Machiavellian missionaries

I have had recently the opportunity to chat with a missionary who has been working as a bush doctor in Western Africa. I find it quite admirable that a Westerner is willing to leave easy life aside and spend many years in the middle of an inhospitable nowhere to help others. Of course, the end goal is to spread Christianity, and I have no problem if these free health services are provided through a sponsor.

What I found very disturbing, though, was the approach to converting the locals. Indeed, missionaries tell these pagans that now that they know about God, Jesus and the Bible, they will go to Hell if they do not convert. They would have avoided that fate had they remained ignorant. The missionaries are devout Christians and believe this as well. Can we then really say they care about the locals? They willingly paint the pagans into a corner, threatening them out of nowhere with the worst possible outcome in their afterlife. What is then the point of making terrestrial life a little better? In the end, many locals would much worse off after the arrival of the missionaries.

What is up with Elsevier?

Whether you like it or not, Elsevier matters in the dissemination of research in Economics. By far the largest player in the field, it enjoys considerable market power (and a profit margin around 30% that comes with it). And even though journals are not at the frontier of research in Economics, it still matters what happens at Elsevier because it controls so many of the top field journals.

According to its web page on the global dissemination of research, Elsevier states:

We recognise that access to quality research is vital to the scientific community and beyond. For us this means providing support and the latest tools to maintain the quality and integrity of published scientific literature, achieving the widest dissemination of content, and embracing the opportunities of open access. We will continue to identify access gaps, and work towards ensuring that everyone has access to quality scientific content anytime, anywhere.

These are all nice words, but this is not all what Elsevier practices. First of all, all of the Economics content of Elsevier is gated, and academic libraries have to pay through the nose to let faculty access the content, including their own works. Even errata and retraction notices are gated. There is no open access journal in Economics, and even in other fields where it is available, the cost is prohibitive (usually US$3000, even more with color charges!), which cannot be justified in any reasonable way by hosting costs. Indeed, Elsevier spends considerable resources trying to keep potential readers away, by gating the material for the general public and making it difficult for individuals to buy subscriptions, especially for hard copies. All this management of subscriptions and filtering of web traffic would disappear with open access, making it much cheaper, not more expensive.

But this is not an issue only with Elsevier (Springer is much worse in this respect). Elsevier, with its market power is trying to kill any competition and any initiative that tries to open up the dissemination of research. For example, it was a huge backer of the Research Works Act in the US, which would have prohibited mandates that publicly funded research should be available in open-access repositories. Of course this generated a huge outcry from the scientific community (you know, the one that Elsevier claims to serve) and lead to a call for a boycott. This seems to have been successful, as Elsevier reversed its stance, thereby killing the bill.

Unfortunately, few economists seem to have participated in the boycott, which is probably why Elsevier continues to flaunt the research community with no remorse. For example, it has not updated the listings of its journals for over a year in RePEc, and still vigorously refuses to let RePEc perform citation analysis on its contents. Repeated attempts to get a reaction from Elsevier have unsuccessful from my part. My suspicion is that RePEc is threatening some of the products that Elsevier is pushing (Sciverse, Scopus), and the interest of the research community becomes second fiddle. From what hear, people are deserting the Economics desk at Elsevier, starting with its head, which makes you wonder who is in charge of "the widest dissemination of content."

To understand further what a fine business Elsevier is, here are some of my previous posts:
The evil empire strikes again
The evil empire strikes again (II)
Copyright and the lack of competition in academic publishing
Why I am boycotting Elsevier

Bruno Frey: the story that keeps giving

A few weeks ago, I had a post entitled Bruno Frey, the epilogue, thinking that now that the University of Zurich made him a gigantic gift by manipulating the investigation into his behavior and keeping mum, Bruno Frey would have learned to finally shut up. But no, he has still not understood a thing a keeps going on, to the point that was getting daily updates in my email about the latest on him. Let me run a few highlights by you.

As was rumored for some time, the University of Zurich decided not to renew the two-year contract he was entitled to as an eminent retiree. There no official announcement, but it was reported by Olaf Storbeck, then by the Tages Anzeiger, a local newspaper. In the latter, Frey's wife, Margit Osterloh, defends his behavior and confirms that "he will continue working in Warwick", so he has indeed been told to leave the University of Zurich.

This firing then explains the bizarre behavior of Bruno Frey in the preceding days. Indeed, he appeared unusually incoherent in a television show, then wrote an outrageous piece in the same Tages Anzeiger newspaper calling for the defunding of his department (which actually got a major gift that was probably waiting for his departure). His reasoning is that the professors try too hard to publish their research, neglecting working with the media. He also mentions his research is essentially the only relevant one. Never mind that his employer tried very hard to protect him, gave a special status to his students who were exempt from exams, and now that was simply to possible to go on, the university did its best to let the situation quietly disappear to avoid embarrassing him. He answers with a slash-and-burn tactic.

That said, I also got a copy of the report commissioned by the University and looking into his self-plagiarism on the Titanic studies. As mentioned earlier, there is nothing about the many previous cases. View a pdf copy here.

So Bruno Frey will now continue his activities at the University of Warwick, which has a long tradition of hiring prominent retirees to boost its academic ranking. He joined in early 2011, that is right before the Titanic case came up, and early enough to qualify for the next research assessment exercise of the UK universities. But for the University of Warwick to keep any credibility, it ought now to take position on the Bruno Frey case, now that it is his sole employer.

Finally, as the story keep going on, I created a tag just for Bruno Frey.

Bruno Frey: the epilogue?

A little less than a year ago, a controversy erupted about the publishing practices of Bruno Frey and his students. Indeed, they tend to repackage their research and submit it to multiple journals simultaneously (or sometimes successively), without cross-references and without alerting editors to this. This is in clear violation of the submission conditions of most academic journals and even goes against principles Bruno Frey has himself advocated in multiple (of course) publications: there is not enough space for everyone to publish on the one hand, and the pressure to publish leads people to (self-)plagiarize on the other hand. On his homepage, Bruno Frey crows about over 500 or 600 publications, depending on where you look, numbers that are completely surreal for any self-respecting academic economist.

The scheme blew in his face when some editors and some blogs started raising questions when very similar articles about the Titanic, with Benno Torgler and David Savage, appeared in four journals (some say there is even a fifth one in German, but I cannot verify). And the article was not even original, as a similar analysis was done and published 25 years prior and is now standard reading and exercise in statistics courses. Newspapers picked up the story, Frey went into denial but finally confessed to the editor of the Journal of Economic Perspectives, who published correspondence about the case and publicly admonished him for multiple submissions (he do not yet know about the prior literature). But that is only for this case, there are all the other ones. The University of Zurich, from where Bruno Frey recently retired, promised an investigation. That was sometime in the Summer. Since then, nothing.

One could suspect the University would do nothing, as Bruno Frey is the best ranked economist in German-speaking universities. And the prolonged silence clearly seemed to corroborate this. But rumors started circulating in the hallways, rumors that were not encouraging at all. But no evidence from Zurich.

Finally, I got good evidence from a reliable source. And it is indeed not encouraging. The University of Zurich mandated three prominent academics to look into the case. But the mandate was formulated in such a way that only the articles about the Titanic could be analyzed. The experts came to the obvious conclusion that unethical behavior was at play for this case. They could not mention the others and thus the University concluded that this was a one off miss-step. The University gave Frey a verbal admonishment, which does not go on his record, and did not release the report.

But this was not an one-off miss-step. Frey has been banned from the editorial board of Public Choice for a similar case of re-publication. He is by now banned from publishing in at least a half-dozen journals. To make matters worse, he has himself advocated to go against plagiarizers and others that unnecessarily take up valuable publication space. The investigation should have looked at his whole career, like when a scientist is suspected of fabricating data and all his publications are subject to scrutiny. And it is not like the information would be difficult to obtain, it is readily available and people have even compiled it, as documented in the FreyPlag Wiki.

For more about the case, you can read my past blog posts: 30 April 2011, 3 September 2011, 27 September 2011. Also, Olaf Storbeck's Economics Intelligence blog was the one that convinced the University of Zurich to finally (pretend to) act: 4 July 2011, 4 July 2011, 5 July 2011, 6 July 2011, 7 July 2011, 9 July 2011, 20 August 2011, 29 August 2011, 12 September 2011

Why September 11 is remarkable

Amid the commemoration of the 10th anniversary of the terrorist attacks of September 11, 2001, I cannot help thinking how successful theses attacks have been. For an organization that wanted the United States to pay for sending troops to Saudi Arabia during the first Gulf war, a relatively little investment paid huge dividends. Indeed the cost of the operation, including training, must have cost only something to be measured in millions of dollars and the lives of 19 volunteers. The return was getting the United States involved in two wars that have costs amounting to trillions, brought the federal government in major financial difficulties, have lead authorities to neglect essential infrastructure investment for a decade, has kept the population in a nevrotic state for a decade, has given us higher oil prices (with revenue going you-know-where) and has lead to major setbacks in civil liberties. And that is just for the United States, as Europe has also been affected. And the costs will continue to mount, as the US is none the wiser and will have to face in addition the costs of care for veterans.

The Bruno Frey Bubble

About four months ago, I reported about the apparent self-plagiarism by Bruno Frey, David Savage and Benno Torgler. I found the case particularly ironic, as Bruno Frey repeatedly wrote about the fact that the pressure to publish to get tenure can lead to scholar to unethical behavior, and about the lack of space in journals for young scholars to publish the articles needed for tenure.

The case has taken a much larger dimension now, as many more cases of self-plagiarism by Bruno Frey and his students have appeared (see many links in the comments on the post mentioned above). This raises two very important questions: 1) how could such a culture of self-plagiarism arise? 2) How could they get away with it for so long?

To answer the first question, I think we need to put Bruno Frey is the context of the German(-speaking) academic environment. At least in Economics and Business, the typical German professor publishes a lot of rather insignificant articles, in particular book chapters and "Festschrifts." These works are rarely original, and are not expected to be so. There is also a tradition of writing "educational" pieces that explain economic concepts, say the Edgeworth box or voluntary export restraints, for journals targeted towards professionals in industry and government (as well as students). Again, there is nothing original in there, except maybe the way something is explained.

Bruno Frey works within this paradigm. His work lacks creativity in the sense that he recycles a lot of his ideas for multiple publications, often copying extensively his own words. The differences is that he does that at a higher level than his German colleagues, in international journals that are actually read. And many of his original papers are in fact not that original it appears. If we take the Titanic paper as an example, the empirical exercise he performs is routinely done in undergraduate statistics classes with the same dataset. His contribution is pedagogical, he found a good and interesting way to explain something already present in the body of knowledge.

Like a bubble that keeps getting fed by self-fulfilling expectations, Bruno Frey built on his initial success and continued with this strategy and encouraged his students to do the same. And several of them have assembled remarkable portfolios that way. I mentioned that of Benno Torgler in my original post, but there are several others who got into positions that seem beyond the usual reach of a Swiss doctoral program.

There is another way in which this resembles a bubble. The Economics department at the University of Zurich has made considerable efforts over the past decade or so to become a program that can compete with the better departments in the world. It is certainly among the best in Europe. It did so by americanizing itself: dropping to a large extend the rigid chair structure so prevalent in German speaking universities, hiring internationally respect scholars and creating a proper PhD program with courses and exams. Bruno Frey has not followed this trend at all. In fact, he insisted on exempting his students from the course and exam requirements. The Frey group lives in a cocoon apart from the rest of the department, and lives entirely following the role model of Bruno Frey. Call this living in a bubble.

Or a cult. The interaction of Bruno Frey and his students is reminiscent of a prophet and his disciples who follow him everywhere and write down every word he utters. Well, I exaggerate somewhat, but this does definitely not look like a standard interaction between a mentor and his students. It looks like they follow him blindly, and with his everlasting confidence, he makes them follow his example in publishing.

But this bubble is now popping under the assault of widespread scrutiny from editors, the Economics community and an internal investigation at the University of Zurich. The second question of course is how it was possible for Bruno Frey to act so unethically for so long (he is 70). It appears that he has been caught in the past, but it never became public, or at least explicitly. For example, he has been booted out of an editorial board, but there was no mention of why, his name just disappeared from the list. Also, the journals he has been publishing in are often not prominent and thus not that well read. In fact, it looks like he targeted them so that the audience would not overlap, including editors and referees (the added bonus of this strategy that it satisfies the goal of increasing the pedagogical reach by reaching very different audiences).

Hiding this unethical may have been helped by the fact that Bruno Frey actually tried to present himself as an expert on publishing ethics in Economics. He has written about the perils of publication pressure and how this can lead to slicing papers into insignificant bits, to self-plagiarizing and other unethical behavior. He has complained loudly about the ranking craze which he has been so adept to exploit, both with his self-plagiarism and by requiring authors to cite other works in Kyklos to increase its impact factor. While he is certainly not the only editor to do so, it is ironic that he openly campaigned against such practices. Bruno Frey abused the moral high ground in which he pictured himself.

But as every lie that grows too big over time, this is unsustainable. And it will be less likely to happen in the future with initiatives like this one. Making this unethical behavior more visible will prevent it.

That said, self-plagiarism is not limited to the Bruno Frey group or German speaking economists. I will discuss soon another case that I find particularly enraging.

Do we need awards in Economics?

I do not like awards. They always create jealousies, and one cannot help that whenever a committee is involved, something may not have gone right. I am thus quite happy that economists give very few awards. It makes their CVs look bad compared to other scientists, but that is the price for a relative peace in the profession.

But we still have some prizes. The Nobel one, which is not really part of the Nobel family but is still attributed much prestige is always under much scrutiny. And in the end, the right people tend to win it. There have been a few controversial cases, Myrdal, Hayek, Buchanan and Ostrom come to mind as example where quite a few eyebrows were raised, but overall this award works well.

The American Economic Association gives an award that is considered to be even more difficult to get than the Nobel Prize: the Clark Medal, given to an American aged under 40. It is difficult to get because only one is awarded every year (no joint winners) and until recently it was given every second year. When comparing to the Nobel Prize, it is relevant to understand that American get a vast majority of them.

Now let us have a look at the past few year for the Clark award:
2011: Jonathan Levin, PhD MIT, Faculty at Stanford
2010: Esther Duflo, PhD MIT, Faculty at MIT
2009: Emmanuel Saez, PhD MIT, Faculty Harvard then Berkeley
2007: Susan Athey, PhD Stanford, Faculty at MIT then Stanford and Harvard
2005: Daron Acemoglu, PhD LSE, Faculty at MIT
2003: Steven Levitt, PhD MIT, Fellow at Harvard then faculty at Chicago
2001: Matthew Rabin, PhD MIT, Faculty at Berkeley
1999: Andrei Shleifer, PhD MIT, Faculty at Princeton, Chicago and Harvard

Do you see a pattern? Well I do, and others have, too. I am not saying these awardees are not bright and promising economists, but is there really no other qualifying economists that could have received it? Of course, John List comes to mind, who has no connection with MIT (or Harvard). But it actually worse than that. The award is given by a small committee, designated by the AEA. The AEA leadership is stacked with people with MIT and Harvard connections, so they also nominate their friends to the various committees, and you see the result.

It is even worse. In 2010, Ester Duflo was considered to be in the pool of strong candidates for the award. Guess who was on the awarding committee? Abhijit Banerjee, her PhD advisor, frequent co-author and colleague at MIT. In such a situation, an ethical person would decline the invitation to serve on the committee. That does not seem to have crossed the mind of Banerjee, who may be used to this cronyism.

There is another award, this time given by the European Economic Association: the Yrjö Jahnsson Award, to an European economist under age 45. It is given every two years, but can have several recipients. This awards has looked much cleaner because the committees and awardees have been distributed all over Europe. Europeans are indeed very sensitive to this. The last one was a shocker, though. Armin Falk won it to the surprise of many. And guess who chaired the awarding committee? His advisor, Ernst Fehr. Again, ethics would have indicated that if Falk had a chance of winning it, Fehr should have recused himself not just from chairing the committee, but from participating in it. In retrospect, this is not Fehr's first wrongdoing: two years earlier he was also on the committee when Fabrizio Zilibotti co-won the award. Zilibotti is a colleague of Fehr in Zurich.

I think we should do away with these two awards. It simply does not work.

The debt ceiling circus is another media debacle

If you compare the media coverage about the current debt ceiling "discussions" in the US to abroad, it is a stark contrast of style. While the US media is focused on the power haggling of politicians, ignoring completely policy matters, foreign media puzzle why such a silly policy the Republicans are proposing is even being discussed. And once more, it makes me wonder why the US media is sleeping.

Roughly, the Republicans want to erase the public deficit from one day to the next, in the middle of difficult times, and without raising taxes, cutting anything to defense expenses and farm subsidies or closing corporate tax loopholes. This is mathematically simply impossible and must results in partial default on public debt, a major increase in interest rates and in then more public expenses to service the debt. In other words, this is an own goal. To top it, the policy uncertainty is severely hurting the US economy which does not seem to be able to get back on track.

The saddest aspect of this is that the media is completely oblivious to this. It is so obsessed to present both views that it shows without critical discussions complete absurdities from the Republicans. I have a hard time understanding the motivations of the right, except hurting the economy ahead of elections or participating in some grand scale insider trading, and nobody in the media is pointing this out. In fact it is relaying the arguments that decreasing taxes will increase revenue, especially if the rich get those breaks. To repeat myself, this is so wrong, especially now. If you want to improve the economy and insist on reducing the deficit, give tax breaks or transfers to the poor and tax the rich significantly more.

The worst is that there are some serious negative externalities on many who have absolutely no say here, and not just the US tax payers, but also foreign economies. Rarely have I seen such a policy kamikaze, say since Saddam Hussein invaded Kuwait. But at least the US media was then on top things.

About the bastardization of news

Earlier this week, I have has the "opportunity" to spend significant time in a US hotel room. The town being of little interest, I used my time to get some work done and to watch some TV. There was the opportunity to see two interesting events, on the same day: the press conference of Ben Bernanke and the statement of Barack Obama about the war in Afghanistan. What a huge disappointment both were.

This is not Bernanke's or Obama's fault, though. The big news channel were treating this like an American Idol contest, with personalities (or journalists, what is the difference now anyways) doing instant ratings on how well they perceived the speakers. Which was then followed by an analysis of some random tweets.

The sad truth is that people will form their opinion from this circus. Never mind that Bernanke and Obama are experts in their field, have thought very hard about their issues with a lot of expert advice, these journalists know on the spot what is best and will dismiss without justification any argument by the push of a button.

This brings me back to the idea that Economics needs some way to certify people to separate those who pretend to know something about Economics and those who do. The latter are mostly unwilling to talk in sound bites and instant opinion, thus the media rushes to the pretend economists. And I wonder how many of the journalists I saw judging Bernanke have any degree in Economics, let alone a graduate degree.

The pitfalls of $1 CEO salaries

CEO how agree to be paid no salary, or a minimal one, are viewed as heroes in media and the public. But in all the cases I know off, they are of course also compensated with stock options and other deferred pay schemes. So does it really make a difference to being paid a substantial salary?

Gilberto Loureiro, Anil Makhija and Dan Zhang find that not everything is rosy abut these $1 CEOs: They tend to be overconfident and thus expect to have very high compensation in the future. As a consequence, they try to deflect future criticism about their earnings by putting on an angel face now. Also, their overconfidence implies that shareholders do not fare well with them, probably the reason institutional investors avoid them. In other words, be wart of $1 CEOs!

In the pretense of protecting me, Emerald stiffles my research

I received a rather unsettling message from Emerald Publishers the other day:

As an Emerald author, you will know that Emerald is dedicated to protecting the copyright of your work. For this reason, we use the Attributor service. Attributor automatically searches cyberlockers for unauthorized copies of works or illegal hosting and then issues legally-binding takedown notices. We are increasing Attributor's searches to the full breadth of the internet, to ensure maximum copyright protection.

For this to run as smoothly and efficiently, we are asking that you provide us with (if applicable):

1. your personal website address
2. your institutional website address
3. the website address of your company

This is so we can exclude these sites from the Attributor searches, whilst protecting your copyright. Upon provision of this information, we will of course ensure full data protection.

We look forwards to hearing from you.

I find this very disturbing. This message is telling me that this publisher is trying to enforce my copyright while in truth it is the publisher's copyright. And it tells me that I better preemptively alert the publisher where I apply the fair-use provisions of copyright before I get automatically accused of violating copyrights on my own work.

Now looking at Emerald's Author Charter, I find another few gems:

Assigning copyright of your work to Emerald allows us to act on your behalf to:

* promote your rights
* facilitate dissemination of your work by granting permissions for educational use or republication
* target other Emerald journals whose readership would benefit from access to your work
* endeavour to protect your work from any infringement of your rights which are brought to our attention.

It does NOT, in any way, restrict your right or academic freedom to contribute to the wider distribution and readership of your work. This includes the right to:

1. Distribute photocopies of your own version of your article to students and colleagues for teaching/educational purposes within your university or externally. Please note, this does not refer to the Emerald branded, published version.
2. Reproduce your own version of your article, including peer review/editorial changes, in another journal, as content in a book of which you are the author, in a thesis, dissertation or in any other record of study, in print or electronic format as required by your university or for your own career development.
3. Deposit an electronic copy of your own final version of your article, pre- or post-print, on your own or institutional website. The electronic copy cannot be deposited at the stage of acceptance by the Editor.

Note that Emerald may publish your article in another journal, if it thinks it increases its dissemination (or increases the impact factor). Nothing is said about the author agreeing to it. But Emerald is also fine if you try to publish your article elsewhere, although the condition of "for your own career development" is open to interpretation.

That said, all this business with copyright on academic research is really sad. These commercial publishers try to tell us that they do their possible to disseminate research while all they is the exact opposite: they gate the research and chase down ungated versions. Let's all move to open access. Much simpler, much less costly, and much better dissemination!

On the dangers of penny auctions, an example

I have written before about the dangers of penny auctions. It is very worrisome that they have become even more popular since, and with additional bells and whistles that make them even more dangerous. I have stumbled upon an auction where the bidding will lead to the bankruptcy of at least one person.

Look at auction 19850 at BidHere.com. This is for a gaming computer, an Alienware Area-51 ALX Desktop with an estimated retail price of US$3999 (the true retail price is certainly lower, but that is not the point). The rules of the auction are: bid increments are $0.02, any new bid delays the conclusion on the auction by 15 seconds, every bid costs $0.60, automatic bidding is allowed, and the winner does not have to pay for his/her bids. This last rule is spelling doom.

As I write this, the bids are approaching $1500.00, which is not a bad price. But one has to realize that this implies that almost 75,000 bids have been placed, for a cost of $45,000.00. When I first noticed the auction two days ago, three bidders were bidding automatically. Yesterday evening, the same three were still at it. Today, two are left, the third one having probably maxed out all credit cards. The remaining two will be continuing until one is bankrupt. Indeed, they have each invested so much into this auction that they absolutely need to win it at any cost, given that the winner gets reimbursed for all costly bids. And the fact that automatic bids are allowed helps this madness.

Of course, this should remind us of the St. Petersburg paradox, where an infinite expected payoff can only be gained if one has infinite resources. I'll be watching the auction, which could be continuing well beyond the market value of the computer. And imagine if a last minute bidder snatches it away from both current bidders...

Libel suits prevent publication of research

I just read in the Times about a disturbing development in the United Kingdom. A firm managed to get an article slated for publication in the International Journal of Speech, Language and the Law to be withdrawn because it would taint the reputation of this firm. In short, a Swedish professor got a an article accepted for publication that was pointing out that lie detectors are very unreliable. The manufacturer got a court order to get the paper removed from the website of the UK-based publisher, appealing to UK libel law.

It is well known that UK libel law has a very broad definition of libel, even leading to some libel litigation tourism. One can also claim that the chosen title of the incriminated article, "Charlatanry in Forensic Speech Science", may go a little bit far. However, there is such a thing called academic freedom, and if this article has been peer-reviewed, industry interests should not prevent it from getting published. In fact, there is every reason to publish it if it highlights a problem.

Imagine if economists could get sued when they say that monetary policy is flawed, or that immigration policy is not optimal, or that Microsoft is behaving monopolistically. Or, say, sociologists writing that Scientology is a cult. Research may sometimes be flawed, but there is a scientific process that deals with that, through peer-review and further research. What is important is that there is a debate. And publishers should not bow to pressure from industry or government, be it when the research is against the industry's interests, or for it (see the abominal case of Elsevier.

On the democracy of science

Should science obey to democratic principles? This is a question that I recently saw discussed on Scienceblogs, and that is also mentioned in the latest strip of PHD Comics.

Democracy is about letting people decide on their fate by choosing between objectives. Concretely, this has translated to choosing between policies, but that is another question. There is, however, a disturbing trend in the media to let people vote ("reader polls") on things they have no business deciding on and then present this as evidence. "Is this person guilty?" Leave that to the courts who have the full information and know the laws. "Is the theory of evolution true"? Leave that to scientist to figure out. "Is climate change real?" Idem. "Should the Feds bail out banks?" Leave that to economists. Etc.

While science is built on consensus, it does not mean consensus among people who do not know what they are talking about. The wisdom of crowds is often wrong. Even among economists, conventional intuition is sometimes wrong, this is what makes great papers in top journals. Instead of turning to the opinion of the people in the street to fill airtime, why not actually ask experts. And by experts, I do not mean political pundits.

Stock spams work

We have all received these spam emails touting some obscure stock as the next one to surge. And have you not wondered who would fall victim to such shenanigans and why we still keep getting such emails?

According to Taoufik Bouraoui, these emails actually have an impact in that they increase the volatility of the stock. And under such circumstances, money can be made, unfortunately only for the originator of the spam emails. Unless you are among the very first to get the emails and are able to quickly buy stocks, you are out of luck...

Exploiting sunk costs

Sunk costs are cost that do not have an impact on decisions once spent. I have have recently come across some websites that use this to their advantage, so-called penny auctions. Examples are Bid Cactus and Bid Rodeo. There you bid in simple auctions that increment in very small steps, one cent for smaller items, ten cents for larger items like consumer electronics. Items typically sell at a fraction of their retail value.

But, -- there is a but -- bidding is not free. On Bid Cactus, each bid costs $0.75 and is sunk. Thus it appears to be a good idea when you bid on a $50 gift card at $1.00, but you may lose your bid the next second and need to bid again at $1.02. Auctions have a predetermined end time, but it gets extended by a few seconds after each bid. I watched a few and it is fascinating how some "players" keep getting outbid and see that their costly bids bring them nothing. I saw a $400.00 camera go for $90.00, which means there have been 900 bids, or $675.00 in revenue for Bid Cactus. Bid Rodeo has more useful information. A $670.00 laptop was sold for $19.57, thus generating 1957 bids at $0.72 or $1409.04. The winning bidder paid $295.41 for his bids, thus still got a good deal, but plenty of people paid for nothing. In terms of return, this seems similar to a state lottery...

There is also a huge potential for fraud. Clearly, the auction houses here have every interest to have people bid often, and thus could have robotic bidders participating. If by any change an item is won by a robot, they still have the income from the bid fees, and can put the item for sale again. Absent this kind of illicit behavior, I do not think these penny auctions can be legally called a scam, but they sure like a suspiciously profitable way to sell stuff.

Microsoft, still the evil monopoly

Let me rant about another evil monopoly, Microsoft. Unfortunately, this is not the first time. The problem with monopolies is that they manage to get away with actions that would never be tolerated in a competitive marketplace. Here are some recent examples regarding Microsoft.

Microsoft automatic updates recently installed updates for the .NET suite that included a Firefox plug-in. Now why would Microsoft bother installing plug-ins for competing products? In this particular case, the plug-in allows websites to install software without the user's knowledge, that is, it creates for Firefox the vulnerabilities that plague Internet Explorer. Users are never prompted about this. Worse even, it does not appear to be possible to remove this plug-in without much trouble (such as downloading additional material from Microsoft). Details.

In view of Vista getting much traction, Windows has been encouraging users to download Windows 7 (release candidate version) for testing (and getting used to). It will stop functioning in June 2010. This will then force users to purchase Windows 7. The installation of any operating system, including a purchased copy of Windows 7 or a return to the previous one, will require wiping clean the hard drive. Thanks. Details (see IMPORTANT).

Microsoft continues to push Windows on manufacturers, making it difficult to buy computers with alternative operating systems, or none. Why would manufacturers go along? Windows is so bloated (along with the ever growing virus software) that it requires to upgrade hardware. And Windows installs typically have a Microsoft Office teaser install, prompting you to buy it after 60 days, while there are free products out there that do the same job (if not better), such as Open Office.

And my previous rants about forced and unnecessary upgrades, abusing patents

The worst bailout of all

Bailouts are difficult to justify in general, because of the adverse effect they have on anticipations and thus the moral hazard they induce. They can only be justified if this moral hazard risk can be outweighed by a strong positive welfare effect. Say, in the case of the bailout of the Big Three car manufacturers, that there is the threat that a new Great Depression would ensue, like Edward Lazear thought when he advocated intervention last September. We can discuss this assessment, and also whether it is a good idea to bail out the financial industry, the airline industry or whoever else is going to line up. But I have just been made aware of the least justifiable bailout of all: Belgium sinking a billion euros into the diamond industry.

Why? Because the diamond industry is a fraudulent operation to begin with. The world market for diamonds is overwhelmingly dominated by the De Beers diamond cartel that forces everyone to sell through it. This allows the cartel to dictate the price, essentially setting it at a multiple of what it would be under normal competition. This cartel was put in place in the late 1800s to preserve prices after major discoveries in South Africa that suddenly increased a lot the diamond supply. When the cartel found it difficult to hold prices in the 1930s, it created the diamond engagement ring, the most successful marketing campaign ever as it created a must have for every fiancée. The latest marketing scam is that "diamonds are forever." Well, actually this is true, as it is extremely difficult to resell a diamond at a price remotely close to its supposed value as diamond sellers have to comply with the cartel. So you are stuck with your diamond forever.

Diamonds, the worst investment ever, now supported by the Belgian government.

The evil empire strikes again (II)

Following up on yesterday's post about Elsevier's strange practices, it appears that a firestorm is erupting, and it seems to uncover other not so nice things about the Evil Empire:

• While I reported about one fake journal, it appears there could be at much as fourteen of them, according to Open Reading Frame. Elsevier so far conceded six, but without naming the corporate sponsors.
  
• The particular Elsevier branch that is mainly incriminated, Excerpta Medica, seems to have been very reputable until fairly recently. The sudden selling out on the goodwill seems consistent with other actions of Elsevier. Journal editors reported to me that when they were negotiating terms with Elsevier, they had the impression the Evil Empire was set to extract as much rent as possible over the next few years, and maintaining quality was not first priority. Hence increased pages and issues in various journals. And selling out to the highest bidder.
  
• Elsevier is not supervising what its editorial boards are doing and imposing standards. Two other examples: Secret blogging seminar discusses a mathematics journal where the chief-editor published dozens of his own articles, none of scientific merit. Elsevier was OK with it, as the journal had the highest impact factor in Mathematics, thanks to self-citations (some much for Thomson's shenanigans as well). The other is the rift between the Society of Economic Dynamics and Control and Elsevier over the board of its own journal, the Journal of Economic Dynamics and Control. This eventually lead to the creation of the Review of Economic Dynamics at Academic Press (which was then promptly acquired by Elsevier). The European Economic Association also left Elsevier in disgust over issues with the European Economic Review and created the Journal of the European Economic Association. The Journal of Economic Theory is similarly being deserted in favor of the open access Theoretical Economics. This is happening in other fields, too, in particular biology.
  
• Elsevier lead the creation of PRISM, a coalition battling the emergence of open access journals. Its main credo is "Government mandates that ignore the need for sufficient and sustainable financial support for peer-reviewed journals -- whether the source of support is from users, authors, or sponsors -- risk undermining the very fabric of the system of independent, formal peer-reviewed publication, a system that is of crucial importance for scholarly communication and the preservation of scientific knowledge." Well, Elsevier just showed this is not possible. Open access is the way to go because it is independent from commercial funding.
  
• In 2004, the CEO of Elsevier testified to a British commission making research available for free would hurt researchers and that payments from firms like Merck (explicitly cited!) are necessary for preserving the integrity of the system. Sure.
  

And what does Elsevier have to say? "It is an isolated case, it was long ago, the people responsible have long left, we are very ethical". We believe you, sure.

The evil empire strikes again

A critical aspect of the research publication process is the integrity of everyone in the business. While one may sometimes have doubts whether particular editors are biased one way or the other, or that journals have a history of favoring certain people (see: JPE and especially QJE), publishing houses should not have any reasons to meddle in this process except to redress editors who venture out of bounds. But could a publishing house, a major one at that, actually hamper the integrity of research and its dissemination?

Yes, Elsevier managed to do just that, according to this article in The Scientist. Let me summarize for those who do not want to go through the free registration. Merck commissioned Elsevier to publish a "fake" journal, the Australasian Journal of Bone and Joint Medicine, stuffed with articles giving positive reviews of Merck drugs, in particular the troubled Fosamax and Vioxx. Now, nothing prevents a drug company to print brochures advertising its products, but Elsevier disguised this like a real journal, with editorial board, subscriptions and real articles (they were a selection of articles published elsewhere, plus fake review articles), all this paid by Merck and without any disclaimer.

This is a particularly nasty practice from a publishing house that has already drawn the ire from librarians and academicians across the board for its journal pricing practices and its predatory acquisitions in the academic publishing market. Closer to home, Elsevier is also trying to hamper the success of RePEc by preventing it to use its bibliographies for citation purposes, as I mentioned before. While the latter practice is not as vile as faking journals and charging researchers exorbitant prices to access their own research, it shows that this company cannot be trusted to be doing what is good for research. It also shows that the profit motive in academic publishing can lead to some pretty nasty results. Non-profit societies and open access outlets need to step up and take over, and we authors need to dump the commercial outlets.

Followup here.