Truck and Barter

A Puzzle for Freakonomics Fans

I’ve often wondered how does street musicians outside major metro stations decide on who should be the one to play on a given day. Does it work on a first come basis? I doubt it. How does a Chinese, an African American and a white country singer coordinate to play on alternative days?

First Kill All Economists!

Satoshi Kanazawa at LSE in a recent paper titled, “First Kill All Economists…”

“Microeconomics and its model of the singular and unitary actor can no longer adequately explain organizational behavior now that there are men and women in corporations. Evolutionary psychology, with its premise of fundamental and inherent sex differences, is necessary to replace microeconomics as the predominant theoretical perspective in business and management schools. The recent Safeway fiasco illustrates the danger of continuing to use microeconomics in the study of management in the 21st century.”

He has also made other predictions as well;

"The productivity of male scientists tends to drop right after marriage,…Scientists tend to 'desist' from scientific research upon marriage, just like criminals desist from crime upon marriage…Men conduct scientific research (or do anything else) in order to attract women and get married (albeit unconsciously),.. "What’s the point of doing science (or anything else) if one is already married? Marriage (or, more accurately reproductive success, which men can usually attain only through marriage) is the goal; science or anything else men do is but a means. From my perspective, scientists are no different than anybody else; evolutionary psychology applies to all humans equally,"

Unsolicited advice to Kanazawa, paraphrasing Hayek, “an evolutionary psychologist who’s only an evolutionary psychologist cannot be a good evolutionary psychologist”. For some pitfalls of evolutionary psychology read the book Ramachandran's Phantoms in the Brain.

Some related posts;

Where do Norms come from?

Darwin’s Nightmare

Phantoms in the Mind

Linguistics and Cultural Roots of Innumeracy

Economics of Witch Hunting

Why Do Magicians Hate Children?

Intellectual Trespassing

Intellectual Trespassing and Socratic Humility

Sexonomics- Women Sell, Men Buy

John Allen Paulos in his latest ‘Who’s Counting’ column reviews this paper, ‘A Theory of Prostitution’ which tries to answer the puzzle: Why is it that prostitution is so relatively well-paid?

“Developing the consequences of their mathematical model, Edlund and Korn argue that the primary reason for the income differential is not the risk sometimes associated with the practice of prostitution but rather that prostitutes greatly diminish their chances for marriage by virtue of their occupation. Men generally don't want to marry (ex)prostitutes, and so women must be relatively well-compensated in order to forgo the opportunity to marry….the authors also conclude that prostitution generally declines as men's incomes increase…Wives and prostitutes are competing "commodities" (in the reductionist view of economists, that is), but wives are distinctly superior in that they can produce children that are socially recognized as coming from the father. ..Thus, if men have more money, they tend to buy the superior good and, at least when wives and prostitutes come from the same pool of women, tend to buy (rent) the cheaper good less frequently….Putting these two tendencies together suggests that if one wishes to reduce prostitution, increasing the incomes of both men and women is likely to be more effective than imposing legal penalties.”

Abstract of the paper;

"Prostitution is a profession that is low-skill, labor intensive, female, and well paid. This paper proposes the following explanation. A woman can be either wife or prostitute, but not both. If marriage is a source of income for women, then the prostitute has to be compensated for foregone marriage market opportunities. Hence, prostitution must be better remunerated than other low skill occupations. Furthermore, we discuss the link between income and prostitution, and show that prostitution may decrease not only in female income but also in male income, suggesting one reason why prostitution has seen a secular decline in developed countries. We point to the role of male sex ratios, and males in transit, in sustaining high levels of prostitution, and discuss possible reasons for its low reputation. Finally, we argue that recognition of prostitution as a female strategy may add to the understanding of the evolution of marriage patterns."

Related:

- Thinking about prostitution
- See earlier post Cost of Safe Sex

The Cost of Safe Sex

To reduce AIDS transmission, it is important that ‘commercial sex workers’ practice safe sex. In this study authors estimate the compensating differential for condom use among sex workers in Calcutta. To identify the relationship between condom use and the average price per sex act, they follow an instrumental variable approach, exploiting an intervention program focused on providing information about the AIDS virus and about safe sex practices. Using this method, they found that sex workers who always use condoms face a loss of 79 percent in the average earnings per sex act;

“In many ways the market for sex work is simply another labor market. Sex workers in the red light area of Sonagachi in Calcutta who are the focus of this paper are almost always part of a brothel under the ownership of a madam or pimp. They are required to pay fifty per cent of their earnings as rent and "protection" to the person controlling the brothel. The market is quite competitive with over 4,000 sex workers working in 3 70 brothels servicing about 20,000 clients a day. Calcutta is one of the world's largest cities with an estimated population 13 million of which 31 per cent are migrants. This results in a male dominated sex ratio with 0.83 females for every male in the population that in turn causes the demand for sex work to be consistent and high. Sonagachi is the oldest and best established red-light area in Calcutta and has been in existence at least for 150 years. It is located close to Calcutta University which provides a steady source of clients, and like many other older Calcutta neighborhoods consists of a dense network of narrow, winding streets lined by two and three story buildings. The brothels are supported by a number of restaurants, teashops, bars and other businesses that serve sex workers and their clients in the area…..While rates are to some extent determined by negotiation, the market is large and competitive and there is a good sense of the "correct" wage or price with differences arising from the sex workers age, physical attributes and her level of education.”

Some Policy implications;

“Some thought may also be given to the fact that sex workers may suffer large economic losses during the initial years of the intervention. This could be circumvented either by direct compensation or by a large scale program which results in a quick increase in condom use so that competition between sex workers does not drive down the price of safe sex.”

For Comment: Could such a compensation scheme have an effect that is not intended?

Related: The Independent goes RED

Journal Ranking By Google?

A new method for ranking science journals is being proposed. What's it based on? Google, of course.

The most popular index of a journal's status is the ISI Impact Factor (IF), produced by Thomson Scientific. It counts the total number of citations a journal's papers receive, and divides it by the number of papers the journal publishes. But the rise of online journals, coupled with sophisticated search engines that permit rankings of web resources, is triggering a wave of other measures. Last year, for example, physicist Jorge Hirsch of the University of California, San Diego, proposed a metric called the h-index for assessing the quality of researchers' publications (see Nature 436, 900; 2005).

Now Johan Bollen and his colleagues at the Research Library of Los Alamos National Laboratory in New Mexico are focusing on Google's PageRank (PR) algorithm. The algorithm provides a kind of peer assessment of the value of a web page, by counting not just the number of pages linking to it, but also the number of pages pointing to those links, and so on. So a link from a popular page is given a higher weighting than one from an unpopular page.

Only hearing second-hand information about the way tenure review goes for academics, I was under the impression that the relative "importance" of the journals in which one might publish also has a big impact on tenure decisions. Ranking systems then seem to be deeply involved in the way research occurs if it impacts who gets financial support either throught grants or university support.

My question is whether the "PageRank" metric might be highly vulnerable to information cascades and manipulation in much the same way as Google's process for ranking sites.

Quote of the Day

David Warsh, zeroing in on why the NYT, WaPo, and FT ignored the Harvard-Russia-Project scandal:

Instead, the informal economy of capitalism is one of deference and respect, of favors today and the implicit promise of favors later, of jobs and dinner invitations and admissions to exclusive kindergartens. Its texture is extremely uneven: dense around, say, academic medical centers and aerospace contractors; sparse where incentives are weak; and, at least in democracies, full of relatively empty seams in the appropriate places, between countervailing sectors. Anyone who doubts that this informal economy extends to newspapers knows nothing about how newspapers work.

Evolving Institutions

What insight might be gained from considering institutions as an evolving system in the same way we might view an ecosystem? That's the question posed over at the Complexity Blog.

One major focus in political science is the role of institutions, particularly for social choice problems. I was thinking about the relation of individual policy decisions and the institutional framework within which they are made and it occurred to me that the relationship has some analogies to the relationship of species evolution and ecological change. Specifically, analogies exist with regard to the i) time scales, the ii) forces exerted on each other, iii) endogenous stability, and iv) susceptibility to exogenous perturbations.

A thoughtful post, and if you're at all interested in the topics of complexity or agent-based modeling, the site is worth a regular read.

Have I Mentioned I Don't Like Putnam?

Really, I don't. One of the silliest non-fiction books I've read in years simply must be Bowling Alone. Oceans of data are marshalled and then misused to claim that people are opting out of community involvement.

Maybe, just maybe, people don't like to bowl anymore because there are ever more numerous ways to be engaged with others. But never mind that! People are going on fewer picnics! Don't you understand how dangerous this is? Nevermind that kids are signed up for a far wider range of extra-curricular activities nowadays. Karate, chess camp, soccer, little league...none of that is important when the rolls of the Boy Scouts aren't increasing as fast as they once were.

Feh. I can only keep that up for so long.

Add to this argument, however, this new paper, "The Strength of Internet Ties." (Via the Complexity and Social Networks Blog.)

Disputing concerns that heavy use of the internet might diminish people’s social relations, the report shows that the internet fits seamlessly with Americans’ in-person and phone encounters. With the help of the internet, people are able to maintain active contact with sizable social networks, even though many of the people in those networks do not live close to them. The report highlights how email supplements, rather than replaces, the communication people have with others in their network.

Meanwhile, the reception for Better Together was appropriately lukewarm. Perhaps that was because it's an anecdote-drivin little work that still seems to miss the point. It mentions Craigslist, but focuses on things like town art shows and interpretive dance.

Hmmmm. Ever wonder about those noisy little objects all the students seem to be carrying around? Ever wonder why people have to demand that they be shut off or put on silent? Here's a suggestion: about taking a look at the size and breadth of the cell phone market to get even a small insight on just how much people contact each other.

Dance Hall Girls

Is this the way it always is here in Mumbai?

Maharashtra, India, is working to close down the widespread dance-bar business. Apart from the direct effect of flooding local job markets with women and former business-owners, more traditional businesses that rely on an informal financing institution are likely to suffer badly:

Hoteliers say that if a few restaurants going out of business could have this impact, the fallout of 750 bars closing down would be significantly higher. Most bar and restaurants are funded through the unofficial Chit Fund (BC) route.

It's fascinating how a BC operates: a fund organiser invites around 19 businessmen to create a monthly fund pool, for say Rs 20 lakh, with each member contributing an equal amount. The organiser is the pivot of the BC, and has the last word.

The pool of money created every month is auctioned to the highest bidder. So, if a borrower (who is also a member and contributor to the pool) bids Rs 5 lakh for the Rs 20-lakh pool, the bid amount will be reduced from the pool and he will get Rs 15 lakh.

Each member, therefore, contributes only Rs 75,000, instead of Rs 1 lakh. The amount the borrower repays would depend on the demand and supply of funds.

In the next month, the pool is created afresh by new contributions from the members. The per-member contribution will depend on the demand. The higher the demand, the steeper the discount. The member who has already borrowed cannot bid again.

A new bidder (from the remaining members) steps in. If he quotes a higher discount, the contribution required will be less. It is through the monthly contribution that the first borrower repays the money. If the discount is high, it benefits the persons who have already borrowed in the previous months, and those who would borrow subsequently. The process is repeated every month, with fewer members bidding, but everybody contributing.

Clearly, the formal financial markets are lacking some depth that the informal ones have long been providing. Perhaps the dance bar scene is a front for prostitution or worse, human trafficking -- I don't know enough to have a view on the policy. But, to go along with my theme from the previous post, such things can't be view in a static setting. Without the funding from the dance bars, numerous other small businesses may crumble, and new ones may have no funding to rise in the place of those that closed.

Is MP3 the New "QWERTY"?

In PC Magazine, Jim Louderback argues that MP3 is a fat, clumsy old-and-busted, and all-around inferior digital music format. He insists that competing formats, like WMA, are superior because of their digital rights management, smaller files sizes, better audio quality, and smaller royalty payments:

Why hasn't MP3 been unseated? Formats, once widely adopted, are very hard to change. MP3 has become a lowest-common-denominator format: A device simply cannot be successful without supporting it. Why? Because so many users have invested so much time in creating and downloading MP3 files, and they'll resist going through gathering and encoding all over again. There's simply too much material in MP3 format floating around for us to change over, even with all the benefits of newer formats.

What's it going to take to change? I've developed a law of technology adoption, which I modestly call Louderback's Law: Unless a new technology includes breakthroughs in at least two different dimensions�without adding hardship along the way�it will not supplant and older, established one.

The newer audio formats, including Ogg Vorbis, seem to have at least two things going for them compared with MP3: smaller files and less expense. But because any change would require conversion of billions of files�a royal pain in the butt�it just won't happen.

The comment forums are very rough on Mr. Louderback--especially here and here. The latter is quite blunt, and wrote something close to what I was thinking--digital rights management is a bug--not a feature--to many consumers:

Louderback must be on drugs. Ditto everything you said. Is it obvious only to you, Uncle_Jessie, and me that DRM is THE reason that MP3's will survive long into the future? Ogg vobis [sp?] is the only format I would even consider using as a replacement and then only as long as a DRM scheme is not attached to it. Only a formst with 1) better quality, 2) higher compression and 3) NO DRM even has a prayer of replacing MP3. It is what the people want that will determine the de-facto standards, not the manufacturers, distributers, RIAA, or anyone else. All they can do is drag their feet.

In reply, Mr. Louderbeck then takes an interesting stand:

Yes, you are right that DRM is also a big deal. You and I care about it. But I think the mass of consumers are vaguely aware of what DRM is.. They just want to take their CDs, and create songs out of them, and share them with friends. Today everything is MP3... and it will stay that way, because that's what people have -- it's more installed base inertia than anything else. If a format with DRM had been the first one to take off, then that would be the defacto standard. Thankfully that didn't happen. (emphasis added)

He too believes that digital rights management is a bug... The absence of DRM means MP3 is actually a superior format...