Chocolate and Gold Coins

Friday, July 29, 2005

The Most Popular Blogger

Today is Friday. It is time for a light Friday post.

Who is the most popular blogger (MPB) in the Indian blogosphere? I’m not necessarily asking who has the most popular blog, although any big blogger would be an obvious candidate for MPB. By far, the biggest blog in the Indian/desi blogoshere is Sepia Mutiny, and, of course, the SM bloggers are all enormously popular, especially Abhi Tripathi (who once commented on this post) and Manish Vij. Other candidates might be Amit Varma of India Uncut, Prem Panniker of Sightscreen, Patrix/Ash of Desipundit and maybe Kiruba Shankar of Kiruba.

However, I would define popularity in a slightly different way than just, “I like to read his/her blog.” I would define popularity as, “I really like that person.” This gets back to a question posed by the post: “are blog friendships phony?” Can you really know that you like X just because X writes a nice blog and comments nicely on your blog. But if blogger were politicians running for office, you really wouldn’t have any other information. So maybe this is the way to think about the popularity question: “if all of the bloggers were running for class president, which one would you vote for.”

Again, you might vote for any of the famous Indian bloggers, but I know one blogger who would get a ton of votes way beyond the popularity of his blog: Sunil Laxman. Why? – Because Sunil comments on everyone’s blog. To some extent, he is everyone’s personal blog buddy. I don’t have any idea where he finds the time to do it. But I’m sure that a lot of minor bloggers (like me) really appreciate that someone bothers to comment on their blog, and therefore Sunil is enormously popular.

So here is the question: Whom would you vote for as your personal MPB? Please don’t vote for me – I say that because I would otherwise be hurt when no one did. Is there someone else who would be everyone’s blog buddy: Charu, Uma, Sayesha, Kaps, Patrix/Ash, or someone else?

Please comment.

Update: Read Vikram Arumilli's excellent post on ranking Indian bloggers by page rank.

Thursday, July 28, 2005

Private/Public Ownership of Natural Monopolies

A natural monopoly is a business that by nature would be impractical to duplicate. A subway system in a major city is a natural monopoly because you could not have two or more competing subway lines running on parallel tracks. The local utilities: gas, water, electricity, are natural monopolies. Even cable television is a natural monopoly. Governments often run these natural monopolies as quasi-independent government corporations. Sometimes these monopolies are owned privately and heavily regulated. In almost all cases, there is an attempt to set the price equal to average cost. Average cost pricing means no profits and therefore the consumer is getting the lowest possible price that can keep the natural monopoly going. Sometimes, the price is set below average cost and the government subsidizes the monopoly directly from tax revenue.

In a recent blog post by Atanu Dey in the new blog The Indian Economy, Atanu argues that the Indian railway service should adopt high-speed trains. He complains that the old trains in India putter along at just 80 kph (55 mph):

The so-labeled “super fast express” trains make their way at a stately 80 kms an hour average, pretty much what they were capable of doing forty years ago. Thirty years ago, the Shinkansens were doing 200 kms an hour and today they exceed 300 kmph. But in India, we maintain a dignified traditional 80 kms an hour for decades on end.

I was reminded of this when I read a recent article in the WaPo about a big subsidy that Congress was considering for the Washington Metro (our subway). The Metro nearly 30 years old and is showing its age. Trains have been derailing recently and the trains run about as fast as the Indian ones. The subsidy comes with strings attached to force this quasi-government corporation (WMATA) that runs the subway to become more accountable:

"We've seen bad management contracting on a fairly regular basis," said Davis, a Republican from Fairfax County who will introduce the bill this morning at a hearing before the House Committee on Government Reform, which he chairs. "These are built-in mechanisms that will make it harder to duplicate the kind of contractual failures that they've had in the last couple of years."

Finally, the bill stipulates that federal money would flow only if the Washington region creates a dedicated source of money for Metro, such as a portion of a sales tax earmarked for transit. That is a significant political challenge to regional leaders and would require the approval of legislatures in Maryland and Virginia as well as the D.C. Council.

"Our federal partners have thrown down the gauntlet," said T. Dana Kauffman, a Fairfax supervisor who chairs the Metro board. He said the lure of federal money might be enough to persuade local and state governments to create a stream of money for Metro. "This may be our best chance in a generation to get stable and reliable funding."

Read the full thing.

Have they considered raising ticket prices? That would cure the overcrowding problem and the revenue problem simultaneously, and it might reduce the need for additional trains.

However there is a bigger issue that both the Washington Metro and the Indian Railways share: these monopolies exhibit underinvestment. Instead of seeing new technology, we see the old technology persisting, and wearing out. Why is that? Well, if you price your commodity below cost, why would you want to invest more money in the production of it? Profits are the enticement that leads to new investment over time. But you need to be free to raise prices if you want to profit from improved service.

This is the fundamental issue with average cost pricing: the monopoly has no incentive to modernize and to reinvest money in maintaining its infrastructure. If the best you can do is earning zero profit, you can do that with the status quo.

Here is another possibility: suppose the government allows the natural monopoly to be fully private and unregulated but merely becomes a passive owner of a share of that company. Because firms will compete to be the owner of the natural monopoly, they will offer the government a sizable share of the stock in return for majority control of the monopoly. Then the government could earn a source of revenue by being a part owner of a lucrative monopoly.

The most important aspect of this plan is that the monopoly would then have the proper incentive to modernize. Profit would encourage the monopoly to modernize as soon as it becomes economically viable to modernize. And the decision to modernize would be based on sound economics and not on politics. When a politician gambles on a new public investment, he almost cannot lose. When a bureaucrat gambles on a new public investment, he almost cannot win. But when a owner risks his own capital on a new investment, he stands to lose his fortune if he is wrong, and he stands to make a fortune if he is right, so either way, his incentives are proper for him to make the correct decision.

The primary objection to this plan would be that it would probably increase fares substantially and the public would be hurt. Obviously fares would have to rise, but not as much as you might think. These natural monopolies have competition from other sources. A national railroad competes with airplanes and with cars. A subway competes primarily with cars. If the fares go up too much, utilization and revenue will fall. Also, the revenue that the government raises could help the poor, so the argument that the "poor will be hurt by a price increase" is not necessarily true. In any case, everyone will benefit from an investment in new technology if it is economically justifiable to use the new technology.

Another objection is that above cost pricing would be economically inefficient because some people would not ride the trains that could afford to pay the average cost price but cannot pay the monopolist’s price. These transactions would be lost in the economy and this is the classic “deadweight loss.” But we should recognize that this increased price would go partly to fund public services, since the government would be a co-owner of the monopoly. There is a deadweight loss associated with any tax, and this might not be any more inefficient that any other way of raising revenue. The biggest “deadweight loss” is the failure to reinvest in the monopoly. This plan would avoid this failure to reinvest.

Another benefit from privatizing the public monopoly is that other firms will try to buy that monopoly if they think they could run it better. I’m sure there are many corporations that could do a better job of running the Washington Metro than WMATA, but the Metro is not for sale at any price.

Wednesday, July 27, 2005

Aphorism of the Day

"Some people have got a mental horizon of radius zero and call it their point of view."

-David Hilbert (January 23, 1862 – February 14, 1943), German Mathematician. [link via Iyer the Great].

Tuesday, July 26, 2005

The Cycle Rickshaw

Saket (aka Vulturo), who writes and excellent blog, tells of his experience with old-fashioned cycle rickshaws in Delhi:

I did not quite like the Cycle-Rickshaw idea when I came across it, for I believe it is a bit inhuman to use human beings in the role of “Beasts Of Burden”. But the DTC Buses which run here are worthless, and finally everyone has to fall back on cycle-richshaws. However, for the first two days, on moral grounds, I stoutly refused to use a cycle-rickshaw to go anywhere and used my own two feet instead. On the third day, a cycle rickshaw driver explained the logic to me “Agar aap nahi baithenge to hum paise kaise kamaenge” and then I somehow reconciled myself. Still, one person per rickshaw is somewhat acceptable, I think - but I sometimes I see even two or three people in them with the rickshaw puller huffing and panting like a dog while pulling his quarry. What is apalling is people even haggle with the poor rickshaw puller, just to save two to three rupees.

Charu, who writes an excellent blog, writes of her similar experience with cycle rickshaws in Jalandhar:

Jalandhar is a small town in many ways - nice friendly people who want to know everyting about you and invite you home for garam khaana (hot food) right after the first meeting…

And small enough for people to commute by cycle rickshaw… Five rupees can take you a long way in this city. And people bargaining with the rickshaw puller - paanch rupaiye kyon? paas hi to jaana hai - teen rupaiye le lo (why five rupees for such a short distance - take three rupees)

I guiltily think about how little five rupees means to me. I wave away the rickshaws who stop near me and start walking…

What is worse - to ride on one of them, with another human being pulling you? or walking away and depriving him of this opportunity to earn his living? I never know…

I have taken a few rides on a cycle rickshaw, but not in India. They are a sort of tourist novelty in Victoria, Canada (a beautiful city – Sunil you and your wife must take the ferry over there). I did not feel any bad feeling about being pulled by another human being because these guys are college students and they are just trying to make a little summer money. They weren’t desperate. But if they were disparate, wouldn’t that mean I had a duty to help them?

The reason we might feel bad about the cycle rickshaw is because it is a holdover from a previous time when economic opportunities were scarce and some people went to this occupation out of desperation. We feel intuitively that a fair society would not cause people to do this. It might be similar to the way we might view prostitution or bar dancing. We think that this should not be happening, and we should not help make it happen. Of course, the analogy to prostitution is extreme: both the rickshaw driver and the prostitute offer their bodies, but the similarity ends there.

However, people should be free to do as they please, and if a man wants to pull a cycle rickshaw, that might be the best employment opportunity he can currently find. We cannot help him by simple refusing his services. Of course, we should be free to refuse his services if we really prefer to walk. But there is no reason to deny him a living simply out of a sense that his job shouldn’t exist.

Instead of thinking that the cycle rickshaw represents the dark side of the free market, we should see it as the dark side of socialism. In a free market, cycle rickshaws only exist as a tourist novelty. In socialism, it is a way of life for a segment of society that was denied other employment opportunities.

Monday, July 25, 2005

The Idiot Diet

Recently, America has been hit by the Atkins Low-Carbohydrate Diet. This is merely the latest version of the idiot diet. A sensible diet is the one your mother told you to eat: eat your fruits and vegetables, and lay off the junk food. The idiot diet “works” on the theory that if you eat only the “approved” foods, you can eat as much as you like and not gain weight. It can work, but only for a silly reason: the “approved” foods are so limited you lose interest in eating.

Let me make an analogy: suppose you spend too much money and desire financial help. The planner tells you can spend as much money as you like as long as you spend it on the approved things. When you find out what the things are on the approved list, you understand why you won’t overspend: you can only spend money on things you didn’t want. You can only visit places you really didn’t want to visit (East St. Louis, Jamshedpur, etc.), you can only buy a make of car you really don’t like, and you can only live in a house you don’t like. Basically it is like forcing yourself to live in the old U.S.S.R. in the middle of the U.S. Why would you want to do this?

One reason the idiot diet works is that it makes eating very inconvenient: you can never find the approved foods in the vending machines, or at your local restaurants. After restraurants and snack food makers hopped on the Atkin’s craze, a funny thing happened: the diet stopped working so well. It turns out you can easily gain weight by eating dozens of low-carb brownies a day, (who would have thought?). This gets back to the ideas I presented in my post on the Economics of Obesity: weight gain is largely a result of the low cost of pre-prepared food. You make it easier to overeat and obesity happens.

The key to weight loss and weight management is to understand that the daily calorie constraint is just like a budget constraint, and you have to spend this “money” wisely. You have to decide which foods are worth the caloric cost and which ones aren’t. I always avoid deep-fried foods, not because I don’t like them, but because I don’t like them enough to give up other foods I like. If I eat donuts, I cannot have chocolate. And we need to understand that we need to eat smaller portions of the foods we like, even it they are not really high fat. Over time, we might get used to eating too much food per meal, and calories are calories.

Friday, July 22, 2005

My “Friend” in Abidjan

I did not know I had one until I received this letter:

Dear Friend,

Good day and Compliments,

I am writing this letter in confidence believing that if it is the wish of God for you to help me and my family, God almighty will bless and reward you aboundantly and you would never regreat this.

I am a female student from University of Cote,D,Ivoier Abidjan. I am 25 yrs old. I'd like any person who can be caring, loving and home oriented. I will love to have a long-term relationship with you and to know more ab=out you. I would like to build up a solid foundation with you in time coming if you can be able to help me in this transaction.

Well, my father died earlier two months ago and left I and my junior brother ehind. He was a king, which our town citizens titled him over sixteen years before his death. I was a princess to him and I am the only person who can take care of his

wealth now because my junior brother is still young and my mother is not literate enough to know all my father's wealth. He left the sum of USD 7,350,000.00 dollars (seven Million, Three Hundred and Fifty Thousand US Dollars)in a security company.This money was annually paid into my late fathers account from Shell petroleum development company(spdc)and chevron oil company operating in our locality for the compensation of youth and community development in our jurisdiction.

I don't know how and what I will do to invest this money somewhere in abroad, so that my father's kindred will not take over what belongs to my father and our family, which they were planning to do without my present because I am a female as stated by our culture in the town.

Now, I urgently need your humble assistance to move this money from the security company to your bank account and I strongly believe that by the grace of God, you will help me invest this money wisely.

I am ready to pay 20% of the total amount to you if you help us in this transaction and another 10% interest of Annual After Income to you, for handling this transaction for us, 5% is for any expenciss which you will strongly have absolute control over.

If you can handle this project sincerely and also willing to assist me in lifting this fund, kindly reach me.

Please, note that this transaction is 100% risk free and I hope to commence the transaction as quick as possible, I will send you my picture as soon as I hear from you.

Yours sincerely,
[many sics]

Such nice people: they want to give $1.4 million dollars. Who says there is no money in blogging!

I think I can trust these people; after all, they are royalty and they are not from Nigeria.

Just Keep Reading

I was reading aloud from the first Harry Potter book to my son (6 years old).

“Why are there no pictures in the book, Daddy?”

“Books for adults and bigger kids rarely have pictures. The author wants you to imagine the scene. She might tell you a few details but you must use your own imagination to complete the mental picture. You must imagine what Harry’s school, Hogwarts, is like. What you imagine and what someone else might imagine will be two different things.

This is the wonderful thing about books: no two people will imagine exactly the same scene so everyone who reads a book will be reading a unique story. You complete the story by adding your own mental images.”



“Just keep reading.”

Thursday, July 21, 2005

Buying the People’s Votes With the People’s Money

Every few years, the residents of Tamil Nadu have a curious custom. They vote for the, “most contemptible Tamilian.” (MCT) Each of the recent contests has pitted J. Jayalalitha and M. Karunanidhi (who named his son “Stalin”). The “winner” gets to be Chief Minister. They have fun arresting each other.

Currently the MCT is Jayalalitha, a heroine of Tamilian movies who now plays the heavy (she weighs about 300 pounds) in Tamilian politics. She certainly has skills as a politician.

Recently, Charukesi (who writes an excellent blog) wrote about a program in which Tamil Nadu would donate bicycles to girls of poor families (lower caste) in Tamil Nadu. I could not find the exact news article Charu referred to, but there is a little background here and here. Both Charu and the commenters on her blog viewed this news favorably, but I think nothing good can come of this. To me, this looks like a classic example of a politician trying to buy the people’s votes with the people’s money, and that is simply wrong.

The justification for the bicycle giveaway is that it helps these girls gain an education. Who could be against an education? It is a good investment. But there are several questions here:
1. Are these bicycles going to all disadvantaged girls or is Jayalalitha playing favorites?
2. What about disadvantaged boys? Does India really want to play gender politics on top of caste and religion politics?
3. If the bicycles were really a good investment, wouldn’t the vast majority of these families already have a bicycle (of perhaps superior quality)?
4. Do these bicycles only go to homes where the girls have to travel at least 3 miles or more to get to the nearest school or do they go to all disadvantage girls?
5. If it is a good idea for government to buy bicycles in the name of promoting education, would it then be justifiable for the government to buy pencils, pens, paper, electric lights or gas lights, tables, chairs, beds…(you get the idea) in the name of promoting education? After all, everything necessary for the home could indirectly promote learning in a direct or indirect way.

I believe that the government should stick to providing public goods: roads, utilities, police protection, etc. Goods that can be provided in the private sector should be paid for by private money. There may be economic justification for a subsidy here or a tax there (and this can get out of hand if not checked) but Indians should insist that they have the final say about what goods they get to buy for their homes.

Charu suggested that without government help, the poor families could not afford the bicycles since a bicycle could cost as much as 3 months salary. This is probably true for a mundane reason: they are not necessary for education or for any other purpose. A distance too far to walk for you or me might not be too far for a poor girl. If the bicycles were necessary, these villagers would definitely find a way to buy them. In Sunil Laxman’s blog, he recalled talking to a waiter (not the lowest income worker, but not rich) and he said it was not uncommon in Orissa for people to spend the equivalent of 5 years of income for one wedding, (the mind boggles). I've been told that that Tamil Nadu wedding are not so extravagant but still very expensive. Obviously, if people could afford to spend like that for a wedding, it would not be too much to spend 3 months of wages to buy a tool that presumably is critical to the daughter’s educational success. I strongly suspect that these bicycles will largely wind up being sold for annas on the rupee.

The main reason why you don’t want politicians spending your money to buy you gifts is that you could have spent that money yourself. If the choice is between spending the money on these girl’s bicycles and spending the money on masala dosas for Jayalalitha and company, then who could argue against the bicycles. But if the money would have been spent on roads or other legitimate services, or rebated back to the taxpayer, the people are poorer. I remember riding on the roads in Tamil Nadu in 1995. Perhaps they are better now (I would hope so), but if not, that is where the money should go.

Radical Mastectomy

My sister died of breast cancer many years ago. Cancer robbed her of easily 40 years of life, maybe as many as 50 or 60 years of life. It also robbed her children of a mother and (if they have children) her children’s children of a grandmother. I should add to this list that it robbed my parents of a child, my brother and me of a sibling, and her husband of a spouse.

This tragedy might have been averted if she had had a forewarning of her cancer. Her cancer was rare and almost certainly genetic and unstoppable. She might have saved her life if she had known and opted for radical mastectomy.

Some women do know they are at higher risk of cancer and opt for this extreme procedure. It isn’t an easy decision to make. If you knew for sure that you would get cancer, you would have to do this. But what if the risk is probability p. For what value of p would sure a radical procedure be worthwhile?

For any woman with small children, this would have to be a serious concern. Medicine is revealing more about our genetic predisposition to cancer, and you might become aware that you are at higher risk. Would you consider such a procedure?

For husbands, do we feel a conflict of interest? We love our wives and we love our children so the thought of losing a loved one is terrifying. But a husband might…ahem…have grown fond of his wife’s breasts, and if the probability p is low, he might feel conflicted. But does this really enter into the equation?

For what value of p would such an extreme procedure be warranted? Please comment.

Also, if you care to admit (or blatantly lie about) how altruistic you are, please add your comments to this growing comment thread here.

Wednesday, July 20, 2005

How Altruistic Are You?

In my previous post Your Vote Does Count, I showed that voting is a worthwhile activity if you are altruistic: you care about the welfare of others. Why would you care? This gets back to a previous post of mine: The Problem With Game Theory and the follow-up Excessive Morality, in which I argued that people do care about harming others, if you are ethical and you believe those others are ethical. If we are ethical, we feel guilt and self-loathing if we are the cause of harm in others, as it should be. This instinct helped us in times of war to band together and fight the barbarians. The truly selfish people never left their genes to future generations.

But how strong is the altruistic instinct? How much do you value helping others vs. helping yourself?

Suppose X is a good sum of money (maybe $10,000 or 1 lakh of rupees). Suppose M is a multiple: M might be 10, or 2, or 1.1, but always greater than 1. Suppose Bill Gates gives you an interesting choice: you can either donate M*X to the charity of your choice anonymously, or you can receive X for yourself and (M-1)*X will be wasted (perhaps donated to the Robert Mugabe fan club or to NAMBLA). Would you be selfish and take the X and waste (M-1)*X or would you be altruistic and donate the entire M*X to charity anonymously.

No one will know what your choice is. If people knew about it, you will definitely feel the pressure to do the right thing, but this is a private matter. Be honest with yourself: do you really care that much about others?

For me, I know for sure that I could not live with myself if I took X instead of donating 10*X to charity. Seeing 9*X going to the Robert Mugabe fan club would just kill me. Even for M=2, I think I would prefer the charity, but I cannot say for sure how greedy I would be at that point to be honest. For M=1.2, I’m feeling pretty greedy. I might think that I will wisely invest the money for the greater good someday. Of course, the greater good will be distributed primarily to myself and my family. But it’s good to be a little selfish. No one will take care of numero uno better than numero uno. So I will guess the indifference value of M for me is about 2.

What would your indifference value of M be? Be honest and please comment.

Tuesday, July 19, 2005

Your Vote Does Count

I recently had lunch with Bryan Caplan (and Alex Tabarrok) but he didn’t mention that he is writing a book about voter irrationality. Here is a recent Econlog post in which Bryan talks about his research. I wished we could have talked about that subject because I do know something about this subject.

One thing that has puzzled economists is why people vote against their interest: many rich people would vote for higher taxes on the rich, many poor people would vote against it. Another puzzling point is why people bother voting at all: the probability that your vote would make a difference in an election is small. These turn out to be related issues.

What is the probability that your vote would make a difference? There are two possibilities: there are an even number of voters not including you, they split 50-50, and you cast the deciding vote, and there are an odd number of voters not including you, you make it a perfect tie, and a coin flip or some other means causes your preferred candidate to become elected. In the each case, you only make a difference is with probability 50%, so on average you vote makes a difference is .75 times p (Update this should be 0.5 time p - my bad), where p is the probability that the election will be within one vote of a tie.

What is the probability p? Politics tends to create two candidates who both can garner at least 40% of the vote. None of the recent U.S. Presidential elections have been more lopsided than 40-60. So if there are 100 million voters, a rough approximation of the probability p is to assume that the winner has equal possibility of getting 50 million votes or 60 million votes or anything in between, (it’s actually more likely he will get closer to 50 million, but we’ll ignore that here). So the probability p of a near tie is about 1 chance in 10 million, or 10 times more likely than the probability that you would win a random lottery of the same number of people. So the probability that your vote would be decisive is 5 times more likely in a general election than in a lottery of the same number of people.

Now, what is the benefit of voting? If you only include the benefit that you receive, it would never justify your bothering to vote. But voting is one of those rare circumstances where your actions affect others much more than they affect you. An intelligent vote could provide benefits not only to you, but also to society in general. Wouldn’t it have been nice if more people had voted against Adolf Hitler , Robert Mugabe, or Hugo Chavez when they had the chance? The outcomes of elections can be the difference between war and peace, socialism and capitalism, poverty and prosperity. The total benefit to society could be enormous.

Suppose that you are more intelligent and virtuous than average (otherwise definitely don’t vote). Suppose that there are two candidates and one is good and one is bad, but the bad candidate is clever and he might just win. If the bad candidate wins, it will cost $2000 to every good person in the country. You naturally don’t care about the loss in benefits to the bad people who might have benefited from the election of the bad candidate, but how much is it worth to you that the other people benefit from the election of the good candidate? Even virtuous people care more for their own family than for the family of strangers, but it would not be unreasonable for people to feel very bad about actions that might hurt a lot of people. Let us say that if you get to help strangers, the benefit to you is 10% of the benefit to the stranger. So the benefit of the good person getter elected to you is $100 times number of people in society times the probability that your vote makes a difference. The probability is small, but the benefit is huge. In this case the net benefit is $500 or a little less than 40% of the benefit to you personally.

I don’t know about you, but I don’t know anything else I will be doing in the next year that would generate a benefit of $500 for about an hour of time. It is certainly worthwhile voting.

Several observations:
1. Only vote for candidates who have a chance at winning, never throw your vote away on a third party spoiler candidate. It would be like throwing $500 away.
2. It is not worthwhile voting if you know nothing about the two candidates. It is worthwhile learning about them.
3. Be honest with yourself. Everyone thinks that they are voting for the “good” candidate but at most, only 60% ever does. You might be voting for the “bad” candidate.
4. It really doesn’t matter what you will likely get from an election since the probability that your vote would be pivotal is small. What matters is which candidate is best for society. Only vote for the candidate who will bring about the most net benefit to society.
5. If you are selfish and really don’t care about other people, definitely don’t bother voting.

Update: read this follow-up piece: How Altruistic Are You?

Sunday, July 17, 2005

The Economics of Obesity

Every once in a while, my wife will drop a subtle hint that I need to lose weight like poking me in the tummy and saying, “Hey fatso.” Actually, I am not all that fat: only 20 pounds over my ideal weight, which is probably typical for an American male of my age. But, sure, I could do better, and I’m working on it, off and on.

So here’s an interesting question: why has obesity become such a problem in America and other countries in the early 21st century? The easy explanation is: we can afford to be obese. For eons, 99.9% of humans never were wealthy enough to afford to overindulge. For most of human history, the major dietary concern was getting enough calories, and this is still the major concern in much of the developing world. Our bodies are efficient at solving the problem of too few calories, but not so well equipped to solve the problem of too many calories. Our bodies are busy storing away calories for a famine that will never come, and we cannot reprogram them to better handle our current caloric prosperity.

The fundamental cause of obesity is the cheap availability of pre-prepared food. This includes snacks in vending machines, coffee and pastry at the coffee houses, fast food restaurants, and store baked cookies and other snacks. We are tempted at every corner to overindulge, and many of us do that.

Let me give a simple example of how ease of eating leads to overindulgence. Try the following experiment at your office: leave out a bowl of almonds with a sign saying, “Eat me” by the coffee machine. In first case, the almonds are unshelled and you leave a nutcracker. In the second case, the almonds are shelled. What do you observe? I can tell you: the shelled almond will be consumed in minutes, but the unshelled almonds will be largely ignored.

Why is that? It cannot be that the unshelled almonds aren’t as tasty. It cannot be that the calories needed to shell an almond are even remotely close to the calories you could get from eating the almond. The answer is that overindulgence is about ease of opportunity: if you increase the cost of getting the food, people will be less likely to indulge. But this doesn’t make rational sense: the effort is small compared to calories involved. If you were starving to death, the fact that the almonds were unshelled would make little difference to you, you would still eat them until the hunger subsided. But overindulgence is not about satiating hunger, but about acting on an instinct to eat food if it is available. If you have to put work into getting food, you think about it, and you might decide, “I really don’t need this.”

This is one reason why we tend to eat a different diet when we prepare our own food and when we go to a fast-food restaurant. When we prepare our own food, we are typically not hungry, so we think rationally about a good combination of taste and nutrition. When we get to work and look in the lunchbox when we are hungry we will eat whatever we packed and be satisfied with it, but we might have wished we had packed some cookies. When we go to a fast-food restaurant, we are already hungry and we have plenty of money to buy whatever. So when the server asks, “Would you like fries with that?” we might be tempted.

The vending machine is another big temptation. We may have neglected to pack cookies in our lunch but we can always put a few coins in the machine and get our snack. If you look at the people who frequent the vending machine, you will see that overweight people visit more frequently. It doesn’t matter if they are buying “healthy snacks,” they are buying food simply because it is readily available, and calories are calories.

The key to losing weight is to recognize that the true cost of food is the calories and not the money you spend. You have a calorie constraint of maybe 2000 calories a day. If you eat more than that you either have to burn those calories in exercise or you gain weight. If you gain muscle mass, you can eat more than 2000 calories a day and still be slim, but muscle takes effort to maintain. So basically, you have a budget constraint, and you should plan your diet each day according to that budget constraint.

Imagine if the food you ate were priced at ten cents per calorie, but you are given 200 dollars to spend on food or anything else per day. You wouldn’t starve, but you certainly wouldn’t overindulge. You would make much more sensible decisions about what to eat and how much to eat. You wouldn’t bother with that fifth slice of pizza and you wouldn’t be visiting the snack machine either. If you just believed that this is reality, you could easily lose weight.

The reason this strategy doesn’t work for me or for others is not because it is foolish but because we find it hard to stick to the plan for the many months and maybe many years necessary to make it work. It requires believing that you really cannot have that chocolate cake that the company offers free on special occasions simply because it will put you over your quota. You naturally think, “Life is short, and you only get so much cake offered to you. Eat it while you can.” This short-term vs. long-term conflict is at the heart of the obesity problem. And I am as guilty as most people in succumbing to the short-tem mentality.

Let me give you an analogy: suppose you went to college and they said, “Attend the lectures, read the text, and do the homework assignments. However, all tests will be given at the end of four years.” How many people could pass college in that way (not many)? People need to have a long-term goal broken down into many short-term goals. And someone needs to hold these people to these short-term goals, or else they can never pace themselves to achieve the long-term goal. People are not good at keeping with a long-term goal by self-discipline, but thankfully markets have emerged to help us.

So why haven’t markets emerged to help pace people to lose weight. Well, to some small extent some of the weight-loss companies are moving in that direction, but they are burdened by their original core philosophy: their wonderful food (in reality, not so wonderful) will help you lose weight. But a bigger reason is that it is too easy to cheat the system if you want to hold people to a weight-loss scheme. If you insist that someone must be less than or equal to X pounds by Y date, many people will get close to the date, discover that they might not make it, and then cheat by dehydrating themselves. This kind of test can also dissuade people from gaining muscle mass, which is very useful in losing fat.

The key is to develop an easy to use inexpensive technology that measures fat content and not just weight. Once weight-loss companies have this technology, then holding their clients to a reasonable weight loss goal will be safe and easy. They would be, in effect, increasing the cost of food, and forcing you to make more intelligent choices about food.

There are scales that claim to measure your body fat but my experience with them is that they are essentially useless. Underwater weighing can yield the true body fat, but it violates the easy and inexpensive criterion. This is an area that needs work.

But there is another big factor to consider which I wrote about here: once you figure out a workable system for motivating people to lose weight and you show that it works, what is there to prevent a thousand other firms from doing the same thing? You need to have an answer for that one as well.

Friday, July 15, 2005

A Market For Detecting Terrorists

I suppose I have terrorism on the brain this week and I promise that I will move on to other subjects next week, but this problem interested me: how does a society efficiently weed out potential terrorists from the honest visitors. The recent London bombers were likely homegrown, but terrorism will soon die if they have to recruit from free countries, so guarding the borders is still each nation’s best prevention technique.

However, my family and millions of other American families have relatives living in other countries, and we don’t like the fact that it is now such a pain to acquire the necessary visas to travel. Sure, we all have to do our part to prevent terrorism, but in my family’s case, would any rational person think that my wife’s parents who are in 70’s, are not Muslim, and have no blots on their records pose any serious threat? An inefficient method of detecting potential terrorists will impose two costs on Americans: it will greatly inconvenience Americans who want their extended families to visit and perhaps immigrate, or it will let in real terrorists, or (most likely) both.

Can we use markets to detect terrorists? Insurance markets are very efficient at preventing certain types of people from driving, for example. They can tell which people are the most likely people to cause accidents, and charge them more, and this can serve to exclude certain people who are at high risk to cause accidents from driving at all. Can a similar system weed out terrorists?

Suppose that the U.S. State Department (which determines who can travel to the U.S.) decides that as a safety precaution, all visas require an insurance contract. The insurance contract will pay a large penalty (perhaps $10 million) for every murderous act of terrorism the visitor commits if convicted or otherwise established in court. So if a terrorist commits a mass murder involving 100 people, the insurance company is out $1 billion. This gives the insurance company a powerful incentive to determine if a tourist is really a potential terrorist.

On the other hand, the insurance companies would quickly determine that they could make easy money from people who are essentially harmless. If they charge $100 to your grandma from India, they’re getting almost $100 in pure profit. Competition will drive down these premiums quickly and your grandma will pay only a few dollars.

The nice thing about this system is it can quickly exploit the Islamic terrorist Achilles heel: they’re no good at lying. The insurance companies will use polygraph tests on anyone who is even remotely suspicious. Of course, the tourist could choose not to take it, but he or she would have to pay more, and so he or she would probably agree to take the test (the results cannot be used to convict anyone of anything). They’ll ask: “Do you think Osama bin Laden is evil?” A potential terrorist will likely stumble at that question.

This method would make the process of getting a visa quick and painless for anyone honest and painful for the potential terrorist – as it should be.

Wednesday, July 13, 2005

Indian Roulette

At the beginning of Jhumpa Lahiri’s excellent book “The Namesake,” the parents of Gogol meet for the first time in the infamous “interview.” I’m talking about the curious Indian custom of arranged marriage. Ashima and Ashoke have never met each other and know essentially nothing about each other except that their parents think they might be an acceptable match. Ashoke never says a word; he just looks down at his knees. Ashoke’s father talks in detail about the qualifications of his son. The interview lasts for maybe two hours and then each of the principles, the prospective husband and wife, must give either thumbs up or thumbs down. If it is thumbs up, they will wed relatively soon: probably within two months.

From a western perspective, the Indian arraigned marriage appears like Russian roulette with a spouse replacing the bullet: it’s a gamble with your life of the most extreme sort. Of course, love and marriage is always a gamble, and western marriages do not succeed in nearly half the cases despite the advantages of love. However, in the west, at least the participants get to throw the dice themselves, and not let their parents control their fates. Perhaps the advantage of the arraigned marriage is the low expectations that such unions bring: they seldom yield a big disappointment because no one really expected true love.

Perhaps I have a voyeuristic mind but I cannot help wondering what the wedding night for Ashima and Ashoke would have been like. Wouldn’t that first intimate meeting be a bit…awkward? How do people who are strangers and are not really physically attracted to one another find the emotion to perform the act? Of course, some westerners have many casual relationships, and I really don’t understand that either. But, again, it comes down to choice: you get to choose whom you would like to make love to. What strikes me about the arranged marriage is that it seems so passive. How do emotions emerge from a passive pairing of people, or is the sexual union completely emotionless?

On the other hand, perhaps there is genius in focusing purely on the objective qualities of each spouse. One reason why so many western marriages fail is that the two people are incompatible. Why is it that people are naturally inclined to find spouses that are so different than themselves? Perhaps it’s instinct: we always find the girl (or guy) in the other tribe to be especially cute because she (or he) has fresh genes to enrich the gene pool. But marrying outside your own culture creates a natural tension in that marriage: there is never a common vision about how things should be done. And marrying outside of your socioeconomic class is always just folly.

Many people have noted that arranged marriages are more like a business merger than a friendship. The marriage is designed to align two dynasties (minor dynasties in most cases to be sure) and therefore the extended family should have a say in this business decision. On the other hand, this dynastic view of family and marriage reinforces the incestuous process of breeding with caste and sub-caste. (Sunil Laxman has a nice article about caste here.) In a world of love marriages, caste would tend to dissolve over time because, as I said, “The girl in the next tribe always looks cuter,” (and I’m sure the same holds true for the guys in the next tribe).

I have been married for twelve years and observed many marriages; some love marriages and a few arranged marriages. I have seen only a few love marriages that have failed; this might be an example of small sample bias. The arranged marriages I have seen have seemed happy on the surface but there was typically enormous tension underneath: I would say that many of these marriages would have failed if divorce had been an option. But, again, this is a very small sample.

My belief is that the age of arranged marriages will gradually pass. Young people will insist on exercising their own sovereignty over their choice of spouse. In some sense, arranged marriage has qualities like the old socialist system: the decision is made by third parties in the best interest of the greater society and not necessarily in the best interest of the betrothed. In a free market system, the potential bride and groom make the mutually beneficial deal, and third parties either embrace it or sulk. Parents might not approve at first, but if they respect the fact that their children are now responsible adults and captains of their own destinies, they can learn to accept their children’s choices.

The essence of freedom is allowing people to make their own mistakes instead of insisting that they live with the mistakes others have made for them.

In the case of my wife and myself, we dated only ten weeks before I proposed to her. It was totally impulsive on my part and the best decision I ever made. Why was the courtship so fast? When you know, you know. Hesitation merely reinforces the notion that maybe you’re not sure. I was too intelligent to be anything but sure.

There is never a day that I don’t thank my lucky stars that such a wonderful woman came into my life.

Perverse Morality

A few days ago, I wrote about Excessive Morality: the idea that too many rules spoil the religion (those word are from desipundit). But what about truly perverse morality: a “morality” that is not moral in any sense but pure madness. It can happen. People can be so intoxicated by religion that they because suicide bombers and kill themselves, many innocents, and whatever cause they were “fighting” for.

Sepia Mutiny has a very interesting post about the people who are suspected of causing the London Attacks.

Hussain was described by friends in Leeds as a tearaway. He drank and dated British women before being sent to Pakistan to visit relations. On his return he was said to have become a devout Muslim, turning his back on his previous life.

Read the Times article. Read the Sepia Mutiny post.

In my post a few a days ago, I joked that Muslims should drink more beer, but here is someone who really needed to drink more beer. Apparently, he was an empty vessel and this void was filled with murderous fanaticism.

What is truly scary is that he was not from some backward country that was ruled by evil zealots; he came from a great free society. That this madness could spring from such soil should make us all ponder. To what extent are we immune or susceptible to this madness? Is this unique to Islam (is it an inherently antisocial religion? - I don't believe so) or is it possible whenever zealotry is tolerated (I believe it is the latter, obviously)?

A deeper question is, “Is religion evil?” I would have never imagined that people would follow a truly evil religion, but are all religions essentially evil because the base their morality on a pure fiction: “What God had commanded us to do”? I would insist that this is a fiction because there is no possible way we human could ever know the difference between what the true God of the Universe would want vs. what some pretender says that the true God of the Universe would want. The essence of faith is to suspend the common sense that is critical in good judgment everywhere else in life. Is faith criminal folly?

I am not at all comfortable with the belief that faith is always criminal folly, but it clearly can be for some people. I always used to believe that people’s morality didn’t really come from reading the holy books but came from people’s common sense, and I still believe this is true for the most part. Religious people generally are simply people who care a lot about others and would like us to live more harmoniously (perhaps they should become economists). But they need the crutch of the almighty deity to justify their notions of morality. There is clearly a danger in this.

On the other hand, if we all abandon our faiths, would we all become amoral uncooperative game theorists? I really wouldn’t want to spend my life in “Non-Cooperative Game Theory Land,” with a bunch of people who really played life like that. The world could use a new religion, but the religions of the world are usually created by people who claim to have talked directly to The God of The Universe. Typically such people lack credibility and probably lack sanity as well.

Could a religion exist merely as a code of ethics without the superstitious mumbo-jumbo?

Tuesday, July 12, 2005


This weekend I made Idlis (spongy rice cakes). The traditional condiment for Idlis is coconut chutney. I have made this many times, but I still mess it up.

I added the coconut, the dahlia (dry roasted channa daal), the green chilies, and some water and tried to grind it up. I tasted the mixture and realize that I added way too much dahlia (it doesn’t take much, maybe one tablespoon for a cup of chutney).

So I took some of the chutney mix and put it back in the mixer (Sumeet makes an awesome mixer). I looked for some more coconut, but we were all out. So, in desperation, I just took a half cup of almonds, thinking: “nuts are nuts.” I ground it smooth. Then I added too much salt so I added a little sugar to hide the salty taste. I was thinking this chutney would be a big disaster.

So how was this salty sugary almond chutney? Not bad at all actually. Of course I have no real sense of what traditional chutney is, so I’m more open to trying variations. If you give someone from India a pizza made with cheddar cheese, he might like it, but an American might think it was really odd tasting.

So the real test was my wife. She’s from Tamil Nadu. Surely she would know that I substituted almonds for coconut, wouldn’t she? Well, I was just curious if she would notice without my telling her. She ate it. I asked her how it was. She said that it seemed a little sweet, “did you add sugar?” I admitted that. “You forgot chilies.” I had not forgotten, but I should have added another one since the original chilies got diluted. But she never mentioned the almonds.

Actually, I think the chutney came out creamier than usual. Maybe substituting almond for coconut is a real option. Almonds are much better to eat that coconut.

Monday, July 11, 2005

Are Blog Friendships Phony?

I came across an interesting post (via Patrix's desipundit) that categorized the visitors to blogs. Most bloggers would probably agree that the only visitors that really count are the banterers and the loyalists: the ones who come by often, leave comments, and maybe post links on their own blogs (if they have them). Although it might be nice to have thousands of visitors a day (which obviously I don’t), if none of them ever commented, or e-mailed, or linked, it would be difficult to believe that your blog made any difference to anyone.

Suppose A, B, C, and D all have blogs and they all read each other’s blogs daily. They comment frequently on each other’s blogs. They frequently link to each other’s blogs. If they all lived in the same city, they might meet and chat and be the best of friends. But A, B, C, and D live in different cities, and will probably never meet. If they never meet, does that mean that they really aren’t friends, they’re just strangers?

My wife (who doesn’t blog and views my blog with contempt) is convinced that “blog friends” are merely strangers, and she cannot see why I would waste precious time writing for strangers. She has a point: if you have never meet someone, then they would be strangers of a sort. But they’re strangers you know a lot about, and they seem nice and interesting and you might form some empathy toward them as if they were your “real” friends. I don’t doubt if D above were to announce that he was getting married or his wife just had a new baby, A, B, and C would be a bit excited about it.

I started this blog as a means for me to write about ideas I had. When I was at the U of Minnesota, I would frequently chat with my classmates about various subjects. It was fun to just to share ideas with peers who could understand my way of thinking. After leaving grad school, I found that my mind was atrophying into mush. I thought that maybe writing about my ideas would force me to keep thinking and to improve the quality of thought and the quality of my writing in general. But, I found that what keeps me blogging more than anything is the fact that there are a few people who read my blog and comment on it.

I remember writing to Amit Varma about what he considered to be the benefit to him from being the great blogger of India. He told me that meeting fellow bloggers at the blog meets meant a lot to him because he is somewhat shy and wouldn’t meet that many people otherwise. It is funny that every picture of him has his face blocked by someone else because he always stands in the background.

It was very nice last week when I got to meet famous bloggers Alex Tabarrok and Bryan Caplan. But such meetings are really rare (they’re the only people I ever met through blogging). I think that blogging is an excellent way of finding people who share your interests and views, but these people might be living on the other side of the world and probably not in your city.

So let me ask you: if you were D and C came to your city, would you be interested in meeting him in person? Why or why not, please comment.

Saturday, July 09, 2005

Excessive Morality

It occurred to me that there was a very interesting connection between two posts I wrote last week. The first post was the Problem With Game Theory and the second was my somewhat controversial post The Curse of Moses. In the first post, I argued that non-cooperative game theory ignores ethics which I defined as a rule which if violate would lead to self-punishment. We have a conscience and we would feel bad if we knew that we hurt others. In the second post, I argued that too many rules spoil the religion, especially if they are very old obsolete rule that no one in the present generation had any role in creating. My idea was that maybe the problem of “too many old rules” is essentially a problem of useless self-punishment. That morality (which is just the ethics of a particular religion) could be a bad thing if it becomes excessive.

Let me clarify this idea with some examples. The first example would be typical prisoner's dilemma type game. Suppose you are dropped into world where you play lots of games with strangers that you will never meet again. The game is this: if you both cooperate, you both get $1000, but if you defect, you get an extra $100 but the other player gets $1000 less. So these are the possible outcomes:
  1. (c,c): $1000; $1000
  2. (d,c): $1100; $0
  3. (c,d): $0; $1100
  4. (d,d): $100; $100
Now looking at these outcomes, it is clear that it would be a nasty thing to play “defect” on the other guy. But, hey, you’re going to get an extra $100 if you play “defect” instead of “cooperate” regardless of what the other guy does. You don’t know him, and you don’t know what he is going to do. It might be tempting.

Now here is where morality comes in handy. Suppose the two players are devoutly religious in the same religion (both Muslim, both Catholics, both something). No way will they cheat a fellow believer. It wouldn’t be worth $100 to risk Hell and the self-torment that would come from knowing that you let down your fellow believer. Religion has it uses: you both get $1000.

This is why people are so bigoted against unbelievers: they’re bad people who might play "defect" in the cooperate-defect game. I can trust my fellow believer but not the infidel. In general, most of us would not be very comfortable in a day at “Non-Cooperative Game Theory Land” if we had to spend it with people who really played these games non-cooperatively.

However, morality doesn’t necessary lead to good outcomes. Morality could just as easily lead to bad outcomes. Let us just change the payoffs to the cooperate-defect game above:
  1. (c,c): $100; $100
  2. (d,c): $1100; $0
  3. (c,d): $0; $1100
  4. (d,d): $1000; $1000

In this case, playing “defect” hurts the other guy, but not too much. Both of you would be better off playing “defect”. But moralists would never be comfortable with the idea that hurting others might be acceptable if it passes some sort of cost-benefit test. So two devout believers would end up playing “cooperate,cooperate” and wind up with only $100 each instead of $1000 each. Morality really failed them here.

Let me give a real world example: beer. Society is much better off with beer than without it. I agree with Benjamin Franklin who said, “Beer is proof that God loves us and wants us to be happy.” But while drinking beer make the drinker happy; some drinkers (if they overindulge) might do stupid things that hurt others. So many religions ban all alcohol (Islam does). Clearly the Muslims are not happy people, but they are following the morals of their religion.

I should stress that the problem of “too much morality” is really not a problem of any one religion. Perhaps every religion, if practiced in the way that the zealots would approve, would lead to a problem with excessive morality, and too little freedom and tolerance. It would seem that Islam, as practice by the horrible Taliban or the Iranian regime or the Saudi regime, or many other Islamic fundamentalist state, would be the best recent examples of “excessive morality”. But the communist societies (communism qualifies as an atheistic religion in my opinion) may have yielded similar examples. It is really an issue of totalitarianism vs. freedom. All beliefs can degenerate into totalitarianism if the zealots gain power.

My hope is that people will sense that the zealots of the world are essentially immoral. Then the zealots will be ignored, and people will be free to practice their religions in a more commonsense way.

And if you are of age, by all means, drink beer (if you like it).

Friday, July 08, 2005

The Curse of Moses

You probably aren’t aware of this but Moses really received eleven commandments from God. The eleventh commandment was:

Thou shalt not write down the word of the Lord.

For some reason, Moses never wrote that one down, but did write the other 10 for posterity. So the curse of Moses is: “He who dares to write down the word of God dooms his followers to obey that word for all eternity.”

This is the fundamental tension in all religions: Write your religion in pencil and someone will erase all of it. Write your religion in stone, and no one will ever be able to change it, even if change is very necessary.

Of course, the mental midgets who run the world’s religions might smugly announce: “The word of God never goes out of fashion. There is no need for amendment.”

Sure. And I suppose we should be still giving burnt offerings to God as penance for our sins. Cultures change, and religion changes with it. If that undermines your concept of the divinity of religion, perhaps you need to think about this some more.

There is a great anecdote that illustrates this concept wonderfully. There was a small Christian sect in Pennsylvania Colony (a haven for religious freedom in colonial times) that was being falsely accused of practicing several evil acts, (I don’t think these acts were record in the source of the anecdote). A representative of the sect went to Benjamin Franklin (who was a very famous publisher in the colonies) and asked that he help erase the bad name of their religion. Franklin asked that the representative write down their beliefs, so that this would show others that they believed in nothing wicked. The representative declined and sited a very interesting reason, which I will paraphrase:

“At one time we had certain beliefs which upon further reflection we discovered to be false. Therefore, we decide we should never write down our beliefs, for in writing them down, we make it impossible to amend them.”

Franklin was struck by the humility of this sect.

Gresham’s law applied to religions drove this humble sect to extinction and Islam and Roman Catholicism number billions of followers. The religions that succeed are the ones that lay the religion out in black and white and leave no scope for ambiguity. The “proof” of their divinity is the fact that they have an answer for everything.

Of course, there’s a heavy price to pay for this lack of ambiguity. “True believers” are doomed to follow a long defunct vision of what “being a good follower” really means. For Catholics priests, it means no marriage, and no hope of ever voiding the pressure building in the prostate. One Pope’s nonsensical notion of the virtues of celibacy doomed millions of Catholics to misery and frustration. And no one can ever change it.

For Islam, the religion was all recorded with no ambiguity by Mohammad from God herself. There is no amendment possible. Muslims suffer under the most extreme “Curse of Moses” possible. It’s not just 10 commandments, its thousands. And many of them are real clunkers after thirteen centuries. But there is no scope for interpretation. Either you believe or disbelieve.

Muslims must confront a daily paradox: they unquestionably believe that they have the one true religion on Earth, and yet they live in countries that show absolutely no evidence that they are blessed by God. Except for a few far eastern countries, the only wealth Muslims see is not produced by their own creativity but pumped out of the ground. No one respects wealth if it is merely won in a lottery. The poverty, the corruption, and the decay of once glorious cultures all seem to mock the religion.

To their credit, most Muslims accept this paradox without resorting to violence. But some cannot accept it. The pressure builds until somehow it is released. And then we see this.

Of course, it is a little too easy to blame all of the problems of the world of Islam on outdated beliefs. The religion does not endorse corruption. The religion does not endorse murder. But the religion does not in any way endorse freedom or tolerance either. And the combination of freedom and tolerance of others is the true antidote to the problems we see in the middle east.

Perhaps Islam could use a new prophet, but no applications are being accepted.

Thursday, July 07, 2005

Cultures Losing Their Identities

I think it is natural for a tourist to go to another culture and see something different, unique, and perhaps ancient. However, we should understand that what we (as tourists) might value might be useless to the residents.

Don Boudreaux of Café Hayek made this point beautifully in his post Blarney, a letter to Mr Ebnet [link via India Uncut] who thought Ireland was losing its identity:

This friend of mine – like you, Mr. Ebnet – selfishly wants other people to be museum pieces for her enjoyment. You and she dislike signs of material progress in Ireland because you live in the United States, with ready access to an abundance of material wealth that the Irish are just now beginning to enjoy themselves.

You blithely wish that the Irish had remained poor so that you would have continued, during your visits from America, to luxuriate in their quaint languages and enjoy gazing upon Ireland’s natural vistas unaffected by advanced commerce.

And you want other peoples to reject the wealth that the Irish (and Americans) now enjoy so that they retain their "identities" – identities as poor, peasant-dominated societies.

Why should other people want to make these sacrifices for you, Mr. Ebnet? Are you willing to make like sacrifices for them? Are you, for example, willing to go off to live in the Minnesota woods in an unheated log cabin with no running water or electricity? No car? No supermarkets? After all, I’m sure that visitors to America would really appreciate gazing upon a true American pioneer, living just the way our great-great-grandparents lived.

Minnesota without heat - I wouldn’t wish that on my worst enemy. He could have easily changed Ireland to India above and made essentially the same point.

Gaurav Sabnis (who writes a very nice blog) writes:

This post on Cafe Hayek (link via Amit Varma) describes perfectly the sentiments I felt a few chapters into Mark Tully's book 'No Fullstops In India', and the reason I chucked the book.

He describes the royal treatment he gets at a wedding he attends in an Indian village. Later on he laments how Indians, especially those in the cities are "losing their identity" by "copying the West". I find a link between the royal treatment and this desire for a status quo.
A person defines, discovers and shapes his own identity, and is proud of it. By hinting that anyone "loses one's identity" because of some changes made in lifestyle or thought process, the very definition of identity is turned on its head. All these changes are made out of choice.

Now here is a little piece from Nilu’s blog:

I met a foreign student today. She totally agreed with me that Bangalore was indeed the Pretence Capital of the world. Suzane is from Tanzania and she is studying Law at Bangalore University. She actually told me this (I swear am not making this up) - "People here are simply losing themselves in the name of whatever it is that they are aping. In the last five years that I have been in Bangalore, I have seen it go from bad to worse".

Of course, it could be that Nilu is merely agreeing with Tanzanian foreign student because young men tend to agree with whatever young ladies say, especially if they find them interesting. But it does sound like Nilu and the Tanzanian student are disappointed with the choices that people in Bangalore have made.

Here is a little piece from that excellent blog Sepia Mutiny about the new Infosys campus in Bangalore, with some excellent photos: just posted photos of the Infosys campus in Bangalore. Wow, Karnataka really can be sterilized so it’s just as boring as Santa Clara. But it’s nice to see homo technorati in their natural habitat.

Most people might have looked at those photos and been rather impressed by the progress than Indian IT corporations have made. But implicit in Manish Vij’s piece is a disappointment that India was looking too much like California.

What I’m trying to do with these various posts is to show varying levels of acceptance of the changes that are sweeping India and the world. While people like the increased wealth that Globalization brings, they decry the loss of “local color” that comes with it. But as Gaurav Sabnis said: “A person defines, discovers and shapes his own identity, and is proud of it.”

As someone who will (hopefully) visit India in the coming months, I will keep an open mind about what I see. I hope I see some happy people, that's all.

Complaining About the Free Ice Cream

Recently Brad Delong had a nice post about someone complaining about Technorati because they didn’t have the most recent links available. Brad said that this was a little like complaining about free ice cream.

Let me join those complaining about the quality of the free ice cream that is Techorati these days,
My experience with the beta site is that large parts of it, like "sort incoming links by 'most authority,'" simply don't work at all; you wait forever for no result. (We [the letter writer to Brad Delong and Brad] both realize this is arguably a variety of complaining about the free ice cream, and yet.)

Well Technorati is like free ice cream and I’ve gorged myself on it for the last couple of months. I use it to find blogs that have linked to my blog. I want to know because I put everyone who has ever linked to Chocolate and Gold Coins on my blogroll - in the “linked to C&GC” category. Also, bloggers that link to me usually have good taste and write interesting blogs that I want to read.

I used to run a Technorati search every day and use the results as a sort of link page. I would just go to the blogs that linked to me to find out if there’s anything new and interesting there. Of course, I could just go to my own homepage, but it’s not automatically updated like Technorati.

But Technorati has always been a mystery to me. It doesn’t find all of the links; I’ve found some overlooked links purely by accident. India Uncut (India’s premiere blog) has linked to my blog at least 19 times, but the only post that Technorati would find was this one from 3 months ago.

Well, if Technorati was annoying before, now it’s useless. Every time I run it, it fails. The free ice cream has melted.

Or maybe this was free heroin. Now that they have us addicted, I can see a fee for service coming. Does anyone remember when Cricinfo was having bandwidth problems and began Cricinfo Plus - a pay site? Cricinfo dumped Cricinfo Plus with little fanfare but not before relieving me of $20.

I remember years ago that there was an anti-drug public service announcement that went something like this:
Punk 1: “How much do I charge?”
Punk 2: “Nothing now. Just give it away. Then wait and see who comes back for more.”
Punk 1: “Then I charge them.”
Punk 2: “You catch on quickly.”

I was thinking, “Great, that’s what we need, a public service announcement showing pushers how to better market their illegal drugs.”

So what became of the punks? My guess is they quit pushing drugs and are now marketing Technorati.

Update: This is ironic: someone linked to this article and I cannot know who did this - Technorati won't say. If someone would please leave a comment about where the link originated, I would be most appreciative.

London Attacks, Al Queda, and Pakistan

What do these three have in common? Well, maybe nothing, but probably they have a lot to do with each other. The coordinated attacks in London on the underground (subway) and the buses look like the kind of coordinated attacks that only al-Queda seem to be capable of. The Washington Post reported:

Several claims of responsibility followed during the day from groups saying they were connected with al-Qaeda. None could be authenticated though experts interviewed agreed that the assault bore the hallmarks of an al-Qaeda operation.

Here’s what Amit Varma of India Uncut said about the terrorists:

Concepts like personal freedom, equality of women and, in fact, human rights are alien to those behind the attack, and they must be defeated. In that sense, the battle that al-Qaeda - I am assuming they are behind this attack - is waging against the world is more significant than any other terrorist movement in history, both in its scope and in its final objective. It must not be allowed to succeed.

emphasis added. Read the full thing.

What is the connection between al-Queda and Pakistan? We have searched Afghanistan for years and have not found bin Laden or his cronies. Those al-Queda terrorists that we have found have been found in Pakistan. A few weeks ago, the CIA director, Porter Goss made the following cryptic statement:

"I have an excellent idea of where he is. What's the next question?" Goss said in the interview.

"In the chain that you need to successfully wrap up the war on terror, we have some weak links. And I find that until we strengthen all the links, we're probably not going to be able to bring Mr. bin Laden to justice," Goss said. "We are making very good progress on it."

He cited some of the difficulties as "dealing with sanctuaries in sovereign states, you're dealing with a problem of our sense of international obligation, fair play."

The bottom line: the U.S. hasn’t taken the war to al-Queda because it doesn’t want to tread in Pakistan. Furthermore, the threat of al-Queda violence is very useful for Republicans, and it’s the single biggest reason why George W. Bush is still the U.S. President. What better proof do you need to know that the U.S. is not really serious about catching bin Laden than the fact that we only put a ridiculously measly $25 million bounty on his head.

If I were the President of the U.S., I would tell Musharraf that he has exactly two months to find bin Laden. If can’t find him, we’ll find him. If the Pakistan Army stands in the way, we will remove it. You cannot be a sanctuary for terror and expect others to respect your sovereignty.

Update: Vikram Arumilli has more detail on the Pakistan - al-Queda connection in an interesting and quote-filled post.

Wednesday, July 06, 2005

The Corn Vendor and the Police

Charukesi from Indsight (a very nice blog) has an interesting little story of a beach vendor in India trying to make a living selling roasted corn-on-the-cob. Charu was taking some pictures of the lady and her customers having a snack when the policeman came:

And suddenly, this police van stopped on the road in front of them. A fat policeman walked out, picked up the stove and walked towards where we were sitting - on the short wall facing the rocks and the sea. And as we sat watching in open-mouthed horror (and I am not exaggerating here), he dropped the stove along with the contents on the rocks - more than twelve feet down…. And he left as quickly as he had materialized - and I still sat open-mouthed (that must have been a pretty picture - but I was too shaken to even think of taking a photograph of the cops).

The last glimpse I had of the cops was of the corn-seller in her yellow sari shouting heatedly to the rear of the van as they drove away…

All I could manage to think and say was - This is her livelihood - and the cop has managed to take it away from her in a moment - and it was not as if she was doing anything illegal or never-done-before… What will she do now?

The story has a happy ending: a boy gets her stove back and she is able to resume operations. But the policeman’s actions seem so unnecessary and rude. She must not have paid the proper bribes.

This story has lots of good photos: read the full thing.

The best way to help poor people is let them help themselves. She was hurting no one. She was providing for herself and two children. Taking away her livelihood serves no one’s interest.

I think it is a challenge in any society to not make the small entrepreneur into a criminal. Society wants to regulate commerce, sometimes with good reasons. Food preparation should be hygienic, for example (I doubt many restaurants in India would pass the hygiene test in the U.S.). But regulation more often becomes a way of kneecapping your competitor. So the lady in our story would probably have to get ten licenses and the cost would put her out of business. Someone complains; the cops come; the stove winds up on the rocks below.

As if she didn’t have enough problems to deal with as it is.

You Have to Wait

Wife to son: “You will have to wait until you are older.”
What my son had to wait for I cannot remember but it a standard answer to many questions.
Son: “Oh, why do I always have to wait till I’m older?”
Wife: “That’s just the way life is.”
Son: “Is this the way life is or the way you make it?”
My son is now 6. I’m not looking forward to when he is 16.

Tuesday, July 05, 2005

Lunch with Alex and Bryan

Today, I had the honor of eating lunch with two great economics bloggers: Alex Tabarrok of Marginal Revolution and Bryan Caplan of Econlog. Alex Tabarrok invited me to lunch during the time that I posted Academic Imperialism (Part I and Part II). What did we talk about?

We started by talking about Bryan’s blogging partner, Arnold Kling. Things like, “Do you know the story about Arnold Kling.” I knew he started a company and sold it for a nice profit. Bryan said that the money did not seem to buy happiness in Arnold case. I explained that money does not solve all of you problems, it solves one of your problems. But there are many things to worry about in life. I think one reason why I tend to be happy is that I do not worry enough, but I just don’t see any reason too. My wife worries enough for both of us.

We talked a bit about children. I mentioned that my son hates losing in games. I told them my philosophy that I did not want to contrive to lose games to my son just to make him feel better. Bryan pointed out that maybe I did not like to lose myself. There is no doubt about that. But I will say it gives me the greatest joy to see my son beat me, which happens occasionally in chess because I spot him a rook. I wouldn’t get much satisfaction if I purposefully lost.

Alex was surprised to find out that Marginal Revolution was really big in India. I explained that I read a lot of Indian blogs and notice that MR and Café Hayek is either blogrolled or linked to in many of these blogs. I explained that many Indians have reacted to the many years of socialism and corrupt government by going for the other extreme of anarchic libertarianism. I told them you could not compare India with Finland, although both have mixed economies. I mentioned India Uncut and the fact that I have been writing to Amit Varma since he started blogging. I told them this story about Prakash Karat.

We talked a lot about graduate school in Minnesota. I told them about Nobel Laureate Ed Prescott. They wondered what subject areas he was interested in when I was there. I mentioned his lottery technology and the story that goes with it.

We talked about Alex’s current research into why real estate commissions seem immune to market forces. I thought that maybe it was an example of a Bertrand Price competition. No one wants to start a price war. But that story would be more believable if there were only a few players.

I noticed something interesting when we went back to Bryan’s car: Bryan takes a seat cushion to the restaurant so that he won’t have to sit on a hard chair (we ate outside).

Alex and Bryan were both very nice and unassuming. I would say that it was a nice meal and pleasant conversation.

The Problem With Game Theory

This is a continuation of this post on the Five Pirates Game. I want to illustrate a problem with a conventional viewpoint of game theory. I can do that just as easily with a simpler game: The three pirates game. There are 60 gold coins to be divided by 3 pirates. Pirate 1 gets to suggest an allocation, for example 60,0,0 or 20,20,20. Pirates 1,2, and 3 vote. If two out of three vote against the allocation, pirate 1 gets nothing and pirate 2 decides how to split the 60 coins.

In this simplified game, we will assume that the pirates only care about themselves (so they have no bad feelings about gypping their fellow shipmates) and are intelligent. Pirate 3 knows that pirate 2 will 1) vote against anything that pirate 1 proposes, and 2) will give himself all 60 coins if he gets the opportunity. Therefore, pirate 3 simply accepts whatever pirate 1 gives him – if he gives him anything. So the allocation is 59,0,1.

There are several potential objections to this reasoning:
1. These pirates have to work together over time. It makes no sense to rip each other off.
2. Pirate 2 and 3 just need a lawyer to draft up an agreement (perhaps a 50-50 split) and then the outcome changes completely.
3. Pirate 2 can increase his payoff if he can convince pirate 3 that he (pirate2) is an oddball who cares little about money and just wants pirate 3 to have it all (how he could do this is an open question).
4. Its worth a gold coin to deny the scoundrel pirate 1 the 59 coins that he gives himself.

All of these objections could be valid in some sense, but they miss the real issue.
1. These pirates many not be playing a repeated game – this might be the last voyage and they will go their separate ways.
2. There probably aren’t any lawyers around, and the courts won’t be their allies anyway.
3. Pirate 2 might be simply unable to convince pirate 3 that he is an oddball – pirate 3 knows the other crew pretty well by now.
4. If pirate 3 is emotional, pirate 1 might be too greedy in offering only one gold coin, but we don’t know that pirate 3 is emotional and irrational.

I think that pirates 2 and 3 do not need a lawyer: they just need a handshake. If pirate 2 agrees to give pirate 3 half of the booty, then probably pirate 3 will take the chance and vote down 59,0,1. I think it would be surprising if the allocation were anything other than 20,20,20 because its fair, and there is honor among thieves. Thievery would have made itself extinct long ago if thieves act so unethically among each other. People who work together automatically create ethics that bind them to agreements; they don’t need lawyers.

The central problem with non-cooperative game theory is that it implicitly ignores ethics, and therefore, it explicitly ignores human’s instinctual method of avoiding the pitfalls of non-cooperation. Sure, some people, including pirates, are unethical, but usually this unethical behavior stems from people being unethical (or at least appearing to be unethical) to them. Co-workers seldom feel that way with each other because otherwise they wouldn’t be co-workers.

What is ethics? I would define it as a rule which, if violated, would cause self-punishment for the violator. So if pirate 2 is unethical and keeps all of the gold, his conscience will bother him so much that he will find no pleasure in his 60 gold coins. If pirate 3 knows that pirate 2 is ethical, he can trust him, and pirate 2 actually makes more money than if he had been both greedy and without conscience. It is important to note that this ethical rule doesn’t help pirate 2 in all cases: if he stumbles upon some wealth, he might feel ethically obliged to share with his buddies, even though he would like to keep it all. This might pay off for pirate 2 later (this is how pirate 3 knows he can trust him) but he doesn’t know for sure it will ever pay off for him.

Why would ethics occur at all? Why would we want to punish ourselves? The point is that we don’t choose ethics, ethics choose us. Our parents raise us to be good people, and we simple obey them by instinct. And an ethical instinct helps people avoid the pitfalls of non-cooperative game theory (and lets us get 20 gold coins instead of 1).

Ethical behavior is only likely to emerge among small groups of people who work closely together or with professional organizations like the ABA. Admittedly, it is hard to tell the difference between ethical behavior and being overly optimistic in playing a repeated game, except when someone does something extreme like falling on a hand grenade. In that case, the non-cooperative game theorist would think he is just a poor game theorist (since he died) but that’s just a judgment.

Ethics dies when people have to act on behalf of their group. Their loyalty is to their own group and not to other groups. A corporate manager has to look out for the good of the company; doing the “right thing” is meaningless in this context. Therefore, non-cooperative game theory might be a good way to explain corporate behavior.

The good news for companies is this: they never lack lawyers!

Monday, July 04, 2005

Freedom on the Fourth of July

I want to wish a happy Fourth of July to all Americans and to people around the world who love freedom. After all, the Fourth of July was the starting point for a revolution in democratic government that has spread over much of the world. Freedom anywhere has a lot to do with the decision, made some 229 years ago, to create a new nation that would allow its citizens much more freedom than citizens in other countries had ever known before.

Although Americans talk a lot about the virtues of freedom, I doubt most people in this country really know what that means. Most people think that freedom means the ability to do as you please. That’s only a small part of what it means to live in a free country. Kim Il Jong and Robert Mugabe both enjoy enormous freedom in their countries by that notion of freedom, but their countries are not at all free. A free country is one where other people are free to do things that you don’t agree with and don’t particularly like, as long as they don’t violate your rights.

Freedom for me and not for you is troubling theme with both Republican and Democratic politicians today. Republicans want to ban flag burning and force their concept of Christianity upon the public schools and government. Democrats would like to regulate our society to, in effect, winnow out only “good choices” and throw out the “bad ones.” Both parties seem to be of the opinion that our money would be better spent collectively by the government than spent individually by families: every year the share of the national income spent by the government keeps creeping up an up. And the courts are also restricting our freedom: taking away our property and giving us what “they” think is a fair price and allowing the Federal government to regulate everything, including the laws of the “sovereign states”.

So, on the Fourth of July, I will look at some of the biggest threats to freedom here in the U.S.:
1. The gradual acceptance of torture as a way of fighting our enemies. We saw the pictures from Abu Ghraib but no one seemed too upset that somehow these soldiers were the only ones in the U.S. Army’s long history that did not seem to have a chain of command. We allowed prisoners to be held out of sight out of mind without rights in Guantanamo Bay. Now, in violation of U.S. law, we are sending prisoners to places where we know they will be tortured. This is sick.
2. The gradual acceptance of Christianity as the state religion. The religious right sincerely believes that we must protect our nation from Satan’s influence, and therefore, we should protect our government building and our schools with the word of God (and spelled out in the New Testament). Lately, the Supreme Court upheld some (but not all) public monuments to the Ten Commandments. Intelligent Design is a subterfuge designed to introduce religion into our schools.
3. The erosion of our civil liberties in the name of fighting terrorism. The Patriot Act allows the government much more latitude to detain people for little reason. We agreed to this compromise on our freedom to fight terrorism. However, we may be making the mistake of trusting our government too much.
4. The death of federalism. Federalism is the idea that the states are sovereign and we can deal most of the issues effectively at the state level. The nice idea about having 50 sovereign states is that if one becomes a Taliban state, you can move to another one. But now, issues that should be dealt on a state level are dealt with on a national level. Recently, the Supreme Court of the U.S. decided that it was okay for the Federal government to ban the medically prescribed painkiller marijuana, even though many states specifically allowed it.
5. The erosion of private property rights. Private property can be seized, and does get seized, by local governments that are simply acting on behalf of private developers.
6. The rising level of government spending. Each year, spending goes up and up. Much of the spending is for popular programs like Social Security, Medicare, and National Defense. However, we should realize that we are trading the right to spend our own money for the privilege of having the government spend it on our behalf. As long as we like how the government spends the money we might not mind too much. However, this is exactly like not minding whether a freedom is restricted until it’s a freedom you personally cared about. Sure, we need National Defense and police protection, and some other government services, but we don’t need the government to spend 40%, 45%, even 50% of the national income.
7. The acceptance of date rape. Every other week it seems we hear of a story of some women who claims she was raped by a celebrity. It gets down to her word against his. She cannot prove that she did not willingly accept sex – so he walks. This story repeats itself – without celebrity – hundreds of thousands of times each year in every community. If a thief robs my house, I don’t have to prove that I did not willingly give those goods away and later regretted that gift. But we are not comfortable trusting that a woman would not falsely accuse a man of rape.
8. Regulations. We regulate our society and our economy to try to prevent problems. Not all regulations are bad: we need to prevent people and industry from spoiling our environment. But regulations can go far beyond what is necessary to prevent externalities and prevent the free and natural operation of the markets. There are laws against everything here, including selling liquor chocolates in the candy shops. You know what, kids wouldn’t like them anyway.
9. Voter apathy. This might be the most important threat to freedom on this list. If people don’t care to scrutinize the people we vote for, we run the risk of allowing all of our freedoms to slip away. We might naively assume that our freedoms are guaranteed in some document, but documents can be interpreted and ignored. We must actively participate in the democratic process to make sure that we elect honest people who love freedom to all elected offices.

I shouldn’t give the impression that American is not free. We may have some troubling trends but, for the most part, we love freedom in America. I don’t see America going too far down the path of restricting freedom before people will object. I guess I’m an optimist by nature.

In any case, have a very happy Fourth of July, and take a moment to think what freedom really means to you and your family. We do have it good here in America.

Postscript If you have some other threats to freedom that you would like to add, please comment.