Open Source Mathematics

There are open source operating systems (here and here), media, courseware, encyclopedias, video games, performance art and even beer. Now Steven Landsburg reports of an open source mathematical theorem proving project. How cool is that?

Decision Affirms Vertical Contracting Rights

Tuesday's federal appeals court decision in the FCC-Comcast case has the effect of allowing firms to decide what terms to offer in vertical relationships. The FCC's proposed "net neutrality" rules would have tended to restrict ISPs so that they would have to treat all content providers identically. By analogy, must a grocery store carry all potential supplier's products? If they do, can they decide to display some at favorable end-of-aisle locations and others on the bottom shelf? Or do we need "food fungibility" rules?

Even the FCC supporters I have heard, admit that high bandwidth content, like that supplied by BitTorrent, may place higher resource costs on an ISP and that treating it differently from other content providers may be warranted. Similarly, grocery stores treat different products differently based on expected demand. They allocate eye-level shelves to top sellers and bottem shelves to rarely purchased items. The grocery store is optimally deciding how to allocate its complementary resources (shelf-space) so as to generate value to consumers.

Comcast's detractors' argument is usually based on the claim that ISPs could favor their own content over unaffiliated content for non-cost related reasons. This is like the grocery store putting a store-brand item, rather than the name-brand item, in the preferred location. But why sink a valuable resource (preferred shelf-space) into a loser store-brand when they could use it to promote a winning name-brand at a higher price? Even worse, customers seeking the name-brand in vain, will choose a different grocery store that better caters to their tastes. Similarly, consumers enjoy an ISP connection only to the extent that it enables access to their preferred content. ISPs who miss-manage their bandwidth to diminish the value of this content risk driving consumers elsewhere.

Other analogies I toyed with:

1. Do car makers get to choose which parts suppliers to use? - "parts impartiality"
   
2. Do magazine editors get to choose which articles to publish? - "article ambiguity"
   
3. Do theaters get to choose which movies to show? - "movie maliability"
   
4. Do radio stations get to choose which songs to air? - "song substitutability"
   

Tax day is almost here

47% American earners pay no federal income tax but the "top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes"

Taleb on the Degradation of Predictability and Knowledge

If you haven’t read Nassim Taleb’s work or don’t follow what he has to say, you should. He’s the author of Fooled by Randomness and The Black Swan.

From a recent post on Edge.org

So consider the explosive situation: more information (particularly thanks to the Internet) causes more confidence and illusions of knowledge while degrading predictability.

Look at this current economic crisis that started in 2008: there are about a million persons on the planet who identify themselves in the field of economics. Yet just a handful realized the possibility and depth of what could have taken place and protected themselves from the consequences. At no time in the history of mankind have we lived under so much ignorance (easily measured in terms of forecast errors) coupled with so much intellectual hubris. At no point have we had central bankers missing elementary risk metrics, like debt levels, that even the Babylonians understood well.

Voluntary transactions used to make both parties better off

This is not satire:  from Bloomberg; not the Onion:

“If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” said Nancy Leppink, deputy administrator of the department’s wage and hour division, according to a story in the New York Times.

"Pope Vows To Get Church Pedophilia Down To Acceptable Levels"

This spoof headline from the Onion and accompanying spoof article are examples of why economists are no fun. To your average non-economist, there is no (positive) acceptable level of child abuse. Hence, we see policy-makers playing lip service to some sort of zero-tolerance goal.

But, to your average economist, it is perfectly reasonable that the church (or any organization) would choose policies that reduce pedophilia but could not possibly eliminate it. Economists are on the look out for the "opportunity cost" of a spectrum of possible policies. Better screening and better vigilance will likely reduce incidents of child abuse and probably should be implemented. But zero-tolerance would require extremely intrusive measures. How would twenty-four hour surveillance affect the rite of confession? Would potential priests be turned off by constant electronic monitoring? What sort of authority would priests have in coming generations if they were prohibited from any contact with non-adults?

The real danger of the zero-tolerance mentality is the typical response when an incident inevitably does occur. We immediately ask where the "failure" was and who was at "fault." We rarely ask if, despite carefully constructed policies, it is still the case that "shit happens." This often leads us to build yet another Maginot Line.

Quants

More entertainment than insight, but fun still.

Quants from Studio Takt / Music & Sound on Vimeo.

One Reason Big Companies Pay More

It’s the same reason crime scene clean-up workers make a good buck: the working conditions require a compensating wage differential. From a recent working paper:

Abstract

Using a Spanish survey, this paper investigates the relationship between firm size and working conditions, and whether firm size differences in workers’ job satisfaction can be accounted for by differences in their work environment. The results indicate that: (1) workers in larger firms have a significantly lower level of autonomy and, in general, face worse working conditions; (2) working in large firms has no statistically significant effect on job satisfaction after controlling for working conditions; and (3) no systematic differences exist in worker mobility across firm-size categories. We conclude that observed wage differentials by firm size are utility-equalizing, so they are due to differences in working conditions.

Fighting over a shrinking pie

Government is by far the most unionized sector of the work force, and among the few places left where blue-collar workers can retire with traditional lifetime pensions. This is creating some obvious conflict:

At the heart of this fight is an unbalanced equation: The economy is shrinking cities' and states' tax income as their pension and health-care costs have soared. As a result, some governments are diverting money from services to cover benefits, or raising taxes and fees. That doesn't sit well with some taxpayers—many frustrated at seeing their own benefits being cut by private-sector employers.

California offers a view of the fallout. The state's largest pension fund, the California Public Employees' Retirement System, known as Calpers, is estimated to be only 57% to 65% funded. Having suffered investment losses in recent years, the state has had to dip deeper into its revenues to make up the funding gap. Last year, a budget impasse forced the state to issue IOUs for taxpayer refunds.

That didn't take long

15 states reduce costs with furlough Fridays for state workers. Businesses are responding with price discrimination schemes to reduce prices to these low-value buyers.

• Lake Tahoe offers a "Frickin' Friday" $15 ticket for furloughed California employees; the normal adult lift price is $47.
• In Lincoln, Calif., the Thunder Valley Casino offers furloughed state workers $30 in coupons on Fridays, which can be used for dessert, side dishes and $5 match play at the tables.
• In Adel, Ga., Ben Rehberg says he got the idea to offer 10% discounts to furloughed state workers there for his computer-repair service after he was furloughed last year from his main job as a state technical consultant.
• a California associate personnel analyst, started a Web site called "Fantastic Furlough" listing all the discounts available to furloughed state employees around Sacramento. They include 30% off eyebrow waxing, braids and other services at Itz Ur Tyme Hair Design and 10% off lunches at Miyagi Bar & Sushi (not including alcohol.)