Even Monkeys Use Markets

This article in the latest issue of Nature find that male chimpanzees exchange food (namely meat) for sex.

Robert Lucas on the Great Depression and the current stimulus package

Here's a transcript of Robert Lucas' talk at the Council of Foreign Relations (March 30, 2009). This is a great overview of what he (and others form the Chicago school) believe about how the Fed should respond in such situations. In the talk he discusses what we did and should have learned from the Great Depression and discusses his views on the current economic situation, specifically regarding the stimulus packages.

A couple of my favorite parts of the transcript:

And one of the lessons of the Great Depression, which has been discussed in many of the sessions today -- this morning, is that a side effect of depression is a proliferation of ill-conceived, hastily put together policies that serve to postpone the recovery.


So I think this monetary response that we're in the middle of now, I think it is a response to the lessons of the 1930s. It's not the whole problem of the 1930s, because there are all kinds of policies that were crucial to that evolution, that monetary policy's not going to touch, and didn't touch in the 1930s. But, I think the monetary -- in terms of the stimulus response, if you could -- a stimulus to get -- help us accelerate the recovery, I think the current policy we're doing is the right one, and I just hope that we have the nerve to terminate it when it's done its job. Thank you.
(Applause.)
(Mr. Lucas apparently trips on the stairs.)
SCHRAMM: (Off mike.) Are you okay?
LUCAS: Yeah.
SCHRAMM: All right.
LUCAS: It wasn't exactly a subtle step, was it? How the hell did I miss it? (Laughter.)

Harvard's most popular major

Q: What major do Harvard students choose most frequently?

Hint: It starts with "E"

For the answer, click here

David Harvey on Democracy Now

Geographer David Harvey appeared on Democracy Now today to discuss the current economic crisis. While I don't agree with a lot of Harvey's arguments regarding how society and markets should be structured, this is a very interesting interview. In particular, I found the following points interesting:

1. Harvey discusses the effect of the crisis on inequality, particularly as it affected African American homeowners. In his view, the mortage crisis resulted in an increase in inequality by disproportionally affecting lower income homeowners. Many of these homeowners are African American.
2. Harvey has some very interesting view on the effects of gentrification in the economic crisis as it has affected individuals living in cities. He has always called for the "democratization of the city". The central idea is that all individuals in the city (regardless of social position or income) should be included in the process of urban planning.
   

Economics Photo of the Week (March 23)

I'm out of town next week so I thought I would make this post a little early. This is a photo of Eugene R. Black Sr. (and his wife). Black was president of the World Bank from 1949-1963 and head of the Brookings Institution from 1963-1968. Black is known for his writings on economic prosperity being a prerequisite for political freedom.

His father (also named Eugene Black) was a governor of the Federal Reserve Bank of Atlanta and head of the Board of Governors in 1933 during the Great Depression. While in Atlanta, he was known for having provided easy and fast credit to banks experiencing bank runs. This is largely thought to have kept these banks open.

Trent Reznor on Ticket Scalping, the Ticket Market, and Auctions

Here's the post from Trent Reznor of Nine Inch Nails. Reznor offers some interesting ways to stop scalping (e.g., printing names on tickets) and some thoughts on how the ticketing agencies will change with future consolidation (e.g., auctioning tickets).

A New View on Altruism: Selfish Punishment

From the latest issues of Scientific American (April 2009): "Thriving on Selfishness" by Marina Krakovsky:

Why it pays for cheaters to punish other cheaters

It's the altruism paradox: If everyone in a group helps fellow members, everyone is better off--yet as more work selflessly for the common good, cheating becomes tempting, because individuals can enjoy more personal gain if they do not chip in. But as freeloaders exploit the do-gooders, everybody's payoff from altruism shrinks.

All kinds of social creatures, from humans down to insects and germs, must cope with this problem; if they do not, cheaters take over and leech the group to death. So how does altruism flourish? Two answers have predominated over the years: kin selection, which explains altruism toward genetic relatives--and reciprocity--the tendency to help those who have helped us. Adding to these solutions, evolutionary biologist Omar Tonsi Eldakar came up with a clever new one: cheaters help to sustain altruism by punishing other cheaters, a strategy called selfish punishment.

"All the theories addressed how altruists keep the selfish guys out," explains Eldakar, who described his model with his Ph.D. thesis adviser David Sloan Wilson of Binghamton University in May 2008. Because selfishness undermines altruism, altruists certainly have an incentive to punish cheaters--a widespread behavior pattern known as altruistic punishment. But cheaters, Eldakar realized, also have reason to punish cheaters, only for motives of their own: a group with too many cheaters does not have enough altruists to exploit. As Eldakar puts it, "If you're a single selfish individual in a group of altruists, the best thing you can do evolutionarily is to make sure nobody else becomes selfish-make sure you're the only one." That is why, he points out, some of the harshest critics of sports doping, for example, turn out to be guilty of steroid use themselves: cheating gives athletes an edge only if their competitors aren't doing it, too.

Although it is hypocritical for cheaters to punish other cheaters, members of the group do not balk as long as they benefit. And when selfish punishment works well, benefit they do. In a colony of tree wasps (where workers care for the queen's offspring instead of laying their own eggs), a special caste of wasps sting other worker wasps that try to lay eggs, even as the vigilante wasps get away with laying eggs themselves. In a strange but mutually beneficial bargain, punishing other cheaters earns punishers the right to cheat.

In the year since Eldakar and Wilson wrote up their analysis, their insights have remained largely under the radar. But the idea of a division of labor between cooperators and policing defectors appeals to Pete Richerson, who studies the evolution of cooperation at the University of California, Davis. "It's nothing as complicated as a salary, but allowing the punishers to defect in effect does compensate them for their services in punishing other defectors who don't punish," he says. After all, policing often takes effort and personal risk, and not all altruists are willing to bear those costs.

Corrupt policing may evoke images of the mafia, and indeed Eldakar notes that when the mob monopolizes crime in a neighborhood, the community is essentially paying for protection from rival gangs--a deal that, done right, lowers crime and increases prosperity. But mob dynamics are not always so benign, as the history of organized crime reveals. "What starts out as a bunch of goons with guns willing to punish people [for breaching contracts] becomes a protection racket," Richerson says. The next question, therefore, is, What keeps the selfish punishers themselves from overexploiting the group?

Wilson readily acknowledges this limitation of the selfish punishment model. Although selfish punishers allow cooperators to gain a foothold within a group, thus creating a mix of cheaters and cooperators, "there's nothing telling us that that mix is an optimal mix," he explains. The answer to that problem, he says, is competition not between individuals in a group but between groups. That is because whereas selfishness beats altruism within groups, altruistic groups are more likely to survive than selfish groups. So although selfish punishment aids altruism from within a group, the model also bolsters the idea of group selection, a concept that has seen cycles of popularity in evolutionary biology.

What is more, altruism sometimes evolves without selfish punishment. In a software simulation, Eldakar and Wilson have found that as the cost of punishing cheaters falls, so do the number of selfish punishers. "When punishment is cheap, lots of people punish," Wilson explains. And among humans, there is no shortage of low-cost ways to keep others in line--from outright ostracism to good old-fashioned gossip.