if coins were rare
If the 95% of the coins in the United States (i.e. 1c, 5c, 10c, 25c) were no longer in circulation, but bills were left alone, what would happen to the remaining coins? Would they go up in value? Could 3 quarters be worth the same as a $1 bill? Or will people still value coins by their face value? Is this relevant to the question of fiat money? Gustavo
Re: how betting games solve problems (apology)
I apologize for sending this message unedited. It was an accident. Feel free to react as you please. Gustavo - Original Message - From: "Gustavo Lacerda" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, July 01, 2002 5:54 PM Subject: how betting games solve problems > Suppose we have 10 people who each wants to rent 1 house for a year. We have > 10 houses in the universe. > Each bidder visits all the houses and assigns preference functions for each > of them. > > UH(bidder,house) is a positive value defined as how much it would please the > bidder to get the house for free. For a given house, this value will be > greatest for the bidders who like the house the most. > > UR(bidder,rent) is a negative value defined as how much it hurts the bidder > to pay the rent without getting the house. For the richer bidders, this will > tend to be a smaller value. > > U(bidder,house) = UH(bidder, house) + UR(bidder, house.rent) > > Let's assume that the landlords only care about how much rent they get: the > bidders are identical in every other way. > A short-sighted utilitarian would want to maximize the sum of everybody's > utility and assign people to houses, and redistributing the wealth. > > A free-marketeer would want a mechanism for individuals to reach > equilibrium: after the end of the assignments, there is no bidder who thinks > that he could have gotten a better deal if they had known others' > preferences beforehand. Of course, a bidder may not reveal his preferences > beforehand because then the landlord of his favorite house could raise the > price to its maximum, reducing the bidder's utility. > > optimize resource allocation > auction game > > The problem: bidders and sellers don't know what the market is going to be > like. > > Similar games are used in graduate school / college admissions. If students > want to hold their space, they have to make a non-refundable deposit. > > Does anybody know this sort of games, and how they solve different problems? > How to formulate a game to solve your particular RA problem. > > > > >
how betting games solve problems
Suppose we have 10 people who each wants to rent 1 house for a year. We have 10 houses in the universe. Each bidder visits all the houses and assigns preference functions for each of them. UH(bidder,house) is a positive value defined as how much it would please the bidder to get the house for free. For a given house, this value will be greatest for the bidders who like the house the most. UR(bidder,rent) is a negative value defined as how much it hurts the bidder to pay the rent without getting the house. For the richer bidders, this will tend to be a smaller value. U(bidder,house) = UH(bidder, house) + UR(bidder, house.rent) Let's assume that the landlords only care about how much rent they get: the bidders are identical in every other way. A short-sighted utilitarian would want to maximize the sum of everybody's utility and assign people to houses, and redistributing the wealth. A free-marketeer would want a mechanism for individuals to reach equilibrium: after the end of the assignments, there is no bidder who thinks that he could have gotten a better deal if they had known others' preferences beforehand. Of course, a bidder may not reveal his preferences beforehand because then the landlord of his favorite house could raise the price to its maximum, reducing the bidder's utility. optimize resource allocation auction game The problem: bidders and sellers don't know what the market is going to be like. Similar games are used in graduate school / college admissions. If students want to hold their space, they have to make a non-refundable deposit. Does anybody know this sort of games, and how they solve different problems? How to formulate a game to solve your particular RA problem.
Fwd: Cheap parking spaces drive up fuel prices
http://csf.colorado.edu/forums/pfvs/2001II/msg02366.html
Re: What is a market?
First, you would need to explain what goods the human consensus (i.e. the equilibrium of the human forces) considers individual property, what goods they consider public property, or not property at all. Then you could explain how this consensus (i.e. laws) is enforced, and then you could introduce the concept of voluntary trade as a consequence of differential preferences. Then you could talk about the people who interfere with this process by punishing those who are caught trading. Places where trades don't occur daily would not be considered markets and vice-versa. I don't think the concept of currency is necessary. Gustavo - Original Message - From: "fabio guillermo rojas" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Sunday, April 28, 2002 11:35 PM Subject: What is a market? > > Imagine that an alien arrives on planet earth and asks you "what > is a market?" What kind of economic system would count as a "market"? > > I know this can be a sticky question, but how would you describe the > economy of Russia or China, and why doesn't it count as a market? Is it > just the lack of the state, or the presence of a state supported system of > law, or would the economy of a place like Sweden count? > > Fabio >
Re: Tax Leisure via Time Audits?
Why would you want to tax leisure? Wouldn't this promote less intense (i.e. more leisurely) and thus, less productive work? Gustavo - Original Message - From: "Robin Hanson" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Thursday, April 25, 2002 11:36 AM Subject: Tax Leisure via Time Audits? > Once upon a time income taxes were difficult to collect, because > income was hard to cheaply monitor. So governments used less > efficient taxes, and arguably this was a reason the size of > government was lower. Today it seems that we can cheaply monitor > the act of paying wages, and so income taxes are feasible, and > government is larger. > > Income taxes are inefficient, however, because people respond by > substituting leisure and home production for wages. But this > inefficiency need only apply if we assume that we cannot cheaply > monitor time spent working for wages. And as the technology of > surveillance improves, it should get easier to monitor this. > > Perhaps in the future, the government will randomly check on each > person ten times a year, and see if they are working for wages > at that moment. Taxes would then depend the fraction of times > that, when checked over the last few years, they were found to be > working for wages. Of course to implement this each person will > need a cell phone, beeper, or some way to be contacted at random > times when they are working for wages. But since most people will > have such things for other reasons, the presumption will be that > the exceptions are doing it to avoid taxes, and so failure to > contact will be coded as not working for wages. > > Anyone ever estimated the size of the deadweight loss from the > income tax distortion? > > > > > Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu > Asst. Prof. Economics, George Mason University > MSN 1D3, Carow Hall, Fairfax VA 22030- > 703-993-2326 FAX: 703-993-2323
Re: Grade Inflation
The misallocation of resources seems obvious if you look at the job prospects of English majors vs Engineering majors: the world wants more engineers. Fabio's argument seems to be that most students' ability to be an engineer is partially predetermined, and that the ones with fewer talents wouldn't be much more useful if they decided to study engineering anyway (compared to their usefulness with an English degree). The bottom line is: grade inflation shouldn't interefere with the process of students choosing their majors. Gustavo - Original Message - From: "fabio guillermo rojas" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, April 15, 2002 1:45 PM Subject: Re: Grade Inflation > > The effect of this is to draw students away from math, science and > > economics and towards the softer social sciences. Similarly, within > > departments students are drawn away from harder graders and towards > > softer graders. Budgets go where students go! Thus grade inflation > > causes a *misallocation of resources* (measured in student time or in > > budgets.) > > Alex > > Alex, were you reading the New York Times this morning? Seriously, > how much misallocation is occuring? Why is better to have more math and > physics majors, and less English majors? Maybe this is in some sense > optimal. > Why should people who can't do math clog up math classes? > English professors are cheaper and more numerous, so maybe lax grading > is a way of allowing people to get the degree while not burdening > the big money generators of the university.
Re: entropy and sustainability
> I know something: any article on economics with the word "entropy" is likely > to be nonsense, unless it itself declares such articles nonsense. Do you mean this even when "entropy" is used in the context of information theory? Gustavo
philosophy of information (was " Re: Securities exchanges shutdowns" )
- Original Message - From: "Robin Hanson" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, April 01, 2002 7:47 PM Subject: Re: Securities exchanges shutdowns > Alex Tabarrok wrote: > > > Yes, in 1968 the exchange closed on Wednesday's in order to deal with > > backlog. French and Roll (1986) find that variance of stock returns on > > days when the market is closed is much lower than on days when the > > market is open which suggests that trading itself, rather than say > > information transmission, generates variance. > > Couldn't we interpret this as trading *creating* information, which is then > transmitted? > How can they measure stock returns when the market is closed? >From my understanding, trading expresses the preferences of two sides agreeing to it. When a trade is executed, this preference information becomes known to everybody else. Unless the trade happens "truly randomly", I don't see how it could be "creating information", except for the interpretation that knowledge about a particular trade only gives you part of the preference information (you don't know how low A was willing to sell or how much B was going to offer), and nobody knows what part that is going to be until the trade occurs, for if the parties involved knew that beforehand, they would have traded already. So, in a sense, each trade is random. (I am probably making several assumptions here. Would anyone care to point them out?) Given a piece of information, does it make a difference whether something is the original source of this information (if we can define such a thing), i.e. the creator of this information; or whether it is a transmitter of this information? If not, then transmitting information is the same as creating it. If it does, could you illustrate this difference? Can somebody resolve this philosophical muddle? Maybe then we can understand how Robin Hanson's theory would explain the phenomenon that inspired this thread. Gustavo
long-lasting cars
Let's assume for a minute that: (A1) It costs the manufacturer the same $8 000 to produce 1 long-lived car as it costs them to produce 1 short-lived car. (A2) Technological and style changes are insignificant. (this means I'm no longer talking about cars in today's world, but never mind) The point is: Since the manufacturers' profit per unit is more or less proportional to the cost of production (call this assumption A3), (P1) when production becomes very cheap, the manufacturers' profits can get smaller, even if the number of sales is increased. The Salt industry comes to mind, although this may be a fake example. If producing 1 long-lived car costs as much as producing 1 regular car, then the cost of producing cars-for-their-use is effectively smaller. By (P1), producing long-lived cars could result in smaller profits (this would happen in the form of fewer sales). Thus the interests of the manufacturer could be in opposition to the interests of the consumer (this reluctance to change production would be held up by collusion with the other manufacturers). Does this make sense?
Re: long-lasting cars
Having functional junk is no worse than having worn-out junk. > This is the problem with communications and other satellites that have > long lives. The owners often choose to replace them long before they > wear out because such better models have become avialable in the > interim. > > Yours, > Asa Janney > > > "Gustavo Lacerda (from work)" wrote: > > > > Claim: "auto manufacturers won't make cars that last long (say, 20 years of > > reliable operation) because they would make less money that way". > > > > Your opinion? > > > > Is the technology for reliable vehicles feasible for mass production? Would > > there be enough demand for such vehicles (i.e. the profit margin per vehicle > > is big enough to offset the loss due to fewer sales)? > > > > Gustavo > > -- > If a man does not keep pace with his companions, perhaps it is because > he hears a different drummer. Let him step to the music which he hears, > however measured or far away. > -- Henry David Thoreau, Walden
long-lasting cars
Claim: "auto manufacturers won't make cars that last long (say, 20 years of reliable operation) because they would make less money that way". Your opinion? Is the technology for reliable vehicles feasible for mass production? Would there be enough demand for such vehicles (i.e. the profit margin per vehicle is big enough to offset the loss due to fewer sales)? Gustavo
Re: Campaign finance changes
- Original Message - From: "Fred Foldvary" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Sunday, March 03, 2002 3:08 PM Subject: Re: Campaign finance changes > What changed is that voters now realize, with escalating campaign > contributions, that past reforms have not worked, so once again, they will > treat the symptoms without changing the cause of the problem. > What is the cause of the problem, and how would you treat it? Gustavo http://www.optimizelife.com
Re: Economics of rank vs. Economics of the most money
"Eric M. McDaniel" <[EMAIL PROTECTED]> wrote: > > > Since the amount of > > > money in the "economy" here was fixed, paying 2 to 25 cents > > to reduce > > > another person's wealth by one dollar sounds like a pretty good > > > investment decision to me, > > in > > > effect raising one's own wealth by between 75 and 98 cents. Is this > > right? > > > > Gustavo replied: > > > > There's something wrong with your math. > > > > Let the state of the game be defined by ((Absolute wealth of > > Player1, Absolute wealth of Player2), (Relative wealth of > > Player1, Relative wealth of Player2 )) > > > > So at t0, the state of the game is (($50, $50), (50%, 50%)) > > > > After the predatory move, this state of the game is about > > (($49.98, $49.00), (50.49%, 49.51%)). > > > > So, yes, if the goal is to maximize relative wealth, the > > predator is being rational, especially if the total wealth of > > the game is small. > > > I'm not sure I understand how my math was wrong, but it's likely since I > am mathematically impaired. However, I think our points are the same: > You seemed to imply that if it costs me 2c to set you back $1, then that action would raise my relative wealth by 98c, when in fact it would raise it by about 49c. This is an approximation that would only be exact at infinity. (try starting with both players having $2 to see what I mean) Gustavo http://www.optimizelife.com
Re: Economics of rank vs. Economics of the most money
"Jacob W Braestrup" <[EMAIL PROTECTED]> wrote: > How well this 'philosophy of envy' is rooted in people seems to me to > be very dependent on culture. In the US people seem to care more about > absolute gains than Europeans (especially Scandinavians, who seem to > focus solely on relative gains). That sounds interesting. Can you back it up? Gustavo
Re: Economics of rank vs. Economics of the most money
- Original Message -
From: "Eric M. McDaniel" <[EMAIL PROTECTED]>
To: <[EMAIL PROTECTED]>
Sent: Wednesday, February 20, 2002 12:56 PM
Subject: Re: Economics of rank vs. Economics of the most money
> Has anyone read the article summarized in The Economist ("Are People
Willing
> to Pay to Reduce Others' Incomes?", in the February issue of Annales
> d'Economie et de Statistique)?
>
> Based strictly on the text of The Economist's article, it seems that the
> players were in fact attempting to maximize their income. There was a
fixed
> supply of money involved in the game, which was initially divided equally
> among the four players. Players could each pay to reduce the money of
other
> players. But it only cost each player between 2 and 25 cents to reduce
> another player's money by one dollar!!! Since the amount of money in the
> "economy" here was fixed, paying 2 to 25 cents to reduce another person's
> wealth by one dollar sounds like a pretty good investment decision to me,
in
> effect raising one's own wealth by between 75 and 98 cents. Is this
right?
There's something wrong with your math.
Assuming that:
* there are exactly 2 players
* each players have $50 at some time t0
* it costs Player1 2 cents to reduce Player2's wealth by $1
Let the state of the game be defined by ((Absolute wealth of Player1,
Absolute wealth of Player2), (Relative wealth of Player1, Relative wealth of
Player2 ))
So at t0, the state of the game is (($50, $50), (50%, 50%))
After the predatory move, this state of the game is about (($49.98, $49.00),
(50.49%, 49.51%)).
So, yes, if the goal is to maximize relative wealth, the predator is being
rational, especially if the total wealth of the game is small.
Gustavo
http://www.optimizelife.com
Re: privatize parking spaces - market failure?
Maybe I didn't explain the problem well, or maybe I just misunderstood you. What if you're parked at home, and there is an unexpected shortage of spaces? If you're surprised by an $800 charge for an unusually tight night, you'll probably be upset and look for other parking solutions, thereby hurting the market for dynamically priced parking spaces. The point is that you didn't know how how much you were going to pay when you parked. Also, if you know that such a risk exists, you would probably avoid parking there in the first place. So, here is the bound question rephrased: --- What is the best parking solution you can think of? (A) A system in which the driver gets a short-duration, (say 24h or 10h, it's the driver's choice) lease for the spot. The price for available spaces fluctuates, but once you park (i.e. sign the lease), the terms of the lease become fixed. (B) A system where available and unavailable prices are fluctuating with no bound, without the driver's knowledge. (liked a naked short sell, in stock market terms) (C) Neither of the above -- I tend to prefer (A), although I can think of some interesting extensions, where (1) there is some bounded fluctuation (bounded risk) in the charge for the parked, and (2) the parked can choose to be notified about good subletting opportunities, if they appear. Does anybody know of contracts similar to (1)? I'm thinking of a situation where the landlord is free to charge more, putting at the stake only his reputation. Is there a name for this? Gustavo - Original Message - From: "Fred Foldvary" <[EMAIL PROTECTED]> > > Would there be a bound to the charge per time? > > No. The charge should be just high enough to eliminate congestion so that > there is usually a parking space within one or two blocks. > > > The parking spaces would be > > more attractive if they offered some sort of guarantee. > > The guarantee is to be able to find a space. > That is what the parkers would pay for, the highest bidders getting the space > during those times. >
Re: privatize parking spaces - market failure?
On Friday 15 February 2002 23:55, you wrote: > --- "Gustavo Lacerda (mediaone)" <[EMAIL PROTECTED]> wrote: > > What if cities decided to privatize on-street parking spaces? > > > > I imagine that this could be a market failure in mixed > > residential-commercial neighbourhoods. The reasoning is that most cars > > spend the night at residences and the day at business locations. > > The market solution would be electronic parking meters that flexibly charge > just enough to avoid congestion at any time of day or night. > Are you suggesting a system that is sensitive to the market conditions at the exact moment in time (i.e. dynamically priced) ? This is the kind of solution I was looking for, but such a system would be hard to implement. Can you think of an existing analogous system in a similar market? Would there be a bound to the charge per time? The parking spaces would be more attractive if they offered some sort of guarantee. Gustavo
privatize parking spaces - market failure?
What if cities decided to privatize on-street parking spaces? I imagine that this could be a market failure in mixed residential-commercial neighbourhoods. The reasoning is that most cars spend the night at residences and the day at business locations. Maybe it's the case that people who now live in mixed zones manage to park their cars close to home because by the time they get back in the evening, most people who work in this zone have gone home as well (probably a different location). If these spaces were private, it could be difficult to work out the logistics of space-sharing, as commercial drivers wouldn't want to be "locked into the contract" to leaving at, say 6pm, and likewise, residents would want to be free to spend days off at home, and not have to vacate their space. So I imagine that both commercial drivers and residents would want to secure their space, doubling the demand (if they residents and workers are in equal proportions), and raising the price of parking by a lot, certainly more than corresponding the tax break (the town would distribute its revenue from selling/renting the spaces as tax-breaks). Gustavo P.S.: I just had to throw this in: something else cities could do is clear parking lanes to make room for segways (Dean Kamen's vehicles).
Re: Tax with positive growth effect
- Original Message - From: "Fred Foldvary" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, November 02, 2001 9:25 AM Subject: Re: Tax with positive growth effect > > Whereas if there were no tax (i.e. if it was voluntary), individual > businesses would be reluctant to use their money that way, even if > they knew that everybody would be better off if everybody invested > their share into the collective fund > > (prisoner's paradox). > > Gustavo > > Does the prisoners' paradox not disappear when the game is on-going > and the participants may communicate? Why would a trade association > with mutual benefits not work? > The prisoner's dilemma does not tend to disappear when there are many participants. It pays off to be a leech. If there are enough leeches, participation in a trade association may cost too much for the benefits it provides. It would be more beneficial to not participate in the trade association and reap the benefits anyway... in this case, the people who do participate end up paying for the ones that don't. Again, this is because the return is collective while the investment is invididual. (unless we have a mandatory investment, i.e. a tax) Gustavo
Re: Tax with positive growth effect
In the following example, it isn't the taxing itself that promotes growth, but its spending. If a state uses tax money to attract rich tourists to the area (by advertising, for example), that could promote consumption, in such a way that the tax promotes growth more than it hampers it. Whereas if there was no tax (i.e. if it was voluntary), individual businesses would be reluctant to use their money that way, even if they knew that everybody would be better off if everybody invested their share into the collective fund (prisoner's paradox). I would be interested to know if there are real-world cases of this, or of any tax promoting economic growth. Gustavo At 08:20 PM 31-10-01 +0200, you wrote: >Has anybody read/heard about a tax which does have a positive effect on >the economic growth? The professors at my university say so, but I >wouldn't be so sure so that's the reason I'm asking. > >Also I'm writing my course paper about the effects of the fiscal policy to >economic growth. Any good links, thoughts, ideas etc. would be >appriciated. > >Regards, >Kristjan Kanarik
