voluntaryXchange

Framing Effects and WMD

For just a minute, suspend your opinions about the situation in Iraq.

I have a point to make about (economic) rationality that I think both sides should appreciate - namely that there is a framing effect clouding an important point.

In short, a framing effect is a common type of irrational behavior that can't yet be fully explained by psychologists or economists, but which they both know is important. More specifically, a framing effect occurs when you ask the same question in two different ways and get different answers.

So, here's a fact: an artillery shell filled with enough Sarin to kill 6,000 people was recently found in Iraq. There are a lot of opinions about whether this is meaningful, and this is where the framing effect comes in.

Here's another fact: this artillery shell can only kill 6,000 people if it is fired through the appropriate artillery piece.

Now for a little bit of semantics: the artillery shell and the artillery piece (potentially) constitute a weapon of mass destruction, but the artillery shell or the artillery piece by themselves clearly do not.

Here's the framing effect. Would the response of the media and the public have been identical in these two cases:

1) Artillery pieces are found and captured in 2003 but poison gas shells that could be fired from them are hidden until a year later, or 2) Poison gas shells are found and captured in 2003, but the artillery pieces to fire them are hidden until a year later.

Obviously, choice 1 is what actually happened. Would we be in the same situation today if choice 2 had occurred? If the answer is no, then there is a framing effect, and therefore some irrationality implicit in current discussions of the situation. It's up to you to decide which side is irrational.

Carnival of the Capitalists

Carnival of the Capitalists is being hosted at Small Business Trends. Check it out!

Blogging Makes the World Smaller

I just found out that there is one degree of separation between me and Ben Muse, author of a good, but technical, economics and public policy blog.

Ever since I found out about Ben's blog, through Marginal Revolution, I've been meaning to ask my friend Wayne if he knows Ben (Wayne had previously been on the faculty at UAS). Today I did, and the answer is yes.

Of course, this was followed by "how do you know Ben Muse", and an introduction of Wayne to this blog (which I've been hiding a little from other faculty here since I don't have tenure).

And ... of course ... this was followed by Wayne's announcement that he wants to start his own blog ... and he'll center it around this topic ... and does he need to know and programming ... and ... and ... he still hasn't started writing anything yet. Yes, I stressed that writing content is where to start.

P.S. Wayne ended up here for the same reason I did. He wanted to live in a small town in the mountain or intermountain west, and there just are not that many schools in places like this to choose from (not that I'm complaining).

Earthshattering Results!

There is now a map showing the whether people call a generic carbonated soft drink pop, soda, or coke. It is nationwide by county.

I grew up in a pop area, and I live in a different pop area now.

Now I know why I never felt like I fit in when I lived in the South. I knew they didn't say pop, so I assumed they must say soda. Being dumb and incompletely culturally sensitive, I switched within a few months to saying soda. I don't remember anyone saying "bless your heart" after I asked for a soda, but I didn't catch on to that one for a few years either.

Tips of the hat to the AtlanticBlog, Internet Commentator, and Gene Expression.

An Observation About Human Nature

Something about human nature dawned on me the other day. My wife says everyone knows this, but I'm not so sure.

Many people regard attractive people as dumber than average - the dumb blond stereotype. I know there isn't much fact behind this, and I also know that attractive people, whether dumber or not, do better on many measures of success and well-being.

So, the non sequitar is that attractiveness causes a decline in intelligence.

Anyway, I ran across a person who displayed the inverse. This is completely subjective, but I swear I got the vibe from this person that because they were unattractive they must therefore be smart. I wasn't trying to be judgemental, and this person is bright enough - probably above average - but I wouldn't go so far out into the tail of the distribution to call them smart.

Now that I think more about it, there are a whole lot of interesting logical classifications of this statement that seem to describe people I encounter every day.

Original: attractiveness leads to lower intelligence
Inverse: unattractiveness lead to higher intelligence
Converse: lower intelligence leads to attractiveness
Contrapositive: higher intelligence leads to unattractiveness

Think about it: the first one is the common stereotype, the second is the observation I made (which seems to apply to more people than I initially recognized), the third is a primary accusation made by feminists about the socialization of women in our culture, and the last one describes a lot of people who hang out around universities.

Vermont Must Be Full of Experts

Everyone in Vermont must be an expert, otherwise why would Wal-Mart be effectively barred from the whole state after it was placed on a list of endangered historic places. I smell a rat.

Juxtapose that idea with this wonderful quote from a May 25th Wall Street Journal article entitled "Marketing Panache, Plant Lore Invigorate Garden Center's Sales" (subscription required) explaining why big retailers don't have good garden centers:

Most independent garden centers are run by plant people learning about retail," says Carol Miller, editor of Garden Center Merchandising and Management, a monthly trade publication based in Fort Worth, Texas. "Most mass merchants are business people learning about plants."

Combine these together and the absence of Wal-Mart from Vermont suggests that the state is full of experts on everything who are bad at retail (of course, reading between the lines will tell you that "bad at retail" and "charge you more to cover their inanity" mean the same thing).

Holy Cow, Is This Dumb

What does it mean if you adjust something for inflation and the result doesn't keep up with inflation? Nothing. In fact, why would anyone care? Hmmm ... you might care if it made Bush look bad and you were grasping at straws.

I may be being cynical here but what else can explain the points made in NathanNewman.orgs post entitled "Wages Lag, Bush Approval Drops".

The point of adjusting for inflation is so that you no longer have to make comparisons to inflation. The post shows that wages adjusted for inflation by less than 2% between 2001 and 2003. That seems about right, and it isn't great, but it is an increase. But comparing that to the rate of inflation is meaningless.

There are problems with the rest of the post as well.

It is noted that "Labor's share of the increase in national income since November 2001, the end of the last recession, is the lowest for any recovery since the end of World War II". Again, that may be right. But, labor's share of national income is so stable across time that it is routinely assumed to be constant by economists of all political stripes. So, what are we talking about here - labor getting 69.9% of the increase instead of 70%?

It is noted that "From the start of 2002 to the end of 2003, national income grew about $804 billion, or 8.7 percent. For the first time, corporate profits received a larger share of the growth than labor did." Perhaps so (I don't know, I haven't checked), but it seems unlikely. But again, profits are extremely volatile and labor's share is not. It is almost certain that a small volatile random number will occassionally exceed a larger less volatile random number.

It is noted that "The median cash compensation for chief executives was up over 7 percent". So let me get this right. National income went up by 8.7% but CEO compensation went up by only 7%. That seems to me like CEO's are getting the shaft. Perhaps we'll see a million-CEO march on the National Mall soon.

You know ... there are real problems with the economy, and as a Republican I can freely state that I am not very happy about many policies pursued by the Bush administration, and by the performance of the economy over parts of the last 4 years. But, please don't make dumb stuff up.

Tip of the hat to Deinonychus Antirrhopus.

Pan-Arabia

Why on earth do we think that Arabs speak with one voice, and that they all think the same thing? Most people don't even know what an Arab is. This extends to the highest levels of government. President Bush recently apologized to the King of Jordan for abuses by our soldiers in Iraq. Huh?

So, what are our misconceptions? In sum, we believe in Pan-Arabia. What's that, you might ask? Fouad Ajami's May 12th Wall Street Journal op-ed piece entitled "The Curse of Pan-Arabia" can clue you in (subscription required).

Our account is with the Iraqi people: It is their country we liberated, and it is their trust that a few depraved men and women, on the margins of a noble military expedition, have violated. We ought to give the Iraqis the best thing we can do now, reeling as we are under the impact of Abu Ghraib -- give them the example of our courts and the transparency of our public life. What we should not be doing is to seek absolution in other Arab lands.

Take this scene from last week, which smacks of the confusion -- and panic -- of our policies in the aftermath of a cruel April: President Bush apologizing to King Abdullah II of Jordan for the scandal at Abu Ghraib. Peculiar, that apology -- owed to Iraq's people, yet forwarded to Jordan. We are still held captive by Pan-Arab politics. We struck into Iraq to free that country from the curse of the Arabism that played havoc with its politics from its very inception as a nation-state. We had thought, or implied, or let Iraqis think, that a new political order would emerge, that the Pan-Arab vocation that had been Iraq's poison would be no more.

The Arabs had let down Iraq, averted their gaze from the mass graves and the terrors inflicted on Kurdistan and the south, and on the Shiite holy cities of Najaf and Karbala and their seminarians and scholars.

Here's my view of what the typical American thinks about Pan-Arabia.

1) All middle-easterners are Arabs.
2) All middle-easterners are Moslems.
3) All middle-easterners are anti-American.
4) All middle-eaterners think the same way.

Wrong, wrong, wrong, and wrong. Let's take them one at a time.

Many middle-easterners are not Arabs. Turks and Iranians would be insulted by this. In fact, places like Egypt are not really Arab. Think about it: could a few thousand conquerers from Arabia have replaced the millions of people that lived in Egypt in the 7th century? No. What we see in the middle-East is a thin veneer of Arab language and culture overlaid on many different lands. Treating the middle-east as a Pan-Arabian area where everyone is Arab is like saying the western world is American. It's true to some extent, but there are a lot of Europeans who object to our cultural dominance.

Many middle-easterners are not Moslems. The middle-East is loaded with religious sects. And, there are two main division in Islam (Sunni and Shia) as well as some smaller ones like the Sufi's. Treating the middle-east as a Pan-Arabian area where everyone is Moslem is like saying Europe is Christian. It's true to some extent, but there are important divisions among both Moslems and Christians.

Many middle-easterners are not anti-American. The middle-East is loaded with countries allied to the U.S. (Morocco, Oman, Kuwait, and so on). Middle-eastern immigrants play a huge role in modern American society. And don't forget about the victim of abuse at Abu Ghraib who indicated that he'd be glad to emmigrate to America as compensation for his trouble. Treating the middle-east as a Pan-Arabian area where everyone is anti-American is like saying Europe is anti-American. It's true to some extent, but you won't find many takers of that line in (say) Poland.

Lastly, middle-easterners do not all think the same way. This is just dumb on the face of it. But there are two filters working here. First, middle-easterners are not generally free to say what they think, and secondly, we in the U.S. get our information filtered by our media.

We don't go around treating the Hungarians badly because we are having political disagreements with the French, or trade problems with Germany. Then why do we lump Syrians, and Algerians, and Yemeni's together? Maybe we're just dumb. That might explain why the Bush people think a U.N. functionary from Algeria (Brahimi) is a good person to involve in decision making in Iraq. This isn't many steps above the level of thinking of the veterninary secretary in New Orleans I spoke to a few years back who was surprised that Vancouver is just like the United States.

Finding New Music

Finding new music is tough, especially if you are not into pop. If you like to find new music that is similar to stuff you like you must check out musicplasma.

It's almost, but not quite as good, as looking through other peoples' MP3 files when the original Napster was up and running.

Tip of the hat to Newmark's Door.

Prices Only Economists Can Appreciate in Deadwood

HBO's Deadwood continues to pour out blatant economics disguised as a western in this week's episode.

Economists are sometimes described as heartless and unemotional, and you probably need to be that way to see the economics of this episode.

The plotline is that Wu imports opium from California by (Chinese) courier. He then sells it to Swearengen who is the prime distributor. This week, Wu confronts Swearengen with the news that two white men killed his courier and stole his opium. He expects Swearengen to find the culprits and deal with them (the unspoken idea is that Wu cannot pursue the culprits himself due to prejudice in the old West). Wu clearly desires a blood atonement for the death of his hireling. And, there is never a question about catching the perpetrators, or passing judgement.

So, where is the economics? It is in the question that comes up repeatedly throughout the episode. If two white men committed the murder, how many need to be killed in order to settle the issue? Swearengen inquires with a number of people (whites only), who tell him implicitly that the opportunity cost of a Chinese man is definitely not two white men. In fact, many exhibit their prejudices by saying that the opportunity cost is zero white men! Ultimately, Swearengen settles on a price of one white man for one Chinese man, but this is only because he is afraid that Wu could extract that cost in other ways that might hurt Swearengen more.

See my earlier economics in Deadwood posts at:
Corruption's Prices in Deadwood
Deadwood's Invisible Hand
Derivatives in Deadwood
Collusion and Asymmetric Information in Deadwood
Elasticities in Deadwood
21st Century Economics in Deadwood