I am currently reading Ryszard Kapscinki's collection of essays on living in and and reporting from Africa called The Shadow of the Sun. As many of you know, I am intrigued by parochialism and in-group and out-group preferences. Kapuscinski (2001, 188-89) captures the idea perfectly in his essay 'The Black Crystals of the Night,'

Our contemporary suspicion of and antipathy for the Other, the Stranger, goes back to the fear our tribal ancestors felt towards the Outsider, seeing him as the carrier of evil, the source of misfortune. Pain, fire, disease, drought, and hunger did not come from nowhere. Someone must have brought them, inflicted them, disseminated them. But who? Not my people, not those closest to me - they are good. Life is possible only among good people, and I am alive, after all. The guilty are therefore ther Others, the Strangers. That is why, seeking retribution for our injuries and setbacks, we quarrel with them, enter into conflicts, conduct wars. In a word, if unhappiness has befallen us, its source is not within us, but elsewhere, outside, beyond us and our community, far away, in Others.

As it was the festive season I took time off to ignore my google reader, get research done and then take a couple of days off with my wife over our anniversary (shock horror no internet access crazy!), I also went to Plett with my family before returning to Italy. As my South African sojourn ended there were flights and waits in airports (someone should write 'Doha: An Ode'). Consequently, I managed to read some books, mostly works of fiction, but there are a few non-fiction works sticking there hands up in the air awaiting a mention.

Fiction
I tooka little time to read my ever-companionable and enjoyable Galactic Milieu series by Julian May. In combination with the May's Saga of Pliocene Exile it is basically a tale of felix culpa for one of the main characters, Marc Remillard. I love this series for no obvious reason, it involves 'higher mind powers', aliens intervening in Earth Civilization in the early 21st century and odd Catholic theology, but I still love the main characters and the storyline. A human who takes a singular leap forward in evolution and basically becomes a disembodied brain sustained by his mindpowers! I can't really fathom why I appreciate this series so much, I think it appeals to the fantasist in me.

After May's series, I read Evelyn Waugh's Brideshead Revisited which I had been intending to read for ages. My wife has a fantastic hard cover Everyman's library version. Although somewhat strange to get into at first (I don't seem to have much sympathy for Oxfordian life), I enjoyed the second half of the book greatly. The reflections on cultural degeneration, the issue of reconciling religion and death, of what it means to be married in pre-WWII England and what lovelessness within marriage entails was both disturbing and enlivening (enlivening because I sympathise, I suppose, with the problems with reconciling areligiosity and death). I recommend this book strongly.

Following this, I read Philip Roth's The Plot Against America. Wow! I love it. It is a phenomenal book. It is an alternative history that considers what might have happened in the US if, instead of FD Roosevelt winning the 1940 US Election, Charles Lindbergh had run as the Republican candidate and beaten FDR. It is told mainly from the perspective of 8-year-old Philip Roth. Roth has a total command of his conceptualisation of this alternative history and writes the details of it well, focusing on the experiences of a working class Jewish family in Newark, New Jersey. Although potentially difficult for some because of its weighty factual nature in certain sections, the writing pulls you through, and brings you to a better understanding of the United States. This is high quality social commentary from Roth.

Next up was another work of fiction, John Updike's Terrorist. Updike follows a few characters in this book, the two main characters are a young Islamic man, Ahmad, who was abandoned by his Muslim father and lives at home with his American liberal, nurse's assistant cum artist mother. The second main character is Jack, a Jewish teacher and counselor at Ahmad's high school who becomes invested in the idea of Ahmad going to university rather than becoming a truck driver. Reading the two reviews on Amazon that gave the book one star, I can't help but think they gave the book an odd reading. The one complains that it gives a unidimensional account of Muslims, it doesn't, in fact the whole purpose of the book is to portray the kind of Islam that a devout, almost obsessive teenager constructs in order to satisfy his own preferences. It also does not portray this Islam as the Islam practised by other Muslims, in fact Updike goes to great lengths to show the different shades of Muslims once could potentially find in the world setting Ahmad in opposition to his boss Mr. Chehab. Anyway, the book does not have the grace that I have experienced reading some of Updike's earlier work, but it is definitely a worthwhile read. I'd give it four stars, not one, because he portrays the character of Ahmad well, I believe, even if he doesn't deal with the religion in as nuanced a way as some might like. If I was comparing it only to Updike's own work, rather than the work of the rest of the world, I'd give it three stars. Here is an interview with Updike about the book. Here's another (video) interview.

E.M. Forster's Maurice was next up on my shelf. Amy had been recommending this to me for ages, we had previously found a copy in that fantastic bookshop on Kloof Street (the name of which I forget), Book Lover's Paradise I think. It had sat on the shelf, unread, while I was here in Italy (Amy had read it previously for a course at uni). The book is a beautifully written, and fantastically witty, depiction of the adolescent and young adult life of Maurice, a young man from an upper class, but not noble, British family. Maurice is homosexual. Forster protrays the struggles that Maurice goes through with forcible and graceful language, portraying both Maurice's limitations to his partners, his fall, his classism (which Maurice fails to realise is as bad as homophobia) and, finally, a sexual and mental awakening to the ways in which his homosexuality will affect his life. The book is highly meaningful as one of the first pieces of genuine 21st century 'gay' literature, as Forster completed the work in 1914 but it was only published posthumously. Forster's reflections on the laws in the UK, which he wrote as part of an afterword during the 1960s, also shows how worried and anxious he was about the state of the law in the UK and how he felt that homosexuality would never be granted the status that it now has. This book is beautiful, easy to read and the timbre of Forster's writing voice is well worth listening to.

Finally, completing the fiction, I bought Terry Brooks's The Gypsy Morph in the Exclusive Books of Cape Town International Airport and finished it by the time I arrived in London (having sat in Doha for five hours twiddling my eyeballs). So yes, I had time to finish that. This book was the finale in Brooks's 'The Genesis of Shannara' trilogy. I am an old fantasy and sci-fi hack and I took pleasure in reading this book. This is good journeyman fantasy, decent battles, magic, elves, etc with a final resolution that ties together the world of a post-apocalyptic 'Earth' and that of Shannara. It was like a decent action movie: enough battles and thrilling events to keep the story moving, tied in with a worthwhile, if somewhat simple, plot. Perfect for hours in Doha waiting for my Qatar airways flight.

Non-fiction
Anne Fadiman's Ex Libris: Confessions of a Common Reader is a collection of essays on bibliophiles and their behaviour, which is often profoundly strange, yet simultaneously entertaining and endearing. I am a bibliophile (hopelessly misunderstood by my parents in that respect - I love books and had to get rid of almost two bookshelves worth when I left the country to start my PhD - the horror, the horror (don't worry I didn't get rid of my Conrads), let it be known, though, that my parents allowed me to keep two bookshelves full of books in my old room). Anyway, Fadiman's book is fantastic, she ruminates on being a sesquipedalianist, she assesses the myriad ways we treat our books (I am a scribbler and write in both fiction and non-fiction books), she meditates on whether his'er would work as a substitute for his in the phrase to each his own (she concludes, emphatically, thankfully, that it would not). Fadiman's essay are witty and insightful. The book was a pleasure to read. My wife, who is possibly as bibliomaniacal (in the metaphorical rather than diagnostic sense) as I am, gave this to me as part of an anniversary gift. We truly are kindred spirits.

As promised previously, a comment on Malcolm Gladwell's Outliers warrants some space. There has been a fair amount of commentary on this book (which I don't feel like linking to, sorry). Gladwell brings together a host of case studies and various research to bring together his ideas about success. He argues that success is basically composed of luck and hard work. However, you also have to be lucky enough to realise that hard work is necessary for success, so that is also part of the luck component. Underpinning both of these, though, are institutional structures (my terminology), such as the cutoff dates at school, the transaction costs of changing from one school to another (low during the 50s and 60s, high now), the mobility between areas, and the recognition given to one group rather than another (i.e. to what extent race disadvantages you because of the institutional structures reinforcing your position). The book is interesting, but I didn't get anything substantially 'new' from it except for some case studies. The studies link the argument together well, but they don't really do anything to tell us about how to change the system, or how to change people's thinking about success, except to show them the evidence against them. Historically, this has not worked: many libertarians still seem to believe in absolute freedom of choice and that institutional constraints don't exist. The book is worthwhile because it brings academic debates to hoi polloi and will hopefully strengthen the understanding that individuals are constrained by history and luck and that 'ability' doesn't always just shine on through.

Lastly, Alex Perry's Falling off the Edge is possibly one of the worst edited books of non-fiction I have read in a long time. This doesn't detract too much from his arguments about globalization, inequality and the dangers inherent in these, but seriously: repeated sentences, misspelled words, incorrect concord. Ahhh!!! I kept track until I lost the bookmark on which I was keeping track of the errors. The book is still worthwhile and I learned a hell of a lot about China, India and several other Asian countries, as well as some things that I didn't know about South Africa. I disagreed with some of Perry's more dire conclusions, such as the potential for a left-wing revolution to overthrow Asia's largest governments (China, India). Maybe I just hoped that these conclusions are wrong. I don't know enough about the countries he discusses to tell whether his arguments hold water or not. Anyway, give it a read, it's written in a reportage style (Perry being Time Magazine's African correspondent), with image plates thrown in to iron off the rougher edges. It falls into my 'racy' non-fiction category.

Next time
Graham Greene's The Quiet American, Ryszard Kapuscinski's The Shadow of the Sun and hopefully Roberto Bolano's 2666 once my order from Amazon arrives.

I just watched the TED talk below by Steve Levitt. In it he highlights some of his work with Sudhir Venkatesh (who regularly posts on the Freakonomics blog) about gang membership and the extent to which economic theory and the performance of crack-cocaine selling gangs coincides. Very interesting. HT: Mind Hacks.

Two points that brought it home for me, as a crack-selling foot soldier you have a greater chance of dying than someone on death row. Second, any black teenager living in the area (in their research inner city Chicago) has approximately double the probability of dying that a US soldier in Iraq has.

These statistics make me shudder when thinking what the equivalent probabilities must be for teenagers living on the Cape Flats.

The 6th Carnival of the Africans is being hosted by Angela who runs 'Skeptic Detective'. Here are my picks from the carnival.

Ivan, of a subtle shift in emphasis, tells the tale of his journey to atheism. He recounts the struggles of really understanding and relating to Christianity after seeing stark depictions of Jesus's torture and crucifixion in the Zeffirelli depiction thereof (in Jesus of Nazareth) and how this vivid experience was followed by catechism, mathematical and science education and more. Have a read, it's worthwhile.

Dr Spurt of Effortless Incitement relates some of the nuances of human tastes and how these relate to the symbolic experiences of what is being tasted (Pepsi vs. Generic cola say). Very interesting.

Mike Meadon reminds us that confusing hypnogogia for actual experiences is alive and well in personal tales of life and religion.

Two of my own posts, one on love and neuroscience and a recent one on the transitive brains of rhesus monkeys featured in the carnival.

A recent paper by Camillo Padoa-Schioppa and John Assad investigates the encoding of value in the brain for rhesus monkeys, a renewal of efforts to understand how and whether the assumption of transitivity, so crucial to the behavioral sciences, is in fact an accurate description of how individuals act when making choices. It builds on a previous paper (2006) of theirs in Nature, 'Neurons in the orbitofrontal cortex encode economic value.' The novelty in their (2008) research is that they provide evidence for value-encoding of juice consumption as menu-invariant, i.e. invariant to changes in the goods that are rank-preferred by the monkeys. I'm going to give you a brief summary and then make some points on where I'd be interested in seeing future research go.

There are three basic characteristics that they define. First, offer value responses which encode quantity or value of one or two offered juices (products). Second, chosen value responses which encode the value of the chosen juice (product) independent of the juice (product) type. Third, taste responses which are binary responses reflecting which one of two juices (products) are chosen independent of the amount of the juice (product). I have highlighted the notion of juice as product to foreground the idea of parallels between monkey juice consumption and the consumption of products by humans. Padoa-Schioppa and Assad assert that the second response, the chosen value response, is the most interesting because it is subjective and it ``represents a common unit for qualitatively different goods.'' (95) Their experimental methods are, thus, engaged with unearthing and isolating this chosen value effect. It is on this basis that we must assess their experimental methods and design.

The Experiment
The authors ran experiments with two (a male and a female) rhesus monkeys, measuring the neuronal output in the orbitofrontal cortex (OFC). The monkeys were prepared for the experiments using normal surgical procedures in preparation for neuronal recording. Juice was delivered to the monkeys in specifically measured quanta. The instructions, as such, that the monkeys were given were consistent with previous literature on the subject, with the monkeys selecting from a set of coloured squares indicating type and quantity of juice. The monkeys had an initial fixation point, after which a `go' signal was given: the introduction of two saccade targets adjacent to the coloured squares. Once the monkey had maintained fixation on the saccade target that they chose, juice would be delivered to them. Trials were aborted if the monkey broke fixation before the `go' signal. This procedure is highly detailed and thus easily replicable with appropriate resources.

Results
The theory was that there are three potential neuronal responses: offer value, chosen value and taste responses. The argument was that the Orbitofrontal Cortex (OFC) neurons have previously responded to delivery of a given juice depending on the context (Tremblay & Schultz
1999). However, that study did not assess whether these encoded responses were invariant to changes in menu. They designed an experiment in which they could isolate whether preference encoding is independent of menu choice and thus whether any (A,B,C) triple selected for an experimental session would allow for valid encoding of value in the OFC, value which would be consistent across menus. The crucial underlying distinction though is that the set of juices given fits the ranking A > B > C, with any one juice falling into a class A, B or C. This brings us to the question of how the juice rankings are derived, for which we do not have the data. Nevertheless, the final result was that 1 unit of an A class juice was equivalent to 1.3 units of a B class juice and one unit of a class B juice was approximately equivalent to 3 units of a class C juice. Finally, they showed that 1 unit of a class A juice was roughly equivalent to 4 units of a class C juice. Hence you have approximate value indifference (1 unit A = 1.3 x 3 ~= 4).

Thus the authors cover a broad base of theory related to preference transitivity and show that with distinct and well-defined preferences, values are encoded and the structure of these values reflects the mathematical conditions of value transitivity and indifference transitivity. This is very interesting and definitely warrants further research in other monkeys and for a larger sample of individuals, rather than it being some quirk of the two monkeys in the experiment.

Random Reflection
Would it not be cool, ladies and gentlemen, if instead of using disjoint sets of ranked goods they doing something that attempted to replicate what Simonson and Tversky (1992) (and most recently reinvigorated in Dan Ariely's book Predictably Irrational) discussed in house choice - seeing two potential consumption goods and then introducing what would be called an 'irrelevant alternative' in economic theory and seeing how the type of 'irrelevant alternative' (or the degree of similarity of the irrelevant alternative to one of the actual choices) affected value encoding. To me, this would bridge the gap from what would be a traditionally 'behavioral economics' assertion (for which we require, I believe, more evidence) and that of a good neurocellular economics discussion. A question for further research I suppose.

Reference
Camillo Padoa-Schioppa, John A Assad (2007). The representation of economic value in the orbitofrontal cortex is invariant for changes of menu Nature Neuroscience, 11 (1), 95-102 DOI: 10.1038/nn2020

William Easterly, aid sceptic extraordinaire (note aid not AIDS), has started a blog: Aid Watch. I am often in disagreement with Easterly, but he does make decent points in his research about aid, about accountability and about guidelines for policy. He starts of his contribution to the blogosphere by commenting on two recent opeds by Robert Zoellick, the president of the World Bank. Easterly criticises Zoellick for his personal pet hate: aid for aid's sake, rather than for what the aid will do. Take a look.

Jonah Lehrer has a recent piece in the WSJ in which he comments on several books on decision-making as a lead up to the release of his upcoming book How We Decide. The problem I wanted to highlight with his article was a reference to the book by Daniel Kahneman, Paul Slovic and Amos Tversky, Judgment Under Uncertainty. Lehrer comments that, "in experiment after experiment, the psychologists demonstrated that, unlike the hypothetical consumers in economics textbooks, real people don't treat losses and gains equivalently."

This is factually incorrect. They did not run experiments, they administered questionnaires. They asked people how they would react as if they were to face a lottery over gains and as if they were to face a lottery over losses. They did not actually run the experiments to test whether people would act in the ways that they described in their seminal (1979) paper, 'Prospect Theory: An Analysis of Decision Under Risk'. To quote Kahneman and Tversky (1979, 264), "The demonstrations are based on the responses of students and university faculty to hypothetical choice problems." Again, not an experiment.

Subsequently, a number of their theories have been validated in the lab, but for a lot of their most famous results they did not run experiments, unless administering questionnaires has suddenly become experimental. Yes, in later papers they did run experiments, and, yes, for certain other research questions they ran experiments, but for the things that Lehrer comments on this did not, especially not prior to 1982. Even as late as 1992 some of Tversky's work was based only on questionnaires (by my count of the papers of his I know), similarly one of their most famous papers with Richard Thaler (1984) was based on questionnaires.

Note that for this I am not saying that questionnaires are useless, I just wanted to clarify that they are not experiments and thus that the norms for other economic experiments, i.e. actually using the monetary incentives involved, were not held to.

Anyway, the books to which he refers are all good. I have read the Ariely, some of the Thaler and some of the Kahneman, Slovic and Tversky. I just wanted to clarify that one point.

Owen Swart of 01 and the universe is hosting the fifth Carnival of the Africans. I have not read the pieces yet, but wanted to promote the carnival. Go and have a look. I will read and tell you of the posts that I enjoyed.

I admit that I have been quiet of late because of work and teaching summer term, but I hope to have a couple of interesting pieces on Neuroeconomics up for the next carnival (Mike hold me to this!).

Anyway, it is also necessary for me to update my African Sceptical and Scientific blogroll. Here they are, I will be adding them to my sidebar promptly:

• 01 and the Universe
• Acinonyx Scepticus
• Amanuensis
• Ambient Normality
• Effortless Incitement
• Ewan's Corner
• Ionian Enchantment
• Irreverence
• Limbic Nutrition
• The Little Book of Capoeira
• Other Things Amanzi
• Orion Spur
• Pause and Consider
• Pickled Bushman
• Prometheus Unbound
• psychohistorian.org
• Scorched
• The Science of Sport
• Stop Danie Krugel
• Subtle Shift in Emphasis
• The Skeptic Detective
• Timbuktu Chronicles
• Yet Another Sceptic's Blog

The UN general assembly signed in a declaration for the universal decriminalization of homosexuality. The action was opposed by the US, the Holy See and by a conglomeration of Islamic Countries.

Anyway, I understand that this kind of thing is not binding, but it is a step in the right direction for the promotion of LGBT rights. I am in favour.

See the article from the UN Dispatch here.

I have not commented on books that I have read for quite some time. Here are a few paragraphs on a selection of books that I've read since last posting on the topic.

Shakespeare by Bill Bryson: Bryson is always good to read and this book didn't disappoint. I reveled in the little anecdotes about the context in which Shakespeare wrote. I remain convinced (as Bryons is) that Shakespeare wrote the plays, but lament the fact that we don’t have more documentary evidence of his history and his literary ‘processes’. What made reading the book even more fun was the fact that I have met Stanley Wells, who Bryson regularly quotes in the book. He is based at the Shakespeare Institute where Amy (my wife) volunteered during her year in Stratford. He took a shining to her and, consequently, I have met him on several separate occasions. He took Amy and I to lunch when we were in Stratford during August. Paul Edmondson (who presided over our wedding) is also quoted a few times in the book, which made it even more entertaining to talk to Paul about speaking with Bryson about the book: this brought a double joy to the reading. Don't go in expecting a book about the plays, go in expecting a book about Shakespeare, his time and his England.

Talking It Over by Julian Barnes: A fantastic little novel which tells the stories three people (two men and a woman) who end up in a love triangle, each telling the story from their perspective as the narrative progresses. Barnes has a fantastic sense of humour and the voices of each of the characters is distinct and seems to encapsulate that character’s foibles, complexities and modes by which they interact with others. Very funny, and quite deeply satirises certain British stereotypes.

Daniel Martin by John Fowles: Is an epic novel that traces the steps of the title character from a brief retelling of his childhood, to his life as a student at Oxford, to his adult life as a screen- and playwright. The book drips with irony, and, rather like the Magus, you cannot believe that there are so many ways in which characters can interact, or threads by which the narrative can be extended. Still, it is a beautifully written novel, it captures a sense of what it must have been like to be a British scriptwriter or author in the US in Los Angeles, but still retaining an essential Britishness that cannot, or is not, adequately understood by many (North) Americans. It is also interesting because during the writing Fowles often goes on philosophical tangents: he tries to navigate an understanding of the conflicts of capitalism and socialism, something in which I am deeply interested, as well as problems of aesthetics, such as whether art should be instructive or not. It is a challenging, fantastically written and epic novel. It makes me want to retrace the routes that the characters do to remote places in the US, certains spots in the UK (yes the UK does have remote beautiful areas) and also Egypt. I'd give this book a big thumbs up if you can deal with his occasional over-writing.

Song of Solomon by Toni Morrison: I enjoyed this book far more than I
enjoyed the previous book of hers that I read, Beloved. Beloved was very well-
written and understandably lauded (for example the New York Times did a survey of American authors and they voted it as the best American novel of the past 25 years). However, I found the writing style of Song of Solomon easier to read, as well as finding it more manageable in terms of the characters and narrative Morrison introduced. The main character’s name is Macon Dead, an African American growing up in the US during the period spanning the 1940s to 60s. Morrison tells his life: how his experience, as the son of an African American who owns property is both an intrinsically African American experience, but also distinctly not African American in the advantages that he has because of his father being a property owner. Combine this with a backdrop of odd family members, a narrative that takes you back to his grandparents and their tale and the book makes for riveting reading - it's a window into the paradoxed of African American life in 20th Century USA.

Divisadero by Michael Ondaatje: I picked this up in Borders Bookstore in Heathrow's Terminal 3 to read on my flight back to Cape Town. I read about half of it on the flight, distracted by action movies, mindless entertainment and the copy of Malcolm Gladwell's Outliers that I have on my ipod (not quite finished more on that book another time). Anyway, this book is somehow caressingly written, as if Ondaatje is drawing you in with the lyrical nature of his writing, drawing you in to the stories of how people love one another, how it damages them, how it helps to construct who they are. This is the second novel of his that I have read (The English Patient was my first, glorious delving into Ondaatje's fiction) and it contrasts oddly with his poetry, which I find to be more comical and more playful, definitely more playful with respect to how he treats and interacts with words. Nevertheless, this book is wonderful and now that it is in soft-cover it constitutes a good gift to the Ondaatje uninitiated.

Predictably Irrational by Dan Ariely: This book constitutes a fun introduction to a fairly limited draw of modern experimental economics and social psychology, the barried between the two is quite small with respect to what Ariely does as I would not always call what he does 'experimental economics'. Although I think that Ariely does some intriguing and worthwhile work, he suffers from the experimentalists Achilles' Heel (in my mind) in that he overstates the parallelism, or generalizability, of the results that he obtains in small-scale and localized experiments. I don't believe that he gives sufficient credence to cultural difference, or to heterogeneity of individual responses. That being said, I would recommend this book to most critical thinkers as it restates many examples of how we, as humans, thinking irrationally and do it in a predictable manner. For as many overly general or slightly inaccurate statements that he makes, Ariely makes many more that are worthy of our consideration in modern economics and psychology, especially in the contemporary crisis-wracked world.

Experimental Methods: A Primer for Economists by D. Friedman and S. Sunder is a book from which I read a chapter or two for a course on decision theory and behavioral economics. I decided to read the book and found it very valuable. Most of my reading in experimental economics has tended towards individual decision-making and individual preferences, the book, though quite dated (published in 1994) now in terms of the field, but is still a classic. They have a significant focus on market, auction and asset-market experiments with barely a mention of preference-based experiments, yet they provide general guidelines for conceiving and implementing experiments, data analysis and writing up that are very valuable. The book is an easy read and I found it worthwhile considering how I want to undertake experiments as part of my disseration research.

Otherwise, I am reading a book of Italian Short Stories, Gladwell's Outliers as mentioned, a book on Italian History, and another on neuroeconomics, in addition to which I am still doing my best to read Adam Smith's The Theory of Moral Sentiments when I have the time (and the patience). Oh yes, I also forgot to mention reading the inestimable 'On Liberty', but I don't believe that I can add much to criticisms or laudatory remarks on that book as it really is one of the great texts in philosophy (or so I believe, whether you disagree with its conclusions or not). Sherbet, I also realise I read Marx and Engels's Communist Manifesto for the first time, I found it interesting with some of the content agreeable and other content particularly disagreeable, but I suppose that was bound to happen. I know I am forgetting others, but this will have to do for now.

Not necessarily what I will get from my students after prescribing them actual (shock! horror!) reading for ECO2003P, but hey. Anyway, the reason I mention this is that while lecturing in Intermediate Micro one of the subjects that I cover with the students is that of monopoly power through network externalities, increasing returns, lock-in and specific, or irreversible, investment. The discussion is based on two articles both very easy to read:

W. Brian Arthur, 'Positive Feedbacks in the Economy', Scientific American, Feb 1990.
Paul A. David, Clio and the Economics of QWERTY, AER, May 1985.

I am hoping to get some lights on in the minds of some of the kids by doing a question-based discussion of the papers. I want them to engage with the readings and come up with their own ideas, I know such intentions may be naive but I remain optimistic. Even if only 1-5 of the 65 students gains some insight and some ability to think better about the world as a consequence of the discussion (rather than a straight up lecture) then I will be happy. In fact, I am guaranteed at least one with a bright and engaging student who I see is getting a fair amount from my lecturing, but I am hoping to get more than four more students to have something more than crepuscular lights going on in their heads.

Does anyone have specific ideas for South African situations of lock-in, network effects resulting in monopoly and irreversibility of investment resulting in monopoly type market dominance?

So after some time travelling, arriving back in SA, going up to Plett for a few days and then arriving back in Cape Town I am now lecturing ECO2003P, intermediate microeconomics, for the Summer Term at UCT. Joy! Well at least it pays for flights and a bit more.

Anyway, my hiatus was as a consequence of said travels. Coming back to SA has been surprising in terms of realising the effects of inflation, but also talking to people who are remarkably positive about the future of the country, as well as (overly?) optimistic about the economic potential of South Africa. I had one of the secretaries in the department ask me if I didn't want to stay on to lecture this same course during the semester, as much as I would love to I need to complete my PhD else no employment for the white male in SA in an academic institution. Note that this is said with no sense of unjustness, but simply a statement of fact. I cannot think of how any (economics) department in South Africa could offer a white male anything resembling a permanent position without them having a worthwhile PhD and some publications. Hence, I will apply to UCT when I am approaching the end of my PhD and I have some job market papers, in the meant time ad hoc work if and when they need me!

So yes, if you are in Cape Town or the vicinity and would like to see me then give me a shout. I look forward to hearing from you. I'll try to keep up a semblance of blogging even though I am teaching. Maybe I will be inspired by my minions (read students) to deal with interesting questions. Or maybe not.

Dan Ariely recently published a short op-ed in the NYT, arguing that excessive wages basically encourage laziness (gross simplification). Peter Foster of the FP responds. I thought it worthwhile to add my 2c have just written my most difficult exam this quarter (Advanced Game Theory) and feeling jubilant and like my opinion is worth something. My other reason for commenting is that I am currently three quarters of the way through Ariely's (audio) book Predictably Irrational, some of which I find interesting and to be of high quality, and other parts of which I think she would be left to the Department of Huh?

The reason I make the DoH comment is that I think that Ariely plays it a little bit loose with the ideas of parallelism and generalizability. What I mean here is that if you consider the experiment he talks about in the article, i.e. using people in India to mimic the working hours and payments of low, middle and high management is your sample in fact similar to that of the people who actually work in those jobs? I don't believe that the people who are the CEOs of the top companies in the world and who receive the inordinately high bonuses and salaries that they do are, in fact, like your average employee. I am not claiming that they are necessarily more intelligent, or that they have higher IQs, that could be the case. It could also be that they have way better social skills than anyone else you know, or that they need only to sleep four hours a night and get huge amounts of work done, or that they are simply more cut-throat, more ruthless and more savage with their opponents than your average Joe (the plumber). Consequently, getting a sample of average people and paying them more and they respond by working less than the medium and low paid people is odd, it is something that warrants its own explanation as an idea and argument separate to that made by Ariely. It cannot be extended to CEO, CFO, etc salary problems.

What do we need to understand for this? First, are CEOs paid less when they perform badly? Are they paid less when they did the same stupid thing that everyone else did? If they truly are miraculously talented people they should be able to see when other people are getting things wrong and they should have the guts, intellect and arguments to say 'X is getting Z wrong, so we should do Y instead of W.' CEO behavior should not simply be a case of bandwagon effects. What does this mean? More CEOs, especially in the US, should lose their jobs. They should not be given bonuses when their company performs, say, a standard deviation below the average. Moreover, during this period when a recession flows sweetly onwards and the ghosts of a possible depression haunts us, they should not be rewarding themselves, or even allowing their boards to reward them, when they should be doing everything they can to keep their jobs, keep the jobs of those below them and make their companies money. This is what normal salaries are for, not salaries that are more than 300 times the average are for. So yes CEOs could be paid less, but don't go making arguments about them being lazy, unintelligent or stupid. They're probably just greedy.

Two items on the agenda. First, the UK has introduced new legislation preventing 'forced' marriages. One would have thought that marriage in the UK would have had to be voluntary, but supposedly this was not the case - especially for families of Middle Eastern heritage. The question is, will this result in fewer marriages in those groups at which the legislation is targeted? Will it result in more antipathy towards the British Government from targeted groups because of them believing the legislation to be Anti-Islamist? I hope that antipathy doesn't rise as a consequence, but I can't see how it won't. I also don't see it dramatically altering the lives of many in the near future, the reason being that it would require intervention from someone who is a) aware of the rights of the partner but who is not complicit with the agreement which is unlikely, or b) the partner who is being forced into the marriage to be aware of their freedoms in the UK and to elect to abandon family, culture, etc in order to get out of the marriage. I am not convinced that this will happen as much as we might like to think it would.

Lastly, are there unintended consequences? For example, Man1, Man2 and Woman 1. Man 1 marries Woman 1 and it is a freely chosen arrangement, no forcing. Man 2 is jealous because he wanted Woman 1 and now lodges charges of forced marriage against Man 1. Will this, or permutations of this, occur? I hope not, but I am not convinced that it won't.

Note though that my personal stance is that the legislation is necessary to protect women's rights.

HT: MD.

Second item on the agenda: supposedly there have been responses by high income individuals the likes of which we might not have considered. Many who have mistresses, or even possibly high paid courtesans, are considering major cutbacks in their spending or abandoning their mistresses entirely. Anyway, what I realised was how this was all from a man's perspective. Do high paid female professionals not seek young virile men and support them with their large paychecks? One, the sample is problematic because there are probably dramatically more men in these high paid jobs because of under-representation of women in those high paid positions, as is still the case in the US. Moreover, and not to diminish the sexuality of women in any way, it would not surprise me if the demand by men, in general, for such services is probably significantly higher than it is for women. Moral of the story? High paid courtesans and mistresses (who are not paid, but who are bought gifts, have their apartments paid for, etc) are luxury goods - a shock to income reduces demand.

HT: GMB.

I didn't think it was that hifalutin, hoity-toity, nampy-pamby, academicky, nerdy... But, then again I am an economist and we regularly make bad assumptions.

Ed Glaeser, in his recent piece in the NYT, talks about how,

Hard-line economists argue that Detroit lost its way decades ago, and that government support for this industry will be worse than wasteful.

One of my courses this quarter was dedicated to decision theory and behavioral economics. Decision Theory has its roots in the axiomatisation proposed by Von Neumann and Morgenstern and is based on 'objective' probabilities, such as a fair coin flip in their Theory of Games and Economic Behavior. Savage proposed an alternative in his Foundations of Statistics that incorporated the notion of subjective probabilities based on individuals having their own perception of the likelihood of events. Anscombe and Aumann later synthesised these two theories to devise a theory that included both subjective and objective probabilities. Nevertheless, the goal for all of this the Expected Utilty Representation of a Utility Function, i.e. representing a utility such that it can be decomposed into the probability of obtaining specific utility amounts and that this can be done in an additively separable manner (this is less complex than it sounds).

However, the problem is that humans often don't behave consistent with the axioms of Von Neumann and Morgenstern, Savage, or Anscombe and Aumann. Allais showed this in his 1952 paper. Kahneman and Tversky (K&T), two psychologists who shifted into economic choice theory, also did work on this in 1979 and subsequently. Previously, I had 'studied' their theory, called 'prospect theory' previously from textbooks, but had not read their original 1979 paper. It is part of our compulsory reading list for this course and so I recently read it. K&T used many surveys to try to come up with an idea of how people responded to risk, to uncertainty over outcomes. In orthodox economic theory an amount of money should be 'state neutral', i.e. you should treat 500 currency units (CUs) in the same manner regardless of whether you are going to gain that money or lose it. However, their evidence indicates that people treat losses and gains differently. People are 'risk-averse' over gains, but 'risk-loving' over losses. I will go over this in a moment.

Take the following example. You are given the choice between R450 for certain or a lottery which involves a 50% chance of winning R1000 and a 50% of getting nothing. The expected value of the lottery (the sum of the probability multiplied by the amount to be won) is R500, which is strictly greater than R450. A 'rational' person should therefore choose the lottery. However, people seem to prefer the situation in which they gain the money for certain. People are therefore 'risk-averse' over gains.

Now take another example. You are offered the following choice. You either lose R3000 for certain, or you face a lottery in which you lose R4000 with 80% probability or lose nothing, R0, with probability 20%. The expected loss of the lottery is R3200. A 'rational' person would thus choose the certain loss. However, empirically, people choose the second option in which they face a lottery rather than the certain loss. People are therefore 'risk-loving' over losses.

These conclusions are in direct conflict with orthodox decision theory. Now, I think that VNM, Savage and A&A provide graceful mathematical depictions of potential behavior. However, they postulate humans with decision capabilities and computational abilities the likes of which I believe are truly miraculous. Savage, for example, talks about being able to partition sets of events into smaller sets of equiprobable events in order for them to be able to rank different sets of events, this would require a super-machine, or a person who is entirely unlike me in their decision capabilities.

K&T's theories should also be seen as largely descriptive. They have taken data and constructed a model that would represent behavior that is consistent with the behave that they observe when people make decisions. This area of decision theory has seen several developments in recent times with Gilboa being the champion of its development, I don't know if I can comprehend Gilboa's math, but hey I'll try and I'll let you know one day... For now it's good to know though that economic theory is doing its best to construct models that use assumptions that are closer to the actual behavior of people, rather than abstract and incorrect postulates of (in)human conduct.

I thought I'd mention briefly some of the reasons I decided against playing rugby here in Italy. First, I thought that I was misunderstanding the political positions and locations of certain individuals because of poor Italian. I also misunderstood several other things, which I will mention in a moment. Initially I stopped playing because I was injured and I had too much work with the PhD. Later, I decided not to return because of politics and racism. Oh well...

This all became even clearer for me recently when a Roman friend of mine described his experiences playing rugby. He'd played a bit as a kid when in Brussels and decided to take it up in Rome, he told me how the players tell one another, when in a ruck or scrum when trying to obtain the ball to 'Caccia il negro', which translates literally as 'hunt the nigger', in fact the ball is often just referred to as 'il negro'. I recalled my own teammates saying this but I didn't understand at that point in time because my Italian was barely sufficient to say my name, let along understood colloquial racist slurs.

On top of this, the beliefs South Africans have about 'right wing' Afrikaners and Rugby is nothing compared to the fascists I met when playing rugby, and the fascist tendencies that my friend described to me of the team he tried to play with (and subsequently left). Absolute belief that Mussolini was dead right, swastika tattoos, immigrant haters (though they don't mind blonde, white English or US immigrants) and more. Crazy times.

Anyway, so if you thought SA had problems with racism and rugby, or politics and rugby, think again. Yes, it is occasionally bad in SA, but at least you don't hear about South African Afrikaans teams saying 'hunt the k***'. Ah... Europe.

Take a look at this post by Daniel Hamermesh at the Freakonomics Blog. The second comment, by a lady named Rachel argues for the introduction of material incentives, i.e. payment, for sperm in the UK. Such incentives are already in place in the US and, as far as I know, involve drug screening and, obviously, screening for STDs.

Another comment, further down the page mirrors the comment that I made earlier in reference to payment for organs and the Tittmus problem. As a consequence of introducing payments for blood altruists were crowded out and drug users tried to use the system to get money. After several blunders this was corrected for and donors went through stricter screening procedures.

Anyway, the point is that I think that probably, in the case of sperm where there is a clause that allows the child to find out the identity of their donor-parent when they are 18 (a historical anonymity clause was repealed) they system could allow for improvements in the number of individuals who donate, assuming that the Titmuss related altruists are not crowded out by the introduction of material incentives and that the screening protocols result in no addicts and STD carriers donating sperm.

One of the other commenters noted how sperm donations have gone up regardless of the introduction of the new clause. I would not claim the new clause was causative in any way. However, there are still several thousand people who fall short of getting sperm for their babes. Crazy times.

Would I consider donating sperm? I don't know. I'd have to ask my wife's opinion on the potential of having a child with my genetic material whom I had not conceived with her potentially arriving on the scene in 18 or so years time. Might material incentives help? Well, it depends on how big they are? Also, do they just want sperm, or do they want high quality nerdy sperm (if I may be so bold, lol)? If so then maybe I should donate. Still unresolved though. It's those little touches of altruism...

Obviously one of the things I was assuming in my first post was that material incentives (money) will result in increased supply of organs by individuals. This may be an incorrect assumption.

For example, Richard Titmuss did research on blood donations in the UK and showed that the introduction of payments reduced donations, i.e. overall supply. Which means that the mechanism to be implemented needs to have a nuanced design such that it does not crowd-out donations that are already occurring because of altruism. Instead it should, somehow, maintain these altruistic incentives while also allowing those who would be positively incentivised to donate because of material incentives to enter into the market.

I am not sure how to do this as of yet. But I still think it is something to which we should aspire. Far too many people are dying and, until we can artificially construct new organs (one day...), offering material incentives is one option that just has not been explored. There are many ways to offer payments if you are worried about it being callous, and I believe it can be done in a way that allows for longer life for those who want it and increases in welfare for those who needed the money in the first place.

Another article to look at on the problem of the introduction of material incentives is Sam Bowles' recent article, on which I blogged here.

We have a voluntary extra-curricular reading group here at Siena organise by one of the young assistant professors, Giulio Zanella. The idea is that we should each present a paper approximately once every couple of months, while ensuring that we read the papers that others present. We generally present for about 1-1 1/2 hours and then try to chat about the paper for the 30 minutes following that.

Anyway, this past Tuesday I presented a recent paper by Ernst Fehr and Lorenz Goette, "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment." There are two purposes to the paper:

1. to demonstrate that there is a negative effort response to an increase in wage rates, even though there is an overall increase in wage supply
2. to explain that the loss-averse workers among those in the sample of experimental subjects are those whose actions resulted in the negative wage-effort relationship.