Thanks to Megan McArdle, I was reminded of the wonderful magazine of Dr. Boli. This entry jumped out at me right away:
Beaten to the punch
I had a brilliant idea over the Christmas break. It would save some people money, it would give other people flexibility, it allow me to get a “markets in everything” link from Tyler Cowen. I couldn’t lose! It turns out that I’m too slow and have been beaten to the punch by a good few years.
I wanted to build a website that allowed people to trade store credit and gift cards. The sellers would get the flexibility of cash, the buyers would get a discount at whatever store they were buying the card for and I’d take a (tiny) slice out of the middle.
Here are two articles from 2005 speaking of exactly that market: one from Wired and one from MSNBC. Between them, they list five different sites already doing what I thought of. Oh well.
They still don’t seem to have realised the full potential of this, though. I would like to see a site to exchange all currently-non-tradable forms of pseudo money (that is, things that effectively are a store of value, but are tied to particular stores or providers). That includes gift cards, store credit, frequent flier miles, supermarket reward programmes and Second Life Linden dollars.
There are clear issues of fraud risk to overcome, but I wonder how those sites get around the various stores’ policies of making gift cards non-transferable (i.e. not for resale).
Sex for free
Following on from my earlier post noting (via Andrew Leigh) that Steven Levitt and Sudhir Venkatesh have been researching street prostitution in Chicago, Andrew managed to find a link to a preliminary draft of the paper. You can find it here. Andrew also noted that:
Levitt cited evidence that in the 1930s-50s, a very large share of men had their first sexual experience with a prostitute. With the rise of premarital sex, this is no longer true, so the market that’s left today is much seedier than in the past.
This would seem to imply that early sexual encounters once represented a sizable, or at least influential, portion of demand, which is interesting in itself.
Many modern-day feminists despair at the way that the so called “sexual revolution” has developed and I do wonder where the current arc of embracing sexuality will stabilise.
Here is a recent story from ABC News being shocked (shocked!) to discover that college parties are both racier and boozier than they used to be at some unspecified time in the past. They report (and fret) that girls seem to drink more at themed parties, where they also tend to wear less.
Here is a story about the merging of reality television and the public acceptability of sex for it’s own sake. A Czech brothel is offering it’s services for free in exchange for the clients’ permission to broadcast the event over the internet.
I suspect that the Czech offering is just the latest in a recent push for a form of authenticity or believability in pornography. It seems to go hand-in-hand with an increase in the popularity of amateur porn, which has two broad sub-categories: the professionally arranged and the truly amateur.
Truly amateur pornography, where the participants film or photograph themselves and share the material for free is arguably the ultimate sharing of the self in the web 2.0 paradigm [1]. It is a logical extension of the attention-seeking self-affirmation that we see in people’s embracing of a public side to their sexuality.
Professional outfits that seek out amateurs who are willing to be filmed (possibly for free) and then offer the material in the traditional business model of internet porn (give out teaser snippets for free and charge for the complete set) , seem to be the adult industry’s response to this shifting demand. In a way, the Czech brothel is just a new branch of this genre.
These developments are not without their concerns. Sara Montague – a presenter on BBC Radio 4’s Today programme – is clearly concerned, noting that much of the movement seems grounded in the hope of empowerment and self-confidence, but worrying that this serves indirectly to promote eating disorders among girls and the acceptance of rape among boys.
The main problem that Montague faces is that for most people, embracing public sexuality is non-harmful – not every girl gets an eating disorder and not every boy contemplates forcing himself on a girl – and is undertaken by choice. Montague is, in essence, faced with Douglas Adams’ cow that wants to be eaten. [2]
There is a saying that seeks to advise against supporting or encouraging prostitution: “No little girl ever says that when she grows up, she wants to be a prostitute.” The idea is a variation on Rawls‘ “veil of ignorance” and implicitly argues that the framing of a choice is of vital importance: that given a wider range of options than those she faces, no woman would choose to be a prostitute.
Montague may argue that just as the prostitute is compelled into her profession by a narrowing of her options, people are lead to an acceptance of public sexuality because of social conditioning. In her article she highlights the flood of media imagery seemingly designed to associate female success with sexiness. In other words, Montague is pointing out that Adams’ cow was genetically engineered to want to be eaten and asking if the cow then truly had a free choice. That question, of course, is moot when considering the cow in front of you. Its preferences may have been implanted, but as a conscious entity, you have to respect it’s choices. At most, you can try to stop future cows from being interfered with.
But to make the same argument for public sexualisation is still predicated on the idea that it is inherently a bad thing. I am not in any way trying to belittle the tragedy of eating disorders or defend the horror of rape, but the point is to weigh the benefits against the costs in aggregate. There is a parallel with opening a country up to trade and allowing jobs to be “lost” to, say, China. It is true that some people will lose their jobs and for them, the pain is tremendous; but it is also true that the vast majority of people experience a small improvement in their material lives because of the cheaper products. It is almost always the case that in aggregate, the latter outweighs the former and the social ideal is to open up to trade but have those that benefit compensate those that suffer.
The same, I think, applies to the progress of public sexualisation. By all means work to increase support for those burdened excessively by concerns of body image. By all means increase support to rape victims and ease the ability of the state to bring those guilty to justice. But that doesn’t mean we should fight to stop it altogether if people choose it freely and feel that it helps them, or even if they just enjoy it.
[1] Yes, I hate that word too; but what else should I have said?
[2] In The Restaurant at the End of the Universe (Foyles, Waterstones, Amazon), Adams had his characters encounter a cow in a restaurant that wanted to be eaten, going so far as to recommend particular parts of it’s body.
John Pilger versus “the great game”
John Pilger (biography on Wikipedia) has a new piece out in the New Statesman, “The ‘good war’ is a bad war.” This is the central part of his essay:
The truth about the “good war” is to be found in compelling evidence that the 2001 invasion, widely supported in the west as a justifiable response to the 11 September attacks, was actually planned two months prior to 9/11 and that the most pressing problem for Washington was not the Taliban’s links with Osama Bin Laden, but the prospect of the Taliban mullahs losing control of Afghanistan to less reliable mujahedin factions, led by warlords who had been funded and armed by the CIA to fight America’s proxy war against the Soviet occupiers in the 1980s. Known as the Northern Alliance, these mujahedin had been largely a creation of Washington, which believed the “jihadi card” could be used to bring down the Soviet Union. The Taliban were a product of this and, during the Clinton years, they were admired for their “discipline”. Or, as the Wall Street Journal put it, “[the Taliban] are the players most capable of achieving peace in Afghanistan at this moment in history”.
The “moment in history” was a secret memorandum of understanding the mullahs had signed with the Clinton administration on the pipeline deal. However, by the late 1990s, the Northern Alliance had encroached further and further on territory controlled by the Taliban, whom, as a result, were deemed in Washington to lack the “stability” required of such an important client. It was the consistency of this client relationship that had been a prerequisite of US support, regardless of the Taliban’s aversion to human rights. (Asked about this, a state department briefer had predicted that “the Taliban will develop like the Saudis did”, with a pro-American economy, no democracy and “lots of sharia law”, which meant the legalised persecution of women. “We can live with that,” he said.)
By early 2001, convinced it was the presence of Osama Bin Laden that was souring their relationship with Washington, the Taliban tried to get rid of him. Under a deal negotiated by the leaders of Pakistan’s two Islamic parties, Bin Laden was to be held under house arrest in Peshawar. A tribunal of clerics would then hear evidence against him and decide whether to try him or hand him over to the Americans. Whether or not this would have happened, Pakistan’s Pervez Musharraf vetoed the plan. According to the then Pakistani foreign minister, Niaz Naik, a senior US diplomat told him on 21 July 2001 that it had been decided to dispense with the Taliban “under a carpet of bombs”.
That is fascinating stuff. I am glad that people like Pilger exist as journalists because he really does push to uncover the truth. Any lie by any government is shameful. Nevertheless, while I am happy to accept the facts that Pilger presents as true, it’s difficult to read this article and to know what he actually wants other than to continue his vociferous criticism of Western foreign policy and that of the United States in particular.
On the one hand, he highlights above some of the awful aspects of an Afghanistan ruled (let’s not say governed) by the Taliban: no democracy, no freedom of religion, little (if any) freedom of speech, the utter subjugation of women, an economy based on the extraction and capture of wealth. On the other hand, he later speaks of the …
… historic ban on opium production that the Taliban regime had achieved. A UN official in Kabul described the ban to me as “a modern miracle”. The miracle was quickly rescinded. As a reward for supporting the Karzai “democracy”, the Americans allowed Northern Alliance warlords to replant the country’s entire opium crop in 2002. Twenty-eight out of the 32 provinces instantly went under cultivation.
But he doesn’t bother noting that the Taliban were only able to enforce their ban by killing anyone who violated it. I’m pretty sure that Pilger opposes the death penalty. I’m absolutely certain that he opposes it when it’s instigated without any recourse to defence in a fair trial.
I agree entirely with Pilger that the main priorities of the U.S. in looking at other countries have been political stability and economic liberalism, with the rule of law being a distant third and anything else almost entirely off the radar. I likewise agree that this is principally because these represent minimum conditions for the inevitably large U.S. companies to do business in those countries. I say “inevitably” because small U.S. companies are not in a position to invest internationally. Pilger views this as a modern form of imperialism. It’s a tempting position, but I tend to think of it more as the U.S. looking out for it’s own and leaving other countries to sort out their own particular rights and values. It is not non-interventionism, but a sort of ideally-minimal-but-occasionally-dramatic-interventionism.
I would understand if Pilger thought that the West ought to promote the good things it has aspired to itself: women’s rights, religious freedom, the welfare state and so forth. But Pilger is apparantly against humanitarian intervention, which he describes as the work of the ascendant, “narcissistic, war-loving wing” of liberalism, so I am again left confused as to what he wants the West to actually do. Does he want complete isolation?
Let me put it this way: Zimbabwe is in a terrible state. From once being described as the “bread-basket of Africa,” it is now the basket-case of the continent. It’s inflation is so high as to become unmeasurable. A third of it’s population has fled the country. It has no democracy. The opposition, when they attempt to rally, is beaten. For it’s part, the West has imposed sanctions, but China has happily handed truckloads of cash to Mugabe’s regime in exchange for Zimbabwe’s natural resources. What does John Pilger think the foreign policy of the U.S.A., the U.K. and the rest of the West ought to be towards Zimbabwe?
Organic food, standards and conspicuous consumption
There is a fantastic article up at the Financial Times by Bee Wilson, entitled “What makes a pig organic?” It’s clearly part of a publicity push for her soon-to-be-published book, “Swindled: From Poison Sweets to Counterfeit Coffee – The Dark History of the Food Cheats” (Foyles, Waterstones, Amazon), which was recently book-of-the-week on the BBC. It starts with:
This is a tale of two pigs. The first – let’s call him Soren – is reared in Denmark. For the first few months of his life, he lives a cramped existence in a barn. This pink, flabby creature is castrated so that his meat won’t taste too strong. When at last he is allowed outside, his only freedom is a small concrete run. At a young age, he is killed and turned into bacon, using potassium nitrate and sodium nitrite. When you put slices of him in a pan, white watery liquid runs out.
The second – let’s call him Juan – was lucky enough to be born in the Iberian peninsula. He is sleek, black and hairless, a descendant of the original wild boar. Juan spends his life munching acorns among the oak trees. By the standards of animals destined for pork, he is allowed to live a long, calm life. He is only killed when he is 20 months, oldish for a pig, after which time his flesh is cured in sea salt until his fat turns to oleic acid, a fatty acid similar to that in olive oil. Juan is now jamón ibérico de bellota. When you eat slices of him, the salty flesh melts in your mouth.
It should be perfectly obvious which pig has led a better life and makes for better food. But there is one further crucial difference between the two. Because he has had only organic feed and has not suffered the worst indignities of factory farmed pigs – overcrowding and no access to outdoor space – Soren the Danish pig ends his life in a British supermarket labelled “organic”. Whereas Juan, for technical reasons, doesn’t qualify for the organic label.
… which is just a little bit sensationalist, but gets the point across. A little later we start getting into the truth of the matter:
When you buy an organic egg you are not just buying the means to make an omelette, you are buying a dream. It is the dream of something delicious, which will simultaneously be good for your body and good for the hens and people who produced and packed it. It is the dream of being self-indulgent and virtuous at the same time – which essentially encapsulates the main yearning of our consumerist world. As Lynda Brown says: “Everybody wants an organic egg to come from a chicken that has led an idyllic life. But most people don’t actually want to pay for it.” The result is that when you look behind the dreamy label of much organic food – as with Soren the pig – you find it is not so very different from the industrial, compromised food you were trying to buy your way out of. The yolk is still pallid. The workers are still underpaid. The hens are still crowded – just a bit less than for conventionally farmed eggs.
In other words, buying organic is a form of conspicuous consumption. How do we know that buying organic is a “dream of being self-indulgent and virtuous at the same time”? Well, as Bee notes later on:
Take soy milk. In the Tesco longlife milk aisle, you can choose between: first, Tesco Calcium Enriched Soya Drink (at 63p a litre), your basic average soy milk; second, Tesco Organic Unsweetened Soya Drink (at 99p a litre), a premium-looking product with a price tag to match; and third, Tesco Value Unsweetened Soya Drink (60p a litre) with its no-frills packaging. Yet if you look at the small print, you will see that the Value soy milk is organic too. In other words, you are being offered a choice between spending 60p on organic soy milk that doesn’t appear to be organic or 39p more for the organic soy milk that loudly trumpets the fact. By paying that 39p, you are effectively admitting that organic food is simply an idea to you. It is an idea that says wealth and health (whereas “Value” is an idea that says poverty). This is the reductio ad absurdum of “organic” as a brand.
However morally-driven we might all pretend (and like) to be, people like Megan McArdle are a rarity. For the vast majority of us, buying organic is a way of tickling our egos or showing off to our dinner-party guests. If we actually end up easing the living conditions of the creatures we eat, that’s a largely unnecessary bonus, because it’s the label that counts. This is not unique. In a very real way, buying organic food is much the same as buying “fair trade” food. We’re buying the highly-visible feel-good factor. Don’t believe me? Here’s another titbit of evidence. Bee Wilson notes:
In the US, [t]he USDA allows many more nonorganic ingredients to be used in “organic” food than are permissible in the UK. Last year, there was outrage when the USDA certified Anheuser-Busch’s Wild Hop Lager, which included hops sprayed with pesticides and grown with chemical fertilisers, as an “organic” beer.
Wild Hop Lager does get lampooned, but not because they failed to make their product truely organic. People bag it because it’s a bad beer. Here are it’s reviews on RateBeer.com, BeerAdvocate.com and hop-talk.com. Notice that none of them are rejecting it because of it’s judicious use of the word “organic.” They’re rating it on the basis of what makes a good beer. The closest we get is from the latter, saying:
Why is it awful…? Because once again a megabrewery is trying to make a product that looks like a craft brew, yet they are pouring their money into marketing it and not into making it.
… which is really saying nothing about the desirability of environmental sustainability or the avoidance of man-made chemicals. If Anheuser-Busch produced a not-at-all organic beer that nevertheless tasted good this reviewer would be all over it.
Another note on identity theft
I notice that Jeremy Clarkson has had his arse handed to him after ridiculing the uproar that occurred following the HMRC’s loss of CDs containing the personal information of 25 million Britons.
First came his effort in The Sun:
Clarkson published details of his Barclays account in the Sun newspaper, including his account number and sort code. He even told people how to find out his address.
“All you’ll be able to do with them is put money into my account. Not take it out. Honestly, I’ve never known such a palaver about nothing,” he told readers.
Then came his retraction in The Times (owned, like The Sun, by News Corp.):
“I opened my bank statement this morning to find out that someone has set up a direct debit which automatically takes £500 from my account,” he said.
“The bank cannot find out who did this because of the Data Protection Act and they cannot stop it from happening again.
“I was wrong and I have been punished for my mistake.”
“Contrary to what I said at the time, we must go after the idiots who lost the discs and stick cocktail sticks in their eyes until they beg for mercy.”
It’s certainly tempting to laugh at Clarkson and even feel smug about it, but that helps nobody. I attended a lecture last year by Bruce Schneier (this one, to be exact. LSE has released a video of the event here) on the economics of information security and the topic of identity theft (obviously) came up. His take, which I couldn’t agree more with, is that personal information security will not improve until appropriate incentives are put in place. In particular, those responsible for permitting a fraud to occur should be required to bear the full cost of that fraud.
Barclays (Clarkson’s bank) ought to be required, by law, to repay Clarkson his money but not get it back from the charity that it was paid to. You better believe that their security checks would be improved, and fast.
Side note: Yes, it was also Barclays that I was speaking about the last time I wrote about identity theft.
Update: It would appear that Mr Clarkson is indeed entitled to get his money back. That doesn’t make my point less valid. There are plenty of things that someone with your information can do that you can’t get cleaned up, at least not with a huge amount of trouble. They might try to take out a loan in your name, which affects your credit rating no matter whether it’s successful. They might try to get a passport with your name and their photo on it. They might do something that puts your name on the TSA’s no-fly list, meaning that you get detained at any US airport.
New Hampshire and the prediction markets
Plenty of people, Paul Krugman among them, are pointing out that just like the polls (which, on average, had Obama ahead of Clinton by over 8 points), the prediction markets were plainly wrong in forecasting the outcome of the Democratic New Hampshire primary. They’ve got a point.
These are the daily closing prices on the Clinton and Obama contracts to win the New Hampshire primary from InTrade:
Up until Iowa, they were fairly steady at ~60% for Clinton and ~40% for Obama, but from the 3rd of January onwards, there was a clear movement towards Obama. On the day before the primary, the markets had Obama 97.8% likely to win. On the day, Clinton won with 39.07% of the vote, while Obama received 36.47%. So why did the market get it wrong?
Paul Krugman contends that the prediction markets were just reflecting the polls and talking heads, presumably because that was all the information there was to be had. This naturally raises the question of why they were wrong (e.g. did we just witness the Bradley effect in action?), but that is not the point here. A prediction market, according to the theory, is meant to be superior to the polls in predicting outcomes because it combines information contained in the polls with information from other sources. So perhaps Krugman is right. But if he is, why did the market go so far towards Obama?
My guesses:
- Perhaps Krugman is partially right, but the talking heads provided a positive feedback loop. The polls predicted Obama, which the markets saw. The talking heads saw the polls too (perhaps in more detail) and then spoke about it on television, but added effectively no extra information. The markets saw the talking heads and believed it to be extra information in support of the polls.
- Like any market, the prediction markets are susceptible to bubbles. Perhaps we saw one here in the days between Iowa and New Hampshire.
- A lack of “true” liquidity. There was plenty of nominal liquidity in these markets leading up to and during the counting, but how much of the trading was arbitrage, how much was momentum (i.e. bubble) trading and how much was “true,” changing-belief-based trading? As the counting occurred, I was watching both the leaked figures on the Drudge Report and the movement on InTrade. It seemed that the prediction market was moving steadily towards Clinton, but nowhere near as quickly as one would have expected. For example, at 9:40pm, with 46% of the vote counted, Clinton was leading 49,719 (40%) to 45,383 (36%), from which one would conclude with extremely high confidence that Clinton would win, but the market was still only putting her at 65%.
- Perhaps – and I’m by no means certain of this last point – in order for a prediction market to work perfectly, we also need people to set the size of their position in proportion to their confidence in that prediction. So perhaps there were traders who, looking at Drudge or some other source were extremely confident that Clinton would win from quite early in the counting, but since they did not take large enough positions, they did not move the market. In other words, liquidity requirements for a successful prediction market are not just on the number of trades, but on the volume traded.
Update: Justin Wolfers, a long-time researcher in prediction markets, has an article in the WSJ highlighting how surprising the result was given the market predictions.
We were led to this research by an age-old racetrack puzzle economists call the “favorite-long shot bias“: Horse bettors historically have overbet long shots, and they win less often than their odds suggest. Our research suggests that similar biases hold in political prediction markets.
As such, Sen. Clinton’s comeback is even more stunning, as political underdogs have historically won even less often than suggested by their prediction market odds.
Historical comparisons are already being drawn between the New Hampshire primary and the famous 1948 presidential race in which President Harry S. Truman beat Republican challenger Thomas Dewey, despite the infamous “Dewey Defeats Truman” headline in the Chicago Tribune.
Yet the magnitude of the Clinton surprise is arguably even greater. Indeed, historical research by Professors Paul Rhode of the University of Arizona and Koleman Strumpf of Kansas University has shown that in the Truman-Dewey race, prediction markets had seen hope for President Truman despite his dreadful polling numbers, and he was rated an 11% chance of winning the election by election-eve. Thus, Sen. Clinton’s victory on Tuesday was more surprising than President Truman’s in 1948.
Personally, I seem to be thinking of this the other way around. Assuming that prediction markets are generally better than other forms of forecasting, I find it surprising that they got it so wrong on this occasion. Rather than thinking of the result as the equivalent of a 6-sigma event given the prediction market, I wonder what was different this time that so disturbed the market’s ability to predict?
Update 2: Okay, okay a 3-sigma event 🙂 Justin in an email:
For the polls, this was about a 3-sigma event. For the market, which had Hillary priced at about a 7% chance [JB: Justin is referring to the WSJ market], it is about a 1.7 sigma event. They aren’t that unusual. Indeed, they probably happen about 7% of the time
Interesting empirics
I cannot wait to read the paper coming out of this:
Most women work 11 hours a week and … make $25-40 per hour [versus] $7-10 per hour … in the formal sector. They are violently victimised once a month.
Prostitutes who work with pimps have higher wages and better conditions.
Supply is quite elastic [a 60% shock in demand occurred with only a 30% increase in prices], adjusting on three margins – higher labour supply by existing prostitutes, in-migration by prostitutes from other areas, and ‘temporary prostitutes’ joining the market.
Doing this research in America, where both the provision and the consumption of prostitution is illegal, is a major achievement for Levitt and Venkatesh. Has anything equivalent ever been done in countries where the law is less restrictive?
iPhone goodness
I got an iPhone for Christmas. It was a bit of a pain to set up, since I was on 64-bit XP and Apple doesn’t support iTunes on it. I ended up with 32-bit Vista Ultimate. I’ve been excited about the iPhone and its competitors for a while, since they manage to combine six gadgets (all of which I’ve owned separately) in a single device:
- Mobile phone
- PDA
- (mini-)Laptop
- Camera
- mp3/video player
- USB stick
To a certain extent, the iPhone’s touchscreen and typically-Apple UI are just icing on the cake.
It’s obviously not perfect (what is?), but I’m pleased to discover that most of what I would like to be improved should be possible on the current generation:
| Would need to be in a new generation | Could probably happen with the current generation |
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I know that some of my list are available already for jailbroken iPhones, but I’m hesitant to do that. I’m going to hold out for a while and see if the rumours about an SDK being released in February are true.