Thursday, May 13, 2010
Fun and Frustration Running Experiments
I've been running economic experiments with undergraduate students at the University of Cape Town. I've learnt a number of things about doing the experiments since I began. Much of this stuff was not in the first 'bible' of experimental economics that I read a couple of years back - Daniel Friedman and Shyam Sunder's Experimental Methods: A Primer for Economists. Nor have I seen it in many articles or other stuff publised about experimental economics, though I may have just forgotten the stuff that I've read. So here are some problems and insights that occurred to me.
- Recruit more people: Recruit a lot of participants and expect that between 10-30% of those who signed up won't come, you'll reach the higher bound of missing participants more readily if it's raining badly and the participants would rather not leave their warm rooms. So recruit more participants than you think you'll need, that way if there are people who don't arrive, you'll be ok. Yes, you could make mistakes, but rather end up with slightly too many people than too few on a regular basis. I over-recruited always, still I got burned with slightly too few (3 participants fewer than I'd have liked) on one day when it was raining heavily.
- Plan for Free Entry: Don't stick too strongly to your list of registered participants. Plan for people who have not registered to show up. I did this in my very first experiment, but I ended up turning two people away who I would have liked to have participate because I didn't prepare sufficiently for enough random arrivals. Often they can slot into the roles of people who didn't arrive, so they counter the forger/weather/double-booked attrition. To do this you obviously need to make the venue and time of the experiment public knowledge, which I had attempted to do through leaflets and UCT's online system (I don't know if this should be called foresight or paranoia). I know that allowing day-of-experiment arrivals may affect your sample because people may have communicated the information through social networks, but when you're playing with university students it's unlikely to have a large effect and I expect it won't have any effect at all given the other constraints you deal with when doing economic and social experiments such as these.
- Confront Disappointment Carefully: Some students don't like being randomly allocated to roles and don't understand that when everyone has the same probability of being a 'Participant A', 'Participant B', 'Participant C', etc that randomness makes the mechanism 'fair', even if the amounts of money at the end of the day if they had perceived them ex ante might be thought of as 'unfair' ex post. I had a couple of students (literally two) who emailed me after the experiment because they were annoyed they got less money than other people did. One of them said it wasn't an experiment and that I'd used him. I reminded him that many other disciplines don't give experimental participants the opportunity to make any money, or if they interview you they may not give any rewards, and when they survey you do may not give any kind of gift. It seems as though the expectation of money influenced these two students and they got annoyed with me for the fact that others walked away with more than them. Oh well... I had to deal with this, 'in the name of science' (I reassure myself). If you were wondering, the range of money that participants could walk away with was ZAR0 to ZAR120, roughly USD0 to USD16 in exchange rate terms, but substantially more, about $30 in PPP terms (by this site's estimates). That said, other students enjoyed participating in the experiment and found it exciting and interesting. I reassured the disappointed students that the outcomes were fair. I made a point of not apolosing though as that would have meant I thought something was wrong - I simply pointed out that the system was fair, they just happened to get a partner with different preferences or maybe they had poor luck. I don't think we should apologise for this, though I could be wrong.
- Deputise: Recruiting good research assistants (RAs) was a crucial step for me. I had recruited a couple of RAs for the first experiment, but not enough to deal with the havoc that can occur when people arrive late and want to play, when trying to ensure all forms are in, trying to stuff envelopes with money at a rapid pace, etc. Two of my colleagues at UCT ended up helping me during the first experiment, which I appreciated greatly. So I'd suggest that you hire at least one more RA than you initially think you need. Maybe you're gifted and can tell exactly how much of a problem X will be or Y might be. I wasn't that gifted, so I should have hired at least one more RA. My first experiment went well, but it could have gone even better or as well as the second and third experiments did when I realised I should dedicate some (of my own) money to getting RAs. You'll be happy you did it after the fact. RAs make your life easier, though they do add their own complexities at times. Also learning to deputise is itself a good skill to have and to develop.
- Plan/Play with other people: You may think you have everything covered. You're probably wrong. Bounce your ideas, your instructions, your forms, your questionnaires off of as many people as possible, both inside and outside of economics (or whatever your discipline happens to be). I don't mean "check with your supervisor" obviously you've done that already. I mean that I tested the instructions, forms, etc on my wife, my parents and my friends before I checked stuff with other economists. It helped. As did checking the stuff with economists and my useful RAs. Other people see things you don't. Use these other people. Crowdsource. Get other people involved, your ideas probably aren't so great that someone with a bit of insight could see a problem you didn't.
Tuesday, April 13, 2010
The Parochial and the Cosmopolitan - Globalization helps cooperation
Continuing my trend of reporting on papers about cooperation, I thought I'd comment on a recent paper by Nancy Buchan and co-authors about human cooperation and globalization. I've argued previously about the role of parochialism in punishment and in theories about the evolution of war and cooperation, today, though, the theme is the extent to which more cosmopolitan countries tend to foster individuals who are more willing to cooperate globally. Sounds intuitive, but how does it work experimentally?
Consider a prisoner's dilemma in the form of a multi-layer public goods game (PGG). A basic PGG works as follows: each player is given some money to contribute to a communal pot, that amount is multiplied by some factor (rate of return), but everyone gets a share of the total minus what they initially contributed. Therefore, I do my 'best' if everyone cooperates fully and contributes all their money, while I free ride and contribute nothing. It's a prisoner's dilemma in action - everyone sees this and they shouldn't cooperate. Consider a similar game, but with two communal pots: one 'local' where only people from my area can contribute to, the amount of which is then doubled and of which I receive 1/4 (3 other people in my group can contribute to it), and one 'global' or 'world' account that I and others can contribute to, the total amount of which is tripled, and of which I receive 1/12 (11 other people can contribute to it) . The tension is the following: the direct return is 0.5 from the local account and 0.25 from the world account. But if everyone contributes a maximal amount to the world account, then we all make off with the most money rather than if we had all defected and not made any contributions. This is also a prisoner's dilemma, but with more layers of complexity.
Buchan et al ran this experiment in 6 countries: the US, Italy, Russia, Argentina, South Africa and Iran, looking specifically at large cities in each of the countries. They made two hypotheses. First, globalization could lead to greater parochialism by emphasizing ethnic, local or national groupings. Conversely, globalization could have a palliative effect on parochialism and perhaps enable and sustain greater tolerance. They indexed a country level globalization index (CGI), an index produced by the University of Warwick. They also constructed an individual level globalization index (IGI) based on questions that each subject answered. The authors used quota sampling methods for gender, age and socioeconomic status (though not for rural-urban, which I comment on later).
Now we come to the reason I'm interested in the research. When the authors ran the experiments, they showed that South Africans ranked 5th out of the 6 countries in the CGI: above Iran, but below Argentina. Considering the experimental results, South Africa also ranked 4th or 5th below Italy, Russia and the United States, but almost exactly equal to Argentina in terms of probability of allocating resources to a global account. Iran came in lowest . Globalization at the individual and country seemed a good predictor of international cooperation. If you're sceptical of the globalization result, the authors also point out that:
"analysis of the CGI along with a host of macroindicators such as the rule of law, generalized trust, per capita income, and norms of civic cooperation shows that the CGI is the only macrovariable that is significantly correlated with mean cooperation rates at the world level." (4140)So, it seems as though the second hypothesis is supported by the authors results: globalization may make people less parochial and more cosmopolitan. But one problem emerges, as the authors chose to do the experiments in large cities, it is possible that they have a biased sample. There may be an underlying correlation between a person's choice to live in a big city and a person's cosmopolitanness - more cosmopolitan people may choose to live in big cities, less cosmopolitan people may choose to live outside of cities. Consequently, in the paper we may be observing an upper bound on a nation's tendency to cooperativeness because the subjects are drawn from inherently more cosmopolitan (and maybe more internationally cooperative) people. I'd like to see this research replicated with rural and urban samples to see what the differences might be. I'd suspect that rural individuals would be more likely to cooperate locally, whereas urban individuals would be more likely to cooperate globally. Thus, globalization might predict urban 'world' cooperation, but not rural as there might be differences across countries over rural behaviour. Apart from potential rural-urban differences that might exist among countries, I could not fault the experiment's design. Moreover, the fascinating research exemplified by this paper tends to make me slightly more optimistic about multilateralism and the benefits of globalization in the 21st century, though that could just be confirmation bias.
References
Buchan, N., Grimalda, G., Wilson, R., Brewer, M., Fatas, E., & Foddy, M. (2009). Globalization and human cooperation Proceedings of the National Academy of Sciences, 106 (11), 4138-4142 DOI: 10.1073/pnas.0809522106
Saturday, March 20, 2010
Apologies for the light blogging. I fly to South Africa next week and I have a number of deadlines before then (applications for conferences, grants, etc), as well as several for when I arrive in Cape Town: exam questions due for external moderator, tutorials must go up on the web, must finish and upload lecture notes, presenting a seminar a few days after I arrive... I have several half-written research posts that I hope to complete soon. So, apologies, but more research on economics and experiments will come soon.
Friday, March 12, 2010
Explain your total sheep played
When you come across a line like this in a paper, you can't help but laugh, "We now discuss and explain the cumulative number of sheep played in all rounds of the game." Yes, subjects played sheep. You may wonder how. I shall attempt to explain.
In three papers based on work in South Africa and Namibia, Bjørn Vollan and, in one paper, his co-author Bernd Hayo investigate several different experiments with the Nama people. They ran trust games, trust games with third party punishment, and common pool resource games with groups of villagers in the Northern Cape Province of South Africa and the southern region of Namibia. Their work was supported by BIOTA, a biodiversity and conservation project.So what kinds of things did they find out? And how on earth were sheep involved? Well, the Nama people spend substantial amounts of time on subsistence herding of goats and sheep. Consequently, when they played the common pool resource game, the game was framed as though the subjects were exploiting common grazing ground by choosing a number of 'sheep' to 'graze' the resource. The game works like a multi-player prisoner's dilemma where the self-interested thing for a subject to do is to 'defect' by having as many sheep as possible in the hope that no one else will choose lots of sheep, but everyone chooses lots of sheep. The social optimum occurs when people exercise self-restraint and jointly have several sheep, but not too many such that the common resource vanishes. Strangely enough, people often don't play completely self-interestedly, instead they choose something in between the individual optimum and the social optimum (see Cardenas and Carpenter, 2008 and Velez et al, 2006). In Bjørn Vollan's work, we see that the Nama also cooperate to some extent with the option to exploit the resource, and, after several rounds, they also are able to vote on adopting a self-regulating policy of punishment, reward or communication, any of which seem to result in a higher degree of cooperation. The experiments were run with groups of five. In the control, when the subjects were given the choice of between 10 and 90 sheep(in tens), 51.6% of people chose the less cooperative options of 60-90 sheep. When, in the latter rounds, a treatment for reward, punishment, or communication, could be voted on the amount of outright defection decreased to 30.7% of the sample, with 46.5% of the sample choosing the highly cooperative 10, 20 or 30 sheep (everyone choosing 20 would be the social optimum).
So we know that introducing some kind of voted rule works, but does any one rule work better? Does 'buy-in' matter? One problems is that the rankings were different in South Africa and Namibia. In the South African community, punishment resulted in lower numbers of sheep chosen with the choice stabilising at around 4 sheep on average; it worked best of all when more people in the group participating in the experiment voted for it. So a community with 'buy-in' to norms could operate more effectively (interesting enough, in the Hayo and Vollan paper there's a strong correlation between voting for punishment and being a Lutheran, one of the few religious affiliation effects they found in the subjects' behavior). Conversely, in Namibia rewards work much better, though the positive effect of decreasing the number of sheep chosen peter off. Vollan argues that this can be explained by rewards 'crowding out' intrinsic motivations to cooperate (read his paper for the full argument).
So, we know what's happened in the CPR game, but what about the trust game and the trust game with third party punishment? Recall that the trust game is a bargain between two subjects: a Trustor and a Trustee. The Trustor chooses some fraction of an endowment to give to the Trustee, the total amount of which is multipled by 3 (this act is called 'trust' below). The Trustee may then send an amount back to the Trustor. In the third party punishment (TPP) variation, a Third Party is introduced with the power to 'punish' the other players: the Third Party can pay to reduce the payoffs of players whose behavior she did not like, either the Trustor, the Trustee or both. In Vollan's results, and moving from sheep to money, we see that South African Nama trust 20% of their endowment to their partner, whereas Namibian Nama trust 40% of their endowment to their partner. The South African group is at the bottom end of all results of trust games internationally (see Cardenas and Carpenter, 2008, Camerer, 2003). Then, in the second set of experiments examing trust, punishment and relatedness, Vollan finds the results presented in the table below.
The paper presents the aggregated results and I could not dis-aggregate them for South Africa and Namibia as in Vollan's other paper. Nevertheless, the results are instructive. We can see, first, that there are substantially different results between villagers, friends and family. Moreover, introducing punishment substantially increases the likelihood that subjects act 'trustingly' (send money to the Trustee) and 'trustworthily' (send money back to the Trustor). But the effect of punishment differs greatly: villagers behave 48.4% more trustingly, friends behave 44.2% more trustingly, and family only 21.9% more trustingly. The relationship is different for trustworthiness: friends come out on top, behaving 65% more trustworthily, villagers 50% more trustworthily, and family 37% more trustworthily. Obviously these rankings occur because family members behave the most trustingly and trustworthily from the outset, but it goes to show that third party punishment may be its most effective between non-relatives in promoting trusting and trustworthy behavior.
The papers are all fascinating, particularly for a South African interested in doing similar work. I hope that the few results I have shown might have piqued your interest enough for you to go and read the papers. I presented what I perceived as the most interesting results without critiquing Vollan's methods too much. That said, Vollan could have done one or two things to improve his methods. For example, and somewhat pettily, with translation into Afrikaans (the language in which the experiments were conducted), Vollan should have translated and back-translated for consistency. Also, we could be given some additional ethnographic information about the Nama's particular institutional structures of third party punishment, though Vollan does provide information about reciprocity, gift-giving, and trusting/trustworthy behavior. He also finds (2008, 16) that the subject display inequity aversion, so I'd think that given the prevalence literature on this topic it would be worth investigating this idea more and offering some insights in the conclusion after the later results. Overall, they're a good contribution to the experimental economics, resource economics and behavioral economics literature and I thoroughly enjoyed reading them.
References
- Hayo, Bernd & Bjørn Vollan. 2009. "Individual Heterogeneity, Group Interaction, and Co-operative Behaviour: Evidence from a Common-Pool Resource Experiment in South Africa and Namibia." Philipps-Universitt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Vollan, Bjørn. 2008a. "Kinship and friendship in a trust game with third party punishment." Philipps-Universitt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Vollan, B. 2008b. Socio-ecological explanations for crowding-out effects from economic field experiments in southern Africa, Ecological Economics, 67 (4), 560-573 DOI: 10.1016/j.ecolecon.2008.01.015
Wednesday, March 10, 2010
Trusting and Bargaining in Africa
Are we Africans different to the rest of the world in our giving, punishing and trusting behaviour? Three remarkable economic anthropology studies try to examine this kind of question with several ethnic groups in four countries: the Pimbwe, Sukuma and Kahama in Tanzania, the Maasai of Kenya and the Ju/'hoan Bushmen of Namibia and Botswana. I can't to do any of the papers justice with my short comments, but I thought you might find them interesting nevertheless.
The three papers take quite different approaches in their use of economic experiments. Paciotti and Hadley's paper with the Pimbwe and Sukuma looks at the institutional scope of interactions, that is the extent to which cultural practices and norms may imply differences in the ways people play. They show that the two ethnic groups live differently and respond dramatically differently in the experiments. The Sukuma are agro-pastoralists with pre-existing norms of within and between village cooperation, and justice institutions (sungusungu) that punish individuals for norm infringement. Their play in the ultimatum game was more generous than the Pimbwe, with very few rejections (most likely because the offers were fair or hyper-fair). Contrastingly, the Pimbwe do not have many institutions for between village cooperation, or any third party justice institutions and their grievances are often settled with personal violence. Their results are consequently unsurprising - much lower offers on average, with substantially lower offers to those of another village. The remarkable thing here is that even the Sukuma's offers to residents of another village were higher than the Pimbwe's offers to residents in their own village. Also, the Pimbwe rejected offers (which some call punishment) substantially more than the Sukuma. The authors therefore show that even within small geographical distances, differences in institutional backgrounds alter how people behave.
Lee Cronk's study of the Maasai cultural norm of osotua fascinated me even more. Osotua is an often reciprocal relationship between male Maasai who call each other isotuatin. Osotua bonds isotuatin to each other so that they should provide for each other in times of great need, normally requiring assistance with food or gifts of livestock, or even revenge killing. So Cronk decided to see how Maasai subjects played the trust game in two settings: the first without any cultural frame, and the second where it was framed as 'an osotua game'. As you'd expect they played the game quite differently given the frame. In the control (no frame) and considering all transfers the subjects gave 35.3% vs. 28.2% in the framed condition. Considering player 1 (the 'trustor'), the transfers differ 38% (unframed) and 30.8% (unframed), though not statistically significantly so, and transfers by player 2 (the 'trustee') back to player 1 also differ: 32.5% (unframed) vs 25.5% (framed). But only in the framed condition did a strong correlation existed between the amounts given and the amounts returned show through, indicating the reciprocal nature of the osotua. Also, Cronk proposes, the lower amounts given in the osotua frame probably reflect the sense that osotua gifts are only given to assuage great need, and normally are not great amounts. Cronk argues forcibly that anthropologists and economists need to act carefully when they construct games within specific tribal and ethnographic contexts, investigating the norms that exist within a specific context, and ensuring that they tailor their studies accordingly, being careful of when they encounter norms that may alter the data that they find.
Finally, Polly Wiessner's research into the Ju/'hoan bushmen looked at their behavior in the dictator game and the ultimatum game, after which Wiessner examined their behavior in everyday life to see whether experimental behavior and behavior outside the experiment were consistent. In the dictator game, the average offer was 20%, and in the ultimatum game the average offer was 16% with 4% refusals. These averages are the some of the lowest in the world (see Henrich et al, 2006, Barr et al 2009). Notwithstanding these low within game offers, outside the game the Ju/'hoansi share tobacco, pool food resources, ostracize those who had infringed social norms (those they ostracized possibly stole a goat) and act compassionately towards those who behaved unwisely with the money from the experiments (some went to the town, got drunk the so-called "fault of the beer"). As per experimental protocols, the subjects behavior was anonymous. Wiessner was asked repeatedly during the experiments if she was lying about this because the concept seemed quite foreign to the subjects whose behavior is normally socially embedded. Wiessner's work reinforces how researchers need to align laboratory and experimental protocols with the everyday lives of the people involved; though many of us are involved in anonymous market economies the distances that separate us from those who produce the goods we produce are immense, this is not always the case. Moreover, being able to understand the spillovers of anonymous behavior to social embedded behavior and the converse can enlighten the use of experiments in urban and rural, market-integrated and non-market-integrated societies.
The papers serve as a reminder to economists (though how many economists read anthropology journals I do not know) that their work must take cognisance of cultural and institutional structures, of the frames that they introduce with experiments (think of harambee with Jean Ensminger's work), and of the parallelism between experimental behavior and behavior in parallel situations outside of the experiment. In this way, pairing laboratory experiments with field experiments and good ethnography could provide a better way to do things in future. Or so I hope.
References:
Cronk, Lee. 2007. "The Influence of Cultural Framing on play in the trust game: a Maasai example." Evolution and Human Behavior 28(5):352-358.
Paciotti, Brian & Craig Hadley. 2003. "The Ultimatum Game in Southwestern Tanzania: Ethnic Variation and Institutional Scope." Current Anthropology 44(3):427-432.
Wiessner, P. (2009). Experimental Games and Games of Life among the Ju/’hoan Bushmen Current Anthropology, 50 (1), 133-138 DOI: 10.1086/595622
Tuesday, March 09, 2010
The Joy of Nastiness
Schadenfreude, taking pleasure in someone else's pain or misfortune, seems to appear a normal thing to most people. It occurs in literature, comedy, our every day lives. But what do Economics and Social Psychology have to say about it? We know from previous research by Simon Gaechter, Benedikt Herrmann and several others that people display 'anti-social preferences' - they punish people who contribute more than they do to a public good. Now, a recent experimental paper, 'The pleasure of being nasty' by Klaus Abbink and Abdolkarim Sadrieh, tries to take some of this work forward, they investigate a game in which players can destroy the output of others without reaping any benefit from the destruction, or without incurring any cost for doing so. What do you think people might do?
Abbink and Sadrieh nested an experiment that allowed players to destroy the output of others in an experiment in which subjects were asked to evaluate adverts for a marketing campaign. They then had the option to 'destroy' the production of another person who was doing a similar evaluation. The destruction treatment came in two forms: in the first treatment (open) subjects could destroy the produce of their partner and the information was shared perfectly, in the second treatment (hidden) the information was shared imperfectly because a random amount would be destroyed. The procedure was repeated ten times. The incidence of nastiness for the two treatments differed substantially (see Fig. 1 adjacent) and people evidently took advantage of the opportunity to destroy their partner's production more when there was less chance of being found out.
So, when there is no benefit to destroying, people destroy anyway. When there is less risk of being found out by your counterpart - even though they could retaliate - people destroy a bit. Moreover, the subjects tendency to destroy did not correlate with whether they had experienced their produce being destroyed in previous rounds. Also, the subjects did not seem to be driven by inequity aversion because they often destroyed their counterpart's produce even their counterpart had the same as or less than they did. Abbink and Sadrieh make the point that we need to reconcile these results of nastiness with the many results we have about prosociality, cooperation, inequity aversion and others. The view also needs to be reconciled with our conception of rational homo economicus which might say that no rational individual would just destroy things without a pecuniary benefit. So, because I take pleasure in the misfortunes of homo economicus, I'll end by linking to the song schadenfreude from Avenue Q - 'Cos when I see how sad you are, it sorta makes me happy!'
Sunday, February 28, 2010
Carnvival of the Africans #14
Angela, the Skeptic Detective, has three fantastics posts. First, 'Atlas V makes you feel like you're tripping', in which she examines sonic booms and speed - a physics fun time. In the second post, 'How to win friends...' she examines the 'work' of Mike Adams, a 'health ranger' and his beliefs in naturopathy and the natural way. Good skeptic defence Angela. Her third post, 'Paranormal Investigators', looks at paranormal beliefs, specific South African urban legends, and their (in)validity as investigated by the South African Society for Paranormal Research.
At Communicating Science, The African Way, Muza Gondwese asks whether 'To snip or not to snip'. She presents the evidence about male circumcision in several African countries and says that there is some evidence that it helps to prevent HIV transmissions (helps to prevent minimally she highlights). She discusses policy implications for Malawi and the situation in Swaziland. A timely post for those considering the role of prevention in HIV - look at the science, do a cost-benefit analysis. (I understand this is a contentious topic, but it's still worth reading her piece).
Ross at the Science of Sport wrote an intriguing post on 'The mental edge or physiology' in sport, in which he tries to understand the role of psychology and 'mental toughness' in sport against physiological superiority. One of the problems, evidently, is that of measurability: how do we measure mental toughness? Is it the same across sports? Is there a consistent and falsifiable theory of mental toughness? He tries to navigate some of these problems in a post accessible to the layperson (so, no, there aren't any discussions of falsifiability and demarcation).
Mark Widdicombe has three good posts. The first, 'Good News', in which he describes the Lancet retraction of Andrew Wakefield's paper linking the measles, mumps and rubella vaccine to autism and bowel disorders (a skeptic victory). The second, 'Witch Professor' in which he entertainingly describes an interaction with the eponymous
doctor, has to be read for entertainment value. Finally, in 'Smoke signals', he reports on his experiences quitting smoking, doing his best to evaluate various methods for quitting smoking.
And finally we get to me. I reviewed two pieces of research. The first, 'Making money vs. Windfalls - Are you hardnosed' in which I reviewed a 2002 article investigating the methods of experimental economics - giving windfall cash to people and watching them behave. The second post, 'Neural Evidence for inequality aversion when giving away other peoples' money' applies the critique from the 2002 paper to a new paper from Nature investigating inequality aversion using FMRI. I also have a more entertaining piece, looking at whether ANCYL (a South African political organisation) knows what evidence is: 'Untrue, Fabricated, False Lies'.
On that note I'll end this month's Carnival of the Africans.
Friday, February 26, 2010
Tim Harford has a fantastic column today talking about the campaign behind the Robin Hood tax. He argued previously that the campaign was misguided, but what scares him more are the ways in which those who support the campaign - bloggers, commenters, twitterers - have tried to 'argue' to support the tax. What did they do? They appealed to authority. How? The supporters reiterated that 'Nobel Laureate Paul Krugman said [X]' or 'Nobel Laureate Joseph Stiglitz said [Y]'. Harford playfully suggested the following three other Nobel Laureates and their ideas:
- We should not levy a price on carbon. Why? Because Nobel laureate Thomas Schelling thinks that cap-and-trade schemes are a silly way to think about climate change policy.
- We should be able to buy and sell kidneys. Why? Because Nobel laureate Gary Becker thinks that it would be a good idea. [pdf]
- We should stop laying into economists. Why? Because Nobel laureate Robert Lucas thinks macroeconomics performed well during the financial crisis.
So yes, be aware of Appeals to Authority, contrast such appeals with deference, and remain aware of arguments and evidence for and against a policy, especially on a topic as emotionally charged as a transaction tax on international banking.
What's my answer? I don't know. I don't know enough about international finance to be able to say whether it'll be good or bad. I have two opposing intuitions: first it may increase volatitily rather than decrease volatility because the tax will act as a disincentive to spread your risks, second, it may decrease volatility because there will be less currency speculation. Separately, as an international student I might be taxed by it personally - depending on the exact structure of the tax - because I have to move money between South Africa, the UK and the EU while doing my research. I don't have all that much money and the little I do is very valuable to me, so the tax will, in effect, act as a disincentive for me to do what I would like to do: high quality international research for which I have to move around a lot and move money around a lot. So, though I don't know too much about it, my personal attitudes are against it (but this is a very slight probabilistic twist in one direction). We'll see whether the tax gets popular and academic support as the year progresses.
Thursday, February 25, 2010
Call for Submissions - Carnival of the Africans
I shall host this month's Carnival of the Africans on Feb 28th. If you happen to be an African Sceptical or Scientific blogger, please email me your submissions by 9pm Feb 27 so I can attempt to publish by 9pm Feb 28th. The guidelines are here. Angela, the Skeptic Detective, hosted the previous edition here. You can contact me at simon{dot}d{dot}halliday{at}gmail{dot}com. I look forward to your sceptical and scientific posts. I will trawl the web to find additional un-submitted posts that fit the criteria, but I prefer submissions to trawling.
Neural evidence for inequality aversion when giving away other peoples' money
This week's Nature has a paper by Elizabeth Tricomi, Antonio Rangel, Colin F. Camerer & John P. O’Doherty, reporting on 'Neural evidence for inequality averse social preferences'. Eurekalert reported on it here. I would have read the paper anyway, but a quotation from one of the researchers, John O'Doherty in the Eurekalert article pricked my ears up, "[We can] try to understand how these changes in valuation actually translate into changes in behavior. For example, the person who finds out they're being paid less than someone else for doing the same job might end up working less hard and being less motivated as a consequence. It will be interesting to try to understand the brain mechanisms that underlie such changes." Now this interpretation would be great, if that's what the experiment had examined. But it didn't. I suspect that O'Doherty was led on by the journalist to say something 'print-worthy'. I comment briefly on the paper, and examine what we need to do to make more claims like O'Doherty's above.
Here's the description of the method from the article:
Twenty pairs of healthy, previously unacquainted male participants participated in the experiment. They were each paid a base $30 fee; each then drew a ball from a hat, labelled ‘rich’ or ‘poor’. The ‘rich’ (high-pay) subject received an immediate payment of $50, whereas the ‘poor’ (low-pay) player received no bonus payment. They then performed an identical task in consecutive fMRI scanning sessions. In each trial subjects viewed possible monetary transfers from the experimenter to themselves and to the other player, ranging from $0 to $50 (Fig. 1). Participants rated how appealing they found the possible transfers on a scale of -5 (very unappealing) to 5 (very appealing). After both players’ scans, a single trial was randomly picked from the set, and the transfers for that trial were paid out.They're basically simulating a dictator game between the experimenter and themselves where all the money is 'windfall', that is unearned money. That leads to the first problem. As I've argued previously and will continue to argue people treat windfall money differently to how they treat earned money. Secondly, when people see that all your options involve only 'giving' to others and not 'taking away' from them then that immediately frames the experiment as something to do with generosity or giving money [see comments on Bardsley paper on this here]. When I know that I could be given something, and someone else could be too, I will react differently than to a situation in which I could have stuff taken away from me while someone else is given something, he could have something taken away while I get something, both of us could have something taken away, or both of us could be given something. I do not know what the ventromedial prefrontal cortex will do in these situations and I think that Tricomi et al should investigate this to see what happens to their results.
Aside: I really appreciate Colin Camerer's work. I draw on it heavily for my dissertation research and I marvel at his output. But I worry about how the work in this paper might be interpreted in the press and by the general Nature readership who may not understand some of the nuances.
Wednesday, February 24, 2010
ANCYL misunderstand Cronin
Oh gosh, it looks like I'm going to have to comment on South African politics again. Floyd Shivambu waxes incoherent about Jeremy Cronin's recent public letter about transparent debate about nationalisation. Shivambu said, "Why a communist cadre in the form of Jeremy Cronin refuses to constructively input into the nationalisation of mines perspective even when humbly requested to is worrying. But as they say, blood is thicker than water." What does that mean? Let me get this straight, Cronin writes constructively about the debate (having been asked to do so), but Shivambu thinks Cronin is incoherent and destructive? Well let's look at why.
Let me state outright that I'm not a communist, but I think Cronin is one of the most coherent, if occasionally wrong, members of the communisty party and of the tripartite alliance. Otherwise, I am a big fan of his poetry and have substantial respect for him as a white man who stood his ground during apartheid. We needed more like him.
Anyway, back to the article. Cronin says, "Behind the headline stories of high-life parties and the flaunting of ill-gained wealth, lies the sordid reality of manipulative sponsorships, wheeling and dealing, organisational factionalism, arm-twisting and the general subversion of our democratic order.” Ahhh.... so that's what annoyed Shivambu. Cronin was criticising Shivambu's, Malema's and many other fair-weather socialists' proclivities to parties and spending. Oh well, poor Floyd.
Next thing, Cronin says that “Our socialism is fundamentally about waging a struggle, here and now, with and in defence of the workers and poor.” How can Shivambu have a problem with that? The workers and the poor? I must have misunderstood the position of ANCYL to not see this as a problem.
Cronin goes on to say, “[SACP policy] is certainly NOT about "capturing" the ANC by infiltrating communists onto ANC electoral lists! If communists enjoy popular support and endorsement from within ANC structures that's great. But they serve in ANC positions as ANC members. We want to have capable, honest and hard-working ANC cadres as ANC leaders - some will be communists, many will not be. Rather a capable non-communist ANC comrade in a leadership position, we say, than a less capable ANC member who happens to be a communist.” Oh gosh! There's another potentially veiled insult. Cronin would prefere efficient and effective capitalists in the ANC than ineffective communists. Again, how can that be a problem? Oh wait, maybe Shivambu realises that Malema is basically an incapable and ineffective croney capitalist. Oh well...
Cronin makes several other coherent comments:
Recent bank bailouts could be considered 'socialism for capitalists'
Better to quote it, “public sector ownership, on its own, is no guarantee that this public property will not be plundered by senior management for their own private accumulation purposes.” And also, “It would be the height of hypocrisy, by the way, to be calling for "nationalisation" on the one hand, while being intimately involved in the private plundering of public resources on the other.” Ahah! I can see why Shivambu might dislike that - no lining the pockets. Poor Floyd.
“In advancing our perspective on socialisation, including progressive nationalisation, the SACP fully intends to locate this advocacy, and any other discussion on nationalisation/ socialisation, within the context of our shared alliance strategic priorities - jobs and sustainable livelihoods; health-care; education; rural development; and fighting crime and corruption. We must all guard against the opportunistic appropriation of "nationalisation", treating it as a stand-alone issue and using it as a rhetorical badge of "radicalism". Any progressive call for nationalisation needs be a coherent and do-able part of an overall democratic programme.” Wait, you mean Cronin actually wants to have democratic processes? You mean he doesn't want to be populist. Floyd, Floyd, Floyd how is this not constructive?
“Grand-standing doesn't help. Threatening comrades that you won't vote for them in future elective conference unless they support your position is infantile and unhelpful.” Ahah, there it is again, not-so-veiled criticism of grandstanders like Malema and Floyd. Understably, Floyd doesn't like it. Floyd labels all people who disagrees with him 'reactionaries' or 'counter-revolutionaries'. Evidently Floyd doesn't understand Democracy or Freedom of Speech. Poor Floyd.
“The current crisis around governance, golden hand-shakes, exorbitant tariffs, and failures to actually effectively deliver in many SOEs provides us with an opportunity to advance (not the cause of privatisation, as the DA will do) but rather their effective and increasing socialisation - i.e. subordination to the logic of meeting social needs not private profits.” Ahah! Something else constructive that Floyd doesn't think is constructive: a clearly articulated position on nationalisation. But Floyd doesn't seem to like being articulate. Poor Floyd.
Sunday, February 21, 2010
Untrue, Fabricated, False Lies
So I don't venture into political commentary too regularly, but I thought I'd highlight the role of evidence in the recent ANCYL vs. The Star conflict. The Star ran a report on the lifestyle of SA leaders, beginning with Julius Malema. ANCYL then responded saying that the report was 'untrue and opportunistic'. So let's go with the claims and counterclaims, the evidence presented, and the interpretation of this by the parties. One general comment, the ANCYL representatives evidently don't understand redundancy because they kept referring to 'untrue fabrication's, by its nature a fabrication is untrue, else it would not be fabrication, therefore calling it an untrue fabrication simply evidences your own silliness. Anyway, on to the claims and the evidence.
- The Star claimed that Malema owned two houses worth R4,6 million that he bought with cash. ANCYL responded saying he didn't buy them for cash but 'like every body [sic] else, he has purchased whatever houses or property registered in his name through banks.' The relevant evidence here is embodied in housing deeds and reports claiming the houses are worth R3,6 million and R1 million each, not whether the houses were bought with cash or not. Does ANCYL produce counter-evidence about him not owning the houses, which is what is relevant given that the article is about Malema's lifestyle? No, they do not produce such evidence.The argue that the report is false because Malema did not buy the houses for 'cash'. Irrelevant. Fail ANCYL.
The Star claimed that Malema had Johnny Walker gold worth R700 and Moët et Chandon 'French Champagne [sic - redundant because Champagne must be French] at his house warming party and that a famous DJ did the music. The Star did not know how much the party cost in total. ANCYL could provide the evidence by giving records of the party's cost and confirm whether or not these items were consumed. They could provide photographs of the party which may or may not indicate whether such beverages were consumed. This would be evidence. My quick inspection suggests The Star had the right price for Johnny Walker Gold, though it could have been donated. Even so that would be relevant. Fail ANCYL.
- Staying on the party, The Star reported, "A police reservist said at the time that he was assaulted by the youth league leader. Neighbours complained about the noise and mess that Malema's party had caused." ANCYL did not comment on this and did not present any counterevidence, that is they did not produce evidence indicating that Malema did not assault the reservist and they did not produce evidence indicating that neighbors did not complain about the party. Not particularly relevant, I know, but still potentially important. Fail ANCYL.
- The Star reported that sources claim that Malema's salary is R20 000 a month. ANCYL countered by saying that was 'far from the truth'. That doesn't help. They should print his payslip and lead the way against corruption by making his bank transactions transparent and provide evidence that Malema isn't involved in any corrupt relationships. That would help to explain how Malema is living beyond his means. Maybe his salary is greater than R20 000, which would in itself be valuable public information. Fail ANCYL.
The Star made the following claim about vehicles: "The 28-year-old politician owns a black Mercedes-Benz AMG, which retails at R734 000, and reportedly drives an Aston Martin and a red Range Rover Sport, too. Last night he went to a lecture at Wits University in a brand-new white Range Rover - with no number plates - which sells for R1,2m." ANCYL responded by saying, "The second untrue fabrication is an impression created through the report that Cde Julius owns four expensive cars. We like to state on record that Cde Julius has one car in his name." The Star did not say Malema owned four cars, they said he owns one and has driven or been reported as driving another three. The one he owns is worth R734 000. What would be relevant to know is how he afforded that car given the evidence about his salary. Also, it would be relevant to know who owns the other three vehicles. It is of public interest if an official in the youth league of the national governing party owns and drives vehicles that are priced more than houses in some areas of South Africa. Fail ANCYL.
- The Star reports that Malema is the director of four companies: 101 Junjus Trading CC, Blue Nightingale Trading 61, Ever Roaring Investment and SGL Engineering Projects. The relevance, again, is that he is a leader in the youth league of the national governing party. The Star has the evidence of this in copies of registration documents or something similar (I assume, The Star doesn't say in the report). ANCYL did not respond to this claim. Fail ANCYL.
- The Star reported that Malema attended a press conference in a Gucci suit, and sported a Breitling watch worth about R250 000 (prices for these are obtainable online and, I assume, this can be verified photographically). ANCYL did not respond to this. Again, where Malema gets the money for these items is relevant because of his role as in the youth league of the national governing party. Fail ANCYL.
- The Star followed journalistic protocols and contact Floyd Shivambu, ANCYL spokesperson for his comment on the report. He said, "I think you need to rethink what you are doing. What business is this of yours? How dare you call me and ask for comment on this?" Let's consider these three sentences. The first sounds like a threat (See also the report by ANCYL linked to above with more threats). The second asks about whose business is it; as I already explained it is in the public interest to know about the spending, salary, funding and relationships of its leaders, which explains why it's The Star's business. Moreover, Pravin Gordhan, SA Finance Minister has explained that targeted personal audits would occur to increase transparency and decrease corruption. On the third sentence, it shows that Shivambu evidently does not understand journalistic integrity which might require that the newspaper contact a spokesperson before publishing a potentially damaging story. Fail ANCYL.
Friday, February 19, 2010
Here I Come to Lecture in SA
- Alchian and Demsetz, 1972, 'Production, Information Costs and Economic Organization'
- Alchian and Demsetz, 1973, 'The Property Rights Paradigm'
- Arthur, 1990, 'Positive Feedbacks in the Economy'
- Bowles, 1975, 'Economists as Servants of Power'
- Coase, 1937, 'The Nature of the Firm'
- Coase, 1960, 'The Problem of Social Cost'
- David, 1985, 'Clio and the Economics of QWERTY'
- Hayek, 1945, 'The Use of Knowledge in Society'
- Machlup, 1967, 'Theories of the Firm: Marginalist, Behavioral, Managerial'
- Marglin, 1975, 'What do bosses do? Part I' and 'What do bosses do? Part II' [I haven't read these yet, they were recommended by a friend]
- Simon, 1961, 'New Developments in the Theory of the Firm'
- Simon, 1959, 'Theories of Decision-Making in Economics and Behavioral Science'
- Stigler, 1976, 'The Xistence of X-efficiency'
- Williamson, 1981, 'The Modern Corporation'
Economics is Contested: that is, economics admits orthodx and heterodox views on things, but that one set of views often gets taught because of the success of particular schools (Chicago, MIT, Harvard). The problem, however, is that the recent crisis, and economic history and philosophy of economics generally, have shown that this one view is problematic and should probably be taught within a pluralistic framework. Now here I want to show the coherent debate between people about the methods, empirics, history and philosophy of economics as it pertains to what they're studying: monopoly, oligopoly, property rights, the 'rational' firm, the 'profit-maximising firm', etc. It pays to be sceptical and think about flaws as well as to show what economist agree upon.
Economics is Historical: see above, but so many students seem to believe that reading anything that's more than 10 years old is silly. No, no, no. Coase, Hayek, Simon, are as readable today as then and as relevant (I'd add Smith, Marx, and several others, but I can't think too much of prescribing them in 'Intermediate Microeconomics'). Moreover, so many recent articles are highly technical, especially articles in Industrial Organization. I can't prescribe Tirole to my second year students who cross the gamut of faculties: engineering, sciences, humanities, commerce, law. What to do? Go back in time to the classics.
Economics is Conversational: playing into the ideas of economics as contested, historical and radical, is the idea, argued by people like Arjo Klamer, Deirdre McCloskey, Steve Zilliak and others, of economics as a conversation or an ongoing debate. When all students see are the symbolic representations of profit maximisation, they often lose touch with the intuitions. Robert Frank's book The Economic Naturalist captures the idea well as does Tim Harford's The Undercover Economist - think economically, enter the economic conversation, and you can apply the ideas to a host of examples in the real world. Converse about it, create dialogue and you will edify yourself and, we hope, others too.
Anyway, if you hapen about theory of the firm, about teaching Monopoly and Oligopoly and can think of fun(!) and interesting articles, then let me know. I've lectured the course several times since 2005, the syllabus has changed regularly and I've lectured everything in the syllabus, but I wanted, this time, to try to make a wider appeal before getting in there. I look forward to your comments.
Monday, February 15, 2010
NHM - Wildlife Photography Awards
Friday, February 12, 2010
Making money vs. Windfalls - Are you hardnosed?
Cherry, Frykblom and Shogren's 2002 paper 'Hardnose the Dictator' made a bit of a splash when it first came out. Other papers before it dealt with payoff legitimacy, but not many showed as stark a result as theirs did. The idea works as follows. Consider a normal dictator game: two players one who is the Dictator the other the Receiver. What happens if you make the Dictator do a task beforehand to earn their money, and, moreover, when there's differential achievement in that task? Cherry, et al get some of their subjects to answer questions from the mathematics section of a GMAT (yes, that's problematic, but let's not worry about it for now). Depending on how many questions they answer correctly, subjects are given $10 or $40. Another group are given an endowment of 'windfall' cash, as has been customary in experimental economics up to now, and they were given $10 and $40 to ensure a decent comparison. For some of the subjects 'distance' is increased when the experiment is done 'double blind'. Customarily, in the dictator game many Dictators give substantial amounts of money to their Receivers (Camerer, 2003). The question here is: do those who earned their money give the same, more, or less than those who were given windfall endowments?
"In the baseline treatment [of windfall earnings] the theoretically predicted outcome of "zero offered" occured in 19% of the low-stakes bargains and 15% of the high-stakes bargains. In contrast, [in the earnings treatment] zero offers increase to 79% and 70% of the low- and high-stakes earnings treatments." (Cherry et al., 2002, 1219)Moreover, in the double blind treatment the zero offer became even more prevalent occuring in 95% in the low-stakes and 97% of the high stakes treatments. What can we deduce from these results? First, 'legitimizing wealth', that is getting subjects to work for their payoffs before making decisions, seems to affect how subjects behave in experiments. Second, combining earning and isolation (the double blind treatment) brought the results of the experiment much closer to the theoretically predicted outcome than in almost all other experiments.
Thursday, February 11, 2010
- Almost everyone should now know about The Lancet deciding to retract Andrew Wakefield's MMR scare paper (reports here and here, Lancet press release here). Wakefield's paper tried to show that vaccinations cause autism and he has been at the forefront of the vaccination-autism conspiracy for some time. I hope that this disempowers the conspiracy theorists, even though Jim Carrey's girlfriend has been funny to watch (though still receiving my sympathy for having an autistic child).
- On the autism front, and providing additional evidence that the vaccination conspiracy is wrong, is a report by the WSJ on research trying to understand autism's rise. The researchers comment briefly on the vaccination conspiracy arguing that if vaccinations did anything then there would be greater statistical regularity about the distribution of cases. To explain, if kids in Cape Town and Johannesburg are all vaccinated with the same stuff and at the same rate, and if vaccinations cause autism, then the kids should manifest autism at the same rate. This doesn't happen, even though kids are vaccinated at roughly the same rates, or with statistically similar patterns in different areas (see graphic). Therefore the claim that vaccinations cause autism is wrong (again). The article documents several of the fascinating conclusions that people are drawing about the diagnosis rates, everything from education levels predicting higher rates (that is parents with higher education are more likely to identify autism and get it diagnosed), but others say that the patterns are due to unobservables that they can't currently measure (this is a professional way of sayng 'We still don't know.' more power to them). Either way, vaccinations stay out of it.
- The mass overdose of homeopathy was entertaining. Hadley Freeman reports on her experiences, or lack of them really, when she 'overdosed'. Simon Singh is interviewed here. Guardian report here. So, what's the idea behind this? If homeopathy does anything, then taking substantially more than the recommended dose should result in some effect. Typically with medicine it isn't advisable to take more than the recommended dose as the dose is tuned to meet the needs of the symptom. If you take more than the dose, then the medication can be poisonous. No one disputes this. But, homeopaths claim that you have to have been prescribed a homeopathic treatment for it to work (sorry?), or you have to take it for a sufficient period of time. Therefore, they argue, the overdoes would be ineffectual because you need to have been told to take the stuff by a homeopath (somehow instilling it with power?), or take it repeatedly for a long time. Now, 'how the taking over a long time' makes something work I don't know, but then their theory of an overdoes should mean that if people took more than they were meant to (having been prescribed it) for a longer period of time than they were meant to, then something would happen? I'll keep that in mind next time I think about taking sleeping pills - it won't matter if I knock back them back over a period of half an hour then if the laws of homeopathy (see 'titration', and a for group discussion) apply - if I haven't been prescribed the pills and the intensity doesn't matter, I should be fine the next morning. Also note, I understand that homeopaths believe that taking a more dilute solution is more powerful, by this reasoning, if I took my dinner, mushed it all up, combined it with water (which supposedly has a memory), diluted it again and again, making sure to shake it of course, and then drank it (assuming the dinner was prescribed to me by a registered homeopath) I would gain more nutritional benefits. No, no, no. Yes, I might get homeopaths annoyed with me, but they seriously need to realise that the benefits from homeopathy are basically no different from a placebo, or may arise from the fact that patients feel better because the homeopath spoke to them for longer than a GP normally does.
Monday, February 08, 2010
The Temptation of Magic
To support her argument, McCloskey reminds us of several characteristics of Magic:
- Magic is often bussinesslike: magic expects to work, and work it shall (or else)
- Magic is often arrogant:magic summons and invokes, reality takes heed
- Magic is often secret: secrecy with public dissembling
- Magic is often exclusive: only performed and understood by a select few
- Magic is often nontransferable: only applicable and given to you and only you
- Magic is often particular and local: on this day, this week, the moon favours us
- Magic is often elaborate: procedures, rituals, sacrifice and execuation - all elaboration and often unnecessary
These are rather inconsequential costs and benefits, further up the ladder, and pertaining to development directly, the costs and benefits are measured more emotively and significantly: one more child fed, one more mother given anti-retrovirals, one more father employed. Even so, in development and economics we must always keep ourselves away from magical thinking, from believing in the arcane, secret musings of 'consulting economists' when judging the costs and benefits, we should try to understand the intricacies, if there are any, ourselves. Similarly, in our daily lives if we consider the evidence deeply, if we steer away from magical thinking, remain sceptical, humble in the face of uncertainty and agnostic about whether something like price can be predicted, if we adhere to thinking that is often general rather than specific (i.e. someone claiming that in this place, at this time, and now, apart from all other moments, X must work), if we seek always to remain simple and avoid elaborateness, then hopefully we'll rid ourselves of the magical thinking that the Economic Magicians of policy, business, and development have all the answers, we'll expunge the thinking that scarcity does not apply to them, that all they need is a final utterance, a final spell, or a final conjuring before the problem is *poof!* solved.
Now, I must say that I consider there to be some caveats to this reasoning lest people misconstrue my meaning. I realise that there are situations in which people, governments, or firms must make large leaps in order for something, anything to happen, for a poor country to yank itself out of poverty, for example, might require massive and directed investment (throwing in jargon, think punctuated equilibrium, evolutionary game theory, and moving from on basin of attraction to another). But, when we do this, we must admit that investing in something a) might not work, and b) has an opportunity cost. Politicians and economists often seem scared to admit projects might fail or that there are opportunity costs, and well they should be scared because their jobs often depend on the the sops in governments and the public believing their magical reasoning that their project - and their project alone - will work. Economists fail. Often. We're much better at post hoc explanations and describing existing data than they are at predictions. We economists know this. We just seem, every so often, to suspend this knowledge in the belief that one more try might make us right. I'm not saying economists won't get it right, or we don't get policies right, we do. But many economists, probably most of the time, get things wrong. The price goes up, not down. Or it goes up or down more than we said it would. Or something else equally scary and equally damaging because we misinformed people and they were led to believe the magic. Beware magical thinking. Remain sceptical. Think of the last seat on the plane and whether you're sitting in it.




