Afternoon roundup, and around the traps

The worthies on the closing of the browser tabs.

• Nice comparison of vacant housing to transitional unemployment, in an American context. Filing this one away here for the next time somebody notices a few empty houses and decides that policy should do something about it. It comes up too often. 
• Susan Edmunds over at Stuff looks at household income distributions; the piece includes a short bit from me on AHC- and BHC- incomes. 
• Universities need to lift their darned game. 
• AUT not only caved at the last minute to pressure from the Chinese Embassy to pull the rooms booked for a memorial event for the Tienanmen Massacre, they also (and I just cannot stress enough how stupid this is) failed to redact the name of the lecturer who had booked the rooms when the documents were released under OIA. I hope that lecturer does not have family living under the Communist dictatorship. Utter muppetry. Newsroom's since blanked out the name but what the hell. 
• International students at Auckland University from China cannot be expected to feel safe there unless the University takes a stronger stand in support of their international students - and especially when the Chinese embassy is lauding the pro-Communist student who shoved the student who was supporting the protesters in Hong Kong. 
• I dunno what the answer is here. Stronger emphasis on freedom of speech in international student orientation events and policies expelling students who become violent in debate with other students could be part of it. But universities are massively dependent on foreign students, disproportionately from China. Capped domestic tuition fees have the universities seek money where they can - from full-fees paying foreign students. The government has to cap tuition fee increases because students don't really pay them - the government does. The first year's free, the rest is funded by loans that are marked down by about 45% the second they're issued. Every tuition fee increase increases the government's liability through the student loan portfolio. So you get this self-reinforcing mess that the government cannot afford to cover the education costs for the volume of students it wants to go through the universities and is unwilling to have students pay their own way a bit more, so pushes the universities to get international students to cover the bill. That builds in vulnerabilities when stuff like this happens. 
• If you wanted to build a house out of straw bales and eco-friendly materials, good luck getting it signed off and consented. "Oh, the market fails to provide eco-friendly alternatives!" Yeah, well, if the government won't sign off on the standards, then you get messes. 
• Elsevier is expensive; the UC libraries no longer subscribe to them. So the excellent Ted Bergstrom is organising volunteers to put together running tables of contents of those journals with links through to faculty website copies of the final edited versions of their own papers. Superb.
• I don't get why the Reserve Bank wants to ban anyone who knows monetary and macroeconomics from serving on the monetary policy committee, but that looks to be what they're doing. It's hard to come up with good explanations. The piece at Interest has some minor comment from me.
• Running field experiments? Watch out for this: the presence of the foreigner as experimenter changes behaviour.
• Google might yet build itself a city development in Toronto. It looks pretty neat. 
• I also give a couple warnings about a 'virtual shopping' study finding that people in a fake supermarket are responsive to sugar taxes. In the real world, people stock up when things are on special, and buy less when it isn't, so short-term price responsiveness isn't the same thing as long term consumption changes. 
• A mammoth listening task: Jordan Hoffman ranks 180 Rush songs. The ranking is very defensible, though I'd have moved Dreamline and Time Stand Still up the list a bit and pushed Working Man down the list. Almost all of the songs are on Spotify; here's a playlist, from lowest to highest ranked. And Hoffman is absolutely correct in his top pick (again: 1 here is the lowest-ranked. You work your way up). UPDATE: It looks like the embedded playlist can only run the lowest-ranked 100; click through to the web player to get the full list.
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Inequality, envy, and earning

Desert matters. And so inequality statistics on their own don't tell us much.

One of the reasons the macro literature on inequality and growth has issues is that inequality's bad for growth where the road to riches is the license raj, but inequality can be one of the things that comes with economic growth where effort and productivity are rewarded.

Zizzo and Oswald, a while back, found that people were willing to pay money in lab experiments to burn others' income where that income wasn't earned:

Dan Zizzo has found in experimental environments, folks are willing to spend their own money to burn the money-holdings of folks who have more money than they do, especially when they reckon that the folks with more money don't deserve it. I tend to think this sort of behaviour a nasty holdover from the Pleistocene - check Paul Rubin's work on Darwinian Politics for the evolutionary advantages of inequality aversion on the Savanna.

A new experimental result also finds that desert matters. Here's Faillo and coauthors:

Thou shalt not steal (from hard-working people)
An experiment on respect for property claims
Marco Faillo†, Matteo Rizzolli‡ and Stephan Tontrup§

Abstract
The institution of property is void without legal and social enforcement against theft. To address wasteful competition over resources, societies have long developed strategies that encompass -inter alia- behavioral traits, social norms and legal institutions to promote the respect and enforcement of property rights. On the other hand, a growing body of biological and ethological evidence suggests that several other animal species establish and respect some forms of property even in the absence of institutions. Would human beings respect others’ property in the absence of institutions? Do people posses some innate sense of property, or do they respect property only because of legal and social enforcement? In this study, we explore this issue with a lab experiment that resembles a famous thought experiment proposed by Plato. As Plato sought to understand how one ought to behave when he or she is completely shielded by the consequences of his actions,we study whether people respect property once full anonymity is granted. In this experiment, we implement a FreeForm Dictator game where participants can both give and take up to five scratchcards from a passive counterpart that they have either previously bought outside the lab with their own money (legal treatments) or gained inside the lab via an effort task (effortful treatments). In conclusion to the experiment, evidence is provided of a (weak) sense of property. We also provide evidence that property in the lab is better established through an effort tasks than through the use of subject’s own real property brought from outside the lab.

The neat twist here is that they required physical theft rather than just punching a button on the computer.

Where it's easier to tell that people have earned what they have, there's stronger respect for property rights. One might wonder how much that gets eroded by Wall Street bailouts.

Marital optimisation

If the experimentalists stuck me in a lab playing standard dictator and trust games with Susan, here's the play:

• Dictator Game: I am strictly indifferent as to how much I send her or she sends me.
• Trust Game: I send her everything and am strictly indifferent as to how much she sends back; I expect she'd send me everything in the sender role and expect she'd prefer a split as a signal of caring but otherwise wouldn't much worry about it as it all winds up in the same place.

I do not understand the drawing of strong conclusions about couples from how much they send in the dictator game. Either I, or Sue, might choose amounts just based on amusement. And similarly in the recipient role in the trust game. Even if the stakes are very large relative to income, we jointly decide how things get spent afterwards. If the stakes are small, money in her pocket is money that isn't spent out of the joint account later, and vice-versa.

Carolina Castilla has a paper out in the May AER running trust and dictator games with spouses in India, with stakes of up to 80% of daily household income. Receivers send back a bit over half of what they receive; when playing as dictator, they send back half. Senders send over a bit over half. There's lots of proposed explanations for the less-than-optimal sending, none of which are the obvious "Maybe they don't trust the experimenter to actually triple the money or not to pocket some of what's in the envelope." 

The main interesting finding (in the ungated and more extensive working paper) is that in households where the man spends a lot on tobacco, the wife sends over less money - potentially indicating problems in household bargaining. And, in households where the wife handles the kids' education expenses, the husband sends over more - presumably saving him the trouble of handing her a bigger share after the experiment to pay the school bills. None of that makes it into the the AER version, presumably because there are rather a few just-so stories floating around. 

The World Bank's Development Blog discusses the paper, lauding the generally higher trust exhibited by married partners as compared to stranger partnerings. Where we don't know how well the subjects trust the experimenters in countries with no small issues with corruption, trust in the experimenter might limit the extent to which within-couple trust can be exhibited in the experiment. 

Say's Law of Humbug

Demand for that which cannot be done brings forth supply of charlatans. Baum knew it:

Oz, left to himself, smiled to think of his success in giving the Scarecrow and the Tin Woodman and the Lion exactly what they thought they wanted. "How can I help being a humbug," he said, "when all these people make me do things that everybody knows can't be done?

The Munchkins had a latent demand for humbug satisfied by the entrepreneurial Oz.

Chris Dillow points out a nice modern example: demand for expert forecasts. Subjects in Powdthavee and Riyanto's experiment were run through "The System" - a classic scam where you send a random set of stock market or horse betting predictions, toss from the set anyone to whom you sent the wrong prediction, do it again, then offer to continue sending predictions (for pay) to folks who received a few lucky hits in a row. What happened in the lab? Says Dillow:

And here's the thing. Subjects who saw just two correct predictions were 15 percentage points more likely to buy a prediction for the third toss than subjects who got a right and wrong prediction in the earlier rounds. Subjects who saw four successive correct tips were 28 percentage points more likely to buy the prediction for the fifth round.

This tells us that even intelligent and numerate people are quick to misperceive randomness and to pay for an expertise that doesn't exist; the subjects included students of sciences, engineering and accounting. The authors say:   

Observations of a short streak of successful predictions of a truly random event are sufficient to generate a significant belief in the hot hand.

It's easy to believe that this happens in real life. For example, the people who are thought to have predicted the financial crisis of 2008 are invested with an expertise which they might not really have.

The paper's excellent title? "Why do people pay for useless advice?"

I wonder whether basic training at high school in financial literacy and classic scams might do any good. But it's hard to overcome the demand for humbug. And the paper finds that student subjects with more correct answers in a statistical test didn't spend less on predictions. If these were the results for college students, how awful would a general sample look?

What a waste

Norwegian experimental economists ran some social trust experiments on a sample of prisoners. In prison.

You'd think the first thing they'd do would be to try the Prisoner's Dilemma, right?

Alas, they run a dictator game and some variants on a trust game.

Is there no poetry left in the world?

HT: Chris Dillow

Oh, they found that prisoners weren't much different from non-prisoners. But what a let-down. I'd have wanted to see two treatments on the Prisoner's Dilemma game. One with neutral framing, the other with the complete "Two prisoners, separated..." framing.