My Intermediate Micro Course: Efficient Auctions « Cheap Talk
Tags: economics, teaching on 2009-07-03 -All Annotations (1) -About
more fromcheeptalk.wordpress.com
-
For the comon-value setting I do a classroom experiment where I auction an unknown amount of cash. The amount up for sale is equal to the average of the numbers on 10 cards that I have handed out to 10 volunteers. Each volunteer sees only his own card and then bids. If the experiment works (it doesnt always work) then we should see the winner’s curse in action: the winner will typically be the person holding the highest number, and bidding something close to that number will lose money as the average is certainly lower.
Netflix Boss Plots Life After the DVD - WSJ.com
Tags: technology, intellectual, property on 2009-06-23 and saved by 10 people -All Annotations (2) -About
more fromonline.wsj.com
-
Mr. Hastings's biggest challenge in reorienting Netflix is getting Hollywood to go along for the ride. Netflix's selection of more than 100,000 DVD rental titles is made possible by the "first-sale doctrine" of U.S. copyright law, which permits buyers of DVDs to lend them out without studios' consent.
In Netflix's early days, its buying team would sometimes purchase DVDs at local Wal-Marts or Best Buys if it couldn't get copies through studios, says Ted Sarandos, Netflix's chief content officer.
In contrast, to deliver movies and television shows over the Internet, Netflix has to license them from studios. So far, it has gotten only about 12,000 titles, a hodgepodge of older films such as "Diehard," episodes of popular TV shows including "30 Rock" and a smattering of new releases.
-
Mr. Hastings concedes that he "fell in love with building boxes" and that part of the inspiration was watching Apple Inc. use its hardware to sell online content. Apple, too, is seeking to bring Internet video to TV sets through its iTunes Store and a box called Apple TV. "Every entrepreneur is a Steve Jobs wannabe," he says. "I was as guilty of that as anybody."
Cafe Hayek: Brooks channels Hayek
Tags: political, philosophy, conservative on 2009-05-07 -All Annotations (3) -About
more fromwww.cafehayek.com
-
Civic order in the classical liberal vision is a bottom up emergent order that takes advantage of knowledge that the top down engineering approach misses. This is true in pecuniary activity such as buying and selling but it's also true in non-pecuniary activity--who I want to associate with religiously or in my hobbies or how much time I have for my children or my parents. Freedom doesn't just mean the right to be selfish. It's the right to associate with whom I choose. The classical liberal prescription for the good life isn't about making as much money as possible. It's about the freedom to choose. It's about voluntary rather than coercive solutions, decentralized rather than centralized solutions, bottom-up emergent solutions that are the result of many actions and actors rather than top-down solutions by experts.
-
Freedom means that the government doesn't try to solve the problem of poverty, but rather it leaves the door open to voluntary community rather than coerced community.
-
Freedom is important not because it makes us rich but because it makes our lives more meaningful.
Op-Ed Columnist - The Long Voyage Home - NYTimes.com
Tags: political, philosophy, conservative on 2009-05-07 -All Annotations (2) -About
more fromwww.nytimes.com
-
What threatens Americans’ efforts to build orderly places to raise their kids? The answers would produce an agenda: the disruption caused by a boom and bust economy; the fragility of the American family; the explosion of public and private debt; the wild swings in energy costs; the fraying of the health care system; the segmentation of society and the way the ladders of social mobility seem to be dissolving.
-
Then they will have to explain that there are two theories of civic order. There is the liberal theory, in which teams of experts draw up plans to engineer order wherever problems arise. And there is the more conservative vision in which government sets certain rules, but mostly empowers the complex web of institutions in which the market is embedded.
PrawfsBlawg: More Problems With Hypothesis Testing (From a More Technical Perspective)
Tags: economics, econometrics, social, science on 2009-04-26 -All Annotations (2) -About
more fromprawfsblawg.blogs.com
-
The confidence level is set in advance. The resulting p-value is a random variable. To adjust the level in response to the p-value is an improper ex post move. So if the pre-set level of significance is 95% and the resulting p-value is 0.0001, the proper response is to say "The results are significant at the 95% level (p = 0.0001)." To readjust the claim to "The results are significant at the 99% level (since) p = 0.0001" is simply incorrect.
Thus: there should only be one star per table, at whatever level the analyst sets in advance.
-
And so it is disappointing that rarely if ever do we see a paper wrestle with the proper level of significance, such as by asking whether this is a case where a false negative is better or worse than a false positive. After all, it is not always clear that we are best served by the conservatism of the 95% confidence interval. A false positive may be worse than a false negative in criminal law ("better 10 guilty men go free..."), but a false negative may be worse in some medical situations, such as whether a particular pill works.
PrawfsBlawg: A Misguided Philosophy of Science
Tags: economics, social, science on 2009-04-26 -All Annotations (3) -About
more fromprawfsblawg.blogs.com
-
Susan Haack provides a nice way to think about how we should approach knowledge production in the social sciences. She equates knowledge to a crossword puzzle. A single word, all alone in the grid, is not well-supported (especially if, as most scientific questions likely are, it is a Saturday NY Times). If 35-down is a seven-letter word for "Oceanographers' references," SEAMAPS fits, but we might not be all that confident it is right. But then we look at 46-across, which starts on the M, and we think that MATED could be the right answer for "Like shoes and socks;" we become a bit more sure that SEAMAPS is right. And our faith in MATED grows when we realize that 47-down, which starts on the D, is probably "DOSE," since the clue is "Recommended intake." So DOSE provides warrant for MATED, which in turn warrants SEAMAPS. Once the whole puzzle is filled, we're pretty sure we're right. We could be completely wrong--I've certainly erased entire quadrants of a crossword puzzle before--but the odds are low.
-
I attended a conference several years ago in which one of the speakers said that if we added up every paper that said "factor x is responsible for y% of the crime drop in the 1990s," we would see that we've explained about 250% of the crime decline. Everyone laughed but thought little of it. But this is a huge problem: the words in the crossword puzzle are not crossing properly. Something, somewhere, is wrong, but by taking a corpuscular view of empirical evidence, we miss it.
-
but by thinking in terms of refutation, we provide the wrong results in our papers. In an inductionist world, p-values and t-statistics mean very little. What matters are confidence intervals, and these are almost never repoted.
Greg Mankiw Gets Technical, Arnold Kling | EconLog | Library of Economics and Liberty
-
Under the unit-root hypothesis, which I thought was well established, I see the attempt to do macroeconometrics as basically hopeless. The way I see it, with a unit root, every change is a structural change. As a result, there is no way to use macroeconomic data from different decades as if they allowed you to conduct a controlled experiment.
Why I Am Not a Conservative by F. A. Hayek
-
Conservatism
proper is a legitimate, probably necessary, and certainly widespread
attitude of opposition to drastic change. -
Let me now
state what seems to me the decisive objection to any conservatism
which deserves to be called such. It is that by its very nature
it cannot offer an alternative to the direction in which we are
moving. It may succeed by its resistance to current tendencies in
slowing down undesirable developments, but, since it does not indicate
another direction, it cannot prevent their continuance. It has,
for this reason, invariably been the fate of conservatism to be
dragged along a path not of its own choosing. The tug of war between
conservatives and progressives can only affect the speed, not the
direction, of contemporary developments. But, though there is a
need for a "brake on the vehicle of progress," -
There has never been a time when liberal
ideals were fully realized and when liberalism did not look forward
to further improvement of institutions. -
In looking forward, they lack the faith
in the spontaneous forces of adjustment which makes the liberal
accept changes without apprehension, even though he does not know
how the necessary adaptations will be brought about. -
This fear
of trusting uncontrolled social forces is closely related to two
other characteristics of conservatism: its fondness for authority
and its lack of understanding of economic forces. Since it distrusts
both abstract theories and general principles,[6]
it neither understands those spontaneous forces on which a policy
of freedom relies nor possesses a basis for formulating principles
of policy. -
In general, it can probably be
said that the conservative does not object to coercion or arbitrary
power so long as it is used for what he regards as the right purposes. -
Since he is
essentially opportunist and lacks principles, his main hope must
be that the wise and the good will rule – not merely by example,
as we all must wish, but by authority given to them and enforced
by them. -
What I mean is that
he has no political principles which enable him to work with people
whose moral values differ from his own for a political order in
which both can obey their convictions. -
It is for
this reason that to the liberal neither moral nor religious ideals
are proper objects of coercion, while both conservatives and socialists
recognize no such limits. I sometimes feel that the most conspicuous
attribute of liberalism that distinguishes it as much from conservatism
as from socialism is the view that moral beliefs concerning matters
of conduct which do not directly interfere with the protected sphere
of other persons do not justify coercion. -
the conservative position rests on the belief that in any
society there are recognizably superior persons whose inherited
standards and values and position ought to be protected and who
should have a greater influence on public affairs than others. The
liberal, of course, does not deny that there are some superior people
– he is not an egalitarian – but he denies that anyone
has authority to decide who these superior people are. -
I do not regard majority rule
as an end but merely as a means, or perhaps even as the least evil
of those forms of government from which we have to choose. -
Unlike liberalism,
with its fundamental belief in the long-range power of ideas, conservatism
is bound by the stock of ideas inherited at a given time. And since
it does not really believe in the power of argument, its last resort
is generally a claim to superior wisdom, based on some self-arrogated
superior quality. -
Though the liberal certainly
does not regard all change as progress, he does regard the advance
of knowledge as one of the chief aims of human effort and expects
from it the gradual solution of such problems and difficulties as
we can hope to solve. -
Personally,
I find that the most objectionable feature of the conservative attitude
is its propensity to reject well-substantiated new knowledge because
it dislikes some of the consequences which seem to follow from it
– or, to put it bluntly, its obscurantism. I will not deny
that scientists as much as others are given to fads and fashions
and that we have much reason to be cautious in accepting the conclusions
that they draw from their latest theories. But the reasons for our
reluctance must themselves be rational and must be kept separate
from our regret that the new theories upset our cherished beliefs. -
Though quieta
non movere may at times be a wise maxim for the statesman it
cannot satisfy the political philosopher. He may wish policy to
proceed gingerly and not before public opinion is prepared to support
it, but he cannot accept arrangements merely because current opinion
sanctions them. In a world where the chief need is once more, as
it was at the beginning of the nineteenth century, to free the process
of spontaneous growth from the obstacles and encumbrances that human
folly has erected -
I doubt
whether there can be such a thing as a conservative political philosophy.
Conservatism may often be a useful practical maxim, but it does
not give us any guiding principles which can influence long-range
developments.
Trends In Economics: A Calculus of Risk: Scientific American
Tags: finance on 2009-02-08 and saved by 2 people -All Annotations (3) -About
more fromwww.sciam.com
-
Options represent the right (but not the obligation) to buy or sell stock or some other asset at a given price on or before a certain date. Another major class of derivatives, called forwards and futures, obligates the buyer to purchase an asset at a set price and time. Swaps, yet another type of derivative, allow companies to exchange cash flows—floating-interest- rate for fixed-rate payments, for instance.
-
Black and Scholes, with Merton’s help, came up with their option-pricing formula by constructing a hypothetical portfolio in which a change of price in a stock was canceled by an offsetting change in the value of options on the stock—a strategy called hedging. Here is a simplified example: A put option would give the owner the right to sell a share of a stock in three months if the stock price is at or below $100. The value of the option might increase by 50 cents when the stock goes down $1 (because the condition under which the option can be used has grown more likely) and decrease by 50 cents when the stock goes up by $1.
To hedge against risks in changes in share price, the investor can buy two options for every share he or she owns; the profit then will counter the loss. Hedging creates a risk-free portfolio, one whose return is the same as that of a treasury bill. As the share price changes over time, the investor must alter the composition of the portfolio—the ratio of the number of shares of stocks to the number of options—to ensure that the holdings remain without risk.
-
Investors who buy options are basically purchasing volatility—either to speculate on or to protect against market turbulence. The more ups and downs in the market, the more the option is worth. An investor who speculates with a call—an option to buy a stock—can lose only the cost of purchase, called a premium, if the stock fails to reach the price at which the buyer can exercise the right to purchase it. In contrast, if the stock shoots above the exercise price, the potential for profit is unlimited. Similarly, the investor who hedges with options also anticipates rough times ahead and so may buy protection against a drop in the market.
Economist's View: "Laffer-able"
-
Tax cuts for the well to do - who are not borrowing constrained - will likely have NO aggregate demand stimulus effect as I have often argued (aka either Life Cycle or Ricardian Equivalence) models so if this is what the Republican Party have in mind - it is based on hogwash economics. Tax cuts for the working poor, however, may be a good idea as these households will consume much of the tax cut. I think this is what Obama has in mind. If your argument is that we should go with the kind of tax cuts Obama campaigned on - I agree. But tax cuts for Bill Gates is just stupid from a Keynesian point of view.
TRUTH ON THE MARKET » More on Error Costs
-
In this era of no monopolization enforcement, there ought to be bundles of empirical examples abound documenting exclusionary distribution contracts with convincing statistical evidence. The literature isn’t there.
Economist's View: "Dynamic Scoring"
-
Many economists think
there are major supply-side benefits to more efficient taxation, but most such
economists think those are primarily long-run benefits (faster growth over a
span of time) rather than benefits that would significantly affect revenues in
the short run. The Keynesian argument would make sense if monetary policy were
passive, but in fact, the Fed has its own goals, and its goals don't necessarily
change in response to fiscal policy. And of course the Fed takes fiscal policy
into account when deciding how to accomplish those goals. So if a tax cut or an
expenditure increase were expected to create, say, a million extra jobs, then,
under normal economic conditions, the Fed would simply raise interest
rates enough (according to its best estimate) to destroy a million jobs. (If the
Fed didn't think the demand for those million jobs would be potentially
inflationary, then it would already have tried to create them.)
Greg Mankiw's Blog: Triangles vs Gaps
-
To put it perhaps a bit too bluntly, the Keynesian mutliplier is about income effects, while neoclassical tax distortions are about substitution effects.
-
Jim Tobin once addressed this issue, saying, "It takes a heap of Harberger triangles to fill an Okun's gap."
Eating Locally in the Pacific Northwest » Blog Archive » Summertime Fennel Salad
-
Fennel, cucumber, fresh dill and tomatoes tossed together with lemon juice, olive oil, salt and pepper make a superb crunchy fresh salad.
Eating Locally in the Pacific Northwest » Blog Archive » Massage Your Kale?
-
Here’s how they made massaged kale salad: Rinse and dry one bunch of kale, tear it up and place it in a roomy bowl. Add two or three cloves of finely minced garlic, a light coating of fruity olive oil, the juice of one lemon, salt and pepper. Now it’s time for the massage. Wash your hands and have at it. Toss the whole business together, squeeze the kale, and give these ingredients a little rubdown for just a minute. Then you can let it sit for a while. The lemon will ‘cook’ the kale, soften the greens and garlic.
The yield curve (wonkish) - Paul Krugman Blog - NYTimes.com
Tags: macro, finance on 2009-01-06 and saved by 2 people -All Annotations (1) -About
more fromkrugman.blogs.nytimes.com
-
The reason for the historical relationship between the slope of the yield curve and the economy’s performance is that the long-term rate is, in effect, a prediction of future short-term rates. If investors expect the economy to contract, they also expect the Fed to cut rates, which tends to make the yield curve negatively sloped. If they expect the economy to expand, they expect the Fed to raise rates, making the yield curve positively sloped.
But here’s the thing: the Fed can’t cut rates from here, because they’re already zero. It can, however, raise rates. So the long-term rate has to be above the short-term rate, because under current conditions it’s like an option price: short rates might move up, but they can’t go down.
Supply and Demand (in that order): Flight to Quality -- Cause or Effect?
-
Barro and King (1984) explained it best -- the basic puzzle of recessions (this one included) is that consumption and leisure move in opposite directions. Wealth effect and intertemporal substitution effect explanations of recessions (Professor Lucas' story is one example) imply that they move together.
Supply and Demand (in that order): Economics Lesson from the University of Chicago’s U.S. Senator
Tags: labor, economics on 2009-01-06 -All Annotations (3) -About
more fromcaseymulligan.blogspot.com
-
In many recessions, the demand for labor gets much of the blame. The demand explanation says that, with orders for their products down, many employers have trouble finding productive uses for their employees. Some employees are then let go. In this view, productivity – the amount produced per hour worked – should decline because reduced productivity is one of the driving forces of layoffs. Gross domestic product thereby declines for two reasons: fewer workers and less productivity per worker. -
The second type of explanation is reduced labor supply.
Suppose, for the moment, that people were less willing to work, with no change in the demand for their services. This means that each worker who remains employed would have to be more productive because employers have to produce with fewer workers. -
Professor Douglas gave us a formula for determining how much output per work hour would increase as a result of a reduction in the aggregate supply of hours: For every percentage point that the labor supply declines, productivity would rise by 0.3 percentage points.
Lectures on Macroeconomics, No. 11, Arnold Kling | EconLog | Library of Economics and Liberty
-
The first type of effective demand failure is a shortage of "animal spirits." No matter how much people want to save, entrepreneurs don't have projects that they want to pursue. The result is that instead of an increase in investment, we see a decline in output.
The second type of effective demand failure is what I think of as the standard multiplier effect. When people lose their jobs, they cut back on consumption.
The third type of effective demand failure is a credit crunch. Entrepreneurs want to engage in projects with reasonable risk-return trade-offs, but banks are busy shoring up their own balance sheets.
I think that in the United States today, we do not have a shortage of "animal spirits." We have a credit crunch. But we have something else, not included in AL's list. We have savers suddenly wanting a lower ratio of risky assets to risk-free assets. This is somewhat akin to Keynes' liquidity preference. It reinforces the credit crunch.
Marginal Revolution: General Theory, chapters one and two
-
I see three main themes in the book as a whole:
1. Income effects are more important than substitution effects.
2. Expectations matter.
3. The private and social returns to liquidity are very different.
#1
(as applied to macro) and #3 were most original in his time. The book
as a whole circles around these themes and repeats them in varying
combinations, not always coherently or consistently. You could also
add the claims that 4. monetary factors render a "natural rate of
interest" problematic and 5. labor markets are special. Chapter two is
essentially about #1 and #5.
Notation: * = Private bookmark and comment|… = Clipping [?] | … = Public highlight [?]
Public Tags (249)
- 32.0,
- 72008,
- 1abortion,
- 1academia,
- 1academics,
- 1american,
- 7and,
- 18antitrust,
- 1architecture,
- 2art,
- 1auctions,
- 1bear,
- 15behavioral,
- 1benefit,
- 20berkeley,
- 1bias,
- 2biology,
- 1bird,
- 1blackberry,
- 3blogging,
- 1blogs,
- 12books,
- 10boston,
- 1budget,
- 22business,
- 5california,
- 1campaigning,
- 5care,
- 1career,
- 1causal,
- 7change,
- 10charities,
- 1choice,
- 1classes,
- 1classics,
- 7climate,
- 1clothing,
- 1coase,
- 3college,
- 2colors,
- 1communication,
- 1competition,
- 3computer,
- 7computers,
- 13computing,
- 4conference,
- 2congress,
- 5conservative,
- 12consulting,
- 2cooking,
- 4cornell,
- 1cost,
- 1costs,
- 1court,
- 11data,
- 5dc,
- 1debate,
- 1decision,
- 1defecits,
- 6design,
- 1domain,
- 4drinks,
- 2drugs,
- 4duck,
- 16econometrics,
- 6economic,
- 145economics,
- 1economy,
- 3econophysics,
- 5education,
- 2elections,
- 1electricity,
- 1eminent,
- 6energy,
- 1entrepreneurship,
- 1environemental,
- 4environment,
- 17environmental,
- 1equality,
- 2events,
- 1events],
- 1evernote,
- 1evolution,
- 4example,
- 1examples,
- 1experts,
- 3externalities,
- 2faculty,
- 57finance,
- 22fiscal,
- 3fishery,
- 2fishing,
- 1fitness,
- 1flying,
- 1fonts,
- 61food,
- 1foreign,
- 1founding,
- 1francisco,
- 5fun,
- 1game,
- 6global,
- 1globalization,
- 1good,
- 1goods,
- 4google,
- 17government,
- 2grad,
- 3graphics,
- 3graphs,
- 1growth,
- 1hampshire,
- 1hayek,
- 47health,
- 1heath,
- 6history,
- 4histpap,
- 6hockey,
- 2housing,
- 1howto,
- 3humor,
- 2hunting,
- 3ideas,
- 4inequality,
- 1inference,
- 1innovation,
- 1institutions,
- 1insurance,
- 2intellectual,
- 3international,
- 3investing,
- 21io,
- 1irish,
- 1job,
- 3jobs,
- 7labor,
- 1language,
- 5latex,
- 30law,
- 19leadership,
- 1libertarian,
- 1lobbying,
- 78macro,
- 3macroeconomics,
- 1madison,
- 1making,
- 1maps,
- 1market,
- 1marketing,
- 3markets,
- 2math,
- 1methodology,
- 4micro,
- 1monopoly,
- 5movies,
- 3music,
- 3new,
- 15news,
- 16nh,
- 1organization,
- 1patents,
- 6personal,
- 1phd,
- 7philosophy,
- 5photography,
- 1photos,
- 6photoshop,
- 1polar,
- 1policing,
- 45policy,
- 16political,
- 1politicians,
- 83politics,
- 1politiics,
- 1pork,
- 1poverty,
- 3prediction,
- 7presentations,
- 2prices,
- 2pricing,
- 1prizes,
- 1probability,
- 9professional,
- 2professor,
- 2professors,
- 3programming,
- 3property,
- 4psychology,
- 4public,
- 4r,
- 6radio,
- 5read,
- 1reading,
- 3reference,
- 6regulation,
- 3relations,
- 1republican,
- 4research,
- 3restaurants,
- 2rhetoric,
- 4rpm,
- 2scholarship,
- 2scholarships,
- 2school,
- 10science,
- 1seafood,
- 2security,
- 4sf,
- 8social,
- 12software,
- 5speaking,
- 1speech,
- 2spending,
- 4sports,
- 2starred,
- 28statistics,
- 1sticky,
- 1strategy,
- 1style,
- 1supreme,
- 3sushi,
- 30tank,
- 7tanks,
- 12taxes,
- 10teaching,
- 9technology,
- 1terrorism,
- 1theorem,
- 2theory,
- 37think,
- 5to-read,
- 5trade,
- 1transaction,
- 4transportation,
- 11travel,
- 1trends,
- 6twitter,
- 1twitterlinks,
- 1urban,
- 1video,
- 6warming,
- 6watch,
- 2weather,
- 9web,
- 1welfare,
- 19wine,
- 3writing,
- 1x-efficiency,
- 2york


