Very interesting discussion about academia

... over at The Atlantic.

My tuppenorth:

• at least half the added value of university for undergraduates is the other undergraduates. If you hang around with clever, interesting people, that expands your brain - and most 18 year olds pay more attention to other 18 year olds than their professors, for some reason - plus, if your friends go on to be important and influential, then you have a network.
• this means that for universities, nothing succeeds like success. (Economic term: multiple equilibria.) No matter how good a community college's teaching, it will be less attractive than Harvard because Harvard has Harvard students.
• This gives famous universities the chance to extract rents: they can charge a lot more than they actually provide by way of teaching etc. You are paying for the name and the networking.
• These rents go into research. 
• The authors are damn right that a lot of research is useless. The problem is, research is like advertising: half of the money spent on it is wasted, but nobody knows which half.

A few tidbits from the pilot experiment

Subjects were divided into three groups. Each played a prisoner's dilemma against another subject from a different group (the "prisoner's dilemma partner" or "PD partner"). Then, each of them made a set of allocations between themselves and other subjects - who were identified by group and player number, but who were not the same as their PD partner.

We call the group of each subject's prisoner's dilemma partner the MET group;  the third group is the OTHER group.

When the PD partner defected, subjects made more allocations that harmed the other player. This difference was larger when making allocations against others from the MET group:

The effect is clearer for subjects who had themselves cooperated in the prisoner's dilemma:

For some decisions, being nasty to the other player actually cost the subject money. Not surprisingly there were fewer of those allocations, but the same pattern is observed:

and again the pattern is even stronger for PD cooperators.

Of course this is just the pilot, and I haven't yet done any rigorous statistical significance tests.

Why don't evolutionary economists believe in equilibrium?

This is a provocative question for Arianna and others of her persuasion. Much of it goes over similar ground to Paul Samuelson's address to a conference of evolutionary economists a couple of years ago.

Evolutionary economics takes its cue from biology and sees the economy as an ecosystem, with an endless variety of different "species" (firm strategies) competing, right? And as a result EEers reject the rationalistic concept of equilibrium, whether market or game-theoretic. The world is always moving forward, never at rest, and behaviour is never perfectly adjusted between different actors.

I find these claims pretty plausible, and ironically more plausible in my field -- political economy, where straight Nash Equilibrium is completely dominant -- than in the study of markets.

But.

1. Biologists use equilibrium concepts all the time, and these concepts were adapted from game theory by John Maynard Smith. Indeed, instead of being looser than "rational" game theory, evolutionary game theory concepts actually make tighter predictions: an Evolutionarily Stable Strategy is always a Nash Equilibrium, but not the other way round.

2. Equilibrium has been tested in the lab, and holds up pretty well -- e.g. in auction markets. I am not claiming we can naively generalize from the lab to real markets. But if it works well in the lab, doesn't that support the underlying theory?

3. One major use of equilibrium predictions is to generate comparative statics (ie predictions that if parameter X varies, outcome variable Y will vary with it in some specific way). Even if economies never reach equilibrium, the forces pushing them towards equilibrium may still generate the same comparative statics. For example, although the voting behaviour that we observe is not compatible with the main equilibrium voting models -- people vote too much -- still, they vote less when the election is less competitive, as the models predict.

4. Social science is all about the search for surprising insights. Equilibrium concepts -- more fundamentally, the idea that people react to incentives -- are a good way to generate these insights. (One random example: smoking bans in pubs might increase child cancer, because more people stay at home and smoke there.)

So, what's wrong with equilibrium?

New paper

There's a new work-in-progress on my website. It's with Ro'i Zultan and is called "Brothers in Arms: Cooperation in Defence". A poster is here.

We started this paper to try and resolve a puzzle in social science and biology. Often, unrelated individuals help each other when they face an external attacker. For example, an estimated 200,000 people were active members of the French Resistance in World War II. In the laboratory, we can observe a similar phenomenon under controlled conditions: cooperation increases in the presence of an external threat. Non-humans do it too. For instance, musk oxen band together to drive off wolves.

This is a puzzle because, economically, helping others seems to have costs but no benefits. Or, biologically speaking, this behaviour should decrease the fitness of the animals who display it.

We explain this cooperation by invoking signalling theory. Some groups are  prepared to cooperate, for example because they are kin, or because they are in long-term cooperative relationships. Other groups consist of self-interested individuals. Attackers are strategic: they prefer to attack groups who will not help each other. (Think of the bandits in the Magnificent Seven.) If they start to think they are attacking a very cooperative group, they will look for another target. Then, even self-interested individuals have an incentive to help each other during an attack, as this will deter further attacks.

So far you might get with common sense. However, economists and others may be asking "surely the group's reputation for cooperativeness is a public good, just like defence itself, and will be underprovided". Here, our theoretical model shows one possible answer: the series of repeated attacks gives this public good a "weakest-link technology". That is, if you are the first person not to help during an attack, then the attacker immediately recognises that previous helping was fraudulent and can no longer be deterred. This in turn gives a strong incentive to help when it's your turn.

The paper is here.

At the demo

Arianna persuaded me to go to the anti-Nazi demo in Gera today. The local fascists were having a sort of annual picnic.

Gera is quite pretty, not like the stereotype of a run-down East German town. If I were an artist I'd buy myself 1000 sq m of old warehouse, cheap as chips.

We avoided the Black Bloc, who looked like teenagers out for a fight, and joined the main crowd on the bridge. Tons of police. Some Christians playing samba. A couple of guys doing capoeira. Soon th Nazis come across the bridge, under heavy police escort. They have to cross in single file, accompanied by our chants of "Nazis raus!" Most are big, tough, aggressive-looking guys. A few scrawny girls. They look as if they enjoy the hate, so is it really effective? Maybe the point is to make sure that people who don't enjoy the hate are put off.

We go and eat at the Sächsische Bahnhof, a cool place in a beautiful old run-down building. When we get back, the demo is gone and the Nazis are listening to speeches. The world Volk appears a lot. We must not allow our Volk to be destroyed!

East Germany is really not a multicultural place: I don't know what they are afraid of. As it happens, I think there are some legitimate reasons to worry about immigration. But actual anti-immigration sentiment always seems to be irrational and driven by primal human fear of strangers.

If this is Europe's biggest Nazi-fest as the flyers said, we have little to fear. There were maybe 1000 people there. The event was a bit smaller than Wivenhoe village fête.

The demo was supported by Die Linke, Germany's Left populist party. I think they are a much bigger threat to European democracy than the neo-Nazis. But they play by democratic rules so they have to be tolerated. And the populist threat is not just from the Left. The French assembly is preparing to ban the Burqa. This is a direct assault on liberal freedoms. But some people misguidedly support it because of an ill-thought-out feminism. Have I quoted J S Mill before? Never mind: "His own good, whether physical or moral, is not a sufficient warrant."

CAP

OMG listen to this vile political gitweasel!

"In looking at the EU budget, Lyon admitted that there would be downward pressure from member states facing their own economic crises but believed that the benefits from a robust CAP far outweighed any reason to reduce the cash in this particular part of the EU budget."

 Screw the CAP, man. It's just a prime example of a policy that benefits nobody. It's like a canker on the rotting corpse of European policy. What the hell are the benefits from it? There are zero Goddamn benefits, except for a few fat-arsed dole-blodging millionaire farmers.

Robust CAP? Gag me with a spoon.



I think it's time for breakfast.

Interesting Haaretz article.