Tag Archives: economics

When is forced organ selfishness good for you?

Posted on April 17, 2010 | 21 comments

Simon Rippon claims having a market for organs might harm society:

It might first be thought that it can never be a good thing for you to have fewer rather than more options. But I believe that this attitude is mistaken on a number of grounds. For one, consider that others hold you accountable for not making the choices that are necessary in order to fulfil your obligations. As things stand, even if you had no possessions to sell and could not find a job, nobody could criticize you for failing to sell an organ to meet your rent. If a free market in body parts were permitted and became widespread, they would become economic resources like any other, in the context of the market. Selling your organs would become something that is simply expected of you when the financial need arises. A new “option” can thus easily be transformed into an obligation, and it can drastically change the attitudes that it is appropriate for others to adopt towards you in a particular context.

He’s right that at that moment where you would normally throw your hands in the air and move on, you are worse off if an organ market gives you the option of paying more debts before declaring your bankruptcy. But this is true for anything you can sell. Do we happen to have just the right number of salable possessions? By Simon’s argument people should benefit from bans on selling all sorts of things. For instance labor. People (the poor especially) are constantly forced to sell their time – such an integral part of their selves – to pay rent, and other debts they had no choice but to induce. If only they were protected from this huge obligation that we laughably call an ‘option’. Such a ban might be costly for the landlord, but it would be good for the poor people, right? No! The landlords would react and not rent to them.

So why shouldn’t we expect the opposite effect if people are allowed to sell more of their possessions? People who currently don’t have the assets or secure income to be trusted with loans or ongoing rental payments might be legitimately offered such things if they had another asset to sell. Think of all the people who would benefit from being able to mortgage their kidney to buy a car instead of riding to some closer job while they gradually save up.

In general when negotiating, it’s best to not have options that are worse for you. When the time comes to carry out your side of a deal, it’s true this means being forced to renege. But when making the deal beforehand, you do better to have the option of carrying out your part later, so that the other person does their part. And in a many shot game, you do best to be able to do your part the whole time, so the trading (which is better than not trading) continues.

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How does information affect hookups?

Posted on April 15, 2010 | 6 comments

With social networking sites enabling the romantically inclined to find out more about a potential lover before the first superficial chat than they previously would have in the first month of dating, this is an important question for the future of romance.

Lets assume that in looking for partners, people care somewhat about rank and and somewhat about match. That is, they want someone ‘good enough’ for them who also has interests and personality that they like.

First look at the rank component alone. Assume for a moment that people are happy to date anyone they believe is equal to or better than them in desirability. Then if everyone has a unique rank and perfect information, there will never be any dating at all. The less information they have the more errors in comparing, so the more chance that A will think B is above her while B thinks A is above him. Even if people are willing to date people somewhat less desirable than they, the same holds – by making more errors you trade wanting more desirable people for wanting less desirable people, who are more likely to want you back , even if they are making their own errors. So to the extent that people care about rank, more information means fewer hookups.

How about match then? Here it matters exactly what people want in a match. If they mostly care about their beloved having certain characteristics,  more information will let everyone hear about more people who meet their requirements. On the other hand if we mainly want to avoid people with certain characteristics, more information will strike more people off the list. We might also care about an overall average desirability of characteristics – then more information is as likely to help or harm assuming the average person is averagely desirable. Or perhaps we want some minimal level of commonality, in which case more information is always a good thing – it wouldn’t matter if you find out she is a cannibalistic alcoholic prostitute, as long as eventually you discover those board games you both like. There are more possibilities.

You may argue that you will get all the information you want in the end, the question is only speed – the hookups prevented by everyone knowing more initially are those that would have failed later anyway. However flaws that dissuade you from approaching one person with a barge pole are often ‘endearing’ when you discover them too late, and once they are in place loving delusions can hide or remove attention from more flaws, so the rate of information discovery matters. To the extent we care about rank then, more information should mean fewer relationships. To the extent we care about match, it’s unclear without knowing more about what we want.

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Why are wine competitions unpredictable?

Posted on January 5, 2010 | 3 comments

Assume:

  • Entering wine competitions costs $x, and winning gets you $y (>x) in increased profits
  • Wine competitions A, B and C are in that order chronologically, and all give medals to a third of entrants
  • There are nine wines, called 1-9
  • There is fair agreement between wine authorities at the competitions on good wine, such that if your wine wins one competition it is almost certain to win the next.

What should the wine sellers do to maximize money? All enter A. Three win. Those three go on to enter B, and its winner enters C, while the others stay out unless y is radically > x, as they are likely to lose again.

That means that A makes $9x, B $3x and C $x. An easy way for B and C to increase their profits is to be less predictable then. At the extreme of unpredictability, all wines would enter all competitions, and A, B and C would all make $9x profits, and medals wouldn’t mean much about wine quality.

Of course when people notice that prizes correlate less with wine quality they ignore prizes more, and competitions must charge less entry. In reality most consumers get virtually no evidence of the quality of wine by drinking it, so they are only likely to notice whether better wines get prizes if someone pays attention to the statistics and finds no correlation between winners in different competitions. Someone did this, and found that, prompting me to try to explain it. What do you think?

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Perfect principles are for bargaining

Posted on January 2, 2010 | 9 comments

When people commit to principles, they often consider one transgression ruinous to the whole agenda. Eating a sausage by drunken accident can end years of vegetarianism.

As a child I thought this crazy. Couldn’t vegetarians just eat meat when it was cheap under their rationale? Scrumptious leftovers at our restaurant, otherwise to be thrown away, couldn’t tempt vegetarian kids I knew. It would break their vegetarianism. Break it? Why did the integrity of the whole string of meals matter?  Any given sausage was such a tiny effect.

I eventually found two explanations. First, it’s easier to thwart temptation if you stake the whole deal on every choice. This is similar to betting a thousand dollars that you won’t eat chocolate this month. Second, commitment without gaps makes you seem a nicer, more reliable person to deal with. Viewers can’t necessarily judge the worthiness of each transgression, so they suspect the selectively committed of hypocrisy. Plus everyone can better rely on and trust a person who honors his commitments with less regard to consequence.

There’s another good reason though, which is related to the first. For almost any commitment there are constantly other people saying things like ‘What?! You want me to cook a separate meal because you have some fuzzy notion that there will be slightly less carbon emitted somewhere if you don’t eat this steak?’ Maintaining an ideal requires constantly negotiating with other parties who must suffer for it. Placing a lot of value on unmarred principles gives you a big advantage in these negotiations.

In negotiating generally, it is often useful to arrange visible costs to yourself for relinquishing too much ground. This is to persuade the other party that if they insist on the agreement being in that region, you will truly not be able to make a deal. So they are forced to agree to a position more favorable to you. This is the idea behind arranging for your parents to viciously punish you for smoking with your friends if you don’t want to smoke much. Similarly, attaching a visible large cost – the symbolic sacrifice of your principles – to relieving a friend of cooking tofu persuades your friend that you just can’t eat with them unless they concede. So that whole conversation is avoided, determined in your favor from the outset.

I used to be a vegetarian, and it was much less embarrassing to ask for vegetarian food then than was afterward when  I merely wanted to eat vegetarian most of the time. Not only does absolute commitment get you a better deal, but it allows you to commit to such a position without disrespectfully insisting on sacrificing the other’s interests for a small benefit.

Prompted by The Strategy of Conflict by Thomas Schelling.

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Externalizing between conformers

Posted on November 7, 2009 | 7 comments

or Why I could conceivably support banning smoking, part 1

Suppose that people are rational and their goals are consistent, and they are free to choose whatever activities they like, as long as they don’t harm others. Suppose we don’t care about equality or whether lifestyles are nihisistic, or anything else Wikipedia claims might be wrong with libertarianism. Should we expect people to approximately end up with the best sets of behaviour? If they smoke, should we infer that they like smoking more than they dislike having lung cancer far in the future? If they watch intellectual documentaries rather than porn should we assume that they have wisely established that they like looking smart more than raunchy fantasy? Many think so, and support libertarianism for this reason.

This makes sense if humans are independently choosing activities. But the all time favorite activity of nearly everyone is doing what other people are doing. This makes such an argument more complicated.

Imagine everyone is doing A. Everyone likes doing B more than doing A, but not as much as they like conformity. There would be a huge gain to a coordinated shift to B, but nobody moves there alone. In some such situations those involved arrange coordination, but often it is impossible. If there are many equilibria like this, and no means to move to better ones, intervention by someone with the power to force a coordinated move could be a great thing.

A good example of this I saw was during first year at college. Everyone used to go to Southpac to drink. I was baffled, as it was probably not just the worst night club around, but actually the least pleasant place I had ever been, possibly but not definitely excluding ankle deep in poo and mud with rotten meat juice running up my arms and dogs clawing at me. When I asked, everyone said they hated it, but it was overall the best place to go, because that’s where everyone else went. It seemed that there were too many people for any student to easily coordinate everyone going somewhere else, so the original equilibrium remained until Southpac was closed down for using (cheap, poisonous) methylated spirits in the drinks. The student council got sponsorship somewhere else, and everyone else went there instead.

Roger
Southpac Elsewhere
Everyone else Southpac 2 1
Elsewhere 0 3

Payoffs for Roger in choosing  a nightclub

In the above table, assume ‘everyone else’ is made up of people in the same situation as Roger. Roger doesn’t want to dance alone, so he gets 2 happiness from going to the same club as everyone else. He also doesn’t like being attached to the floor by stickiness and vomit, but it’s less of an issue, so he gets 1 happiness from going anywhere but Southpac. Everyone going to Southpac and everyone going elsewhere are both Nash equilibria, but the going elsewhere equilibria is half as good again.

Why wouldn’t people be able to coordinate to change? One reason is group size or ungainliness. The other is that liking the current activity sends a signal. Suggesting everyone choose a different activity to signal group loyalty for instance marks you as disloyal as fast as refusing to participate alone does.

This doesn’t necessarily mean government intervention is necessary. That might still be worse than freedom, because if the government were to legislate culture it would be hard to verify that they were doing it in only the justified instances. It does seem to mean that free choice will not lead to the best outcomes however, undermining some justification for libertarianism.

Whether we should be concerned about externalities that others choose to bear is a matter of contention. If you should be encouraged against an activity because others want to do the same as you and they don’t like that activity, you should probably also be encouraged not to demonstrate homosexuality where it is unpopular or be ugly for instance. These also harm others, because they choose to disapprove. I think most would disagree that externalities caused by others choosing to care what you are doing should be regulated. I suspect such a sentiment is just a heuristic for allowing those who have the greatest interests in something having control over it, so people should usually be allowed to do unpopular things visibly, but in this case forced change may be a good thing.

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