Gun-free zones an easy target for killers | John Lott
19 Jun 2015 1 Comment
in applied price theory, economics of crime, economics of regulation, law and economics, politics - USA Tags: game theory, gun control, John Lott, mass public shootings, offsetting behaviour, read killers, The fatal conceit, The pretence to knowledge, unintended consequences
The Triumph (and Failure) of John Nash’s Game Theory – The New Yorker
29 May 2015 Leave a comment
in applied price theory, history of economic thought, Public Choice Tags: conjecture and refutation, game theory, John Nash, methodology of economics, philosophy of science, philosophy of social sciences
Why America refuses to sign climate treaties that don’t include the BRICs
12 May 2015 Leave a comment
in environmental economics, global warming, international economic law, international economics Tags: climate alarmism, climate treaties, free riding, game theory, global warming
Gentlemen Reading Each Others’ Mail: A Brief History of Diplomatic Spying as a force for peace and nuclear stability
24 Mar 2015 Leave a comment
in politics - New Zealand, politics - USA, war and peace Tags: game theory, mutually assured destruction, nuclear deterrence, nuclear war, Ronald Reagan
At the 2009 G20 meetings in London, GCHQ set up fake internet cafes for delegates to use to log their keystrokes. If you are dumb enough to use an Internet cafe for official business, you deserve to be spied on.
Barack Obama, even with special encryption software, is now allowed to email only some 20 aides, family members and friends whose devices have similar protections.
All this spy v. spy stuff is a force for peace. At the 1921 Naval conference aimed to limit naval capability among the world’s powers as a way of curbing the war-ship arms race at the time, the U.S. wanted Japan to concede to having fewer ships, but Japan wanted slightly more. With code-cracking, the U.S. discovered that it was more important to the Japanese to preserve their relationship with the U.S. than to be able to spend more on their navy.
“We pressed hard, and Japan abandoned its position that it wanted to build more,” Kahn said. “We won a great victory for not just the U.S., but for the whole world because we built fewer war ships and we had more money to build roads and for other infrastructure.”
Richard Posner in a lecture some years ago talked about how useful spying was during the cold war. Each side develop a far more accurate appreciation of the other’s strengths. As a result, it did not overreact nor under react to threats. For example, it was through U-2 spying that the USA learned that there was no missile gap with Russia. In fact, Russia is very weak and much less of a threat.
In 1983, Ronald Reagan learned through secret intelligence that through a series of misinterpretations of routine military manoeuvres in Western Europe, and some bureaucrats at Russian embassies trying to inflate their own importance and knowledge of the workings of their host governments, the Soviet leadership came to the impression that they were a ruse for war and they were under the threat of imminent attack. The Russians started to prepare to counter attack.
At the same time, a Korean airline was shot down by the Russian air force. Privately, Reagan and his advisers are horrified that such a thing could happen through a comedy of errors and that could lead to something far worse through mutual alarm and tests of will.
Historians now regard 1983 as the closest time there was a possibility of a nuclear war since the Cuban missile crisis. It all arose through a series of misunderstandings of a series of routine military manoeuvres against a background of worsening relations with the Soviet union. Robert Gates, Deputy Director for Intelligence in 1983, has published thoughts on the exercise that dispute this conclusion:
Information about the peculiar and remarkably skewed frame of mind of the Soviet leaders during those times that has emerged since the collapse of the Soviet Union makes me think there is a good chance—with all of the other events in 1983—that they really felt a NATO attack was at least possible and that they took a number of measures to enhance their military readiness short of mobilization.
After going through the experience at the time, then through the post-mortems, and now through the documents, I don’t think the Soviets were crying wolf. They may not have believed a NATO attack was imminent in November 1983, but they did seem to believe that the situation was very dangerous. And US intelligence [SNIE 11–9-84 and SNIE 11–10–84] had failed to grasp the true extent of their anxiety.
This secret intelligence led Reagan to both reappraise his attitude to the Russians and put out some peace feelers and take other stabilising measures. The period is known as the Reagan reversal. In his memoirs, Reagan wrote of a 1983 realization:
Three years had taught me something surprising about the Russians: Many people at the top of the Soviet hierarchy were genuinely afraid of America and Americans. Perhaps this shouldn’t have surprised me, but it did…
During my first years in Washington, I think many of us in the administration took it for granted that the Russians, like ourselves, considered it unthinkable that the United States would launch a first strike against them.
But the more experience I had with Soviet leaders and other heads of state who knew them, the more I began to realize that many Soviet officials feared us not only as adversaries but as potential aggressors who might hurl nuclear weapons at them in a first strike…
Well, if that was the case, I was even more anxious to get a top Soviet leader in a room alone and try to convince him we had no designs on the Soviet Union and Russians had nothing to fear from us.
Reagan began seeking a rapprochement with the Kremlin fifteen months before Gorbachev took office. Reagan spoke of common concerns, the mutual desire for peace and the urgent need to address “dangerous misunderstandings” between Moscow and Washington.
via Gentlemen Reading Each Others’ Mail: A Brief History of Diplomatic Spying — The Atlantic, L. Gordon Crovitz: Gentlemen Read Each Other’s Mail – WSJ and Able Archer 83 – Wikipedia, the free encyclopedia.
The shifting sources of greenhouse gas emissions
24 Feb 2015 Leave a comment
in development economics, environmental economics, global warming, growth miracles, politics - Australia, politics - New Zealand, politics - USA Tags: China, climate alarmism, free riding, game theory, global public goods, global warming
What happens when you play “chicken” with a game theorist (The Greek Finance Minister)?
14 Feb 2015 Leave a comment
in currency unions, Euro crisis, international economics Tags: game theory, Greece, Greek default, optimal currency areas, sovereign default
Luke Froeb suggests:
However, opting for forgiveness risks creating dangerous incentives for other countries to act in the same way as Athens. “Germany may decide that if the eurozone does not punish Greece, it will have problems with other countries such as Spain and Italy,” says Roger Myerson, a Nobel-winning economist at the University of Chicago.
Mr Varoufakis should therefore try to convince Germany that Athens’ situation is unique and that other eurozone countries will not seek debt relief as a result, he says. In doing so, he would follow the illustrious precedent of the citizens of Melos, to whom Athens, during the Peloponnesian war between Athens and Sparta, gave the choice of surrendering or facing annihilation.
“The Melians sought to argue that they were different and that sparing them would not set a dangerous precedent vis-à-vis other islands,” says Mr Myerson.
The problem with this strategy, however, is that the other player may choose to build a reputation for toughness. This is what Athens opted for — it laid siege to the island and starved the inhabitants into submission.
via Managerial Econ: What happens when you play “chicken” with a game theorist? and Greek Game Theory: Default, Devaluation, Deliverance?..
Armistice Day: World War I as a bar fight
11 Nov 2014 Leave a comment
in war and peace Tags: Armistice Day, David Friedman, game theory, Thomas Schelling, World War I
Wars are like bar fights. Both are about not backing down. David Friedman explains:
Consider a barroom quarrel that starts with two customers arguing about baseball teams and ends with one dead and the other standing there with a knife in his hand and a dazed expression on his face.
Seen from one standpoint, this is a clear example of irrational and therefore uneconomic behaviour; the killer regrets what he has done as soon as he does it, so he obviously cannot have acted to maximize his own welfare.
Seen from another standpoint, it is the working out of a rational commitment to irrational action–the equivalent, on a small scale, of a doomsday machine going off.
Suppose I am strong, fierce, and known to have a short temper with people who do not do what I want.
I benefit from that reputation; people are careful not to do things that offend me. Actually beating someone up is expensive; he may fight back, and I may get arrested for assault. But if my reputation is bad enough, I may not have to beat anyone up.
To maintain that reputation, I train myself to be short-tempered. I tell myself, and others, that I am a real he-man, and he-men don’t let other people push them around. I gradually expand my definition of “push me around” until it is equivalent to “don’t do what I want.”
We usually describe this as an aggressive personality, but it may make just as much sense to think of it as a deliberate strategy rationally adopted.
Once the strategy is in place, I am no longer free to choose the optimal response in each situation; I have invested too much in my own self-image to be able to back down… Not backing down once deterrence has failed may be irrational, but putting yourself in a situation where you cannot back down is not.
Most of the time I get my own way; once in a while I have to pay for it.
I have no monopoly on my strategy; there are other short-tempered people in the world. I get into a conversation in a bar. The other guy fails to show adequate deference to my opinions. I start pushing. He pushes back. When it is over, one of us is dead.
No-one could back down in 1914. Tom Schelling even said that once a country mobilised for war in 1914, it had no plans at hand on how to stop this mobilisation.
Schelling spent a lot of time on going to war as an emergent process: what a nation does today in a crisis affects what it can be expected to do tomorrow:
A government never knows just how committed it is to action until the occasion when its commitment is challenged.
Schelling argues that nations, like people, are continually engaged in demonstrations of resolve, tests of nerve, and explorations for understandings and many misunderstandings.
That is why there is a genuine risk of major war not from accidents in the military machine but through a diplomatic process of commitment and escalation that is itself unpredictable.
In Schelling’s view, many wars including World War 1 were products of mutual alarm and unpredictable tests of will.
Schelling and others in the 1950s and after studied World War 1 to learn how to not blunder into wars when nuclear weapons now would be used.
When people discuss the futility of World War 1, they under rate the role of unintended consequences and the dark side of human rationality in situations involving collective action.
Wars arise as unintended consequences of mutual alarm and unpredictable tests of will. As such, they are not moral ventures that you can choose to join or not. People blunder into wars.
It is even harder to get out of a war than into one. The problem is credible assurances that the peace is lasting rather than just a chance for the other side to rebuild and come back to attack from a stronger position.
A state would think that another state’s promise not to start another war is credible only if the other state would be better off by keeping such promises not to start another war than by breaking its promise once it has rearmed.
Making sure that Germany and its allies did not restart the war a few years later, fed and rested, is why the peace treaty in 1919 totally disarmed Germany and split-up the other Axis powers.
One side will think that the other’s promise not to re-start a war is credible only if the other state would be better off by keeping its promise not to re-start a war than by breaking its promise.
France fortified its border with Germany in the 1920s because of a lack of trust that the peace would endure. Germany was disarmed after 1918 so that the day which it would be a threat again was well into the future.
An understudied issue is peace feelers in World War 1 such as by the German chancellor in 1916 and the Reichstag peace resolution on 19 July 1917. Pope Benedict XV tried to mediate with his Peace Note of August 1917.
Peace initiatives failed because until the last months of the war, neither side really lost confidence that they could prevail over their opponents.
Both sides suffered from a profound sense of insecurity in an international system characterised by uncertainty, arms races, warfare, and constant intrigue.
Both sides assumed the worst of the other; both trusted in the reduction of their opponents’ military power to keep them safe. As long one side could believe that they had a plausible chance to prevail on the battlefield, they would not abandon their quest to achieve that goal.
From late 1914 to early 1917, the Allies thought the balance of power favoured them because they had access to greater resources than the Central Powers.
German peace feelers when they were winning were based on Germany keeping everything it had conquered up till then. When Germany was in retreat, the German peace feelers were based on going back to the old borders before the war.
With its armies in possession of enemy territory in both the east and west, and the Allies unable to push them out, German leaders saw no reason to offer extensive concessions for peace.
HT: Ross A. Kennedy,
From Sam Peltzman’s (1991) review of the handbook of industrial organisation
22 Oct 2014 Leave a comment
Deirdre McCloskey (2001) on the state of modern industrial organisation economics
15 Oct 2014 Leave a comment
The central role of the market in the emergence of fairness
04 Jul 2014 Leave a comment
in applied price theory, liberalism Tags: evolution of cooperation, experimental economics, game theory
Experiments in psychology and economics find that in market societies all over the world, a substantial fraction of individuals will be fair in anonymous interactions and will punish unfairness more.
In the dictator game , when played by participants in industrialized societies, the dictators gave away nearly half the prize — a division that probably sounds fair.
As for the noble savage, not corrupted by civilization and symbolising humanity’s innate goodness.what they do in the dictator game: hunter- gatherers, foragers, pastoralists and subsistence farmers were much less willing to share the prize, apparently because they didn’t feel an obligation to someone they didn’t know.
Success in the market correlates with the following characteristics:
- Be nice: cooperate, never be the first to defect.
- Be provocable: return defection for defection, cooperation for cooperation.
- Don’t be envious:: be fair with your partner.
- Don’t be too clever: or, don’t try to be tricky.
Being nice and not too clever or too tricky becomes ingrained to success in market societies so that is why in market societies people are fair in the dictator game as a matter of course.
Why drop your standards because some silly experiment by psychologists? After all, you may have future dealings with members of the experiment, and even if you don’t, such as in anonymous computer-based experiments of interaction, you don’t want risk picking up bad habits just to please a psychologist.
Adam Smith, in his study of religion, noticed was that religious sects with stricter codes of honesty and intense mutual monitoring by co-congregants for the slightest moral lapses proliferated in cities. Many successful businessmen belonged to these strict religions. These highly religious businessmen were successful in their businesses because they were looked upon by the public as reliable trading partners in a time of weak law enforcement.
Smith viewed participation in religion as a rational device by which individuals enhanced the value of their human capital.These businessmen did not know that this was profit maximising but the businessmen with religious backgrounds slowly gained market share over rivals that had less efficient ways of communicating both their reliability and that their personal honesty was under daily scrutiny.
Ethnic minorities are advantaged in the same way in business. Because of their extensive social interactions with each other because of their language, religious practices and inter-marriage, the costs of bad business behaviours are much higher due to the risk of social ostracism by everyone you know. This greater trustworthiness gives them a cost advantage in the marketplace even though they may be unaware of its source.
Utopia, you are standing in it! 
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