Paying for the right to be infected
August 14, 2020 in covid-19, economics, infection, Mechanism design

Serious infectious diseases are a prime example of a public bad (non-exclusive and non-congestible). We limit them by restricting behavior and or getting individuals to internalize the externalities they generate. For example, one could mandate masks in public places. To be effective this requires monitoring and punishment. Unpleasant, but we know how to do this.  Or, one could hold those who don’t wear masks responsible for the costs they impose on those whom they infect. Unclear exactly how we would implement this, so impractical. However, it is still interesting to speculate about how one might do this. Coase pointed out that if one could tie the offending behavior to

The Lockdown Debate
July 16, 2020 in covid-19, economics, Mechanism design | Tags: lockdown

The efficacy of lockdowns was debated at the start of the pandemic and continues to this day. Sweden, famously, chose not to implement a lockdown. As Anders Tegnell, remarked:`Closedown, lockdown, closing borders — nothing has a historical scientific basis, in my view.’
Lyman Stone of the American Enterprise Institute expresses it more forcefully:
`Here’s the thing: there’s no evidence of lockdowns working. If strict lockdowns actually saved lives, I would be all for them, even if they had large economic costs. But the scientific and medical case for strict lockdowns is paper-thin.’
The quotes above reveal an imprecision at the heart of the debate. What exactly is a lockdown? Tegnell

William Sandholm
July 9, 2020 in economics, Uncategorized

One of the delights of pursuing a relatively young discipline is that one meets its pioneers. As one grows old in the discipline, so do the pioneers, who eventually pass into `the undiscovered country from whose bourn no traveler returns.’ Overlooked, at least by me, was that one also meets, in the chrysalis stage, those who will eventually lead the discipline into the next century. It was the untimely passing of William Sandholm on July 6th of this year, that brought this to mind.
I first met Bill in 1998. I had just moved to MEDS and he was on his way out as a new minted PhD. He, a shiny new penny and myself on the way to becoming so much loose change.
Within a decade, Bill rose to prominence as an authority on

Testing Alone is Insufficient
May 6, 2020 in covid-19, economics, Mechanism design | Tags: covid19, mechanism design, pandemic

Will widely available and effective tests for COVID-19 awaken the economy from its COVID induced coma? Paul Romer, for one, thinks so. But what will each person do with the information gleaned from the test? Should we expect someone who has tested positive for the virus to stay home and someone who has tested negative to go to work? If the first receives no compensation for staying home, she will leave for work. The second, anticipating that infected individuals have an incentive to go to work, will choose to stay home. As a result, the fraction of the population out and about will have an infection rate exceeding that in the population at large.
In

Universities After the Pandemic
May 4, 2020 in education, covid-19, infection

On the 3rd of July, 1638, George Garrard  wrote Viscount Wentworth to tell him:
The Plague is in Cambridge; no Commencement at either of the Universities this year.
On October 2nd of that same year, Cambridge canceled all lectures. Even if history does not repeat (but historians do), one is tempted to look to the past for hints about the future.
From the Annals of Cambridge  (compiled by Charles Henry Cooper ) we learn that the plague combined with the residency requirements for a degree at Oxford, prompted a rush of Oxford students to Cambridge to obtain their Masters of Arts degree. We know this from an anonymous letter to Oxford’s Chancellor:
…..many of Batchelor of Arts of Oxford came this Year

Hiring Freezes & Endowment Hoarding
April 11, 2020 in economics, education, hiring freezes | Tags: economics, endowment hoarding, hiring freeze

Some days ago I learnt that a job offer to a promising postdoc I advise evaporated. Not unexpected in these times, but disappointing nevertheless . There are now about 300 Universities with hiring pauses or freezes in place.
For Universities that are tuition driven, this is understandable. For those with large endowments of which a large portion are unrestricted this is puzzling. It is true that about 75% of all US university  endowment funds are invested in equities and these have declined since the start of the pandemic. But, the 3 month treasury rate is, at the time I write this, at 0.22%. Why aren’t they borrowing? More

Effects of a Partially Effective Vaccine
April 10, 2020 in covid-19, economics, infection, networks, vaccine | Tags: covid-19, networks

The race to publish COVID-19 related papers is on, and I am already behind. Instead, I will repurpose a paper by Eduard Talamas and myself on networks and infections which is due out in GEB.
It is prompted by the following question: if you are given the option to distribute—without cost to you or anyone else—a perfectly safe but only moderately effective vaccine for a viral infection, should you? That we’ve posed it means the answer must be no or at least maybe not.
Unsurprisingly, it has to do with incentives. When the risk of becoming infected from contact declines, individuals tend to be less circumspect about coming into contact with

Econometrica Submission Fees
March 31, 2020 in academic satire, economics, Pricing strategies

This morning, a missive from the Econometrics society arrived in my in box announcing “two modest fees associated with the submission and publication of papers in its three journals.” As of May 1st 2020, the Society will assess a submission fee of $50 and a page charge of $10 per page for accepted papers. With papers on the short side running to around 30 pages and 10 page appendices this comes out to about $400. By the standards of the natural sciences this is indeed modest.
At the low end the American Meteorological Society charges $120 per page, no submission fee. In the middle tier, the largest open-access publishers — BioMed Central and PLoS — charge $1,350–2,250 to publish

Pass/Fail and Unraveling
March 23, 2020 in Bayesian Games, education

With the move to on-line classes after spring break in the wake of Covid-19, my University has allowed students to opt to take some, all or none of their courses as pass/fail this semester. By making it optional, students have the opportunity to engage in signaling. A student doing well entering into spring break may elect to take the course for a regular grade confident they will gain a high grade. A student doing poorly entering into spring break may elect to take the course pass/fail. It is easy to concoct a simplified model (think Grossman (1981) or Milgrom (1981)) where there is no equilibrium in which all students elect to take the course pass/fail. The student confident of being at the top of the

Going On-line
March 13, 2020 in education, academic satire | Tags: covid-19, teaching, virtual learning

In response to the Covid-19 virus a number of American Universities are moving instruction on-line. Some see this as great natural experiment to test the efficacy of virtual instruction (NO). Others believe it will speed the pace at which instruction  moves on-line (NO). The focus now is on execution at scale in a short period of time.  We would be better off canceling the rest of term and giving all the students A’s.
Here is what I predict will happen. Students will be dilatory in viewing lectures. Temptation and the difficulty of adjusting to new habits will be obstacles. When the exams approach, some will complain that they are unprepared because virtual is not as good

Who Should Quarantine?
March 11, 2020 in Mechanism design, political economy, economics | Tags: healthcare, infection, public bad, quarantine

An agent with an infectious disease confers a negative externality on the rest of the community. If the cost of infection is sufficiently high, they are encouraged and in some cases required to quarantine themselves. Is this the efficient outcome? One might wonder if a Coasian approach would generate it instead. Define a right to walk around when infected which can be bought and sold. Alas, infection has the nature of public bad which is non-rivalrous and non-excludable. There is no efficient, incentive compatible individually rational (IR) mechanism for the allocation of such public bads (or goods). So, something has to give. The

New Intermediate Microeconomics Book
February 26, 2020 in economics, education | Tags: intermediate microeconomics, learning, teaching

Six years ago, I decided to teach intermediate microeconomics. I described my views on how it should be taught in an earlier post. The notes for that course grew into a textbook that is now available in Europe and in the US this April. I am particularly delighted at being able to sport Paolo Ucello’s `The Hunt’ upon the cover. The publishers, Cambridge University Press, asked me to provide an explanation for why I had chosen this, and it appears on the rear cover. Should you make your way to Oxford, be sure to stop by the Ashmolean Museum to see it, the painting of course, in all its glory. I day dream, that like Samuelson’s `Economics’, it

The Incentive Auction for Radio Spectrum
February 25, 2020 in Auctions, economics, market design, Mechanism design, political economy | Tags: Incentive Auction

Over a rabelaisian feast with convivial company, conversation turned to a twitter contretemps between economic theorists known to us at table. Its proximate cause was the design of the incentive auction for radio spectrum. The curious can dig around on twitter for the cut and thrust. A summary of the salient economic issues might be helpful for those following the matter.
Three years ago, in the cruelest of months, the FCC conducted an auction to reallocate radio spectrum. It had a procurement phase in which spectrum would be purchased from current holders and a second phase in which it was resold to others. The goal

Institute for Wow
December 15, 2018 in academic satire, education, Popular Science

Hot on the heels of its new Division of Linear Algebra, Empire State’s President announced a new Institute for Wow. Unlike other centers and institutes on campus that were dedicated to basic research or innovation, this one would focus only on research that would grab attention. “Universities,” she said, “ have tried for centuries to inform and educate. We’ve learnt in the last decade from all the data collected that this just annoys the students, frustrates the professors and bores donors. Instead,” she continued, “we are going to entertain.” She went on to say that the institute would jettison traditional measures of impact and significance and focus on media mentions, `likes’ and

New Linear Algebra Division
November 1, 2018 in academic pedigree, computer science, Data Science, education, Popular Science

Empire State University today announced a new Division of Linear Algebra and Information. It is the university’s largest program change in decades and helps secure its status among the country’s top Linear Algebra research and training hubs.
“The division will enable students and researchers to tackle not just the scientific challenges opened up by pervasive linear algebra, but the societal, economic, and environmental impacts as well,” the university said.
Empire State is in an elite group with Carnegie Mellon University, MIT, Stanford, and the University of Washington in the caliber and scope of its linear algebra program, said A. N. Other, chief

A New Business Idea
June 16, 2018 in Auctions, market design, Pricing strategies, Uncategorized

Apparently, it is quite the rage to festoon one’s slides with company logos, particularly of the  frightful five. At present this is done for free. It suggests a new business. A platform that matches advertisers to faculty. Faculty can offer up their slides and advertisers can bid for the right to place their logos on the slides.

Samuelson on Linear Programming
December 28, 2017 in economics, equilibria, linear programming, networks, Operations research, Uncategorized

Volume 42 of the AER, published in 1952, contains an article by Paul Samuelson entitled `Spatial Price Equilibrium and Linear Programming’. In it, Samuelson uses a model of Enke (1951) as a vehicle to introduce the usefulness of linear programming techniques to Economists. The second paragraph of the paper is as follows:
In recent years economists have begun to hear about a new type of theory called linear programming. Developed by such mathematicians as G. B. Dantzig, J. v. Neumann, A. W. Tucker, and G. W. Brown, and by such economists as R. Dorfman, T. C. Koopmans, W. Leontief, and others, this field admirably illustrates the failure

Entrepreneurship
September 27, 2017 in economics, education, Uncategorized

My students often use me as a sounding board for their new ventures. A sign that the modern University could pass for a hedge fund with classrooms. The request brings a chuckle as it always reminds me of my first exposure to entrepreneurial activity.
It happened in the most unlikeliest of places as well as times. A public (i.e. private) school in pre-Thatcherite England.  England was then the sick man of Europe and its decline was blamed upon the public schools.  Martin Wiener’s English Culture and the Decline of the Industrial Spirit, for example, argued that the schools had turned a nation of shopkeepers into one of lotus eaters.
Among the boys was a fellow, I’ll call Hodge. He was a well

Miserly Millennium Prizes
August 24, 2017 in Popular Science, prizes, mathematics | Tags: millennium prize

17 years ago the Clay Institute announced 7 Millennium problems and offered $1 million for the solution to each.  To date, only one has been solved. It suggests that the supply (of mathematical attention) has not increased to meet demand. Therefore, the value of the prizes are to low. Why might the current value of the  prize prolong the time it takes to obtain a solution? Suppose, two agents, each in possession of an idea that in combination would produce the sought after solution. Neither agent has an incentive to reveal what they know, for fear that the other will build upon this to earn the prize. Pooling their efforts means splitting the prize. Thus, one has a

Medawar’s Test
July 24, 2017 in academic pedigree, equilibria, Uncategorized

There is a test for `smarts’ that Sir Peter Medawar was fond of. I often think of it when teaching equilibrium.
If you have ever seen an El Greco, you will notice that the figures and faces are excessively elongated. Here is an example.The eye surgeon Patrick Trevor-Roper, brother to the historian Hugh offered an explanation. Readers of  certain vintage will recall the long running feud between Hugh Trevor-Roper and Evelyn Waugh. Waugh said that the best thing Hugh Trevor-Roper could do would be to change his name and leave Oxford for Cambridge. Hugh Trevor-Roper eventually  became Lord Dacre and left Oxford for Cambridge. But, I digress.
Returning to Patrick, he suggested that El Greco had a form

Russian Meddling, Fake News & Lemons
July 7, 2017 in economics, Information theory, political economy

The various US intelligence agencies have identified three ways in which the Russian state meddled with the recent US elections:
Intrusions into voter registration systems.
Cyberattack on then DNC and subsequent release of hacked material.
Deployment of `fake’ news and internet trolls.
The first two items on this list are illegal. If a PAC or US (or green card holder) Plutocrat had deployed their respective resources on the third item on this list, it would be perfectly legal. While one should expect the Russian’s to continue with item 3 for the next election, so will each of the main political parties.
Why is `fake’ news influential? Shouldn’t information from a source with

CS Referencing Conventions
June 18, 2017 in citation practices, computer science, Uncategorized

In a CS paper, it is common to refer to prior work like [1] and [42] rather than Brown & Bunter (1923) or Nonesuch (2001). It is a convention I have followed in my papers with CS colleagues. Upon reflection, I find it irritating and mean spirited.
No useful information is conveyed by the string of numbers masquerading as references beyond the statement: `authors think there are X relevant references.’
A referee wishing to check if the authors are aware of relevant work must scroll or leaf to the end of the paper to verify this.
The casual reader cannot be surprised by some new and relevant reference unless they scroll or leaf to the end of the paper to verify this.
Citations are

In My Mailbox Today
September 19, 2016 in Uncategorized

Suicide Lotteries
August 29, 2016 in Game Theory, Probability

When discussing the allocation of indivisible objects, I point to randomization as a method. To emphasize it is not merely a theoretical nicety, but is used to allocate objects that are of high value I give the example of suicide lotteries. I first came across them in Marcus Clarke’s `For The Term of His Natural Life’. It counts as the first Australian novel. Its hero, an Englishman, Rufus Dawes is transported to Australia for a crime he did not commit. In the course of his tribulations, Dawes is shipped to a penal settlement on Norfolk Island, 800 miles east of Australia; even a prison needs a further prison. Robert Hughes, in his heart rending and eloquent account of the founding of Australia, called the `Fatal

Trump and the 25th Amendment
August 10, 2016 in Strategy, Uncategorized

Many people say (actually, just one) that the Republican’s have a plan to remove Trump from the Presidency, should he win in November using the 25th amendment. Section 4 of the amendment reads:
`Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.’
The VP is Pence. The President pro tempore of the

Pigou, Uber & Lyft
March 24, 2016 in economics, market design | Tags: congestion, economics, ride hailing

Platooning, driverless cars and ride hailing services have all been suggested as ways to reduce congestion. In this post I want to examine the use of coordination via ride hailing services as a way to reduce congestion. Assume that large numbers of riders decide to rely on ride hailing services. Because the services use Google Maps or Waze for route selection, it would be possible to coordinate their choices to reduce congestion.
To think thorough the implications of this, its useful to revisit an example of Arthur Pigou. There is a measure 1 of travelers all of whom wish to leave the same origin () for the same destination (). There are two possible paths from to . The