Hey Maltesers

... stop trying to Nudge my chocolate consumption dammit. 

How cynical!

An anecdote from a teacher friend

(Paraphrased.)

“I caught a pupil of mine cheating on his history coursework, he’d copied it wholesale. So I told him he couldn’t take his A level. First my boss comes in and asks me to reconsider. I say no. So then my boss comes back with the boy and asks me to reconsider. I say no. Then my boss’s boss comes in with the parents, and ask me to reconsider. You see, the school’s results will look bad if we don’t let him take the exam I say no. Finally, my boss’s boss’s boss comes in. I still say no. I like the kid as a person, but he shouldn’t have cheated."

What lessons can we draw from this? First, obviously, misused incentives are as toxic in the education system as elsewhere. Second, it is an example of how difficult (but crucial!) honesty can be. It involves the drawing of clear lines in a story full of shades of grey. I’m sure the kid was nice, I’m sure his parents thought up excellent reasons why his future shouldn’t be harmed by this one mistake, and that the head teacher made the same eloquent arguments, I bet nobody was crass enough to say “we can’t make our exam results look bad”. I equally bet that nobody pointed out the consequence - which is, after all, highly diffuse, distant and uncertain - that if we turn a blind eye to large-scale cheating, our education system will cease to do its job.

More abstractly, I think this anecdote shows that the theory of repeated games is very misleading as a guide to the social science of ethical behaviour.

Let’s recap: numerous “folk theorems" show that if a situation is repeated often enough among the same group of actors, they can achieve almost any outcome, including efficient outcomes (roughly, those which are best for everyone), by punishing bad behaviour in future rounds of play. This has often been taken as a parable for real world. If only people can interact often enough in stable communities, then they will force each other to do the right thing. So, for instance, Coleman (1988): “Social capital in the creation of human capital”. Or Elinor Ostrom passim. Or Ellickson, Order without law, about midWestern ranchers.

Unfortunately, no. Look at the story. Everyone around my teacher friend is persuading him to do the wrong thing. People in the relevant community have interests that are misaligned with that of the wider society. The pressure they bring to bear is making outcomes worse, not better, and only my friend’s strong personality bears up against them. This will be typical in any social system larger than Hillary Clinton’s proverbial village. To function well, large societies need internalized moral rules, not just social pressure.

Linkage

Failure to replicate Spolaore and Wacziarg's well-known paper on genetic distance. Well, not failure to replicate but failure to be robust to be different controls. Perhaps this is just the old problem of "what to do with cross-country correlations?": it is hard to make claims about causality from such regressions, and yet we want to know something about the differences between countries. A tricky problem which I cannot solve, and that is one reason I try to work at the micro level! Spolaore and Wacziarg reply beneath the article.

Found in the Scottish Students' Songbook

Linkage

Journal Impact Factor shapes scientists' reward systems (PLOSOne). Hee hee.

The Private Finance Initiative does not look like good value for money. Sigh.

Private finance provides a short-term cash flow benefit for a department. However, over the long term it will not have an advantage as it will have to spend its future budget (over a 25- to 30-year period) to repay the capital and interest of the debt and a return on the investors’ equity to compensate the private sector for their participation in the project....

The Office of Budgetary Responsibility estimates that official government debt levels would be 2% of GDP higher if public rather than private finance had been used in government private finance deals. 

In [two previously mentioned] cases the decision to use private finance was made at a time of low private finance costs relative to gilts but by the time these deals were closed the spread above gilts had increased significantly but the ability to use public financing was no longer available to the department....

Note that the NAO's method of calculating private vs. public borrowing costs looks rather back-of-the-envelope (divide total payments this year by total debt held this year).

Why not inflate?

John Cochrane and Noah Smith debate whether a bit of inflation would be a good idea for Japan.

As an observer with a poor grasp of macro, my suspicion is that inflation sometimes happens because it is a socially optimal (read: least painful) way to deal with past debts. I suspect it will happen to the Eurozone at some point too. But an awful lot of institutional and ideological scaffolding will first have to be dismantled. Interesting.

One question I'm unsure about is whether expected inflation does the job of deflating debts. I assume it does for e.g. social security transfers, but not for inflation-proofed debt or short-term debt which has to be rolled over. I don't know how much this vitiates the argument for inflation as a "soft default".

Linkage

A Westboro baptist church member who changed her mind. This is not just about the good side of social media. It is a story about the process of conversion:

I once was lost, but now am found
Was blind, but now I see.

More on messy science, from a journal editor in psychology. I wonder if economics (including experimental economics) should be playing catch-up.

Just for the record

I believe the Paris attacks clearly have implications for Europe's refugee policy. Three of the attackers arrived in France from Syria via Greece. In other words the current system's lax controls, and the mass movements engendered by Germany's open door policy, threaten the security of EU citizens. Not surprisingly, and rightly, those citizens don't like it. Manuel Valls is right, whatever people on Twitter may think.

Linkage

Where a refugee who wants to learn Dutch is against it. Google-translated from the Dutch, which I definitely cannot speak.

Linkage: myself

Here is an interesting study by... me! On Marginal Revolution. Fame, fame at last.

It Is The Family Table

And now it is in my kitchen.

Accompaniment: