Club Troppo

I’ve often mused at the paradoxical fact that we buy insurance to reduce risk and then gamble to increase it. Which led me to wonder how one could harness the gambling instinct to try to make the lives of those who like going to casinos better rather than worse. I don’t have any very bright ideas alas, though obviously taxing the hell out of such people doesn’t help. (I’m not here arguing against taxing gambling, just observing that it can get in the way of my thought experiment. I’ve thought of trying to get punters to punt on risky but worthwhile stocks – bio-tech, oil exploration etc. And of course some punters do bet on these things – there’s a good tradition in Australia of backing a few ‘penny dreadful’ miners just to see if one can come by The Fortunes of Richard Mahoney.

Anyway, as ever, there do exist products which combine savings and winnings. I was rather incredulous when told of them, but they are quite prominent in some countries, and as one might imagine they are hard to introduce in other countries which have crafted gambling regulations without regard to them. They’re written about in this paper.

4. Making Savers Winners: An Overview of Prize-Linked Savings Products by Melissa Schettini Kearney, Peter Tufano, Jonathan Guryan, Erik Hurst – #16433 (LE PE)

For over three centuries and throughout the globe, people have enthusiastically bought savings products that incorporate lottery elements. In lieu of paying traditional interest to all investors proportional to their balances, these Prize Linked Savings (PLS) accounts distribute periodic sizeable payments to some investors using a lottery-like drawing where an investor’s chances of winning are proportional to one’s account balances. This paper describes these products, provides examples of their use, argues for their potential popularity in the United States –especially to low and moderate income non-savers–and discusses the laws and regulations in the United States that largely prohibit their issuance.

Thank you Nicholas for a generous introduction, not to mention the gift of an opportunity to pontificate. And hello Troppodillarians. Formally.  Nicholas’s “formidably well read” comment in his intro was a bit OTT, replies to blog posts being an opportunity to make a great deal of not much at all, and being able to get away with it if no-one looks too closely. In keeping with that idea, to write the following post, I have read hardly anything.
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I am something of a stranger to the arcane workings of football. In fact all team sports are a mystery. However, enough of the past fortnight leaked through my fog of indifference for me to be bemused by the fact that fans looked depressed and disconsolate after the AFL football finals draw. What could be wrong when both sides had won? Clearly the players had tried their hardest and all of them had proven up to the job. Why were fans of both sides not ecstatic?

Once upon a time, we thought highly of trying our best. Reporting of sports events, especially the Olympics, used to be on the basis of good performance. I remember as a child listening to the results of obscure events without Australian contestants, broadcast purely because the winner or winners, or sometimes just all the participants were “good sports”.

I don’t think extra time ought to be an option in sport, when both sides win. It spoils the harmony of equality. Neither am I a great fan of jingoistic tribalism. Let’s face it; the outcome in sport is hardly a life and death exercise.

However extra time is possibly a very good idea for elections, especially where hung parliaments are the outcome. At least after the second or third go at getting a result. (Continued)

I’d like to introduce Julia Thornton to Troppodillians. IJulia is involved in the Accountability Roundtable has been dropping in to Troppo for a while now and judging by threads like these is formidably well read in a range of areas. Now speaking as one of the chief bloviators here at Pontification Central I’d just like to say that we don’t normally like people to know too much about what we’re talking about here. It just puts unnecessary pressure on us in this relentless chase for eyeballs. But despite my better judgement I shot Julia an email and suggested that if she were ever cogitating, she would be welcome to pontificate here shortly afterward.

I’ve previously hoisted a guest post of hers on LobbyLens up on Troppo.  Julia is a Research Associate at RMIT University, has qualifications in Program Evaluation and a Masters in Social Science and is currently taking time off from work to complete a PhD on Sensemaking with the technology of online learning in Academic teaching: a study of the interaction between academic teaching staff and the RMIT Learning Management System –“Blackboard”. She’s also trained and worked in Early Childhood Education,

Anyway, there you have it.  I don’t know if Julia will be a prolific or very occasional poster, but she has the keys to the platform, so I hope we see her next post soon.

Since I heard of it, I’ve been fascinated by an idea that William Hazlitt wrote up to prosecute his case for the “natural disinterestedness of the human mind”. From an early age and then until his death Hazlitt fancied himself as a philosopher even though it wasn’t where he made his name. Wikipedia tells us that:

around 1795 [he was born in 1778], his thoughts were directed [toward] not only politics but, increasingly, modern philosophy, which he had begun to read with fascination at Hackney. He spent much of his time in intensive study of English, Scottish, and Irish thinkers like John Locke, David Hartley, George Berkeley, and David Hume, and French thinkers . . . From then on Hazlitt’s goal was to become a philosopher. His thoughts were focused on man as a social and political animal, and, even more intensely, on the philosophy of mind, what would later be called psychology.

In this period he discovered Jean-Jacques Rousseau, who became one of the most important influences on the budding philosopher’s thought, and Edmund Burke, whose writing style impressed him enormously. He was painstakingly working out a treatise on the “natural disinterestedness of the human mind”, meant to disprove the idea that man is naturally selfish, a fundamental concept in most of the philosophy of the day. Hazlitt’s treatise would not be published for a number of years, after further reading, and after other changes had occurred to alter the course of his career, but to the end of his life he would think of himself as a philosopher.

Hazlitt’s (my spellchecker reckons ‘Hazelnut’s', but we’ll leave that for the time being), Hazlitt’s idea is expounded in his philosophical treatise “An Essay on the Principles of Human Action:  Being an Argument in Favour of the Natural Disinterestedness of the Human Mind“. It is this.  That while it makes sense for us to be selfish about our current self and situation, our relationship to our future self is more indirect. Our future self is another person. I have to confess that while I’m not too sure people would take to it regarding their future selves tomorrow, plenty might feel like me, that the self of me in ten or twenty years time isn’t something that the ‘me’ of today has the same kind of relationship with as the self of dinner time later today.

I like this idea.  I think it’s very powerful. I think it is capable of being a framework in which to house idealistic notions. For most of us the future is a place we hope to make better than the present, and we hope to make it better for ourselves and for others – so we can each enjoy it more together. I won’t say more about it, because, I am ashamed to say, I’ve still not read Hazlitt’s treatise. It sits on my Kindle in its original lettering in a difficult to manipulate visual pdf file. It will be read, but I’ve been busy lately. I really have.  Really really busy. And I’m getting busier. Funny thing is, it’s been on my Kindle for a year or so, during which time there have been periods when I’ve not been busy.  And then I haven’t whipped it out and read it.  What does that tell you? (Continued)

This story on slashdot is an excellent example of how debauched intellectual property is as a means of stimulating research, development and innovation:

As we discussed on Tuesday, Andre Geim won this year’s Nobel prize in physics for graphene, but he never patented it. In an interview with Nature News, he explains why: ‘We considered patenting; we prepared a patent and it was nearly filed. Then I had an interaction with a big, multinational electronics company. I approached a guy at a conference and said, “We’ve got this patent coming up, would you be interested in sponsoring it over the years?” It’s quite expensive to keep a patent alive for 20 years. The guy told me, “We are looking at graphene, and it might have a future in the long term. If after ten years we find it’s really as good as it promises, we will put a hundred patent lawyers on it to write a hundred patents a day, and you will spend the rest of your life, and the gross domestic product of your little island, suing us.” That’s a direct quote.

Of course this doesn’t just point to the inadequacies of the intellectual property system. It points to the extraordinary inefficiencies of our legal system. You’d think it might have been targeted for micro-economic reform by now, but because micro-economic reform became a deregulatory formula long ago the best that economists can manage is to argue for deregulation of advocacy, which may or may not be a good idea. But there are much bigger problems than that.

In a recent post I noted the massive investments that are going into moving the servers of traders for hedge funds and such like as physically close as possible to exchanges so as to get a few milliseconds ahead of their competitors. I proposed this solution

Buyers and sellers would send in orders as they do now.  But they would go into one minute batches.  Thus whether your order arrived in the first or the last second of a one minute segment of time, it would go into the pool of buyers and sellers in a random order for that minute.

I was thinking that this solution would need to be a regulatory one. But when I thought about it (this was in the shower – as usual!) it seemed to me that exchanges actually have an incentive to do this themselves. Why? Because, so long as the thing that’s traded is only traded on their exchange, they can add value by privately regulating in the same way that a sporting stadium has an interest in privately trying to stop everyone standing up to see the game. It’s in everyone’s interest not to have to spend lots of money moving and optimising their computer set ups.

Except those that have already done it and perhaps those who think that they might do it better than others – or have more money to do it. Of course observing this interest is not the same thing as convincing the bureaucrats inside such organisations to change their ways, but it’s nice to have self interest on one’s side.

Oh Troppodillians, prithee relieve me of any errors in this analysis.

The Monkey Cage, via Mark Thoma

Does Inequality Make People More Conservative?

Yes, according to some new research (pdf) from Nathan Kelly and Peter Enns. They rely on a a yearly measure of “policy mood” from 1952-2006. This is an omnibus summary of the public’s ideological leaning, liberal to conservative. (See the graph and corresponding Excel file at Jim Stimson’s homepage.) They also draw on a specific measure of the public’s support for welfare. The question is whether and how both measures respond to inequality.

Their first main finding: increases in inequality are associated with a conservative shift in mood and increasing opposition to welfare. (For more on why this would be true, see this paper (pdf) by Roland Benabou.)

Their second main finding: increases in inequality are associated with a conservative shift among both the wealthy and the poor. (Continued)

A while back I was rung up and interviewed by a student doing a thesis on Government 2.0. She asked lots of good questions and they brought out in me a bunch of things I’ve been thinking about regarding Government 2.0.

Since she sent me a transcript, I thought it may be useful to put it online. Please excuse some strange things that go on in the transcript. Sometimes words are clearly wrong. And elsewhere if it’s badly expressed that’s probably the difference between me extemporising and me with the opportunity to correct and qualify things. So apologies, but I don’t have the time to go through and correct it.

Anyway, some people may find it of interest and I’d be interested to know what, if anything people make of it. And I’ll be happy to try to elaborate on anything you want me to.

Phone Interview with Nicholas Gruen (20/7/10)

AB: To begin, I wanted to ask how you personally have become involved or interested with the ideas of gov 2.0?

NG: Well there is quite a nice diagram, which I can send you, which I now use in my slides, which is a curve that you follow when getting involved with web 2.0. It starts by reading a post, then you can maybe stick it in your favourites or you make a comment and then you make longer comments and then someone sends you an invitation to write a post and on it goes. So I basically got involved in blogging in about 2005. I’m an economist who is fairly critical of the way that economics works typically because it is obsessed with the measurable and the quantifiable and it used to be a system for thinking about our economy and society and how it worked. I had been arguing for a long time that information flows are much more important than economists were behaving as if they were. It was a very exciting development when I happened upon the blog of John Quiggin and saw three or four years of archives of him having written on any number of subjects and how useful that can be. So things like that and Wikipedia got me pretty excited. So I became a blogger and wrote about this sort of stuff and the applications of it to government. Remarkably enough the government then asked me to chair the enquiry. I say remarkably because normally our social systems aren’t anything like that responsive and it was pretty lucky I think for me personally. Well some people think that I was a well-chosen candidate because I was a new convert to this stuff. Of course there was nobody but new converts because it was a very new sort of thing.

AB: I’m just going to start by asking some really general questions regarding your ideas about how to define the idea. How do you define the concept of gov 2.0?

NG: The application of the collaborative possibilities and mores to all tasks in government. By all tasks I don’t mean that there will still be some tasks that we can’t apply those things to but for virtually everything it’s worth asking the question how much can we throw the switch in that direction.

AB: And in your opinion what do you see to be the relationship between gov 2.0 and the concept of web 2.0?

NG: Well one is a sub set of the other. The web 2.0 is a set of technical possibilities and a zeitgeist, which has an influence in many areas and government, is the most obvious area where it should have an influence.

AB: What do you think are the origins of gov 2.0? How do you think it has evolved into its current form?

NG: Well I guess in my theory I’m quite happy to follow Tim O’Reilly’s article: What is web 2.0? So it’s a set of technical possibilities that people stumbled upon. One of the interesting things you could say about web 2 is that it is the reality catching up with the hype. Before web 2 you had a hell of a lot of hype about how the Internet was going to change the world, make everyone their own publisher and all this sort of stuff. Apart from the fact that it ended up with lots of egg on its face at the time of the dot com crash, many of those things proceeded to come true as we spontaneously wrote encyclopaedias together and did all these extraordinary things. So the origin of web 2 is this phoenix rising from the ashes to show that once the focus suddenly turned towards this chaotic collaboration that was possible over the web and people started building platforms to facilitate it, many of these very star struck dreams of the hype people had been going on with about web 1 started becoming true.

AB: Government 2.0 is a complex idea with many different elements. What do you think is the most important aspect of government 2.0?

NG: A couple of really critical things are, that tapping of collaboration from anywhere and the possibility of turning an organisation inside out or simply re-drawing the boundaries of an organisation. For example the national library has a newspaper digitisation project in which it is digitising its historic collection of newspapers going back to 1802. Obviously getting those in text is very useful because it enables us to search the text and it gets computers to do the optical character recognition. There are lots of errors in that and then volunteers from outside the national library and indeed volunteers, who are not paid, correct all the character recognition flaws. So that’s the kind of re-arrangement of how it might have otherwise been done. I’ve argued that we should hope that in 20 years time, maybe 10 years time, we get our first secretary of a department who has been recruited as a volunteer and has worked for quite some time as a volunteer rather than as a recruit that comes in as a graduate and just works their way up the ladder in a normal way. One of the problems of public service is that you want people who are well motivated and the only ways we’ve had of doing that so far is to have codes of conduct and prevent people from having conflicts of interests. Another way of selecting people who really value the public interest is through the volunteers’ route because if they are volunteering they have no other reason for doing it, other than for doing a good job and to serve the public in doing so.

(Continued)

Some readers will be familiar with a famous refrain from the Tea Party “Keep your Government hands of my Medicare payments”. Anyway, I liked this property newsletter which complained that negative gearing really wasn’t what it used to be:

It’s been all bad news for property investors in Australia for the last 5 years. All of the benefits of “Negative Gearing” have evaporated between government intervention through lower taxes, Banks lowering LVR’s and raising lending criteria and a flattening out in house price rises. No wonder buyers are now saying “why bother”.

Why indeed. What is the country coming to? Soon you’ll have to earn your living.

Next week the Mont Pelerin Society has a General Meeting in Sydney (Australia). Speakers will address a range of topics under the general theme of The 21st Century Liberal Enlightenment.  I appreciate that there is a high level of scepticism regarding the MPS on this site however this information is provided in good faith with all care taken and no responsibility accepted for products that are offensive or substandard.

The speakers include some locals, among them Sinclair Davidson (academic and Catallaxy blogger), Noel Pearson (Aboriginal leader), Paul Kelly (journalist and author) and John Howard (ex Prime Minister) and some big names from offshore like Harold Demsetz, Terence Kealey, Chandran Kukathas, Deepak Lal and Ken Minogue.

The main program runs from Registration on Sunday 10 to the Closing Dinner on Friday 15. There is a stunning recreational program for partners who want to get out and about and see the Rocks, walk to Manly and take in an Aboriginal tribal experience. They all get to see a sheep station.