Why monogamy?

Isn't it interesting that most human societies, even when not in contact with each other, evolved to a model with long-term monogamous families? What made it crucial for evolution to avoid polygyny, communal families or repeated monogamy? Certain biological traits must have been necessary (and sufficient?) for this to happen.

Marco Francesconi, Christian Ghiglino and Motty Perry show that once you put this into the framework of a game theory model with overlapping generations, it all makes sense. You just need three features: children of different ages overlapping (i.e., women cannot bear "too many" children simultaneously), paternal investment (father need to help for children to succeed), fatherhood uncertainty (fathers may not be certain which children are theirs). This means that mothers need to secure the help of fathers by assuring that they are helping the right children thanks to monogamy. The first feature is necessary, but it is not clear to me why. I think it is because it gives more assurance to the father about paternity. Monogamy is then not only the most efficient family form in the sense that it maximizes the number of offspring, this is even amplified because it is the only form that creates altruistic ties between children.

The option of suicide

Suicide is a trigger strategy and when to pull the trigger is a decision that involves forming expectations over future outcomes. It is a difficult decision, as future outcomes are very uncertain, if not difficult to quantify.

Shin Ikeda models the suicide decision as the decision to exercise an American option on future wages. Seen this way, the suicide option is straightforward to quantify once you have wage profiles of suicide candidates (to determine timing) and non-candidates (to determine future wage profiles, their distribution and how they may differ form suicide candidates). From anecdotal evidence, anxiety seems to be an important factor, thus modeling at least risk aversion right is very important, as well as bankruptcy. Unfortunately, this is not at all how the paper proceeds. Individuals are risk neutral, but returns are adjusted for market risk. Individuals hold no assets or debt, except their human capital. The wage process is identical for everybody. It is then no surprise that the results are not realistic, indicating that the strike price corresponds to 90% of the average initial wage in perpetuity, meaning that a majority of workers is at suicide risk at some point during their life. Any study in the value of life literature gives numbers much higher than this value, and this is because people value more than just wages. Instead of only looking at money flows, one needs to consider concepts like utility and preferences...

The obscure economics of vampires

There is a certain appeal to study the economic aspects of something that on first glance has nothing economic. Following the motto of this blog, I have reported on quite a few of those, such as boobs, beer, toilet seats and the scruples of teens. It is almost always good to stretch the boundaries of what we can do with Economics, what I have called the imperialism of Economics. But in rare cases this is going too far.

Daniel Farhat presents us with such a case, wherein he studies the Economics of vampires. The paper uses an agent-based model to follow the interactions of humans and vampires and draws inferences about aggregate phenomena. I have had my issue in the past with agent-based models, in a large part because they are build on unjustified assumptions with no robustness tests, and this papers makes me most concerned about these issues. Indeed, the model is built in a complete empirical vacuum, and none of the modeling assumptions are tested for robustness. Furthermore, because vampires never existed, and with current medical knowledge never will, the paper is pointless.

Forecasting the weather using the market

In public opinion, economic forecasting has as low regards as weather forecasting. To some extend this is coming from a firmly anchored stereotype, because forecasts for both are actually much better than a mean reverting random walk. And one should factor in that the weather or the economy are very complex animals with a lot of interacting forces (including silly politicians who take nonsensical decisions). But, in a horse race between meteorologists and economists, who would be better at forecasting?

Enter the economist, Matthias Ritter. He uses the price of weather derivatives traded at the Chicago Mercantile Exchange to determine what the market thinks is going to be the future temperature, more precisely the two-week ahead Heating Degree Days and Cooling Degree Days for 6 US cities. And the economic forecast is impressive, it manages to lower the meteorologists' root mean square error by about a quarter. And people say such speculative markets are useless.

Your turn, meteorologist.

Women and children first? No

The infamous quadruplicate papers of Frey, Savage and Torgler have caused a lot of grief for their multiplicity, yet they yielded a somewhat interesting, yet old result: women and children get priority on maritime disasters, crew are last, and there are some subtle differences among passengers from different nationalities. This result, however, was obtained using a sample of two: the Titanic and the Lusitania. And one also argue that there was some selection bias for the Titanic, as this was a much celebrated inaugural voyage with, let's say, an unusual set of passengers. It could therefore not hurt to increase the sample size.

Mikael Elinder and Oscar Erixson jack up the sample from 2 to 18. And the results are completely reversed. Women are at a distinct disadvantage, crew fare much better than the rest. This is the outcome you would expect from a free-for-all situation where weaker women get pushed aside on the run for the lifeboats. The lesson from this: do not trust a sample of two, even if amplified by four publications.

The econophysics of religion

Other social scientists do not like when economists venture into their turf and challenge established methodology. We economists, of course, welcome these instances of Economics imperialism because we believe our methods are superior. But other scientists also venture into Economics, and the most brazen are the physicists. They created a new field, Econophysics, that has been met with bewilderment or amusement by economists, including myself (Exhibits A and B). Economics and Econophysics largely ignore each other. Here is now the paper that will be with upmost bewilderment in social sciences, Econophysics applied to religion.

Marcel Ausloos studies a religious sect, the Antoinists, over 80 years. Lacking information about membership, attention is turned towards income and expense reports. Ausloos tries to find patterns and regimes in the data in order to understand the growth and decay of the cult. While there is some discussion of GDP and demographics, the exercise is all about fitting the evolution of expenses with a mixture of geometric growth and a sine wave in three different regimes. Why is not clear. And I also do not think the data has been adjusted for inflation. A really bizarre study, I doubt scholars in religion will learn much from it, and economists certainly nothing except to view this field even more with suspicion.

Seemingly unrelated regressions and lamb carcasses

The great thing about the Internet is that one can discover unexpected uses of familiar techniques. Or one can search for new applications with one's tool set. So what about SUR and lamb carcasses?

Vasco Cadavez and Arne Henningsen are responsible for this paper. I have nothing to add to the abstract: The aim of this study was to develop and evaluate models for predicting the carcass composition of lambs. Forty male lambs of two different breeds were included in our analysis. The lambs were slaughtered and their hot carcass weight was obtained. After cooling for 24 hours, the subcutaneous fat thickness was measured between the 12th and 13th rib and the total breast bone tissue thickness was taken in the middle of the second sternebrae. The left side of all carcasses was dissected into five components and the proportions of lean meat, subcutaneous fat, intermuscular fat, kidney and knob channel fat, and bone plus remainder were obtained. Our models for carcass composition were fitted using the SUR estimator which is novel in this area. The results were compared to OLS estimates and evaluated by several statistical measures. As the models are intended to predict carcass composition, we particularly focused on the PRESS statistic, because it assesses the precision of the model in predicting carcass composition. Our results showed that the SUR estimator performed better in predicting LMP and IFP than the OLS estimator. Although objective carcass classification systems could be improved by using the SUR estimator, it has never been used before for predicting carcass composition.

Ethnic heterogeneity and natural disasters

Some countries seems to be very poorly located, as they are in the path of all sorts of natural disasters. But some do better than others in coping with their perilous situation. In particular, death tolls from cataclysms seems to be, in general, of an order of magnitude larger in developing countries. What else could influence such numbers?

Eiji Yamamura, from a rich and homogeneous country that does quite well with earthquakes, tsunamis and typhoons, studies ethnic heterogeneity in two different ways in this regard. The first is ethnic polarization, which describes how close the distribution of ethnic group is from a fifty-fifty one, and ethnic fractionalization, which can be interpreted as the probability that two random people are from the same ethnic group. Once one adds the miracle instrument of cross-country regressions, legal origins, the first indicator has shows that heterogeneity has a positive impact on natural disaster deaths (meaning more of them), while the second has none.

Now Yamamamura takes this as a sign that ethnic polarization is a better indicator of ethnic heterogeneity than ethnic fractionalization. This looks like some seriously flawed reasoning here, which is repeated several times in the papers: the fact that some indicator tests favorably some hypothesis does not necessarily mean that it measures what the hypothesis says. What if in really the hypothesis is false? And in any case, on what theory would this hypothesis be based? I can easily imagine good reasons why homogeneity would lead to fewer deaths, a better social cohesion that leads to better institutions coping with disasters, like in Japan.

Econophysics: an introduction

I have criticized a number of times Econophysics as a rather naive venture of physicists into Economics, where there is too much focus on "automatic" data exploration and too little use of theory and understanding of what the data measure. But may it is just my prejudice against and my ignorance of Econophysics.

B. G. Sharma, Sadhana Agrawal, Malti Sharma, D. P. Bisen and Ravi Sharma offer in six pages an account of what Econophysics is, what its goals are, what it can contribute and where it is headed. The basic idea is that economic agents are like particles in that they are in large numbers and interact in complex ways. The dynamics of such complex processes are studied with powerful statistical tools in Physics, and physicists think that this should also apply to Economics. The focus is very much on the stock market, probably because physicists have realized where money can be made. There is no sense that there would be an attempt to improve welfare. They are also much more likely to completely discard a model in one set of observations does not corroborate it. Physicists are especially critical of how economists stick to rejected dogmas and of their inability to explain how small shocks can pan out into large crises.

The focus is really on the description of data process and documenting there statistical properties. In particular, econophysicists want to find ways to exploit even the smallest opportunities for arbitrage by finding, often through obscure and complex black box processes, the right price of an asset at any moment in time. However, there is no attempt at understanding why these arbitrage opportunities arise, say because of some form of irrationality, asymmetric information or perverse interactions in the price mechanism. From this I conclude that Econophysics can be interesting to make money on the stock market, but at least at this point, does not help us in any way in understanding why the world is like it is. Which I find rather ironic for Physics.

The Internet did not raise a generation of loners

The image of the basement-dwelling World-of-Warcraft-playing loner is often shown as an example of the adverse impact of the Internet on social capital and in particular social interactions. Whether this is true is not so obvious, as the Internet also makes possible social interactions that could not exist before, as this blog shows in a limited way.

Stefan Bauernschuster, Oliver Falck and Ludger Woessmann study the impact of broadband Internet on social capital using a natural experiment in Eastern Germany. There, some choice by the telecommunications provider resulted in 11% of East German households to be on OPAL lines instead of DSL, which better supports high speeds. Using the German Socio-Economic Panel, they measure social capital with the frequency of going out, visiting friends and performing volunteer work. They find that Internet access has no visible impact on social capital. To the contrary, for children it seems to enhance social capital, possibly because it makes them aware of new opportunities to interact in real life. This is in stark contrast with television use, which has many times been shown to be detrimental to social capital, likely because it is a one-way communication, while the Internet can build two-way communication.

Animals as forecasters

Futures markets and in particular prediction markets are a good way to hedge against various risks as well as establish what people really think about the likelihood of some event. As they a putting money on the line, these markets are deemed (and have proven) to be more really than surveys and polls. Of particular interest in this context was the short-lived "terrorism futures market" organized by the Pentagon, which was supposed to offer an additional tool for predicting terrorist threats, and which would allow those who could suffer from terrorism to buy insurance against it. Unfortunately, there was also a fear that threats could materialize because of the market, as people would try to manipulate it.

Adi Schnytzer and Yisrael Schnytzer point out that there is another potential for prediction markets: natural disasters. Of course, we humans are so far not particularly good at forecasting such events as earthquakes, but some animals have evolved a sixth sense in this respect that is rather underexploited. While it seems difficult for scientists to drum up money to study this, maybe because this technology does not seem credible or usable, the Schnytzers point out that if prediction markets are created for natural disasters, then funding would emerge if money is to be made. And this would also establish whether these theories have credibility.

The economic behavior of bees

I find it fascinating that there is also plenty of Economics in the animal kingdom. Two recent papers about bees just caught my attention.

Antoine Champetier studies the interaction of bees and farmers, as bees play an important role in pollination and are thought to be subject to a mysterious decline in numbers. He takes California almonds as an example and builds a model of pollination supply with hive owners and bees that forage. One aspect appears to be rather important: economies of scale in the hive, as larger hives have an easier time regulating the temperature and can devote more time to more aggressive foraging. Champetier formulates a spatial model of foraging and coordination in the bee colony, where energy used and gained by foraging is assessed, as well as time costs in each step of pollen acquisition and storage.

Noam Bar-Shai, Tamar Keasar and Avi Shmida study what makes that a bee departs early or stays longer in a flower patch. Looking at videos, they concluded that bees cannot count, but are rather governed by clues left by odor marks (to prevent revisiting the same flowers) and current foraging success.

Breastfeeding and cognitive skills

Breastfeeding is now almost universally promoted as the healthiest way to feed a baby. And indeed, while breastfed babies are a little smaller and than bottle-fed ones and gain a little less weight, they are healthier, it is thought mainly because the mother milk transmits antibodies and relevant nutrients. But not every mother breast feeds, maybe because not every mother realizes all the benefits, or because some of the costs are high (time management for working mothers or aesthetic issues). Or there are some other benefits that are not well known.

Maria Iacovou and Almudena Sevilla-Sanz report that breastfeeding has significant positive impacts on cognitive skills (reading, writing and mathematics). While this correlation is well known, it may be spurious because mothers who breastfeed are more likely to be well educated (Irish example), and their children are also more likely to be well educated as well. The obvious way to overcome this statistical issue, a randomized trial, is not feasible on ethical grounds. What Iacovou and Sevilla-Sanz do is use propensity score matching, which essentially matches babies that have the same characteristics but breastfeeding and then compare their cognitive skills. What is particularly impressive in this study is that the retained characteristics are very broad beyond baby demographics and health, including parent characteristics such as education, job, income, and even pre-birth attitude towards breastfeeding or home and neighborhood. And even after controlling for all these variables, the impact of breastfeeding is still significant on babies from Bristol (England), and it may even grow with age.

Suicide in happy places

It is quite baffling that the countries with the highest standards of living, and among several dimensions the happiest ones, also exhibit the highest suicide rates. Is it that places where material necessities are easily met other more psychological worries take over? Is it that somehow happiness is more volatile, or more diverse?

Mary Daly, Andrew Oswald, Daniel Wilson and Stephen Wu use two data sets that allow to compare suicide rates and happiness across US states to show that this paradox is also true within the United States. This thus invalidates the cultural or institutional explanations of the international paradox. This also allows to use all sorts of cross-state controls, but none makes the paradox disappear. Daly, Oswald, Wilson and Wu then conclude that there must be a direct causality from happiness to suicide: living among happy people is depressing for some. This may be consistent with the fact that suicide rates drop in war time. And it is difficult to imagine the reverse causality, that high suicide rates make survivors happy.

The economics of swinging

This is not about economic fluctuations or long cycles like Kondratieff cycles, this is about the sexual practice of partner exchanges or group sex. This practice that started in US military families in World War II has now spread world-wide, first as wife swapping than with women's emancipation into couple exchanges that a organized through websites or swinging clubs. Estimates vary widely, but somewhere between 1 and 15% of the population practices it.

Fabio d'Orlando tries to explore the economics of swinging. In the absence of much data and theory about it, he draws heavily on Jeremy Greenwood and Nezih Guner's theory of the emergence of premarital sex (discussed here) and modifies it to a theory of increasing kinkiness of sex. I did not think this was very inspiring in this paper, but a (long) footnote caught my eye.

Swinging clubs charge an entrance fee, which depends on who enters. Couples pay, say, $50, but single men $150. This is more than a night with a prostitute, but single men seem to value of having sex with a woman who does not fake it. Single women, however, are typically not allowed in on the premise that they are prostitutes. The interesting bit is how a swinging club owner should maximize profits, given that couples are more likely to come if there are fewer single men. Given the hidden nature of this market and thus the lack of information, it would interesting to see the diversity of outcomes.

Syphilis cannot be eradicated

Syphilis is back. As the most widespread venereal disease in the 1930's it was curtailed after huge efforts, both in developed and developing countries. And ten years ago a push was made to finally eradicate it. But syphilis is quietly making a comeback, hidden in the shadows of AIDS. And because the transmission of this disease is primarily driven by risky sexual behavior, it can be a leading indicator of other sexually transmitted diseases on the rise.

David Aadland, David Finnoff and Kevin Huang use a model of human behavioral response to study this resurgence and come to the conclusion that there is a fundamental cycle that cannot be broken. The point is that the transmission model that epidemiologists use has constant parameters tracing back to biological features of the disease, but these parameters can change through human intervention, and they do. Call this a Lucas Critique of epidemiology. The key here is that when prevalence is low, individuals in a riskier fashion and in particular have more sexual partners. No reasonable policy can overcome this.

When should amniocentesis be performed?

Every pregnant woman past some age is recommended to perform an amniocentesis to check whether her fetus suffers from Down syndrome. The reason is that the risk of this syndrome increases with the age of the mother. But the test is risky, as it can lead to miscarriage, thus it is only performed for higher (syndrome) risk pregnancies.

Eduardo Fajnzylber, Joseph Hotz and Seth Sanders tell us that the logic that the medical profession has adopted is wrong. The basic idea is that the risk of miscarriage is constant with the mother's age, while the risk of Down syndrome is increasing. At first sight you would only want to test older women. That is the logic from the perspective of the physician. They now propose to see this from the perspective of the mother. An older women will have fewer opportunities to conceive, thus a miscarriage is much more costly to her compared to a young woman. This would make her to want to avoid the risk of miscarriage. The recommended strategy becomes much less obvious and could in fact be that young women carry out the test and older ones bypass it. It all boils down to a personal evaluation of the cost of miscarriage, Down syndrome and abortion. Not as easy as the physicians say it is.

Laws and attitudes: which comes first?

It is said that laws reflect current morals and that laws cannot influence morals. I imagine that it is rather difficult to find more than anecdotal data to test such a hypothesis.

Niklas Jakobsson and Andreas Kotsadam claim to have found the right natural experiment. In January 2009, buying sex became a criminal offense in Norway. The explicit goal of the law was to change the attitude of the people towards buying sex. Looking at Norway and Sweden (where there was no such change on law), they find that attitudes did not change more in Norway than in Sweden, if anything, people become a little more liberal. Save for one case: Oslo. There, prostitution is more visible, thus people were more aware of it and responded the way the lawmakers wanted.

The analysis is based on survey data. It would be interesting to know whether the actual purchases of sexual services were also affected. Indeed, it does not matter much if someone who would not buy sex anyway now has a negative attitude towards it. The paper clearly shows that people who are not close to the problem are not affected. Those that are at the margin of changing a decision are those you would want to affect. And only market data can reveal their choices.

Veiling bans can be counterproductive

Several countries are currently contemplating veiling bans, and some, such as France, have already adopted such measures. Their stated goal is to alleviate the oppression of veiled women within their communities, but it is also feared that it will only keep them away from public areas. Economists have always been suspicious of bans, as they are not efficient or can have adverse effects. They can contribute to the debate with some structured reasoning about this issue.

Jean-Paul Carvalho uses game theory to analyze veiling bans. The premise is that the recent rise of veils coincides with the Islamic renewal and is mostly voluntary. Indeed, veiled women are mostly new adoptees that started this despite oppositions from their mothers or husbands. They do it for three reasons: 1) they use the veil as a commitment device to remind themselves to avoid secular activities, 2) the veil is a signal to others that one is religious, 3) the veil is used to conform in a social group.

Now imagine that there are few religious people in the population. Then there is no veiling, as even the religious conform with the majority. With a larger religious population, their is veiling by that group only. And if that group is sufficiently large, everybody veils to conform. The interesting case is the middle one. If a veiling ban is imposed, if there is little return to deveiling, these women may segregate further by seeking reclusion in their group, where the returns from conformity become larger. The goal of the ban to expose them to more secularity would then fail completely.

Richard Wagner's Lohengrin and game theory

The analysis of fiction or fictional worlds from an economic point of view is an interesting "hobby" of some economists, from the Economics of Harry Potter, World of Warcraft to CSI: Crime Scene Investigation. There appears to be also a stream of research dealing with operas, and in particular Wagner's, which are full of intrigues, hard decisions and conflicting beliefs.

Ilias Chrissochoidis and Steffen Huck look at Lohengrin. The story is about whom to believe, commitment, signaling, normal form games, Bayesian updating, and asymmetric information. I need to listen again to Lohengrin, which I have not touched in decades. Maybe I will hear it with a new ear now that I can recognize all the Economics in it. This paper is totally useless for policy, yet fascinating.