Blogger flies – open thread

I’m heading up to Brisbane today, and giving a talk at UQ Business School on Friday. In the meantime, feel free to post on the NSW bearpit, William F. Buckley’s passing, why hedge funds don’t like Eddy Groves, or anything else that takes your fancy.

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9 Responses to Blogger flies – open thread

  1. gaddeswarup says:

    Can somebody comment on the paper ‘Learning with Regret’
    by Michael D. Cohen
    http://www.sciencemag.org/cgi/content/summary/319/5866/1052

  2. Kevin Cox says:

    I gave a presentation titled “A guaranteed way to achieve sustainability” yesterday to a conference. The method is

    When we have a common resource that anyone can use then we charge people to use it but we also pay people who decide not to use it. As a quid pro quo the people who get paid not to use it must use the money to increase the size of the resource.

    The talk then illustrated its applicability by showing how it would lead to a removal of water restrictions in cities immediately and could reduce Australia’s net greenhouse emissions to zero within a short period of time depending on the amount of money diverted from one group (the high consumers) in society to another (the frugal).

    No one in the audience or in later discussion refuted the central premise that it would work. With Andrew’s indulgence I would like to ask for comments on the central premise and what effect the system have on the GDP of the country where we assume that the transfer costs are near zero and where the money transferred is invested in a productive resource and not consumed.

    If as I suspect the GDP would be the same then the next statement to which I would invite comment is:

    To get greenhouse emissions to zero it is not a matter of if or when but how quickly we decide to move funds from high consumers to the frugal. (My guess with current technologies is about $45 billion dollars a year for ten years to get zero net emissions in Australia).

  3. Kevin Cox says:

    gaggleswarup is there another link that we can read for free.

    Without reading the paper but only the summary

    “Choices in economic games are predicted better by models that look back at what might have been, instead of looking forward to maximum gain.”

    My comment is that if it means what I think it means then this I am not surprised. That is, we make choices mainly by considering the past not the future. This would help explain why people are not falling over themselves to adopt the proposed solution to stop global warming in my previous post. We choose the familiar and we resist change even if there is a clear benefit.

  4. derrida derider says:

    Kevin this is a “Pigovian tax”, named after AC Pigou who worked all this stuff out in the 1920s. The proceeds from a Pigovian tax go to reduce taxes on non-users of the resource, and hence compensate them. It’s second-year economics stuff.

    Of course where there is an externality (such as non-sustainability) a correctly set Pigovian tax can enhance efficiency (ie increase GDP. That’s why carbon abatement schemes, for example, usually have a low net cost – according to Garnaut, about 1% of GDP over 50 years. And consequently why inaction on these things is so bloody frustrating – the inaction arises because, while the aggregate loss to output is small, the loss to some groups (coal industry shareholders in this case) is large.

    Go looking through Jodn Quiggin’s blog for lots of discussion on this stuff.

  5. Kevin Cox says:

    derrida there is a fundamental differences between the pigovian tax and what we propose.

    The difference is that the pigovian tax gives the money to people to spend as they will. In our proposal they must spend the money they receive on increasing the public goods or reducing the public bads. This is what makes it powerful and brings into play a positive feedback effect. I get paid for not consuming but I must spend my money on ways to further reduce consumption or increase the availability of the goods I am not consuming.

    It is not the payment or the collection of money that are critical it is having a lot of buyers with a lot of money in a market place for sustainable investment opportunities.

    Having listened through many presentations over the past few days on sustainability it is clear we know what to, we know how to collect money in efficient ways. What we do not have are efficient ways of spending the money on the things we know will make a difference.

  6. gaddeswarup says:

    I could not find a free version of ‘Learning with regret’. The journal is available online from Melbourne University. The article is based on another in the same journal (again not free) but here is the link to tha abstract:
    http://www.sciencemag.org/cgi/content/abstract/319/5866/1111
    Abstract:
    Predicting Human Interactive Learning by Regret-Driven Neural Networks
    Davide Marchiori1 and Massimo Warglien2*

    Much of human learning in a social context has an interactive nature: What an individual learns is affected by what other individuals are learning at the same time. Games represent a widely accepted paradigm for representing interactive decision-making. We explored the potential value of neural networks for modeling and predicting human interactive learning in repeated games. We found that even very simple learning networks, driven by regret-based feedback, accurately predict observed human behavior in different experiments on 21 games with unique equilibria in mixed strategies. Introducing regret in the feedback dramatically improved the performance of the neural network. We show that regret-based models provide better predictions of learning than established economic models.

  7. Kevin Cox says:

    Gaddeswarup

    Unfortunately I do not have access through any University. Suggestion to any University administrator reading this is to engage your alumni by giving them access to subscription journals. Some of us would pay for this or donate to the University to get access.

    The second abstract is even more intriguing as it fits in with the idea of herd mentality as an important factor in choice. That is we are follows of fashion in our economic choices as much as we are in the clothes we wear or even more important in the ideas we act on.

    When you are trying to introduce a new product into the market place the value the product brings is a second order effect to whether others have adopted the technology. One intriguing outcome we have just obtained from some usability testing of our latest product is that we asked potential users what would give them more trust in the product and almost all volunteered without prompting “if I had seen it on TV”

    In my post above I am trying to “sell the idea” of paying people not to consume but requiring them to direct the money they receive to a particular purpose as a system for building a sustainable society. One of the reasons for pushing the idea on this and other economic blogs is that the gatekeepers to economic ideas are economists and I know that if one economist decides the idea may have merit then others will follow.

    I expect it is an under explored idea in classroom learning. That is, many of us who have been teachers believe that students appear to learn more from each other than they do from us. Perhaps we have taught them but they have not learned until they see others have believed.

    It – the idea of herd learning – is another issue that economic modelers need to address.

  8. Kevin Cox says:

    My understanding of economic theory is that all money is treated equally. No matter what we spend the money on it is always treated as consumption and hence adds to the GDP. What this means is that if consumers spend $1 billion dollars on cigarettes that – as far as the GDP – is assumed to be the same as spending $1 billion dollars on renewable energy generation.

    Can some economist tell me how we can justify using models that has these underlying characteristics to help us formulate economic policy.

  9. Kevin Rennie says:

    Primary/caucus day in Ohio and Texas today. You’ll find some oddities about democracy Texas style and their State Capital Austin on my recent posts. What’s the literary connection between Australia and the University of Texas at Austin? Which 3 Presidents hail from those parts? What do they call the local beer?

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