out in general.

book pricing

any idea why Rahul Bhattacharya's "The Sly Company of People Who Care" is priced at $30 at Amazon, and at INRs.371 at Flipkart? Surely the audiences are the same?

$30 = 30*50 = INRs.1500 approx. Rs.371 = 371/50 = $7.4 approx. Purchasing power parity needs to be adjusted, yes, but it couldn't be too acute for a product like this.

Methinks the Amazon pricing bot is not doing a great job. Unless it is accounting for the fact that if I order from Flipkart, I'll have to pay shipping charges, which are about $20. That still doesn't make sense, because surely Amazon could ship the book cheaper.

prediction in economics

a philosopher has a conversation with Russ Roberts, on Econtalk, where he discuss the achievements and limitations of economics.

While praising economics for its departure in the last 3 decades toward more realistic assumptions and more empirical attention, he claims that economics is not yet a science because it lacks predictive power. By predictive power, he means one ought to be able to forecast the effects of a change in policy. Although this was attempted in the 1950s - by finding out exactly what a demand curve's parameters are - it was a flop.

My position is that the predictive power of any theory derives from how good the theory is, this point is noted by philosopher sahab. The other point of note is that no where do they talk about the new institutional economics, which offers a very powerful alternate.

To be clear, there are two kinds of new institutional economics, one deals with macro-level institutions (property, policy, regulation) this has Douglass North as its master and chief. The other deals with micro-level institutions (contract, transactions) this has Oliver Williamson as its headmaster.

One often neglected component of the Williamson type of institutional economics is the abandonment of the price-quantity framework. Williamson notes this in his Nobel prize lecture where he quotes Herbert Simon:

"In the physical sciences, when errors of measurement and other noise are found to be

of the same order of magnitude as the phenomena under study, the response is not to

try to squeeze more information out of the data by statistical means; it is instead to find

techniques for observing the phenomena at a higher level of resolution. The corresponding

strategy for economics is obvious: to secure new kinds of data at the micro level."

Observing economic phenomenon from the contract level is a genuinely different approach as it observes the same process through a higher level of resolution (this is not the same thing as observing the process in a more disaggregated manner). Fitting demand curves turns out to give poor predictions perhaps because demand curves are not the most appropriate tool.

So, before we judge whether or not economics can predict anything, we must first agree on what is the appropriate way to analyze economic behavior. That neither the host nor the guest on the show mention the idea in the above paragraphs indicates the some of the lessons of the new institutional economics haven't sunk in. But they are not alone. Even the eminent Samuel Bowles and Herbert Gintis in a 2004 article in the Quarterly Journal of Economics, one of the top journals to publish in, claim that the price-quantity framework is what is so wonderful and great about economics. No sirs, not quite.

For further support of this notion (that new institutional economics isn't as mainstream as it is thought to be), consider the following points

Paul Joskow claims that the reason electricity deregulation has proven to be a failure in the US is not understanding the lessons of the new institutional economics. If one of the leading lights (ha ha) in the business admits to this what hope has the ordinary economist.

Being in an agriculture and resource program, I have never once heard of Steven Cheung's outrageously brilliant 1983 paper on the notion of an externality. Cheung claims externalities are present in each and every transaction, there is nothing special about them, all trade is conducted to minimize (or maximize) the impact of "externalities". So all the policy and talk and publishing activity is misled by incorrect thinking. This is not to say that the "best" policy in any case will necessarily be different than one suggested by conventional thinking, but it works the wrong way, and so it is more likely to suggest incorrect policies than correct ones. If you live in the circles that most resource economists do, these statements contain the capacity to completely overturn the field. Yet, not a whisper of this to be found in the usual first or second year courses.

why are people always smiling in photographs

when they don't keep smiling in real life

if you see someone walking around with a smile on his or her face you either think the person is insane or laughing at you

but when we take photographs everyone is always smiling. what gives?

photographs would be much more interesting if there was genuine emotion instead of isko facebook par lagana hain.

grow up people. after all despite bollywood we don't break into dancing and singing when a definite turn in life's road is reached. if we can resist that, what is facebook? unite, we have nothing to lose but our smiles. scowl more. it will make you look older but you deserve it. what are you, a model or what.

*Indeed*

the next academic to use the word "indeed" in writing or presentation should be shot.

you're just being a smart ass, and knowing you can get away with it, because you have some clever little argument to prove your point.

stop it. if you're so smart, why aren't you rich.

rant rant roar!

It's always a little funny, the things we take for granted, the things we don't, all the things that some say are beautiful, and you know you're thinking

"that bugger, always talking about something being beautiful, doesnt he know he cheapens the word by using it like that...and bloody I just want a beer, even this pale watery stuff in a plastic glass, not a lecture on the psychological inconsistencies of the english language, it's a friday come on I've been at that damn dataset the whole day"

all the pretty little flaws of the people around us, all that poetic talk of mystic meaning, you can all take a walk, i'm tired of all this over thinking, of trying to be clever why cannot people just be themselves. life would be easier wouldn't it. and then some smart ass says

"that guy, wow, he's so honest, I mean, he's got problems, but who doesn't. He could grow up a bit he's quite a child actually he is a child."

jeez, all I wanted was a beer! and a comfortable pre-midnight talk and off to bed and dream dreams no one else can see like what Bryan Adams said. and get up fix a strong cup of tea and toast and oatmeal and engage in pleasing, involving scholarly conduct. instead I get a debate or a lecture, my word, what efforts we put into friday evenings.

so anyway, I need to go, time and tide wait for no man etc.

hmm

http://www.youtube.com/watch?v=PRK6VCnfFms

Sainath says: "...Giant corporations having brought the worlds economies to its knees in 2008..."

Well, it is the giant corporation that gave the worlds economies the ability to stand in the first place. Or to put it better, the world economy stands and falls with these giant corporations. We're better off working together, Mr Sainath, because we need each other.

when predictions come true

see this

then this

ha!

Many theses could be written on this

found this comment on well, an Atif Aslam video on youtube

(Okay, so Pakistani pop-rock is for some reason perfect music to write to. I don't quite know why. )

This comment explains many things, albeit from a limited point of view:

Indians good in creating computer languages.They function from head.Pakistanis are just different.They use heart and use too much of it. That's why so many beautiful melodies of hearts and whole country is full of singers,each one has different style and great songs.Good for India and good for Pak.They are just different.Not same.Indians copy Pakistani songs.Pakistanis watch Indians movies.One loves others songs,other loves bollywood.Both love and hate each other,and both split inside & confused.

comment comment

An anonymous comment that is intelligent is one of the greatest compliments a blog post can be served; beaten out only by a non-anonymous comment from someone you don't know - but it is of course difficult for someone who doesn't know you to know that a non-anonymous comment comes from someone you didn't know.

Thus anonymous comments can serve as a separating equilibrium device if such things exist.

Bourgeois Virtue

Saigal Blues, the song, it makes a great soundtrack to an imagined fading of Nehru's and the broader Socialist dream.

There's a short award winning skit waiting to happen.

Duniya mein pyar jab barse
Na jane dil yeh kyun tarse

2 drinks ahead

3 makeshift meals - rice and lentils, pizza and cookies, rice and spinach

a diet of a sick man that can kill the healthy

9 pm and the sun still hasn't set

a Land of Mary then, a land of Maria now

some day the numbers vanish, some day we will

realize

some day

smile, please

Get Rajni in there and that's it

contracts as encouragement: an application to heavy metal

For the nth time, we return to this issue of the popularity of heavy metal, why is it popular where it is, why do people listen to it, how come it has come to generate this sub culture all of its own.

Some of the frequently cited observations regarding heavy metal music can be listed as follows:

(a) it's aggressive
(b) loud
(c) overblown
(d) not subtle

Similarly, heavy metal fans are characterized as:

(a) frustrated
(b) repressed
(c) mostly male

Now, one way of summing all this up is to understand the following truth: all bands, and I would argue heavy metal/hard rock bands in particular, display one amazing characteristic of human nature - they show what a group of men or women can accomplish when they work together. By making their music loud and fast, the heavy metal band is proclaiming this from the rooftops - and the kind of mind that will attract to this proclamation are those who have a desperate need to get out of their present situation because it represents hope to them. Subtlety in announcing this runs the risk of being mistaken for apology - and apology is not going to be tolerated by the miner's son in England in the 1960s or the Mexican immigrant in Langley Park in 2010.

So the crowd at a metal show is not there because the music is the way it is, the direction of causation runs the other way. The music is representing a basic idea - hope to mitigate conflict by mutuality in working - that people for whom life has been hard (or they believe it to be) are likely to promote. The music is the way it is because that's the way the world is. As Lemmy said it once, rock and roll is middle class - and the middle class is always striving upward.

The mocking that heavy metal music often is subject to is therefore only looking at a superficial layer of the music, it does not allow that there might a deeper reason behind the forms the music takes. This deeper reason is really quite simple, and once admitted, it allows for an understanding of why the music works the way it does.

Now, if you think about it, this explanation also explains why heavy metal music has no solo artists - apart from a brief time during the late 1980s when the "neoclassical" stuff started becoming popular - and it might even represent a reason why as we move in an increasing direction on the income scale more and more solo artists become popular. In some extremes, there is almost no team behind the music - think classical music for instance. (Yes a team plays the music, but the team is not making the music).

In some ways therefore, a contract by its very existence offers hope of a better life simply by allowing for the fact that a private ordering amongst two or more parties can make both better off. This is now beginning to sound very much like McCloskey's recent thesis on the bourgeois virtues, so I'll stop now.

time series

"here, you, why are you sleeping? go wash your face and come back" - 9th standard

"why are you sitting with that guy? didn't no one tell you to cover your mouth when you cough?" - 11th standard

"you know, you remind me of this russian character who grows a moustache to join an army" - 2nd yr BA

"..ah yes, he played the village idiot rather well..."

"you're really saying that? you ought to really study hard if you're going to pass..." - 2nd year MA

"why the hell do you come here at all? what is it you want to do anyway?" - 2nd yr, PhD

"you're not good at specifying details...this could cost you..." - 4th yr PhD

dogged persistence in the face of mounting evidence to the contrary, you betcha.

I know it's only Ronald Coase, but I like him

Explaining the forms of transactions that firms take within and between themselves is one of the enduring puzzles in economics. Ronald Coase (1937, 1960) was the first to formulate this question by asking why we do not see one large firm and offers the view that any transaction carried out comes with costs. One answer came from Oliver Williamson (1975, 1979, and 1985) who pioneered what is now known as the transaction cost theory of the firm. Following on this, other theories have developed. The most prominent among these is the property rights theory of the firm (Grossman and Hart 1986, Hart and Moore 1990) and the multi-task theory (Holmstorm and Milgrom 1991). These theories seek to explain firm organization in terms of ownership of residual control rights[1]. As such they focus on ex-ante investments.

The transaction cost theory of the firm focuses instead on ex-post inefficiencies generated by the fundamental condition of asset specificity[2]. Recently a theory has been proposed that stresses a different source of ex-post inefficiencies – the complexity of the transaction (Bajari and Tadelis 2001, Tadelis 2002, Tadelis and Williamson 2010). More complex transactions carry a greater risk of deviations from a previously agreed upon plan. Thus more adaptation ex-post is required. For complex transactions therefore, contracts that can adjust better to such ex-post changes will be chosen. This is not had without cost – more flexible contractual forms also tend to have weaker incentives. The level of complexity thus works as an exogenous shifter to determine the trade-off between incentives and adaptability. The optimal contractual form is derived in this manner.

Being a recent advance, empirical evidence of the workings of this theory is limited. The theory offers two comparative static predictions that one can test with data. First, more complex transactions will tend to be organized within a firm, that is, integration (vertical or horizontal) is more likely when the transaction engaged in rises in complexity. Second, more complex transactions will affect the choice of compensation scheme that the buyer offers the seller. With complex transactions, a cost-plus type of contract will be chosen. With simple transactions, a fixed-price type of contract will be chosen. Out of these the first has seen some beginning work. Forbes and Lederman (2009) test, with success, whether airline integration decisions in the US can be understood along these lines. Costinot, Oldenski and Rauch (2010) conduct an investigation on international trade using this theoretical construct and find validation for the predictions of the model. The second prediction has not been subject to any empirical test to the best of my knowledge, and this is what I seek to do.

---

[1] A residual control right, as defined by Hart (1995) is that collection of rights not already contained in current custom, law or contract. The owner of a firm is he or she who holds residual control rights.

[2] Asset specificity arises in conditions where the identity of the contracting party matters and refers to assets that cannot be redeployed to a different use or user without significant loss in value.

__________________________________________________________________
(Notice the temporal flow of ideas.)

Existential dilemma

One lives one's death.

One dies one's life.

hat tip to Sartre!

what madness, what splendor

what gives us the urge to wonder

we spin, we spin

endless

infinite

*flush*

ha ha ha

There is a great comment here can you find it?

if Shakespeare was an applied economist

confirmation of theory or unobserved heterogeneity that is the question. Is it nobler to suffer the slings and arrows of outrageous reduced form estimates or take arms against a matrix of possible unobserved variables and by making identifying assumptions, end them?

Golden Boy

when you start looking for perfection, you realize it's impossible to attain, so it takes the pressure off, and you - as Ravi Shastri would put it - go for maximum. but if you don't look for it, you will never realize it's impossible, so you perform inoptimally.

not clear?

btw, Jon Levin published his first article in the Journal of Economic Perspectives. I'd request anyone to look over the editorial policy and birth of this particular Journal to see why this observation has made an impression on me.

I'm not criticizing Levin, he's a very good economist. What frustrates me is the apparent non-random inconsistency of the editorial policies of journals...*grumble grumble*

dilemma

all things are considered/

all said and done/

when the genius is laid to rest/

in the sleepy hollows of time/

will they still ask/

in expectation, is the probability/

of winning/

when sachin gets to a century/

rather small, vanishingly?

or, is there unobserved heterogeneity?

co-exist?

"Nothing spoils the taste of peanut butter like unrequited love"

(on both sides of the border)

Sing for the moment

I'm not forgetting it





For Sachin, 100th 100 in front of home crowd in what may be his last one-day international. Imagine that. Good luck Sachin, you've given us a lot.

giggle

"Main toh khud ko gale lagaun
Kisi aur ki mujhko zaroorat kya
Main toh khud se pyaar jataun"

yes her name is sheila...!

Shor Bazaar

"Irreverent": characterized by a lightly pert and exuberant quality; Lacking proper respect or seriousness; sarcastic; Disrespectful, cynical, caviling, querulous, or vulgar, where one's own feelings, or especially deference to the feelings of others, customarily command silence, discretion, and circumspection

grey markets

why not sell people the right to sell tickets later at a price they choose?

I'm seeing reports of all these tickets for the India Pakistan world cup semi-final being sold on the black market at several times what their price was...this is probably construed as being "bad" or "wrong" and is deemed illegal.

But it isn't quite so clear to me what exactly is wrong about this. Surely if one is talking about say dal or onions or salt then such behaviour is clearly going to harm a whole lot of people and benefit a select few so on balance this is not very good.

In this case, however, there is a legitimate trade that can be carried out. If some student wants to pay 5000R instead of 250R (the mandated price), well why not let him or her? In this case the entire costs of the exchange are being internalized by the participating parties. The whole reason why a "black" market exists is because re-sale isn't possible. But why prohibit re-sale if the seller and the buyer enter into a trade such that the buyer's value exceeds the seller's cost?

However, there is a potential problem in that this may encourage a few to buy every single ticket and then sell it at an inflated price. As long as it is mandated that every ticket sold is mapped to one and only one individual - i.e two tickets cannot belong to the same individual - I don't quite see the problem here either. Let's say you fine someone who ends up holding on to two tickets, for instance, a monetary equivalent of the earlier price of the ticket. Now, the person who chooses to mass buy will for sure internalize the probable fine, and we will get revenues that are better reflective of the willingness to pay for the ticket.

In this instance, everyone wins - the spectators who have essentially carried out something like an auction and allocated tickets according to willingness to pay; the administrators who will make more money; and the players too because the more passionate fans are in the stadium.

Of course, it would require some knowledge of how tickets are actually sold to see if this is a sensible idea or not.

number one!

since this blog is basically become a writing pad for research topics

I guess you got to say

I like this s***!

let us agree to disagree and bow down to our collective bounded rationality

leave the contract incomplete in the face of this eternal asymmetry

for haggling costs are great

to coordinate

our trade and the actions we take

when information is costly and there is specificity and complexity

we must draw our boundaries with the least amount of haste

Amitabh Bachchan, Deewar, and the Hold Up Problem

In the film Deewar, Amitabh Bachchan (AB) plays a coolie whose origins draw from a childhood born of homelessness and poverty.

In one of the first few scenes of the film, AB opposes the illegal extraction of wages (earned by AB and his co-coolies) by some local goons. Seeing this, a rich dude in a car pulls up next to AB a few days later and impressed by this opposition enlists AB to land some gold (probably illegally) for him.

Now, apparently, when AB was a child, he used to shine shoes to make money and had shined the shoes of this rich dude. So post-enlisting, rich dude throws some money on the table as payment, where AB states "You may remember a kid who refused to pick up money thrown at him. I still don't pick up money thrown at me..."

This sets up a double-cross later on, when AB gives out details of the landing of the gold to some other rich dude who is probably the first rich dude's competitor. (By the way it's interesting that such a negative action is being carried out by the main hero, but this theme has probably been written about till its death).

On the completion of the double-cross, the other rich dude takes out a gun and states "You've given me the gold, now what if I refuse to pay you". The gun is an explicit threat to back up the refusal.

To which AB replies with a story of the guy who killed the golden goose. The other rich dude laughs, and the two - other rich dude and AB - decide to enter into a long term relationship. Or, at least, that's the impression one gets from the line "It will be a pleasure to work with you" that the other rich dude utters as a means of settling the bargain.

This is essentially a resolution of an (ex-post) hold-up problem. The hold-up is that the buyer (other rich dude) may refuse to honour payment to the seller (AB), but because AB carries great human asset specificity (his value to the buyer in his present use - carrying out double cross i.e. working as informant - is much lesser than in any other use - death or no use at all - which is conveyed to the buyer by AB telling the story of the golden goose) it is better to enter into a long term relationship. This will protect the value of the trade - influenced in this story almost entirely by AB's asset specificity - and minimize haggling ex-post.

Essentially they sign a contract to certify this expectation, although this is a verbal one. The buyer fears that he will lose out on an increased value of trade - which arises from the seller's asset specificity- and costs this will impose on him. The seller fears the buyer may be out to screw him. The contract between the two is therefore understood as attempting to minimize these fears- ex-post haggling costs - with the result that trade of higher value (than would be possible without a contract) occurs. At this point, my brain is jumping with ideas about how cheap talk influences the process of getting into a contract, but this is a separate idea.

So contractual decisions are understood as a response to minimizing opportunistic behaviour and result in efficient trade. It should be evident that the focus of this Williamson inspired view (on why a long term contract is signed) is explicitly on adaptation problems that occur in a strictly ex-post sense. Notice that the hold-up can arise from both the buyer and supplier's side. (In fact it seems more intuitive that the seller should be the one attempt to engage in ex-post haggling.) So the optimal contract really ought to protect both parties interests against this eventuality.

Also notice that without asset specificity, this theory will not work. Ex-post haggling is costly because of the asset specificity. After all if there were a lot of AB's in the market, the buyer could just let AB go without payment and replace without hassle. But if there are few AB's then the costs of finding a replacement are very high. The relationship specific investment by AB - finding out information - makes AB a very specific asset, which then is used to convince the buyer that a long term relationship will make both parties better off.

Two points are important - one, if we find long term relationships without any specificity involved what is going on? Two, clearly, by this example, it is evident that the role of talking is important. Although the buyer knows of AB's specificity his attempt at expropriating some of the gains from trade are frustrated because AB's utterance makes AB's specificity common knowledge. Real research idea here, this hasn't really been worked on.

To the first point then: the recent theory by Patrick Bajari and Steven Tadelis attempts to rescue this basic notion - that contractual decisions are best understood as a result of minimizing ex-post haggling costs - by the notion that ex-post haggling can arise from factors external to the buyer-supplier relationship. Specifically, the complexity of the transaction can influence ex-post haggling costs. This theory is what I seek to test as my dissertation, and so far, it does seem to work.

Krugman (slight return)

Paul Krugman once wrote a paper on the economics of interstellar space travel.

The idea being, I guess, that the faster you travel the slower time goes, so that would alter your interest rate, which would impact consumption and investment decisions.

The same idea can be applied to figuring out whether we can get complete contracts in outer space. One of the reasons for an incomplete contract is that we cannot predict perfectly or even very well what will happen in the future, thus it makes sense to leave some wriggle room. The more we expect the unexpected, the more incomplete the contract.

However what may be more important is how can we adjust to unexpected changes. If time slows down slowly enough, can you almost see the unexpected coming along and then perform your adjustment? Even if you cannot do this, since time is moving slowly, adjustment might be better informed.

The other way to look at this in terms of a (Williamsonian) notion of haggling costs. More complete contracts are likely to also involve more haggling if something unexpected arises. However more complete contracts get chosen when the probability of something unexpected is low. If time slows down enough might we reach agreement quicker...because our discount of the future is now lower so we can cooperate more? This then might make for more complete contracts in outerspace?

*grin*

not a bad idea, eh?

why do we give wrong answers?

often times wrong answers to a given question arise from two reasons:

(a) the answerer is trying too hard, making a simple case way more complicated than it truly is

("missing the wood for the trees")

(b) the answerer is not trying at all

>95% of "research", "policy suggestions", "white papers", "discussion papers" etc falls into one of the above two.

keep in mind the inconsistent nature of this post, which follows (almost) by definition.

the path to be followed would be to simplify to the maximum extent possible.

"the market and the firm are placed on equal footing" (Williamson 2010)

galloping growth and hunger

this is quite a scandal, if the new york times is right. (by the by, why am I reading about this in the new york times?) is it really that laws prohibit corporations from owning large farms?

if that is right, my own unsubstantiated, knee-jerk view is that this is typical suspicion of the big ugly capitalist enterprise - this is justified to some extent but institution economics will say that different forms of organization are optimal under different conditions, optimal in the sense of producing at lesser cost.

no one wants food to become what it has in the US - mass produced flavour deficient product - but if I am to choose between this and malnutrition of the future of the country, which is the lesser evil is obvious.

research statement

I write these words
great leaps of theory
all these thoughts that go unheard
from men greater than you or me

theory is metaphor and thus
this leaves me
free from worry

because I can choose my metaphor
and the idea now has a part of me
so I speak freely
telling people how I wish we could all be

good metaphor is hard, bad are easy
and, after all, greatness is subject to relativity

inversion

one day there will be a blog which will have a fresh post every day, detailing some little conundrum, or figuring out something paradoxical, or examining an old worn out subject with a brilliantly illuminating alternate view, a blog that will drip insight into your little sponge of a brain at the rate of one per day. this blog will be the ultimate blog, stirring passionate debate with every view, even the fence will be tempted to join in, thus calling into the question the whole notion of point and counterpoint. it will be evolutionarily revolutionary, and everyone will become smarter.

conversation at dinner parties will suddenly start to plumb the deepest of questions. conversations will start happening at after dinner parties. an eco-politico-socio-enviro-anthro-phsyic-historical perspective on everything will arise. there will then, one day, be no issue too great to solve. adam sandler will direct a 4 hour psycho thriller where a rudimentary understanding of string theory will be the least cognitive demand on the highly enlightened viewer. sarah palin will debate courageously with noam chomsky and amartya sen on the meaning of identity and freedom.

and then, alas, the blog will die, the most creative destruction ever known, for equilibrium is attained and the absolute truth has been discovered. mankind will plunge into darkness, and even the slightest flicker of light will seem like the radiance of a thousand suns, and the cycle will repeat...

do you regard others in order to regard yourself?

"why have other regarding preferences?"

(a) "to protect the self from possible rent seeking we must understand the actions of the other"

(b) "this is evolutionarily sustainable strategy to preserve the species"

which answer grabs you? Are (a) and (b) independent of each other? What implicit assumptions underlie this question?

What is an economic model?

In recent years, much has been written about behavioral biases in the actions of people, biases that contradict (apparently) the "rational choice" model in economics.

At first sight, such apparent irrationalities appear as a comforting thought ("surely people are not calculating utility at every instant!"). The more I've thought about it though, the less I am convinced that such irrationalities constitute a contradiction - a more appropriate term would be behavioral biases, as I've used in the first sentence.

To understand this, it is useful to begin here. It becomes apparent from reading that piece that one of the main motivations to introduce a utility function (probably first by Pareto then rigorously defined by Samuelson, if I get the paper) was to avoid such considerations of individual behavior.

A supposed irrational deviation from a supposed rational model can be criticized as follows - "the rational model is saying that people do what pleases them. Proving this mathematically requires some slightly strong axioms. So, one can see whether these axioms hold in the real world. Let's say you find they don't hold. Is it then fair to claim that the results do not follow through?"

Let me take an example. Imagine a lab experiment that demonstrates one group of people are unwilling to give up a coffee cup for a chocolate bar when they are "endowed" with a coffee cup, while the exact opposite holds for another group "endowed" with a chocolate bar. This is the endowment effect, and it is claimed to be irrational. One can argue however, that such endowment effects point to the fact that the basic preference ordering of any person is affected by what you give them. From here, lets say you derive a particular utility function that predicts exactly the supposed irrational behavior. Will you then say the behavior is irrational?

The criticism from the other side will then be - "okay, but you, rational choice theorist, claimed that preference orderings are fixed and unchanging, and now you alter that assumption. It is not surprising that you then get a different prediction." My reply would then be - "Precisely!"

This points to a basic fact about what a theory model in economics is, a fact that is becoming clearer to me over time. Theory in economics is never to be interpreted literally, it is highly metaphorical, yet mathematically exact. It is a way of thinking, a way to organize thoughts. Getting too deeply into how people make decisions - whether in the lab or field - is going to throw up so many different interpretations that it is going to be hard to make sense of them. Instead of claiming the rational choice model is wrong, I am quite sure that if people took the trouble of understanding exactly what extra dimension they are bringing in, a dimension that was not part of the traditional analysis, and how that affects the traditional analysis, we will all be better off.

Let me take another example. Think of the classic prisoner's dilemma problem - 2 person game. Now, we have a Nash equilibrium outcome (in pure strategies) which is inefficient in the sense that each is worse off than they could be, and another outcome which is efficient in the sense that each is as well off as possible. If you interpret this model literally, you will say "if I give people such payoffs I should never see anyone cooperating". Then you test this in a laboratory and find that actually people do cooperate. And you publish in the American Economic Review, claiming that "people don't play Nash thus they cannot be rational as defined".

My reply is twofold - (a) the utility function has been misdefined and (b) you're missing the point. Take (b) first. The point is not that people will play Nash or not, the point is much vaguer perhaps but more true, and it is this - "Adam Smith told us (by the way, the rest of this argument does great disservice to Smith who had a much more humane view of the world) the invisible hand (what a great metaphor!) of self interest makes everyone better off. Well this may not be true. Self interest alone may make everyone worse off." This, I don't think, anyone can have a problem with. After all think about any country, company, individual who "did well" - self interest played a big role perhaps in this, but surely it wasn't the only thing; we typically rely on many others often selfless contribution.

Point (a) is somewhat harder. If people are not playing Nash despite the (monetary) payoff indicating - as described by theory - that they should, the conclusion arguably is that there exist non-monetary payoffs that are driving the decisions being made. Thus the mapping from the utility function imagined by the authors of the published article to the monetary payoffs received isn't clear. Now, you may object - "yes, but you're just evading the issue by bringing up another cause that we cannot know is operating". My answer is - "Precisely". This is what we were trying to avoid when we said you get utility from what you consume, whatever that may be.

Of course, if neuroeconomics develops enough, we can actually understand (maybe) the mapping from utility to monetary as well as non-monetary payoffs. That may lay all this debate to rest.

But the broader point will remain - a theory in economics is not something where it is straightforward to take predictions to data. How a theory will operate in any circumstance must be understood not by the blackboard model offered by the theorist, but by understanding the broad meaning behind the mathematics, and interpreting that to analyze any situation. This isn't easy, and I believe requires just as much work as coming with the theory in the first place.

In fact, if you think about it, the idea that "people ought to work together to understand how a new observation can fit received theory, does it really contradict the theory or is the theory not supposed to apply there, etc" is just another way of stating that if we work together, we will be better off. Which is the lesson of the prisoner's dilemma.

why are dhabas clustered together?

so I watch this show, "Highway on my Plate" starring a Rocky and Mayur two non-skinny men, one from the south one from the north, one vegetarian the other non-vegetarian, as they travel all over India eating at local places.

It's getting to an interesting point now, because they've done so much traveling, that they begin to see some patterns emerge from their experiences. In other words, they've generated enough of a sample to see a trend. This is basically an empirical observation therefore: they say that no matter where they go, the appearance of a single dhaba by itself is never observed. Instead, there are long stretches of emptiness, followed by a sudden clustering of dhabas, followed by emptiness, and so on.

Why does this happen? For one reason, this is essentially the Hotelling model operating. In the simplest version of the Hotelling model, imagine two people competing for the custom of a local town. Call these two people restaurant owners. (Incidentally, Hotelling is the name of the guy who came up with this.) Where should they locate their restaurant? To simplify the problem to its essentials, imagine that the possible locations can be only on a single street, in fact, imagine the whole town to be arranged on a single street. So it's now just a matter of choosing where to locate on a single line.

Using assumptions on the cost functions of operating a restaurant (linear), and on the distribution of town residents on the street (uniform), it is easy to derive that the optimum location given that each hotel owners location impacts the number of consumers the other gets is the center of town. The basic intuition can be seen by seeing why any other location will not be optimal: assume one guy (A) gets to the center of town, now where should the other (B) locate? If B goes to the left of center, he will get the custom of all those to the left of his location, A will get all those to the right of his location (which is the center); but B and A will have to compete for those customers that locate between the their individual points.

Why will A get all those to the right of center? with a uniform distribution, the costs of finding a restaurant for any consumer will increase with the distance travelled, thus the result that A gets all those to the right of center, while B gets all those to the left of where B locates.

This competition between B and A can be alleviated if B shifts a little to the right. Now, B gets more consumers, while A gets the same number as before, although he probably loses a bit from before because some consumers he had now go to B. If A moves leftward he will gain a bit. B will respond by moving to the right. Eventually they will settle into the same place. However, and this is important, now either A or B can gain more by moving to the center. Thus the only place from where deviations are non-profitable for both A and B is the exact center.

Therefore, dhabas tend to cluster, and what's more, they should cluster somewhere in the middle of the cities. The episode on Ranchi I was watching appears to confirm the second result, but of course that is just one observation.

However there is also probably another reason, in that reciprocity - you benefit from having another dhaba nearby, in case one of your cooks doesn't show up, then you can borrow one from a nearby dhaba, with the understanding that in the future you will lend one of yours - can be another reason to locate nearby. Or they can take advantage of co-location and share electrical generators. This is more subtle reasoning, because it is a dynamic argument as opposed to the Hotelling model above which is static.

I just watched Exit through the Gift Shop, a documentary on street art that asks similar questions to those asked by the people who liked Iron Maiden and Motorhead and Metallica, were convinced this music would be big, however it was the glam rock bands that got big, which became a bit of a problem. Because it appears to prove that most people seem to prefer the inferior product, or are unable to tell the rip-offs from the originals.

nerd

"i'm getting sick of this drinking tea everyday, I want something new to drink. Day after day, din par din, chai pe chai, milord!..."

"you could try coffee, you know"

"but it's going to be instant, no?"

"yes, you should try this spoon, take two spoons of coffee and one of sugar, but only with this spoon with this particular combination...there's some non-linearities inherent in this particular production process"

"okay"

contention

"you know, I'm glad you stuck with this...I can see you enjoy this..."

"yeah, we were pretty skeptical in the beginning, but you've convinced us. It's good you were persistent..."

(n-2) obstacles cleared. good relations established. good topic chosen - both important and interesting. most important: the topic is mine, thus independence also (endogenously) arises.

so far, therefore, so good. now to make the good better!

fuel price hikes

apparently the price of petroleum (gasoline in american) has been "deregulated" in India, with the obvious impact being the price rising because the subsidy provided is gone.

I found this reaction to be somewhat hilarous (found on NDTV's live TV): "you know, the common man has been really hurt by this...I have a Santro and an Accent and now I have to think whether I want to drive my Accent..."

I might wager that this is perhaps (partly) the point of making consumers face the "right", or at least, a "less wrong" price?

Oh, you thought I'd go after the fact that this supposed common man has two cars in a country where the number of malnourished children out number those in sub-saharan Africa, didn't you?

Deregulating the price of fuel is a brave step, but I'm not entirely sure a wise one. Of course, the people making this decision would (should?) have thought about this before. The "right" price arrived at by a calculation that does not allow for some weighting of those worse off isn't right, after all. "Free" markets, that elusive concept, are not going to put weights on anyone.